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FORTY-FOURTH ANNUAL REPORT of the BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM COVERING OPERATIONS FOR THE YEAR a LETTER OF TRANSMITTAL BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Washington, April 14,1958 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-fourth Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1957. Yours respectfully, W M . M C C . MARTIN, JR., Chairman. CONTENTS TEXT OF REPORT Introduction Inflationary pressures Cyclical turning point Decline in activity Functioning of the Discount Mechanism Nature of discount instrument Role of the discount rate Discount policy 1955-57 Demand and Supply of Funds in 1957 Credit demands Business sector Consumer sector Government sector International capital transactions Credit supplies Personal saving Institutional lenders Bank credit Record of Policy Actions—Federal Open Market Committee Record of Policy Actions—Board of Governors Bank Supervision by the Federal Reserve System Examination of Federal Reserve Banks Examination of State member banks Bank holding companies Trust powers of national banks Foreign branches and banking corporations Inter-Agency Bank Examination School Federal Reserve membership Reserve Bank Operations Loan guarantees for defense production Volume of operations Earnings and expenses Holdings of loans and securities Foreign and international accounts Retirement System Bank premises Board of Governors—Income and Expenses iii _, Page 1 1 5 6 7 10 13 16 18 19 20 22 23 25 27 27 29 29 33 63 70 70 70 71 72 72 74 74 75 75 76 76 78 79 79 80 80 TABLES „ Page 1. Statement of Condition of the Federal Reserve Banks (in detail), Dec. 31, 1957 2. Statement of Condition of Each Federal Reserve Bank at End of 1957 and 1956 84 86 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1955, 1956, and 1957 90 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1953-57. . 91 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1953-57 91 6. Earnings and Expenses of Federal Reserve Banks during 1957 92 7. Earnings and Expenses of Federal Reserve Banks, 1914-57 94 8. Member Bank Reserves, Reserve Bank Credit, and Related Items— End of Year 1918-57 and End of Month 1957 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1957 96 98 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1957 11. Federal Reserve Bank Discount, Interest, and Commitment Rates (in effect Dec. 31, 1957) 100 12. Member Bank Reserve Requirements 101 99 13. Maximum Interest Rates Payable on Time Deposits 101 14. Margin Requirements 15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950 16. Principal Assets and Liabilities, and Number of All Banks, by Classes, Dec. 31, 1957 and 1956 17. Member Bank Earnings, by Class of Bank, 1957 and 1956 18. Analysis of Changes in Number of Banking Offices during 1957. . . . 19. Number of Banking Offices on Federal Reserve Par List and Not on Par List, Dec. 31, 1957 20. Open Market Transactions of the Federal Reserve System during 102 1957 102 103 104 105 106 107 FEDERAL RESERVE DIRECTORIES AND MEETINGS Board of Governors of the Federal Reserve System 110 Federal Open Market Committee Federal Advisory Council Federal Reserve Banks and Branches Ill 112 113 Map of Federal Reserve Districts 131 Index 132 iv OF THE FEDERAL RESERVE SYSTEM Output, employment, consumption, and business investment in fixed capital established new records in 1957 in the United States and in other industrial countries. During much of the year, striking cross currents and mixed tendencies influenced economic conditions. At the year-end, economic activity was declining in the United States and Canada, but it was continuing at advanced levels in the industrial countries of Western Europe. During the first three quarters of the year inflationary forces continued to push prices of goods and equities upward. The pressure of capital and credit demands on the supply of new savings and other loan funds, in the face of restrictive financial policies of governments and monetary authorities, led to the highest levels of interest rates in more than two decades. In late summer and early autumn, financial tensions and uncertainties, domestic and international, became dominant forces. By mid-autumn, inflationary pressures were abating and there were indications, both in this country and abroad, of less intensive resource utilization. INFLATIONARY PRESSURES In the United States, the year opened with output and activity close to capacity in key industries, with margins of unemployed manpower relatively low, foreign demands for American exports very active, and prices of goods and services generally under upward pressure. Uncertainties in late winter suggested the possibility of slackening in aggregate demand. These uncertainties were partly seasonal and partly associated with reductions in inventory demands, in new orders for durable goods, and in housing construction, as well as with declines in prices of basic materials as supplies became more ample. In the spring, however, consumer buying, particularly of nondurable goods and of services, showed renewed strength and imparted 1 ANNUAL REPORT OF BOARD OF GOVERNORS GROSS NATIONAL PRODUCT Billions of dollars, annual rates 500 450 CURRENT DOLLARS 400 1952 DOLLARS 350 300 1953 1955 1957 NOTE.—Department of Commerce seasonally adjusted quarterly estimates, deflated by Federal Reserve on basis of Commerce annual data. fresh impetus to over-all economic activity, encouraging expectations of further intensification of resource use and upward price pressure. Business spending for inventories rose and expenditures for plant and equipment advanced, although at a reduced rate and with some additional slowing of forward orders. Also, housing starts were rising again. Until autumn, defense spending increased faster than had been expected. Beginning around midyear new procurement orders were sharply curtailed and expenditures began to taper off. Spending by State and local governments maintained a steady increase. United States exports remained strong, although petroleum exports, which had risen sharply during the Suez crisis, fell off after April. While total industrial production edged off in the second quarter from the high level reached late in 1956 and early 1957, it strengthened during the summer months. FEDERAL RESERVE SYSTEM INVESTMENT OUTLAYS Billions of dollars, annual rates CONSUMER BUSINESS PRODUCERS' — DURABLE EQUIPMENT^**"""""*'* f — ^*M. / \ ^ ^ 40 DURABLE GOODS RESIDENTIAL CONSTRUCTION - 30 — 20 S* •mm+' v * NONRESIDENTIAl CONSTRUCTION 1 1 I 1953 1 1955 Lv 1957 v 10 1 1 1 1 1^ 1953 1955 1957 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Total employment continued to expand into the third quarter of the year in spite of moderate decline in manufacturing employment. Industrial production was thus not the expanding demand force in labor markets that it had been in the preceding two years. The additional expansion in employment that occurred was primarily in service lines, trade, and State and local government activities. Economic activity generally continued to rise into the third quarter with inflationary pressures dominant. In that quarter gross national product reached a peak 5x/2 per cent above a year earlier, reflecting higher prices as well as further expansion in the volume of output. During the first three quarters of the year demand for bank credit remained strong and bank loans and investments continued to grow. This growth was paralleled by an increase in time deposits. The increase in demand deposits and currency was small and there was a marked lowering of these forms of money holdings in relation to gross national product. With an associated rise in the turnover of demand deposits, the liquidity position of business enterprises and of financial institutions declined further. A disturbing feature of the economic climate in this country as well as abroad in 1957 was the notion that creeping inflation was an unavoidable and inevitable condition of modern economic life. Partly reflecting this view, common stocks, the most popular hedge against 4 ANNUAL REPORT OF BOARD OF GOVERNORS inflation, rose sharply in price while bond prices were falling. Similarly, farm and urban land values extended their rise. In July, for the first time in two decades, the average dividend yield on stocks fell below the average yield on high-grade corporate bonds. CORPORATE SECURITY YIELDS Per cent >jr CORPORATE BONDS Aaa /V 1953 1955 1957 NOTE.—Yields on common stocks are Standard and Poor's Corporation monthly averages of Wednesday data for 90 stocks: 50 industrials, 20 rails, and 20 utilities. Bond yields are from Moody's Investors Service: monthly averages of daily data on 20 bonds with average maturity of about 25 years. Until autumn, total credit demands remained vigorous and pressed against the supply of available savings, and market interest rates rose to a postwar peak. In early August, in view of heavy current and prospective demands for bank credit, city banks raised their lending rate to prime business customers from 4 to 4% per cent. Federal Reserve discount rates, which had remained below market rates for some months, were raised from 3 to 3Y2 per cent. This increase served to realign them with market rates and to restore their effectiveness as a cost deterrent to member bank borrowing. FEDERAL RESERVE SYSTEM 5 CYCLICAL T U R N I N G P O I N T In late summer and early autumn, mixed trends and uncertainties in the United States and abroad began to dampen business and financial spending plans. In European financial markets, widespread expectations of changes in exchange rates fostered large speculative movements of funds between European centers and particularly toward Germany. These expectations in part reflected fears that inflationary developments would not be arrested in affected key countries, despite restraining actions taken during the summer. The crisis was not resolved until late September, after the Bank of England raised its discount rate from 5 to 7 per cent and the German Bundesbank, almost simultaneously, lowered its discount rate from 5 to 4J4 per cent, thereby lessening the incentive for short-term funds to move from sterling into deutsche marks. It then became clear that inflationary trends would be strongly resisted and that key foreign currency values would be maintained. Unexpected curtailment in defense payments and changes in procurement policies, inaugurated in the United States during the summer to avoid exceeding budget estimates and the debt ceiling, had an unsettling effect on business in early autumn. Also, retail trade, which had been at record levels in July and August, showed signs of sluggishness in September. Partly as a result of these developments, common stock prices, which had already reacted from the high points reached in July, broke further in late September and passed through the lower edge of the trading range that had prevailed during the past two years. In this context, there was a change in attitudes of businessmen, investors, and the public generally toward spending and investing. Downward adjustments that had been occurring for some months in various individual lines of activity, including capital goods and ordnance lines, became a more widespread influence on spending plans. This change was reinforced by the realization that growth in industrial capacity had been large relative to current and prospective demands. In contrast to earlier indications of strong bank credit demands, bank loans to business during early autumn decreased contrary to usual seasonal tendencies. Thus the business cycle upswing that began in the third quarter of 1954, nourished at first by outlays for consumer capital goods and 6 ANNUAL REPORT OF BOARD OF GOVERNORS later by a surge of business capital investment, culminated in a turning point in economic activity during the third quarter of 1957. DECLINE IN ACTIVITY During the fourth quarter, economic recession set in. It was dominated by a sharp liquidation in business inventories and cutbacks in new orders for machinery and equipment. Industrial output declined rapidly, particularly in durable goods lines. Industrial employment as well as the length of the workweek was reduced substantially. Gross national product declined to an annual rate of $433 billion from the record $440 billion in the preceding quarter. Personal income also declined but at a slower rate, in part because increased unemployment benefits offset some of the loss in wage and salary incomes. These reductions in incomes and expenditures were not reflected in price developments. The average for consumer prices rose further, while that for wholesale prices remained relatively steady at its advanced level. The fourth quarter also witnessed rapid readjustment in financial markets. Credit demands, particularly for carrying business inventories, moderated. Business profits declined sharply. Monetary expansion slowed, and turnover of demand deposits fell. In view of the indications of changing economic and financial trends, Federal Reserve open market operations in mid-October began to ease restraint on bank credit expansion. In mid-November as the various shifts in the business and financial climate gave evidence of general economic recession, the Federal Reserve Banks reduced their discount rates from 3Y2 to 3 per cent. Following this discount rate action, market rates of interest fell abruptly as funds in the credit and capital markets also became more readily available. As the quarter drew to its close, a progressive easing of commercial bank reserve positions was fostered by open market operations. In these circumstances, bank loans and investments began to increase vigorously. At the year-end, the nation's immediate economic objective was that of cushioning and moderating recession tendencies. The basic problem confronting monetary and fiscal policy was to promote resumed growth of aggregate demand and at the same time en- FEDERAL RESERVE SYSTEM courage those essential adjustments and shifts in resource utilization, prices, and costs that would contribute to sustainable economic expansion. SELECTED ECONOMIC INDICATORS 1947-49-100 160 INDUSTRIAL PRODUCTION 140 NONAGRICULTURAL EMPLOYMENT NONMANUFACTURING 140 120 " 120 1 , 1 , MANUFACTURING I 100 , 100 1 140 CONSUMER PRICES 120 120 FINISHED , I 1953 , I 1955 , 1957 GOODS . 100 100 •^•n I I t 1953 I 1955 I 1957 NOTE.—Seasonally adjusted series, except for prices. Bureau of Labor Statistics data for employment and prices, and Federal Reserve data for production. FUNCTIONING OF THE DISCOUNT MECHANISM The restraints on bank credit expansion in force from 1955 until the latter part of 1957 featured a considerably more active use of the discount rate than in the previous restrictive period of 1952-53. In the earlier period, discount rates were raised only once—in January 1953, by % percentage point to 2 per cent. During the 1955-57 period in contrast, the Reserve Banks advanced their discount rates four times in 1955, twice in 1956, and once in 1957—altogether from \l/2 per cent to 3l/2 per cent. In November 1957, they were lowered to 3 per cent, reversing the August increase. 8 ANNUAL REPORT OF BOARD OF GOVERNORS The more frequent use of the discount rate is a further step in an evolving process, which began seven years ago when the TreasuryFederal Reserve Accord reactivated the flexibility of monetary policy. It is the purpose of this section of the Annual Report to outline the role of the discount function as an instrument of monetary policy under present-day conditions. DISCOUNT AND BILL RATES Per cent TREASURY MARKET 1953 1955. BILLS YIELDS 1957 NOTE.—Treasury bill rates are monthly averages of daily market yields on 90-day bills. Discount rate is that charged by the Federal Reserve Bank of New York. Federal Reserve Bank lending to member banks has taken the form chiefly of advances secured by United States Government securities rather than discounts of commercial paper as envisaged in the original Federal Reserve Act. Following active utilization of the discount mechanism in the early years of the System, this facility was little used from 1934 through 1952. During most of the 1930's, when member banks had large excess reserves, the discount mechanism had mainly a standby significance. During the war and until early 1951, member banks generally found it advantageous to re- FEDERAL RESERVE SYSTEM )) plenish their reserves by disposing of United States Government securities rather than by borrowing at the Federal Reserve Banks. They held large amounts of such securities, the prices of which were supported by the Federal Reserve. After the spring of 1951, however, when the support policy was discontinued, market prices of Government securities became responsive to supply and demand forces. Thenceforth, when banks, in order to replenish their reserves, sold Government securities, yields were free to rise. When yields on short-term Government securities rose above the discount rate, the discount window at the Federal Reserve Banks became in terms of cost an attractive alternative to security sales as a means of making reserve adjustments. In 1952-53, as credit demands expanded and Federal Reserve policy limited the amount of reserves made available through open market operations, pressure on bank reserves increased, and member bank borrowing from the Reserve Banks rose rapidly. During this initial revival of the discount mechanism after a generation of disuse numerous problems arose, including uncertainty among many member banks about what was an appropriate use of the discount privilege. A special circumstance was that the then-existing excess profits tax made borrowing from the Reserve Banks profitable to banks subject to the tax. Nevertheless, revival of member bank borrowing demands served to refamiliarize member banks and the Federal Reserve System with the discount mechanism and its role in credit and monetary management. As one result of these developments, the System re-examined historical experience, notably in the 1920's, with member bank borrowing under prevailing provisions of the law. In the light of practices shown by experience to be appropriate and sound and also in the light of statutory provisions now governing Reserve Bank discounts and advances to member banks, the Board of Governors revised its Regulation A. The revised regulation, effective in February 1955, set forth the following general guiding principles applicable to both the extension of advances and discounts by the Reserve Banks and the use by member banks of the discount privilege: Federal Reserve credit is generally extended on a short-term basis to a member bank in order to enable it to adjust its asset position when necessary because of developments such as a sudden withdrawal of deposits or seasonal 10 ANNUAL REPORT OF BOARD OF GOVERNORS requirements for credit beyond those which can reasonably be met by use of the bank's own resources. Federal Reserve credit is also available for longer periods when necessary in order to assist member banks in meeting unusual situations, such as may result from national, regional, or local difficulties or from exceptional circumstances involving only particular member banks. Under ordinary conditions, the continuous use of Federal Reserve credit by a member bank over a considerable period of time is not regarded as appropriate. In considering a request for credit accommodation, each Federal Reserve Bank gives due regard to the purpose of the credit and to its probable effects upon the maintenance of sound credit conditions, both as to the individual institution and the economy generally. It keeps informed of and takes into account the general character and amount of the loans and investments of the member bank. It considers whether the bank is borrowing principally for the purpose of obtaining a tax advantage or profiting from rate differentials and whether the bank is extending an undue amount of credit for the speculative carrying of or trading in securities, real estate, or commodities, or otherwise. Thus, when monetary restraint once again became appropriate in 1955, the stage was set for a more effective and more readily understood use of the discount mechanism as one element in the process of limiting monetary and credit expansion. NATURE OF DISCOUNT INSTRUMENT Monetary policy in the United States operates largely by regulating the volume of member bank reserves, which constitute the base for bank credit and the money supply. Apart from infrequent changes in reserve requirements, the reserve base is regulated from week to week and from month to month by open market operations at the initiative of the Federal Reserve System. In a period of monetary restraint, such as prevailed in the past three years, open market policy tends to provide a smaller amount of bank reserves than is called for by the demands for bank credit. Limited provision of bank reserves on the System's initiative does not mean that additions to reserve funds are prevented, but rather that such further accretions as occur will reflect in part initiative taken by member banks in discounting with the Reserve Banks. Thus, in a period of monetary restraint, reserves for monetary expansion while continuously available, must be obtained to a greater extent through the discount window at Federal Reserve Banks than 11 FEDERAL RESERVE SYSTEM in other periods. The provision of the reserves thus supplied is subject to the principles of prudent discounting set forth in Regulation A and to an interest cost—the discount rate established by Federal Reserve action. RESERVES AND BORROWINGS Billions of dollars 2.0 i\ .• _ \ •> ', \ EXCESS RESERVES ^ /% —^. /BORROWINGS vv. I | fcA< _ 1.0 0 i -1.0 1953 1955 1957 NOTE.—Monthly averages of daily figures for member banks. Free reserves are excess reserves less borrowings from Reserve Banks. In view of the general reluctance of member banks to operate on reserves obtained through continued borrowing, the discount mechanism acts as a brake on bank credit and monetary expansion. Although individual banks may continue to expand their loans from the proceeds of security sales, this gradually reduces their liquidity positions and in time works as a check on their loan expansion. While such sales of securities provide additional reserves to individual banks, they do not add to over-all bank reserves unless they are purchased for Federal Reserve account. In other words, each bank's gain 12 ANNUAL REPORT OF BOARD OF GOVERNORS of reserves is another bank's loss. As a result, restrictive open market operations, by causing more frequent and widespread reserve drains among member banks, leads them to discount temporarily at the Federal Reserve Banks in order to maintain their legal reserve positions. At times of a relatively large volume of member bank borrowing, many banks are in debt to their Federal Reserve Banks. For each bank, however, borrowing is temporary and the repayment by one bank tends to draw reserves from other banks, which in turn may have need to borrow. Consequently, a progressively larger number of member banks become subject to the restrictive functioning of the discount mechanism over time as the volume of discounts rises. In a purely accounting sense, an increase in borrowing by member banks, by providing them with additional reserves, offsets, at least in part, the effect of open market operations designed to limit reserve availability. This observation calls for further comment on the role of discounting. The discount mechanism acts as a safety valve, providing a temporary means of adjustment to the more frequent reserve deficiencies that occur at times of pressure on reserves. Use of the safety valve, however, does not provide an escape from monetary restraint. In the first place, a higher discount rate makes member bank borrowing more expensive. Secondly, indebted banks tend to restrict credit expansion at such times and to use reserve accretions that come into their possession to repay their debts to the Reserve Banks rather than to make additional loans and investments. The attitude of member banks toward operating with borrowed resources varies from bank to bank. Many banks never borrow from the Federal Reserve Banks, preferring to make reserve adjustments by varying their holdings of liquid assets or by borrowing from other commercial banks. Many of the banks that do avail themselves of the discount privilege are reluctant to incur frequent indebtedness at the Federal Reserve Banks. This attitude is based on a long-standing tradition among commercial banks against assuming liabilities that take precedence over those to depositors. It is also based on Federal Reserve practice in administering the discount window, which ordinarily discourages reliance on discounting for extended periods. The function of the discount rate at times of re- FEDERAL RESERVE SYSTEM 13 straint is to reinforce both the commercial banks' reluctance to borrow or remain in debt and the Reserve Banks' administration of the discount window. In summary, open market policy and discount policy are complementary instruments of day-to-day monetary policy. In a period of monetary restriction, open market policy limits the availability of bank reserves at the System's initiative. In effect this action places initiative in obtaining additional reserves with the member banks, many of which are reluctant to operate for extended periods on the basis of borrowed reserves. As restrictive monetary policy continues or becomes more intense, there are increases in the frequency, average duration, and volume of discounts, as well as in the number of member banks engaging in such borrowing. At such times, the cost of borrowing reserves—that is, the discount rate—may also be raised. Commercial bank lending and investing policies thus come under increasing restraint. At a time when a reversal of monetary restraint is called for by economic circumstances, open market and discount policy also operate in association. As reserves are supplied at the System's initiative, one result is that member banks are enabled to repay their indebtedness at Reserve Banks. As this happens and excess reserves accrue, banks seek active uses for them in loan and investment expansion. ROLE OF THE DISCOUNT RATE Because of the restraining effect of borrowing and the stimulating effect of excess reserves on member banks' extension of credit, there is a broad relationship between the amount of borrowings and excess reserves—or the net of these figures—and the level of shortterm open market interest rates. When member bank borrowing is at a relatively high level, short-term market interest rates tend to remain close to and at times above the Reserve Bank discount rate. The effectiveness of the discount rate as an influence on member banks' attitudes toward indebtedness depends upon a number of factors, including the relationship of the discount rate to market rates of interest, especially rates on the market instruments that banks use as secondary reserves. The margin of preference as between one form of reserve adjustment and another is in part affected by the relative cost of the alternative methods. 14 ANNUAL REPORT OF BOARD OF GOVERNORS As pressure on bank reserve positions leads to increasingly frequent reserve deficiencies, banks dispose of Treasury bills and other short-term securities, particularly if the market yield on bills is appreciably below the discount rate. Their actions, in view of the active credit demands that are likely to feature a period when credit restraint is in force, increase the market supply of short-term securities and this tends to raise their market yields. As these rise above the discount rate, there is some shift in the margin of preference of member banks as between borrowing and sale of short-term securities to meet reserve drains. If, from the point of view of the Federal Reserve, it is desirable to maintain or increase the pressure on banks to restrict loan expansion, an increase in discount rates may become appropriate. Although effective discount policy requires that the discount rate remain in touch with market rates, there are no simple rules governing either the magnitude or timing of changes in discount rates. A given change in discount rates may in some circumstances express a shift in direction or intensity of policy. In other circumstances, however, a change may merely represent a technical adjustment designed to maintain the existing degree of restraint or ease, when variations in the strength of credit demands have caused market rates to move substantially above or below the prevailing discount rate. The relationship between market rates and discount rates is one of interdependence. When market rates rise in periods of monetary restraint, it is desirable that discount rates rise concurrently in order to reinforce the influence of a relatively high level of indebtedness on member bank willingness to extend credit. On the other hand, however, discount rates in such periods are also focal rates in the credit market, and short-term rates tend to become closely related to them. For example, if discount rates are raised above yields on shortterm securities, the margin of preference of many banks as between sales of securities and borrowing at Reserve Banks will shift toward sales of securities. This, in turn, will work to raise short-term market yields toward or above the discount rate. It is evident, therefore, that discount policy can be used more or less actively depending upon the economic and financial situation with which monetary policy is attempting to cope. Discount rates 15 FEDERAL RESERVE SYSTEM can be raised fairly aggressively, leading the market to some extent, at times when it is desirable to impose a distinct increase in monetary restraint. In those circumstances member banks would find it desirable to sell securities in order to avoid or reduce indebtedness at the Reserve Banks. At the other extreme, even when there is no INTEREST RATES Per cent 1953 1955 1957 NOTE.—Weekly averages. Corporate series is from Moody's Investors Service; U. S. Government bonds, old series through April 1953, then consolidated series based on bonds due or callable in 10 or more years; discount rate is that charged by Federal Reserve Bank of New York; and Treasury bill series represents market yield on 90-day issues. All Government yields are averages of daily closing bid quotations compiled by the Federal Reserve Bank of New York. desire to increase the degree of restraint, a significant advance in market rates may require that discount rates be raised in order to avoid a diminished effectiveness of existing restraint. The discount rate also plays a role at a time of recession, when monetary policy is endeavoring to increase the availability of bank credit to finance expenditures. In the first place, a reduction in discount rates at such times, like an increase in periods of monetary restraint, tends to be reflected in many market rates of interest. Secondly, it makes the direction of Federal Reserve policy perfectly clear 16 ANNUAL REPORT OF BOARD OF GOVERNORS to financial markets and to the public generally, as is true also of increases in discount rates in times of expansion. In addition, as open market operations provide reserves that enable member banks to reduce indebtedness at the Reserve Banks, a lowering of discount rates assures the banks that any temporary reserve drains can be offset by temporary borrowing without severe penalty. In these circumstances, individual banks will tend to be more willing to utilize such increments in reserves as they may experience in expanding their loans and investments. This role of the discount rate in relaxing restraint or in easing credit conditions, while psychological in its impact, may at times justify reductions in rates that lead the market. Initiative in changing discount rates under the Federal Reserve Act rests with the individual Reserve Banks. The law requires that the Reserve Banks shall establish discount rates every 14 days, and recommend them to the Board for review and determination. Each Reserve Bank has an economic intelligence staff which keeps economic and credit conditions in its District under continuous observation in relation to developments in national markets as well as in relation to international developments. Officials of individual Reserve Banks are also in constant communication with officials of other Reserve Banks and with the Board of Governors, facilitating the exchange of information within the System. Thus, a continuous flow of information about regional, national, and international influences in the economic and credit situation is available to the Reserve Bank directors, who also are actively engaged in banking, business, or other pursuits and who, through these pursuits, have close knowledge of commerce, industry, and agriculture. Coordination of discount rate action among the Reserve Banks is ordinarily effected through this flow and exchange of economic information, although all Banks do not act at the same time or by the same amount. DISCOUNT POLICY 1955-57 As rapid recovery from the 1953-54 recession turned into vigorous economic expansion in 1955, Federal Reserve policy gradually changed from ease to restraint. The restrictive policy was designed mainly to limit the rate of bank credit and monetary expansion to a FEDERAL RESERVE SYSTEM 17 pace that would foster sustainable economic growth but also dampen inflationary pressures. The policy of restraint—which continued with varying intensity until the autumn of 1957—was implemented by a combination of open market operations and discount rate changes. Open market policy during the period of restraint limited the growth of bank reserves in the face of rapid expansion in loan demands. This led, among other consequences, to a substantial reduction of bank holdings of United States Government securities and, at the same time, to a decline in excess reserves and an increase in member bank borrowing at the Federal Reserve Banks. Member bank indebtedness rose above $500 million in mid-1955, and, with few exceptions, fluctuated between this amount and $1 billion until late in 1957. In the course of the entire period, strong demand for loanable funds in credit markets maintained upward pressure on interest rates. As market yields on short-term securities—notably Treasury bills—rose to or above the prevailing discount rates, these rates were increased in order to maintain pressure on member banks to repay their borrowings and thus to restrain their lending activity. In most instances, the advance in discount rates represented an adjustment to changes that had occurred in market rates rather than an attempt to lead market rates. In contrast with 1952-53, however, such adjustments in discount rates were made quickly and readily. There were few occasions until late 1956 when the yield on Treasury bills remained above the discount rate for an appreciable period. Discount rates were raised in April, August, September, and November 1955, for a total of one percentage point. In April 1956, 10 Reserve Banks raised discount rates one-fourth percentage point to 2% per cent and the Minneapolis and San Francisco Banks advanced rates to 3 per cent. In August 1956, the other 10 Banks went up to 3 per cent. From August 1956 until August 1957, discount rates remained unchanged at 3 per cent. During most of this 12-month period, Treasury bill yields were above the discount rate. A factor delaying a further increase in discount rates in 1957 was the frequency of Treasury financing operations for both new borrowing and refunding purposes. Also, variation in economic developments was a factor, 18 ANNUAL REPORT OF BOARD OF GOVERNORS as appraisals of economic prospects shifted from exuberance to uncertainty and back to exuberance again. In August 1957, following several months of rise in market rates of interest, with Treasury bill yields above 3% per cent, and with leading banks raising their rate on loans to prime customers to 4!/2 per cent, discount rates were raised to 3l/2 per cent after the completion of a large financing by the Treasury. This action represented an effort to maintain the effectiveness of the discount mechanism as a component of restrictive policy in the face of the sharp increases in rates on loans and in market yields on securities. By October, bank loans were being reduced contrary to usual seasonal trends and economic information becoming available suggested that inflationary pressures were abating. In these circumstances, open market operations were modified to lessen restraint on bank credit and monetary expansion. In mid-November, information indicated that general downward readjustment was setting in and Federal Reserve Bank discount rates were reduced from 3*/2 to 3 per cent. While short-term money rates had shown a declining tendency before this action, this discount rate reduction was intended not as an adjustment to the movement of market rates but rather as a clear signal to the business community and the public generally that Federal Reserve policy was being directed toward moderating pressures on bank reserves. Postwar experience with flexible monetary policy embraces a relatively short period—in fact, less than a decade. While a pattern of complementary use of the discount and other policy instruments has emerged in this brief period, it would be premature to regard this pattern as established. The Federal Reserve System has had to proceed experimentally, evaluating the relative strength of forces in each developing situation and keeping constantly mindful of the lessons learned from experience and of the public interest as expressed in the Federal Reserve Act and in the Employment Act of 1946. Further development of the complementary use of policy instruments will necessarily have to evolve in this way. DEMAND AND SUPPLY OF FUNDS IN 1957 Total public and private debt increased somewhat less in 1957 than in the preceding year. After rising by a record peacetime amount in 1955, total debt in the economy grew at a declining rate 19 FEDERAL RESERVE SYSTEM in the two subsequent years. With supplies of loanable funds from all sources less readily forthcoming as the capital goods boom extended itself, and with credit demands remaining strong, interest rates rose further until the autumn of 1957. When economic activity turned down in the latter part of the year, total demands for borrowed funds declined. With monetary policy also easing, interest rates fell sharply in the fourth quarter. CREDIT AND CAPITAL EXPANSION Billions c f dollars BUSINESS <ZONSUMER CONSUMER CREDIT BANK LOANS SECURITY ISSUES Mi 9 1 1 MORTGAGE liiIII FEDERAL STATE AND LOCAL — - r Ill 20 10 • 0 10 •55 '56 '57 •55 '56 '57 •55 '56 '57 '55 '56'57 NOTE.—Calendar-year totals. Business: (1) Security issues—net change in outstanding corporate securities as estimated by Securities and Exchange Commission; (2) bank loans— net change in business loans at all commercial banks with figure for 1957 preliminary. Consumer: (1) Net change in mortgage debt outstanding on 1- to 4-family houses with figure for 1957 preliminary, and (2) net change in short- and intermediate-term consumer credit outstanding. Federal: Net cash borrowing as reported by the United States Treasury Department. State and local government: Net change in outstanding State and local government debt as estimated by Federal Reserve. CREDIT DEMANDS Over-all credit demands remained strong in 1957, increasing in some areas and declining in others. As the business investment boom leveled off, business demands for new funds subsided slightly from the advanced level of the previous year. Net borrowing by consumers to finance purchases of both homes and durable goods declined further, after the extraordinary surge of such borrowing in 1955. The Federal Government, on the other hand, reduced its cash 20 ANNUAL REPORT OF BOARD OF GOVERNORS surplus markedly and Treasury debt repayment supplied a smaller volume of funds to financial markets. Borrowing by State and local governments continued to expand strongly. International transactions also brought increased pressures on credit markets in 1957. Business sector. The boom in fixed capital spending by business extended itself into the third quarter of 1957 after a record increase in 1956. These outlays were about 8 per cent larger than in the first three quarters of 1956. Business receivables continued to grow rapidly, but additions to nonfarm business inventories were much less than earlier. Consequently total investment outlays of business were about the same as in the first three quarters of 1956. In the fourth quarter fixed investment expenditures declined while business receivables and inventories were reduced. In this quarter, too, capital commitments and plans for new expansion were being cut sharply. In financing investment outlays, business corporations had available a somewhat greater volume of internal funds than in 1956, as the continued rise in depreciation allowances was offset only in part by a decline in retained earnings. Even so, they reduced further their holdings of cash and Government securities. The volume of external financing through securities markets and banks combined was thus slightly less than the extraordinary amounts in 1956. There was, however, a marked shift in the external sources of business financing. Security issues for new capital were one-fifth larger than in the previous year. On the other hand, business loans outstanding at commercial banks increased only one-third as much as in 1956. In the first nine months of 1957, business loans at commercial banks expanded at a slower pace than in the previous year, as loan repayments rose more rapidly than new lending. The amount of new loans made, however, continued to exceed the 1956 volume month by month. In the fourth quarter, there was little net growth in loans outstanding as seasonal borrowings were offset by net repayments on the part of other users of bank credit. Contrary to usual seasonal trends, business loans at commercial banks were actually reduced in October and November. The shift in business financing from banks to securities markets in 1957 was in part a reflection of the changing pattern of business 21 FEDERAL RESERVE SYSTEM BUSINESS INVESTMENT Billions of dollars, annual rates 60 - 50 PRODUCERS' DURABLES AND BUSINESS CONSTRUCTION - 40 W jT ... - 30 1 1 1 10 i <^\J ! 1 1953 INVENTORY 1 1 1955 CHANGE » 1 10 1957 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. spending. Inventories were accumulated at a reduced rate as industrial capacity increased and supplies of most materials and products became readily available on short notice. Accordingly, bank financing of inventory expansion was held down and even discouraged. Furthermore, an increasing proportion of the growing total of fixed capital outlays was accounted for by public utility firms, which typically rely more heavily than other industries on borrowing in the capital markets. The shift by businesses from banks to securities markets also was a result of rapid growth of bank loans in 1955-56, when bank financing was frequently used in anticipation of long-term borrowings. Finally, the reduction in liquidity of businesses and banks that had already occurred tended to discourage, on both the demand and supply sides, further expansion of business loans at banks. Among other forms of business finance, the expansion of mort- 22 ANNUAL REPORT OF BOARD OF GOVERNORS gage credit other than on 1- to 4-family homes, part of which represents business borrowing, was about one-third less than in 1956. In addition, corporations raised a smaller volume of funds through the sale of United States Government securities. The reduction in holdings of Government securities by nonfinancial corporations was about $2.5 billion, compared with $4.7 billion in 1956. Although smaller than in 1956, the total amount of funds absorbed by the business sector was large relative to other years. Following as it did two years of rapid debt expansion, the volume of business borrowing in the first nine months of 1957 gave rise, especially in the corporate bond market, to sharply advancing interest rates and to other loan provisions more attractive to lenders. In the last quarter of the year, these tendencies were reversed. Consumer sector. Consumer indebtedness increased less than in 1956 but the rate of expansion, about 6 per cent, exceeded the growth in consumer incomes. The growth of debt in the form of residential mortgages and consumer credit, at $11.3 billion, was one-fifth less than in 1956 and two-fifths less than the unusual expansion of 1955. Residential construction, after a two-year decline, leveled out in the spring of 1957. For the year as a whole outlays for residential construction were less than in 1956, as was the volume of sales of existing houses. The slower expansion of residential mortgage debt was related to these developments as both cause and effect. The slower growth of home mortgage debt in 1957 was reflected mainly in continued sharp reduction of Federally underwritten loans, as market interest yields rose relative to the fixed rates on FHA and VA mortgages. Rates on conventional mortgages rose more than one-half percentage point. In the course of the year, terms on Federal Housing Administration mortgages were adjusted to improve their competitive position. Maximum permissible interest rates on FHA mortgages, which had been raised one-half percentage point to 5 per cent in December 1956, were increased to 5% per cent in August 1957. Although maximum discount schedules were also established, FHA mortgages apparently became more attractive instruments of housing finance, and applications rose markedly in the latter months of the year. Concurrently, with the rate on Veterans Administration mortgages fixed at FEDERAL RESERVE 23 SYSTEM 4^4 P e r cent > applications in connection with this type of financing dwindled to low levels. Consumer purchases of automobiles and other durable goods increased in dollar terms in 1957. Extensions of consumer instalment credit also rose, particularly for automobile purchases and personal CONSUMER INSTALMENT AND MORTGAGE CREDIT Billions of dollars . INSTALMENT CREDIT — - 12 . MORTGAGE CREDIT 10 EXTENDED LOANS MADE y REPAID ~" 8 - 6 4 i 1953 1 1955 1957 10 8 / 6 4 <*-~~mm~m~ ^ - I.. RETIREMENTS 1 , 1953 1955 1 , 2 1957 NOTE.—Instalment credit: Federal Reserve seasonally adjusted quarterly estimates. Repayments include amortization and interest, and changes in outstandings are differences between credit extended and repaid. Mortgage credit: Quarterly data, seasonally adjusted by Federal Reserve. Loans made are Federal Home Loan Bank Board's series on mortgage recordings of $20,000 or less. Changes in outstandings are derived from Federal Reserve estimates of mortgage debt outstanding on 1- to 4-family houses. Retirements include prepayments and scheduled amortization of principal and are differences between loans made and changes in outstandings. loans. Repayments continued to increase rapidly, however, and the expansion in outstanding credit slackened toward the end of the year. Most of the slowdown was accounted for by credit for purchasing consumer goods other than automobiles. Government sector. The Federal Government's cash operations in the calendar year 1957 resulted in a surplus of $1.5 billion compared with a surplus of $6.3 billion in the preceding year. While tax receipts rose $4 billion, Treasury cash expenditures increased more than twice that amount. Federal spending rose sharply from mid-1956 to mid-1957, with much of the increase in the national 24 ANNUAL REPORT OF BOARD OF GOVERNORS security category. After midyear 1957, outlays and new orders for military procurement were somewhat reduced. For the calendar year 1957 as a whole, Federal cash expenditures were nearly $9 billion above the level of the previous year. About one-third of the increase was accounted for by spending for goods and services and the rest by transfer payments including social security benefits, agricultural payments, and payments to the States from the highway trust fund. As the Federal cash surplus declined, net Treasury debt repayment, which had amounted to $5.9 billion in 1956, fell to $1.5 billion in 1957. Aside from returning a smaller volume of funds to the securities markets in 1957, the Treasury found it necessary to sell securities more often and in larger amounts than in 1956. Unanticipated difficulties in managing the Treasury's balances in the early months of the year—associated with heavy redemptions of savings bonds and of maturing securities that were being refunded—led to sales of securities for new money in the amount of nearly $6 billion in the first half. Such financing is usually unnecessary during this period of the year when tax receipts are heavy. In the second half of 1957, new money borrowing also was greater than in the corresponding period of 1956. In addition to direct Treasury borrowing, various Government agencies increased their sales of securities in the market. Some of the funds obtained financed expanding activities of these agencies; some repaid indebtedness to the Treasury, permitting it in turn to increase expenditures without increasing direct debt. State and local government expenditures continued to grow steadily in 1957. Following the approval of a record volume of new construction projects at the November 1956 elections, the demand for long-term funds by State and local governments increased. Bonds issued for new capital amounted to $7.1 billion, about one-third more than in 1956. Issues to finance school construction were in record volume and accounted for about two-fifths of the total, compared with one-third in 1956. A large volume of authorized borrowing was still unused at the end of 1957. Interest costs for both the United States Treasury and State and local governments rose to new high levels during the first three quarters of 1957 as the entire interest rate structure moved up. By 25 FEDERAL RESERVE SYSTEM BOND YIELDS-LONG TERM Per cent STATE AND LOCAL GOVT. Aaa 1953 1955 1957 NOTE.—U. S. Government yields are old series through April 1953, then consolidated series based on bonds due or callable in 10 years or more. Yields on corporate and State and local government bonds are from Moody's Investors Service. U. S. Government and corporate yields are weekly averages of daily figures and State and local yields are based on Thursday data. late summer, the spread between short- and long-term Treasury securities had almost disappeared, and long-term Treasury bonds were yielding nearly 3% per cent. Yields on the highest grade State and local obligations, which are tax-exempt, reached a peak of nearly 3l/2 per cent in late August and then turned down. In the last quarter of the year, all rates declined sharply in response to the downturn in economic activity and the relaxation of credit restraint. International capital transactions. The financing of increased United States exports added to the credit demands of domestic and foreign business borrowers and of the Federal Government. Moreover, foreign holdings of money market assets such as Treasury bills increased much less than in preceding years. Export of goods and services in the first half of 1957 were at an annual rate of about $27 billion, 20 per cent more than in the corre- 26 ANNUAL REPORT OF BOARD OF GOVERNORS sponding period of 1956. Capital transactions provided much larger sums for the financing of exports than at any time in the preceding four years. Net foreign investment—defined in financial accounts as the increase in United States assets abroad and in gold minus the increase in foreign assets in the United States—was at an annual rate of almost $4 billion in the first half of 1957, compared with about $500 million in the same period of 1956. In the second half of 1957, foreign purchases from the United States were reduced and net foreign investment fell off to about $2.5 billion. At the end of the year it was at a still lower rate. Financing of the $3 billion excess of foreign purchases in this U. S. BALANCE OF PAYMENTS Billions of dollars TOTAL PAYMENTS FROM U. S. EXPORTS OF GOODS AND SERVICES //^ N/ _s+ * IMPORTS OF GOODS_ AND SERVICES i l i l l l i U i •••••• NET TRANSFERS OF GOLD AND DOLLARS I 1953 I • | 1955 1957 NOTE.—Upper section: Quarterly data, adjusted for seasonal variation by the Department of Commerce. Total payments from the United States include imports of goods and services, private remittances, Government grants and loans, and net U. S. private capital outflow. Exports of goods and services and Government grants exclude military transfers under aid programs. Lower section: Increases in total foreign gold and dollar holdings through transactions with the United States, quarterly, unadjusted for seasonal variation. Dollar holdings include short-term U.S. liabilities to foreigners reported by banks in the United States and U. S. Government long-term securities. FEDERAL RESERVE SYSTEM 27 country over United States imports and Government grants was accomplished through the interplay of several types of flows, affecting various segments of United States financial markets. Net outflows of United States private capital and Government credits amounted to about $3 billion and $1 billion, respectively. On the other hand, there was a net inflow of foreign private long-term capital and unidentified net inflows which together amounted to about $1 billion. Gold sales to the United States by the International Monetary Fund and foreign countries were about $800 million; these, however, were partly offset by an increase, though a smaller one than in earlier years, in aggregate foreign holdings of liquid dollar assets, including Treasury bills and other Government securities, bankers' acceptances, and bank deposits. The $3 billion outflow of United States private capital had its counterpart in domestic credit markets and in flows of corporate internal funds. Net new investment abroad of $2 billion in subsidiaries of United States companies was supported in part by internal funds of the parent companies and in part by new corporate security issues and bank loans in the United States. Issues of new securities by foreign borrowers and by the International Bank for Reconstruction and Development amounted to about one-half billion dollars in the year 1957 as a whole. Other foreign borrowings net of repayments exceeded one-half billion. CREDIT SUPPLIES The supply of loanable funds from all sources—savings plus bank credit—declined further in 1957, as it had in 1956 after the extraordinary volume of lending that had occurred in 1955. Activation of idle cash balances continued in 1957 but at a slower pace than in the two previous years. New funds available to savings institutions other than commercial banks were somewhat smaller in the aggregate than in 1956 but direct lending by individuals in capital markets increased. Commercial bank credit, reflected particularly in growth in time deposits, expanded by nearly $5 billion—somewhat more than in the two preceding years. Personal saving. For the year as a whole, net personal saving was little changed from 1956. It declined slightly as a percentage of dis- 28 ANNUAL REPORT OF BOARD OF GOVERNORS posable personal income, reflecting a lower saving rate in the second half of the year. Saving in financial form, however, increased markedly. The spurt in financial saving by individuals was the result of larger accumulation of financial assets as well as smaller incurrence of debt, and accompanied a rise in interest returns available on savings. Repayments on short- and intermediate-term consumer instalment credit rose from 13.0 per cent of disposable income in 1956 to 13.3 per cent in 1957. GROWTH OF SELECTED TYPES OF SAVINGS Billions of dollars COMMERCIAL BANKS MUTUAL SAVINGS BANKS 1954 1955 1956 1957 NOTE.—Time deposits (excluding interbank deposits) at commercial and mutual savings banks. Share accounts for all savings and loan associations in the United States, from the Federal Savings and Loan Insurance Corporation. Figures are preliminary for 1957. Among the financial assets acquired by individuals were exceptionally large amounts of corporate securities and savings deposits at commercial banks, the interest returns on which were rising during much of the year. Their holdings of United States Government securities rose less than in 1956 as substantial amounts of savings bonds were turned in for redemption. While a larger share of individuals' savings was invested directly in securities, a smaller share was invested through the financial intermediaries that channel these savings to capital market borrowers. FEDERAL RESERVE SYSTEM 29 Institutional lenders. The growth in combined assets of insurance companies, savings and loan associations, and mutual savings banks was somewhat less than in 1956. While the assets of savings and loan associations increased a little more than in the previous years, those of life insurance companies and mutual savings banks expanded less. More striking than the small changes in the rate of asset growth of these institutions was the shift in the pattern of their investments. The flow of their funds into business securities increased while their new investment in mortgages declined sharply. As yields on corporate securities rose more rapidly than those on residential mortgages, the allocation of investment funds by savings institutions shifted accordingly. The growth of net mortgage holdings by life insurance companies was $1.4 billion less than in 1956 while holdings of business securities rose half a billion more than in 1956. Mutual savings banks acquired $800 million of business securities in 1957, compared with $200 million in 1956; on the other hand, mortgage portfolios of these institutions rose $900 million less than in 1956. Savings and loan associations, which are more highly specialized in their lending activity, increased mortgage holdings slightly more than in 1956. Bank credit. Loans and investments at all commercial banks increased $5 billion in 1957, or one-sixth more than in 1956. Most of the difference between the two years occurred in the fourth quarter, when monetary policy shifted and commercial bank credit expanded $500 million more than in the fourth quarter of 1956. Bank loan expansion slowed considerably. After rising 16 per cent in 1955 and 9 per cent in 1956, loans outstanding at commercial banks grew 4 per cent in 1957. As noted earlier, business loan expansion slackened in the first nine months of the year and, contrary to seasonal expectations, practically ceased in the last quarter. Other bank loans, however, increased in the fourth quarter by as much as in the same period of 1956. Bank holdings of securities rose in 1957 after declining substantially in 1955 and 1956. Although United States Government security holdings were reduced by a small amount, holdings of other securities, including those of Government agencies, State and local governments, and business corporations, increased $1.5 billion. Commercial bank deposit liabilities increased more than in 1956. 30 ANNUAL REPORT OF BOARD OF GOVERNORS BANK LOANS AND INVESTMENTS ALL COMMERCIAL BANKS Billions of dollars 180 TOTAL 160 140 J I I I 120 100 J^J_ 80 1953 1955 1957 NOTE.—Figures are partly estimated. Data exclude interbank loans and are for last Wednesday of month, except for June and December call dates. Figures for last half of 1957 are preliminary. Within the total, however, demand deposits declined slightly over the year while time deposits grew by a record peacetime amount. The large growth in savings and other time deposits at commercial banks in 1957—amounting to $53 billion or more than twice as much as in 1956—undoubtedly represented in part a shift of relatively inactive balances from demand deposits. Demand deposits adjusted and currency outside banks, generally considered as the active money supply, had increased 3 per cent in 1955 and one per cent in 1956. The latter rate of growth continued in the first half of 1957 but was not maintained thereafter. At the end of the year, the active money supply was slightly below the end-of1956 level. Turnover of demand deposits rose further in the first three quarters, but not so much as in the preceding two years. In the 31 FEDERAL RESERVE SYSTEM MONEY SUPPLY AND RATE OF TURNOVER Per Billions of cent dollars 135 DEMAND DEPOSITS A N D CURRENCY 130 23 125 22 120 21 TURNOVER Scale 20 19 18 1953 1955 1957 NOTE.—Figures for deposits and currency are quarterly averages of seasonally adjusted data for last Wednesday of month and are partly estimated. Demand deposits are for all banks in the United States and exclude U. S. Government and interbank deposits and items in process of collection. Currency excludes bank vault cash. Data for last half of 1957 are preliminary. Figures for turnover are annual averages for 337 leading centers outside New York and 6 other financial centers. fourth quarter, with the downturn in economic activity, turnover declined. Since bank deposit expansion during 1957 was in time deposits, which carry low reserve requirements, there was little change in required reserves of member banks during the year. Reserves were supplied early in the year from additions to the country's gold stock and at times by member bank borrowing. Federal Reserve holdings of securities declined on balance during the year. The principal changes in Federal Reserve policy during the year are summarized on the following page. 32 ANNUAL REPORT OF BOARD OF GOVERNORS DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, Period 1957 Action Purpose of action January-June Reduced holding of U. S. Government securities by about $1.8 billion. Member bank borrowings increased from an average of $400 million in January to $1 billion in June. To offset the effect on reserves of seasonal factors and the sale of $600 million of gold to the United States Treasury by the International Monetary Fund, and to exert pressure on bank reserve positions by bringing about a higher level of member bank borrowings. August Raised discount rates from 3 to 3% per cent at all Reserve Banks. To bring discount rates into closer alignment with open market money rates and maintain the restrictive effect of member bank borrowing. JulyMid-October To meet changing reserve needs and at the same time maintain continuing pressure on bank reserve positions. Mid-OctoberDecember Bought and subsequently sold small amounts of U. S. Government securities at various times. Member bank borrowings remained at or near average of $1 billion. System holdings of U. S. Government securities increased by $1 billion, including substantial amounts of securities held under repurchase agreement. Member bank borrowings declined to an average of less than $750 million. NovemberDecember Reduced discount rates from 3/4 to 3 per cent at all Reserve Banks. To reduce the cost of borrowing from the Reserve Banks and eliminate any undue restraint on bank borrowing in view of the decline in business activity and evidences of economic recession. To increase the availability of bank reserves and thereby cushion adjustments and mitigate recessionary tendencies in the economy. FEDERAL RESERVE SYSTEM 33 RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE The policy directive of the Federal Open Market Committee in effect at the beginning of 1957 was the directive that had been approved at the meetings on November 27 and December 10, 1956. This directive, which placed emphasis on restraining inflationary developments and which was issued to the Federal Reserve Bank of New York as the Bank selected by the Committee to execute transactions for the System open market account, read as follows: (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allowing maturities to run off without replacement) for the System open market account in the open market or, in the case of maturing securities, by direct exchange with the Treasury, 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 restraining inflationary developments in the interest of sustainable economic growth, while recognizing additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions, and (c) 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 $1 billion; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 $500 million; (3) To sell direct to the Treasury from the System account for gold certificates such amounts of Treasury securities maturing within one year as may be necessary from time to time for the accommodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. 34 ANNUAL REPORT OF BOARD OF GOVERNORS The Federal Open Market Committee met 18 times during 1957, and the policy actions taken at those meetings are reported on the following pages by date of meeting, together with the record of votes on each such action. In addition to these meetings, the Committee held a telephone conference of the available members on April 24, 1957 for the purpose of discussing informally the instructions that had been issued at the preceding meeting. No policy actions were proposed or taken during that discussion. January 8, 1957 1. Authority to effect transactions in System account. The Committee changed clause (b) of the first paragraph of its directive to provide for open market operations with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while recognizing unsettled conditions in the money, credit, and capital markets and in the international situation." Since November 27, 1956 this clause had read "to restraining inflationary developments in the interest of sustainable economic growth while recognizing additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, and Szymczak. Votes against this action: None. The domestic economic situation, as of this meeting, was summarized as strong and still on the inflationary side; while abroad it was partly slackening and partly steady in Europe and inflationary outside Europe. Commodity prices were continuing to tend upward, industrial production had risen slightly in December from the November level and a further rise appeared possible for January, construction activity had been holding close to record levels, total employment was close to the highest levels reported for this season of the year, business inventories had shown a spurt in November (the latest month for which data were available), new orders in durable manufacturing in November exceeded slightly previous record levels, and personal income in November had been 6 per FEDERAL RESERVE SYSTEM 35 cent ahead of a year earlier. Department store sales in November and December had shown similar gains over the previous year. The full year 1956 represented close to capacity performance for the domestic economy, and this had taken place while the rate of increase in the privately held monetary stock had declined, the money supply having averaged only 1.3 per cent greater in the course of 1956 than in 1955. Although there had been a more active use of the existing money stock, the cumulative effects of the slower growth in the privately held money stock had operated to retard the further expansion of aggregate demand for goods and services in relation to output and to damp down inflationary pressures. This business picture showed essentially no change since the December 10 meeting of the Committee, although there were intimations that the upward thrust of the economy might be losing some of its momentum. System open market operations during the closing weeks of 1956, as called for by the directive approved at the November 27 and December 10 meetings, had been designed to meet expected heavy liquidity needs of the period due to seasonal and special international factors. They had, in effect, been conducted so as to prevent any increase in restrictive pressures beyond those previously applied and had actually relaxed pressures somewhat. There had been continued pressures on the market, however, because of the very heavy credit demands, some of which reflected more than the usual business borrowing to meet end-of-year financial needs, owing in part to the reduced liquidity of business. These developments indicated that credit demands continued to be vigorous. With the economy operating at close to capacity limits and with prices continuing to rise, the change in the policy directive to delete the reference to seasonal factors that brought additional pressures and which had called for some adjustment of policy in the last few weeks of 1956 seemed appropriate. At the same time, the revised wording registered an awareness by the Committee of the possibility of unduly severe restraint inherent in the current low level of corporate liquidity and in the financing program ahead. In other words, the directive issued at this first meeting of 1957 continued the policy of restraint upon credit expansion that had been in effect for approximately two years, but it represented an adjustment from the program followed in the last few weeks of 1956 when funds had 36 ANNUAL REPORT OF BOARD OF GOVERNORS been put into the market to help meet added seasonal pressures within the limits of the policy of restraint. 2. Resolution concerning International Monetary Fund transactions. The Committee approved the following resolution: "Resolved, that the Federal Open Market Committee express no views with respect to the form in which the International Monetary Fund chooses to draw upon its dollar resources." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, and Szymczak. Votes against this action: None. This resolution was a response to an inquiry by the United States Executive Director of the International Monetary Fund who had inquired whether the Federal Reserve System would see objection to use by the Fund of some of its gold holdings in meeting prospective drawings against the Fund. In concluding that it would express no views as to the form in which the Fund might choose to draw upon its dollar resources, the Committee sought to preserve the utmost freedom to the Fund in meeting its problems. It was not felt that the Federal Reserve System should tell the Fund or any other agency how it should carry out its responsibilities. The Committee wanted, however, to be kept informed by the Fund in advance of its operations in the American market and appreciated having had an opportunity to know of and consider the current proposal. In keeping with this approach, the Committee felt that the System should follow monetary policy that fitted the circumstances whenever external factors occurred. Thus, in approving the resolution it was understood that the Committee's operations would be used to offset the influence of the operations of the Fund in accordance with whatever the Committee's policy might be. January 28, 1957 1. Authority to effect transactions in System account. The Committee made no change at this meeting in the wording of its directive to the Federal Reserve Bank of New York, thus con- FEDERAL RESERVE SYSTEM 37 tinuing in effect the policy decision that operations for the System open market account should be with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while recognizing unsettled conditions in the money, credit, and capital markets and in the international situation." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: None. At the time of this meeting the economic situation domestically remained one of intensive utilization of manpower and other resources and of demand pressure on price levels. Abroad, output and employment generally continued at high levels with price trends most typically on the upside. Domestic industrial production for January was turning out to be at about the same level as in December. There were at the same time developments that suggested that the economy might be losing some of its upward momentum. While these data were not sufficient to support a forecast of a downward turn as a clear, nearby prospect, they suggested that the economy might be entering a period of sidewise movement. For example, a tendency for total capital expeditures to level off was evidenced by recent figures for factory construction contracts, new machine tool orders, and freight car orders, together with scattered announcements of postponements of plant construction projects. There were cross currents in the area of prices with higher costs showing up in increased prices for finished goods, both at wholesale and at retail, in contrast with a softening trend in prices of a number of primary products. Business loans at all reporting member banks after a fourth quarter rise of $1.6 billion declined by more than $700 million in the three weeks to mid-January, a postwar record decline for the period that compared with a drop of $355 million a year earlier. A rapid decline in security loans had also occurred and about threefourths of the total rise in loans during the fourth quarter of 1956 had been wiped out. December's sharp rise in interest rates had been followed by an equally sharp decline, the tight tone of the money market by a feeling of ease. The contraction in bank loans that had occurred since the latter part of December had taken place 38 ANNUAL REPORT OF BOARD OF GOVERNORS notwithstanding a continued state of relatively less restraint on bank reserve positions, reflected in a decrease in member bank borrowing to the lowest level since early 1955. This liquidation of bank loans since the Christmas season indicated that most of the unprecedented credit demands in December had been to cover temporary needs for cash. These mixed developments suggested on balance that, while the situation still seemed to be one of pressures on the expansionary side requiring continued restraint on credit growth, care was needed to avoid becoming too restrictive. In reviewing operations during recent weeks, the Committee recognized that the furnishing of reserves in the latter part of 1956 to meet seasonal and other requirements had actually resulted in some reduction in the degree of restraint on credit expansion that had existed in mid-November. It also recognized that the current relative ease was unintended, since it reflected a larger than expected decline in loans and return flow of currency, as well as the relative immobility imposed on the System by the Treasury financing operation. It was believed that operations now should be designed toward restoring approximately the degree of restraint of the late November-early December period, but it was not believed that an increase in that level of restraint was called for at this particular time. 2. Increase in authority to effect transactions in System account. The Committee ratified the action taken by the individual members of the Committee as of the close of business January 22, 1957 in increasing by $300 million the authorization to the Federal Reserve Bank of New York to make sales of securities from the System open market account under paragraph (1) of the directive approved January 8, 1957. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: None. The directive approved at the meeting on January 8, 1957, provided a limitation of $1 billion on the aggregate amount of securities that might be purchased or sold for the System open market account in carrying out the policy approved at that meeting. By FEDERAL RESERVE SYSTEM 39 January 22, the larger than expected contraction in bank loans, along with various other factors adding to the availability of reserves, made it desirable that the System account have greater leeway to makes sales of securities than had been authorized at the January 8 meeting in order to absorb more of the reserves coming into the market and thus to maintain the policy of restraint on inflationary developments. This January 22 increase of $300 million in the limitation was no longer believed necessary at the time of the meeting on January 28 and, in issuing the directive at that time, the Committee fixed the limitation at $1 billion, the same as that approved on January 8. February 18, 1957 Authority to effect transactions in System account. No change was made in the policy directive issued by the Committee, which again directed that open market operations be with a view to restraining inflationary developments in the interest of sustainable economic growth, while recognizing unsettled conditions in the money, credit, and capital markets and in the international situation. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: None. There was no clear evidence of serious weakness in the economy, although business and financial observers had been reappraising, with some doubts, their year-end expectations that 1957 would bring further advances in business activity and further creeping inflation. Industrial production had hesitated in January and slipped back one index point, but it remained close to record levels. While the general level of wholesale commodity prices had continued to rise from mid-December to mid-January and probably further to mid-February, advances in industrial commodities had slackened since late autumn. For some months industrial construction had been below a year ago and, since the spring of 1956, residential contract awards in millions of square feet had been falling. Nonresidential construction awards for business purposes also had been declining, and avail- 40 ANNUAL REPORT OF BOARD OF GOVERNORS able evidence suggested that plant and equipment expenditures by manufacturing industries were in the process of leveling off. Unfilled orders in durable goods industries had changed little since August, in contrast to the earlier situation of a mounting order backlog. Business inventories had risen through 1956 at about the same rate as in 1955. This increase in inventories had been greater than the rise in sales, so that inventory-sales ratios in manufacturing were currently higher than a year earlier. The labor market was still strong. Government spending for goods and services had been rising steadily, and further steady rise seemed to be in prospect. Consumer incomes had risen further and spending at retail in January had been at about the record level relative to the season of December. Business optimism was running higher than in the third quarter of 1956—a feeling that appeared to be shared by most manufacturing and retail groups. Demand for long-term business funds continued very strong. From the survey of economic data available, there was evidence of some slackening in the momentum of inflationary tendencies, but as yet there was no clear-cut evidence of a combination of forces that would halt the advance in the foreseeable future. The financial problem of the economy continued to be that of aggregate demand pressing against aggregate supply. Credit developments in recent weeks had continued to indicate a relaxation of pressures, with rapid bank loan liquidation, less strain on bank reserve positions, a sharp decline in money rates, and an improved tone in the bond market which had permitted sale of a large volume of new issues of securities at declining yields. This easing of inflationary pressures was the goal toward which monetary forces had been directed. It was too early to tell, however, whether this was but a temporary lull, the beginning of a downturn, or the attainment of high-level stability. While it seemed clear that it would be unnecessary and inappropriate to have more stringent restraint at this time, there appeared to be confidence in the vitality of the economy, and this suggested that credit policy should not help to promote a new bulge in activity. The Committee's conclusion was that this was a time calling for continuation of the status quo, and on that basis no change in the policy directive was deemed necessary or desirable. FEDERAL RESERVE SYSTEM 41 March 5, 1957 1. Review of continuing authorities or statements of policy. At this, the first meeting of the Federal open Market Committee after the new members elected by the Federal Reserve Banks for the year beginning March 1, 1957 had assumed their duties, the Committee reviewed and reaffirmed all continuing statements of operating policy and specific authorities for operations which were in effect immediately prior to this meeting. Among the continuing statements of policy that were renewed were the following: a. 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 markets). b. Operations for the System account in the open market, other than repurchase agreements, shall be confined to short-term securities (except in the correction of disorderly markets), and during a period of Treasury financing there shall be no purchases of (1) maturing issues for which an exchange is being offered, (2) when-issued securities, or (3) outstanding issues of comparable maturities to those being offered for exchange; these policies to be followed until such time as they may be superseded or modified by further action of the Federal Open Market Committee. c. 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; such policy to be followed until such time as it may be superseded or modified by further action of the Federal Open Market Committee. The action renewing these three statements was taken by unanimous vote, pending further study of these and related matters. Votes for these actions: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against these actions: None. 2. Authority to effect transactions in System account. The policy directive of the Federal Open Market Committee was changed at this meeting for the first time since the meeting on Janu- 42 ANNUAL REPORT OF BOARD OF GOVERNORS ary 8, 1957 by adopting wording for clause (b) of paragraph (1) to provide that, among other things, open market transactions would be with a view "to restraining inflationary developments in the interest of sustainable economic growth while recognizing uncertainties in the business outlook, the financial markets, and the international situation." This wording superseded that in effect since January 8, which had called for operations with a view "to restraining inflationary developments in the interest of sustainable economic growth, while recognizing unsettled conditions in the money, credit, and capital markets and in the international situation." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against this action: None. This change in wording of clause (b) of the Committee's directive was not an indication of a shift in direction of policy but was designed to emphasize the factor of uncertainty in the current business outlook. The general direction of policy continued to be one of restraining inflationary developments. In its review of conditions, the Committee found evidence of the slowing down of expansionary forces in many sectors of the private economy but no indication that a pronounced downturn had begun. Rather, there were many underlying forces tending to hold activity at a high level. In contrast to the indications of balance in the private economy, the governmental sectors were showing some signs of strain. State and local government expenditures continued to increase and those of the Federal Government also were rising. It was apparent that the Federal budget surplus would be considerably less during the current year than last, and in addition large cash drains on the Treasury were to be expected for non-budgetary payments such as savings bond redemptions, aid to the mortgage market, drawings by international agencies, and attrition on refundings of marketable securities. There had been some easing in credit markets during January, partly because of funds made available by the Treasury and because bank loans had declined as increased funds had become available for new capital issues. Increased financing strains had developed for the Treasury, and it had had to go to the short-term market for new funds at a time when a reduction in FEDERAL RESERVE SYSTEM 43 Treasury debt had been expected. The apparent slackening in demand for private credit, if accompanied by increased Government borrowing, might not present an appropriate occasion for relaxation of restraints on credit in general, since it seemed essential that the Treasury borrow as much as possible from savings or that any Treasury borrowing from banks be largely offset by curtailment in bank credit supplied to private borrowing. It was suggested that the only way in which the economy would continue to have growth without inflation under existing conditions was by reducing spending and increasing saving. While it was apparent that a sidewise movement was taking place in the economy, there was uncertainty as to which way the economy would go. In any event, however, since the economy's upward momentum had definitely slackened and since the rise in finished goods prices seemed likely to level off in the near future, it was not believed appropriate that overt action be taken toward increasing credit restraint, although maintenance of about the degree of restraint that had existed for some time seemed to be called for. Thus, the Committee sought to continue about the same pressure on credit expansion that had been intended by the actions taken at the last several meetings, and in modifying the wording of the policy clause of the directive it was simply bringing into the picture a specific reference to the business outlook which had not been mentioned in the previous wording. March 26, 1957 Authority to effect transactions in System account. The policy directive calling for a continuation of restraint on inflationary developments was renewed without change at this meeting of the Federal Open Market Committee. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: None. The Committee's review of the economic situation did not indicate a material change since the preceding meeting but rather showed a sidewise movement of activity at inflated price levels. 44 ANNUAL REPORT OF BOARD OF GOVERNORS There had been evidence of slackened momentum in the cyclical advance after some 30 months of sustained rising activity, and the question was how monetary policy should react in this situation after a depreciation in the purchasing power of the wholesale dollar over these months of about 6 per cent and of the consumer dollar of over 3 per cent. This cyclical rise in activity had gotten its first stimulus from consumer outlays for houses and durables purchased heavily on credit. This had been in direct response to the exceptionally easy credit conditions prevailing in 1954. The size of this stimulus had resulted in a large acceleration in business plant and equipment expenditures but there were other factors bringing about these capital expenditures, such as high wage costs and much technological obsolescence of plant and equipment. The large capital investment had meant a heavy total demand for credit and also that savings would have to increase substantially if monetary expansion were not to get out of control. It also had meant that interest rates would rise to higher levels. In addition, since supplies had to be diverted so largely to producers' goods, thus generating additional income without enlarging short-run supplies of products for current use, the rising investment had meant that commodity and service markets were under heavy demand pressures tending to advance prices. Against this background, the Open Market Committee had directed policy for more than a year before this meeting to resisting inflationary pressures as they intensified. Although it appeared at this time that the boom had lost much of its buoyancy, it was not possible to tell whether the present sidewise movement would continue for some months, perhaps with a renewed upward movement, or whether the economy would decline. Consumer demand, industrial production, and employment remained at or near record levels, although they were no longer rising appreciably. The Committee's conclusion that the policy directive should be continued with emphasis on restraint included the understanding that, in adjusting amounts of reserves supplied to the market by the Federal Reserve System, doubts should be resolved on the side of greater rather than less restraint than had existed in recent months. FEDERAL RESERVE SYSTEM 45 April 16, 1957 Authority to effect transactions in System account. The directive of the Committee was renewed without change, continuing the policy of restraint on inflationary developments. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: None. Economic activity continued on a high plateau with divers surface irregularity. Wholesale prices appeared to be generally stable with consumer prices continuing to tend up. In the credit field, private loan demands were somewhat more moderate than they had been a year earlier, but they were still large and in addition the Government was becoming a new source of borrowing demand on banks. Additional reserves sought by member banks recently had been supplied largely through an increase in member bank borrowing, and the money market had become tighter than at the time of the preceding meeting. The Committee considered that the increased degree of pressure that had resulted since the preceding meeting had been appropriate. In deciding to renew its policy directive without change, it felt that a stable situation should be maintained for the next few weeks. May 7, 1957 Authority to effect transactions in System account. Again the Committee's directive was renewed without change, providing for restraint on inflationary developments. Votes for this action: Messrs. Martin, Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Vardaman, Williams, and Treiber. Votes against this action: None. The economy continued to move sidewise but with a slight upward tilt for both gross national product and prices. Credit markets had continued under pressure of large borrowing demands. New securities issues by corporations, though at a slower rate than in the first quarter of the year, had continued relatively heavy. Pressure of credit demand had resulted in a sharp run-up in bond yields although rates on Treasury bills had declined, reflecting an easing of 46 ANNUAL REPORT OF BOARD OF GOVERNORS member bank reserve positions as a result of funds supplied when the Treasury drew down its balances that had been built up during March. Business sentiment appeared to have become more optimistic. There were fewer products in short supply. At the same time, there was a shortage of savings, the country was operating at an inflated price level, and, although monetary policy could not appropriately be used to restore the price level that had been lost through the inflationary process, it was believed that it should be set to counter further inflationary developments. Renewal of the directive without change was on the basis that current developments made a continuation of substantially the existing degree of restraint appropriate and that no overt action to ease or to tighten the situation was called for. May 28,1957 Authority to effect transactions in System account. The policy directive of the Committee calling for restraint on inflationary developments was renewed without change at this meeting. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against this action: None. The economic situation continued fundamentally strong and essentially unchanged since the preceding meeting. Business sentiment seemed to have improved perceptibly even though current indexes of production and distribution indicated a sidewise movement, at best, or perhaps a slight downward tilt. Wholesale prices had shown little change and retail prices had advanced somewhat further. The degree of pressure in the money market had continued about unchanged for several weeks, and in renewing its directive without change the Committee sought to have the same situation continue for future weeks. The Committee also observed that the Federal Reserve System would be called upon to supply additional reserves to meet seasonal needs in the second half of the year and discussed whether the directors of the Federal Reserve Banks might consider an increase in the discount rate appropriate as a means of maintaining restraint under these circumstances. FEDERAL RESERVE SYSTEM 47 June 18,1957 Authority to effect transactions in System account. Renewal of the directive without change at this meeting continued the policy of firm restraint on inflationary developments. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against this action: None. Over-all economic activity appeared to be showing great strength. The general level of wholesale prices had advanced slightly since mid-May. Consumer prices had been continuing their steady rise and were estimated to be about 4 per cent higher than a year earlier. Expansion of bank loans had unmistakably slowed down this year, but the turnover of demand deposits had risen substantially. Thus, while monetary growth had been moderate during the preceding 12 months, it appeared to have been adequate for the economic activity that could be had on the basis of existing resources. The tighter condition of the money market during the past three months, which had been brought about within the present wording of the Committee's directive, did not appear to have been too restrictive, and the Committee's conclusion was that a firm policy of restraint should be continued for the present. July 9, 1957 Authority to effect transactions in System account. Another renewal without change of the directive providing for restraint on inflationary developments resulted from the deliberations of the Federal Open Market Committee at this meeting. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against this action: None. At midyear, over-all economic activity was being maintained at about the high level of the past winter. Downward adjustments had been going on in a number of lines but the areas of weakness had not widened significantly and upward adjustments had been taking place in other areas. The general sidewise movement during 48 ANNUAL REPORT OF BOARD OF GOVERNORS the first half of 1957 had been similar to that of the first half of 1956. In the earlier year, easing tendencies through July had been followed by strong expansion later in the year. A like course of events was widely anticipated in business and financial circles at the time of this meeting. One of the strong factors at this time was in construction where outlays for residential building had increased in June—the first rise in seven months—following a sharp rise in total construction contracts in May. A disturbing element, however, was the renewed rise in construction costs after six months of relative stability. There also had been a rise in new orders of durable goods manufacturers in May, the first since November of 1956. Average hours worked in manufacturing had increased slightly in June, following several months of decline. Economic activity abroad remained buoyant and a number of countries recently had adopted additional measures to restrain the strong inflationary pressures. It seemed clear that the economy was in a period of prosperity as well as inflation. Considerable feeling was expressed at this meeting of the Open Market Committee that an increase in the degree of pressure was called for, particularly since the Federal Reserve System would have to supply reserves during the remainder of 1957 to take care of seasonal borrowings and Treasury needs. One of the possibilities discussed was that of putting additional reserves into the market through the System account and at the same time increasing the discount rates of the Federal Reserve Banks as a signal that the System felt that credit policy should be tighter than it had been. It was concluded, however, that under present conditions it would not be wise simultaneously to increase the flow of reserves and to raise discount rates. The Treasury was about to make an offering of securities for which payment would be made when seasonal demand for reserves was increasing. The Committee's decision, therefore, was to renew the directive without change and to maintain but not to increase the existing degree of restraint for the immediate future. July 30,1957 Authority to effect transactions in System account. This meeting of the Committee also resulted in a decision to continue without change the policy directive providing for restraint on inflationary developments. FEDERAL RESERVE SYSTEM 49 Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Shepardson, Vardaman, and Williams. Votes against this action: None. Data presented at this meeting showed little change in the picture of the economy that had been developed in recent meetings of the Committee. Such new data as had become available, while indicative of divergent trends in various areas, did not alter the over-all impression of the sidewise movement, and they provided no clue as to the direction and intensity of the next major change in economic activity. Prices were up at both wholesale and retail, however, apparently to new highs. During July there had been some moderation of the degree of tightness in money and securities markets. A large Treasury refunding operation was completed and a substantial reduction in bank loans and investments occurred following a sharp increase in June. The Committee took cognizance at this meeting of a further rise in interest rates, including a sharp rise in bond yields. Although recent credit expansion had been moderate, the world-wide atmosphere of ebullience and the tendency to accept inflation as inevitable seemed to call for continued restraint through monetary and fiscal measures. Four of the European central banks had increased discount rates during the month, and the reports indicated that inflationary pressures existed in Asia, South America, and other parts of the world as well. Commodity prices had shown a disturbing degree of imperviousness to monetary restraint for more than a year. The Committee's decision that there should be no change in its policy directive at this time but that efforts should be made to regain the degree of pressure that existed before the Treasury refunding operation in July reflected the view that it was appropriate to keep the banking system under substantial pressure. However, it was observed during the Committee discussion that the discount rates of the Federal Reserve Banks at 3 per cent were already lagging behind the rate structure generally and that if other rates continued to rise the directors of some of the Reserve Banks could be expected to give consideration to raising their discount rates. 50 ANNUAL REPORT OF BOARD OF GOVERNORS August 20, 1957 Authority to effect transactions in System account. No change was made at this meeting in the Committee's directive that policy should be with a view to restraining inflationary developments. Votes for this action: Messrs. Martin, Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Vardaman, Williams, and Treiber. Votes against this action: None. In the period between the Open Market meeting on July 30 and that on August 20, the directors of nine Federal Reserve Banks acted to increase the discount rates of those banks from 3 per cent to 31/2 per cent. These actions followed an increase from 4 per cent to 4% per cent early in August in the rate charged by commercial banks on loans to prime borrowers, as well as further increases in other market rates. The increase of one-half percentage point in discount rates generally was regarded as primarily a technical move made at a time when market interest rates were considerably above discount rates. It was recognized that business activity was continuing to move sidewise and that the business outlook seemed to be a little less buoyant than a few weeks earlier. Money markets had tightened somewhat in August. Although a heavy repayment of business loans occurred in July and early August following record tax borrowings in June, demand for credit and capital continued strong. No change in the directive of the Committee calling for restraint on credit expansion was made at this meeting, but in renewing the directive the Committee did so with the understanding that the System account would have latitude for flexibility in providing reserves during the next few weeks. September 10, 1957 Authority to effect transactions in System account. The Federal Open Market Committee's policy directive was again renewed at this meeting without change in the wording calling for restraint on inflationary developments. FEDERAL RESERVE SYSTEM 51 Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Leedy, Mills, Robertson, Szymczak, Vardaman, Williams, and Irons. Votes against this action: None. When the Committee met on September 10, it again found no material change in over-all business activity since the preceding meeting or, for that matter, for the past several months. Data were presented showing that bank credit had expanded somewhat less rapidly in the past five weeks than in the corresponding period of other recent years. It was also pointed out that banks continued to feel heavy pressure for loans and that the substantial reduction in bank liquidity since a year earlier had intensified that pressure. Monetary expansion had been virtually absent since spring, some slackening in the rise in money turnover had appeared, and normal seasonal pressures could be expected to reinforce the Committee's policy of restraint. Also, it was reported that banks currently were cautious and that since the increase of one-half percentage point in the Reserve Bank discount rates in August, there was recognition throughout the country of the Federal Reserve's policy of firm restraint. Thus, although the Committee made no change in the policy directive, it was renewed with the understanding that in carrying out the broad policy of restraint in the immediate future doubts would be resolved on the side of less rather than greater restraint. October 1, 1957 Authority to effect transactions in System account. The directive of the Federal Open Market Committee was renewed without change at this meeting and the policy of restraint on inflationary pressures was thus continued. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Williams. Votes against this action: None. At the time of the October 1 Open Market Committee meeting, an increasing number of business observers were suggesting that the major expansive forces had been spent, that pressure of inflationary forces was in process of lessening and even of dispersing, and that the prospective movement in activity was a decline. Business senti- 52 ANNUAL REPORT OF BOARD OF GOVERNORS ment, which had shown pronounced gyrations over the past two years, being at times more optimistic than the figures and portents, at other times less optimistic, appeared to be developing into a psychology of gloom in some places and was much more cautious about prospects than for some months. That was reflected in inventory policy which, after permitting some rise in the spring months, later was designed to hold inventories in close relationship with sales. On the other hand, the reports to the Committee at this meeting did not present a picture of a settling or declining economy. There was considerable feeling that while inflationary clouds might be breaking up, it would be premature to conclude that they had been scattered. The most significant financial development reported to the Committee was that there had been a leveling out of interest rates at the advanced level of early August. This leveling out had occurred notwithstanding the increase in Reserve Bank discount rates, the unprecedented two-point rise in the rate of the Bank of England, continued large offerings of new security issues by corporations and State and local governments, and relatively heavy borrowing by the United States Treasury. A smaller than seasonal increase in business loans in the first half of September had been followed by an unusually large decline in the latest week. Required reserves of banks had increased less than anticipated, reflecting the smaller increase in credit and deposits. For the third quarter as a whole, growth in bank loans had fallen further behind the preceding year than had been the case in the second quarter, but bank investments had increased somewhat more than in the previous year. The money supply was less than one per cent higher than a year earlier. This picture suggested that banking developments had kept within the limits envisioned by recent policies of credit restraint and that capital market rates might have reached the level appropriate to the maintenance of equilibrium. The views of the Open Market Committee at this meeting were that there should be no change in policy or in the Committee's directive at this time. In reaching this conclusion, the Committee did so with the understanding that, in carrying on transactions for the System open market account, an effort would be made to continue the same degree of restrictive pressure that had been sought during the preceding three weeks. FEDERAL RESERVE SYSTEM 53 October 22, 1957 Authority to effect transactions in System account. The Committee renewed its policy directive with the same wording that had been adopted at the meeting on March 5 and at each meeting since, namely, that open market operations were to be with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while recognizing uncertainties in the business outlook, the financial markets, and the international situation." Votes for this action: Messrs. Hayes, Vice Chairman (presiding), Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: None. The over-all situation at the time of the October 22 meeting was such as to suggest that the Committee should be especially alert to any sign of breakout from the sidewise movement that had been characteristic of business for some months. In a searching reexamination of the economic situation, the Committee found that the latest quarterly and monthly figures showed continuation through the third quarter of 1957 of many features prevailing earlier in the year, with production steady at a high level, price movements in wholesale markets mixed with the average up, and consumer prices generally continuing upward. September industrial production was at 144, down a point from August but within the narrow 143 to 146 range prevailing so far this year. The economy as a whole showed basic strength, but there was uncertainty as to what combination of demands would prevent recession in activity, or, on the other hand, make for an advance in total output and employment from present levels. In analyzing the implications of recent business and credit developments for monetary and fiscal policy, it appeared that there had been short-run abatement in inflationary pressures, and questions were raised about potential declines in important sectors of activity. Business sentiment had turned more pessimistic than the current indicator picture, and attitudes of common stock investors appeared to reflect a growing disbelief in the extension of inflationary trends. Business loan expansion was continuing to run behind the preceding year. As a result of the increasing uncertainty as to the business 54 ANNUAL REPORT OF BOARD OF GOVERNORS situation, resulting particularly from psychological factors and from international developments including the Russian earth satellite launching, the environment for monetary policy was beginning to look quite different from the boom conditions that initially justified the current restrictive policy. It was suggested that the Federal Reserve System should meet seasonal reserve requirements freely and that, if readjustments then taking place were to gather momentum, some easing of member bank reserve positions and even a decrease in Reserve Bank discount rates might be appropriate. In sum, the economic data presented indicated that developments in business and economic conditions would have to be watched particularly closely in coming weeks in order to make policy adjustments that might be suitable. The Committee concluded, after reviewing the data, that there was no immediate occasion to reverse its policy of restraint on credit expansion or to make a change in the policy directive. While it was clear that the Committee at this juncture did not wish to make any move which would signal a change in policy, it wished to supply seasonal needs reasonably freely. It did not wish to increase restraint from what it had been. There was some feeling that the Committee should actually diminish restraint a little, but more of the members believed that the Committee should resolve doubts on the side of ease. Thus, in renewing the directive without change, the Committee agreed that although general policy was not to be changed appreciably, it should tend on the easier side from where it had been in recent weeks. November 12, 1957 Authority to effect transactions in System account. The directive of the Federal Open Market Committee was changed at this meeting by deleting the clause that had been in effect since March 5,1957 calling for operations with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while recognizing uncertainties in the business outlook, the financial markets, and the international situation," and by replacing that clause with wording that called for operations with a view, among other things, "to fostering sustainable growth in the FEDERAL RESERVE SYSTEM 55 economy without inflation, by moderating the pressures on bank reserves." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Shepardson, Szymczak, and Williams. Vote against this action: Mr. Robertson. Data presented to the Committee at this meeting showed that the economic climate domestically was in process of change, that expansive forces had eased, and that contractive forces had become more prominent. Declines were indicated by data for October covering industrial production, employment, and department store sales, and unemployment claims were running sharply above a year earlier. These changes had followed significant weakening in business sentiment as evidenced by sharp declines in stock market prices, in prices of sensitive commodities, and in new orders. There also had been a sizable number of professional forecasts of business decline. The spreading view that business outlays for fixed capital were heading downward had been given recent support by a survey of plans for capital spending in 1958, which showed a decline of a tenth or more. Private demands for bank credit had eased considerably in October, with business loans at city banks showing a substantial decrease in contrast to a marked increase customary during that month. Demands for long-term funds, however, continued strong. Yields on Government securities had declined steadily although moderately in recent weeks. Bank reserve positions had eased somewhat since early October, reflecting in part a decline in required reserves and in part Federal Reserve open market operations. Among the latest specific data presented at this meeting, the Committee noted that after five months of little change, domestic output at factories and mines was expected to show a drop of as much as two index points from September to October. Declines in output were widespread although most conspicuous in durable goods lines. Both freight carloadings and electric power generation in October were off moderately, the decline in carloadings extending a decline that had begun in April and that for power generation a decline that commenced in August. While total new construction was holding at a high level, industrial construction had continued the decline that had set in in May of this year. Business inventory accumulation had slowed markedly in recent months. Nonfarm 56 ANNUAL REPORT OF BOARD OF GOVERNORS employment in October had receded further from the peak reached in August. Not only were the signs of domestic decline fairly general, but in Canada recession tendencies had become clear, and in Europe industrial activity which had ceased expanding in late spring of 1957 had tapered off moderately through the summer months. Although the Committee's analysis showed that the domestic economy still was operating at high levels and that the downward adjustment thus far had been moderate, there no longer was much doubt that at least a mild downturn in business activity was under way, and there was widespread belief that it would probably continue well into 1958. The major question seemed to be not whether a further business decline would occur, but for how long and in what degree. In terms of credit policy, the question presented was how far the Committee should go at this time in recognizing the change in the economic situation and outlook, and by what means. The Committee's decision at this meeting was that action should now be taken to recognize the change in the general economic situation away from the sidewise movement that had prevailed during most of 1957. This did not signify a shift that would entirely eliminate restraint on credit expansion, but it did reflect a decision that there should be a moderate relaxation of the degree of restrictive pressure. It was on the basis of this general view that the directive was changed to eliminate the previous clause (b) which had called for restraining inflationary pressures and to replace that clause with wording that provided for open market operations with a view, among other things, "to fostering sustainable growth in the economy without inflation, by moderating the pressures on bank reserves." Mr. Robertson dissented from the foregoing action with respect to the insertion in clause (b) of the words "by moderating the pressures on bank reserves." His action was based on the belief that the prevailing condition of the economy was not such as to call for a lessening of restraint, that inflationary potentials were still strong, and that continued restraint was essential to their containment. There was also a discussion at this Open Market Committee meeting, at which all of the Federal Reserve Bank Presidents were in attendance, of the relationship of open market policy to the discount rates of the Federal Reserve Banks and the appropriateness of those rates in view of the changed economic situation and the change in open market policy. FEDERAL RESERVE SYSTEM 57 December 3, 1957 1. Authority to effect transactions in System account. The Committee renewed its directive in the same form that had been adopted at the meeting on November 12, 1957, at which time the wording of clause (b) of the first paragraph had been changed so that it called for operations in the open market with a view, among other things, "to fostering sustainable growth in the economy without inflation, by moderating the pressures on bank reserves." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Shepardson, Vardaman, and Williams. Vote against this action: Mr. Robertson. The economic report at this meeting was consistent with that presented at the meeting on November 12 showing a moderate downsettling of the economy. Industrial production had continued to sag, especially in the areas of steel and other metals, equipment and ordnance, household durables, apparel and textiles, and mining, but higher automobile output had tended in the direction of maintaining the level of the index of industrial production. On the other hand, new construction was being well maintained, with residential and public utility construction up, industrial construction down, and commercial and public construction about even. The further sag in equipment production and industrial construction was closely related to cutbacks in spending decisions for business, plant, and equipment. Information that had just become available on third quarter capital appropriations of large manufacturing companies showed a decline of almost a third from a year earlier. This was the second successive quarter showing a substantial decline. Labor market data showed a further rise in unemployment claims, with increases fairly widespread geographically. The mid-November unemployment survey showed substantially more than the usual seasonal rise in number of unemployed to a seasonally adjusted level of about 5.2 per cent of the labor force. Gross national product for the fourth quarter of the year according to preliminary estimates would probably show little change or moderate decline from the third quarter of the year. Personal income in October had declined for the second successive month due to reduced wage and salary 58 ANNUAL REPORT OF BOARD OF GOVERNORS disbursements. The general average of wholesale prices had shown little change in November, while the consumer price index which was unchanged in October was expected to show a rise in November, reflecting higher new automobile prices and additional advances in rents and service costs. In the credit field, cross currents in economic forces in recent weeks had precipitated sharp and often paradoxical developments in financial markets. Through action reducing the discount rates of the Federal Reserve Banks from a 3l/2 per cent level to a 3 per cent level in mid-November, there had been public recognition by the Federal Reserve System that economic adjustment had lessened and perhaps removed the threat of inflation for the time being. Prices of securities in the stock market had increased sharply in this period, and prices of bonds had risen substantially with corresponding decreases in yields. Bank credit had continued to decline, contrary to the usual seasonal tendency at this time of year. As a result of the slackened growth in bank credit and deposits, required reserves of member banks had failed to show the customary seasonal increase in November. In addition, reserves had been supplied by a reduction in Treasury balances at the Federal Reserve Banks and by substantial System purchases of bills. The cumulative results of these measures were being reflected in member bank reserve positions at the time of this meeting, and it was expected that if the Treasury continued to keep its balances in the Federal Reserve Banks at a low level, no strain on member bank positions would occur during December despite customary seasonal demands for additional funds. In the Committee's review of the economic situation, the view was advanced that while it had become more evident than at earlier meetings that business was declining, there were basic uncertainties that made it difficult to assume either a prompt resumption of the upward movement in business or much further continuation of the decline. In these circumstances, the general view of the Committee was that there should be further moderating of the restrictive pressures on credit expansion and, for this reason, the directive was renewed with the same terms that had been approved at the meeting on November 12 calling for "fostering sustainable growth in the FEDERAL RESERVE SYSTEM 59 economy without inflation, by moderating the pressures on bank reserves." Mr. Robertson dissented from this action for the same reasons as those stated previously for dissenting from the wording adopted at the meeting on November 12. 2. Rate of interest on special certificates. The Committee authorized that the rate to be charged on special short-term certificates of indebtedness purchased direct from the Treasury pursuant to paragraph (2) of the Committee's directive to the Federal Reserve Bank of New York be fixed at one-fourth of one per cent below the discount rate of the Federal Reserve Bank of New York at the time of such purchase. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Shepardson, and Vardaman. Votes against this action: Messrs. Robertson and Williams. Section 14 (b) of the Federal Reserve Act authorizes purchases or sales of securities by the Federal Reserve Banks direct from the United States Treasury under certain conditions and with a proviso that the aggregate amount held by the Reserve Banks at one time shall not exceed $5 billion. Paragraph (2) of the Committee's directive, which authorized purchases for the account of the Federal Reserve Bank of New York 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, had been used infrequently over the years and had not been used at any time since March 1954. The rate charged for the facility when it had been used had been one-fourth of one per cent, a rate that had prevailed since the early 1940's when the discount rates at the Federal Reserve Banks were at the one-half per cent level. The purpose of the Committee in taking the action was to adopt a procedure which would provide for a rate that was flexible and closer to the current market. In voting against this action, Messrs. Robertson and Williams indicated that they felt the matter was of little importance and that on the whole it would be preferable to let the existing rate of onefourth of one per cent stand. 60 ANNUAL REPORT OF BOARD OF GOVERNORS December 17,1957 Authority to effect transactions in System account. The policy directive of the Federal Open Market Committee was changed at this meeting to provide that transactions for the System open market account were to be with a view, among other things, "to cushioning adjustments and mitigating recessionary tendencies in the economy." This wording replaced that adopted at the meeting on November 12 and reaffirmed at the meeting on December 3 calling for transactions that would foster sustainable growth in the economy without inflation, by moderating the pressures on bank reserves. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: None. General economic recession appeared to be the most appropriate description for the drift in over-all activity that had characterized developments for some weeks prior to this meeting. The industrial production index for October had been placed at 141 and a preliminary estimate of the index for November was 139, or 5 index points below the September level of 144. The decline, which had been greater than was indicated previously, had been widespread despite the strong factor of new automobile assemblies during November. December production schedules for the automobile industry had been reduced because of a resistant sales market in November, steel output had slipped further, and it appeared that average hours worked might decline further in December. The latest data on business plant and equipment expenditures also justified the characterization of general recession in that these figures pointed to a faster and a greater downward adjustment than had been indicated earlier. Another item was the liquidation of business inventories at a rate of $4.5 billion annually during the month of October—a movement which appeared to have continued during November, with the contraction concentrated in durable goods lines. The labor market also pointed to general recession, with unemployment at the highest rate, on a seasonally adjusted basis, since late 1954. Accompanying these changes, personal income was down during November and this had been reflected in slower retail trade in recent weeks. FEDERAL RESERVE SYSTEM 61 The average of wholesale prices had shown little change during the past two months. In the financial area, a significant development in November had been a decline in the seasonally adjusted annual rate of turnover of demand deposits at banks outside New York City, along with a less than seasonal increase in the volume of demand deposits. With turnover about the same as a year earlier, it could no longer be said that increased turnover had offset the effect of a decrease in the supply of money. Federal Reserve operations in late November and early December had supplied a substantial volume of reserves to meet seasonal needs, but even so considerable tightness in the money market had developed in mid-December, partly reflecting the usual seasonal increase in currency needs along with a sharp expansion in credit demands to meet heavy liquidity requirements of the public usual at that time of the year. In addition, the Treasury was raising new money in the market at that time. The economic and financial data presented at this meeting confirmed rather clearly the developing recession that had been indicated by reports at earlier meetings at which the Committee acted to moderate the pressures on bank reserves. The recession was still of moderate intensity, and inasmuch as the Committee actions taken since mid-November to lessen pressures on reserves, together with the reduction in Reserve Bank discount rates, had signaled an effective change in policy toward less severe credit restraint, it did not appear to the Committee that additional major actions were necessary at the moment. The change at this meeting in wording of the Committee's policy directive was adopted with the understanding that reserves would continue to be made somewhat more available, but the particular reason for this change was to recognize that the economy had encountered a recession and that the Federal Open Market Committee's policies were being molded accordingly. Four changes in the wording of the directive of the Open Market Committee were made during 1957, the changes being those reported in this record for the meetings held on January 8, March 5, November 12, and December 17. The January 8 and March 5 changes continued policy within the framework of that in effect at the beginning 62 ANNUAL REPORT OF BOARD OF GOVERNORS of the year which placed emphasis on restraint of inflationary developments. The change made on November 12 represented a significant shift in policy away from the emphasis on restraint of inflationary developments, to a program for fostering sustainable growth in the economy without inflation, by moderating the pressures on bank reserves. This shift in policy was further emphasized at the meeting on December 17 with the inclusion in the directive of words that gave frank recognition to recessionary tendencies that were present and to the need for mitigating such tendencies and for cushioning adjustments in the economy. The directive in effect at the conclusion of 1957 read as follows: (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allowing maturities to run off without replacement) for the System open market account in the open market or, in the case of maturing securities, by direct exchange with the Treasury, 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 cushioning adjustments and mitigating recessionary tendencies in the economy, and (c) 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 $1 billion; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 $500 million; (3) To sell direct to the Treasury from the System account for gold certificates such amounts of Treasury securities maturing within one year as may be necessary from time to time for the accommodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. FEDERAL RESERVE SYSTEM 63 RECORD OF POLICY ACTIONS BOARD OF GOVERNORS May 15, 1957 Amendment to rule for classification of central reserve and reserve cities. Effective March 1, 1957, the Board amended its rule adopted on December 19, 1947, for the classification of central reserve and reserve cities, so as to provide that the designation of a city as an additional reserve city, because that city qualifies for designation as such under the average-aggregate-deposit standard set forth in paragraph (2) of subsection (b) of the rule, shall not become effective until after one year, or such longer period as the Board may determine, from the date as of which such designation would be effective under paragraph (4) of subsection (b) of the rule in the absence of this amendment. Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, Robertson, and Shepardson. Votes against this action: None. Provisions of the Federal Reserve Act, including particularly Section 11 (e), confer upon the Board authority to classify and designate central reserve and reserve cities and to terminate the designation of cities as such. In 1947, after careful consideration of all relevant information, the Board concluded that a logical, fair, and appropriate standard for determining the designation and termination of reserve cities would be one determined by the ratio of interbank demand deposits held by member banks in each city to the aggregate amount of interbank demand deposits held by all member banks of the Federal Reserve System, or by such a ratio considered in connection with the ratio of interbank demand deposits held by member banks in each city to the aggregate amount of all demand deposits held by the member banks in such city. The Board also concluded that such a standard for the designation and termination of reserve cities should be reapplied at three-year intervals. Accordingly, a rule based on these conclusions was adopted effective March 1,1948. Pursuant to this rule, the Board gave consideration in December 1956 to the classification of central reserve and reserve cities effective March 1, 1957. It then appeared, among other things, that the city of Miami, Florida, qualified for designation as a reserve city under 64 ANNUAL REPORT OF BOARD OF GOVERNORS the prescribed standard, and the Federal Reserve Bank of Atlanta was requested to so advise all member banks located in Miami. At the request of such banks, and in order that full consideration might be given to the Miami situation, the Board on January 22, 1957, decided to defer until not later than June 1, 1957, a decision on the designation of that city as a reserve city. The Board thereafter gave thorough study to all relevant data and views, including views presented in writing and orally by the member banks in Miami. As the result of this study, the Board on May 15, 1957, concluded that there was justification for giving the member banks in Miami, and in any other city that might be similarly affected in the future, an adequate period in which to make the adjustments required by designation of the city as a reserve city. Accordingly, the Board adopted, effective March 1,1957, and published in the Federal Register, the amendment to its 1947 rule which is described above. At the same time, pursuant to the amended rule, the city of Miami was designated as a reserve city effective May 15,1958.1 May 15, 1957 Increase in maximum permissible interest rate on loans made pursuant to Regulation V, Loan Guarantees for Defense Production. Effective immediately, the Board raised from 5 per cent to 6 per cent the maximum permissible rate of interest on V-loans, with no change in the existing maximum commitment fee of 54 oi one per cent or in the existing schedule of guarantee fees. Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, Robertson, and Shepardson. Votes against this action: None. Under the provisions of the Defense Production Act of 1950 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 and to finance contractors and subcontractors in connection with, or in contempla1 Acting pursuant to the 1947 rule, the Board took action, effective March 1, 1957, for the continuance of the classification of all existing reserve cities except Cedar Rapids and Sioux City, Iowa, which ceased to be reserve cities on that date. A full statement on the Board's action is set forth in the March 1957 issue of the Federal Reserve Bulletin, p. 276. FEDERAL RESERVE SYSTEM 65 tion of, the termination of their defense contracts. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies in receiving applications and in the making of such contracts of guarantee. The Board's Regulation V, issued pursuant to the aforementioned statutory authority, provides that rates of interest, guarantee fees, commitment fees, and other charges which may be made with respect to guaranteed loans and guarantees executed through the agency of any Federal Reserve Bank pursuant to the Regulation, will from time to time be prescribed, either specifically or by maximum limits or otherwise, by the Board of Governors after consultation with the guaranteeing agencies. In view of the higher prevailing structure of interest rates generally, and indications that under the existing 5 per cent maximum rate of interest the net yield to lending institutions on guaranteed loans was not sufficiently high in some cases to make such loans attractive in preference to alternative uses of available funds, thus hampering the effectiveness of the program, the Board and the guaranteeing agencies gave consideration, beginning in 1956, to the possibility of an increase in the maximum permissible rate of interest. The Board had received advice from the Department of Defense that the Secretary of that Department agreed with and concurred in the view that the maximum rate should be increased to 6 per cent, with no change in the schedule of guarantee fees. Advice likewise had been received from the guaranteeing agencies outside the Defense Department that they would regard such an increase favorably. In these circumstances, and in the interest of maintaining the effectiveness of the V-loan program, the Board decided to increase the maximum permissible rate of interest to 6 per cent, effective immediately. May 20, 1957 Amendment of Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges. Effective May 27, 1957, the Board amended Section 4(f)(2) of Regulation T to exempt certain additional types of loans for capital purposes, particularly certain such loans between a member firm or member corporation of a national securities exchange and its corporate affiliate. 66 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, and Shepardson. Votes against this action: None. Section 4(f) (2) of Regulation T has the effect of exempting from the usual margin requirements certain loans made for capital purposes to a member or member firm of a national securities exchange. The principal effect of the minor technical amendment adopted by the Board at this time was to give recognition to the fact that corporations are now permitted to be members of a securities exchange. May 24, 1957 Increase in maximum rate on advances under Section 13b of the Federal Reserve Act. Effective May 27, 1957, the Board approved establishment by the Board of Directors of the Federal Reserve Bank of Philadelphia of a maximum rate of 6 per cent (an increase from 5 per cent) on advances direct to industrial or commercial businesses, including advances made in participation with other financing institutions, under Section 13b of the Federal Reserve Act. Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, Robertson, and Shepardson. Votes against this action: None. Pursuant to the policy established by this action, the Board subsequently approved the same maximum rate for the Federal Reserve Bank of Boston, effective June 5, 1957, and for the Federal Reserve Banks of Cleveland and Kansas City, effective June 17, 1957, the increase being from 5% per cent in each instance. For the Kansas City Bank the Board also approved a minimum rate of 4 per cent, rather than 3J4 per cent. (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 involving new policy had been made in these rates since those referred to on pages 50-52 of the Board's Annual Report for 1956.) Section 13b of the Federal Reserve Act provides that in exceptional circumstances, when it appears to the satisfaction of a Federal Reserve Bank that an established industrial or commercial business located in its district is unable to obtain requisite financial assistance on a reasonable basis from the usual sources, the Federal Reserve FEDERAL RESERVE SYSTEM 67 Bank, pursuant to authority granted by the Board of Governors of the Federal Reserve System, may make loans to or purchase obligations of such business, or may make commitments with respect thereto, on a reasonable and sound basis, for the purpose of providing it with working capital. No obligation may be acquired or commitment made under this authority with a maturity exceeding five years. The increase to 6 per cent in the maximum rate for the Reserve Banks named above was approved by the Board of Governors in recognition of the increased prevailing structure of rates generally, including the increased maximum permissible rate of interest on V4oans which was approved by the Board effective May 15, 1957. l August 8, 1957 Increase in rates on discounts and advances by Federal Reserve Banks. Effective August 9, 1957, the Board approved actions by the boards of directors of the Federal Reserve Banks of Philadelphia, Chicago, Minneapolis, and Kansas City establishing a rate of 3% per cent (an increase from 3 per cent) on discounts and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. Votes for this action: Messrs. Martin, Balderston, Vardaman, Mills, and Shepardson. Votes against this action: None. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Boston Atlanta Dallas San Francisco Richmond St. Louis New York Cleveland August August August August August August August August 13, 13, 13, 15, 19, 21, 23, 23, 1957 1957 1957 1957 1957 1957 1957 1957 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 4 per cent on advances to member banks under Section 10(b) of the Federal Reserve Act, together with increased rates on advances to individuals, partnerships, and corporations under the last paragraph of Sec- 68 ANNUAL REPORT OF BOARD OF GOVERNORS tion 13 of the Act. In addition, the Board approved, for most of the Banks, increased rates on industrial loans and commitments under Section 13b. For a period of several months the economy had exhibited in general a sidewise movement at a high level of activity. The index of industrial production, seasonally adjusted, moved within a narrow range just under the peak reached in December 1956, employment had been growing further and was at a very high level, and there was almost full utilization of resources. Prices of goods and services, after showing some tendency to stabilize during the spring of the year, resumed an upward trend during the summer which carried them to new peak levels, an important factor being the persistent increase in wages and other costs of production. Demands for credit, stimulated by the need for financing a large volume of business plant and equipment expansion, continued to be vigorous, while the rate of bank credit expansion slackened somewhat after midyear due to Federal Reserve policies limiting the availability of reserves and also to a reduction of liquidity resulting from the steady growth of loans relative to deposits. With the upward movement of interest rates, the discount rate of the Federal Reserve Banks, which had stood at 3 per cent since the fall of 1956, fell further behind the rate structure generally. The disparity became even more pronounced in early August when the commercial banks increased from 4 to 4% per cent the rate charged on loans to prime business borrowers. The increase in the Federal Reserve Bank discount rates, which brought them into better alignment with money market rates, raised the cost to member banks of operating on borrowed reserves and thus diminished incentive on the part of the member banks to borrow from the Reserve Banks. November 14, 1957 Reduction in rates on discounts and advances by Federal Reserve Banks. Effective November 15, 1957, the Board approved actions by the boards of directors of the Federal Reserve Banks of New York, Richmond, Atlanta, and St. Louis establishing a rate of 3 per cent (a reduction from 3l/2 per cent) on discounts for and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. FEDERAL RESERVE SYSTEM 69 Votes for this action: Messrs. Martin, Balderston, Szymczak, and Vardaman. Vote against this action: Mr. Robertson. (While the Board was in session on November 14 advice was received from the Federal Reserve Bank of New York that the directors of the Bank had fixed a discount rate of 3% per cent. The Board voted unanimously to take no action on this rate and the Federal Reserve Bank of New York was so informed. Shortly thereafter the Board was advised that the directors of the New York Bank had fixed a rate of 3 per cent. This rate was approved by the Board with the votes as stated above.) Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Boston Philadelphia Minneapolis Kansas City Cleveland Chicago San Francisco Dallas November November November November November November November December 19, 1957 22, 1957 22, 1957 22, 1957 29, 1957 29, 1957 29, 1957 2, 1957 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 3*4 per cent on advances to member banks under Section 10(b) of the Federal Reserve Act. In addition, the Board approved changes at some of the Banks in 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. By the middle of November available economic information suggested an abatement of inflationary pressures, some change in the economic environment, and a deterioration in the tone of business psychology. While the economy continued to operate at a high level, it seemed clear that the sidewise movement evident during earlier months of 1957 was no longer continuing and that a rather widespread downward adjustment had begun. From a level of 145 for August, the index of industrial production slipped a point in September and in mid-November it appeared from preliminary estimates that the index for October had dropped further. Declines in output were quite general, the rate of business inventory accumulation had slowed down markedly in recent months, and employment had receded from the August peak. 70 ANNUAL REPORT OF BOARD OF GOVERNORS While the demand for long-term funds continued strong, the demand for bank credit eased considerably and bank loans to business decreased during the autumn contrary to the usual seasonal pattern. The greater ease in the money market was reflected in a moderate but steady decline in the yields on Government securities. The reduction of the discount rate reflected a judgment that the prevailing economic situation, and in particular its financial aspects, indicated a downward trend was developing. The action constituted a public signal of that judgment and, as a stabilizing step, provided a relaxation of the restraint of credit that had prevailed. Governor Robertson voted against approving the discount rate reduction because in his opinion the prevailing economic situation did not call for an overt act that could be interpreted as a drastic move toward monetary ease. It appeared to him that the downtrends noticeable in the economy might be generally in the nature of readjustments from unsustainable upward movements and that the dangers of continuing inflation remained as great as the dangers of deflation. In such a situation, he felt that an indication of changed monetary policy might encourage the belief that the System would validate all price and wage increases by supplying enough credit base to support the higher levels; he was concerned about the possible effect of such a belief on people administering prices and negotiating wages. He was also apprehensive that a discount rate reduction would create the erroneous impression that the System saw greater danger in current economic movements than it actually considered to exist. This might cause unjustified fears to feed upon themselves and become exaggerated, with unfortunate results. On balance, therefore, he felt that prevailing conditions did not justify the risks involved in reducing the rate at this time. 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 by the Board of Governors. The established policy is to FEDERAL RESERVE SYSTEM 71 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 1957 program for the examination of State member banks was practically completed, since only 10 out of 1,773 banks were not examined during the calendar year. Bank holding companies. Pursuant to the provisions of Section 5 of the Bank Holding Company Act of 1956, the Board extended to January 15, 1957, the time within which bank holding companies were required to register. During 1956 and 1957, 69 bank holding companies registered with the Board; 19 of those organizations have since ceased to be bank holding companies. During 1957, pursuant to Section 3(a) (2) of the Act, the Board approved the acquisition by six bank holding companies of voting shares of seven banks and denied two applications for such acquisitions with respect to two banks. Under Section 4(c) (6) of the Act, the Board, after a hearing, denied a request for a determination that an insurance subsidiary of a bank holding company was so closely related to the banking activities of the holding company system as to be a proper incident thereto and as to make it unnecessary for the prohibitions of Section 4 to apply in order to carry out the purposes of the Act. During the year the Board issued three certifications in accordance with the tax provisions of the Act (Internal Revenue Code, Sections 1101 and 1103). To provide necessary current information, annual reports for the year 1956 were obtained from registered bank holding companies. During 1957, pursuant to the Banking Act of 1933, the Board authorized the issuance of four voting permits for general purposes and 13 permits for limited purposes to holding company affiliates of member banks. 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 72 ANNUAL REPORT OF BOARD OF GOVERNORS "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 six organizations and denied one application for such a determination. Trust powers of national banks. During 1957, 30 national banks were granted authority by the Board to exercise one or more trust powers under the provisions of Section 11 (k) of the Federal Reserve Act. This number includes the grant of additional powers to 7 banks which previously had been granted certain trust powers. Trust powers of 30 national banks were terminated by voluntary liquidation, consolidation, merger, or conversion. At the end of 1957, there were 1,715 national banks holding permits to exercise trust powers. Foreign branches and banking corporations. Under the provisions of Section 25 of the Federal Reserve Act, the Board approved during 1957 two applications made by member banks for permission to establish branches in foreign countries and overseas areas of the United States. One member bank closed one branch and contemporaneously opened another in London, England, and opened an additional branch in Havana, Cuba (the latter two authorized by the Board in 1956); and also opened an additional branch in Mexico City, Mexico (authorized by the Board in 1955). At the end of 1957, seven member banks had in active operation a total of 117 branches in 26 foreign countries and overseas areas of the United States. Of the 117 branches, three national banks were operating 91 and four State member banks were operating 26. The branches were distributed geographically as follows: Latin America Argentina Brazil Chile Colombia Cuba Mexico Panama 60 10 10 2 4 21 3 5 Peru Uruguay Venezuela Continental Europe Belgium France Germany 1 1 3 5 1 3 1 FEDERAL RESERVE SYSTEM England 11 Near East Egypt Lebanon Saudi Arabia 4 2 1 FarEast Hong Kong India 20 1 2 l 73 Japan Philippines Singapore Thailand U n i t e d S t a t e s O v e r s e a s Areas Canal Zone Guam Puert0 Ric0 Total 10 5 1 1 « •• 17 4 l 12 117 There were in operation at the beginning of 1957 four banking 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. Three of these "agreement" corporations were examined in 1957 by examiners for the Board of Governors. During the year, one of these corporations converted into a foreign banking corporation organized and operating under the provisions of Section 25(a) of the Federal Reserve Act. Of the three corporations now in operation, one operates a branch in France; one has an English fiduciary affiliate; and one has a branch in England, owns all the stock of a bank organized under the laws of, and operating in, Liberia, and operates two agencies at the New York International Airport (the second agency having been authorized by the Board and opened in 1957). At the end of 1956, there were in operation three banking corporations organized under the provisions of Section 25(a) of the Federal Reserve Act to engage in international or foreign banking. Of these corporations, during 1957 the Board granted permission to one to be a Financing Corporation subject to the provisions of Regulation K as revised effective January 15, 1957 and approved the organization of a new Section 25(a) corporation for the purpose of acquiring substantially all the assets and substantially all the liabilities of another such corporation which was placed in liquidation. As indicated above, in December 1957, one State chartered corporation operating under agreement with the Board converted into a new Section 25(a) corporation with the permission of the Board of Governors. The home offices of these four corporations, two of which are regarded as "Banking Corporations" and two as "Financ- 74 ANNUAL REPORT OF BOARD OF GOVERNORS ing Corporations," are located in New York City. Three were examined during the year by examiners for the Board of Governors. Two such institutions have no subsidiaries or foreign branches; one has a branch in France and an English fiduciary affiliate; and one operates branches in Germany, France, Singapore, Lebanon, and Guatemala (authorized by the Board in 1956 and opened in 1957) and owns substantially all of the stock of a bank organized under the laws of, and operating in, Italy. Inter-Agency Bank Examination School. During 1957, four sessions of the School for Assistant Examiners and two 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 the InterAgency School was established in 1952, the various sessions have been attended by 839 men, representing the three Federal bank supervisory agencies, the State Banking Departments of California, Connecticut, Indiana, Louisiana, Maine, Michigan, Mississippi, Montana, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, and Virginia, the Treasury Department of the Commonwealth of Puerto Rico, and one foreign country. Federal Reserve membership. Member banks account for 47 per cent of the number, and hold approximately 85 per cent of the deposits of all commercial banks in the United States. The 6,393 member banks of the Federal Reserve System at the end of 1957 included 4,620 national and 1,773 State member banks, reflecting net declines of 31 and 38, respectively, from the previous year-end. The total number of member bank offices increased, however, as a result of both the conversion of merged banks into branches and the establishment of de novo branches. At the end of the year member banks were operating 6,166 branches, 484 more than at the close of 1956. The continued decline in the number of member banks was largely due to consolidations and mergers. Other reductions included 13 State member banks that withdrew from membership and 3 national banks that converted into nonmember banks. The decrease was partly offset by 20 newly established national banks, 3 FEDERAL RESERVE SYSTEM 75 newly established State members, the admission of 7 nonmember banks to membership, and the conversion of two nonmember banks into national banks. State member banks accounted for 20 per cent of the number, 30 per cent of the banking offices, and about 67 per cent of the deposits of all State commercial banks. Detailed figures on banking structure changes for the year 1957 are shown in Table 18 on page 105. RESERVE BANK OPERATIONS 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 and to finance contractors and subcontractors in connection with or in contemplation of 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 during World War II. In the making of guarantees, the Federal Reserve Banks are authorized to act, on behalf of the guaranteeing agencies, as fiscal agents of the United States, subject to the supervision of the Board of Governors of the Federal Reserve System; and the Board is authorized, after consultation with the guaranteeing agencies, to prescribe rates and fees and forms and procedures. During 1957, the guaranteeing agencies authorized the issuance of 35 guarantee agreements amounting to $151 million. On December 31, 1957, guarantee agreements outstanding covered credits totaling $530 million of which amount $395 million represented actual loans outstanding and $135 million was available to borrowers under guarantee agreements in force. Of the actual loans outstanding, 76 per cent on the average was guaranteed. This compares with total guarantee agreements outstanding December 31, 1956 of 76 ANNUAL REPORT OF BOARD OF GOVERNORS million. During the year, approximately $1,085 million was advanced on V-loans, most of which are revolving credits. From the beginning of the program in September 1950 through December 31, 1957, 1,503 V-loans totaling $2,912 million were authorized by the procurement agencies which may guarantee such loans under the Defense Production Act of 1950. Of the total loans authorized, 56 per cent of the number and 6 per cent of the amount were under $500,000 and 72 per cent of the number and 13 per cent of the amount were loans under $1 million. Of the total loans authorized 42 per cent of the number and 8 per cent of the amount were to borrowers having assets of less than $500,000; 58 per cent of the number and 12 per cent of the amount were to borrowers having assets of less than $1 million. Seventy-two per cent of the number and 19 per cent of the amount of loans authorized were to borrowers having less than 500 employees. Under the law as amended by the Defense Production Act amendments of 1956, authority for the V-loan program, unless further extended, will terminate on June 30,1958. In May 1957, the Board of Governors, after consultation with the guaranteeing agencies, authorized an increase from 5 per cent to 6 per cent in the maximum permissible rate of interest a lending bank may charge a borrower. Volume of operations. Table 5 on page 91 shows the volume of operations in the principal departments of the Federal Reserve Banks for the years 1953-57. In general, activities were somewhat greater in 1957 than in 1956. All-time peaks were reached in the number and amount of currency and coin received and counted, checks handled, and transfers of funds. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1957 are shown in detail in Table 6 on pages 92-93, and a condensed historical statement is shown in Table 7 on pages 94-95. The table on page 77 summarizes the earnings and expenses and the distribution of net earnings for 1957 and 1956. Current earnings of $763 million in 1957 were 28 per cent more than in 1956, reflecting mainly a higher average rate of interest on United States Government securities which more than offset a slight 77 FEDERAL RESERVE SYSTEM decline in average holdings. Earnings of $27 million from discounts and advances also were somewhat greater than in the year before, reflecting increases in the discount rate and a rise in the volume of discounts and advances. Current expenses of $131 million were about 9 per cent above 1956. Current net earnings amounted to $632 million, an increase of 33 per cent from 1956. After allowing for profit and loss additions and deductions from current net earnings, net earnings before payments to the United States Treasury amounted to $624 million, an increase of 32 per cent over 1956. EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS, 1957 AND 1956 [In thousands of dollars] Item Current earnings Current expenses Current net earnings Additions to current net earnings1 Deductions from current net earnings Net deductions Net earnings before payments to U. S. Treasury 1957 1956 763,348 131,814 595,649 121,182 631,534 474,467 1,580 8,721 359 383 7,141 24 624,393 474,443 542,708 20,081 61,604 401,555 18,905 53,983 2 Paid U. S. Treasury (interest on F. R. notes)... Dividends paid 1 Transferred 7) Includes tonetsurplus profits(Sec. of $167,000 in 1957 and $268,000 in 1956 on sales of U. S. Government securities. 2 Includes a payment of $8,335,000 to Federal Reserve retirement system representing adjustment for revised benefits. Statutory dividends to member banks amounted to $20 million, a rise of about $1 million over 1956 that reflected an increase in the capital and surplus of member banks and a consequent increase in the paid-in capital of the Federal Reserve Banks. Payments to the United States Treasury as interest on Federal Reserve notes amounted to $543 million in 1957. This was 90 per cent of net earnings after dividends and allowance for building up surplus to 100 per cent of subscribed capital where Section 7 surplus was 78 ANNUAL REPORT OF BOARD OF GOVERNORS below that amount. This allowance is consistent with the provisions of the franchise tax when it was in effect; for 1957 the allowance for bringing surplus up to subscribed capital was $1,303,000 for one Bank, and for 1956 the total was $9,366,000 for four 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 $2,993 million. Net earnings of $61 million remaining after dividends and payments to the United States Treasury were added to surplus account. Holdings of loans and securities. Average daily holdings of loans and securities during 1957 amounted to $24,222 million, $341 million less than during 1956; holdings of discounts and advances increased $17 million and holdings of United States Government securities decreased $362 million. The average rate of interest earned on discounts and advances rose from 2.76 to 3.15 per cent, reflecting an increase in the discount rate to 3l/2 per cent for a portion of the year; and the average rate on Government securities rose from 2.41 to 3.15 per cent. The accompanying table shows holdings, earnings, and interest rates on loans and securities held by the Federal Reserve Banks during the past three years. R E S E R V E B A N K E A R N I N G S O N L O A N S A N D S E C U R I T I E S , 1955-57 [Dollar amounts in thousands] Item and year Total Average daily holdings:1 $24,570,401 1955 24,563,390 1956 24,222,331 1957 Discounts and advances Industrial loans Acceptances U.S. Government securities $666,152 833,297 850,097 $607 837 686 $12,422 20,662 25,142 $23,891,220 23,708,594 23,346,406 24 36 30 216 547 848 398,978 571,788 735,371 Earnings: 1955 1956 1957 412,303 595,396 763,041 13,085 23,025 26,792 Average rate of interest (per cent): 1955 1956 1957 1.68 2.42 3.15 1.96 2.76 3.15 [ Based on holdings at opening of business. 3.99 4.26 4.37 1.74 2.65 3.37 1.67 2.41 3.15 FEDERAL RESERVE SYSTEM 79 Foreign and international accounts. Gold and dollar assets held for foreign account at the Federal Reserve Banks rose $65 million in 1957, almost the same as the increase for 1956. At the end of the year holdings amounted to $9,926 million, consisting of $5,488 million of earmarked gold, $3,729 million of United States Government securities (largely Treasury bills), $356 million in dollar deposits, $76 million of bankers' acceptances purchased through Federal Reserve Banks, and $277 million of miscellaneous assets. The latter item includes mainly dollar bonds issued by foreign countries and international institutions. The aggregate gold and dollar assets held for the International Bank for Reconstruction and Development, the International Finance Corporation, and the International Monetary Fund declined $670 million in 1957, reflecting principally drawings on the Fund by member countries. Accounts were opened for three central banks, two in Asia and one in Latin America. Loans on gold were again of relatively minor importance. A loan of $25 million outstanding at the beginning of 1957 was repaid by June. New credit arrangements amounted to a total of $16.5 million, of which $5 million was outstanding at the end of the year. Loans on gold are ordinarily made to foreign monetary authorities to assist them in meeting their dollar requirements for temporary needs. The Federal Reserve Bank of New York, as depositary and fiscal agent, continued to perform various services for the international institutions mentioned above. As fiscal agent of the United States, the Bank continued to operate the United States Exchange Stabilization Fund pursuant to authorization and instructions of the Treasury Department. Also on behalf of the Treasury Department it continued the administration of foreign assets control regulations pertaining to assets in the United States of, and transactions with, Communist China and North Korea and their nationals, and regulations involving certain assets of the Egyptian Government and the Suez Canal Company. Retirement System. During the year a number of important changes were made in the Retirement System of the Federal Reserve Banks. The provisions of the Retirement System had been under study for many months. Initially Industrial Relations Coun- 80 ANNUAL REPORT OF BOARD OF GOVERNORS selors Service, Inc., of New York was engaged by the Federal Reserve System to examine and evaluate the Retirement System in the light of other retirement programs in the cities where Federal Reserve Banks and Branches are located. On the basis of this study and a review by a special subcommittee of the Conference of Presidents, recommendations of this latter group were put into effect, after approval by the Board, on September 1,1957. The principal changes resulted in an over-all increase in total retirement benefit allowances of about 25 per cent and provided a somewhat more liberal disability pension. The accrued liability for these benefits resulted in an 8.3 million dollar expenditure by the Federal Reserve Banks. Bank premises. During the year the Board authorized the construction of a new building for the Salt Lake City Branch, and the construction of an addition to and alteration of the Federal Reserve Bank building in Chicago. The Chicago construction program is planned to extend over several years. BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1957 were audited by the public accounting firm of Price Waterhouse & Co., whose certificate follows: To the Board of Governors of the Federal Reserve System In our opinion the accompanying financial statements present fairly the assets, liabilities and fund balances of the operating fund and the property and equipment fund of the Board of Governors of the Federal Reserve System as at December 31, 1957, and the related assessments and expenditures for the year then ended, in conformity with generally accepted accounting principles. Our examination of the financial statements 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. Price Waterhouse & Co. Washington, D. C, February 12, 1958. FEDERAL RESERVE SYSTEM 81 ASSETS, LIABILITIES AND FUND BALANCES DECEMBER 31,1957 ASSETS Cash, exclusive of $149,399 representing withheld taxes Miscellaneous receivables and travel advances Stockroom and cafeteria inventories, at cost $ 456,975 91,898 21,192 Total assets of operating fund 570,065 Property and equipment, at cost: Land and improvements Building Furniture and equipment 792,852 3,831,976 524,747 Total assets of property and equipment fund 5,149,575 Total assets $5,719,640 LIABILITIES AND FUND BALANCES Accounts payable and accrued expenses Fund balances: Operating fund—December 31, 1956 Excess of assessments over expenditures for the year $ 240,562 $299,578 29,925 Operating fund—December 31, 1957 Property and equipment fund, including 1957 additions of $29,603 (Note) Total liabilities and fund balances 329,503 5,149,575 $5,719,640 NOTE—During 1957 the Board concluded that it was not necessary or meaningful to account for depreciation of furniture and equipment in its case and it therefore decided to discontinue the practice. The accumulated allowance for depreciation of $331,453 was restored to the property and equipment fund. 82 ANNUAL REPORT OF BOARD OF GOVERNORS ASSESSMENTS AND EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 1957 ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS: For Board expenses and purchases of property and equipment For expenditures made on behalf of the Federal Reserve Banks Total assessments $ 7,507,900 5,363,711 $12,871,611 EXPENDITURES: Printing, issue and redemption of Federal Reserve Notes paid on behalf of the Federal Reserve Banks $ 5,363,711 Expenses of the Board: Salaries $3,541,885 Retirement and insurance contributions: Special payment for increased benefits—prior years. . 2,233,178 Contributions for current year 356,506 Traveling expenses 310,966 Postage and expressage 55,901 Telephone and telegraph 81,976 Printing and binding, net 210,305 Stationery and supplies 38,181 Equipment and other rentals 29,319 Books and subscriptions 15,382 Heat, light and power 46,678 Repairs, maintenance and alterations 16,075 Insurance 5,631 Operation of cafeteria, net 44,222 Miscellaneous, net 16,790 Professional and contractual services: Legal, consultant and audit fees and expenses 204,252 Consumer Finances Surveys 160,724 Small Business Financing Study 30,200 Retail Trade Survey 25,000 Other 25,201 7,448,372 Furniture and equipment purchases Total expenditures EXCESS OF ASSESSMENTS OVER EXPENDITURES FOR THE YEAR 29,603 $12,841,686 $ 29,925 The Board's expenses in 1957 include survey costs of $30,200 and other costs of $3,331, a total of $33,531, incurred on the Small Business Financing Study, which was undertaken during the year by the Federal Reserve System to provide information for the use of Congress in its 1958 session, and also to initiate a longer run survey of the financial structure and experience of small business as viewed by the businessmen themselves. Also included are expenditures of $2,369.25 contributed by the Board of Governors for three luncheons at meetings of Treasury Department Savings Bond Program voluntary workers and costs of $20,521 for emergency planning programs under Defense Mobilization Order No. 1-20. TABLES 84 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 1957 [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars] Gold certificates on hand: Held by Federal Reserve Banks Held by Federal Reserve Agents Gold certificates due from U. S. Treasury: Interdistrict Settlement Fund Federal Reserve Agents' Fund ASSETS 1,015,555 1,800,000 7,926,837 10,473,000 21,215,392 Redemption fund for Federal Reserve notes 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 Industrial loans Acceptances: Bought outright Held under repurchase agreement U. S> Government securities: Bought outright— Bills Certificates Notes Bonds Total bought outright Held under repurchase agreement 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 869,249 22,084,641 443,288 28,055 251,281 6,383 1,272 51,631 338,622 50,364 5 ,000 50,364 5,000 55,364 482 42,337 23,351 983,573 19,933,612 2,801,750 Total buildings Less depreciation allowances Total bank premises: Other assets: .Miscellaneous assets acquired account industrial loans.. 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 Total other assets Total assets -. 23.718,935 519,350 24,238,285 24,359,819 15 5,055,147 228,679 210,909 88,123 34,193 122,316 58,717 5,494,735 20,164 63,599 83,763 25 25 3 ,689 212 ,263 1 ,553 1 ,742 3 ,154 556 627 223,584 53,028,467 FEDERAL RESERVE SYSTEM 85 NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) —Continued LIABILITIES Federal Reserve notes: Outstanding (issued to Federal Reserve Banks) 28,643,286 Less: Held by issuing Federal Reserve Banks 1,010,898 Forwarded for redemption 97,597 1,108,495 Federal Reserve notes, net (includes notes held by U. S. Treasury and by Federal Reserve Banks other than issuing Bank) 27,534,791 Deposits: Member bank reserves 19,033,795 U. S. Treasurer—general account 480,810 Foreign 356,342 Other deposits: Nonmember bank—clearing accounts 75,101 Officers' and certified checks 8,585 Federal Reserve exchange drafts 328 Reserves of corporations doing foreign banking or financing 21,765 International organizations1 38,356 All other 102,149 Total other deposits Total deposits Deferred availability cash items Other liabilities: Accrued dividends unpaid Unearned discount Discount on securities Sundry items payable Suspense account All other 246,284 20,117,231 4,070,844 149 9,893 4,555 96 255 Total other liabilities Total liabilities CAPITAL ACCOUNTS Capital paid in Surplus (Sec. 7) Surplus (Sec. 13b) Other capital accounts: Reserves for contingencies: Reserves for registered mail losses All other Total other capital accounts2 Total liabilities and capital accounts 14,948 51,737,814 345,106 809,198 27,543 10,806 98,000 108,806 53,028,467 Contingent liability on acceptances purchased for foreign correspondents 76,114 Industrial loan commitments 1,109 1 Includes International Bank for Reconstruction and Development, International Monetary Fund,8 and International Finance Corporation. During the year this item includes the net of earnings, expenses, profits, etc., which are closed out on December 31; see Table No. 6 on pp. 92-93. NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1957 AND 1956 [In thousands of dollars] Total Item 1957 Boston 1956 1957 Philadelphia New York 1956 1957 1956 1957 1956 Cleveland 1957 1956 Richmond 1957 1956 ASSETS 21,215,392 20 ,374,393 1,010,595 Gold certificate account Redemption fund for Federal Reserve 894,951 notes 869,249 56,043 871,773 5,522,298 5,402,485 1,182, 730 1,051,273 1,943,736 1 ,934,799 1,347,887 1 ,315,476 Total gold certificate reserves. . . 22,084,641 21,269,344 1,066,638 928,799 5,704,795 5,601,223 1,243,631 1,114,326 2,023,294 2,012,668 1,421,456 1,386,616 57,026 182,497 198,738 60,901 63,053 79,558 77,869 73,569 71,140 Federal Reserve notes of other Banks.. Other cash 443,288 338,622 350,598 306,196 31,701 19,863 29,465 22,291 95,949 66,417 53,311 61,624 38,556 15,056 35,132 13,116 28,480 22,701 19,69! 21,212 45,902 25,618 31,349 18,749 Discounts and advances: Secured by U. S. Govt. securities... Other Industrial loans 50,364 5,000 482 25,02 25,000 794 450 290 285 325 1,475 312 3,290 1,405 1,400 7,150 5,140 350 173 6,175 1,800 440 3,750 450 1,250 2,275 4,010 255 3,250 1,275 Acceptances: Bought outright Held under repurchase agreement.. 42,337 23,351 33,541 35,222 42,337 23,351 33,541 35,222 U. S. Government securities: Bought outright 23,718,935 24,609,632 1,293,773 1,352,693 5,931,655 6,193,703 1,384,545 1,478,817 2,083,424 2,128,561 1,515,474 1,515,191 305,100 519,350 305,100 Held under repurchase agreement.. 519,350 Total loans and securities Due from foreign banks Uncollected cash items Bank premises Other assets Total assets 1 24,359,819 25,034,316 1,294,798 1,354,805 6,521,388 22 15 5,494,735 5,623,921 73,361 83,763 252,054 223,584 1 467,096 5,010 11,971 53,028,467 2,909,812 2,897,078 6,576,116 1,390,208 1,487,232 2,087,624 2,132,086 1,519,739 1,519,716 1 4 16 1 525,927 1,173,568 1,039,318 10,664 5,361 9,397 55,349 13,445 62,069 1 345,425 4,514 12,740 490,271 9,678 19,340 2 540,172 7,805 21,489 1 421,538 6,996 14,058 417,564 7,220 15,336 094 13,628,134 13,403,064 3,050,131 3,075,286 4,681,389 4,755,131 3,455,308 3,396,551 After deducting $11,000 participations of other Federal Reserve Banks on Dec. 31, 1957, and $16,000 on Dec. 31, 1956. 2 405,812 4,782 14,884 LIABILITIES 27,534,791 27,475,657 1,638,156 1,623,169 6,500,863 6,414,299 1,738,756 1,756,490 2,624,653 2,592,654 2,188,221 2,181,224 Federal Reserve notes Deposits: 777,422 778,900 5,716,993 5,540,767 874,741 859,677 1,486,691 1,470,223 801,083 814,961 19,033,795 19,058,790 Member bank reserves 30,221 33,984 27,841 441,243 38,077 56,548 45,778 480,810 68,734 31,313 47,161 28,484 U. S. Treasurer—general account. 23,870 17,464 2 111,163 2 110,925 21,312 322,294 19,778 30,690 356,342 26,936 15,096 Foreign 17,391 12,954 16,865 426,325 3,106 6,197 5,483 246,284 269,748 10,971 Other 150,963 5,156 8,820 Total deposits Deferred availability cash items. Other liabilities 20,117,231 20,248,652 4,070,844 3,959,006 17,279 14,948 838,383 344,347 549 836,545 6,047,853 5,977,988 348,117 672,671 717,766 662 6,060 5,367 941,786 279,334 623 925,695 1,568,642 1,539,443 306,868 371,626 513,240 1,484 800 1,454 870,791 327,773 587 867,361 283,634 970 51,737,814 51,700,594 2,821,435 2,808,493 13,271,849 13,071,018 2,960,499 2,989,853 4,566,405 4,646,791 3,387,372 3,333,189 Total liabilities CAPITAL ACCOUNTS 345,106 809,198 27,543 108,806 Capital paid in Surplus (Sec. 7) Surplus (Sec. 13b) Other capital accounts. Total liabilities accounts 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 , 325,602 747,593 27,543 108,480 17,742 47,013 3,011 7,877 16,801 43,948 3,011 7,841 102,215 223,963 7,319 22,788 93,991 208,002 7,319 22,734 21,192 55,923 4,489 8,028 20,629 52,301 4,489 8,014 32,514 71,550 1,006 9,914 31,046 66,393 1,006 9,895 15,695 41,236 3,349 7,656 14,817 37,594 3,349 7,602 53,028,467 52,909,812 2,897,078 2,880,094 13,628,134 13,403,064 3,050,131 3,075,286 4,681,389 4,755,131 3,455,308 3,396,551 46.3% 44.6% 43.1% 76,114 1,109 50,055 2,365 4,414 37.8% 2,938 45.5% 3 21,398 45.2% s 14,498 46.4% 5,327 26 41.5% 48.3% 48.7% 46.5% 45.5% 6,849 77 4,532 121 3,881 2,540 3,586 15 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 28,643, 286 28 ,532,527 1,702,333 1,676,884 6,795,945 6,655,515 1,800,791 1,855,738 2!,700,128 2!, 665,145 2 266,546 21,251,832 Held by Federal Reserve Bank and forwarded for redemption... 1,108,495 1,056,870 295,082 62,035 99,248 64,177 241,216 72,491 53,715 70,608 78,325 75,475 Federal Reserve notes, net4. . . . 27,534,791 27,475,657 1,638,156 1,623,169 6,500,863 6,414,299 1,738,756 1,756,490 2,624,653 2,592,654 2,188,221 2,181,224 Collateral held by Federal Reserve Agent for notes issued to Bank: 12,273,000 11 618,000 Gold certificate account 700,000 580,000 3,270,000 2,870,000 640,000 660,000 1,130,000 1,130,000 945,000 945,000 12,299 5,140 Eligible paper 7,722 6,175 17,165,000 17 U. S. Government securities 605,000 1,150,000 1,200,000 3,600,000 3,900,000 1,200,000 1 200,000 1,600,000 1,550,000 1,350,000 1,350,000 Total collateral. 29,450,299 29,230,722 1,850,000 1,780,000 6,870,000 6,770,000 1,845,140 1,866,175 2,730,000 2,680,000 2,295,000 2,295,000 2 After deducting $245,179,000 participations of other Federal Reserve Banks on Dec. 31, 1957, and $211,344,000 on Dec. 31, 1956. 3 After deducting $54,716,000 participations of other Federal Reserve Banks on Dec. 31, 1957, and $35,557,000 on Dec. 31, 1956. * Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank. NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK A T END OF 1957 A N D 1956—Continued [In thousands of dollars] Atlanta Minneapolis St. Louis Chicago Kansas City San Francisco Dallas Item 1957 1957 1956 832,066 3,805,144 3,606,373 908,740 821,262 390,876 351,393 843,470 798,610 808,001 161,000 43,349 43,812 22,171 22,952 41,597 41,614 28,495 883,239 3,962,234 3,767,373 54,054 37,731 29,609 23,034 56,959 48,569 952,089 17,588 25,649 865,074 13,676 23,357 413,047 23,008 8,359 374,345 14,377 9,319 885,067 10,162 12,492 840,224 9,327 12,462 836,496 21,148 12,829 5,500 3,500 250 185 150 950 120 24 3,530 625 42 6,909 190 1,397 950 14,565 260 1956 1957 1956 1957 1956 1957 1956 1957 1956 1957 1956 ASSETS Gold certificate account Redemption fund for Federal Reserve notes 830,921 Total gold certificate reserves Federal Reserve notes of other Banks Other cash 879,840 56,404 24,744 Discounts and advances: Secured by U. S. Govt. securities, OO Other OO Industrial loans 3,050 225 48,919 51,173 1,850 1,100 157,090 8,750 710 727,344 2,620,994 2,661,539 26,197 75,060 80,377 753,541 2,696,054 2,741,916 28,288 36,659 32,313 47,935 14,956 37,507 1,275 200 560 200 2,625 Acceptances: Bought outright Held under repurchase agreement , U. S. Government securities: Bought outright Held under repurchase agreement 1,228,570 1,265,403 4,140,164 4,293,692 980,896 1,027,452 511,855 555,858 1,018,325 1,066,335 929,521 978,085 2,700,733 2,753,842 Total loans and s e c u r i t i e s . . . . 1,231,845 1,268,353 4,149,624 4,302,692 981,331 1,028,552 511,999 560,055 1,025,424 1,068,682 944,346 979,360 2,701,493 2,756,667 1 135,945 4,719 5,686 1 223,368 6,260 9,345 1 250,706 3,970 10,584 D u e from foreign banks. Uncollected cash items.. Bank premises Other assets Total assets. s Less than $500. 1 466,237 6,497 11,657 1 411,223 4,687 13,382 2 887,537 6,823 40,656 3 951,921 5,882 45.720 1 188,651 6,138 9.041 1 208,733 4,443 10,354 () 136,191 5,307 4,779 1 238,904 4,903 9,493 1 254,312 4,346 10,820 1 455,949 10,973 25,155 2 482,288 10,749 28,285 2,677,225 2,657,973 9,141,566 9,151,769 2,180,488 2,154,190 1,102,690 1,104,447 2,186,446 2,200,174 2,053,793 2,041,406 5,974,219 6,089,727 LIABILITIES Federal Reserve notes 1,305,420 1,371,607 5,334,243 5,273,439 1,226,564 1,211,029 Deposits: 851,881 905,111 2,905,986 3,063,567 699,440 699,664 Member bank reserves 62,021 25,982 31,063 U. S. Treasurer—general account 24,258 41,231 69,236 48,422 11,248 Foreign 13,024 41,440 12,617 15,345 10,423 7,248 Other 22,804 3.974 2,560 7,233 Total deposits Deferred availability cash items Other liabilities Total liabilities CAPITAL ACCOUNTS Capital paid in Surplus (Sec. 7) Surplus (Sec. 13b) Other capital accounts. 494,826 498,236 1,077,385 1,075,190 748,184 433,491 18,515 8,184 1,336 398,117 22,652 7,400 3,835 996,223 1,013,277 2,685,733 2,654,102 30,868 39,654 30,532 38,439 17,732 15,096 38,192 31,105 2,167 6,884 44,726 59,563 804,111 41,690 12,958 3,436 860,424 37,771 11,248 6,157 726,041 2,657,520 2,752,279 949,626 3,026,852 3,197,047 740,599 749,223 461,526 432,004 862,195 915,600 1,046,990 1,074,911 2,799,183 2 ,783,209 280,190 594,080 507,453 163,043 146,317 113,263 142,597 195,229 161,017 190,958 177,690 374,508 419,212 534 572 1,252 595 480 440 628 1,344 684 3,196 540 439 2,475 2,617,260 2,602,107 8,957,650 8,981,135 2,130,645 2,107,109 1,070,243 1,073,432 2,135,289 2,152,341 1,986,704 1,979,082 5,832,463 5,956,044 912,431 398,917 492 16,562 36,192 762 6,449 15,493 33,179 762 6,432 46,570 121,504 1,429 14,413 44,408 110,421 1,429 14,376 11,577 31,586 521 6,159 11,084 29,331 521 6,145 7,426 19,697 1,073 4,251 7,182 18,520 1,073 4,240 13,781 30,533 1,137 5,706 13,025 27,983 1,137 5,688 19,405 40,871 1,307 5,506 18,019 37,508 1,307 5,490 40,427 89,130 2,140 10,059 39,107 82,413 2,140 10,023 Total liabilities and capital accounts 2,677,225 2,657,973 9,141,566 9,151,769 2,180,488 2,154,190 1,102,690 1,104,447 2,186,446 2,200,174 2,053,793 2,041,406 5,974,219 6,089,727 — Ratio of gold certificate reserves to QO deposit and F . R. note liabilities 42.2% 46.6% 47.4% 44.5% 48.4% VO combined 40.2% 41.8% 49.4% 49.5% 43.2% 39.7% 3 8 . 1 % 44.1% 45.6? Contingent liability on acceptances purchased for foreign correspond2,892 10,806 6,972 1,892 8,523 ents 1,826 1,245 3,957 2,540 1,892 2,816 3,425 2,191 5,229 2,128 66 940 101 Industrial loan commitments FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 1,374,708 1,437,728 5,472,919 5,404,795 1,280,689 1,265,818 Held by Federal Reserve Bank 54,125 and forwarded for redemption. 69,288 66,121 138,676 131,356 54,789 534,419 Federal Reserve notes, n e t 4 . . . 1,305,420 1,371,607 5,334,243 5,273,439 1,226,564 1,211,029 494,826 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 425,000 450,000 2,500,000 2,300,000 Eligible paper U. S. Government securities 1,000,000 1,000,000 3,100,000 3,200,000 Total collateral. 450,000 250 895,000 39,593 552,463 1,109,605 1,106,161 498,236 1,077,385 1,075,190 748,184 726,041 2,657,520 2,752,279 300,000 6,909 820,000 300,000 1,397 820,000 283,000 283,000 1,500,000 1,500,000 525,000 525,000 1,500,000 1,500,000 610,000 1,126,909 1,121,397 808,000 808,000 3,000,000 3,000,000 130,000 150,000 900,000 425,000 460,000 32,220 * Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank. 771,479 2,812,335 2,888,969 44,684 450,000 150 1,425,000 1,450,000 5,600,000 5,500,000 1,345,250 1,350,150, 555,000 792,868 30,971 54,227 45,438 154,815 136,690 NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, END OF DECEMBER 1955, 1956, AND 1957 [In thousands of dollars] December 31 Type of issue Treasury bonds: 1956-58 1958 June 1958 Dec 1957-59 1956-59 1960 Nov 1961 Seot. 1961 Nov 1959-62 June 1959-62 lDec. . . 1958-63 1963 Aug... 1960-65 » 1962-67 1963-68 1964-69 Tnnp 1964-69 Dec 1965-70 1966-71 1967-7 2 June 1967-7 2 Sent 1967-72 TW. . 1969 Oct 1974 Nov 1978-83 . 1995 Feb Rate of interest (per cent) 2H 9 1 / 2 $1 2\4L 2\A 2% 2% 2% 2% 2}/ 2}i 2 i^j 71 ,79. 1? ,00(1 4 339 ,09(1 ?1 .69C 1? ,49. 1? ,49.3 339 ,09 ?1 ,6Qfl 339 jOOf ?1 j6on 319 ,84<3 693 76 319 ,84P 693 76 319 ,840 693 765 56 ,61(1 1?? 203 80(1 266 ,999 521 ,40( 132 707 49 ,266 ? ,SS? 58 758 S6 ,610 1?? ,S8 203 ,800 266 ,999 5?1 ,400 132 j7O7 49 ,266 ? g ss? 58 ,7S8 sr>,61( 1?? ,S8S 203 ,800 266 ,999 S?1 ,400 132 ,707 49 ,266 ? ,SS? 58 ,758 2 2H 2% 2 ,827 ,300 2 ,801 ,750 2 ,801 ,750 4 3% 3}4 1% j i / 2 8 000 500 ,000 ?9 000 7 ,945 ,065 ?3 400 713 ,848 in 2 2% 1 713 ,848 —8 -500 —29 -7,945 -23 -713 000 000 000 065 400 848 000 500 +9 +55 22 500 + 2 2 500 - 4 , 0 6 6 000 — 1,000 000 -7,451 415 —500 000 — 18 600 + 29 + 7,945 + 23 000 065 400 4 in 4 2 iy2 3% 87 000 2 5 599, 100 18 600 7 872, 065 6 614, 547 9 219, 313 14 258 763 - 9 , 1 3 2 , 313 12 700 26 ?00 5 0?5, SOO S 06?, 800 6, 500 5 943, 400 - 5 , 0 2 5 , 500 —937, .300 - 6 , 500 +6, 500 400 +5,943, 400 -5,943, 2 0 , 104, 312 1 0 , 975, 499 6 0 0 1 , 799 1 , 918, 170 1 , 722, 321 1 , 219, 673 4 , 238, 285 2 4 , 914, 732 2 4 , 784, 633 Partly tax-exempt. 4 ,066 000 1 ,000 000 7 ,451 415 500 ,00( 26 ,60( 500 ,000 +25 ,550 i ly Total +9 ,300 + 12 ,000 +4 ^50 \y* 3 V Total certificates . 1956 9 ,000 55 ,500 2V Treasury bills 1957 3 Tota Treasury no es . . . . Certificat 1955 2H 9 1 / Total Treasury bonds Treasury notes: Mar. 15, 1956-A Apr. 1, 1956-EA. . Aug. 15, 1956-B Oct. 1, 1956-EO. . Mar. 15, 195 7-A Apr. 1, 1957-EA.. May 15, 195 7-B Aug. 1, 195 7-D.... Aug. 15. 1957-C Oct. L, 1 9 5 7 - E O . . Apr. L, 1958-EA. . June L, 1958-A Oct. I, 1 9 5 8 - E O . . . Feb 1 5 1959-A Apr. JI, 1 9 5 9 - E A . . . Oct. 1. 1959-EO. . . Apr. 1, 1960-EA... May 15, 1960-A Oct. 1, 1960-EO... Apr. 1, 1961-EA. .. Aug. 1, 1961-A Oct. 1, 1961-EO... Feb. 15, 1962-A Apr. 1, 1962-EA... Aug. 15, 1962-B Oct. 1, 1962-EO... Nov. 15, 1962-C 1956 1957 Change during 90 - 5 , 0 3 9 , 450 — 12, 700 —26 ''OO +5,599, 100 + 18, 600 + 7,872, 065 +6,614, 547 +9,128, 813 +4,973, 700 + 195, 849 - 6 9 8 , 497 - 6 7 6 , 447 + 130 099 NO. 4—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-571 [In millions of dollars] Date 1953—Mar. 18 19 20 *21 *22 23 24 25 26 June 5 6 *7 Date Amount Date 1953—June 8 9 10 11 12 *13 *14 15 16 17 18 19 374 491 451 358 506 506 506 999 1,172 823 364 992 1953—June 20 *21 22 23 24 1954—Jan. 14 15 *16 *17 18 19 20 Amount 110 104 189 189 189 333 186 63 49 196 196 196 Amount 992 992 908 608 296 22 169 169 169 323 424 323 Amount Date 306 283 283 283 203 3 134 190 1954—Jan. 21 22 *23 *24 25 26 Mar. 15 16 1955) 1956> n o transactions 1957) * Sunday or holiday. 1 Under authority of Section 14(b) of the Federal Reserve Act. On November 9, 1953, the Reserve Banks sold directly to the U. S. Treasury $500 million of Treasury notes; this is the only use that has been made under the same authority to sell U, S. Government securities directly to the United States. NOTE.—Interest rate M 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, 1953-57 [Number in thousands; amounts in thousands of dollars] 1957 1956 1954 1955 1953 NUMBER OF PIECES HANDLED^ Discounts and advances: 2 Notes discounted and advances made Currency received and counted Coin received and counted 3 Checks handled: U. S. Govt. checks Postal money orders. . . All other« Collection items handled: U. S. Govt. coupons paid All other Issues, redemptions, and exchanges of U. S. Govt. securities Transfers of funds 25 23 21 10 20 4,631,676 4,466,739 4,282,562 4,384,270 4,405,255 9,089,460 8,610,821 8,430,796 8,382,024 7,856,216 469,158 324,161 2,974,940 539,359 342,313 2,822,589 503,516 347,351 2,643,549 481,408 354,368 2,512,985 458,607 366,807 2,414,150 12,546 19,308 11,997 17,813 12,301 16,368 12,753 15,443 13,703 14,360 207,246 2,302 198,519 2,123 191,922 1,960 191,112 1,808 177,596 1,718 AMOUNTS HANDLED Discounts and advances 3 . 114,469,820 109,665,475 88,436,422 22,871,449 93,438,640 Currency received and counted 29,926,319 29,104,496 27,461,048 28,482,428 29,514,663 Coin received and 922,742 counted 3 887,418 862,022 810,278 775,029 Checks handled: 102,062,972 114,173,132 123,215,681 141,037,495 140,739,438 U. S. Govt. checks Postal money orders. . . 5,943,178 6,091,173 5,796,279 5,941,097 5,814,754 All other 4 845,365,275 850",673,084 Collection items handled: 1,044,553,457 1,003,202,371 927,648,399 U. S. Govt. coupons 3,032,805 2,563,075 paid 2,595,305 2,209,045 2,270,606 5,758,976 Allother 5,495,317 5,354,604 5,085,695 4,615,970 Issues, redemptions, and exchanges of U. S. 493,391,267 421,612,394 429,701,960 469,247,400 381,877,330 Govt. securities 1,345,185,037 1,233,509,550 1,091,608,891 1,038,100,606 876,838,475 Transfers of funds 1 2 4 Two or more checks, coupons, etc., handled as a single item are counted as one "piece.1 3 Exclusive of industrial loans. Data for^l953-56 revised. Revised to exclude checks drawn on the Federal Reserve Banks. 91 NO.6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1957 Item Total Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco CURRENT EARNINGS Discounts and advances.. . . $26,791,945 $1,228,807 $6,735,194 $2,141,016 $2,365,599 $1,180,778 $1,902,719 $5,656,908 $570,184 $1,228,440 $1,854,824 $791,239 $1,136,237 Industrial loans 1,618 13,703 30,091 14,770 Commitments to make industrial loans 9,854 92 8,695 645 422 Acceptances 848,296 848,296 U. S. Government securities. 735,371,329 40,016,934 186,431,449 43,035,887 64,104,414 46,405,111 37,870,750 127,819,903 30,352,291 15,971,951 31,508,276 28,792,667 83,061,696 16,059 All other 13,842 14,483 14,520 17,242 31,337 17,981 55,130 53,047 296,015 27,290 11,151 23,933 Total current earnings.. 763.347.53Oi 41,278,492 194,070,069 45,207,940 66,494,591 47,600,372 39,804,806 133,530,280 30,933,626 17,216,529 33,399,085 29,597,748 84,213,992 CURRENT EXPENSES Salaries: Officers 5,860,196 Employees 77,454,122 Directors and other fees. . . . 599,105 Retirement contributions... 8,165,460 Traveling expenses 1,627,455 Postage and expressage.... 15,338,253 Telephone and telegraph. . . 1,217,008 Printing, stationery, and supplies 6,147,513 Insurance 1,185,055 Taxes on real estate 3,462,408 Depreciation (building).... 3,590,427 Light, heat, power, and water 1,448,510 1,195,314 Repairs and alterations Rent 283,654 Furniture and equipment: 2,663,296 Purchases 5,186,502 Rentals 1,813,081 All other . . Subtotal 137,237,360 Federal Reserve currency... 6,374,195 Assessment for expenses of 7,507,900 Board of Governors Total 478,886 512,141 401,666 447,688 470,503 321,444 1,069,310 401,781 313,616 636,445 399,751 406,965 4,727,541 17,072,051 4,194,542 7,079,664 5,009,373 4,741,083 12,287,883 4,326,074 2,367,213 3,968,173 3,607,258 8,073,267 46,171 40,544 34,862 57,469 38,766 140,351 24,545 43,922 33,626 39,097 47,919 51,833 845,043 418,368 536,385 521,065 1,277,823 488,527 1,702,811 443,255 288,442 743,670 438,971 461,100 174,527 103,610 131,981 122,266 107,945 265,910 67,572 89,862 206,829 107,545 103,709 145,699 784,832 1,773,146 1,251,165 2,230,209 830,234 1,288,067 1,503,123 1,350,521 2,102,495 528,411 887,756 808,294 125,223 77,685 88,900 120,091 67,164 254,209 60,747 42,412 138,583 71,893 69,442 100,659 481,685 76,968 554,700 413,484 1,095,077 226,405 681,175 277,262 302,680 49,523 138,067 268,149 532,015 122,287 293,945 590,935 431,795 90,126 170,352 470,756 449,137 84,416 159,733 157,624 1,022,683 138,194 434,326 310,084 398,319 87,853 108,599 225,676 183,974 48,008 274,367 29,554 340,692 83,747 142,689 89,829 275,057 68,572 112,436 115,820 634,399 108,956 392,019 641,25 4 115,410 28,815 8,354 260,231 27,585 5,145 95,495 69,492 12,072 141,959 128,905 69,205 146,791 72,460 2,507 74,820 50,347 23,229 176,834 35,333 93,438 91,055 224,068 2,698 70,658 399,728 3,130 103,497 23,968 729 59,808 12,550 50,372 111,952 122,063 12,775 135,775 409,059 93,615 37,011 248,344 709,958 331,874 -431,244 72,759 333,177 85,780 44,336 395,806 442,613 374,856 58,143 195,597 352,629 92,991 -4,340 247,527 329,543 107,732 31,238 179,257 844,950 224,022 91,017 256,092 288,485 83,368 25,092 181,072 187,313 87,251 15,712 226,925 293,809 117,662 25,935 313,192 281,286 87,401 34,311 210,950 713,680 126,529 72,790 9,357,428 26,166,663 7,494,206 13,064,491 9,773,976 9,098,344 20,239,293 8,018,722 5,144,349 7,371,490 6,844,768 14,663,630 393,877 1,599,884 548,964 660,459 439,168 1,057,111 166,363 211,329 59,698 649,208 365,185 222,949 434,600 2,107,100 527,900 672,400 380,800 338,200 1,066,200 279,300 182,500 288,200 388,700 842,000 151,119,455 10,185,905 29,873,647 8,233,435 14,285,855 10,815,235 9,875,712 22,362,604 8,520,971 5,386,547 8,024,875 7,399,831 16,154,838 Less reimbursement forcertain fiscal agency and other expenses Net expenses 19,305,452 131,814,003 1,062,242 3,206,655 1,000,760 1,923,694 1,055,332 1,394,733 3,389,348 1,201,632 582,776 1,341,845 1,107,327 2,039,108 9,123,663 26,666,992 7,232,675 12,362,161 9,759,903 8,480,979 18,973,256 7,319,339 4,803,771 6,683,030 6,292,504 14,115,730 PROFIT AND LOSS Current net earnings Additions to current net earnings: Profits on sales of U. S. Government securities (net) Reimbursement for fiscal agency expenses incurred in p r i o r years All other Total additions Deductions from current net earnings: Reserves for contingencies Retirement System (adjustment for revised benefits) All other Total deductions.. . Net deductons 631,533,527 32,154,829 167,403,077 37,975,265 54,132,429 37,840,469 31,323,827 114,557,025 23,614,288 12,412,759 26,716,055 23,305,244 70,098,262 166,900 9,848 41,083 10,180 14,874 10,406 8,972 27,882 7,489 4,302 7,177 6,941 17,747 1,298,381 114,003 94,314 982 128,582 44,511 112,853 38 114,553 4,625 116,135 1,886 201,541 361 123,875 5,436 83,015 1,438 54,077 2,421 52,223 998 84,379 50,971 132,834 335 1,579,284 105,144 214,176 123,071 134,052 128,427 210,873 157,193 91,943 60,800 60,398 142,290 150,917 327,829 37,011 54,582 13,998 18,614 53,038 17,674 37,505 14,259 11,108 18,221 15,707 36,112 8,335,008 57,361 543,884 1,307 2,114,932 515 604,360 687 752,928 2,510 571,926 533 410,380 13,251 1,118,809 1,155 455,325 3,204 259,276 1,351 452,488 694 388,652 14,734 662,048 17,418 8,720,198 582,202 2,170,029 619,045 774,052 625,497 441,305 1,157,469 472,789 271,735 471,403 419,093 715,578 7,140,914 477,058 1,955,853 495,974! 640,000 497,070 230,432 1,000,277 380,846 210,935 411,005 276,803 564,661 Net earnings before payments to U. S. Treasury. 624,392,613 31,677,771 165,447,224 37,479,291 53,492,428 37,343,399 31,093,395 113,556,748 23,233,442 12,201,823 26,305,051 23,028,441 69,533,600 Paid U. S. Treasury (interest on F. R. notes) 542,708,405 27,583,697 143,648,153 32,594,736 46,416,660 322,783,688 27,114,696 99,743,254 20,296,234 10,587,139 22,947,784 18,545,292 60,447,071 682,073 917,082 20,080,527 1,029,223 5,838,197 1,262,925 1,918,377 438,340 807,520 1,119,715 2,370,195 965,959 2,730,921 Dividends paid Transferred to surplus (Sec. 61,603,682 3,064,850 15,960,873 3,621,631 5,157,392 3,642,628 3,012,739 11,082,573 2,255,135 1,176,345 2,549,747 3,363,435 6,716,334 Surplus (Sec. 7) Jan.' i.'.'.''.'. 747,593,998 43,947,826 208,002,326 52,301 ,142 66,392,961 37,593,783 33,,179,336 110,421,051 29,331,210 18,520,204 27,983,154 37,507,649 82,413,356 Surplus (Sec. 7) Dec. 3 1 . . . . 809,197,680 47,012,677 223,963,199 55,922,772 71,550,353 41,236,411 36,192,075 121,503,625 31,586,344 19,696,549 30,532,901 40,871,083 89,129,690 NOTE.—Details may not add to totals because of rounding. NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-57 Current earnings Bank and period All Federal Reserve Banks, by years: 1914-15 1916 1917 1918 1919 Current expenses Net earnings before payments to U. S. Treasuryi 2,173,252 $ 5,217,998 16,128,339 67,584,417 102,380,583 2,320,586 $ —141,459 2,750,998 2,273,999 5,159,727 9,582,067 10,959,533 52 716,310 19,339,633 78 367,504 181 296,711 122,865,866 50,498,699 50 708,566 38,340,449 28,258,030 34,463,845 29,559,049 29,764,173 28,431,126 . 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 9 16 13 32 36 449,066 611,745 048 249 122,021 402,741 1930 1931 1932 1933 . . . 1934 36 424,044 29,701,279 50 018 817 49,487,318 48,902,813 28 342,726 27,040,664 26 291 381 29,222,837 29,241,396 1935 1936 1937 1938 1939 42,751,959 37,900,639 41,233,135 36,261,428 38,500,665 $ 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 149 294,774 82 087,225 16,497,736 12 711,286 3 718,180 Dividends paid $ 217,463 1 742,774 6,804,186 $ 5 540,684 5 011,832 5 654,018 6 119,673 6,307,035 6 552 717 6 682,496 Paid to U. S. Treasury (interest on F. R. notes) 1,134,234 $ 2 703,894 1,134,234 48 334 341 70,651,778 82 916 014 15 993 086 ~659,904 2 545 513 —3 077 962 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 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 n oil 418 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 , 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 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 60 59 10 3 Transferred to surplus (Sec. 7) Transferred to surplus (Sec. 13b) 724 742 974,466 850,605 613 056 113,646 1940 1941 1942 1943 1944 Paid to U. S. Treasury (Sec. 13b) Franchise tax paid to U. S. Treasury -60,323 —2 297 724 -7,057,694 11 020 582 -916,855 6,510,071 297,667 227,448 176,625 119,524 24,579 27,695 102,880 67,304 —419,140 -425,653 607 42"> 352,524 2,616 352 1,862,433 4,533,977 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 48,409,795 262,133 27,708 86 772 81,969,625 81,467,013 8 366 350 18,522,518 21,461,770 $ $ 247,659 67,054 35,605 $ 75 223 818 166,690,356 193,145,837 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 16,442,236 196,628,858 254,873,588 291,934,634 342,567,985 276,289,457 21,849,490 28,320,759 46,333,735 40,336,862 35,887,775 1955 1956 1957 412,487,931 595,649,092 763,347,530 110,060,023 121,182,496 131,814,003 302,162,452 474,443,160 624,392,613 17,711,937 18,904,897 20,080,527 251,740,721 401,555,581 542,708,405 32,709,794 53,982,682 61,603,682 Total 1914-57. . 6,548,599,315 1,999,518,753 4,491,835,764 409,286,760 149,138,300 Aggregate for each Federal Reserve Bank, 1914-57: Boston 411,663,465 266,024,370 142,898,090 New York 1,676,668,371 450,321,575 1,221,756,779 Philadelphia 438,372,098 301,597,323 135,973,785 Cleveland 592,916,755 401,523,674 184,483,226 Richmond 390,013,327 255,968,052 130,042,031 Atlanta 337,774,815 222,698,632 109,268,642 1,011,006,072 719,959,037 279,715,267 Chicago . . . . 303,971,808 188,637,244 109,622,313 St. Louis 186,089,601 116,868,390 Minneapolis 67,232,277 300,692,906 188,494,432 Kansas City 108,331,166 Dallas 266,033,265 171,941,904 90,446,044 633,396,833 436,365,926 191,184,337 San Francisco Total 6,548,599,315 1,999,518,753 4,491,835,764 26,164,877 135,738,385 33,669,342 40,427,807 17,589,159 15,757,608 49,827,401 14,146,823 9,611,650 14,417,836 15,794,212 36,141,659 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 7,697,341 409,286,760 149,138,300 1 2,188,893 2,993,359,242 -3,658 2 937,866,224 175,088,928 757,290,070 190,812,357 271,406,157 185,033,025 156,441,600 507,811,321 135,074,385 78,294,717 132,417,780 110,226,325 293,462,576 + 135,412 —433,413 +290,661 -9,907 -71,516 +5,491 + 11,681 -26,514 +64,875 -8,674 + 55,336 -17,090 57,242,913 260,786,357 70,543,656 84,774,240 47,044,702 41,464,107 136,844,061 36,679,457 23,638,637 34,664,177 45,203,898 98,980,018 2,188,893 2,993,359,242 -3,658 937,866,224 280,843 369,116 722,406 82,930 172,493 79,264 151,045 7,464 55,615 64,213 102,083 101,421 Current earnings less current expenses, plus and minus profit and loss additions and deductions. s The $937,866,224 transferred to surplus was reduced by direct charges of $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation and $500,000 for charge-off on bank premises, and was increased by $11,131,013 transferred from reserves for contingencies, leaving a balance of $809,197,680 on Dec. 31, 1957. NOTE.—Details may not add to totals because of rounding. NO. 8—MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—END OF YEAR 1918-57 AND END OF MONTH 1957 [In millions of dollars] Deposits, other than member bank reserves, with F. R. Banks Reserve Bank credit outstanding End of year or month U.S. Government securities Total DisAll Held counts Float other* under and adBought repuroutchase vances right agreement Total Gold stock2 Treasury currency outstanding3 Currency in circulation Treasury cash hold-4 ings ForTreaseign Other ury deposits deposits deposits 1918... 1919... 239 300 239 300 1 766 2 215 199 201 294 575 2,498 3,292 2,873 2,707 1,795 1 707 4,951 5,091 288 385 51 31 1920... 1921... 1922 . . 1923... 1924... 234 436 134 540 287 287 2 687 1,144 618 54 723 4 320 119 146 273 355 390 3,355 1,563 1 405 1,238 1,302 2,639 3,373 3 642 3,957 4,212 1,709 1,842 1 958 2,009 2,025 5,325 4,403 4,530 4,757 4,760 57 40 78 27 52 262 218 234 436 80 536 1925... 1926... 1927... 1928... 1929... 375 315 617 228 511 367 312 560 197 488 8 643 3 637 57 582 31 1,056 23 632 63 45 63 24 34 378 384 393 500 405 1,459 1,381 1,655 1,809 1,583 4,112 4,205 4,092 3,854 3,997 1,977 1,991 2,006 2,012 2,022 4,817 4,808 4,716 4,686 4,578 1930... 1931... 1932... 1933... 1934 . 729 817 1,855 2,437 2,430 686 775 1,851 2,435 2,430 43 42 4 2 251 638 235 98 7 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 2,511 1935... 1936... 1937 1938 . . 1939... 2,431 2,430 2 564 2,564 2,484 2,430 2,430 2,564 2,564 2,484 1 2,486 2,500 2,612 2,601 2,593 10,125 11,258 12,760 14,512 17,644 1940... 2,184 2 254 1941 1942 . . 6,189 1943.. . 11,543 1944... 18,846 2,184 2,254 6,189 11,543 18,846 2,274 2,361 6,679 12,239 19,745 21,995 22,737 22,726 21,938 20,619 5 3 12 39 38 28 10 4 19 17 19 16 7 91 11 3 3 80 94 8 10 6 471 14 5 80 681 815 10 4 96 73 25 28 Other Federal Reserve accounts 5 Member bank reserves Total Required6 118 208 1,636 1,890 1,585 1,822 51 68 Excess6 96 11 38 51 12 3 4 19 18 298 15 26 19 20 285 276 275 258 1,781 1,753 1,934 1,898 2,220 1,654 99 1,884 2,161 14 59 203 201 208 202 216 16 17 18 23 29 8 46 5 6 6 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 4,603 5,360 5,388 5,519 5,536 211 222 272 284 3,029 19 54 8 3 121 6 79 19 4 20 22 31 24 128 169 375 354 355 360 241 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 2,476 2,532 2 637 2,798 2,963 5,882 6,543 6,550 6,856 7,598 2,566 2,376 3,619 2,706 2,409 544 244 29 99 226 160 253 261 142 923 634 172 199 235 242 397 256 263 260 251 5,587 6,606 7,027 8,724 11,653 2,743 4,622 5,815 5,519 6,444 2,844 1,984 1,212 3,205 5,209 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 1,133 774 793 1,360 1,204 599 586 485 356 394 284 291 14,026 12,450 13,117 12,886 14,373 7,411 9,365 11,129 11,650 12,748 6,615 3,085 1,988 1,236 1,625 214 225 213 211 799 579 440 5 256 339 402 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 1950... 1951... 1952... 1953... 1954... 20,778 23,801 24,697 25,916 24,932 20,725 23,605 24,034 25,318 24,888 1955... 24,785 1956... 24,915 24,391 24,610 1957— Jan.. Feb.. Mar.. Apr.. May. June. July.. Aug.. Sep.. Oct.. Nov.. Dec. 23,421 22,887 23,149 23,169 23,108 23,035 23,355 23,539 23,312 23,338 23,733 24,238 23,421 22,854 23,040 23,169 22,950 22,994 23,079 23,475 23,312 23,218 23,448 23,719 578 580 535 541 534 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 53 196 663 598 44 67 1,368 19 1,184 156 967 28 935 143 808 3 5 4 2 1 22,216 25,009 25,825 26,880 25,885 22,706 22,695 23,187 22,030 21,713 4,636 4,709 4,812 4,894 4,985 27,741 29,206 30,433 30,781 30,509 1,293 1,270 1,270 394 305 108 1,585 50 1,665 29 70 26,507 26,699 21,690 21,949 5,008 5,066 31 25 24 25 21 23 20 28 17 17 21 66 25,195 24,704 24,970 24 960 25,224 24,816 24,691 25,418 24,622 25,206 25,515 25,784 22,252 22,304 22,306 22,318 22,620 22,623 22,627 22,626 22,635 22,691 22,763 22,781 5,071 5,076 5,086 5 094 5,104 5,107 5,111 5,118 5,125 5,135 5,139 5,146 249 163 85 223 78 668 1,076 595 1,196 994 803 829 936 158 1,170 926 41 558 1,199 276 896 420 64 865 986 898 396 "no' 789 1,062 285 942 819 519 55 1,424 33 109 862 t 446 | 821 314 569 547 750 495 607 563 590 706 15,915 16,139 17,899 20,479 16,568 14,457 15,577 16,400 19,277 15,550 1,458 508 392 642 767 895 526 550 423 490 565 363 455 493 441 714 746 777 839 907 17,681 20,056 19,950 20,160 18,876 16,509 19,667 20,520 19,397 18,618 18,903 1,172 761 796 668 247 389 346 563 31,158 31,790 767 775 394 441 402 322 554 426 925 901 19,005 19,059 19,089 -30 30,614 30,575 30,585 30,519 30,836 31,082 30,933 31,133 31,073 31,090 31,661 31,834 809 809 804 791 788 758 759 752 773 784 761 761 715 458 591 509 568 498 504 477 429 552 243 481 344 327 311 316 360 449 364 342 337 378 283 356 263 206 304 294 274 308 296 285 261 256 196 246 891 18,882 18,576 18,629 18,864 19,049 18,376 18,630 18,975 18,399 18,917 19,274 19,034 18,517 18,294 18,512 18,588 18,351 18,543 18,520 18,305 18,694 18,541 18,578 19,091 365 282 117 276 698 977 393 870 1,123 1,133 1,137 1,079 1,072 1,075 942 1,198 1,111 1,056 1,000 998 562 1,499 1,202 1,018 389 -570 763 258 102 -167 110 670 -295 376 696 -57 1 Comprises acceptances and industrial loans. * Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation. 8 The stock of currency, 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 currency of these kinds held in the Treasury and the Federal Reserve Banks as well as that in circulation. * 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 currency held in the Treasury: subsidiary silver and minor coin, United States notes, Federal Reserve notes, Federal Reserve Bank notes, and national bank notes. 6 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. « These figures are estimated. Available only on call dates prior to 1929 (in 1920 and 1922, the call dates were December 29). NOTE.—For description of figures and discussion of their significance, see Banking and Monetary Statistics, Sec. 10, pp. 360—66. NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES DECEMBER 31, 1957 Cost Federal Reserve Bank or branch Net book value Land Building (including vault)1 Fixed machinery and equipment Total $1,628,132 $5,929,169 $2,977,084 $10,534,385 $5,010,067 5,215,656 592,679 607,779 12,183,528 1,464,815 4,394,369 4,886,521 562,181 22,285,705 2,619,675 5,002,148 5,143,118 899,339 4,621,772 Philadelphia... Cleveland Cincinnati Pittsburgh.... 1,884,357 4,839,506 2,130,561 8,854,424 4,513,482 1,295,490 400,891 1,189,941 6,568,878 1,288,501 4,982,108 2,976,173 968,093 689,889 10,840,541 2,657,485 6,861,938 3,008,634 1,450,155 5,219,568 Richmond Baltimore Charlotte Atlanta Annex Birmingham... Jacksonville. .. Nashville New Orleans. . Chicago Detroit St. Louis Little Rock Louisville Memphis Minneapolis. .. Helena 469,944 250,487 116,569 4,164,663 2,009,381 1,052,360 2,082,952 1,062,747 607,294 6,717,559 3,322,615 1,776,223 3,024,369 2,445,444 1,526,446 633,387 93,931 327,352 164,004 470,113 277,078 1,722,115 137,100 1,031,851 1,686,250 1,248,326 762,456 362,731 103,867 70,511 694,291 35,091 265,700 2,718,233 334,898 1,429,714 2,544,545 1,753,530 1,305,234 1,175,848 325,117 1,018,342 2,038,458 1,531,954 406,845 3,641,447 1,147,734 7,054,984 2,831,755 2,736,080 1,214,162 13,432,511 5,193,651 3,096,422 3,726,943 1,675,780 85,007 644,515 128,542 3,171,719 264,604 3,118,776 287,469 1,994,738 194,115 72,464 152,606 6,842,237 543,726 3,835,755 568,617 2,094,915 204,709 3,547,450 291,340 600,521 15,709 6,693,528 126,401 646,249 62,977 7,940,298 205,087 5,213,620 92,997 Kansas City... Denver Oklahoma City Omaha 545,764 592,271 65,021 444,176 3,521,181 523,041 421,252 2,324,006 1,312,190 86,910 97,589 94,548 5,379,135 1,202,222 583,862 2,862,730 1,472,407 773,006 173,139 2,484,197 Dallas El Paso Houston San Antonio... San Francisco. Los Angeles. .. Portland Salt Lake City. Seattle Total... 189,831 250,000 708,581 448,451 1,362,220 1,042,845 1,979,635 1,395,498 466,692 112,111 570,846 2,018,743 1,292,845 2,800,327 2,414,795 241,930 1,292,845 2,395,009 2,329,920 476,768 736,867 207,380 555,723 274,772 3,783,530 4,074,380 1,678,512 649,515 1,891,564 1,440,643 1,491,100 630,920 84,814 642,240 5,700,941 6,302,347 2,516,812 1,290,052 2,808,576 1,558,185 4,534,918 1,872,397 912,292 2,094,189 29,052,650 103,661,791 34,579,680 167,294,121 83,761,788 Boston New York Annex Buffalo OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Richmond Chicago . . . . Dallas El Paso Los Angeles Total 146 550 855,000 496 412 39,003 40,747 1,577,712 1 ,536,912 124 ,601 119,739 29,464 1 ,686,115 32 ,575 157 ,176 146 550 2 ,516 ,513 406 412 191 ,317 70 ,211 3 ,421 ,003 146,550 496 412 31,869 70,211 3 ,153,983 2 ,408,941 1 Includes expenditures incident to construction programs carried in unallocated accounts pending completion of programs and subsequent allocation of costs to appropriate accounts. 98 NO. 10—NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS [December 31, 1957] Boston New York Philadelphia Cleveland Richmond Atlanta. . Chicago St. Louis . . . . . .. Minneapolis . . Kansas City Dallas.... San Francisco Total 1 Includes 1,041 part-time employees. . . Employees1 Other officers President Federal Reserve Bank (including branches) Annual salary Number $35 000 60,000 35,000 35,000 21 58 26 36 $288,500 1,012,450 358,000 476,550 35,000 35,000 50,000 35,000 33 36 40 32 30 000 35,000 35,000 35,000 $455,000 Total Annual salaries Number Annual salaries $4,875,510 17,204,064 4,122,119 7,041,411 1,389 3,816 1,086 1,760 $5,199,010 18,276,514 4,515,119 7,552,961 411,200 442,100 570,100 382,400 1,367 3,757 1,059 1,723 1,363 1,357 3,018 1,099 4,787,851 4,729,620 12,059,416 4,140,154 1,397 1,394 3,059 1,132 5,234,051 5,206,720 12,679,516 4,557,554 23 29 30 36 274,200 363,000 365,600 444,000 661 1,029 989 1,983 2,349,210 3,786,168 3,602,794 7,887,924 685 1,059 1,020 2,020 2,653,410 4,184,168 4,003,394 8,366,924 400 $5,388,100 19,405 $76,586,241 19,817 $82,429,341 Annual salaries Number NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES In effect December 31, 1957. For changes during the year, see "Record of Policy Actions of Board of Governors.' [Per cent per annum] Type of transaction Boston New York Philadelphia Cleveland Richmond 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 Act) Other secured advances (Sec. 10b of the Federal Reserve Act) 3 sy2 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) Loanso to industrial or commercial businesses under Sec. 13b f t n e 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 , Atlanta Chicago St. Louis Minneapolis Kansas City 3 3H 3 3H Dallas San Francisco 4-6 3% 4-6 (0 () X-1X X-iX 3%-sy2 3Y2-6 0) () 4-6 4-6 3%-6 0) (3) 0) (3) 0) 4} 4-1} 4-iX 4-iX y2 3H-6 4-iX 4-6 4-6 4-6 4-6 4-6 0) (3) C1) 4-iX 4-iX (3) l\\ 1 Rate charged borrower by financing institution less commitment rate. Rate charged borrower but not to exceed 1 per cent above the discount rate. s Rate charged borrower. 4 Twenty-five per cent of loan rate on disbursed portion; y2 per cent per annum on undisbursed portion. 6 Rate on disbursed portion; 34 per cent per annum on undisbursed portion of loan. 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 loans and commitments under Section 13b: 5 years. 2 NO. 12—MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits1 Effective date of change 1917—June 1936—Aug. 1937—Mar. May 1938—Apr. 21 16 1 1 16 1941—Nov. 1 1942—Aug. 20 Sept. 14 Oct. 3 1948—Feb. 27 June 11 Sept. 16 Sept. 24 1949—May 1 May 5 June 30 July 1 Aug. 1 Aug. 11 Aug 16 Aug. 18 Aug. 25 Sept. 1 1951—Jan. 11 Jan. 16 Jan. 25 Feb. 1 1953—July 1 July 9 1954—June 16 June 24 July 29 Aug 1 In effect Jan. 1, 1958 Statutory requirements: Minimum Maximum Central reserve city banks Time deposits Reserve city banks Country banks Central reserve and reserve city banks Country banks 10 15 20 * 17H 7 3 3 12}J 20 14 13 26 22^ 26 24 22 20 22 24 P 14 12 6 5 6 5 6 16 26 22 24 21 20 2314 19H 23 22^ 22 19 18 15 7 7 6 14 13 6 5 12 5 2 23 19 24 20 22 19 21 20 18 20 18 12 12 5 5 13 26 10 20 7 14 3 6 3 6 6 6 13 14 13 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). NO. 13—MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS x [Per cent per annum] Nov. 1, 1933— Jan. 31, 1935 Feb. 1, 1935— Dec. 31, 1935 Jan. 1, 1936— Dec. 31, 1956 Savings deposits 3 2H 2M 3 Postal Savings deposits 3 2Y2 3 Other time deposits payable: In 6 months or more In 90 days to 6 months. . In less than 90 days 3 3 3 I* 3 2y2 Type of deposit 2y2 m Effective Jan. 1, 1957 1 1 Maximum permissible rates for member banks established by Board of Governors in Regulation Q, which provides that rate paid by a member bank may not exceed maximum rate payable by State banks or trust companies on like deposits under laws of State in which member bank is located. Since Feb. 1, 1936, maximum rates established by Federal Deposit Insurance Corporation for insured nonmember banks, under authority of the Banking Act of 1935, have been the same as those in effect for member banks. 101 NO. 14—MARGIN REQUIREMENTS1 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, 1946Jan. 31, 1947 Regulation T: For extension of credit by brokers and dealers on listed securities For short sales Regulation U: For loans by banks on stocks . Feb. 1, 1947Mar. 29, 1949 Mar. 30, 1949Jan. 16, 1951 Jan. 17, 1951Feb. 20, 1953 Feb. 20, 1953Jan. 4, 1955 Jan. 4, 1955Apr. 22, 1955 Effective Apr. 23, 1955 100 100 75 75 50 50 75 75 50 50 60 60 70 70 100 75 50 75 50 60 70 1 Regulations T and U limit the amount of credit that may be extended on a security by prescribing a maximum loan value, which is a specified percentage of its market value at the time of the extension; the "margin requirements" shown in this table are the difference 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, 1957] Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan Percentage of loan guaranteed 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 30 35 40-50 Maximum Rates Financing Institution May Charge Borrower [Per cent per annum] Interest rate Commitment rate. 102 NO. 16—PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF ALL BANKS, BY CLASSES, DECEMBER 31, 1957 AND 1956 * [In millions of dollars] Mutual savings banks Commercial banks Item All banks Member banks Total2 Total National State Insured nonmember Noninsured Total Insured Noninsured December 31, 1957 3 203,980 115,310 88,670 65,880 22,790 49,940 170,150 94,050 76,100 58,330 17,770 49,000 142,440 80,960 61,480 47,240 14,240 43,200 91,160 50,110 41,050 31,450 9,600 27,630 51,280 30 850 20,430 15,790 4,640 15,570 26,190 12 640 13,550 10,410 3,140 5,450 1,550 470 1,080 690 390 350 33,830 21,260 12,570 7,550 5,020 940 25,900 16,840 9,060 5,260 3,800 750 7,930 4,420 3,510 2,290 1,220 190 Deposits, total Interbank Other demand... t £3 Other time OJ Total capital accounts 233,630 17,290 128,420 87,920 20,620 201,870 17,290 128,390 56,190 17,540 171,130 16,440 109,530 45,160 14,660 109,840 9 540 69,550 30,750 9,160 61,290 6,900 39,980 14,410 5,500 29,200 470 17,980 10,750 2,560 1,570 380 880 310 320 31,760 24,450 7,310 30 31,730 3,080 30 24,420 2,270 7,310 810 Number of banks 14,088 13,566 6,393 4,620 1,773 6,753 423 522 239 283 Loans and investments, total. Investments U. S. Govt. obligations. . Other securities Cash assets I December 31 , 1956 Investments. . . . U. S. Govt. obligations.. Other securities.. Cash assets 197,063 110,079 86,985 66,523 20,461 49,641 165,123 90,302 74,821 58,552 16,269 48,720 138,768 78,034 60,734 47,575 13,159 42,906 88,477 48,109 40,367 31,568 8,800 27,006 50,291 29,924 20,366 16,007 4,359 15,900 24,859 11,808 13,051 10,274 2,777 5,448 1,521 471 1,051 714 336 369 31,940 19,777 12,163 7,971 4,192 920 24,170 15 542 8,628 5,518 3,110 739 7,770 4 235 3,535 2,453 1,082 182 Deposits, total Interbank Other demand Other time Total capital accounts 227,546 17,595 129,044 80,908 19,249 197,515 17,593 129,015 50,908 16,302 167,906 16,855 110,142 40,909 13,655 107,161 9 844 69,507 27,810 8,450 60,744 7 012 40,634 13,098 5,205 28,073 1,562 30 032 7 146 310 2 22 886 427 26 22,857 2,130 3 7,143 313 29 30,001 2,947 14,167 13,640 6,462 4,651 1,811 6,737 444 527 223 304 Loans and investments, total. Number of banks 1 8 17,922 9,724 2,336 952 300 2 817 All banks in the United States, and one in Alaska and one in the Virgin Islands that became national members in 1954 and 1957 respectively. Total for commercial banks excludes three member mutual savings banks. » Preliminary figures based largely on data collected regularly or estimated as of last Wednesday of month. Some items, particularly cash assets and demand deposits, are subject to large daily changes and may differ from reported figures that will be published in the Federal Reserve Bulletin, probably in the May issue. 104 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 17—MEMBER BANK EARNINGS, BY CLASS OF BANK, 1957 AND 19561 [Dollar amounts in millions] Central reserve city Danks Reserve city banks Total Item New York 1957 1956 1957 Chicago 1956 Earnings 1957 . . $6,756 $6 ,078 $1,137 $1,014 $ On U. S. Govt. securi137 133 ties . . . 1,162 1,101 308 On other securities.. . . 47 725 633 On loans .. 4,190 3,725 All other 945 201 Expenses Salaries and wages Interest on deposits All other 4,214 3,680 1 735 650 1,295 Net current earnings before income taxes. 2,542 2,398 Recoveries and profits 2 .. Losses and charge-offs3 Net addition to valuation reserves .. Profits before income taxes.... Taxes on net income.. Net profits Cash dividends declared 4 594 544 1956 1957 1956 Country banks 1957 1956 274 $ 243 $2 660 $2 402 $2 685 $2 419 46 172 536 275 59 202 136 478 137 49 16 143 35 123 60 19 44 119 426 404 116 553 514 129 1 689 1 511 1 605 1 438 371 338 1,664 1,441 1,820 1,579 677 266 497 996 961 724 305 551 865 840 151 577 44 109 9 40 47 222 51 206 229 67 7 63 91 2,063 1,744 718 442 209 346 157 93 41 82 30 850 385 723 302 677 259 593 229 1,169 1,027 894 234 189 53 52 464 421 418 364 604 547 152 133 24 23 242 223 186 168 18.0 1.42 18.1 1.37 18.2 1.71 17.0 1.52 20.6 1.66 18.7 19.2 1.43 1.42 19.7 1.40 16.4 1.25 17.0 1.26 8.3 .65 7.7 .59 7.8 .73 6.7 .60 7.9 .64 8.2 .63 8.9 .66 8.6 .61 7.9 .61 7.4 .55 2.52 5.30 2.31 5.02 2.47 4.52 2.22 4.15 2.36 4.56 2.19 4.14 2.53 5.29 2.31 5.02 2.55 5.88 2.36 5.64 (Per cent) Ratios: Net current earnings before income taxes to— Average total capital accounts Average total assets. Net profits to— Average total capital accounts Average total assets. Average return on U. S. Govt. securities Average return on loans. 1 Data for 1957 are preliminary, and some items are not available; final figures will appear in the Federal Reserve Bulletin, probably in the May or June issue. 2 Includes recoveries credited to valuation reserves. 3 Includes losses charged to valuation reserves. 4 Includes interest on capital notes and debentures. FEDERAL RESERVE SYSTEM 105 NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 1957 * Commercial and stock savings banks and nondeposit trust companies Member banks All banks Total Number of banks, Dec. 31,1956 14,167 13,640 Changes during 1957 New banks 3 Suspensions Reopening Consolidations and absorptions: Banks converted into branches. Other Voluntary liquidations 4 Conversions: National into State State into national Federal Reserve Memberships Admission of national bank in Virgin Islands Admissions of State banks Withdrawals of State banks. Federal Deposit insurance:6 Admissions of State banks Net increase or decrease + 87 National l State member 2 Insured 4,651 1,811 6,737 444 +3 + 51 + 13 -1 -26 —6 -57 -6 -6 ^ -3 -3 +1 +1 + 20 -1 +1 -138 —24 -134 —23 -45 —8 +87 -3 Nonmember banks -1 -3 +1 -2 +7 + 13 -38 + 21 + 16 -21 -21 Number of banks, Dec. 31,1957 14,088 13,566 4,620 1,773 6,753 Number of branches and additional offices, Dec. 31, 19567. 7,728 7,362 3,629 2,053 + 501 + 134 -30 + 278 + 71 -13 -2 -19 -21 423 1,643 37 257 109 + 109 + 35 -10 -14 + 112 + 27 -6 -11 +2 +1 + 22 +2 + 14 +2 -2 + 15 -15 + 120 + 122 + 606 +1 + 27 +1 + 364 Number of branches and additional offices, Dec. 31, 1957 7 . 8,373 7,968 3,993 2,173 1,765 227 227 180 24 23 + 17 -8 + 17 -8 + 13 -8 +2 +2 +9 +9 +5 +1 +3 +1 236 236 185 27 24 Number of banking facilities,. Dec. 31, 1957» -2 —1 + 19 + 16 239 Changes during 1957 + 537 De novo branches Banks converted into branches.. + 138 -31 Discontinued Interclass changes—Net8 Other (Virgin Islands member). . +1 + 645 Net increase or decrease Changes during 1957 Established Discontinued Interclass change Net increase or decrease 304 -7 -13 -31 Number of banking facilities, Dec. 31, 1956 s 223 -2 -74 -79 Noninsured +3 -3 +1 NonIninsured 2 sured 2 -3 +4 +1 Mutual savings banks 283 + 39 37 296 109 i 1 Excludes banks in United States territories and possessions except one national bank in Alaska and one in the Virgin Islands. 2 State member bank figures and 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 Exclusive of conversions of State member banks into national banks. 6 Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve membership, and vice versa. 7 Except banking facilities which are shown separately; see note 9. * For details of interclass branch changes, see Federal Reserve Bulletin, February 1958. 9 Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department. NO. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, DECEMBER 31, 1957 i Federal Reserve District, State, or other area DISTRICT Boston New York2... Philadelphia.. Cleveland... . Richmond. . . Atlanta... Chicago St. Louis Minneapolis.. Kansas City. Dallas San Francisco2 On par list Total 2 Total Member Not on par list (nonmember) Nonmember Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches & offices & offices & offices & offices & offices 430 655 698 976 978 1,312 2,473 1,467 1,290 1 761 1,085 594 1,481 496 740 963 408 918 256 123 41 375 2,127 8,268 T o t a l . . . 13,500 STATE Alabama 239 Arizona 6 Arkansas. . . . 237 California 122 Colorado 158 Connecticut.. 82 Delaware.... 27 Dist. of Col... 16 Florida 261 Georgia 412 Idaho 28 Illinois. ... 936 Indiana Iowa Kansas Kentucky... . Louisiana. . . . Maine.. Maryland.... Mass. Michigan.... Minnesota. . . Mississippi.. . Missouri.. . . Montana. . . . Nebraska.... Nevada N. Hampshire New Jersey. . New Mexico.. New York. . . N. Carolina.. North Dakota Ohio Oklahoma.... Oregon 463 669 Pennsylvania Rhode Island. S. Carolina... South Dakota Tennessee.... Texas Utah Vermont Virginia Washington.. West Virginia Wisconsin.... Wyoming. ... Alaska 2 Hawaii 2 V 12 595 121 430 655 698 976 816 737 2,473 1,167 691 1,755 1,001 594 1,481 496 740 814 357 918 183 80 41 293 559 533 599 465 397 1,019 491 474 749 108 360 2,122 7,934 11,759 186 6,387 5,372 1,556 94 4 75 74 57 104 6 1,247 53 2 51 48 2 22 3 137 30 84 13 260 15 5 1,741 334 64 1 37 18 4 105 68 11 411 33 24 10 2 10 5 463 669 223 161 233 167 147 4 230 502 76 157 593 73 268 52 457 109 57 611 380 54 765 10 144 172 296 957 596 78 110 53 168 24 765 10 73 71 213 920 49 58 313 66 18 217 244 49 58 312 364 76 56 148 170 397 281 50 547 114 415 6 88 182 550 53 3 5 2 94 5 73 268 52 457 198 154 611 386 54 151 1 15 61 2 367 1,862 6,378 107 18 47 10 57 73 4 223 161 88 183 550 53 18 5 2 78 174 149 51 45 9 12 111 65 17 523 108 114 110 192 296 446 6 46 4 1 2 32 3 334 39 1,172 244 7 491 6 157 6 634 162 575 300 599 6 82 27 16 216 133 28 934 158 140 42 57 13 69 78 4 5 137 96 165 377 351 340 1,454 676 217 1 006 59 126 9 1 384 5 140 42 57 12 67 78 4 147 6 126 122 60 126 29 1 384 5 108 141 110 192 296 446 6 115 4 1 2 32 3 334 39 1,172 387 26 491 6 157 364 182 56 148 170 397 682 195 604 114 415 117 118 91 95 282 58 384 64 46 477 1,363 405 645 532 299 534 119 34 30 212 108 52 36 67 132 226 207 34 173 85 140 4 5 73 93 70 115 253 371 6 26 4 1 2 381 256 24 20 81 38 171 74 16 374 29 275 35 21 40 77 43 75 20 1 4 2 293 20 1,110 136 1 433 5 143 22 41 18 59 58 17 220 157 35 1 41 19 62 108 6 58 1 14 596 78 104 29 151 24 586 6 32 60 83 579 519 61 81 24 113 24 179 4 41 11 130 341 77 17 23 5 38 66 18 217 244 20 34 202 58 8 153 29 24 110 8 10 64 35 113 161 40 1 151 1 10 61 2 1 28 237 23" 1 1 53 69 389 13 2 5 1 92 1 111 20 45 279 1 2 2 51 227 34 398 51 40 391 223 19 5 73 43 2 106 27 401 145 57 69 89 97 143 19 6 71 101 83 37 6 24 17 1 7 1 128 10 61 1 15 5 1 Comprises all commercial banking offices on which checks are drawn, including 236 banking facilities. Number of banks and branches differs from Table 18 because of banks and trust companies on which no checks are drawn, 3 mutual savings member banks, and banks in Alaska, Hawaii, and the Virgin Islands. * Alaska and Hawaii, assigned to the San Francisco District for check clearing and collection purposes; Virgin Islands assigned to the New York District. 106 NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1957 [In millions of dollars] Net change in holdings U. S. Government securities U.S. Government securities and acceptances U. S. Government securities January February.. . . March April May June July August September... October November... December... -1,533 -540 +261 + 21 -65 -71 +317 + 192 -237 + 26 + 399 +550 -1,494 -534 + 262 +20 -62 -73 + 320 + 184 -227 + 26 +395 +505 263 129 70 124 371 452 168 88 443 299 Total, 1957 -680 -676 2,407 Month Outright transactions Gross market purchases Repurchase agreements Gross market sales Cash redemptions 791 455 71 398 112 5 154 75 157 15 287 182 99 28 135 5 130 42 44 2,314 984 i Less than $500,000. NOTE.—Details may not add to totals because of rounding. 107 Bankers' acceptances 114 Gross purchases Gross sales Outright -3 -6 -1 Net repurchases -35 305 117 84 364 288 725 834 405 247 419 535 822 587 178 390 330 394 894 774 1,071 906 1,552 1,318 -9 C1) +4 + 22 + 23 6,875 6,661 +9 -12 +1 -3 0) +6 +2 +2 FEDERAL RESERVE DIRECTORIES AND MEETINGS BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1957] W M . MCC. MARTIN, JR., of New York, Chairman C. CANBY BALDERSTON of Pennsylvania, Vice Chairman M. S. SZYMCZAK of Illinois Tefm Expim January 31, 1970 January 31, 1966 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 CHAS. N. SHEPARDSON of Texas ELLIOTT THURSTON, Assistant to the Board WINFIELD W. RIEFLER, Assistant to the Chairman January 31, 1968 WOODLIEF THOMAS, Economic Adviser to the Board ALFRED K. CHERRY, Legislative Counsel CHARLES MOLONY, Special Assistant to the Board S. R. CARPENTER, Secretary MERRITT SHERMAN, Assistant Secretary KENNETH A. KENYON, Assistant Secretary CLARKE L. FAUVER, Assistant Secretary HOWARD H. HACKLEY, General Counsel FREDERIC SOLOMON, Assistant General Counsel DAVID B. HEXTER, Assistant General Counsel G. HOWLAND CHASE, Assistant General Counsel JEROME W. SHAY, Assistant General Counsel THOMAS J. O'CONNELL, Assistant General Counsel RALPH A. YOUNG, Director, Division of Research and Statistics FRANK R. GARFIELD, Adviser, Division of Research and Statistics GUY E. NOYES, Adviser, Division of Research and Statistics ROLAND I. ROBINSON, Adviser, 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 ALBERT R. KOCH, Assistant Director, Division of Research and Statistics LEWIS N. DEMBITZ, Assistant Director, Division of Research and Statistics ARTHUR W. MARGET, Director, Division of International Finance ROBERT F. LEONARD, Director, Division of Ban\ Operations J. E. HORBETT, Associate Director, Division of Ban\ Operations GERALD M. CONKLING, Assistant Director, Division of Ban\ Operations JOHN R. FARRELL, Assistant Director, Division of Bank Operations ROBERT C. MASTERS, 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 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 M. B. DANIELS, Assistant Controller, Office of the Controller no FEDERAL OPEN MARKET COMMITTEE [December 31, 1957] MEMBERS W M . MCC. MARTIN, JR., Chairman (Board of Governors) ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New York) CARL E. ALLEN (Elected by Federal Reserve Banks of Cleveland and Chicago) 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) CHAS. N. SHEPARDSON (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) OFFICERS WINFIELD W. RIEFLER, Secretary THOMAS R. ATKINSON, Associate Economist ELLIOTT THURSTON, Assistant Secretary MERRITT SHERMAN, Assistant Secretary HOWARD H. HACKLEY, General Counsel ' FREDERIC SOLOMON, Assistant General Counsel WOODLIEF THOMAS, Economist KARL R Econom t " B O P P > Assodate " ARTHUR W. MARGET, Associate Economist ~, . M _, TTr , , A GEORGE W. MITCHELL, Associate Economist . V. ROELSE, Associate Economist CLARENCE W. TOW, Associate Economist H RALPH A. YOUNG, Associate Economist AGENT FEDERAL RESERVE BANK OF NEW YORK ROBERT G. ROUSE, Manager of System Open Market Account During 1957 the Federal Open Market Committee met every two or three weeks, as indicated in the Record of Policy Actions taken by the Committee (see pages 33-62 of this report). in FEDERAL ADVISORY COUNCIL [December 31, 1957] MEMBERS District No. 1—LLOYD D. BRACE, President, The First National Bank of Boston, Boston, Massachusetts. District No. 2—ADRIAN M. MASSIE, Chairman of the Board, The New York Trust Company, New York, New York. District No. 3—WILLIAM R. K. MITCHELL, Vice Chairman of the Board and Chairman of the Executive Committee, Provident Tradesmens Bank and Trust Company, Philadelphia, Pennsylvania. District No. 4—FRANK R. DENTON, Vice Chairman, Mellon National Bank and Trust Company, Pittsburgh, Pennsylvania. District No. 5—ROBERT V. FLEMING, Chairman of the Board, The Riggs National Bank, Washington, D. C. District No. 6—COMER J. KIMBALL, Chairman of the Board, The First National Bank of Miami, Miami, Florida. District No. 7—HOMER J. LIVINGSTON, President, The First National Bank of Chicago, Chicago, Illinois. District No. 8—LEE P. MILLER, President, Citizens Fidelity Bank and Trust Company, Louisville, Kentucky. District No. 9—GORDON MURRAY, President, First National Bank of Minneapolis, Minneapolis, Minnesota. District No. 10—R. CROSBY KEMPER, Chairman of the Board and President, The City National Bank and Trust Company of Kansas City, Kansas City, Missouri. District No. 11—WALTER B. JACOBS, President, The First National Bank of Shreveport, Shreveport, Louisiana. District No. 12—FRANK L. KING, President, California Bank, Los Angeles, California. EXECUTIVE COMMITTEE ROBERT V. FLEMING, ex officio FRANK R. DENTON, ex officio HOMER J. LIVINGSTON ADRIAN M. MASSIE WILLIAM R. K. MITCHELL OFFICERS President, ROBERT V. FLEMING Vice President, FRANK R. DENTON Secretary, HERBERT V. PROCHNOW Assistant Secretary, WILLIAM J. KORSVIK Meetings of the Federal Advisory Council were held on February 17-19, May 12-14, September 15-17, and November 17-19, 1957. The Board of Governors met with the Council on February 19, May 14, September 17, and November 19. 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. 112 FEDERAL RESERVE BANKS AND BRANCHES [December 31, 1957] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Federal Reserve Bank of— Chairman and Federal Reserve Agent Deputy Chairman Boston Robert C. Sprague (Vacancy) New York John E. Bierwirth Forrest F. Hill Philadelphia William J. Meinel Henderson Supplee, Jr. Cleveland Arthur B. Van Buskirk Joseph H. Thompson Richmond John B. Woodward, Jr Alonzo G. Decker, Jr. Atlanta Walter M. Mitchell Harllee Branch, Jr. Chicago Bert R. Prall J. Stuart Russell St. Louis Pierre B. McBride Joseph H. Moore Minneapolis Leslie N. Perrin O. B. Jesness Kansas City Raymond W. Hall Joe W. Seacrest Dallas Robert J. Smith Hal Bogle San Francisco A. H. Brawner Y. Frank Freeman 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. A meeting of the Conference of Chairmen was held on December 5-6, 1957, and was attended by members of the Board of Governors, and also by the Deputy Chairmen of the Federal Reserve Banks. Mr. Meinel, Chairman of the Federal Reserve Bank of Philadelphia, was elected Chairman of the Conference and of the Executive Committee in December 1956. Mr. Hall, Chairman of the Federal Reserve Bank of Kansas City, and Mr. Smith, Chairman of the Federal Reserve Bank of Dallas, served with Mr. Meinel as members of the Executive Committee, Mr. Hall also serving as Vice Chairman of the Conference. At the meeting held in December 1957, Mr. Hall was elected Chairman of the Conference and of the Executive Committee. Mr. Smith was elected Vice Chairman and a member of the Executive Committee, and Mr. Mitchell, Chairman of the Federal Reserve Bank of Atlanta, was elected as the other member of the Executive Committee. 113 114 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—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 are appointed by the Board of Directors of the parent Federal Reserve Bank and the others are appointed by the Board of Governors of the Federal Reserve System. District 1—Boston Term Expires DIRECTORS Class A: Harold I. Chandler Oliver B. Ellsworth William D. Ireland Class B.Frederick S. Blackall, jr Harry E. Umphrey Milton P. Higgins Class C.Robert C. Sprague Harvey P. Hood Nils Y. Wessell Dec. 31 President, The Keene National Bank, Keenc, N. H 1957 President, Riverside Trust Company, Hartford, Conn 1958 President, Second Bank-State Street Trust Company, Boston, Mass 1959 President and Treasurer, The Taft-Peirce Manufacturing Company, Woonsocket, R. 1 1957 President, Aroostook Potato Growers, Inc., Presque Isle, Maine 1958 President, Norton Company, Worcester, Mass.. . . 1959 Chairman and Treasurer, Sprague Electric Company, North Adams, Mass 1957 President, H. P. Hood & Sons, Inc., Boston, Mass.. 1958 President, Tufts University Medford, Mass 1959 District 2—New York Class A: Ferd. I. Collins Howard C. Sheperd Charles W. Bitzer President and Trust Officer, Bound Brook Trust Company, Bound Brook, N. J 1957 Chairman of the Board, The First National City Bank of New York, New York, N. Y 1958 President, City Trust Company, Bridgeport, Conn.. 1959 FEDERAL RESERVE SYSTEM 115 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Class B.Augustus C. Long Clarence Francis Lansing P. Shield Class C: Forrest F. Hill Franz Schneider John E. Bierwirth Dec, 31 Chairman of the Board, The Texas Company, New York, N. Y Director, General Foods Corporation, New York, N. Y President, The Grand Union Company, East Paterson, N. J Vice President, The Ford Foundation, New York, N. Y Consultant to Newmont Mining Corporation, New York, N. Y President, National Distillers and Chemical Corporation, New York, N. Y 1957 1958 1959 1957 1958 1959 Buffalo Branch Appointed by Federal Reserve Ban\: Charles H. Diefendorf Chairman of the Executive Committee, The Marine Trust Company of Western New York, Buffalo, N. Y 1957 John W. Remington President, Lincoln Rochester Trust Company, Rochester, N. Y 1958 Leland B. Bryan President, First National Bank and Trust Company, Corning, N. Y 1958 Vernon Alexander President, National Bank of Geneva, Geneva, N. Y 1959 Appointed by Board of Governors: Clayton G. White Dairy Farmer, Stow, N. Y 1957 Ralph F. Peo Chairman and President, Houdaille Industries, Inc., Buffalo, N. Y 1958 Raymond E. Olson President, Taylor Instrument Companies, Rochester, N. Y 1959 District 3—Philadelphia Class A: W. Elbridge Brown Lindley S. Hurff Geoffrey S. Smith Class B: Bayard L. England Charles E. Oakes President and Trust Officer, Clearfield Trust Company, Clearfleld, Pa President and Trust Officer, The First National Bank of Milton, Milton, Pa President, Girard Trust Corn Exchange Bank, Philadelphia, Pa President, Atlantic City Electric Company, Atlantic City, N. J Chairman of the Board, Pennsylvania Power and Light Company, Allentown, Pa 1957 1958 1959 1957 1958 116 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. R. Russell Pippin Class C.William J. Meinel Henderson Supplee, Jr Lester V. Chandler Dec. 31 Treasurer, E. I. du Pont de Nemours & Company, Inc., Wilmington, Del Chairman of the Board, Heintz Manufacturing Company, Philadelphia, Pa President, The Atlantic Refining Company, Philadelphia, Pa Professor of Economics, Princeton University, Princeton, N. J 1959 1957 1958 1959 District 4—Cleveland Class A: Edison Hobstetter King E. Fauver John A. Byerly Class B.Joseph B. Hall Charles Z. Hardwick George P. MacNichol, Jr Class C.Frank J. Welch Arthur B. Van Buskirk Joseph H. Thompson President and Chairman of the Board, The Pomeroy National Bank, Pomeroy, Ohio Director, The Savings Deposit Bank and Trust Company, Elyria, Ohio President, Fidelity Trust Company, Pittsburgh, Pa President, The Kroger Company, Cincinnati, Ohio Executive Vice President, The Ohio Oil Company, Findlay, Ohio President, Libbey-Owens-Ford Glass Company, Toledo, Ohio Dean, College of Agriculture and Home Economics, University of Kentucky, Lexington, Ky Vice President and Governor, T. Mellon & Sons, Pittsburgh, Pa President, The M. A. Hanna Company, Cleveland, Ohio Cincinnati Branch Appointed by Federal Reserve Ban\: Roger Drackett President, The Drackett Company, Cincinnati, Ohio Bernard H. Geyer President, The Second National Bank of Hamilton, Hamilton, Ohio William A. Mitchell President, The Central Trust Company, Cincinnati, Ohio Franklin A. McCracken Executive Vice President and Trust Officer, The Newport National Bank, Newport, Ky Appointed by Board of Governors: W. Bay Irvine President, Marietta College, Marietta, Ohio 1957 1958 1959 1957 1958 1959 1957 1958 1959 1957 1957 1958 1959 1957 FEDERAL RESERVE SYSTEM 117 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Ivan Jett Anthony Haswell Dec. 31 Farmer, Georgetown National Bank Building, Georgetown, Ky President, The Dayton Malleable Iron Company, Dayton, Ohio Pittsburgh Branch Appointed by Federal Reserve Ban \: John H. Lucas Chairman of the Board, Peoples First National Bank and Trust Company, Pittsburgh, Pa Irving W. Wilson Chairman of the Board, Aluminum Company of America, Pittsburgh, Pa Sumner E. Nichols President, Security-Peoples Trust Company, Erie, Pa Frank C. Irvine President, First National Bank in Tarentum, Tarentum, Pa Appointed by Board of Governors: John C. Warner , . . . President, Carnegie Institute of Technology, Pittsburgh, Pa Douglas M. Moorhead Farmer, North East, Pa Ben Moreell Chairman of the Board, Jones & Laughlin Steel Corporation, Pittsburgh, Pa 1958 1959 1957 1957 1958 1959 1957 1958 1959 District 5—Richmond Class A: Daniel W. Bell Joseph E. Healy Robert Gage Class B.Robert O. Huffman L. Vinton Hershey W. A. L. Sibley Class C: D. W. Colvard John B. Woodward, Jr Alonzo G. Decker, Jr President and Chairman of the Board, American Security and Trust Company, Washington, D. C President, The Citizens National Bank of Hampton, Hampton, Va President, The Commercial Bank, Chester, S. C.. . President, Drexel Furniture Company, Drexel, N. C President, Hagerstown Shoe Company, Hagerstown, Md Vice President and Treasurer, Monarch Mills, Union, S. C Dean of Agriculture, North Carolina State College of Agriculture and Engineering, Raleigh, N. C.. Chairman of the Board, Newport News Shipbuilding & Dry Dock Company, Newport News, Va Executive Vice President, The Black & Decker Manufacturing Company, Towson, Md 1957 1958 1959 1957 1958 1959 1957 1958 1959 118 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Baltimore Branch Appointed by Federal Reserve Ban\: Charles A. Piper President, The Liberty Trust Company, Cumberland, Md Stanley B. Trott President, Maryland Trust Company, Baltimore, Md John W. Stout President, The Parkersburg National Bank, Parkersburg, W. Va James W. McElroy President, First National Bank, Baltimore, Md.. . Appointed by Board of Governors: Clarence R. Zarfoss Wm. Purnell Hall Gordon M. Cairns Vice President, Western Maryland Railway Company, Baltimore, Md President, Maryland Shipbuilding and Drydock Company, Inc., Baltimore, Md.. Dean of Agriculture, University of Maryland, College Park, Md 1957 1958 1958 1959 1957 1958 1959 Charlotte Branch Appointed by Federal Reserve Ban\: Ernest Patton Chairman of the Board, The Peoples National Bank of Greenville, Greenville, S. C I. W. Stewart Chairman of the Board, American Commercial Bank, Charlotte, N. C G. G. Watts President, The Merchants & Planters National Bank, Gaffney, S. C Charles D. Parker President, First National Bank & Trust Co., Asheville, N. C Appointed by Board of Governors: Paul T. Taylor President, Taylor Warehouse Company, WinstonSalem, N. C T. Henry Wilson President and Treasurer, Henredon Furniture Industries, Inc., Morganton, N. C William H. Grier Executive Vice President, Rock Hill Printing & Finishing Company, Rock Hill, S. C 1957 1958 1958 1959 1957 1958 1959 District 6—Atlanta Class A: W. C. Bowman William C. Carter Roland L. Adams Class B: Pollard Turman Chairman of the Board, The First National Bank of Montgomery, Montgomery, Ala Chairman and President, Gulf National Bank, Gulfport, Miss President, Bank of York, York, Ala President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga 1957 1958 1959 1957 FEDERAL RESERVE SYSTEM 119 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Donald Comer Joseph T. Lykes Class C.Henry G. Chalkley, Jr Walter M. Mitchell Harllee Branch, Jr Dec. 31 Chairman of the Board, Avondale Mills, Birmingham, Ala Chairman and Director, Lykes Bros. Steamship Company, Inc., Tampa, Fla President, The Sweet Lake Land & Oil Company, Lake Charles, La Vice President, The Draper Corporation, Atlanta, Ga President, The Southern Company, Atlanta, Ga.. . Birmingham Branch Appointed by Federal Reserve Ban\: Malcolm A. Smith First Vice President, Birmingham Trust National Bank, Birmingham, Ala Robert M. Cleckler President, First National Bank of Childersburg, Childersburg, Ala E. W. McLeod President, The Morgan County National Bank, Decatur, Ala John R. Downing Executive Vice President, Citizens-Farmers & Merchants Bank, Brewton, Ala Appointed by Board of Governors: Edwin C. Bottcher Farmer, Cullman, Ala John E. Urquhart. . . President, Woodward Iron Company, Woodward, Ala Adolph Weil, Sr President, Weil Brothers-Cotton, Inc., Montgomery, Ala Jacksonville Branch Appointed by Federal Reserve Ban\: James L. Niblack President, The First National Bank of Lake City, Lake City, Fla Linton E. Allen Chairman, The First National Bank at Orlando, Orlando, Fla W. E. Ellis Chairman and President, The Commercial Bank and Trust Company, Ocala, Fla James G. Garner President and Chairman, Little River Bank and Trust Company, Miami, Fla Appointed by Board of Governors: J. Wayne Reitz Harry M. Smith McGregor Smith President, University of Florida, Gainesville, Fla.. President and Manager, Winter Garden Ornamental Nursery, Inc., Winter Garden, Fla Chairman of the Board and Director, Florida Power and Light Company, Miami, Fla 1958 1959 1957 1958 1959 1957 1958 1959 1959 1957 1958 1959 1957 1958 1958 1959 1957 1958 1959 120 FEDERAL ANNUAL REPORT OF BOARD OF GOVERNORS RESERVE BANKS A N D BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. SI Nashville Branch Appointed by Federal Reserve Ban\: J. R. Kellam, Jr Executive Vice President, Commerce Union Bank, Nashville, Tenn Stewart Campbell President, The Harpeth National Bank of Franklin, Franklin, Tenn C. L. Wilson Chairman and President, The Cleveland National Bank, Cleveland, Tenn Jo H. Anderson President, Park National Bank of Knoxville, Knoxville, Tenn Appointed by Board of Governors: A. Carter Myers Treasurer, Knoxville Fertilizer Company, Knoxville, Tenn (Vacancy) Frank B. Ward Dean, College of Business Administration, University of Tennessee, Knoxville, Tenn 1957 1958 1958 1959 1957 1959 New Orleans Branch Appointed by Federal Reserve Ban\: D. U. Maddox President, The Commercial National Bank and Trust Company of Laurel, Laurel, Miss 1957 H. A. Pharr President, The First National Bank of Mobile, Mobile, Ala 1958 William J. Fischer Chairman, Progressive Bank and Trust Company, New Orleans, La 1958 J. Spencer Jones President, The Citizens National Bank in Hammond, Hammond, La 1959 Appointed by Board of Governors: Joel L. Fletcher, Jr President, Southwestern Louisiana Institute, Lafayette, La 1957 G. H. King, Jr Executive Vice President, King Lumber Industries, Canton, Miss 1958 E. E. Wild Rice grower, Midland, La 1959 District 7—Chicago Class A: Walter J. Cummings Nugent R. Oberwortmann Vivian W. Johnson Class B.Walter E. Hawkinson Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 President, The North Shore National Bank of Chicago, Chicago, 111 President, First National Bank, Cedar Falls, Iowa. Vice President in Charge of Finance, and Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis 1957 1958 1959 1957 FEDERAL RESERVE SYSTEM 121 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. William J. Grede William A. Hanley Class C.Bert R. Prali Robert P. Briggs J. Stuart Russell Dec. 31 President, Grede Foundries, Inc., Milwaukee Wis.. Director, Eli Lilly and Company, Indianapolis, Ind 1958 Winnetka, 111 Executive Vice President, Consumers Power Company, Jackson, Mich Farm Editor, The Des Moines Register & Tribune, Des Moines, Iowa 1957 Detroit Branch Appointed by Federal Reserve Ban\: Howard P. Parshall President, Bank of the Commonwealth, Detroit, Mich Ernest W. Potter President, Citizens Commercial & Savings Bank, Flint, Mich Raymond T. Perring President, The Detroit Bank and Trust Company, Detroit, Mich Ira A. Moore Chairman of the Board, Peoples National Bank of Grand Rapids, Grand Rapids, Mich Appointed by Board of Governors: John A. Hannah President, Michigan State University, East Lansing, Mich C. V. Patterson Executive Vice President, The Upjohn Company, Kalamazoo, Mich J. Thomas Smith President, Detroit Harvester Company, Detroit, Mich 1959 1958 1959 1957 1957 1958 1959 1957 1958 1959 District 8—St. Louis Class A: Phil E. Chappell J. E. Etherton Kenton R. Cravens Class B.Leo J. Wieck S. J. Beauchamp, Jr Harold O. McCutchan Class C.Joseph H. Moore President, Planters Bank & Trust Company, Hopkinsville, Ky President, The Carbondale National Bank, Carbondale, 111 President, Mercantile Trust Company, St. Louis, Mo Vice President and Treasurer, The May Department Stores Company, St. Louis, Mo President, Terminal Warehouse Company, Little Rock, Ark Executive Vice President, Mead Johnson & Company, Evansville, Ind Farmer, Charleston, Mo 1957 1958 1959 1957 1958 1959 1957 122 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. J. H. Longwell Pierre B. McBride Dec. 31 Director, Division of Agricultural Sciences, University of Missouri, Columbia, Mo President, Porcelain Metals Corporation, Louisville, Ky Little Rock Branch Appointed by Federal Reserve Ban\: H. C. McKinney, Jr President, The First National Bank of El Dorado, El Dorado, Ark E. C. Benton President, Fordyce Bank and Trust Company, Fordyce, Ark J. V. Satterfield, Jr President, The First National Bank in Little Rock, Little Rock, Ark Donald Barger President, Peoples Exchange Bank, Russellville, Ark Appointed by Board of Governors: Shuford R. Nichols Farmer, ginner, and cotton broker, Des Arc, Ark.. A. Howard Stebbins, Jr P. O. Box 1413, Litde Rock, Ark , T. Winfred Bell President, Bush-Caldwell Company, Little Rock, Ark Louisville Branch Appointed by Federal Reserve Ban \: M. C. Minor President, The Farmers National Bank of Danville, Danville, Ky W. Scott Mclntosh President, State Bank of Hardinsburg, Hardinsburg, Ind. . , Magnus J. Kreisle President, The Tell City National Bank, Tell City, Ind Merle E. Robertson Chairman of the Board and President, Liberty National Bank and Trust Company of Louisville, Louisville, Ky Appointed by Board of Governors: Philip Davidson President, University of Louisville, Louisville, Ky. J. D. Monin, Jr Farmer, Oakland, Ky.. , David F. Cocks Vice President and Treasurer, Standard Oil Company (Kentucky), Louisville, Ky 1958 1959 1957 1957 1958 1959 1957 1958 1959 1957 1957 1958 1959 1957 1958 1959 Memphis Branch Appointed by Federal Reserve Ban\: John A. McCall President, The First National Bank of Lexington, Lexington, Tenn John E. Brown President, Union Planters National Bank, Memphis, Tenn J. H. Harris President, The First National Bank of Wynne, Wynne, Ark 1957 1957 1958 FEDERAL RESERVE SYSTEM 123 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. John K. Wilson Dec. 31 President, The First National Bank of West Point, West Point, Miss Appointed by Board of Governors: A. E. Hohenberg President, Hohenberg Bros. Company, Memphis, Tenn Frank Lee Wesson President, Wesson Farms, Inc., Victoria, Ark John D. Williams Chancellor, The University of Mississippi, University, Miss 1959 1957 1958 1959 District 9—Minneapolis Class A: Harold C. Refling (Vacancy) Harold N. Thomson Class B.Ray C. Lange Thomas G. Harrison John E. Corette Class C: O. B. Jesness F. Albee Flodin Leslie N. Perrin Cashier, First National Bank in Bottineau, Bottineau, N. Dak 1957 Vice President, Farmers & Merchants Presho, S. Dak 1959 Bank, President, Chippewa Canning Company, Inc., Chippewa Falls, Wis President, Super Valu Stores, Inc., Hopkins, Minn President and General Manager, Montana Power Company, Butte, Mont Head, Department of Agricultural Economics, University of Minnesota Institute of Agriculture, St. Paul, Minn President and General Manager, Lake Shore, Inc., Iron Mountain, Mich Director, General Mills, Inc., Minneapolis, Minn.. Helena Branch Appointed by Federal Reserve Ban\: A. W. Heidel President, Powder River County Bank, Broadus, Mont J. Willard Johnson Financial Vice President and Treasurer, Western Life Insurance Company, Helena, Mont Geo. N. Lund Chairman of the Board and President, The First National Bank of Reserve, Reserve, Mont Appointed by Board of Governors: George R. Milburn Manager, N Bar Ranch, Grass Range, Mont Carl McFarland President, Montana State University, Missoula, Mont 1957 1958 1959 1957 1958 1959 1957 1958 1958 1957 1958 124 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. 31 District 10—Kansas City Class A: Harold Kountze W. S. Kennedy W. L. Bunten Class B: Max A. Miller E. M. Dodds K. S. Adams Class C.Joe W. Seacrest Raymond W. Hall Oliver S. Willham President and Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo.. . President and Chairman of the Board, The First National Bank of Junction City, Junction City, Kans President, Goodland State Bank, Goodland, Kans Livestock rancher, Omaha, Nebr Chairman of the Board, United States Cold Storage Corporation, Kansas City, Mo Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla President, State Journal Company, Lincoln, Nebr. Vice President and Director, Hallmark Cards, Inc., Kansas City, Mo President, Oklahoma State University, Stillwater, Okla 1957 1958 1959 1957 1958 1959 1957 1958 1959 Denver Branch Appointed by Federal Reserve Ban\: Merriam B. Berger Vice President, The Colorado National Bank of Denver, Denver, Colo Ralph S. Newcomer Executive Vice President, First National Bank in Boulder, Boulder, Colo Arthur Johnson President, First National Bank in Raton, Raton, N. Mex Appointed by Board of Governors: Aksel Nielsen President, The Title Guaranty Company, Denver, Colo Ray Reynolds Cattle feeder and farmer, Longmont, Colo 1957 1958 1958 1957 1958 Oklahoma City Branch Appointed by Federal Reserve Ban\: George R. Gear President, The City National Bank of Guymon, Guymon, Okla R. Otis McClintock Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Okla C. L. Priddy President, The National Bank of McAlester, McAlester, Okla Appointed by Board of Governors: Davis D. Bovaird President, The Bovaird Supply Company, Tulsa, Okla Phil H. Lowery Owner, Lowery Hereford Ranch, Loco, Okla.... 1957 1958 1958 1957 1958 FEDERAL RESERVE SYSTEM 125 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Omaha Branch Appointed by Federal Reserve Ban\: George J. Forbes President, Bank of Laramie, Laramie, Wyo C. Wheaton Battey President, The Continental National Bank of Lincoln, Lincoln, Nebr William N. Mitten Chairman of the Board, First National Bank of Fremont, Fremont, Nebr Appointed by Board of Governors: James L. Paxton, Jr President, Pax ton-Mitchell Company, Omaha, Nebr Manville Kendrick Rancher, Sheridan, Wyo 1957 1957 1958 1957 1958 District 11—Dallas Class A: Sam D. Young J. Edd McLaughlin John M. Griffith Class B: D. A. Hulcy J. B. Thomas John R. Alford Class C.Robert J. Smith Lamar Fleming, Jr Hal Bogle President, El Paso National Bank, El Paso, Tex.. . President, Security State Bank & Trust Company, Rails, Tex President, The City National Bank of Taylor, Taylor, Tex Chairman of the Board, Lone Star Gas Company, Dallas, Tex President and General Manager and Director, Texas Electric Service Company, Fort Worth, Tex Industrialist and farmer, Henderson, Tex 1958 1959 1957 1958 1959 President, Pioneer Aeronautical Services, Inc., Dallas, Tex 1957 Chairman of the Board, Anderson, Clayton & Co., Inc., Houston, Tex 1958 Rancher and feeder, Dexter, N. Mex 1959 El Paso Branch Appointed by Federal Reserve Ban\: John P. Butler President, The First National Bank of Midland, Midland, Tex Floyd Childress Vice President, The First National Bank of Roswell, Roswell, N. Mex Thomas C. Patterson Vice President, El Paso National Bank, El Paso, Tex F. W. Barton President, The Marfa National Bank, Marfa, Tex Appointed by Board of Governors: James A. Dick President, James A. Dick Investment Company, El Paso, Tex 1957 1957 1957 1958 1959 1957 126 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. E. J. Workman D. F. Stahmann Dec. 31 President, and Director of Research and Development Division, New Mexico Institute of Mining and Technology, Socorro, N. Mex Treasurer, Stahmann Farms, Inc., Las Cruces, N. Mex Houston Branch Appointed by Federal Reserve Ban\: W. B. Callan President, The Victoria National Bank, Victoria, Tex L. R. Bryan, Jr Vice Chairman of the Board and Chairman of the Executive Committee, Bank of the Southwest National Association, Houston, Houston, Tex S. Marcus Greer Vice Chairman of the Board, First City National Bank of Houston, Houston, Tex I. F. Betts President, The American National Bank of Beaumont, Beaumont, Tex Appointed by Board of Governors: John C. Flanagan Vice President and General Manager, Texas Distribution Division, United Gas Corporation, Houston, Tex Tyrus R. Timm Head, Department of Agricultural Economics and Sociology, A. & M. College of Texas, College Station, Tex A. E. Cudlipp Vice President and Director, Lufkin Foundry and Machine Corp., Lufkin, Tex 1958 1959 1957 1957 1958 1959 1957 1958 1959 San Antonio Branch Appointed by Federal Reserve Ban \: V. S. Marett President, The Citizens National Bank of Gonzales, Gonzales, Tex 1957 J. W. Beretta President, First National Bank of San Antonio, San Antonio, Tex 1957 Burton Dunn Chairman of the Executive Committee, Corpus Christi State National Bank, Corpus Christi, Tex 1958 E. C. Breedlove President, The First National Bank of Harlingen, Harlingen, Tex 1959 Appointed by Board of Governors: Alex R. Thomas Vice President, Geo. C. Vaughan & Sons, San Antonio, Tex 1957 Harold Vagtborg President, Southwest Research Institute, San Antonio, Tex 1958 Clarence E. Ayres Professor of Economics, The University of Texas, Austin, Tex 1959 FEDERAL RESERVE SYSTEM 127 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. 31 District 12—San Francisco Class A: Carroll F. Byrd John A. Sthoonover M. Vilas Hubbard Class B: Reese H. Taylor Walter S. Johnson N. Loyall McLaren Class C.Philip I. Welk Y. Frank Freeman A. H. Brawner President, The First National Bank of Willows, Willows, Calif 1957 President, The Idaho First National Bank, Boise, Idaho 1958 President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif 1959 Chairman of the Board, Union Oil Company of California, Los Angeles, Calif Chairman of the Board, American Forest Products Corporation, San Francisco, Calif Partner, Haskins & Sells, San Francisco, Calif 1957 1958 1959 Vice President, Centennial Mills, Inc., Portland, Oreg 1957 Vice President, Paramount Pictures Corporation, Hollywood, Calif 1958 Chairman of the Board, W. P. Fuller & Company, San Francisco, Calif 1959 Los Angeles Branch Appointed by Federal Reserve Ban \: Joe D. Paxton Chairman of the Board, County National Bank and Trust Company of Santa Barbara, Santa Barbara, Calif 1957 Anderson Borthwick President, The First National Trust and Savings Bank of San Diego, San Diego, Calif 1958 James E. Shelton Chairman, Security-First National Bank of Los Angeles, Los Angeles, Calif 1958 Appointed by Board of Governors: Robert J. Cannon President, Cannon Electric Company, Los Angeles, Calif 1957 Leonard K. Firestone President, Firestone Tire and Rubber Company of California, Los Angeles, Calif 1958 Portland Branch Appointed by Federal Reserve Ban\: E. C. Sammons President, The United States National Bank of Portland, Portland Oreg John B. Rogers President, The First National Bank of Baker, Baker, Oreg J. H. McNally President, The First National Bank of Bonners Ferry, Bonners Ferry, Idaho 1957 1958 1958 128 FEDERAL ANNUAL REPORT OF BOARD OF GOVERNORS RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Warren W. Braley Partner, Braley & Graham Buick, Portland, Oreg.. William H. Steiwer, Sr Livestock and farming, Fossil, Oreg Salt Lake City Branch Appointed by Federal Reserve Ban\: Harry Eaton President, Twin Falls Bank and Trust Company, Twin Falls, Idaho Russell S. Hanson Executive Vice President, The First National Bank of Logan, Logan, Utah George S. Eccles President, First Security Bank of Utah, National Association, Salt Lake City, Utah Appointed by Board of Governors: Joseph Rosenblatt President, The Eimco Corporation, Salt Lake City, Utah Geo. W. Watkins President, Snake River Equipment Company, Idaho Falls, Idaho 1957 1958 1957 1958 1958 1957 1958 Seattle Branch Appointed by Federal Reserve Ban \: Charles F. Frankland President, The Pacific National Bank of Seattle, Seattle, Wash 1957 S. B. Lafromboise President, The First National Bank of Enumclaw, Enumclaw, Wash 1958 James Brennan President, First National Bank in Spokane, Spokane, Wash 1958 Appointed by Board of Governors: D. K. MacDonald Chairman of the Board, D. K. MacDonald & Company, Inc., Seattle, Wash 1957 Lyman J. Bunting President, Rainier Fruit Company, Yakima, Wash 1958 129 FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. PRESIDENTS AND VICE PRESIDENTS Federal Reserve President Bank of— First Vice President Boston J. A. Erickson E. O. Latham New York Alfred Hayes William F. Treiber Philadelphia . . . Alfred H. Williams W. J. Davis Cleveland W. D. Fulton Donald S. Thompson Richmond Hugh Leach Edw. A. Wayne Atlanta Malcolm Bryan Lewis M. Clark Chicago Carl E. Allen E. C. Harris St. Louis Delos C. Johns Guy S. Freutel Minneapolis . .. Frederick L. Deming A. W. Mills Kansas City . . . H. G. Leedy Henry O. Koppang Watrous H. Irons Dallas W. D. Gentry San Francisco .. H. N. Mangels Eliot J. Swan Vice Presidents D. H. Angney Ansgar R. Berge George H. Ellis H. A. Bilby John Exter M. A. Harris H. H. Kimball H. V. Roelse Robert V. Roosa Karl R. Bopp Robert N. Hilkert E. C. Hill Dwight L. Allen Roger R. Clouse C. Harrell L. Merle Hostetler N. L. Armistead J. Dewey Daane Aubrey N. Heflin Upton S. Martin V. K. Bowman J. E. Denmark John L. Liles, Jr. Harold T. Patterson Neil B. Dawes W. R. Diercks A. M. Gustavson Paul C. Hodge C. T. Laibly Wm. J. Abbott, Jr. Geo. E. Kroner Dale M. Lewis C W. Groth M. B. Holmgren A. W. Johnson John T. Boysen Joseph S. Handford E. B. Austin W. H. Holloway T. W. Plant E. R. Millard R. H. Morrill John A. O'Kane Benjamin F. Groot Dana D. Sawyer O. A. Schlaikjer Robert G. Rouse Walter H. Rozell, Jr. T. G. Tiebout V. Willis R. B. Wiltse Wm. G. McCreedy P. M. Poorman J. V. Vergari A. H. Laning Martin Morrison H. E. J. Smith Paul C. Stetzelberger J. M. Nowlan James M. Slay Thomas I. Storrs C. B. Strathy L. B. Raisty Earle L. Rauber S. P. Schuessler George W. Mitchell H. J. Newman A. L. Olson W. W. Turner H. H. Weigel J. C. Wotawa H. G. McConnell M. H. Strothman, Jr. Sigurd Ueland Clarence W. Tow D. W. Woolley L. G. Pondrom Morgan H. Rice Harry A. Shuford H. F. Slade O. P. Wheeler FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1957—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES Federal Reserve Bank of— New York .. Cleveland . . . Richmond .. Atlanta Chicago . . . . St. Louis . . . Minneapolis . Kansas City . Dallas San Francisco Chief Officer 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 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 Donald L. Henry Darryl R. Francis Kyle K. Fossum Cecil Puckett R. L. Mathes P. A. Debus Howard Carrithers J. L. Cook W. E. Eagle W. F. Volberg J. A. Randall E. R. Barglebaugh 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. The Conference of Presidents held meetings on January 28-29, March 26, June 17-18, and September 30-October 1, 1957, and the Board of Governors met with the Presidents on January 29, June 18, and October 1, 1957. Mr. Leedy, President of the Federal Reserve Bank of Kansas City, and Mr. Erickson, President of the Federal Reserve Bank of Boston, were re-elected Chairman of the Conference and Vice Chairman, respectively, at the meeting held on March 26 and served as such during 1957. Mr. John T. Boysen, Vice President and Cashier of the Federal Reserve Bank of Kansas City, continued to serve as Secretary of the Conference during 1957. 130 FEDERAL RESERVE SYSTEM BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES • BOUNDARIES OF FEDERAL RESERVE DISTRICTS BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES it BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ® FEDERAL RESERVE BANK CITIES • FEDERAL RESERVE BRANCH CITIES DECEMBER 1,1954 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 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 later changes in branch territory lines, see p. 57 of the 1954 Annual Report. Page Acceptances, bankers': Federal Reserve Bank holdings 78, 84, 86, 88 Open market transactions during 1957 107 Assets and liabilities: Banks, by classes 103 Federal Reserve Banks 84-89 Bank credit, review for year 29 Bank holding companies 71 Bank premises, Federal Reserve Banks and branches 80, 84, 86, 88, 98 Bank supervision by Federal Reserve System 70 Banking offices, changes in number 105 Board of Governors: Accounts audited 80 Income and expenses 80-82 Members and officers 110 Policy actions 63-70 Regulations (See Regulations) Branch banks: Domestic, changes in number 105 Federal Reserve (See Federal Reserve Banks) Foreign, number in operation 72, 73, 74 Business finance 20 Capital accounts: Banks, by classes 103 Federal Reserve Banks 85, 87, 89 Central reserve and reserve cities, amendment to rule for classification of. . 63 Chairmen of Federal Reserve Banks 113 Charts: Bank loans and investments 30 Bond yields, long-term 25 Business investment 21 Consumer instalment and mortgage credit 23 Corporate security yields 4 Credit and capital expansion 19 Discount and bill rates 8 Economic indicators, selected 7 Gross national product 2 Interest rates 15 Investment outlays 3 Money supply and rate of turnover 31 Reserves and borrowings, member banks 11 Savings, growth of selected types 28 U. S. balance of payments 26 Commercial banks: Assets and liabilities 103 Banking offices, changes in number 105 Loans and investments 29, 103 132 INDEX 133 Page Commercial banks—Continued Number, by classes Condition statement of Federal Reserve Banks Consumer finance Credit demands and supplies Defense production loans (See V-loans) Deposits: Banks, by classes Federal Reserve Banks 85, 87, Growth of Savings and other time deposits, maximum rates Deputy Chairmen of Federal Reserve Banks Directors, Federal Reserve Banks and branches Discount mechanism, functioning of Discount rates at Federal Reserve Banks: Increase in 4, 18, 32, Reduction in 6, 18, Table of Discounts and advances by Federal Reserve Banks. . . .78, 84, 86, 88, Dividends: Federal Reserve Banks 77, Member banks Earnings: Federal Reserve Banks 76, Member banks Economic conditions Examinations: Federal Reserve Banks Foreign banking corporations Holding company affiliates State member banks Expenses: Board of Governors Federal Reserve Banks 76, Member banks t Federal Advisory Council: Meetings Members and officers Federal Open Market Committee: Meetings Members and officers Policy actions Resolution concerning International Monetary Fund transactions Review of continuing authorities or statements of policy Federal Reserve Banks: Assessments for expenses of Board of Governors Bank premises 80, 84, 86, 103 84-89 22 19, 27 103 89, 96 29, 30 101 113 114 7-18 67, 78 32, 68 100 91, 96 93, 94 104 92, 94 104 1-7 70 73, 74 71 70 80-82 92, 94 104 112 112 34, 111 Ill 33-62 36 41 82, 92 88, 98 134 INDEX Page Federal Reserve Banks—Continued Branches: Bank premises 80, 98 Directors 114 Vice Presidents in charge of 130 Capital accounts 85, 87, 89 Chairmen and Deputy Chairmen 113 Condition statement 84-89 Directors 114 Discount rates: Functioning of discount mechanism 7-18 Increase in 4, 18, 32, 67, 78 Reduction in 6, 18, 32, 68 Table of 100 Dividends 77, 93, 94 Earnings and expenses 76, 92, 94 Examination of 70 Foreign and international accounts 79 Officers and employees, number and salaries 92, 99 Presidents and other officers 129 Profit and loss 93 Retirement System, changes in 79 Special certificates purchased direct from Treasury: Holdings of 91 Interest rate on 59 U. S. Govt. securities: Holdings of 78, 84, 86, 88, 90, 91, 96 Open market transactions during 1957 107 Volume of operations 76, 91 Federal Reserve notes: Condition statement data 84-89 Cost of printing, issue, and redemption 82 Interest paid to Treasury 77, 93, 94 Federal Reserve policy: Digest of principal changes in 32 Discount mechanism as instrument of 7-18 Record of policy actions: Board of Governors 63-70 Federal Open Market Committee 33-62 Federal Reserve System: Bank supervision by 70 Map of 131 Membership, changes in 74 Foreign branches and banking corporations 72 Government finance 23 Government securities (See U. S. Govt. securities) Holding company affiliates 71 Industrial loans by Federal Reserve Banks: Condition statement data 84, 86, 88 Earnings on 78, 92 INDEX 135 Page Industrial loans by Federal Reserve Banks—Continued Rates on: Maximum rate, increase in 66 Table of 100 Insured commercial banks 103, 105 Inter-Agency Bank Examination School 74 Interest rates: Advances under Section 13b of Federal Reserve Act, increase in maximum rate on 66 Discount rates at Federal Reserve Banks: Functioning of discount mechanism 7-18 Increase in 4, 18, 32, 67, 78 Reduction in 6, 18, 32, 68 Table of 100 Federal Reserve rates, table of 100 Regulation V loans: Fees and rates, table of 102 Maximum permissible rate, increase in 64, 76 Savings and other time deposits, maximum rates 101 Special certificates purchased direct from Treasury 59 International capital transactions 25 International Monetary Fund transactions, resolution of Federal Open Market Committee concerning 36 Investments: Banks, by classes 103 Commercial banks 29, 103 Federal Reserve Banks 84, 86, 88 Member banks 103 Loans (See also specific types of loans): Banks, by classes 103 Commercial banks 29, 103 Federal Reserve Banks 78, 84, 86, 88, 96, 100 Member banks 103 Regulation V loans: Fees and rates, table of 102 Maximum permissible interest rate, increase in 64, 76 Number and amount outstanding 75 Margin requirements: Table of 102 Technical amendment to Section 4(f)(2) of Regulation T 65 Meetings: Chairmen of Federal Reserve Banks 113 Federal Advisory Council 112 Federal Open Market Committee 34, 111 Presidents of Federal Reserve Banks 130 Member banks: Assets, liabilities, and capital accounts 103 Banking offices, changes in number 105 Earnings, expenses, and dividends 104 136 INDEX Page Member banks—Continued Foreign branches, number in operation 72 Number 74, 103 Reserve requirements 101 Reserves and related items 96 Membership in Federal Reserve System, changes in 74 Miami, Florida, designation as reserve city 64 Monetary policy, discount mechanism as instrument of 7-18 Mutual savings banks 103, 105 National banks: Assets and liabilities 103 Banking offices, changes in number 105 Foreign branches, number in operation 72 Number 74, 103 Trust powers 72 Nonmember banks 103, 105, 106 Open market operations 33-62, 107 Par List, banking offices on, and not on, number 106 Policy actions, Board of Governors: Advances under Section 13b of Federal Reserve Act, increase in maximum rate on 66 Central reserve and reserve cities, amendment to rule for classification of 63 Discounts and advances by Federal Reserve Banks: Increase in rates on 67 Reduction in rates on 68 Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendment of Section 4(f)(2) 65 V-loan interest rate, increase in maximum permissible 64 Policy actions, Federal Open Market Committee: Authority to effect transactions in System Account 33-62 Rate of interest on special Treasury certificates 59 Resolution concerning International Monetary Fund transactions 36 Review of continuing authorities or statements of policy 41 Presidents of Federal Reserve Banks: Conference of 130 List of 129 Meetings 130 Salaries 99 Regulations, Board of Governors: T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendment of Section 4(f)(2) 65 V, Loan Guarantees for Defense Production: Fees and rates, table of 102 Maximum permissible interest rate, increase in 64, 76 Number and amount outstanding 75 INDEX 137 Page Repurchase agreements: Bankers' acceptances 84, 86, 88, 107 U. S. Govt. securities 84, 86, 88, 96, 107 Reserve and central reserve cities: Action under rule for classification of 64 Amendment to rule for classification of 63 Reserve requirements, member banks 101 Reserves: Federal Reserve Banks 84-89 Member banks 96 Retirement System of Federal Reserve Banks, changes in 79 Salaries: Board of Governors 82 Federal Reserve Banks 92, 99 Savings 27 Savings deposits (See Deposits) Small business financing study 82 State member banks: Assets and liabilities 103 Banking offices, changes in number 105 Examination of 70 Foreign branches, number in operation 72 Number 74, 103 System Open Market Account: Authority to effect transactions in 33-62 Time deposits (See Deposits) Treasury finance 23 Trust powers of national banks 72 U. S. Govt. securities: Bank holdings, by class of bank 103 Commercial bank holdings 29, 103 Federal Reserve Bank holdings 78, 84, 86, 88, 90, 91, 96 Open market operations 33-62, 107 Special certificates purchased direct from Treasury 59, 91 V-loans: Fees and rates, table of 102 Maximum permissible interest rate, increase in 64, 76 Number and amount outstanding 75 Voting permits issued to holding company affiliates 71
@FedFRASER