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FORTY-SIXTH
ANNUAL REPORT
of the
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
COVERING OPERATIONS FOR
THE YEAR
LETTER OF TRANSMITTAL
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Washington, March 7, 1960.
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES.
Pursuant to the requirements of Section 10 of the Federal
Reserve Act, as amended, I have the honor to submit the
Forty-sixth Annual Report of the Board of Governors of
the Federal Reserve System. This report covers operations
for the year 1959.
Yours respectfully,
WM. M C C . MARTIN, JR., Chairman.
CONTENTS
TEXT OF REPORT
Introduction
Federal Reserve Action
Open market operations and the gold outflow
Discount operations
Reserve requirements
Margin requirements
Interest Rates, Economic Activity, and Saving
Historical perspective
Saving-investment process
Supply and demand for lendable saving
Role of credit availability
Factors in interest rate trends of the 1950's
Credit demands
Financial saving of consumers
Inflationary expectations
Monetary policy and interest rates
Economic growth, interest rates, and saving
Reserves and Reserve Requirements
Amendment of Board authority
Change in Board regulation
Digest of Principal Federal Reserve Policy Actions, 1959
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 member banks
Federal Reserve membership
Bank holding companies
Trust powers of national banks
Acceptance powers of member banks
Foreign branches of member banks
Foreign banking and financing corporations
Inter-Agency Bank Examination School
Legislation
Reserves of member banks
iii
Page
1
2
3
4
5
6
6
7
10
12
16
17
18
20
21
22
24
25
26
28
30
31
66
86
86
86
87
88
89
89
90
91
92
92
92
Page
Member banks dealing in obligations of Tennessee Valley
Authority and Inter-American Development Bank
93
Federal Reserve Banks as fiscal agents for Inter-American
Development Bank
93
Amendments to eliminate ambiguities and repeal obsolete
provisions
93
Statehood of Alaska and Hawaii
93
Bank Holding Company Act
94
Litigation and Hearings
94
Reserve Bank Operations
95
Loan guarantees for defense production
95
Volume of operations
95
Earnings and expenses
96
Holdings of loans and securities
99
Foreign and international accounts
99
Bank premises
100
Board of Governors—Income and Expenses
101
TABLES
1. Statement of Condition of the Federal Reserve Banks (in detail),
Dec. 31, 1959
2. Statement of Condition of Each Federal Reserve Bank at End of
1959 and 1958
3. Holdings of United States Government Securities by Federal
Reserve Banks, End of December 1959, 1958, and 1957
4. Federal Reserve Bank Holdings of Special Short-Term Treasury
Certificates Purchased Directly from the United States, 1953-59
5. Volume of Operations in Principal Departments of Federal
Reserve Banks, 1955-59
6. Earnings and Expenses of Federal Reserve Banks during 1959..
7. Earnings and Expenses of Federal Reserve Banks, 1914-59
8. Member Bank Reserves, Reserve Bank Credit, and Related
Items, End of Year 1918-59 and End of Month 1959
9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31,
1959
10. Number and Salaries of Officers and Employees of Federal
Reserve Banks, Dec. 31, 1959
11. Federal Reserve Bank Discount Rates (in effect Dec. 31,1959)..
12. Member Bank Reserve Requirements
13. Maximum Interest Rates Payable on Time Deposits
14. Margin Requirements
iv
106
108
112
113
113
114
116
118
120
121
121
122
122
123
Page
15. Fees and Rates Established under Regulation V on Loans
Guaranteed Pursuant to Defense Production Act of 1950
(in effect Dec. 31, 1959)
16. Principal Assets and Liabilities, and Number of All Banks, by
Classes, Dec. 31, 1959 and 1958
17. Member Bank Earnings, by Class of Bank, 1959 and 1958
18. Analysis of Changes in Number of Banking Offices in the
United States during 1959
19. Number of Banking Offices on Federal Reserve Par List and
Not on Par List, Dec. 31, 1959
20. Open Market Transactions of the Federal Reserve System during
1959
123
124
125
126
127
128
FEDERAL RESERVE DIRECTORIES AND MEETINGS
Board of Governors of the Federal Reserve System
Federal Open Market Committee
Federal Advisory Council
Federal Reserve Banks and Branches
130
131
132
133
Map of Federal Reserve Districts
Index
151
152
OF THE FEDERAL RESERVE SYSTEM
During 1959 total credit in the economy expanded by
about $60 billion in all—one-third more than the previous
peacetime record. Mortgage debt, most of it for housing,
increased by a peak $19 billion. Consumer credit outstanding rose about $6.5 billion, equaling the previous high of
1955. New borrowing by State and local governments continued in near-record volume, and new Federal borrowing
exceeded that in all earlier peacetime years.
The increase in commercial bank loan portfolios over the
year was large and equaled the previous peak of 1955. The
banks financed a substantial part of this lending activity by
selling U. S. Government securities to nonbank investors
through the market. As a result, total loans and investments
of banks increased only moderately.
A main service performed by the commercial banks for
the economy last year was acting as an intermediary between
borrowers and savers. Banks, in effect, drew out of the
market funds provided through security purchases by individuals and corporations to meet the specialized credit
demands of various types of borrowers, including many
whose credit demands could not be met as readily by nonbank sources. This flow of funds from savers to banks to
borrowers enabled a large credit demand to be accommodated with little increase in the money supply.
Over the year, consumers and businesses increased their
spending of existing cash balances as well as their spending of
newly borrowed funds. This contributed to a more active
use of money, reflected in an increase in the turnover or rate
of use of the money supply. Cash balances were also used to
invest in securities, particularly those of the Federal Government and of State and local governments.
Consumer spending was a prime generative force in the
1
2
ANNUAL REPORT OF BOARD OF GOVERNORS
economic expansion last year as it had been in 1955. State
and local government expenditures were large, and prior to
the steel strike business outlays to build up inventories were
substantial. Partly as an aftermath of the 1957-58 recession,
Federal Government expenditures exceeded revenues by a
substantial amount.
Employment rose more slowly than output, and so output
per worker increased somewhat. Consumer prices rose, but
the general level of wholesale prices changed little. Prices of
industrial materials and products increased, however, while
agricultural prices declined. Wage rates continued to increase, although at a slower average rate than in other recent
years. Abroad, rapid expansion of industrial activity was
resumed early in 1959 and continued during the year.
The flow of saving into financial assets increased markedly
during the year but was inadequate to meet all demands for
credit at prevailing levels of interest rates. As a result,
money market rates and bond yields rose further, and by
the end of the year were above their previous peaks in
late 1957.
Stock prices, which had advanced sharply in 1958, continued to rise into early August 1959. For a period thereafter they declined, but later in the year they rose again.
Although dividends increased, yields on stocks declined to
new postwar lows during the year. Yields on high-grade
corporate bonds exceeded stock yields by more than a percentage point over much of the year.
FEDERAL RESERVE ACTION
The credit and monetary policies pursued by the Federal
Reserve System have the broad purpose of providing a
financial climate favorable to sustainable growth of the
economy without inflation. With demands for financing in
1959 continuously strong, higher interest rates were needed
to equate these demands with the available supply of saving
and bank credit. Higher rates also induced a more economical use of cash balances and a larger flow of current financial
saving. The money supply, which increased substantially in
1958 and early 1959, was limited to little further growth after
FEDERAL RESERVE SYSTEM
3
last spring. The public's holdings of other liquid assets,
however, expanded sharply throughout the year.
The principal Federal Reserve policy actions during the
year are summarized in the sections that follow. Later in
this report they are listed in tabular form and are described
more fully in the records of specific policy actions of the
Board of Governors and of the Federal Open Market
Committee.
OPEN MARKET OPERATIONS AND THE GOLD OUTFLOW
Federal Reserve purchases or sales of U. S. Government
securities in the market are commonly known as open market
operations. Such operations are used to provide reserves to
the commercial banking system that enable it to meet the
economy's growing needs for financing and also to offset the
possible disturbing effects of a variety of seasonal and other
market factors that recurringly create or absorb bank
reserves. Over the year 1959, the most important market
factor absorbing bank reserves was the further outflow of
gold from the country.
Foreign operations drained $800 million from bank reserves in 1959 as net gold acquisitions from the United States
by foreign monetary authorities and international institutions totaling $1.1 billion were offset in part by Treasury
transactions. Other factors tending to reduce the reserves
available to banks included an increase of about $400 million
in the amount of currency in circulation. Unless replenished,
the reduction in bank reserves due to these developments
would have led to an undesirable degree of credit stringency.
The largest single source of reserves to offset this was the net
open market purchases of the Federal Reserve System.
The over-all deficit in this country's international payments was somewhat less than $4 billion, exclusive of a
subscription to the International Monetary Fund. In the
second half of the year, however, exports rose in response to
increasing foreign demand, imports leveled off, and the
balance-of-payments deficit tended to diminish, although
continuing large. Apart from the gold transfers, settlement
ANNUAL REPORT OF BOARD OF GOVERNORS
CHANGES IN MEMBER B A N K RESERVES
[Based on averages of daily figures for December; in billions of dollars]
Item
1959
1958
0)
-0.5
-0.3
-0.5
+0.1
-0.5
+0.1
-1.5
+1.0
C1)
-0.1
Member bank reserves
Total reserves.
Reserves held with Federal Reserve Banks.
Reserves allowable in cash
Required reserves
Effect of:
Reduction in reserve requirement percentages.
Change in deposits
Excess reserves
Principal factors affecting reserves
Federal Reserve credit:
Discounts and advances to member banks
Federal Reserve holdings of U.S. Govt. securities and
acceptances
Float
Currency in circulation
Gold stock and foreign accounts.
Other factors
+0.3
(sign indicates
effect on reserves)
+0.3
+0,7
-0.2
-0.1
+2.3
+0.1
-0.4
2-1,2
2+0.3
-0.4
-2.1
-0.2
1 Less than $50 million.
Changes in gold stock and Treasury cash (included in other factors) include the
effect of a payment of $344 million in gold from Treasury cash holdings to the International Monetary Fund in connection with the increase in the U.S. subscription to the
Fund; these changes were offsetting and had no effect on total reserves.
NOTE.—Figures may not add to totals because of rounding.
2
of the deficit involved large foreign acquisitions of Treasury
bills and other U. S. Government securities.
DISCOUNT OPERATIONS
A part of the reserve funds to support growth of bank credit
and money last year was obtained by member banks borrowing at the discount windows of their respective Federal Reserve Banks. Reserve Bank advances to or discounts for
member banks, which had increased in the latter part of 1958,
averaged around $700 million over the first half of 1959,
although by June they reached a level exceeding $900 million.
Throughout the remainder of the year, borrowings fluctuated
FEDERAL RESERVE SYSTEM
5
around this higher level. Member banks obtaining Reserve
Bank advances typically did so to meet drains of reserve
funds to other banks as checks were cleared; such individual
borrowings were soon repaid. The number of member banks
accommodated by the Reserve Banks during the year was
fairly large, 1,967, or almost one-third of all member
banks.
To discourage bank borrowing of reserves in a situation
of vigorous demand for bank credit and rising market
interest rates, discount rates at the various Reserve Banks
were increased three times in 1959. These changes occurred
in early March, in late May and early June, and in early
September. Rate increases occurred after market rates had
risen to levels above prevailing discount rates. Each set of
increases amounted to one-half of one per cent, and together
they raised the level of rates at all Federal Reserve Banks
from 2x/2 per cent at the beginning of the year to 4 per cent
at the end.
RESERVE REQUIREMENTS
In early December 1959 the Board of Governors modified
its reserve requirement regulation. This modification permitted member banks to count their vault cash in excess of
specified percentages of their deposits as part of their required reserves. The action was taken under the authority
of legislation enacted by the Congress in July 1959 and was
designed in part to remedy inequities that had arisen because
many banks, particularly smaller country banks, had found
it necessary to hold relatively larger amounts of vault cash
than other banks did for operating purposes.
No change in the over-all credit and monetary policy of
the Federal Reserve was involved in this action. It had the
effect of supplying some $300 million of reserves to the
banking system at a time of the year when the Federal
Reserve usually makes available to the banks a sizable
volume of reserves for seasonal purposes. It correspondingly
reduced the need for open market operations to meet these
temporary demands.
6
ANNUAL REPORT OF BOARD OF GOVERNORS
MARGIN REQUIREMENTS
The Federal Reserve at midyear strengthened somewhat its
restraints over the amount of credit used for the purchasing
or carrying of stock market securities by adopting certain
technical amendments to its margin regulations. Margin
requirements for this type of credit, which had been raised
to 90 per cent by the Board of Governors in mid-October
1958, were continued at this level throughout 1959.
The most important of the amendments had the effect of
reducing the amount of cash which can be withdrawn from
the proceeds of sales of securities held on margins below
those currently required. The substitution of one security for
another in such a situation can still be made without providing additional margin if it is done during the same day.
Another amendment had the effect of limiting the number of
cases in which bank loans secured by stock exchange collateral can be regarded as loans for purposes other than
buying or carrying stocks and hence not subject to margin
requirements.
INTEREST RATES, ECONOMIC ACTIVITY, AND SAVING
Recent years have witnessed increasing discussion and
public awareness of long-debated questions about interest
rates—their function in the economic system, their relation
to inflationary pressures and to economic growth, and their
suitability or limitation as a focus for governmental economic
policy. In this country, much of the discussion has been
prompted by the upward trend as well as the fluctuations in
interest rates during the 1950's. In each successive period of
expansion in activity, yields on private and government
obligations rose to new postwar peaks; in the second half of
1959 short- and long-term rates generally reached new highs.
A specific problem in 1959 was the inability of the Federal
Government, in meeting its large financing needs, to issue
new long-term bonds in view of the statutory ceiling of
414 per cent on the coupon rate for such bonds.
In foreign countries whose financial markets had been
substantially restored to flexible functioning by the early
FEDERAL RESERVE SYSTEM
LONG - TERM INTEREST RATES
Per cent
8
GERMANY fafr
-
FAC
RNE
/
y/
*J LA C
A
\
/
s
UNITED
\f\l NETHERLANDS^^KINGDO/V^\KT
H^/
*S\f^\
^
\
6
^ ( ^ ^
/
4
- ^
^^^"^iJNITED
STATES
.«. 1
1947
1
1
'49
1
1
'53
1
1
'51
2
1
1
'55
1
1
'57
1 ,.
1959
NOTE.—Average monthly yields on long-term government bonds for all countries
except Germany. For Germany, yield on issues of public authorities; monthly series not
available prior to August 1956.
1950's—for example, Canada, Germany, and the United
Kingdom—interest rates likewise fluctuated in response to
variations in economic activity. Continued improvement in
world trade and the strengthening of foreign balance-ofpayments positions fostered progress towards a more general
currency convertibility. As a consequence, loanable funds
during recent years have moved with increasing freedom
among markets in different countries in response to emerging
interest rate differentials; and interest rates, both short- and
long-term, have become more reflective of world-wide developments than at any time during the past 30 years.
HISTORICAL PERSPECTIVE
After small advances early in the postwar period, interest
rates in the United States showed an upward sweep through
8
ANNUAL REPORT OF BOARD OF GOVERNORS
the 1950's. Over the preceding 20 years, the general level of
rates had been exceptionally low. The low level prevailing
under depression conditions of the 1930's was maintained in
the ensuing decade by policies of war and postwar finance.
These policies, which were justified at the time by conditions
of, or transition from, national emergency, placed major
emphasis upon low, stable interest rates, even though such
LONG- AND SHORT-TERM INTEREST RATES
Per cent
10
"1 <
COMMERCIAL PAPER
-T\
—
—
8
6
w
' \V
i
CORPORA TE BONDS
II 1 1 1 1 1 1 1 11111111111M i M111
! II I 1
1880
1 1 1 II 1 M 1 1 1 1 1 1 1 1 1 M
1900
1920
/fr
4
2
^>
1940
0
1960
NOTE.—Corporate bond yield is average of high-grade railroad bonds until 1932 and
of corporate Aaa bonds thereafter. Commercial paper is rate on 4- to 6-month open
market paper.
emphasis contributed to an unregulated and very large wartime expansion of the money supply, and a postwar situation
in which the money supply was without effective regulation.
Price advances were held down during the war by direct
controls over spending and prices, but were very sharp in
early postwar years when controls were removed.
Against this background, the outbreak of hostilities in
Korea in 1950 and the accompanying inflationary pressures
prompted public discussion of monetary policy aimed at
stability of interest rates at low levels, because such a policy
in effect was leaving the money supply unregulated. En
FEDERAL RESERVE SYSTEM
deavors to meet this problem and to allay public anxiety
about the future value of the dollar led to the TreasuryFederal Reserve accord in March 1951, which, after a
transition period, discontinued further official pegging of
interest rates. Monetary policy thus became free to resume
regulation of bank credit and money in order to combat not
only deflationary but also inflationary tendencies in the
SELECTED
INTEREST
RATES
Per cent
6
-
CORPORATE Aaa
4
U. S. GOVERNMENT
LONG-TERM
A*
\
L/
-<&$
^^yOs
2
/
K
- •>-'*
/„'
/
1
1947
/
k
*\ x -i, J
w - ^ " COMMERCIAL K J
PAPER
V
1
1
'49
1
1
'51
1
I
'53
1
TREASURY
BILLS
1
55
| |
1
'57
0
1959
economy, and market rates of interest again reflected the
influence of underlying supply and demand forces.
Changes in interest rates have both responded to and
reflected cyclical movements of the economy. The upward
trend of interest rates during the 1950's was interrupted by
declines during the recessions of 1953-54 and 1957-58. The
most recent cyclical rise began around mid-1958, as recovery
in economic activity from the 1957-58 recession quickened.
As is usual, the largest increases occurred in yields on shortterm instruments, such as Treasury bills, commercial pa-
10
ANNUAL REPORT OF BOARD OF GOVERNORS
per, and bankers' acceptances, which are generally more
volatile and which had fallen sharply following the onset of
recession and the easing of credit conditions that began in the
fall of 1957. Yields on corporate and State and local
government bonds and on U.S. Government long-term
securities also rose substantially after mid-1958 to levels
above their previous postwar peaks. During 1959, corporate
yields moved to levels well in excess of yields on common
stocks, thus reversing the historical relationship between
bond and stock yields.
Even at recent advanced levels, interest rates were generally low relative to earlier periods, although some rates were
near their averages in the 1920's, which was also a period of
intensive utilization of economic resources and strong credit
demands. Moreover, since the 1920's the level of market
interest rates on U. S. Government securities has risen relative to those on other obligations, reflecting in part the much
larger volume of Federal debt relative to other debt and the
elimination of tax exemption on Treasury bonds.
Historical comparisons of interest rates encounter various
problems. Limited statistical records are one handicap.
Also, broad economic and social changes—for example, the
development of financial institutions, changes in the tax
structure, and the enlarged role of governments—affect the
interpretation of differing interest rate levels over time.
SAVING-INVESTMENT PROCESS
There are a number of theories of interest rate determination.
Some emphasize the saving-investment process; others look
mainly to the cash and liquidity demands of the public; and
still others stress the supply and demand for loanable funds.
The different theories center on different, though not necessarily mutually exclusive, aspects of the process through
which interest rates are set. No one theory, however, comprehends the full complexity of this process. Observed
interest rate movements reflect elements of all theories in
varying degree, depending on circumstances of time and
place as well as on institutional characteristics of the
economy.
FEDERAL RESERVE SYSTEM
11
From the point of view of the economy's use of its resources, the rate of interest is a price that translates present
saving into future command over resources. For example, at
a 5 per cent interest rate, $1.00 of present income saved will
exchange for $1.05 to be received after a year. In the meanwhile, since the saver has refrained from current consumption, his saving permits resources to be used to an equivalent
amount in the nation's investment in plant and equipment,
durable goods, and housing, or in net foreign investment.
This investment increases the economy's capacity to produce
future income in terms of goods and services, and thus provides the additional real income that makes it possible for
the borrower to pay the interest earned by the saver.
Since interest is both an earning of savers and a cost of
investment, movements of interest rates can be said to
reflect the balancing of saving and investment tendencies at
given levels of income and of prices. Imbalances between the
willingness to save and investment demand, however, affect
real income (that is, income in terms of constant prices) and
market prices as well as interest rates. The extent of influence
on each depends on the economic and institutional structure,
the phase of the economic cycle, and general economic
conditions.
At times when productive capacity is underutilized, for
example, greater investment demand is likely to lead to the
financing of a larger volume of real investment, and thus to
increased output and rising incomes. The rise in real income
will tend to be accompanied by an increase in saving, and
the balancing of saving and investment may be achieved with
little advance in interest rates and prices. At times when
investment demand exceeds available saving under conditions of high capacity utilization, there will be greater pressure on interest rates and prices since the extent to which
saving might be increased by a rise in real income is limited;
pressures on interest rates and prices will be intensified when
inflationary expectations are widely prevalent. It is under
such circumstances that excessive expansion of bank credit
and money results mainly in rising prices and merely enlarges the monetary value of both saving and investment,
12
ANNUAL REPORT OF BOARD OF GOVERNORS
without relieving a shortage of real resources and even without checking, except perhaps temporarily, a pronounced
tendency for interest rates to rise.
SUPPLY AND DEMAND FOR LENDABLE SAVING
The saving-investment process in financial markets is reflected in the balancing of supplies and demands for loanable
funds, as funds move into and out of financial assets of
varying types in response to borrowing demands. The composition offlowsin financial markets represents the combination of supplies and demands originating in the various
sectors of the economy.
The saving of an individual sector—consumer, business,
or government—represents the extent to which its current
receipts (after taxes) are not spent on current consumption.
This saving flows into investments, and on the investment
side is equal to purchases of capital goods plus a financial
component which is the sector's net saving in financial form.
More specifically, a sector's saving in financial form is equal
to its net acquisitions of financial assets less net incurrence of
debt. Within a sector, however, some individual units or
groups may be predominantly savers and acquire financial
or tangible assets without incurring much debt, while others
may be mainly borrowers.
The nation's saving, in contrast with the saving of any
sector, is equal only to the value of investment in tangible
assets plus net foreign investment. The nation's saving does
not include, in measurement, investment in financial claims
other than net claims on foreigners. What anyone owes
within the economy is owned by another; thus, in aggregating the wealth of the nation, assets representing financial
claims cancel out against liabilities. Nevertheless, the flow of
saving by individuals or sectors into financial claims is a
significant element in the determination of the nation's
investment. The forms in which people save and the state of
financial markets through which these savings flow both
reflect and affect decisions to purchase capital goods.
Consumers as a group provide enough saving—either directly or through financial intermediaries, such as savings
13
FEDERAL RESERVE SYSTEM
institutions, life insurance companies, and pension funds—
to cover the aggregate borrowing of the consumer sector and
also to help finance demand for loanable funds from other
sectors. While businesses finance themselves to a large
extent out of internal saving, as a group they are usually net
borrowers from the rest of the economy, as shown in the
accompanying chart. In recent years governments as a
group have generally been heavy net borrowers of the
nation's saving; a governmental net surplus, of course, is a
net addition to the nation's saving.
The supply and demand for financial saving, as well as
shifting portfolio preferences of individuals, businesses, and
financial institutions, come together and are balanced in
financial markets, as is illustrated in the table on page 14.
SAYING IN FINANCIAL FORM
Billions of dollars
+, net funds made availiable
20
CONSUMERS
10
^ ^
GOVERNMENTS
/
10
NONFINANCIAL
BUSINESSES
—,
1
1950
20
net funds obtained
1
'51
1
'53
'55
'57
1959
NOTE.—Federal Reserve flow-of-funds data. Consumers include nonprofit organizations. Saving in financial form of a sector is equal to the net increase in its financial
assets less the net increase in its liabilities. When positive, it represents the net amount of
saving made available to other sectors; when negative the net amount obtained. Rest-ofworld sector not shown.
14
ANNUAL REPORT OF BOARD OF GOVERNORS
In financial or monetary terms, changes in interest rates
reflect this market process. Changes in the supply of money
in the economy, effected through the market for bank credit,
are an important marginal element affecting interest rates.
FINANCIAL QUANTITIES REFLECTIVE OF SUPPLY AND DEMAND FOR SAVING
[In billions of dollars]
1958
1959*
Flows into financial assets, total
76.7
Credit market instruments, total
1
45,4
84.0
60.2
Purchased by:
Consumers
Nonfinancial businesses
Financial institutions
Governments
3.6
1.4
36.8
3.6
14.2
7.6
28.9
6.4
30.4
17.1
24 A
6.3
16.8
A
1.0
6.7
76.7
85.1
45.2
60.4
12.0
14.1
1.5
15.2
20.7
18.5
4.7
15.8
29.9
16.9
1.6
7.7
Supply quantities
Claims on financial institutions, total1
Acquired by:
Consumers
Others
Other assets3
Demand quantities
Increase in liabilities, total
Credit market instruments, total1
Borrowed by:
Consumers
Nonfinancial businesses
Financial institutions
Governments
Liabilities of financial institutions2
Other liabilities
3
P Preliminary estimates.
1
Consists of marketable Federal, State, and local government securities, corporate
bonds and stocks, mortgages, consumer credit, security credit, and bank and other
loans. Rest of world included in total but not shown separately.
2
Consists of currency and demand deposits, savings deposits and shares, and saving
through private life insurance and pension funds. Excludes claims on financial institutions through purchase of credit market instruments.
3
Consists of consumer-held U.S. savings bonds, trade credit, proprietors' net investment in noncorporate business, saving through government life insurance and pension
funds, and miscellaneous other types of financial flows.
NOTE.—-Based on Federal Reserve flow-of-funds data. Flows into financial assets
and increase in liabilities are on a net basis. Differences between total financial assets
and liabilities and between paired subtotals offinancialassets and liabilities reflect statistical discrepancies. Details may not add to totals because of rounding.
FEDERAL RESERVE SYSTEM
15
Interest rate movements not only reflect a changing supply
and demand situation but also in turn have some effect on
the flow of loanable funds through financial markets. Flows
into savings institutions or commercial banks in the form of
time and savings deposits, into U.S. savings bonds, and into
instruments bought and sold in credit markets respond to
differential interest rate movements. Moreover, when interest rates are very low—generally periods of reduced economic activity and business uncertainty—savers are likely
to hold more of their funds in cash, that is, demand deposits
in commercial banks and currency. On the other hand,
when the economy is expanding and interest rates are at
higher levels, there is a tendency for the public to economize
on cash balances and invest in other financial assets.
Some flows into financial institutions—especially the bulk
of those going into life insurance companies and pension
funds—are contractual in nature and vary only gradually, if
at all, with interest rate changes. Similarly, some inflows of
funds into credit markets to repay debt are fixed by previous
commitments and in general do not vary with interest rate
movements in a current period. On the other hand, some
debts of businesses and others contain contract provisions
that permit accelerated repayment, and interest rate changes
may affect the timing of such repayments.
On the demand side, changes in interest rates—for example, a rise—have varying effects, depending on the relation of interest cost to total cost of the project being financed
and on expectations as to the future course of interest rates.
For many outlays, the relative interest cost may be small,
although in individual cases it may be of sufficient size to
encourage efforts to economize as rates rise. For longer lived
investments, such as housing, public service facilities, and
many types of commercial and industrial construction, the
relative interest cost is higher and is an important consideration in making long-term commitments. Business decisions
as to inventory holdings also have to take account of interest
rate variations. Thus, in many areas of the economy the
incurrence of debt is influenced by changes in the level of
interest rates.
16
ANNUAL REPORT OF BOARD OF GOVERNORS
The restrictive impact of rising rates on borrowers may be
temporarily moderated if further advances are expected;
indeed, as in the case of other costs that are expected to rise,
expectations may temporarily accelerate the demand for
funds. This transitory effect on demand is reversed when
rates reach a level that the market believes will not be sustained. Under these conditions, restrictive monetary action
has a role to play in changing market expectations.
ROLE OF CREDIT AVAILABILITY
When credit demands are strong, limitations on credit
availability together with higher interest rates restrict the
extent to which borrowers can obtain needed funds. And,
conversely, when credit demands are slack, increased availability of lendable funds reinforces incentives given by lower
interest rates, and facilitates satisfaction of credit demands.
The direct impact of credit availability on the ability of
borrowers to satisfy their demands is readily observable in
market segments where changes in interest charges and in
lenders' returns are not commensurate with changes in the
level of market interest rates. Whatever the source of this
rate inflexibility—whether unique features of lender competition, of borrower demand, or of some program of governmental underwriting of borrower default risk—lenders in
such market segments experience a relative decline in interest
yields when market interest rates rise elsewhere; or, if some
of their funds are in turn borrowed from the market, lenders
experience an actual decline in their net returns. Willingness
to lend in these specialized markets is thus reduced.
When credit demand presses actively against the supply
of lendable saving and interest rates rise, lenders generally
tend to screen the creditworthiness of loan applicants more
carefully. Under such conditions, lenders tend to adhere to
stricter lending standards, to set more stringent borrowing
terms, and to allocate their lendable funds on a nonprice
basis as between borrowers. Where this situation develops,
many borrowers are obliged to shop more intensively in
order to find lenders whose loan standards and terms they
can meet, and some borrowers fail to find accommodation
FEDERAL RESERVE SYSTEM
17
at current interest rates. Successful borrowers are likely to
include customers of long standing or with established credit
lines, borrowers offering debt instruments not subject to
statutory interest rate limitations, borrowers prepared to
adjust to more stringent prepayment conditions, and those
offering types of loans or instruments with relatively low
servicing costs.
Federal Reserve actions initially influence only the availability of loan and investment funds at banks, but changes
in the availability of bank credit are reflected in the general
availability of loan funds in other credit markets. Banks can
to a degree avoid restriction of credit availability to their
own customers by selling securities. Their sales of securities,
however, tend to absorb funds of other investors and lenders.
This process limits the availability of credit from these other
sources except to the extent that saving increases or the
public tends to substitute other financial assets for cash.
Many observers of financial processes assign great importance to changes in credit availability in restricting or
accelerating the volume of current borrowing; indeed, some
assign a more decisive role to availability than to changes in
interest cost. The Federal Reserve, in discussing and
evaluating the market impact of its policy actions, has continuously stressed the importance of changes in the availability of funds in affecting satisfaction of demands.
FACTORS IN INTEREST RATE TRENDS OF THE 1950'S
During the past decade, private and governmental demands for credit, together with factors affecting the supply
of saving, exerted strong upward pressures on interest rates
in financial markets. The economy was generally characterized by rapid population growth and, apart from two brief
recessionary periods, by well sustained utilization of plant
and equipment and widespread demand pressures on prices.
Attempts on the part of the Federal Reserve to keep interest
rates from rising in recent periods of economic buoyancy
would have had effects adverse to the public interest. Expansion of bank credit and money to hold down interest rates
would have run the danger of stimulating speculative de-
18
ANNUAL REPORT OF BOARD OF GOVERNORS
mands for resources and credit, would have restrained
interest rate rises only temporarily, and would have led to
sharply adverse repercussions later.
Credit demands. All major sectors of the economy increased
their demands for credit in the 1950's. Growth of business
credit demand was accompanied by continuously expanding
credit demands from consumers and governments. In fact,
the indebtedness of consumers and of State and local governments increased at a more rapid rate than business
indebtedness.
PERCENTAGE INCREASE IN OUTSTANDING DEBT
1949 TO 1959, BY SECTOR
0
100
200
300
100
200
300
CONSUMER
STATE AND LOCAL
GOVERNMENT
BUSINESS
FEDERAL
GOVERNMENT
N0TE.—Based
Debt consists of
State, and local
credit, and bank
on end-of-year data from Federal Reserve flow-of-funds accounts.
credit market instruments other than corporate stocks (i.e., Federal,
obligations, corporate bonds, mortgages, consumer credit, security
and other loans) together with trade credit.
Consumer demands on credit markets rose along with
expanding incomes and wants, and with the development and
broadening of credit facilities to finance purchases of
homes, durable goods, and other goods and services. Low
FEDERAL RESERVE SYSTEM
19
down-payments and the lengthening of maturities on home
mortgage financing—in part in response to Federal aids—
together with ready availability of short- and intermediateterm consumer credit brought increasing proportions of the
population into the credit market. A large share of expenditures on homes and durable goods was financed on credit
terms, and both mortgage debt and consumer credit expanded greatly.
Growth of the population and its spread to the suburbs
during the past decade enlarged demands for education,
transport, sewage, and other services of State and local
governments, and required expansion of existing facilities to
provide them. Many of these services are provided with
long-lived physical facilities which are financed mainly
through long-term borrowing.
Increased credit demand of businesses in the 1950's reflected the expected high profitability of business investment
and innovation during a period when, for much of the time,
demand for goods and services pressed against the capacity
of existing plant, and when rapidly changing wants and
needs of the population, as well as striking improvements in
technology, tended to accelerate obsolescence of the existing
facilities. Another important factor, particularly in recent
years, was the rapid advance in industrial wages and the
incentive this gave to labor-saving investment.
At times Federal budget deficits contributed to expanded
over-all credit demand. In six years of the period beginning
with 1950, when defense outlays were stepped up following
hostilities in Korea, the Federal Government's receipts fell
short of its spending. In these deficit years, the Federal
Government competed with other sectors for part of the
nation's supply of private saving, and its absorption of saving
tended to reduce the availability of credit to other sectors.
Expansion of credit demands would not entail rising
interest rates if it were accompanied by a commensurate
increase in the public's willingness to make saving available
in lendable form. The tendency for lendable saving to fall
behind borrowing demand, notwithstanding a substantial
growth in national income, may be attributed to many
20
ANNUAL REPORT OF BOARD OF GOVERNORS
factors. No explanation, however, can ignore the widespread belief during the latter part of the 1950's that prices
would continue upward indefinitely.
Financial saving of consumers. Consumers provide the bulk—
about three-fifths—of the economy's gross saving, as shown
in the accompanying table. Fluctuation in the consumer
share during the past decade was relatively limited. The
amount that consumers were willing to make available at
pre-existing rates, however, usually fell short of the demand
for saving. The lag in lendable saving from this major source
contributed to the upward pressure on interest rates.
G R O S S NATIONAL SAVING, BY SECTOR
[In billions of dollars]
Sector
Consumer1
Nonfinancial business
Financial institution
Gross private saving
2
Government saving
Gross national saving
1958
1959*
67.2
36.1
3.4
73.2
46 9
5 0
106.6
125.0
-12.8
-9.6
93.8
115.4
p Preliminary estimates.
1 Includes nonprofit organizations.
2 Coverage of Government saying is not comparable with that of private saving.
Because of conceptual and statistical problems, governmental outlays on capital goods
are treated as current expenditures.
Saving and spending for current consumption are, of
course, alternative uses of income, and the flow of saving
depends on the many factors that affect the desire to spend
out of current income. A part of consumer gross saving goes
directly into purchases of durable goods and homes. Another
part—that is, consumer net saving in financial form—is
available to meet the financing needs of the rest of the
economy.
Changes in the flow of consumer financial saving influence
interest rate variations, and in turn are influenced to an extent by such variations. At times during the past decade, relatively large amounts of consumer net saving in financial
FEDERAL RESERVE SYSTEM
21
form were associated with comparatively high interest rates.
During 1951-53, consumer saving in financial form was
markedly higher than in 1948-50, and interest rates were also
higher. Also, after falling in 1955 in reflection of the boom
in spending on consumer durable goods during that year,
financial saving rose in 1956-57, when interest rates were
relatively high.
At other times, such as in 1959, an advance in interest
rates was accompanied by greater consumer acquisitions of
financial assets, but these greater acquisitions were offset, for
the sector as a whole, by even greater expansion of consumer
debts; as a consequence, net saving in financial form of the
sector declined. The rise in interest rates last year brought
forth greater consumer acquisitions of securities, particularly
U. S. Government obligations, and this helped to finance
credit demands of the Government. By buying securities
from banks offering them, consumers also indirectly helped
to finance increased borrowing by other consumers. A
somewhat similar pattern of consumer response occurred in
the 1954-55 cyclical upswing of economic activity, as can be
observed in data available in the Board's new quarterly
flow-of-funds and saving accounts.
Inflationary expectations. The willingness of savers to supply
funds to meet credit demands has been adversely affected
when rising average prices for goods and services engendered
expectations of continued advances. Such conditions were
evident from early 1956 to late summer 1957, and also for a
time after mid-1958.
Under the influence of inflationary expectations, savers
became less willing to make funds available under fixedinterest contracts and tended to prefer assets, such as
equities and land, which appeared to provide a hedge against
possible erosion of the real value of saving through future
price rises. Funds that might otherwise have financed new
credit demands were committed to speculation in the stock
market or in real estate—and eventually may have leaked
into consumption expenditures based on capital gains. Both
the resultant rise in interest rates and the decline in yields on
equities were in part manifestations of moves by lenders
22
ANNUAL REPORT OF BOARD OF GOVERNORS
intended to maintain the real value of their funds in the
face of expected price rises.
Inflationary anticipations work to increase borrowing
demands even in the face of rising interest rates. Inflationary
expectations make it appear to be less expensive to borrow
in the present than in the future. Moreover, the cost of
borrowing may seem small relative to possible speculative
profits. These financial incentives tend to accelerate investment, especially in inventories or in plant and equipment,
whose value may be expected to rise or which may help to
produce goods and services which will rise in price.
Inflationary expectations, reflected in rising stock market
activity and stock prices, may also lead to some substitution
of equity for debt financing by corporate borrowers. As
yields on bonds rise relative to yields on equities, it may
become possible to satisfy current business demands for
funds at relatively low cost by shifting to equities, and thus
to strengthen the corporation's equity position for future
borrowing, including that undertaken in response to inflation
incentives. Such shifts apparently occurred to some extent
in 1959. Corporate issues of stocks were larger than the
year before, while sales of bonds were smaller.
MONETARY POLICY AND INTEREST RATES
Monetary policy in the public interest seeks to facilitate
sustained high levels of employment, relative stability of
average prices, and balanced economic growth. Over the
long run, these objectives are likely to be best served by
moderate expansion of the quantity of cash balances held by
the public. In the short run, monetary policy focuses on the
volume and availability of bank reserves in relation to the
credit demands being generated by current economic forces,
and assesses whether the volume of such demands, given the
share being satisfied by bank credit and monetary expansion,
is making for inflationary or deflationary tendencies. On the
average, the share that is satisfied by bank credit growth is
relatively small.
Monetary actions affect market interest rates in a variety
of ways. The main impact comes from the increase or
decrease in the supply of funds in the market resulting from
FEDERAL RESERVE SYSTEM
23
forces of multiple expansion or contraction of bank credit
based on fractional reserve requirements. With present
reserve requirements, the member banks may expand or
must contract demand deposits in a multiple of about $7
to $1 of reserves supplied or withdrawn.
The Federal Reserve can initiate a change in bank reserves
through its open market operations or, when appropriate
and feasible, it can vary the reserve requirement percentages.
Federal Reserve purchases and sales of Government securities in the open market have some immediate, direct impact
on interest rates, but this impact is least when System open
market operations are conducted in short-term securities.
In any event the initial, direct effect of any particular Federal
Reserve operation is minor relative to the secondary multiple
effects that develop out of the resulting changes in bank
reserves.
A relationship between monetary action and market interest rates sometimes emphasized in public discussions is
that associated with changes in the discount rates of the
Federal Reserve Banks. The discount rate is not a market
rate, but a rate charged by a Federal Reserve Bank on loans
to member banks, the only institutions having regular access
to Reserve Bank credit. When the Reserve Banks change
their discount rates, their purpose is to influence the willingness or unwillingness of member banks to borrow from
them, and thus to affect the over-all availability of bank
reserves and bank credit. Borrowing is most advantageous
to member banks, in adjusting their reserve positions, when
market yields of secondary reserve assets exceed the Reserve
Bank discount rates.
For a combination of reasons—traditional, operational,
and regulatory—member bank borrowing from the Reserve
Banks is typically very short-term and hence is resorted to
mainly in financing temporary adjustments in member bank
reserve positions. By keeping the discount rate in close
alignment with market rates on short-term liquid paper, the
Reserve Banks regulate the amount of member bank borrowing. While the Federal Reserve discount rate is related to and
interacts with short-term market rates, the composite of supply and demand forces in the various sectors of the market is
24
ANNUAL REPORT OF BOARD OF GOVERNORS
more fundamental than the discount rate in determining the
level and structure of interest rates.
Because of expectational or other psychological factors in
the market, Federal Reserve actions may have some effects
on interest rates in addition to, and even prior to, those
resulting from changes in bank reserve positions. Such
effects, however, are not likely to be long sustained unless
accompanied by changes in basic supply and demand conditions. While market professionals strive to assess the effects
of possible System actions on bank reserves, and through
their own market transactions try to anticipate changes in
interest rates, their judgments are likely to be based primarily
on underlying economic developments that shape the demand for and supply of saving—that is, on many of the
same developments that influence Federal Reserve policy
decisions and actions.
In summary, while the course of interest rates is necessarily influenced by monetary actions, the monetary policy
decisions themselves are based primarily on judgments as to
the appropriate flow of bank credit and money, and not on
judgments as to an appropriate level or pattern of interest
rates. To the greatest degree possible, the determination of
interest rates is left to freely functioning markets.
ECONOMIC GROWTH, INTEREST RATES, AND SAVING
The rate of growth of the economy depends in large part on
the extent to which resources are devoted to the production
of capital goods that will increase output or services in the
future, rather than to the production of goods and services
for current consumption. In our free society, choice in the
use of resources is partly made through public decisions as
to governmental taxation and spending, but it more largely
depends on decisions of a multitude of individuals and
businesses effected through competitive bidding in the market. The nation's willingness to save represents the degree to which it is willing to refrain from current consumption, and its willingness to invest represents the extent to
which it desires to use available resources to increase future
output. Monetary policy aids society in its choice as to use
FEDERAL RESERVE SYSTEM
25
of economic resources by exerting an influence toward
minimizing cyclical fluctuations that interrupt the growth
process and by encouraging relative stability in average
prices.
Under long-run conditions of generally high capacity
utilization and high investment demand, growth and stability are consistent with relatively low interest rates as long
as the economy's willingness to save is great. In a society
with high and rising consumption standards, however, rapid
rates of economic growth generate tendencies toward price
inflation and high interest rates. The encouragement of
saving under such conditions helps to release resources to
meet investment demand, to lessen upward pressures on
prices and interest rates, and to facilitate the growth process.
RESERVES AND RESERVE REQUIREMENTS
In July 1959, the Congress amended the Federal Reserve
Act in several respects concerning reserve requirements of
member banks and the powers of the Board of Governors in
this field. The amendments relate primarily to assets that
can be counted as reserves and to the classification of banks
for reserve purposes. They do not alter in any fundamental
way the established mechanism of reserve requirements or
their use for effectuating monetary policies, although they do
change some important features of the mechanism.
When the Federal Reserve System was founded in 1913,
many students of banking considered that the main purpose
of reserve requirements was to assure liquidity of bank
deposits. They regarded limitation on the banking system's
capability for expanding credit and money as an incidental
result of such requirements.
Banking experience under the Federal Reserve Act has
made it clear that required bank reserves in themselves do not
assure liquidity of bank deposits. For such liquidity, banks
must place main reliance on the liquid market assets that
they hold, often called "secondary reserves," with supplementary and ultimate reliance on the discount facilities
of the Reserve Banks. Experience has also demonstrated
26
ANNUAL REPORT OF BOARD OF GOVERNORS
that the principal function of the reserve requirement is to
serve, along with control over the volume of reserves, as a
base for regulating the volume of bank credit and money.
It can be said, accordingly, that the present-day monetary
function of a required reserve percentage is to provide the
fulcrum for the quantitative regulation of bank credit and
money. How large a volume of bank deposits may be
generated by a given amount of reserves, in other words,
will be determined by the expansion multiple derived from
the reserve requirements.
Given a percentage of deposits that commercial banks are
required to hold as reserves, the supply of reserve funds
available to the banking system sets an over-all limit to bank
credit and monetary expansion. If reserve funds available to the banking system exceed the required reserves by
more than a customary margin, expansion in bank loans and
investments may occur. On the other hand, if the reserve
funds available fall short of required reserves, expansion in
bank loan and investment assets must come to a halt, and
contraction of such assets may occur. Because of these
effects, monetary administration in the present-day setting
must constantly pay close attention to the relation between
the volume and sources of bank reserves and the amount of
reserves that banks are required to hold, and to the balance
of forces working to change these relationships.
AMENDMENT OF BOARD AUTHORITY
The legislation approved July 28, 1959 changed Section 19
of the Federal Reserve Act, which contains the provisions on
reserve requirements, in the following separate but related
respects:
(1) The Board was authorized to permit member banks to
count their holdings of currency and coin as part of the
reserves that they are required to hold under the Federal
Reserve Act. Previously, only balances on deposit at a
Federal Reserve Bank could be counted for this purpose.
The scope and timing of any permission for the banks to
count such cash in their vaults was left to the Board's
discretion.
FEDERAL RESERVE SYSTEM
27
(2) By no later than July 28, 1962, the category of "central
reserve city banks" is to be abolished. For reserve computation purposes thereafter, member banks will be divided into
only two classes, reserve city banks and other banks (usually
referred to as "country banks"), instead of three.
(3) Effective immediately, the statutory range within
which the Board can set the reserve requirements on demand
deposits is changed to 10-22 per cent for both central reserve city and reserve city banks. The range for country
banks is kept at 7-14 per cent, and that for time deposits for
all member banks at 3-6 per cent.
(4) The Board's power to permit individual banks in reserve or central reserve cities to carry lower reserves than the
full requirements for those cities, which had been limited to
banks situated in outlying districts of cities, was broadened
to allow such exceptions to be based on the character of
business of banks, wherever the bank may be located.
At the end of 1959, central reserve city banks consisted of
30 member banks in New York and Chicago, including the
principal money market banks in those cities, which held
altogether about $38 billion of deposits. The reserve cities
were those cities having Federal Reserve Banks or branches
and 15 other cities which had been so designated, mainly
on the basis of their importance as places where interbank
deposits were held. The 265 banks designated as reserve city
banks, which included some banks in outlying districts of
central reserve cities, had about $72 billion of deposits. The
remaining 5,938 country banks had about $71 billion of
deposits.
In addition to reserve requirements, member banks by
practice or necessity hold in their vaults varying amounts of
currency and coin, which serve the same function as reserves
in limiting the ability to expand credit. Thus the average
differentials between classes are not those indicated by the
reserve requirement percentages alone. Since cash holdings
vary somewhat among individual banks, the effective combined reserve and cash needs differ for banks within the
same class.
28
ANNUAL REPORT OF BOARD OF GOVERNORS
MEMBER B A N K RESERVE REQUIREMENTS
[Per cent of deposits]
Type of deposit
and class of bank
Statutory range of requirements
Requirements
in effect
during 1959
Before 1959
legislation
1959
legislation1
13 to 26
10 to 20
7 to 14
10 to 22
10 to 22
7 to 14
18
I6I/2
11
3 to 6
3 to 6
5
Against net demand deposits:
Central reserve city banks
Reserve city banks
Country banks
Against time deposits:
All member banks
i Act approved July 28, 1959.
CHANGE IN BOARD REGULATION
The Board of Governors amended Regulation D to permit
country banks, effective December 1, 1959, to count any
vault cash that they hold in excess of 4 per cent of their net
demand deposits, along with balances at a Federal Reserve
Bank, toward meeting their reserve requirements; and effective December 3, 1959, to permit reserve city and central
reserve city banks similarly to count any vault cash, in excess
of 2 per cent.
In amending its regulation to permit this counting of vault
cash, the main purpose of the Board, in keeping with a
principal purpose of the 1959 legislation, was to reduce the
inequity that had existed because some banks found it necessary for operating purposes to hold much larger amounts of
vault cash, relative to deposits, than were held by other banks
in the same reserve classification.
With permission to count as reserves holdings of vault
cash in excess of 4 per cent of net demand deposits, the
maximum combined reserve and cash needs for a country
bank are fixed at 15 per cent of such deposits. Similarly,
with permission to count as reserves any cash holdings in
excess of 2 per cent of net demand deposits, the maximum
needs of a reserve city bank are fixed at 18.5 per cent and
FEDERAL RESERVE SYSTEM
29
those of a central reserve city bank at 20 per cent. The new
provision has the effect of limiting potential variation in combined reserve and cash needs between banks in the same
class to less than 4 percentage points for country banks
and 2 points for reserve city and central reserve city banks.
The differential between the requirement against net
demand deposits for a country bank and that for a reserve
city bank, in effect during 1959, was 5l/i percentage points,
and between a country bank and a central reserve city bank,
7 points. These figures, however, overstate the differences
between country banks and others in their total needs for
cash and reserve balances, because country banks typically
keep in their vaults proportionately larger amounts of currency and coin. Their total holdings of vault cash have
recently averaged around 3.5 per cent of their net demand
deposits, compared with 1.7 per cent at reserve city banks
and 0.6 per cent at central reserve city banks.
The average effective requirement for banks in each class
continues to depend in part on the amounts of vault cash
actually held. Since for country banks cash holdings up to
4 per cent of net demand deposits are not counted as reserves and since about half of the country banks hold varying
amounts less than 4 per cent, the total cash not counted
equals about 3 per cent of net demand deposits of all country banks. Added to 11 per cent for required reserves, this
makes the average effective requirement for all country
banks about 14 per cent. The average amount of cash not
counted at reserve city banks is about 1.5 per cent, making
the average effective requirement for these banks 18 per cent.
That for central reserve city banks, few of which reach the
maximum, is about 18.6 per cent.
Computed on the basis of the average effective requirements, the differential between country banks and reserve
city banks is about 4 percentage points, or about the same as
before the authorization to count some cash as reserves. If a
country bank and a reserve city bank hold enough cash to
bring them up to the maximum combined requirement percentages of 15 and 18.5 per cent, respectively, the differential
between them would be 3.5 percentage points.
30
ANNUAL REPORT OF BOARD OF GOVERNORS
DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS,
Action
Period
1959
Purpose of action
JanuaryFebruary
Reduced holdings of U.S. Government securities in January by about
$1 billion. Member bank borrowings
at the Federal Reserve Banks continued at an average of $500 million
or more.
To offset the seasonal inflow
of reserve funds resulting
mainly from the post-holiday return flow of currency
from circulation and thus
maintain restraint on credit
expansion.
MarchMid-July
Increased System holdings of U.S.
Government securities by about $1.1
billion. Member bank borrowings
rose further to an average of $1.0
billion in mid-July.
To offset partially the absorption of reserves due
mainly to a decline of $780
million in gold stock and an
increase of about $1 billion
in currency in circulation
and to keep credit expansion
under restraint.
March
Raised discount rates from 2Vi to 3
per cent at all Reserve Banks.
May-June
Raised discount rates from 3 to 3Vi
per cent at all Reserve Banks.
To keep discount rates in
an appropriate relationship
with the rise in market rates
resulting from vigorous
credit demands and to restrain undue credit expansion.
Mid-JulyOctober
Bought and subsequently sold small
amounts of U.S. Government securities around periods of Treasury financing and the 3rd quarter tax date.
Member bank borrowings averaged
about $900 million with temporary
increases above $1 billion around
Treasury financing and tax payment
dates.
To supply special reserve
needs for only limited periods in recognition of pressures in money, credit, and
capital markets resulting
from vigorous public and
private demand for credit.
September
Raised discount rates from 3% to 4
per cent at all Reserve Banks.
To keep discount rates in an
appropriate relationship
with the rise in market rates
resulting from vigorous
credit demands and to restrain undue credit expansion.
NovemberDecember
Increased System holdings of U.S.
Government securities by about $800
million through mid-December and
then reduced holdings somewhat.
Authorized member banks to count
about $300 million of their vault
cash as required reserves through
amendment to Regulation D, effective December 1, under new legislation. Average borrowings rose to
about $1 billion in the last half of
December.
To meet part of the temporary end-of-year needs of
banks for reserve funds but
at the same time to keep
bank reserve positions under pressure.
FEDERAL RESERVE SYSTEM
31
RECORD OF POLICY ACTIONS
FEDERAL OPEN MARKET COMMITTEE
The record of policy actions of the Federal Open Market
Committee is presented in the Annual Report of the Board of
Governors pursuant to the requirements of Section 10 of the
Federal Reserve Act. That section provides that the Board
shall keep a complete record of the actions taken by the Board
and by the Federal Open Market Committee upon all questions of policy relating to open market operations, that it shall
record therein the votes taken in connection with the determination of open market policies and the reasons underlying the
actions of the Board and the Committee in each instance, and
that it shall include in its Annual Report to the Congress a full
account of such actions.
In the pages that follow, there is an entry with respect to the
policy approved by the Committee at each of the 18 meetings
held during the calendar year 1959, which record includes the
votes on the policy decisions as well as a resume of the basis
for the decisions, as reflected by the minutes of the Committee's meetings. In some cases policy decisions were by unanimous vote, while in others a dissent was recorded. As this
record shows, the fact that a decision for a general policy was
by large majority or even by unanimous vote does not necessarily indicate that all members of the Committee were equally
agreed as to the reasons for a particular decision or as to the
precise operations in the open market that were called for to
implement the general policy. These shades of opinion, fully
expressed at meetings, serve to provide the Manager of the
System Open Market Account (who attends the meetings of
the Committee) with guides to be used in the conduct of open
market operations within the framework of the policy directive
adopted.
Set forth below is the policy directive of the Federal Open
Market Committee that was in effect at the beginning of 1959,
the directive having been approved in this form at the meeting
on December 16, 1958. This directive was issued to the Federal Reserve Bank of New York as the Bank selected by the
32
ANNUAL REPORT OF BOARD OF GOVERNORS
Committee to execute transactions for the System Open Market Account. It directed that Bank:
(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 fostering conditions in the money market
conducive to sustainable economic growth and stability, 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.
January 6, 1959
Authority to effect transactions in System Account.
The Federal Open Market Committee's directive was approved in the same form that had been adopted at the last
meeting of the Committee in 1958 (December 16), calling for
a policy of fostering conditions in the money market conducive to sustainable economic growth and stability.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Balderston, Fulton, Irons, Leach, Mills,
Robertson, Szymczak, and Deming. Votes against this action:
None.
Presentation and consideration of a detailed review of the
FEDERAL RESERVE SYSTEM
33
regional and national economic and financial situation preceded the Committee's decision to renew the existing policy
directive. There was general agreement that the Committee
should attempt to maintain about the same degree of restraint
on credit expansion during the immediate future that had applied in the recent past. However, there was a considerable
body of sentiment that favored resolving doubts in the operation of the System Open Market Account on the side of restricting, rather than easing, the reserve positions of banks.
This policy decision was made against an economic backdrop of maturing recovery with output back or nearly back to
prerecession levels, meaning that problems of sustainable
growth had now replaced problems of recession. The failure
of commodity prices to decline significantly during the recession, the speed and generality of the economic recovery, the
persistent rise in common stock prices, the pace of monetary
expansion early in 1958, and the size of the current Federal
deficit suggested the likelihood of the development of speculative or otherwise unsustainable elements in the further expansion of activity. This posed a key question for Federal Reserve
policy as to what rate of monetary expansion would contribute
best to the sustainability, without inflation, of prospective economic expansion.
It was noted that the money market had functioned more
smoothly in the closing weeks of 1958 than in other year-end
periods. Treasury bill rates had reached a peak on December 16 but since then had moved downward. As for bank
credit, recent statistics had shown greater expansion than had
been apparent a month or two earlier. This was true particularly with respect to a larger than expected growth in loans
and investments at country banks, bringing the increase in
loans and investments of all commercial banks to around $13
billion for the first eleven months of 1958.
Other factors to which the Committee paid close attention
in reaching its decision as to the policy directive included the
forthcoming cash and refunding operations of the Treasury,
the need for the System to absorb the seasonal return flow of
currency into the banking system to prevent the expansion in
34
ANNUAL REPORT OF BOARD OF GOVERNORS
the reserve base that otherwise would occur, and the continued
evidence of speculative fever in the stock market. At the same
time, concern was expressed over the persistence of relatively
large unemployment.
The conclusion of the Committee that the degree of restraint on credit expansion in the near future should be about
the same as in the immediate past, but that any deviation
should be on the side of restraint, reflected the foregoing
considerations.
January 27, 1959
Authority to effect transactions in System Account.
No change was made at this meeting in the Open Market
Committee's directive, thus continuing the policy of conducting operations in the System Open Market Account with a
view, among other things, to fostering conditions in the money
market conducive to sustainable economic growth and stability.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels,
Mills, Robertson, Shepardson, and Szymczak. Votes against
this action: None.
In reaching its decision as to policy, the Committee gave
particular attention to the fact that the monetary basis for continued economic expansion had already largely been established and that forces mostly outside the area of bank credit
were likely to determine whether demands for consumption
and investment would be of such magnitude and nature as to
reduce the volume of unemployment, whether there would be
sustainable growth, whether persistent pressures on prices
would produce creeping inflation, or whether speculative commitments would create a bubble on a boom that would burst at
an early stage.
Analysis of current economic trends led to the conclusion
that further recovery to reasonably full utilization of resources
and then continued growth at a sustainable rate would depend
FEDERAL RESERVE SYSTEM
35
upon individual decisions with respect to pricing and buying
and investment and saving. It appeared that additional stimulants through fiscal or credit policies were not now needed. In
fact, the forces already at work might induce commitments of
a speculative nature, or lead to pricing policies that would first
contribute to inflation but ultimately discourage buying. Consequently, it was the view of the Committee that the current
degree of restraint on bank reserves was appropriate under
existing circumstances and should be continued, especially in
the light of the forthcoming Treasury refunding which indicated the desirability of no change in the general state of the
money market until a reasonable time following completion of
this Treasury financing.
The Committee members and the other Reserve Bank presidents in attendance at this meeting also discussed the level of
the discount rate at the Reserve Banks, then 2x/i per cent. Although they recognized that that rate wasfixedby the directors
of the Federal Reserve Banks subject to review and determination by the Board of Governors, there was a fairly unanimous opinion that no action to change the rate would be desirable prior to completion of the Treasury's February refunding.
February 10, 1959
Authority to effect transactions in System Account.
The Committee again renewed without change its directive
that set forth a policy of fostering conditions in the money
market conducive to sustainable economic growth and stability.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels,
Robertson, Shepardson, and Szymczak. Votes against this
action: None.
Careful consideration by the Committee of business and
financial developments preceded its decision to renew its existing policy directive. Widespread but small further increases in
industrial production were reported, and prices for some stra-
36
ANNUAL REPORT OF BOARD OF GOVERNORS
tegic industrial materials had risen further. On the whole,
business recovery appeared to be continuing at a moderate
pace, although unemployment had risen about seasonally during January.
In reaching its decision to make no change in policy and to
maintain the same degree of pressure on bank reserve positions that had been exerted recently, the Committee took particular account of the fact that the large and almost continuous
schedule of Treasury borrowings, together with potentially
large private credit demands, showed every likelihood of
bringing the capital markets increasingly under pressure, thus
tightening credit conditions even without any aggressive System effort at restraint. The Committee also considered the
prospect that the upward trend of interest rates caused by such
borrowing might be sharper than would be appropriate for the
general state of business activity. Nevertheless, the view was
expressed by a few members that any doubts in arranging
transactions for the Open Market Account, pursuant to the
terms of the directive issued at this meeting, should be resolved on the side of restraint rather than of ease.
There was further discussion at this meeting of the Reserve
Bank discount rate level in relation to the open market policy
being followed and to prevailing market rates. Several of
those present expressed the opinion that action by the Reserve
Bank directors to increase the discount rate level soon after
the Treasury's large February refunding operation had been
completed would be appropriate and consistent with current
open market policy.
March 3, 1959
1. Review of continuing authorities or statements of policy.
This being the first meeting of the Federal Open Market
Committee following election of new members by the Federal
Reserve Banks for the year beginning March 1, 1959, and assumption by them of their duties, the Committee reviewed and
reaffirmed all continuing statements of policy and authorities
for operations. These included the following:
FEDERAL RESERVE SYSTEM
37
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).
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, Mills,
Robertson, Shepardson, Szymczak, and Bryan. Votes against
this action: None.
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.
Votes for this action: Messrs. Martin, Chairman, Allen,
Balderston, Deming, Erickson, Mills, Robertson, Shepardson,
Szymczak, and Bryan. Vote against this action: Mr. Hayes,
Vice Chairman.
Mr. Hayes stated that he continued to have the same reservations as a year ago about the wording of this statement,
which he would vote to approve if the qualifying phrase "as a
general rule" were inserted after "shall" in the second and
fourth lines.
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.
Votes for this action: Messrs. Martin, Chairman, Allen,
Balderston, Deming, Erickson, Mills, Robertson, Shepardson,
Szymczak, and Bryan. Vote against this action: Mr. Hayes,
Vice Chairman.
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ANNUAL REPORT OF BOARD OF GOVERNORS
Mr. Hayes said that he would vote to approve this action if
the word "solely" were deleted from the second line and
"primarily" substituted therefor, and if the phrase "as a general rule" were inserted after "shall" in line three.
2. Authority to effect transactions in System Account.
No change was made at this meeting in the directive of the
Committee, thus continuing the policy of fostering conditions
in the money market conducive to sustainable economic
growth and stability.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, Mills,
Robertson, Shepardson, Szymczak, and Bryan. Votes against
this action: None.
The state of economic activity appeared to be one of budding inflationary boom. The economy had now about attained
the preceding cyclical high in industrial production, and it was
exceeding the high in terms of aggregate output of goods and
services. Business demands for fixed capital and for stock
were expected to gain strength as expansion continued. The
response of industrial prices to increasing demands had been
at least as prompt and as strong thus far during 1959 as in the
two preceding postwar expansions, with increases fairly widespread and encompassing finished products as well as materials.
Although this was the general picture, unemployment was
still sizable at 6 per cent of the labor force. Further, the
sharp rise that had taken place in the operating rate in the
steel industry was believed to reflect to some extent precautionary buying against a possible strike, rather than a corresponding increase in final demands for steel products.
The financial situation suggested that there was adequate
liquidity to finance further expansion and that under the circumstances further growth in the money supply might not be
necessary for some time—at least not until there was evidence
that unfulfilled monetary needs might be unduly retarding
growth.
FEDERAL RESERVE SYSTEM
39
The foregoing considerations led the Committee to conclude that the policy directive should be continued without
change, with the understanding as expressed by a majority of
the Committee that about the same level of restraint should
be maintained on bank reserves as at present and that any
doubts on the part of the Account Management regarding
transactions to be effected should be resolved on the side of
restraint. However, a minority view was that any greater pressure than presently evidenced was unnecessary and might be
unwise, and in fact that the occasional appearance of free reserves (excess reserves in excess of member bank borrowings
from the Reserve Banks) could be psychologically desirable.
The members of the Open Market Committee and the other
Federal Reserve Bank presidents who were in attendance at
this meeting also discussed the level of the discount rate at the
Federal Reserve Banks. A majority indicated the belief that
the IVz per cent rate was clearly out of line and that early
adoption of a 3 per cent rate would be more appropriate.
March 24, 1959
Authority to effect transactions in System Account.
The Open Market Committee renewed without change its
directive to the Federal Reserve Bank of New York, which
specified that operations should be with a view, among other
things, to fostering conditions in the money market conducive
to sustainable economic growth and stability.
Votes for this action: Messrs. Balderston, Chairman pro
tern, Allen, Deming, Erickson, Mills, Robertson, Shepardson,
Szymczak, Bryan, and Treiber. Votes against this action:
None.
The Committee's decision to continue the policy directive in
its existing form followed a review of national and regional
business and credit conditions from which it appeared that
economic activity was continuing its upward swing, with further gains noted in a number of the leading indices, including
40
ANNUAL REPORT OF BOARD OF GOVERNORS
the index of industrial production. Prices of industrial materials had risen somewhat further, while prices of agricultural
commodities had declined, and the average of all wholesale
prices was fairly stable. The most recent statistics, for February, indicated that both employment and unemployment were
little changed.
Since the March 3 meeting of the Committee, financial markets had absorbed with remarkably little disturbance the
effects of an increase in Federal Reserve Bank discount rates
from 2Vi per cent to 3 per cent earlier this month, some tightening of bank reserve positions, the demands of the corporate
tax and dividend payment period, and the announcement of
a Treasury cash financing operation totalling $4 billion. The
explanation of this relative calmness in money markets during
a period of special pressures seemed to lie partly in the moderateness of current credit demands, but more largely in the
general state of liquidity of the economy.
The consensus favored maintaining about the degree of restraint that had prevailed during the preceding three weeks,
with the impending Treasury financing operation one factor
that suggested no change in open market policy. During the
discussion, one view was expressed that doubts arising in the
conduct of open market operations should be resolved on the
side of ease and that near-term System policy should be
directed toward maintaining only sufficient pressure on reserves to aid the redistribution of the Treasury's new security
offerings out of the underwriting commercial banks into permanent hands. However, most members of the Committee
concluded that recent policy had been appropriate and should
be continued.
April 14, 1959
Authority to effect transactions in System Account.
The policy directive calling for operations in the System
Account with a view to fostering conditions in the money
market conducive to sustainable economic growth and stability was again renewed,
FEDERAL RESERVE SYSTEM
41
Votes for this action: Messrs. Hayes, Vice Chairman, Balderston, Deming, Erickson, Mills, Robertson, Shepardson,
Szymczak, Bryan, and Fulton. Votes against this action:
None. Mr. King did not vote on this action.
A consideration of importance to the Committee in the determination of policy at this juncture was the situation of the
Treasury. From the $4 billion cash financing operation that
had been completed on April 1, there remained for the banks
and dealers the task of distributing a large portion of their
acquisitions to the investing public. In the offing were the
Treasury's large May refunding and another cash financing
operation, while holders of the 4 per cent notes of August
1961 had until the end of this month the option of deciding
whether to turn in those notes by August 1, 1959, in lieu of
holding them to maturity. In the Government securities market, a slow but steady deterioration of atmosphere had developed since the first of April, with nonbank demand for
securities off substantially and buyers for commercial bank
offerings of the Treasury's latest issues more difficult to locate.
Reflecting the heavy schedule of Treasury financing ahead
and continued improvement in the business situation, there
appeared to be a growing belief in the market that interest
rates were likely to move higher. As to the business situation,
recent data provided a record of general economic advance,
with available statistics for March indicating advances in industrial production, housing starts, and personal income, along
with continued accumulation of business inventories. A
greater than seasonal rise in employment was reported, and
creeping advance in average prices of industrial commodities
was noted.
The consensus at this meeting in terms of policy for the
three-week period ahead called for maintenance of about the
same degree of restraint as had existed during the past three
weeks. However, the mixture of views contributing to the
consensus covered a rather wide spectrum of opinion. There
were those who felt that the Treasury problem was a reason
for moving cautiously and that a certain degree of caution
might in any case be warranted by the lack of definite evi-
42
ANNUAL REPORT OF BOARD OF GOVERNORS
dence of inflationary threats at the present time. There were
also those who believed that the economy was reaching toward
boom proportions and who concluded with only the greatest
reluctance that the System should refrain from further restrictive measures because of the Treasury's financing program,
while a small minority would have favored some probing in
the market toward increased restraint. It was out of this mixture of views that there came agreement that the existing
policy directive should be renewed without change and that
operations in the immediate future should continue as nearly
as practicable the existing degree of pressure against credit
expansion.
May 5, 1959
Authority to effect transactions in System Account.
The decision of the Committee at this meeting was to renew
without change the policy directive that called for operations
with a view to fostering conditions in the money market conducive to sustainable economic growth and stability.
Votes for this action: Messrs. Balderston, Chairman pro
tern, Deming, Erickson, King, Mills, Robertson, Shepardson,
Szymczak, Bryan, Fulton, and Treiber. Votes against this
action: None.
The Treasury being in the midst of a large refunding and
cash financing operation, with the new securities to be issued
the next week, the consensus at this meeting of the Federal
Open Market Committee favored continuing the existing degree of restraint for an appropriate period following the
Treasury financing. However, upon review of current business
and financial data, it was the majority view that it would be
desirable to move toward greater restraint as soon as feasible
after the Treasury financing and that revision of the policy
directive might be indicated at the next meeting of the
Committee.
The economic report was one of strongly expanding de-
FEDERAL RESERVE SYSTEM
43
mand, rising productive activity, advancing prices at wholesale, and strongly optimistic business and financial expectations. Labor market data pointed to further strengthening of
demands for manpower, and altogether the domestic expansion in process was suggestive of developing inflationary boom.
Internationally, a pick-up of activity in key industrial countries and improvement in the balance-of-payments positions of
material-supplying areas indicated that a general upturn in
world output and trade was under way.
Pressures on financial markets had increased during April,
apparently reflecting expanding monetary and credit demands
incident to the continuing advance of business activity rather
than limitations on the supply of credit. Demands on longterm capital markets had been moderate, but bank loans (particularly consumer instalment credit) had increased more than
seasonally and banks also had been endeavoring to distribute
Government securities taken on in the April 1 financing.
Mortgage demands continued large and real estate loans at
banks had increased more than at any time since 1955. The
stock market had risen to new high levels and stock market
credit continued to increase. Interest rates had continued to
rise further. Reflecting these factors, member bank borrowings from Federal Reserve Banks had risen in recent weeks to
an average of around $700 million.
Although the majority of the Committee agreed that it
would be desirable to move towards greater restraint on credit
expansion as soon as feasible after the current Treasury financing was completed, a minority point of view cautioned against
a monetary policy that might defeat and finally counteract
what could prove to be only normal economic growth by
touching off a spiral of contractive credit forces. A specific
danger cited was that undue restraint on the growth of the
money supply could result in harmful consequences to the
Government securities market if commercial banks were
forced to liquidate unduly large amounts of securities in order
to fulfill lending obligations to their customers.
44
ANNUAL REPORT OF BOARD OF GOVERNORS
May 26, 1959
Authority to effect transactions in System Account.
Clause (b) of the first paragraph of the Committee's policy
directive was revised at this meeting so as to provide for increased restraint on credit expansion. This was indicated by
adoption of wording specifying that open market operations
should be conducted with a view "to restraining inflationary
credit expansion in order to foster sustainable economic
growth and expanding employment opportunities." This replaced the clause of the directive that had been in effect since
December 16, 1958 calling for operations with a view "to
fostering conditions in the money market conducive to sustainable economic growth and stability."
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, King,
Robertson, Shepardson, Szymczak, and Bryan. Vote against
this action: Mr. Mills.
Productive activity was spurting ahead and the economic
climate had become distinctly more inflationary, according to
reports at this meeting. Industrial production in April, which
carried the Board's index up two points in a month for the
third consecutive month, reflected principally gains in output
of durable goods industries, including both producer and consumer lines. Data available for May suggested another twopoint advance in the index for that month. Personal income
had been climbing for several months at an annual rate of
more than $3 billion a month, principally because of higher
wage and salary payments. Reflecting this improvement in
personal income, retail sales (seasonally adjusted) in April
carried beyond the large March volume and were about 12
per cent higher than the cyclical low point of March 1958.
A robust expansion of consumer instalment credit, which had
been in process since late 1958, supported rising sales of automobiles and household durables.
Housing starts in April, seasonally adjusted, were at the
annual rate of 1.4 million, and the total of starts in the first
FEDERAL RESERVE SYSTEM
45
four months of 1959 was the highest on record for a comparable period. Total construction contract awards in April
had reached the highest level on record, 31 per cent above a
year earlier. Marked improvement in the employment situation also had occurred in April, and the unemployment problem appeared to be diminishing in scope to certain pockets of
structural unemployment. Industrial prices rose further in
April and an additional advance was taking place in May; at
mid-May, the level was up 2.5 per cent from a year earlier and
stood 2 per cent above the prerecession high reached in 1957.
Consumer prices advanced slightly in April, with a further
modest rise indicated for May.
In financial markets, the month of May was characterized
by unseasonably large credit demands and further increases in
interest rates to the highest levels for some years. Nearly all
interest rates rose except yields on three-month Treasury bills,
which continued in the 23A to 3 per cent range that had prevailed generally since late February. Yields on long-term
Treasury bonds and on both new and seasoned corporate issues had now risen to the highest levels since the 1920's. On
May 15, large city banks announced an increase from 4 to
AV2 per cent in their lending rate on prime customers' loans.
Following an exceptionally large increase in bank loans at
all commercial banks in April, city banks showed a further
loan expansion in the first three weeks of May. The increase
had been particularly large in business loans, but real estate
and consumer loans also showed marked increases. The ratio
of total loans to total loans and investments of banks now
stood close to the high level reached in 1957. The aggregate
money supply, after adjustment for seasonal variations,
showed an advance in recent months at an annual rate of
4 per cent or more, and in addition the turnover of bank deposits had been increasing in recent months.
The large May refunding and cash operations of the
Treasury were now completed, and it appeared likely that no
additional borrowing would be necessary until early July.
Nevertheless, the expansion in credit demands during April
and May had brought increased pressure on the reserve posi-
46
ANNUAL REPORT OF BOARD OF GOVERNORS
tions of banks, as indicated by the rise in borrowings at the
Federal Reserve Banks and the accompanying increase in the
level of net borrowed reserves.
Upon review and analysis of the over-all situation, including the continuing United States balance-of-payments deficit,
the Open Market Committee reached the conclusion that the
current level of restraint imposed by monetary and credit
policy was not sufficiently restrictive and that an intensification of restraint was required. Reports presented by the Reserve Bank presidents at this meeting indicated the possibility
that the directors of the respective Federal Reserve Banks
would move soon to fix the discount rate at a level higher
than the prevailing 3 per cent—probably 3V2 per cent. On
the assumption of a rate increase of no larger proportions, the
Committee favored conducting open market operations with
a view to exerting additional pressure as rapidly as that could
be done without creating an untenable condition in the market
for Government securities.
Although the firmer tone desired by the Committee was not
expressed in terms of a specific target of net borrowed reserves
(an excess of member bank borrowings at the Reserve Banks
over their excess reserves), it was noted that additional restraint could be brought about in the next few weeks by letting
natural factors take their course. On the basis of projections
before the Committee as to factors affecting the supply of and
need for reserves in the weeks ahead, it appeared that under
such a procedure net borrowed reserves, which recently had
been running in the neighborhood of $250 million, would
move upward toward the $500 million level.
In the current circumstances, the policy directive to the
Federal Reserve Bank of New York was deemed to be in need
of revision. Accordingly, after consideration of several suggestions, it was decided that clause (b) of the first paragraph
of the directive, which since December 1958 had provided for
operations with a view "to fostering conditions in the money
market conducive to sustainable economic growth and stability," should be changed to provide for operations with a
view "to restraining inflationary credit expansion in order to
FEDERAL RESERVE SYSTEM
47
foster sustainable economic growth and expanding employment opportunities."
Mr. Mills, who voted against approval of the revised policy
directive, indicated that apprehensions he previously had expressed had not diminished with respect to the delayed and
violent financial and economic reactions that he sensed to be
in the offing when the cumulative pressures inherent in present
monetary and credit policy took their full effect. He cautioned
against undue alarm concerning anticipated events that had
not yet come into clear perspective.
June 16, 1959
Authority to effect transactions in System Account.
Since the previous Open Market Committee meeting
(May 26), the discount rate at each of the Federal Reserve
Banks had been increased from 3 per cent to Wi per cent.
While prices of Treasury notes and bonds remained virtually
unchanged following this increase, rates on bills of longer
maturities moved up slightly and those on 91-day bills advanced fairly sharply.
As envisaged by the consensus at the May 26 Committee
meeting, natural market factors had been allowed to have their
effect since that time in order to bring about an increase in the
degree of restraint. Net borrowed reserves, for example, rose
from slightly over $300 million in the week ended May 27 to
more than $500 million in the following week and continued
around that level.
In addition to seasonal demands that would require additions to reserves during the latter part of June, it was noted
that, within the three-week period following this meeting of
the Committee, the Treasury was to conduct another cash
financing operation in which it was anticipated that around
$3.5 to $4.5 billion of new money would have to be raised,
presumably again in the short-term area.
In considering the course of System policy, the Committee
had before it reports indicating further economic expansion
on a broad front to new high levels. Production, sales, in-
48
ANNUAL REPORT OF BOARD OF GOVERNORS
come, and employment showed increases, while unemployment in May fell below 5 per cent of the labor force for the
first time since the end of 1957. Businesses were adding to
their inventories at an unusually high rate and had revised
upward their plans for new plant and equipment expenditures.
Total bank credit expansion, including that of the Federal
Reserve Banks, appeared to have been adequate to meet the
persistent gold outflow and provide for further expansion of
the money supply. Abroad, general economic expansion
seemed clearly in process, with principal foreign countries continuing to show a strong balance-of-payments situation and to
accumulate gold and dollar reserves.
On the basis of business and credit conditions and in view
of the forthcoming Treasury financing, the consensus favored
continuance of the present open market policy of restraint on
inflationary credit expansion. While a number of Committee
members expressed the hope that the Account Management
would be able to avoid any development of less restraint
against credit expansion, others urged caution against operations that might result in excessive tightness.
With no change in policy indicated by the consensus at the
meeting, the Committee continued without change the directive, adopted at the May 26 meeting, which was stated in
terms of restraining inflationary credit expansion in order to
foster sustainable economic growth and expanding employment opportunities.
Votes for this action: Messrs. Hayes, Vice Chairman, Allen,
Deming, Erickson, Johns, King, Robertson, Shepardson, and
Szymczak. Votes against this action: None.
July 7, 1959
Authority to effect transactions in System Account.
It appeared to the Committee that a number of major expansive influences that had been operating in the economy,
including residential construction, inventory accumulation,
and gains in industrial productivity, might now have passed
their maximum rates of growth and that some slowdown in the
FEDERAL RESERVE SYSTEM
49
rapid pace of advance could be expected during the next few
months. A major industrial uncertainty was the possibility of
a strike in the steel industry. However, for the period up to
the time of this meeting, the data reflected continuation of a
vigorous expansion in economic activity. Industrial production apparently had increased further in June, while estimates
placed gross national product for the second quarter up $10
billion from the first quarter of the year in terms of both current and constant dollars. Expanding consumer demand was
being supported by a rapid growth of consumer instalment
credit, which increased in the April-May period at an annual
rate in excess of $5 billion.
During June, money markets were under pressure from
continued strong credit demands. The restricted availability
of bank reserves made it necessary for banks to reduce their
holdings of securities by large amounts in order to meet these
demands, and a high level of borrowings at the Federal Reserve Banks also kept the banks under restraint. It now appeared that growth in the money supply during the first six
months of 1959 had been at an annual rate of about 2 per cent
but that only a small increase had taken place in May and
none in June.
At the time of this meeting, interest in the Government
securities market focused on the new Treasury financing,
which involved the offering of a total of $5 billion of bills at
auctions on July 1 and July 8 in addition to the regular weekly
bill auctions. There had been pronounced increases in interest
rates in recent weeks, and in the regular Treasury bill auction
on the day preceding this meeting demand for both long- and
short- bills was light, resulting in an average rate of 3.26 per
cent for the 91-day bills and 3.96 for the 182-day bills.
Awards to dealers had totalled $587 million, and the result of
that auction indicated another upward adjustment in bill rates.
For the period immediately ahead, it was the consensus that
there should be no change in open market policy. However,
in view of the difficult Treasury financing situation, the instruction to the Manager of the System Open Market Account
was tempered with the proviso that, in carrying on operations
50
ANNUAL REPORT OF BOARD OF GOVERNORS
for the Account, doubts should be resolved on the side of ease
during the period of Treasury financing.
In view of the decision of the Committee to make no change
in policy, and with the indicated understanding as to resolving
doubts on the side of ease, the directive calling for restraint on
inflationary credit expansion in order to foster sustainable
economic growth and expanding employment opportunities
was again renewed without change.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Johns, King,
Mills, Shepardson, Szymczak, and Bopp. Votes against this
action: None.
July 28, 1959
Authority to effect transactions in System Account.
At this meeting the Open Market Committee continued
without change the policy directive providing for restraint on
inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, Johns,
Mills, Robertson, and Shepardson. Votes against this action:
None.
Financial developments during July had been dominated by
the massive Treasury operations, which included not only the
raising of $5 billion of new cash through two bill offerings but
the subsequent refunding of $14 billion of issues maturing on
the first of August. Difficulties and uncertainties connected
with the earlier Treasury operations resulted in a sharp rise in
rates to the level of 434 per cent for a one-year issue, but this
rate attracted funds from widespread sources. The refunding
offer at 4% per cent on both a 122/i month issue and a 4-year,
9-month issue was successful, with unusually low attrition. As
a consequence, the tone of the Government securities market
had improved somewhat, and the amount of prospective new
Treasuryfinancingin mid-August was reduced.
FEDERAL RESERVE SYSTEM
51
(On July 16, 1959, the Open Market Committee, by poll of
the available members, authorized exchange of as much as
one-half of System Open Market Account holdings of $8,143
million of Treasury certificates of indebtedness maturing
August 1, 1959, into 43A per cent notes maturing May 15,
1964, the remainder to go into 4 % per cent notes maturing
August 15, 1960. Only $2.6 billion of the Account's certificate holdings actually were exchanged into the 1964 notes.
The purpose of this authorization was to assist the Treasury
in evening out the maturity schedule.)
Almost all recent economic data continued to reflect rapid
growth. Expansion in the second quarter of 1959 proved to
have been more vigorous than earlier figures had indicated,
with gross national product rising at an annual rate of $13
billion above the previous quarter. The increase over the
quarter in physical volume amounted to about $10 billion, so
that there was $3 billion of inflationary price rise, i.e., an
annual rate of a billion dollars a month. Consumer spending
advanced by the near-record rate of $7.5 billion during the
quarter. Demand for producer durable goods was strong, reflecting both increased consumer spending and rising business
investment, and construction activity continued at close to
peak levels in June. Although wholesale prices of industrial
commodities marked time, the consumer price index showed
an abrupt rise of .4 per cent in June. A major uncertainty
was introduced into the economic situation by the steel strike
that began July 15 after extensive negotiations failed to produce a settlement. Another matter of concern accompanying
the expansion in business was the balance-of-payments situation; it now appeared that the total accumulation of gold and
dollar assets by foreign accounts in 1959 might be over $4 billion, compared with $3.4 billion in 1958.
The generally strong business picture, the strength of credit
demands, the need to keep the Treasury's seasonal deficit
financing in the next few months from swelling the money supply unduly, prospective wage and price developments, and the
failure of the balance of payments to show improvement appeared clearly to justify continued monetary restraint. On the
52
ANNUAL REPORT OF BOARD OF GOVERNORS
other hand, the steel strike had injected a major element of
uncertainty into the outlook, and the situation in the Government securities market remained delicate in spite of the successful Treasury refunding. Thus, although an opinion was
expressed that such inflationary pressures as now existed
would be adequately contained by a more moderate degree of
restraint, the consensus favored aiming as far as practicable
at the same degree of restraint on credit expansion as currently prevailed. Accordingly, the directive was renewed
without change.
August 18, 1959
Authority to effect transactions in System Account.
The conclusion reached by the Open Market Committee
was to aim toward maintenance of the status quo, that is, continuation of the existing degree of restraint, during the period
immediately ahead, with no change at this time in the policy
providing for System open market operations with a view to
restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Accordingly, the directive was renewed in the form
that had been in effect since May 26.
Votes for this action: Messrs. Martin, Chairman, Allen,
Balderston, Deming, Erickson, Johns, King, Mills, Szymczak,
and Treiber. Votes against this action: None.
In discussion leading to this conclusion relative to the
course of open market policy, the Committee gave consideration to whether the present economic situation and prospective
developments justified moving in the direction of additional
restraint during the two-week period before its next meeting,
scheduled for September 1, 1959, or, on the other hand,
whether the tendency should be in the direction of leaning
slightly on the side of ease.
The business and financial position was characterized by
strong and broadly-based demands despite the month-old steel
strike, and general optimism was reported to prevail with re-
FEDERAL RESERVE SYSTEM
53
spect to the business and employment outlook over the next
few months. There continued to be reports of strong demand
for bank credit, widely distributed among different types of
borrowers. The index of industrial production dropped 2
points in July, but this was accounted for by the steel strike
along with adjustments from the abnormal levels of activity
in some sectors of the economy that had been attained in the
past few months in anticipation of the strike. However, approximately 5 per cent of the labor force (exclusive of those
on strike) was unemployed, and some excess production
facilities were still available. Although the volume of commercial bank loans had expanded, this expansion was accompanied by substantial divestment of Government securities by
the banks. This trend, together with the continued high level
of member bank borrowing at the Federal Reserve Banks, suggested to some the possibility that monetary and credit policy
may have been more restrictive than appeared from surface
indications. The consensus that emerged from consideration
of these and other factors favored continuing the present degree of restrictiveness at least until the next Committee
meeting.
September 1, 1959
Authority to effect transactions in System Account.
The two-week period since the previous meeting of the
Open Market Committee was marked by a further steep increase in Treasury bill rates. The rate on three-month bills,
which was at the 3 per cent level in late July and moved up to
3.40 per cent by mid-August, had now increased to a point
where the average rate in the auction on the day prior to this
meeting was 3.89 per cent. In the same auction the average
rate on six-month bills was 4.47 per cent, almost 75 basis
points above the average rate in the auction on August 17.
This rise in rates reflected continued sales of short-term securities by banks in order to meet an exceptionally strong loan
demand, reduced demand for Treasury bills on the part of nonbank buyers as seasonal increases in cash needs approached,
54
ANNUAL REPORT OF BOARD OF GOVERNORS
and further additions to the supply of bills. The current rate
level caused attention in the market to focus on the Reserve
Bank discount rate ( 3 ^ per cent) and the commercial bank
prime rate (AV2 per cent); uncertainties with respect to the
latter rate were resolved when an increase to 5 per cent was
announced on the morning of this meeting.
Aside from the influence of work stoppages attributable
directly or indirectly to the steel strike, the economic picture
presented at this meeting appeared to be one of widespread
strength. Construction activity, although showing moderate
decline from the all-time record level of April and May, was
at a rate one-third higher than a year earlier. New orders and
sales figures for durable goods manufacturers reflected marked
strength in most lines, retail sales continued vigorous, and consumers continued to seek and incur instalment and mortgage
debt at a near-record pace. After rising in June, United States
exports reached a seasonally adjusted rate in July one-fifth
above the level earlier in the year. While prices of industrial
commodities showed relative stability, the consumer price
average rose in four consecutive months through July, with a
broad range of price increases.
Discussion at this meeting revealed cross currents of thinking with respect to the appropriate posture of System policy at
this juncture. Among other things, it was pointed out that the
level and trend of Treasury bill and other short-term market
rates, together with the increase in the commercial bank prime
rate, raised a substantial question as to the practicability of
indefinite continuation of the existing Reserve Bank discount
rate.
With respect to the appropriateness of the current degree of
credit restraint, some sentiment was expressed to the effect
that it would be a mistake to await settlement of the steel
strike before moving to a more restrictive position. This point
of view suggested that there should be some reluctance on the
part of the System in meeting seasonal reserve needs and some
increase in the level of net borrowed reserves. A different
point of view expressed by one member of the Committee held
that recent developments indicated that current System policy
FEDERAL RESERVE SYSTEM
55
was unduly restrictive and that its continuation might not be
consistent with the System's objective of fostering longer-run
economic growth and stability. This opinion suggested that
System policy traditionally had sought to meet seasonal credit
needs and that there should be no doubt about doing so at this
time.
The majority of the Committee favored maintenance of the
existing degree of pressure on reserve positions of banks in the
period immediately ahead, but no intensification, which would
mean supplying reserves to meet the usual seasonal increase in
money and credit needs during the next few weeks. Factors
influencing the thinking of the majority included the uncertainties attendant upon the steel strike and the further complications that might be created in the Government securities
market by the exertion of additional restraint at this time.
Some consideration also was given to the possibility of a
revision of the Committee's directive to the Federal Reserve
Bank of New York. However, in view of the consensus that
there should be no move at this point toward either more or
less restrictiveness on reserves, the Committee made no change
in the existing directive, providing for open market operations
with a view to restraining inflationary credit expansion in
order to foster sustainable economic growth and expanding
employment opportunities.
Votes for this action: Messrs. Martin, Chairman, Allen,
Balderston, Deming, Erickson, King, Mills, Robertson, Shepardson, Szymczak, Bryan, and Treiber. Votes against this
action: None.
September 22, 1959
Authority to effect transactions in System Account.
The directive to the Federal Reserve Bank of New York
was renewed without change, continuing the Open Market
Committee's policy of restraining inflationary credit expansion
in order to foster sustainable economic growth and expanding
employment opportunities.
56
ANNUAL REPORT OF BOARD OF GOVERNORS
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, Johns,
King, Mills, Robertson, Shepardson, and Szymczak. Votes
against this action: None.
The Committee's decision to renew the existing policy directive was made after presentation and consideration of a detailed review of the national and regional economic and financial situation. Although no change was made in the directive
that provided for restraint on inflationary credit expansion,
the Committee qualified its instruction to the New York Reserve Bank with an understanding that to whatever extent
operations in the open market for the System Account might
result in deviations from the existing degree of restraint on the
reserve positions of banks, such deviations preferably should
be on the side of reducing restraint. The large majority of
Committee members favored this understanding, but the opposite view was put forward, namely, that any such deviations
from the existing degree of pressure be on the side of greater
restraint.
This policy decision was made against the background of
information showing that, despite the spreading effects of the
steel and other strikes, economic activity and credit demands
were continuing at a high level. The discount rates of all
Federal Reserve Banks had been increased from 3Vi per cent
to 4 per cent since the September 1 meeting, and rates on the
longest outstanding Treasury bills had been bid at above 5 per
cent. Some uncertainties were expressed as to the near-term
future, depending on the settlement of the steel strike, but with
demand for credit continuing strong, bank reserve positions
remained under pressure. The banks continued to dispose of
Government securities to help in meeting loan demands, and
the Government securities market had weakened around midSeptember as nonbank holders liquidated securities to meet
quarterly tax and dividend payments. Investor demand was
low, the market supply of Treasury securities was large, and it
was noted that a new short-term Treasury financing expected
in October would add further to the supply of securities on the
market.
FEDERAL RESERVE SYSTEM
57
Some concern was expressed about the difficulties that the
Treasury might expect in its imminent cash financing operation. The point also was made that the anti-inflationary policy
that had been followed for some months was contributing to a
tempering of business and investor exuberance in forward expectations and planning. Another factor noted was that the
seasonal increase in demand for credit during the fall of the
year would tend automatically to increase pressure on banks,
even though additional amounts of reserve funds were supplied to the market by the Federal Reserve in accordance with
projections of aggregate needs of the banking system.
The conclusion of the Committee that the degree of restraint to be maintained in the market during the next few
weeks should be about the same as in the recent past, but that
any deviations preferably should be on the side of less restraint, was a reflection of such considerations as the foregoing, even though there was recognition of factors to suggest
a rapid recovery in economic activity, perhaps developing
boom characteristics, after production of steel was renewed.
October 13, 1959
Authority to effect transactions in System Account.
At its preceding meeting (September 22, 1959), the Open
Market Committee made no change in the existing policy
directive calling for restraint on inflationary credit expansion,
with the instruction to the Federal Reserve Bank of New York
qualified by the understanding that, to whatever extent System
Open Market Account operations might result in deviations
from the existing degree of restraint, such deviations preferably should be on the side of reducing the degree of restraint.
At the time of this meeting (October 13), the business and
financial outlook was obscured by the cumulative impact of
the steel strike. Important economic developments since late
spring suggested a possibility that the danger of inflationary
boom might have been overcome, although a positive judgment in this respect awaited settlement of the steel strike and
the results flowing from such a settlement. The Committee's
58
ANNUAL REPORT OF BOARD OF GOVERNORS
analysis of the domestic situation gave little reason for either
increasing restraints or providing additional stimulants to the
economy, and in these circumstances the consensus favored
watchful waiting and marking time in the period immediately
ahead.
One member of the Committee, Mr. Mills, in whose opinion
a moderating of the policy of credit restraint had long been in
order, dissented from the policy indicated by the consensus,
although only mildly at this particular juncture. Mr. Mills felt
that a gradual shift in policy toward relaxation of restraint
was called for and that a cautious approach in shaping the
supply of reserves and expanding the availability of credit was
required in order to avoid provoking an artificial distortion in
the structure of interest rates. While certain other members of
the Committee also favored a mild backing away from the
present degree of restraint, in those cases the shades of difference involved were not sufficient to cause them to record disagreement with the policy indicated by the consensus. Mr.
Mills, although dissenting to the extent indicated from a policy
of watchful waiting and marking time, joined in the unanimous vote to continue the existing directive to the Federal
Reserve Bank of New York, which provided for restraining
inflationary credit expansion in order to foster sustainable
economic growth and expanding employment opportunities.
Votes for this action: Messrs. Martin, Chairman, Allen,
Balderston, Deming, Erickson, King, Mills, Robertson, Shepardson, Szymczak, and Treiber. Votes against this action:
None.
November 4, 1959
Authority to effect transactions in System Account.
The Open Market Committee again renewed without
change its directive to the Federal Reserve Bank of New York
calling for operations with a view to restraining inflationary
credit expansion in order to foster sustainable economic
growth and expanding employment opportunities.
FEDERAL RESERVE SYSTEM
59
Votes for this action: Messrs. Hayes, Vice Chairman,
Allen, Balderston, Deming, Erickson, Johns, King, Robertson,
Shepardson, and Szymczak. Vote against this action: Mr.
Mills.
Renewal of the directive reflected the conclusion of the
Committee, after analysis of business and financial developments, that there should be no change in basic policy at this
time and that in implementing the policy decision, operations
for the Open Market Account should aim at maintaining a
feeling of stability in monetary and credit conditions and assuring the availability of funds for seasonal credit needs.
In reaching its decision as to policy, the Committee gave
careful consideration to the continuing lull in economic activity and in monetary and credit demands. This lull, which
had been evident at the October 13 meeting and which led to
the suggestion that current developments pointed less in the
direction of inflationary boom than was earlier considered
likely, was associated largely with the steel strike and its cumulative impact on various segments of the economy. Despite
the strike, demand, particularly at the consumer level, remained strong, and an upward tilt was visible in prices for
consumer goods and most basic industrial materials. Nevertheless, following a year of heavy pressures in the over-all demand for funds, some moderation of expansive pressures had
appeared in late September and continued to characterize the
financial markets. At this stage, however, it was questionable
whether this moderating of pressures reflected a change in
trend or simply a passing phase.
In voting against continuing the existing directive, Mr,
Mills proposed revising clause (b) so that it would provide
for "fostering sustainable economic growth and expanding
employment opportunities while guarding against inflationary
credit expansion." This suggestion reflected his judgment that
uncertainties as to the future were strong enough to argue for
a monetary and credit policy that would lessen the degree of
restraint on credit expansion. Certain other Committee members expressed themselves as leaning toward a slight easing of
restraint, but only to the extent that this might be accom-
60
ANNUAL REPORT OF BOARD OF GOVERNORS
plished within the framework of the existing policy directive.
None expressed the view that there should be an intentional
increase in the degree of restraint at this time.
November 24, 1959
Authority to effect transactions in System Account*
The policy directive providing for restraint on inflationary
credit expansion in order to foster sustainable economic
growth and expanding employment opportunities was again
renewed by the Open Market Committee.
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Deming, Erickson, Johns, King,
Robertson, Shepardson, and Szymczak. Vote against this
action: Mr. Mills.
The consensus of this meeting favored maintaining the same
degree of restraint. In reaching this conclusion as to the objective that should guide open market operations in the ensuing three-week period, the Committee had in mind that the
period of heaviest pre-Christmas drain on reserves was now
beginning and that the financial markets would be subject to
the usual special pressures of the season. In addition, the $2
billion Treasury cash financing operation for which subscriptions were being received the day of this meeting suggested no
change in the degree of restraint.
Activity in the steel industry had been resumed for approximately two weeks, after a four-month interruption, under a
Taft-Hartley Act injunction. Steel production had climbed to
about 80 per cent of capacity in the week before this meeting,
and a 90 per cent rate was estimated for the current week.
Nevertheless, the outlook as to the rate of economic advance
remained uncertain, particularly since it was not yet known
when and how the steel and other major labor disputes might
ultimately be settled and what would be the continuing and indirect effects of shortages that had accumulated during the
work stoppage.
Evidence of the underlying strength in the business situa-
FEDERAL RESERVE SYSTEM
61
tion that had prevailed despite the strike led to expression of
the view by some members of the Committee that settlement
of the steel dispute might result in a sharp upsurge marked by
unsustainable elements of expansion and strong pressures for
price increases. Those expressing this view urged that the
trends be watched carefully, although they did not propose
that the current degree of credit restraint should be intensified
at this point. The view also was presented that the System
should be ready to move in the direction of lessening restraint
if a pattern of reduced pace of economic expansion should
emerge. It was noted, among other things, that stability of the
money supply and money velocity had prevailed over recent
months and that the seasonal growth of bank credit this fall
had been somewhat below normal, reflecting at least in part a
slackening in economic activity and monetary needs related to
the steel stoppage. At the same time, the public's holdings of
liquid assets in the form of short-term Government securities
had continued to increase. Under all these circumstances, the
consensus was that the current open market position was not
unduly restrictive or stimulating and should be continued.
Mr. Mills, who voted against continuing the existing policy
directive, renewed the suggestion he had made at the meeting
on November 4 that clause (b) be amended to provide for
"fostering sustainable economic growth and expanding employment opportunities while guarding against inflationary
credit expansion." This suggestion reflected his view that the
availability of credit had been brought to a point where the
commercial banking system was restricted in making its normal contribution creditwise to growth and stability.
December 15, 1959
Authority to effect transactions in System Account.
The Open Market Committee continued the policy directive
calling for restraint on inflationary credit expansion in order
to foster sustainable economic growth and expanding employment opportunities.
62
ANNUAL REPORT OF BOARD OF GOVERNORS
Votes for this action: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Allen, Balderston, Deming, Erickson, Johns,
King, Robertson, Shepardson, and Szymczak. Vote against
this action: Mr. Mills.
At the time of this Committee meeting, the last held during
calendar year 1959, a substantial recovery of industrial production from the setback due to the steel strike was under way.
With full-scale output restored in the steel and to a large extent in the steel-dependent industries, it was anticipated that
the Board's index of industrial production, placed at 147 for
October and estimated at 148 for November, would advance
further in December by five or more index points. Retail sales
showed widespread gains in November in lines other than
automobiles, and early December figures indicated some additional advance. Employment rose moderately in November,
the gain being concentrated mainly in durable goods industries, while wholesale price averages were marked by relative
stability and consumer prices continued to veer upward. Buying at the consumer level was supported by a further strong
growth of instalment credit. Recent data confirmed that the
balance-of-payments position of the United States had not
deteriorated further and probably had strengthened somewhat.
Abroad, the expansion of economic activity in industrial nations continued to be vigorous.
Domestically, prospects seemed weighted toward resumption of an expansionary movement. Although the trend in
housing construction was downward from a very high level
and a similar trend prevailed with respect to agricultural commodity prices, most general business indicators appeared likely
to reach or exceed previous records in the near future. As yet,
however, evidence of a general scramble for inventories was
lacking, and latest estimates of plant and equipment expenditures suggested somewhat less of an upward trend than had
been expected earlier. With the injunction period under the
Taft-Hartley Act due to expire in January and labor-management negotiations apparently making little progress, the ultimate outcome of the wage dispute in the steel industry remained in doubt.
FEDERAL RESERVE SYSTEM
63
Largely in response to usual seasonal liquidity needs, and
perhaps to some increase in credit demands as a result of the
resumption of steel operations, interest rates rose in the latter
part of November and early December. System open market
transactions supplied nearly half a billion dollars of reserves
to the market during the three-week period preceding this
meeting, and in addition some reserves were released by action
to permit member banks with relatively large holdings of vault
cash to count part as required reserves, effective at the beginning of December. Treasury bill rates reached new record
highs in the first part of December, but on the other hand
there were occasions when the money market showed signs of
easing. Among the cross currents in the market was an element of uncertainty concerning the trend of interest rates in
early 1960. Although a decline in rates usually follows the
end-of-year rise, there was some feeling that a resumption of
expansion in credit demands following settlement of the steel
strike might contribute to rate firmness. Also, substantial
Treasury financing operations were in prospect, including the
raising of possibly as much as %2Vi billion of new money in
January, the refunding of a $2 billion issue of special bills
maturing January 15, and the refunding of a large February
certificate maturity.
Analysis of business and financial developments and prospects resulted in a consensus favoring maintenance of the degree of restraint on credit expansion that had been agreed
upon by the Committee at its meeting on November 24, 1959.
Noting that the economy was still operating below capacity,
that the growth of the quantitative money supply had been
quite small during the past year, and that the liquidity of the
banking system had diminished, some Committee members
concluded that the cumulative effects of monetary policy may
have become sufficient for a time and that a cautious approach
should be followed in order to prevent undue tightness.
Within this group, a few felt that the tendency of System
policy might well be toward a slight relaxation of restraint, or
at least that doubts arising in the conduct of open market
operations should be resolved on the side of ease. However,
64
ANNUAL REPORT OF BOARD OF GOVERNORS
in view of the prospects for an advancing level of economic
activity, with vigorous monetary and credit demands, in the
months ahead, other members felt that the greater danger lay
in too little rather than too much restraint. The prevailing
opinion was that any lessening of restraint at this time would
be unwise.
Mr. Mills, who voted against renewal of the existing policy
directive, proposed the alternative wording for clause (b) that
he had also suggested at the two previous Committee meetings. He believed that Federal Reserve monetary and credit
policy should aim at moderate restraint over the expansion of
bank credit, as contrasted with what he considered to be a
policy of relatively severe restriction.
The policy directive of the Open Market Committee in
effect at the beginning of 1959 was aimed at fostering conditions in the money market conducive to sustainable economic
growth and stability. Within the framework of this directive,
however, there was room for an increase in pressure on member bank reserve positions during the spring, as recovery in
the economy had given way to expansion. On May 26, the
directive was revised to provide that transactions should be
undertaken with a view to restraining inflationary credit expansion in order to foster sustainable economic growth and
expanding employment opportunities. Although this was the
only change during the year in the language of the directive,
there were occasions, as indicated in the entries for the individual meetings, when the directive was issued with the understanding that in the conduct of open market operations there
would be a leaning on the side of restraint or of ease. The
directive at the end of 1959 instructed the Federal Reserve
Bank of New York, until otherwise directed by the Committee:
(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
FEDERAL RESERVE SYSTEM
65
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 credit expansion
in order to foster sustainable economic growth and expanding employment opportunities, 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.
66
ANNUAL REPORT OF BOARD OF GOVERNORS
RECORD OF POLICY ACTIONS
BOARD OF GOVERNORS
January 9, 1959
Amendment to Regulation P, Holding Company Affiliates—Voting Permits.
Effective immediately, subsection (d) of Section 1 of Regulation P was
amended by deleting clause (3) and appropriately renumbering clauses
(4) and (5).
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, and Robertson. Votes against this action: None.
As previously in effect, the definition of "affiliated/5 in
subsection l(d), technically covered situations where control
of one corporation was held, directly or indirectly, by shareholders of another corporation who also owned or controlled
a majority of the shares of the latter corporation or more
than 50 per cent of the number of shares voted at the last
election of directors of that corporation. The amendment
eliminated this technical coverage as being unnecessary to
carry out the purposes of the law.
March 5, 1959
Increase in rates on discounts and advances by Federal Reserve Banks.
Effective March 6, 1959, the Board approved action by the Boards of
Directors of the Federal Reserve Banks of New York, Philadelphia, Chicago, and Dallas establishing a rate of 3 per cent (an increase from 2l/z
per cent) on discounts for and advances to member banks under Sections
13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, 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
San Francisco
March 10, 1959
March 12, 1959
FEDERAL RESERVE SYSTEM
Cleveland
Richmond
St. Louis
Kansas City
Atlanta
Minneapolis
March
March
March
March
March
March
67
13, 1959
13, 1959
13, 1959
13, 1959
16, 1959
16, 1959
Effective the same dates, the Board approved for the respective Federal
Reserve Banks a rate of 3Vi 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.
(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 for and advances to member
banks at least every 14 days, and submit such rates to the Board for consideration. Prior to this date, no changes had been made in these rates
since those referred to on pages 85-86 of the Board's Annual Report for
1958.)
The period since October 1958, when the discount rates
of the Federal Reserve Banks were increased to 2l/i per cent,
had been marked by further expansion of economic activity.
Industrial production had reached a level only slightly below
the record high of February 1957, and other measures such
as gross national product, construction, and retail sales were
sharply higher on a seasonally adjusted basis than in the last
quarter of 1958 or in the first quarter a year ago. Industrial
prices also were continuing to move upward, and the average
of wholesale prices was held stable only by virtue of declining
prices of farm products. Successive surveys of consumer and
business expectations reflected mounting optimism.
The year 1959 thus far had been characterized by relatively
light credit demands from business but large demands from
governments—Federal, State, and local. Borrowing by individuals against mortgages continued large, and consumer
credit, after increasing more than seasonally in late 1958,
showed substantially less than the usual seasonal contraction
in the early part of 1959. The total prospective demand for
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ANNUAL REPORT OF BOARD OF GOVERNORS
credit during the next few months included large borrowing
needs of the Treasury to cover the current deficit.
Despite the over-all liquidity of the economy, pressures
upon money markets and the banking system appeared
likely to strengthen when the public found it necessary to
draw upon time deposits, to liquidate securities, or to borrow
at banks in order to obtain additional funds to support
further expansion. The impact of the Treasury's financing
program would be an additional factor causing upward
pressures on short-term interest rates during the coming
months. The increase in the discount rate meant that, if
contemplated pressures upon the money markets and the
banks developed and if a restrictive open market policy
made it necessary for member banks to borrow additional
reserves, the policy of restraint upon credit expansion would
be reinforced by a discount rate close enough to market
rates to help to deter such borrowing.
May 1, 1959
Amendmends to Regulation T, Credit by Brokers, Dealers, and Members
of National Securities Exchanges (formerly entitled Extension and
Maintenance of Credit by Brokers, Dealers, and Members of National
Securities Exchanges).
Effective June 15, 1959, Section 3(b)(2) of Regulation T and the Supplement to that Regulation were amended in order further to restrict withdrawals of cash or securities from so-called "restricted" accounts (that is,
accounts in which more credit is outstanding on the securities in the
account than would be permitted in a new purchase of those securities
under current margin requirements).
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, Shepardson, and King. Votes against this
action: None.
Regulation T is issued by the Board pursuant to the
Securities Exchange Act of 1934, particularly Sections 7 and
8(a) thereof. It applies to every member of a national securities exchange and to every broker or dealer who transacts a
business in securities through the medium of any such
member. In announcing the amendments to the Regulation
FEDERAL RESERVE SYSTEM
69
that were made effective June 15, 1959, the Board issued the
following explanatory statement:
Accounts can become "restricted" by declines in market value of the
securities held in the account or by increases in margin requirements.
(The margin requirement of a stock is the difference between its prescribed
maximum loan value and its current market value.) Securities can be
withdrawn from these "restricted" accounts through sale or otherwise, if
there is a specified reduction in the debt owing in the account.
Under the previous regulation, when a security was withdrawn from a
"restricted" account, the amount by which the debt in the account had
to be reduced worked out to be the same as the maximum loan value of
the security at the time. This percentage automatically changed with each
change in margin requirements.
The amendment to Section 3(b)(2) provides for a new method of limiting
withdrawals from "restricted" accounts. The amendment provides for a
separatefigurewhich represents the "retention requirement" of a registered
nonexempted security (i.e., in the case of a withdrawal of securities, the
percentage of market value that must be deposited in the account; or, in
the case of a sale, the percentage of sale proceeds that must be left in the
account). In a new paragraph (c) of the Supplement of Regulation T the
"retention requirement" is set at 50 per cent of the market value of the
securities involved. This "retention requirement" may be changed by the
Board from time to time.
The amendment does not alter existing provisions that allow a purchase
of registered nonexempted securities to be made in a "restricted" account
without additional margin if the purchase is made on the same day that
an equal or greater market value of such securities is sold in the account
and the proceeds applied to the purchase.
The purpose of amending Regulation T in the manner
described was to limit more effectively the excessive use of
credit for the purpose of purchasing or carrying securities.
On May 6, 1959, the following conforming amendments
to Regulation T were approved, effective June 15, 1959, with
the understanding that they would be issued in conjunction
with the amendments approved on May 1, 1959:
Section 3(g) was amended to make it clear that a transaction used to
permit one offsetting transaction—for example, a deposit of securities
used to permit a withdrawal of cash—would be to that extent unavailable
to permit another offsetting transaction. Section 3(g) was also amended
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ANNUAL REPORT OF BOARD OF GOVERNORS
to stipulate that a sale of a security held in a margin account must, for
the purposes of Regulation T, be treated as a "long" rather than a "short"
sale. Section 3(e) was amended to change the amount of liquidation required when a customer fails to supply the margin that Regulation T
requires the broker to obtain within four days on additional purchases in
margin accounts.
May 1, 1959
Amendments to Regulation U9 Loans by Banks for the Purpose of Purchasing
or Carrying Registered Stocks (formerly entitled Loans by Banks for
the Purpose of Purchasing or Carrying Stocks Registered on a National
Securities Exchange).
Effective June 15, 1959, (1) the third paragraph of Section 1 of Regulation U and the Supplement to that Regulation were amended in order
further to restrict withdrawals of collateral against so-called "restricted"
loans (that is, stock-collateralled loans which are larger than would be
permitted in the case of a new loan to purchase registered stocks under
current margin requirements); (2) Section 3(a) was amended to strengthen
the provisions regarding statements accepted by a bank as to the purpose
of a loan; (3) Section 3(b)(l) was amended to broaden the provision relating to "carrying"; (4) Section 3(j) was amended to provide for reports from
certain nonbank lenders; (5) Section 3(n) was amended to prohibit the
weakening of collateral behind a "purpose" loan which occurs when that
same collateral is also used as the basis of a "nonpurpose" loan; (6) a new
Section 3(q) was added to require that bank loans to borrowers importantly
engaged in relending for stock market purposes shall comply with Regulation U even though the bank loans are not secured by any stock; (7) a new
Section 3(r) was added to require loans originally for the purchase of convertible securities to be brought into conformity with the margin requirements within 30 days after conversion into a registered stock takes place;
and (8) conforming changes were made at several places in the Regulation.
Votes for this action: Messrs. Martin, Szymczak, Mills,
Robertson, and Shepardson. Mr. Balderston voted for all of
the amendments except the amendment of Section 3(n), on
which he voted "no". Mr. King voted for all of the amendments except the amendment of Section 3(a), on which he
refrained from voting. There were no other negative votes on
any parts of the action.
Regulation U is issued by the Board pursuant to the Securities Exchange Act of 1934, particularly Section 7 thereof.
FEDERAL RESERVE SYSTEM
71
In announcing the amendments that became effective
June 15, 1959, the Board issued the following explanatory
statement:
Withdrawals of collateral.—Loans can become "restricted" by declines
in market value of the stocks securing the loan or by increases in margin
requirements. (The margin requirement of a stock is the difference
between its prescribed maximum loan value and its current market value.)
Stock securing a "restricted" loan can be withdrawn through sale or otherwise if there is a specified reduction in the loan.
Under the former rule, if a stock securing a "restricted" loan was withdrawn, the amount by which the loan had to be reduced worked out to
be the same as the maximum loan value of the stock at the time. This
percentage automatically changed with each change in margin requirements.
The amendment to the third paragraph of Section 1 provides for a new
method of limiting withdrawals of collateral securing "restricted" loans.
The amendment provides for a separatefigurewhich represents the "retention requirement" of a stock (i.e., in the case of a sale or other withdrawal
of collateral, the amount, stated as a percentage of the market value of
the collateral, by which the loan must be reduced). In a new paragraph
(b) of the Supplement to the Regulation the "retention requirement" is
set at 50 per cent of the market value of the stocks involved. This "retention requirement" may be changed by the Board from time to time.
Statement of purpose of loan.—The former Section 3(a) provided that
a bank could rely upon a statement signed by an officer of the bank or
by the borrower as to the purpose of a loan, if the statement was accepted
by the bank in good faith. Under that section, a bank could accept a
statement that a loan was not for the purpose of purchasing or carrying a
registered stock without ascertaining affirmatively the purpose for which
the loan was to be used. The amendment requires that the statement
be signed by both borrower and lending officer. If the statement merely
states what is not the purpose of the loan, the lending officer must provide
a memorandum or notation describing the purpose of the loan. The
amendment also emphasizes the alertness and diligence required of the
bank before a statement can be said to be accepted in good faith.
"Carrying" of registered stocks.—The former Section 3(b)(l) excluded
from loans for the purpose of "carrying" registered stocks all loans except
a limited group specified in that section, principally loans to enable the
borrower to reduce or retire indebtedness originally incurred to purchase
such stock. The net effect was to exclude from regulation a large number
of loans which were closely related to thefinancingof positions in stocks.
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ANNUAL REPORT OF BOARD OF GOVERNORS
The amendment strikes this earlier, narrower approach and instead
describes affirmatively certain situations in which a loan will not be
deemed to be for the purpose of "carrying" registered stocks.
Reports from unregulated lenders.—The former Section 3(j) required
banks to make such reports as the Board of Governors may require. The
amendment expands this requirement to include, in addition, "every
person engaged in the business of extending credit who, in the ordinary
course of business, extends credit for the purpose of purchasing or carrying" registered stocks.
Loans relying on collateral which has served to permit a purpose loan.
—Regulation U allows a bank to lend a specified portion, currently 10
per cent, of the market value of a stock used as collateral where the loan
is to purchase or carry registered stocks. However, after the bank made
such a loan, unless the borrower was a broker or dealer, the Regulation
previously allowed the bank to lend as much more as it pleased on the
same collateral for any other purpose. The former Section 3(n) forbade
such double use of collateral when the borrower was a broker or dealer.
The amendment expands this prohibition to forbid such double use in the
case of loans to all borrowers under Regulation U, just as it is already
forbidden in all cases under Regulation T. The amendment does not,
however, require the bank to forego or to waive any lien, nor does it apply
to loans to meet emergency expenses not reasonably foreseeable provided
the circumstances are suitably documented.
Exemption discontinued for certain unsecured loans.—The Regulation
previously exempted all loans that were not secured, directly or indirectly,
by at least some stock. The new Section 3(q) discontinues this exemption
as to loans made to companies engaged principally, or as one of the
company's important activities, in making loans on an exempt basis to
finance the purchase of registered stocks.
Loans to purchase convertible securities.—The Regulation previously
did not apply to loans for purchasing or carrying convertible bonds. The
new Section 3(r) requires the entire transaction to be brought into conformity with margin requirements prevailing at the time when conversion
into a registered stock occurs, allowing, however, 30 days for this to be
done.
The purpose of these amendments was to make the Regulation more effective in its objective of preventing the
excessive use of credit for purchasing or carrying securities.
Governor Balderston voted against the amendment of
Section 3(n), relating to prohibiting the double use of col-
FEDERAL RESERVE SYSTEM
73
lateral for both "purpose" and "nonpurpose" loans, because
he felt that the amendment went beyond the proper scope of
the Board's responsibility under the statutes.
May 28, 1959
Increase in rates on discounts and advances by Federal Reserve Banks.
Effective May 29, 1959, the Board approved action by the Boards of
Directors of the Federal Reserve Banks of New York, Chicago, St. Louis,
Minneapolis, and Dallas establishing a rate of 3*/2 per cent (an increase
from 3 per cent) on discounts for and advances to member banks under
Sections 13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Martin, Szymczak, Mills,
Robertson, Shepardson, and King. 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
Philadelphia
Kansas City
San Francisco
Cleveland
Richmond
June
June
June
June
June
June
June
2, 1959
2, 1959
5, 1959
5, 1959
11, 1959
12, 1959
12, 1959
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. 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.
Since early March, when the discount rates of the Federal
Reserve Banks were increased to 3 per cent, productive
activity had surged ahead vigorously and expectations were
now optimistic in virtually every sector of the economy. The
Board's index of industrial production for April attained a
level four points higher than the prerecession peak in Febru-
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ANNUAL REPORT OF BOARD OF GOVERNORS
ary 1957, and weekly output data for May indicated the
possibility (later confirmed) of a further gain in that month.
Activity in durable goods industries advanced to a new high,
while production of nondurable goods, which had surpassed
the earlier highs of 1957 by mid-1958, continued to expand
to a level one-tenth above those highs. Principally because of
higher wage and salary payments, personal income continued
to climb at a rate in excess of $3 billion a month, a rate of
increase that equaled or surpassed the comparable months
of the 1955-57 period of expansion. Retail sales for April
exceeded the large March volume and in May were about
10 per cent above a year earlier. In early May, new automobile sales were running nearly 50 per cent higher than a
year earlier and 15 per cent higher than in the similar period
in 1957, while used car sales continued active at prices some
15 per cent higher than a year earlier. A strong expansion in
consumer instalment credit, in evidence since the latter part
of 1958, was supporting sales of automobiles and household
durables; the first quarter increase in automobile credit was
the largest since the first quarter of 1956, and the credit rise
for diversified consumer durables was the largest since the
last quarter of 1956. Marked improvement in the employment situation had occurred in the past several weeks, with
the gains, which were widespread in the durable goods
manufacturing industries, carrying total employment to
around 52 million, approximately one million above a year
earlier. At the same time, unemployment declined considerably more than seasonally to 5.3 per cent of the civilian
labor force in April, with a further decline indicated in May.
Thus, although unemployment remained somewhat higher
than at a similar stage in other postwar recovery periods, the
recent trend suggested that aside from certain pockets of
"structural" unemployment, the problem would continue to
diminish in importance. Average wholesale prices were
relatively stable, but consumer prices were edging upward
and increased price pressures seemed likely.
In financial markets, the period was marked by heavy
credit demands. An exceptionally large increase in bank
FEDERAL RESERVE SYSTEM
75
loans in April was followed by further expansion in May, the
demand extending to virtually all loan categories, including
particularly business loans. In the face of this demand, the
banks liquidated Government securities, resulting in a rise in
the ratio of loans to loans and investments to a point close to
the high level reached in 1957. Along with an increase in the
aggregate money supply in recent months, the turnover of
bank deposits increased, which meant that economic activity
was expanding faster than the volume of money. On
May 15, large city banks announced an increase from 4 to
4y2 per cent in the lending rate on prime customers' loans.
Nearly all interest rates had risen except yields on threemonth Treasury bills, which continued to move in the lower
part of the 2% to 3 per cent range that had prevailed generally since late February, reflecting a desire on the part of
investors to maintain liquidity positions in view of the possibility of further interest rate increases. Yields on sixmonth Treasury bills had risen to around the 3l/s per cent
level, and yields on longer bills had been as high as 4 per cent.
Stock prices had again risen to peak levels, accompanied by
a further increase in stock market credit. With the conclusion of May operations, it appeared that the Treasury might
have no need for additional borrowing until early in July,
but additional refunding and new cash offerings would be in
process from late July until mid-August, to be followed by
large borrowing needs in the fourth quarter of the year.
The over-all deficit in the United States balance of payments continued at about the same rate as in 1958, when it
amounted to $3.4 billion, although a smaller proportion was
taking the form of gold outflow. To bring the international
accounts of the United States into balance, the problem of
maintaining costs and prices on a competitive basis with
those of other leading industrial countries loomed as vital.
In view of the strength of credit demands, and with System
credit policy limiting additions to the open market portfolio
to amounts sufficient only to offset drains from factors such
as the contraseasonal rise of currency in circulation and the
gold outflow, member banks were resorting to the discount
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ANNUAL REPORT OF BOARD OF GOVERNORS
facilities of the Federal Reserve Banks in increasing volume.
The added restraint of a discount rate increase seemed
appropriate, particularly in view of the recent further rise in
market interest rates.
July 31, 1959
Actions incident to admission of Hawaii to Statehood.
Effective upon issuance by the President of the United States of a
proclamation admitting Hawaii to Statehood, which proclamation subsequently was issued on August 21, 1959, the Board readjusted the Federal
Reserve districts so as to include the State of Hawaii in the Twelfth District, as a part of the territory served by the head office. Effective the same
date, certain amendments were made to several regulations of the Board
to correct language rendered inappropriate by the admission of Hawaii
to Statehood.
Votes for this action: Messrs. Martin, Balderston, Robertson, and Shepardson. Votes against this action: None.
Section 2 of the Federal Reserve Act provides that the
Federal Reserve districts, as created originally by the Reserve
Bank Organization Committee, may be readjusted from time
to time by the Board of Governors of the Federal Reserve
System, the districts not to exceed 12 in all. Section 17 of the
Hawaii Statehood Act amended the aforesaid Section 2 to
provide that when the State of Hawaii "is hereafter admitted
to the Union the Federal Reserve Districts shall be readjusted
by the Board of Governors of the Federal Reserve System in
such manner as to include such State." In anticipation of a
Presidential proclamation admitting Hawaii to Statehood,
the Board took action to include Hawaii in the Twelfth
Federal Reserve District coincident with the date of proclamation, with the understanding that Hawaii would be a
part of the territory served by the head office of the Federal
Reserve Bank of San Francisco.
Certain technical changes in a number of Board regulations were made, effective the same date, because the admission of Hawaii to Statehood rendered the existing language
inappropriate. The regulations affected included: E, Pur-
FEDERAL RESERVE SYSTEM
77
chase of Warrants; G, Collection of Noncash Items; H,
Membership of State Banking Institutions in the Federal
Reserve System; I, Increase or Decrease of Capital Stock of
Federal Reserve Banks and Cancellation of Old and Issue
of New Stock Certificates; J, Check Clearing and Collection;
L, Interlocking Bank Directorates under the Clayton Act;
and U, Loans by Banks for the Purpose of Purchasing or
Carrying Registered Stocks.
August 10, 1959
Termination of Regulation S, Industrial Loans by Federal Reserve Banks.
Effective at the close of business August 21, 1959, Regulation S was
terminated.
Votes for this action: Messrs. Martin, Balderston, Robertson, and King. Votes against this action: None.
Section 13b of the Federal Reserve Act was repealed,
effective August 21, 1959, by the Small Business Investment
Act of 1958, approved August 21, 1958. Accordingly, since
the Federal Reserve Banks would no longer be authorized to
make loans and commitments for commercial and industrial
purposes pursuant to Section 13b, the Board of Governors
terminated Regulation S as of the close of business August 21, 1959.
August 27, 1959
Amendment of Regulation Q, Payment of Interest on Deposits.
Effective October 1,1959, Section 3(d) of Regulation Q was amended to
permit member banks of the Federal Reserve System to pay interest at
the maximum rate permitted under the Regulation calculated from the
first day of the month on savings deposits received during the first ten
calendar days of such month, in lieu of permitting interest to be paid at
such rate from the first day of the month only on savings deposits received
during the first ten business days of any calendar month commencing a
quarterly or semiannual interest period and during the first five business
days of any other calendar month.
Votes for this action: Messrs. Mills, Robertson, Shepardson,
and King. Votes against this action: None.
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ANNUAL REPORT OF BOARD OF GOVERNORS
The purpose of this amendment was to reduce misunderstandings in connection with so-called "grace periods" in
computing interest on savings deposits, to make possible
uniform advertising, to create better customer relationships,
and to enable banks that compute interest on a cycle basis
to facilitate computation of interest on savings accounts and
eliminate difficulties being encountered. The amendment
was the subject of a notice of proposed rule making, published in the Federal Register, and was adopted after consideration of all relevant views and arguments received from
interested persons.
Also effective October 1, 1959, the Federal Deposit Insurance Corporation adopted a similar amendment to its
regulations relating to insured nonmember banks.
September 10, 1959
Increase in rates on discounts and advances by Federal Reserve Banks.
Effective September 11, 1959, the Board approved action by the Boards
of Directors of the Federal Reserve Banks of New York, Cleveland,
Richmond, Chicago, St. Louis, Kansas City, Dallas, and San Francisco
establishing a rate of 4 per cent (an increase from 3*/i per cent) on discounts for and advances to member banks under Sections 13 and 13a ot
the Federal Reserve Act.
Votes for this action: Messrs. Balderston, Szymczak, Robertson, Shepardson, and King. 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
Minneapolis
Philadelphia
September
September
September
September
14, 1959
14, 1959
14, 1959
18, 1959
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 and a rate of 5 per cent on
advances to individuals, partnerships, and corporations under the last
paragraph of Section 13 of the Act.
FEDERAL RESERVE SYSTEM
79
In early September the economic picture reflected both the
direct influence of the steel strike, which began in mid-July,
and its spreading secondary effects. Work stoppages had
developed in other basic metal industries, and new model
changeovers had reduced assemblies of automobiles. The
Board's index of industrial production was estimated to be
eight points below the peak reached in June. However, aside
from the work stoppage influence, the economy continued to
show widespread strength. Retail sales in August remained
close to the high levels of the previous three months and
were 7 per cent above a year earlier, while the total value of
construction put in place in August was close to the peak
rate reached in the spring. Prices of basic materials, which
had been relatively stable, began to rise after early August;
the index of consumer prices had been edging upward for
some time and in July was .8 per cent above a year earlier.
As the result of strike effects, employment declined about
one-half million to 52 million by mid-August, while unemployment decreased somewhat less than the usual seasonal amount.
Demand for credit was heavy and increasing. Bank loans
expanded rapidly through July and August, with bank holdings of Government securities reduced in the latter month.
Borrowings by member banks at the Federal Reserve Banks
were averaging close to $1 billion.
The month preceding this action on the discount rate was
marked by a sharp increase in short-term interest rates.
Market yields on three-month Treasury bills, which were at
a level around 3 per cent at the beginning of August, climbed
sharply thereafter to approximately 4 per cent in early
September. Yields on six-month bills rose in similar fashion,
to a level around 4y2 per cent, and the same trend was evident
in rates on longer-term Treasury issues as well as corporate
and municipal securities. At the beginning of September,
large city banks increased their rate on prime customers'
loans from 4y2 to 5 per cent. These developments appeared
to reflect expectations of higher interest rates in view of the
general strength of the economy notwithstanding the steel
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ANNUAL REPORT OF BOARD OF GOVERNORS
strike and other work stoppages, the vigor of present and
prospective credit demands, Treasury borrowings in prospect, and the further economic expansion that seemed likely
following settlement of the strike.
The increase in the discount rate brought it to a level that
produced a better alignment with short-term money market
rates and also recognized existing trends in the money
market and underlying trends in the economy generally.
Governor Mills, who was not present on September 10,
1959, abstained from voting when the discount rates established by the directors of the Federal Reserve Banks of
Boston, Philadelphia, Atlanta, and Minneapolis came before
the Board for approval on subsequent dates. As he regarded
the situation, technical conditions in the money market
justified an increase in the discount rate to 4 per cent.
However, it was his judgment that System monetary and
credit policy, about which he had strong reservations, had
been instrumental in creating the market conditions that
stood in favor of such an increase.
October 23, 1959
Amendment to Regulation R, Relationships with Dealers in Securities
under Section 32 of the Banking Act of 1933.
Effective immediately, Section 2 of Regulation R was amended by
striking out the words "debentures issued by Federal Intermediate Credit
Banks, bonds issued by Federal Land Banks," and substituting therefor
"obligations of Federal Intermediate Credit Banks, Federal Land Banks,
Central Bank for Cooperatives, Federal Home Loan Banks, and the
Federal National Mortgage Association."
Votes for this action: Messrs. Balderston, Szymczak, Mills,
Shepardson, and King. Vote against this action: Mr. Robertson.
Section 32 of the Banking Act of 1933, as amended by Section 307 of the Banking Act of 1935, provides that no officer,
director, or employee of any corporation or unincorporated
association, no partner or employer of any partnership, and
no individual, primarily engaged in the issue, flotation,
FEDERAL RESERVE SYSTEM
81
underwriting, public sale, or distribution, at wholesale or
retail, or through syndicate participation, of stocks, bonds,
or other similar securities, shall serve at the same time as an
officer, director, or employee of any member bank of the
Federal Reserve System except in limited classes of cases in
which the Board of Governors of the Federal Reserve System may allow such service by general regulations when in
the judgment of the Board it would not unduly influence the
investment policies of such member bank or the advice it
gives its customers regarding investments.
Prior to the amendment adopted effective October 23,
1959, Section 2 of Regulation R exempted from the general
prohibition of Section 32 of the Banking Act of 1933 relationships of officers, directors, or employees of member
banks with firms dealing in direct obligations of the United
States, obligations fully guaranteed both as to principal and
interest by the United States, debentures issued by Federal
Intermediate Credit Banks, bonds issued by Federal Land
Banks, and general obligations of territories, dependencies,
and insular possessions of the United States.
Adoption of the amendment broadening the exceptions
contained in Section 2 of the Regulation to include obligations of the Central Bank for Cooperatives, the Federal
Home Loan Banks, and the Federal National Mortgage
Association reflected the Board's conclusion that such action
would not increase the likelihood of activities of an undesirable character such as were sought to be guarded against
by the language of Section 32 of the Banking Act of 1933.
Governor Robertson voted against this amendment because in his view a sufficiently strong case had not been made
for broadening the exemption further.
November 30, 1959
Amendments to Regulation D, Reserves of Member Banks.
The Supplement to Regulation D was amended to permit member banks
not classified as central reserve or reserve city banks to count currency and
coin in excess of 4 per cent of net demand deposits as part of their required
reserves, effective December 1, 1959, and to permit central reserve and
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ANNUAL REPORT OF BOARD OF GOVERNORS
reserve city banks similarly to count currency and coin in excess of 2 per
cent of their net demand deposits, effective December 3, 1959. Also,
effective December 1, 1959, Regulation D was amended to define currency
and coin as including currency and coin in transit to or from a Federal
Reserve Bank; to require currency and coin to be counted as of the beginning of the business day; to exclude drafts or authorizations on a member
bank's reserve account from the definition of gross demand deposits; and
to permit member banks at their option to include nonbusiness days at
the end of a reserve computation period in the next succeeding period.
Effective December 31, 1959, Regulation D was amended to change the
reserve computation period for banks not classified as central reserve or
reserve city banks from semimonthly to biweekly.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, Shepardson, and King. Votes against this
action: None.
In announcing this action, which would permit many
member banks to count a portion of their vault cash in
meeting reserve requirements, the Board stated:
On the basis of average vault cash holdings for the past 12 months, it
appears that almost half of the 6,250 member banks will be in a position
to count a part of their vault cash in meeting their required reserves. As
a result, total member bank reserve balances at the Federal Reserve Banks
may be lower than would otherwise be required by as much as $230
million, of which $160 million would be at country banks and $70 million
at reserve city banks. Total vault cash held by member banks has averaged
about $2.2 billion.
This Federal Reserve action was taken under the terms of an Act of
Congress in 1959 designed in part to remedy inequities that have arisen
because many banks, particularly small country banks, find it necessary
for operating purposes to hold relatively larger amounts of vault cash
than other banks do. No change in the System's general monetary or
credit policy is involved. The beginning of December is a logical time for
this action inasmuch as the Federal Reserve System needs to make additional reserves available to the banking system each year at this season
in order to meet the seasonal requirements for the economy.
The remaining amendments to Regulation D, as described
above, were of a technical nature.
FEDERAL RESERVE SYSTEM
83
December 18, 1959
Actions with respect to capital accounts of the Federal Reserve Banks.
Effective December 31, 1959, and until further action by the Board,
the Board determined that the surplus of the Federal Reserve Banks be
maintained at a level equal to 100 per cent of the subscribed capital of
the respective banks.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Shepardson, and King. Vote against this action: Mr. Mills.
Mr. Robertson dissented from the action to the extent that he
did not favor reducing the existing surplus of any Federal
Reserve Bank in order to bring it down to a level of 100 per
cent of subscribed capital, but he approved the principle that
hereafter no additions would be made to surplus of any Bank
beyond 100 per cent of subscribed capital.
The Board also directed that, by December 31, 1959, the reserves for
contingencies of the respective Reserve Banks be discontinued and the
amounts therein transferred to profit and loss, except that the reserve for
registered mail losses would not be discontinued until after appropriate
amendment of the Loss Sharing Agreeement of the Federal Reserve Banks.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, Shepardson, and King. Votes against this
action: None.
Prior to 1933, the Federal Reserve Act included a provision under which each Federal Reserve Bank was required
to pay a franchise tax to the Government equal to 90 per
cent of its earnings, after the Bank had accumulated a
surplus equal to its subscribed capital. The Banking Act of
1933 required each Federal Reserve Bank to pay an amount
equal to one-half of its surplus on January 1, 1933, for
capital stock of the Federal Deposit Insurance Corporation.
These payments amounted to $139 million and reduced the
surplus of the Federal Reserve Banks to an equivalent figure,
or considerably less than one-half of their subscribed capital.
Congress, therefore, eliminated the franchise tax in order to
permit the Federal Reserve Banks to rebuild their surplus
accounts from future earnings.
By the end of 1946, the combined surplus of the Federal
84
ANNUAL REPORT OF BOARD OF GOVERNORS
Reserve Banks totaled $440 million, as compared with subscribed capital of $374 million. In the circumstances, the
Board on April 23, 1947, concluded that it would be appropriate to accomplish the same results as were accomplished
earlier through payment of the franchise tax by establishing,
under the authority of the fourth paragraph of Section 16 of
the Federal Reserve Act, such rates of interest on outstanding Federal Reserve notes not covered by gold certificate
collateral as would make it possible to transfer to the
Treasury approximately 90 per cent of the earnings of each
Federal Reserve Bank after payment of necessary expenses
and statutory dividends, and after such provisions as might
be necessary to restore surplus of each Bank to 100 per cent
of subscribed capital if it fell below that figure. The procedure thus established by the Board in 1947 was followed
through the year 1958.
At the end of 1959, combined subscribed capital of the
Federal Reserve Banks stood at $777 million, while combined surplus amounted to $868 million. After a review of
the situation, which included consultation with the Federal
Reserve Banks, the Board concluded that the maintenance
of surplus at a level equal to 100 per cent of subscribed
capital would be sufficient to meet any foreseeable needs of
the Banks. It was therefore decided to change the practice
of adding approximately 10 per cent of the annual net
earnings of the Federal Reserve Banks to the surplus accounts, and to pay to the Treasury the amounts by which the
surplus accounts exceeded subscribed capital. Pursuant to
this decision, the 1959 payments to the Treasury as interest
on Federal Reserve notes, totaling $911 million, consisted of
all net earnings after dividends and after provision for building up surplus to 100 per cent of subscribed capital at those
Reserve Banks where surplus was below that amount. In
addition, there was paid to the Treasury the amounts by
which surplus at the other Banks exceeded subscribed
capital (which is twice the amount of paid-in capital).
In dissenting from the decision to maintain surplus at no
more than 100 per cent of subscribed capital after Decem-
FEDERAL RESERVE SYSTEM
85
ber 31, 1959, Governor Mills took the position that there
were good reasons to continue to make reasonable additions
to surplus and that any decision to pay over to the Treasury
a larger share of Federal Reserve Bank earnings than paid
under the formula in effect from 1947 through 1958 should
be reached in accordance with some newly prescribed formula that had found acceptance by the Congress.
Governor Robertson agreed with the principle of paying
100 per cent of current net earnings of the respective Federal
Reserve Banks to the Treasury, after carrying to surplus any
amounts needed to bring surplus to a figure equal to 100 per
cent of subscribed capital, but he disagreed with that part of
the Board's action pursuant to which there would be paid to
the Treasury the amounts by which surplus at certain Banks
currently exceeded subscribed capital. He would have preferred to leave surplus accounts at their existing levels and
let subscribed capital build up to them over a period of time.
The Board also acted to discontinue certain reserves for contingencies of the Federal Reserve Banks and to cause the respective Banks to transfer such reserves to profit and loss by
December 31, 1959. The transfers from reserves for contingencies at all Reserve Banks pursuant to this action
amounted to $98 million. Similar action was taken to discontinue the reserve for registered mail losses, effective after
the boards of directors of the Federal Reserve Banks had
acted to amend the Loss Sharing Agreement of the Federal
Reserve Banks and the Board of Governors had approved
the revised Agreement.
86
ANNUAL REPORT OF BOARD OF GOVERNORS
BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM
Examination of Federal Reserve Banks. The Board's Division of
Examinations examined the 12 Federal Reserve Banks and
their 24 branches during the year as required by Section 21
of the Federal Reserve Act. In conjunction with their annual
examination of the Federal Reserve Bank of New York, the
Board's examiners also made a detailed audit of the accounts
and holdings of the System Open Market Account maintained
at that Bank, and rendered a report thereon to the Federal
Open Market Committee. The techniques and procedures
employed by the Board's examiners were surveyed and appraised by a private firm of certified public accountants during
the course of the examination of one of the Federal Reserve
Banks. The public accountants made their own choice of the
examination that was the basis for their study.
As supplement to its own examinations, and continuing a
longstanding practice, the Division of Examinations received
and reviewed the reports of audits made periodically during
the year by the internal auditing staffs of the respective Federal
Reserve Banks.
Examination of member banks. Although authorized to examine
all member banks, both State and national, as a matter of practice neither the Federal Reserve Banks nor the Board of Governors examines national banks since the Comptroller of the
Currency is directly charged with that responsibility by law.
Reports of examinations made by the Comptroller are furnished the respective Federal Reserve Banks and made available to the Board of Governors. Likewise, because all member
banks are insured, the Federal Deposit Insurance Corporation
is empowered to make special examinations of national banks
and State member banks whenever such special examination
is necessary to determine the condition of any such bank for
insurance purposes. However, such examinations have been
infrequent and have been made only in anticipation of financial assistance by the Corporation in a rehabilitation program or where a member bank desired to continue as an
insured bank after withdrawal from membership in the System.
Reports of examination of both national banks and State mem-
FEDERAL RESERVE SYSTEM
87
ber banks are made available to the Federal Deposit Insurance
Corporation, and the Corporation in turn makes its reports
available to the Comptroller of the Currency and the Board
of Governors. At the request of the Comptroller of the Currency, the Board makes recommendations to his office concerning applications which he receives for charters of national
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 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.
Here again, 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 1959 program for
examining State member banks was practically completed,
since only four of the 1,691 banks were not examined during
the calendar year.
In its supervision of State member banks, the Board passes
upon applications to establish branches, including original
offices and offices to be acquired through merger or consolidation, and also upon investments in bank premises that
will exceed 100 per cent of the capital stock of the member
bank. The Board does not pass upon mergers or consolidations involving State member banks unless the resulting institution will be a State member bank with less capital stock or
surplus than the aggregate capital stock or aggregate surplus,
respectively, of all the merging or consolidating banks.
Federal Reserve membership. At the end of 1959 member banks
accounted for 46 per cent of the number, and held approximately 85 per cent of the deposits, of all commercial banks
in the United States. State member banks accounted for 19
per cent of the number, 31 per cent of the banking offices, and
88
ANNUAL REPORT OF BOARD OF GOVERNORS
about 65 per cent of the deposits of all State commercial
banks.
The 6,233 member banks of the Federal Reserve System at
the end of 1959 included 4,542 national and 1,691 State
member banks. There were net declines of 36 and 43, respectively, in these two categories during the year. The decline in
the total, continuing the trend of recent years, was due largely
to consolidations and mergers. Reductions from other causes
included 15 State banks that withdrew from membership and
two national banks that converted into nonmember banks.
The membership losses were offset in part by newly established
banks, of which 23 were national banks and four were State
members, by the admission to membership of six nonmember
banks in Alaska, one in Hawaii, and five in other States, and
by the conversion of one nonmember bank into a national
bank.
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 7,259 branches,
558 more than at the close of 1958.
Detailed figures on changes in banking structure during
1959 are shown in Table 18 on page 126.
Bank holding companies. During 1959, pursuant to Section
3 ( a ) ( l ) of the Bank Holding Company Act of 1956, the
Board approved one application for prior approval of action
to become a bank holding company. Pursuant to Section
3(a) (2) of the Act, the Board approved the acquisition by
nine bank holding companies of voting shares of seven banks;
with respect to two of the banks, applications were filed by
two related bank holding companies, one of which controlled
the other. Under Section 4(c) (6) of the Act, the Board, after
hearings, denied requests by two holding companies for orders
determining that one subsidiary of each was so closely related
to the banking activities of its respective 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; such requests as to 15
FEDERAL RESERVE SYSTEM
89
subsidiaries, by six holding companies, were approved. During the year the Board issued 12 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 1958 were obtained
from registered bank holding companies.
During 1959, pursuant to the Banking Act of 1933, the
Board authorized the issuance of seven voting permits for general purposes and 13 permits for limited purposes to holding
company affiliates of member banks. In accordance with
established practice, examiners for the Federal Reserve Banks
examined a number of affiliates of holding companies the
principal offices of which are located in their districts.
Section 301 of the Banking Act of 1935 provides that the
term "holding company affiliate" shall not include, except for
the purposes of Section 23A of the Federal Reserve Act, any
organization which is determined by the Board not to be
engaged, directly or indirectly, as a business in holding the
stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies. During the year
the Board made such determinations with respect to nine
organizations.
Trust powers of national banks. During 1959, 45 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 four banks that had previously been granted
certain trust powers. Trust powers of 29 national banks were
terminated, 27 by consolidation or merger and two by voluntary surrender. At the end of 1959, there were 1,734 national
banks holding permits to exercise trust powers.
Acceptance powers of member banks. During the year the Board
approved applications of three member banks, pursuant to the
provisions of Section 13 of the Federal Reserve Act, for increased acceptance powers. One member bank was granted
permission to accept commercial drafts or bills of exchange
to an amount not exceeding at any time, in the aggregate, 100
per cent of its paid-up and unimpaired capital stock and surplus; and one member bank was granted full permission, and
90
ANNUAL REPORT OF BOARD OF GOVERNORS
another limited permission, to accept drafts or bills of exchange drawn for the purpose of furnishing dollar exchange
as required by the usages of trade in such countries, dependencies, or insular possessions of the United States as may
have been designated by the Board of Governors.
Foreign branches of member banks. Under the provisions of
Section 25 of the Federal Reserve Act, the Board approved
during 1959 eighteen applications made by member banks
for permission to establish branches in foreign countries and
overseas areas of the United States. One member bank opened
four branches in the Virgin Islands and a branch in Panama, Republic of Panama. Another member bank opened
branches in Buenos Aires and Cordoba, Argentina; Nassau,
Bahamas; Belo Horizonte and Curitiba, Brazil; Kuala Lumpur, Malaya; Singapore, Colony of Singapore; and Montevideo, Uruguay. Six of these branches had been authorized
by the Board prior to 1959.
At the end of 1959, seven member banks had in active
operation a total of 132 branches in 30 foreign countries and
overseas areas of the United States. Three national banks were
operating 101 of these branches, and four State member banks
were operating 31. The branches were distributed geographically as follows:
Latin America
Argentina
Bahamas
Brazil
Colombia
£uba
Mexico
Panama
Paraguay
fTeru
Uruguay
Venezuela
Continental Europe
Belgium
France
Germany
England
69
12
1
12
2
*
21
3
6
1
I
2
4
5
1
3
1
10
Near East
Egypt
Lebanon
Saudi Arabia
Far East
Hong Kong
India
j
Mal
Philippines
Singapore
Thailand
4
1
2
1
22
1
2
10
j
5
2
1
United States Overseas Areas . . 2 2
Canal Zone
4
Guam
Puerto Rico
Virgin Islands
Total
1
13
4
132
FEDERAL RESERVE SYSTEM
91
In 1959, examiners for the Board of Governors surveyed
the overseas branches of three State member banks at their
respective head offices in New York.
Foreign banking andfinancingcorporations. In 1959, one corporation was organized under State law and opened for business
to operate under agreement 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. Another "agreement"
corporation ceased operations as a result of its merger into
a State member bank. The head offices in New York of the
three "agreement" corporations now in operation were examined in 1959 by examiners for the Board of Governors.
One corporation operates two agencies at the New York
International Airport, has a branch in England, and owns
the stock of two banks organized under the laws of, and operating in, Liberia and the Union of South Africa, respectively.
Another corporation owns the stock of a bank organized
under the laws of, and operating in, the Union of South
Africa. The investment in the latter bank was authorized by
the Board in 1958 and the bank opened in Johannesburg
in 1959.
During 1959 one corporation was chartered by the Board
under the provisions of Section 25(a) of the Federal Reserve
Act to engage in international or foreign banking. At the end
of the year there were six corporations in active operation
under that section; three of these are regarded as "banking
corporations" and three as "financing corporations." The
home offices of these six corporations are located in New York
City, and all were examined during the year by examiners for
the Board of Governors. Three corporations have no subsidiaries or foreign branches; one has a branch in France and an
English fiduciary affiliate that has a branch in Canada; one
has a subsidiary organized under the laws of Panama; and
one operates branches in France, Germany, Guatemala, Hong
Kong, Lebanon, Malaya, and Singapore, and also has an
agency in Guatemala and owns substantially all of the stock
of a bank organized under the laws of, and operating in, Italy.
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ANNUAL REPORT OF BOARD OF GOVERNORS
In 1959, examiners for the Board of Governors surveyed the
branches of one foreign banking corporation at its home office
in New York.
Inter-Agency Bank Examination School. Two sessions of the
School for Examiners and four sessions of the School for
Assistant Examiners were held in 1959. The Inter-Agency
Bank Examination School is conducted in Washington 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 establishment of the
School in 1952, the various sessions have been attended by
1,273 men, representing the three Federal bank supervisory
agencies, one other Federal agency, the State Banking Departments of California, Connecticut, Indiana, Louisiana, Maine,
Michigan, Mississippi, Montana, Nebraska, New Hampshire,
New Jersey, New Mexico, New York, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, and Virginia, the Treasury
Department of the Commonwealth of Puerto Rico, and one
foreign country.
LEGISLATION
Reserves of member banks. The Act of Congress approved
July 28, 1959 (Public Law 86-114) amended certain provisions of the Federal Reserve Act and related laws with respect
to reserves against deposits required to be maintained by
member banks of the Federal Reserve System. The Act (1)
authorizes the Board of Governors to permit member banks
to treat vault cash as reserves; (2) reduces from 13 per cent
to 10 per cent the minimum reserves against demand deposits
that member banks in central reserve cities must maintain;
(3) reduces from 26 per cent to 22 per cent the maximum
reserves against demand deposits that member banks in central
reserve cities may be required to maintain; (4) increases from
20 per cent to 22 per cent the maximum reserves against
demand deposits that member banks in reserve cities may be
required to maintain; (5) authorizes the Board of Governors
to permit a member bank located in a central reserve or
reserve city to carry lower reserves than other banks in the
FEDERAL RESERVE SYSTEM
93
same city, based upon the nature of the bank's business rather
than upon its geographical location, as heretofore; and (6)
provides for the termination of the classification "central
reserve cities" on July 28, 1962. The law also authorizes the
Board to designate which holding company affiliate, where
there is more than one with respect to the same bank or a
group of banks, may establish and maintain the reserves of
readily marketable assets required by law.
Member banks dealing in obligations of Tennessee Valley Authority
and Inter-American Development Bank. B y Acts of Congress
approved August 6, 1959 (Public Law 86-137), August 7,
1959 (Public Law 86-147), and September 16, 1959 (Public
Law 86-278), paragraph "Seventh" of Section 5136 of the
Revised Statutes of the United States was amended so as to
permit national banks to deal in or to underwrite obligations
issued by the Tennessee Valley Authority or by the InterAmerican Development Bank. Such transactions remain subject to the limitation of 10 per cent of the national bank's
capital and surplus. Subject, of course, to any applicable
provision of State law, the permission also extends to all State
member banks of the Federal Reserve System, as Section 9
of the Federal Reserve Act makes this paragraph of Section
5136 applicable to State member banks.
Federal Reserve Banks asfiscalagents for Inter-American Development Bank. The Act of Congress approved August 7, 1959
(Public Law 86-147) also authorized any Federal Reserve
Bank to act as depository and fiscal agent for the InterAmerican Development Bank.
Amendments to eliminate ambiguities and repeal obsolete provisions.
The Acts of Congress approved September 8 and 9, 1959
(Public Laws 86-230 and 86-251, respectively) amended the
national bank laws and certain other statutes so as to clarify
or eliminate ambiguities and repeal certain laws which had
become obsolete and also amended the lending and borrowing
provisions applicable to national banks.
Statehood of Alaska and Hawaii. The Acts of Congress approved March 18, 1959, and June 25, 1959 (Public Laws
86-3 and 86-70, respectively) made certain technical amend-
94
ANNUAL REPORT OF BOARD OF GOVERNORS
ments to the Federal Reserve Act occasioned by the admission
of Alaska and Hawaii to Statehood.
Bank Holding Company Act. The Board is required by Section
5(d) of the Bank Holding Company Act of 1956 to include
in its annual report to Congress any recommendations for
changes in that Act which, in the opinion of the Board, would
be desirable. In a special report submitted to Congress on
May 7, 1958, the Board recommended a number of amendments to the Bank Holding Company Act which would tend
to clarify ambiguities in the law and facilitate its administration. The Board continues to urge favorable consideration of
those amendments.
LITIGATION AND HEARINGS
On August 1, 1958, a suit for declaratory judgment was
filed against the Members of the Board of Governors of the
Federal Reserve System by Old Kent Bank and Trust Company, Grand Rapids, Michigan, in the United States District
Court for the District of Columbia, challenging, among other
things, the statutory authority of the Board to approve or
disapprove the operation of branches acquired by a State
member bank as a result of a merger and the authority of the
Board to consider competitive effects in passing upon the
operation of such branches. On April 22, 1959, the District
Court granted a motion for summary judgment in favor of the
Board and denied a cross-motion for summary judgment filed
by plaintiff. On April 30, an order to this effect was signed
and filed. The case is now pending in the United States Court
of Appeals for the District of Columbia.
On January 7, 1959, a suit raising substantially the same
question was filed by Wachovia Bank and Trust Company,
Winston-Salem, North Carolina, and the parties have stipulated that the answer of the Board of Governors need not be
filed until final disposition of the Kent Bank case.
On September 18, 1959, a petition was filed in the United
States Court of Appeals for the Eighth Circuit to review an
order of the Board of Governors denying an application of
First Bank Stock Corporation under Section 4 ( c ) ( 6 ) of the
FEDERAL RESERVE SYSTEM
95
Bank Holding Company Act of 1956. The time within which
the Department of Justice may file its brief on behalf of the
Board has been extended to March 8, 1960.
Following a hearing held in connection with an administrative proceeding regarding capital adequacy instituted by
the Board with respect to The Continental Bank and Trust
Company, Salt Lake City, Utah, the trial examiner on March
16, 1959, submitted his Report and Recommended Decision
in which he recommended that the proceeding be dismissed.
Oral argument was presented to the Board on July 22, 1959;
and the matter is now pending before the Board for its determination.
RESERVE BANK OPERATIONS
Loan guarantees for defense production. Incident to the Defense
Production Act of 1950, the Departments of the Army, Navy,
Air Force, Commerce, Interior, and Agriculture, the General
Services Administration, the National Aeronautics and Space
Administration, and the Atomic Energy Commission are
authorized to guarantee loans made by commercial banks
and other private financing institutions in connection with
defense contracts. The Federal Reserve Banks act as fiscal
agents of the guaranteeing agencies under Regulation V.
During 1959 the guaranteeing agencies authorized the issuance of 20 guarantee agreements covering loans amounting to
$84 million. On December 31, 1959, guarantee agreements
in force authorized credit totaling $438 million, of which
$340 million represented actual loans outstanding and $98
million represented additional credit available to borrowers.
Of the total loans outstanding, 75 per cent on the average was
guaranteed. During the year approximately $1,147 million
was advanced on V loans, most of which are revolving credits.
Authority for the V-loan program, unless further extended,
will terminate on June 30,1960.
Volume of operations. Table 5 on page 113 shows the volume
of operations in the principal departments of the Federal
Reserve Banks for the years 1955-59. Volume was larger in
1959 than in 1958 in all activities except postal money orders,
96
ANNUAL REPORT OF BOARD OF GOVERNORS
which continued a downward trend. The number of discounts
and advances increased sharply over 1958, but the amount
involved was somewhat lower than in 1957, a peak year.
Upward trends continued in coin, checks (other than Government and postal money orders), and transfers of funds. The
amount of currency received and counted was the largest ever
recorded.
Earnings and expenses. Current earnings, current expenses,
and the distribution of net earnings of each Federal Reserve
Bank during 1959 are shown in detail in Table 6 on pages
114-15, and a condensed historical statement is shown in
Table 7 on pages 116-17. The table below summarizes the
earnings and expenses and the distribution of net earnings for
1959 and 1958.
EARNINGS, EXPENSES, AND DISTRIBUTION OF N E T EARNINGS OF
FEDERAL RESERVE B A N K S , 1959 AND 1958
[In thousands of dollars]
Item
1959
1958
Current earnings
Current expenses
886,226
144,703
742,068
137,722
Current net earnings
Net additions to current net earnings1
741,523
98,248
604,346
124
Net earnings before payments to U.S. Treasury
Dividends paid
Paid U.S. Treasury (interest on F. R. notes)...
839,771
22,722
910,650
604,470
21,197
524,059
Transferred to surplus
-93,601
59,214
i Includes net profits on sales of U.S. Government securities of $190,000 in 1959
and $157,000 in 1958; and, in 1959, $98 million transferred from reserves for contingencies.
Current earnings of $886 million in 1959 were 19 per cent
more than in 1958, largely because of an increase of $123
million in earnings on U.S. Government securities. The increase in the earnings on such securities reflected the combined
effect of increases in average yields and average holdings, as
is shown in the table on page 99. A growth of $21 million
in earnings from discounts and advances reflected higher discount rates and larger holdings. Current expenses of $145
FEDERAL RESERVE SYSTEM
97
million were about 5 per cent more than in 1958. Current
net earnings amounted to $742 million, an increase of 23 per
cent from 1958.
After allowing for net additions of $98 million to current
net earnings, resulting almost entirely from the discontinuance
of certain reserves for contingencies, net earnings before dividends and before payments to the U.S. Treasury amounted to
$840 million.
Statutory dividends to member banks amounted to $23
million, about $2 million more than in 1958. This expansion
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 U.S. Treasury as interest on Federal Reserve notes amounted to $911 million in 1959. These payments consisted of (a) all net earnings ($815 million) after
the dividends of $23 million and after provision of $2 million
for raising surplus to the level of subscribed capital at the two
Banks where surplus was below that amount, and (b) the
amount (totaling $96 million) by which the surplus at the
other 10 Banks exceeded subscribed capital.
The 1959 payments to the Treasury reflect a conclusion
reached by the Board, after consultation with the Federal
Reserve Banks, that the maintenance of surplus at the level
of subscribed capital (which is twice paid-in capital) would
be appropriate in the light of present circumstances. The
surplus accounts of the Federal Reserve Banks had been building up over the years and at a number of Banks exceeded
subscribed capital by substantial amounts. It was therefore
decided to discontinue the practice followed in the years
1947-58 of adding 10 per cent of the annual net earnings of
the Federal Reserve Banks to the surplus accounts, and to pay
to the Treasury the amounts by which the surplus accounts
exceeded the level of subscribed capital.
These decisions, along with the decision to discontinue certain reserves for contingencies, which had been set up largely
out of earnings in 1948 and 1949, increased the 1959 payment
to the Treasury by $266 million. Of this increase, $72 million
98
ANNUAL REPORT OF BOARD OF GOVERNORS
represented the difference between 90 and 100 per cent of
net earnings, $96 million the surplus reductions, and $98
million the discontinued reserves for contingencies. The
amounts resulting from the surplus reductions and from the
discontinued contingency reserves are nonrecurring items.
The decision to pay to the Treasury all net earnings after
dividends and surplus allowances, rather than 90 per cent of
such earnings, will have a continuing effect on the Treasury's
income, although the amount will depend upon the financial
experience of the Reserve Banks.
The practice of paying part of the earnings of the Federal
Reserve Banks to the Treasury had its origin in the original
Federal Reserve Act. The extent of the payments, however,
has changed from time to time during the intervening years.
Prior to 1933 the Federal Reserve Act included a provision
under which each Federal Reserve Bank was required to pay
a franchise tax to the Government equal to 90 per cent of its
net earnings after it had accumulated a surplus equal to its
subscribed capital. The Banking Act of 1933 required each
Federal Reserve Bank to pay an amount equal to one-half of
its surplus on January 1, 1933, for capital stock of the Federal
Deposit Insurance Corporation. These payments amounted
to $139 million and reduced the surplus of the Federal Reserve
Banks to an equivalent figure, which was considerably less
than one-half of their subscribed capital at that time. Congress, therefore, eliminated the franchise tax in order to permit
the Federal Reserve Banks to rebuild their surplus accounts
from future earnings.
By the end of 1946 the surplus of each Federal Reserve
Bank was at least equal to its subscribed capital and their
combined surplus totaled $440 million. Under those circumstances the Board concluded that it would be appropriate to
accomplish the purpose of the earlier franchise tax by establishing such rates of interest on outstanding Federal Reserve
notes not covered by gold certificate collateral as would make
it possible to transmit to the Treasury approximately 90 per
cent of the net earnings of each Federal Reserve Bank after
dividends and after such provisions as might be necessary to
99
FEDERAL RESERVE SYSTEM
bring surplus up to subscribed capital. This procedure began
in 1947 and continued through 1958.
Holdings of loans and securities. Average daily holdings of loans
and securities, excluding industrial loans, amounted to
$27,036 million during 1959, $2,053 million more than during 1958. Holdings of discounts and advances increased $516
million, and holdings of U.S. Government securities increased
$1,544 million. The average rate of interest earned on discounts and advances rose from 2.28 to 3.42 per cent, reflecting
increases in the discount rate, and the average rate on Government securities rose from 2.98 to 3.27 per cent. The accompanying table shows holdings, earnings, and average interest
rates on loans and securities held by the Federal Reserve
Banks during the past three years.
RESERVE BANK EARNINGS ON LOANS AND SECURITIES,
1957-59
[Dollar amounts in thousands]
Item and year
Average daily holdings:2
1957
1958
1959
Total*
Discounts
and
advances
U.S.
Acceptances Government
securities
$24,221,645
24,982,770
27,035,989
$850,097
295,250
810,981
$25,142
38,904
32,246
$23,346,406
24,648,616
26,192,762
Earnings:
1957
1958
1959
763,011
741,763
885,831
26,792
6,745
27,728
848
806
1,075
735,371
734,212
857,028
Average rate of interest (per
cent):
1957
1958
1959
3.15
2.97
3.28
1
2
3.15
2.28
3.42
3.37
2.07
3.34
3.15
2.98
3.27
Excludes industrial loans, the authority for which expired Aug. 21,1959.
Based on holdings at opening of business.
Foreign and international accounts. Gold and dollar assets held
for foreign account at the Federal Reserve Banks increased
$1,309 million in 1959. At the end of the year holdings
amounted to $13,424 million, representing $8,032 million of
earmarked gold, $4,477 million of U.S. Government secu-
100
ANNUAL REPORT OF BOARD OF GOVERNORS
rities (largely Treasury bills), $345 million in dollar deposits,
$82 million of bankers' acceptances purchased through Federal Reserve Banks, and $488 million of miscellaneous assets.
The latter item includes mainly dollar bonds issued by foreign
countries and international institutions.
In 1959 the aggregate gold and dollar assets held for the
International Bank for Reconstruction and Development, the
International Finance Corporation, and the International
Monetary Fund increased $2,772 million, reflecting principally the United States payment of its increased subscription
($1,375 million) to the Monetary Fund and payments by
other member countries of the gold portions of their increased
subscriptions.
During the year new accounts were opened for the European Investment Bank, the Italian Foreign Exchange Office,
the Bank of Taiwan, and the recently organized Central Banks
of Malaya and Tunisia.
As in the past several years loans secured by gold collateral
were of relatively minor importance. Loans of $17.9 million
outstanding at the beginning of 1959 were repaid. New
arrangements, including a stand-by commitment, amounted to
a total of $41.1 million, of which $5 million was outstanding
at the end of the year. Loans on gold are ordinarily made to
foreign monetary authorities to help them meet dollar requirements of a clearly temporary nature.
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.
Bank premises. During the year the Board authorized the
construction of an addition to, and alteration of, the Federal
Reserve Bank building in Atlanta.
FEDERAL RESERVE SYSTEM
101
With the approval of the Board, property adjoining the
Federal Reserve Branch in Pittsburgh was acquired to avoid
street parking of armored trucks awaiting entrance to the
building.
BOARD OF GOVERNORS—INCOME AND EXPENSES
The accounts of the Board for the year 1959 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, 1959, and the related assessments and expenditures for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding
year. Our examination of thefinancialstatements 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 4, 1960.
102
ANNUAL REPORT OF BOARD OF GOVERNORS
ASSETS, LIABILITIES AND FUND BALANCES—DECEMBER 31,
1959
ASSETS
Cash, exclusive of $177,845 representing withheld taxes
Miscellaneous receivables and travel advances
Stockroom and cafeteria inventories, at cost
$ 824,969
20,394
20,239
Total assets of operating fund
865,602
Property and equipment, at cost:
Land and improvements
Building
Furniture and equipment
792,852
3,940,050
606,719
Total assets of property and equipment fund
5,339,621
Total assets
$6,205,223
LIABILITIES AND F U N D BALANCES
Accounts payable and accrued expense
Fund balances:
Operating fund—
Balance December 31, 1958
Excess of assessments over expenditures for the year
Property and equipment fund—
Balance December 31, 1958
Expenditures for additions
Excess of cost of assets disposed of over trade-in
allowances
Total liabilities and fund balances
$ 269,691
$ 328,356
267,555
595,911
5,233,320
139,430
(33,129)
5,339,621
$6,205,223
FEDERAL RESERVE SYSTEM
103
ASSESSMENTS AND EXPENDITURES
Y E A R E N D E D DECEMBER 31,
1959
ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS:
For Board expenses and additions to property and equipment
For expenditures made on behalf of the Federal Reserve Banks
Total assessments
$ 6,470,600
4,943,223
$11,413,823
EXPENDITURES:
For printing, issue and redemption of Federal Reserve Notes, paid on
behalf of the Federal Reserve Banks
$ 4,943,223
For expenses of the Board:
Salaries
$4,045,223
Retirement and insurance contributions
539,927
Traveling expenses
274,627
Professional and contractual services:
Economic surveys
281,244
Legal, consultant and audit fees
92,573
Other
30,770
Printing and binding
250,083
Telephone and telegraph
90,626
Postage and expressage
78,180
Equipment and other rentals
142,200
Operation of cafeteria, net
52,656
Heat, light and power
52,064
Stationery and office and other supplies
54,094
Repairs, maintenance and alterations
30,541
Books and subscriptions
19,708
Insurance
4,866
Miscellaneous, net
24,233
6,063,615
For property and equipment
Total expenditures
EXCESS OF ASSESSMENTS OVER EXPENDITURES FOR THE YEAR
139,430
$11,146,268
$
267,555
The Board's expenses for 1959 include the following
special items: (1) an expenditure of $45,468 incurred in connection with the continuation of the Small Business Financing Study initiated in 1957; (2) an expenditure of
$129,745 for Quarterly Consumer Buying Intentions Surveys; and (3) an expenditure of $87,905 incident to Civil and
Defense Mobilization.
TABLES
106
ANNUAL REPORT OF BOARD OF GOVERNORS
NO. 1 — STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (EN DETAIL)
DECEMBER 31, 1959
[Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollarsl
ASSETS
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
1,015,555
1,800,000
6,520,087
8,850,000 18,185,642
Redemption fund for Federal Reserve notes
978,083
Total gold certificate reserves
Federal Reserve notes of other Federal Reserve Banks
Other cash:
United States notes
Silver certificates
Standard silver dollars
National bank notes and Federal Reserve Bank notes
Subsidiary silver, nickels, and cents
Total other cash
Discounts and advances secured by U.S. Govt. securities:
Discounted for member banks
Discounted for others
Other discounts and advances:
Discounted for member banks
Foreign loans on gold
Total discounts and advances
Acceptances:
Bought outright
Held under repurchase agreement
U.S. Government securities:
Bought outright:
Bills
Certificates
Notes
Bonds
19,163,725
524,450
29,305
270,566
7,932
1,013
50,580
35936
452,417
309
5,000
44,168
31,173
2,605,765
10,506,993
11,010,298
2,483,771
Total bought outright
26,606,827
41,500
Total U.S. Government securities
Total loans and securities
Due from foreign banks
Cash items in process of collection:
Transit items
Exchanges for clearing house
Other cash items
Total cash items in process of collection
Bank premises:
Land
Buildings (including vaults)
Fixed machinery and equipment
Total buildings
Less depreciation allowances
Total bank premises
Other assets:
Miscellaneous assets acquired account industrial loans
Less valuation allowances
Total other assets
Total assets
5,309
457,726
Held under repurchase agreement
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
452,417
26,648,327
27,181,394
15
6,036,323
202,263
198,720
6,437,306
95,985
44,963
140,948
65,051
23,678
75,897
99,575
25
25
3,525
251,892
775
2,268
1,970
617
693
261,740
54,027,601
FEDERAL RESERVE SYSTEM
107
NO. 1 — STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL)
— Continued
LIABILITIES
Federal Reserve notes:
Outstanding (issued to Federal Reserve Banks)
29,447,692
Less: Held by issuing Federal Reserve Banks
1,053,370
Forwarded for redemption
132,355 1,185,725
Federal Reserve notes, net (includes notes held by U.S. Treasury and by Federal
Reserve Banks other than issuing Bank)
28,261,967
Deposits:
Member bank reserves
18,173,970
U.S. Treasurer—general account
503,778
Foreign
344,788
Other deposits:
Nonmember bank—clearing accounts
79,233
Officers* and certified checks
8,991
Federal Reserve exchange drafts
Reserves of corporations doing foreign banking or financing
18,923
International organizations1
74,223
All other
512,365
Total other deposits
693,735
Total deposits
Deferred availability cash items
Other liabilities:
Accrued dividends unpaid
Unearned discount
Discount on securities
Sundry items payable
Suspense account
All other
19,716,271
4,847,216
538
23,437
4,446
153
46
Tota Jother liabilities
28,620
Total liabilities
52,854,074
CAPITAL ACCOUNTS
Capital paid in
Surplus
Other capital accounts:
Reserves for registered mail losses
Total other capital accounts2
Total liabilities and capital accounts
Contingent liability on acceptances purchased for foreign correspondents
1
387,404
774,808
11,316
11,316
54,027,601
82,006
Includes International Bank for Reconstruction and Development, International Monetary Fund,
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 6, pp. 114-15.
NO. 2 —STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1959 AND 1958
[In thousands of dollars]
New York
Boston
Total
Item
1959
Philadelphia
1958
1959
1958
Cleveland
1959
Richmond
1958
1959
1959
1958
18,185,642 19,012,893
978,083
937,919
889,340
59,652
888,156
55,671
4,685,959
213,325
5,277,367 1,050,113 1,037,847 1,634,684 1,443,593 1,067,069 1,033,459
198,412
60,965
60,195
87,708
87,750
79,240
85,803
19,163,725 19,950,812
5,475,779 1,111,078 1,098,042 1,722,392 1,531,343 1,146,309 1,119,262
1959
1958
1958
ASSETS
Redemption fund for Federal Reserve notes..
948,992
943,827
4,899,284
Federal Reserve notes of other Banks
Other cash
524,450
359,396
476,993
336,474
40,058
20,849
41,061
19,758
90,056
54,975
83,865
60,901
43,544
18,085
47,991
16,950
34,133
32,180
29,107
28,071
69,408
25,494
57,452
22,112
Discounts and advances:
Secured by U.S. Govt. securities
Other
452,417
5,309
45,963
18,000
336
700
385
200
1,020
327
201,380
1,400
6,520
5,048
42,725
330
5,485
1,235
300
450
2,775
1,593
5,050
250
1,575
913
Acceptances:
Boiieht outricht
Held under repurchase agreement
44,168
31,173
43,290
5,799
44,168
31,173
43,290
5,799
Total gold certificate reserves
*-*
O
00
U.S. Government securities:
Held under repurchase agreement
Total loans and securities
Diie from foreisn banks . .
Cash items in process of collection
Total assets.
26,606,827 26,251,512 1,442,489 1,429,342
41,500
95,000
6,695,661
41,500
6,619,791 1,517,281 1,509,042 2,303,566 2,323,915 1,705,178 1,708,764
95,000
27,181,394 26,459,900 1,443,574 1,430,889
7,015,282
6,775,448 1,560,336 1,515,762 2,304,316 2,328,283 1,710,478 1,711,252
14
1,280,699
9,858
65,069
14
1,215,353
10,313
36,477
15
6,437,306
99,575
261,740
15
5,630,684
93,636
146,641
1
467,341
4,328
13,956
1
394,830
4,036
14,639
1
332,939
4,245
8,181
1
565,404
9,315
22,452
1
543,121
9,432
12,768
1
502,789
6,651
16,639
1
433,573
6,654
9,479
54,027,601 53,095,155 2,939,099 2,853,631 13,415,227 13,658,140 3,146,549 3,024,111 4,690,193 4,482,126 3,477,769 3,359,785
i After deducting $11,000 participations of other Federal Reserve Banks.
1
405,506
4,705
7,884
LIABILITIES
Federal Reserve notes
Deposits:
Member bank reserves
U.S. Treasurer—general account
Foreign
Other
28,261,967 27,872,023 1,614,203 1,630,425
6,646,973
6,512,632 1,807,990 1,751,391 2,570,372 2,571,638 2,131,600 2,135,757
18,173,970 18,503,991
503,778
358,364
344,788
272,485
693,735
390,851
800,636
28,362
19,140
26,422
771,057
21,009
13,395
2,202
5,092,824
65,278
2 94,228
367,074
5,570,787
35,306
2 103,755
307,036
892,994
37,645
22,968
32,548
863,417 1,460,303 1,344,045
4,656
22,996
32,804
20,915
16,215
31,320
5,054
4,013
26,294
789,451
56,937
17,400
28,317
764,580
29,422
11,985
4,635
Total deposits
Deferred availability cash items
Other liabilities
19,716,271 19,525,691
4,847,216 4,335,126
28,620
21,683
874,560
390,252
1,474
807,663
338,324
1,069
5,619,404
808,203
7,453
6,016,884
755,659
5,376
986,155
281,609
1,513
906,641 1,550,721 1,374,670
275,287 457,026 413,145
1,853
1,253
2,439
892,105
399,444
1,592
810,622
343,293
1,130
Total liabilities
52,854,074 51,754,523 2,880,489 2,777,481 13,082,033 13,290,551 3,077,267 2,934,572 4,580,558 4,361,306 3,424,741 3,290,802
CAPITAL ACCOUNTS
Capital paid in
Surplus
387,404
774,808
11,316
363,098
868,410
109,124
19,166
38,332
1,112
18,121
50,116
7,913
110,452
220,905
1,837
105,850
238,902
22,837
22,819
45,638
825
21,894
59,607
8,038
36,265
72,530
840
34,246
76,643
9,931
17,283
34,566
1,179
16,439
44,846
7,698
Total liabilities and capital accounts.... 54,027,601 53,095,155 2,939,099 2,853,631 13,415,227 13,658,140 3,146,549 3,024,111 4,690,193 4,482,126 3,477,769 3,359,785
Ratio of gold certificate reserves to deposit
and F. R. note liabilities combined
Contingent liability on acceptances purchased
Industrial loan commitments.
39.9%
42.1%
38.1%
38.7%
39.9%
43.7%
39.8%
41.3%
41.8%
38.8%
37.9%
38.0%
82,006
67,799
975
4,526
3,864
3 22,750
3 19,119
5,432
4,678
7,407
6,034
4,115
3,458
29,447,692 29,057,573 1,703,036 1,703,455
6,945,921
73,030
298,948
28,261,967 27,872,023 1,614,203 1,630,425
6,646,973
6,512,632 1,807,990 1,751,391 2,570,372 2,571,638 2,131,600 2,135,757
10,650,000 11,073,000
530,000 650,000
99,778
25,393
19,530,000 18,615,000 1,250,000 1,150,000
2,900,000
4,200,000
700,000 640,000 920,000 920,000 700,000 725,000
5,285
42,725
4,000,000 1,200,000 1,200,000 1,750,000 1,750,000 1,550,000 1,530,000
30,279,778 29,713,393 1,780,000 1,800,000
7,100,000
6,920,000 1,942,725 1,845,285 2,670,000 2,670,000 2,250,000 2,255,000
FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes:
Issued to Federal Reserve Bank by
Federal Reserve Agent and outLess held by issuing Bank, and forwarded
for redemption
Federal Reserve notes, net4
Collateral held by Federal Reserve Agent for
notes issued to Bank:
Gold certificate account
Eligible paper
U.S. Government securities. •
Total collateral
3
8
4
1,185,725
1,185,550
88,833
6,827,935 1,867,380 1,815,156 2,645,846 2,645,549 2,222,859 2,223,439
315,303
59,390
63,765
75,474
91,259
87 682
2,920,000
After deducting $250,560,000 participations of other Federal Reserve Banks on Dec. 31, 1959, and $168,730,000 on Dec. 31, 1958.
After deducting $59,256,000 participations of other Federal Reserve Banks on Dec. 31, 1959, and $48,680,000 on Dec. 31, 1958.
Includes Federal Reserve notes held by U.S. Treasury and by Federal Reserve Banks other than the issuing Bank.
73,911
NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1959 AND 1958—Continued
[In thousands of dollars]
Item
Chicago
Atlanta
1959
1958
1959
St. Louis
1958
1959
Minneapolis
1958
1959
Kansas City
Dallas
1958
1959
1958
1959
SanfFrancisco
1958
1959
1958
ASSETS
Gold certificate account
Redemption fund for Federal Reserve
notes
899,380
Total gold certificate reserves
964,008
64,628
864,742 3,000,460 3,326,227
723,963
753,490
358,239
458,383
707,873
748,339
713,196
182,357
167,634
46,241
44,661
23,410
22,463
45,167
43,533
31,037
921,779 3,182,817 3,493,861
770,204
798,151
381,649
480,846
753,040
791,872
744,233
17,588
8,664
24,273
15,272
11,317
14,662
33,442
16,519
28,333
14,687
43,297
46,246
43,582
38,862
42,453
195
18,408
798
8,650
260
750
931
30,200
560
2,005
57,037
Federal Reserve notes of other Banks
62,570
28,685
53,143
26,560
39,909
65,447
40,267
58,734
20,751
23,922
23,287
26,513
23,009
11,722
Discounts and advances:
Secured by U.S. Govt. securities
Other
45,300
235
4,765
805
43,470
939
3,885
2,560
14,600
185
1,600
662
17,589
120
430
9
721,519 2,455,366 2 459 771
29,845
84,353
84,915
751,364 2,539,719 2,544,686
Acceptances:
U.S. Government securities:
Total loans and securities
Cash items in process of collection
Other assets
Total assets
3 Less than $500.
1,402,286 1,335,756 4,604,365 4,585,614 1,082,100 1,070,904 606,024
552,253 1,146,887 1,120,493 1,061,985 1,028,298 3,039,005 2,967,340
1,447,821 1,341,326 4,648,774 4,592,059 1,096,885 1,073,166 623,733
552,692 1,189,535 1,139,699 1,070,895 1,029,979 3,069,765 2,969,345
1
1
2
2
1
1
514,749 453,214 1,036,246 902,999 270,271 232,399
9,542
15,597
11,824
7,036
6,862
9,294
14,899
10,528
5,917
8,470 44,898 24,838
163,981
5,059
5,938
145,320
5,193
3,076
1
1
1
1
1
1
309,923 254,995 294,454 242,747 636,619 468,518
11,339
7,786
12,178
12,529
4,636
4,799
10,599
5,917
29,966
16,504
12,157
7,130
3,042,275 2,813,787 9,033,690 9,124,584 2,199,598 2,166,296 1,215,091 1,213,379 2,308,837 2,224,475 2,181,482 2,080,814 6,377,791 6,094,027
LIABILITIES
Federal Reserve notes
Deposits:
Member bank reserves
U.S. Treasurer—general account
Foreign
Other
Total deposits
Deferred availability cash items.
Other liabilities
1,604,441 1,476,020 5,324,442 5,302,6811,245,164 1,238,269
608,162
598,279 1,117,824 1,101,081 815,895
798,613 2,774,901 2,755,237
875,240
26,581
16,356
13,693
846,398 2,637,889 2,809,518 620,895
48,619
41,412
32,479
39,321
33,605
12,876
10,575
51,504
8,404
20,532
2,347
65,504
669,057
19,283
8,695
3,141
404,178 419,895
23,771
24,459
8,352
5,640
10,390
961
840,994
44,445
13,572
14,654
817,730
38,271
9,165
3,279
931,870
443,145
1,473
891,799 2,794,218 2,900,146 695,715
380,576 747,318 721,508 218,371
1,085
1,080
3,967
5,236
700,176
174,787
792
446,691
132,062
1,512
913,665
228,113
1,141
868,445 1,047,592 1,015,397 2,963,575 2,782,293
200,590 249,555 196,451 492,118 405,729
848
710
2,743
959
2,672
450,955
129,777
933
973,362
44,231
18,096
11,903
969,769 2,785,2042,657,738
62,991
30,630
51,234
38,976
12,220
26,320
76,404
2,778
47,001
2,980,929 2,749,475 8,871,214 8,928,302 2,160,335 2,114,024 1,188,427 1,179,944 2,260,743 2,170,964 2,114,001 2,011,171 6,233,337 5,945,931
Total liabilities.
CAPITAL ACCOUNTS
Capital paid in
Surplus
Other capital accounts.
Total liabilities and
counts
20,153
40,306
887
18,371
39,474
6,467
53,667
107,334
1,475
49,665
132,159
14,458
12,931
25,862
470
12,348
33,746
6,178
8,790
17,580
294
8,387
20,785
4,263
15,860
31,720
514
14,848
32,935
5,728
22,322
44,645
514
20,684
43,436
5,523
47,695
95,390
1,369
42,245
95,761
10,090
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
,
1,215,091 1,213,379 2,308,837 2,224,475 2,181,482 2,080,814 6,377,7916,094,027
3,042,275 2,813,787 9,033,690 9,124,584 2,199,598 2,166,296
38.0%
38.9%
39.2%
42.6%
39.7%
36.2%
1,975
Federal Reserve notes:
Issued to Federal Reserve Bank by
Federal Reserve Agent and outstanding
, 1,684,882 1,556,710 5,483,344 5,474,3131,307,000 1,296,838
Less held by issuing Bank, and for61,836
58,569
warded for redemption
80,441
80,690 158,902 171,632
622,690
3,051
12,180
9,695
3,045
41.2%
2,509
3,868
45.8%
37.1%
40.2%
39.9%
2,644
940
4,280
614,338 1,155,248 1,137,662
869,505
1,627
3,210
41.4%
3,526
44.3%
9,218
46.0%
7,594
FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes, net 4 .
1,604,441 1,476,020 5,324,442 5,302,6811,245,164 1,238,269
Collateral held by Federal Reserve Agent
for notes issued to Bank:
500,000 475,000 1,900,000 2,200,000 430,000
Gold certificate account
14,600
Eligible paper
U.S. Government securities
1,200,000 1,100,000 3,700,000 3,400,000 935,000
Total collateral.
430,000
1,600
935,000
1,379,600 1,366,600
1,700,000 1,575,000 5,600,000 5,600,000
14,528
16,059
36,581
53,610
608,162
598,279 1,117,824 1,101,081 815,895
180,000
200,000
450,666 425,666
630,000
300,000
42,453
870,000
300,000
18,508
850,000
625,000 1,212,453 1,168,508
4 Includes Federal Reserve notes held by U.S. Treasury and by Federal Reserve Banks other than the issuing Bank.
37,424
290,000
849,075 2,939,981 2,913,103
50,462
165,080
157,866
798,613 2,774,901 2,755,237
313,000 1,300,000 1,300,000
'625,666 '575,666 i, 800,666 1,7*00,666
915,000
888,000 3,100,000 3,000,000
NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL
RESERVE BANKS, END OF DECEMBER 1959, 1958, AND 1957
[In thousands of dollars]
Type of issue
Rate of
interest
(per cent)
Change during
December 31
1959
1958
1957
1959
1958
Treasury bonds:
1956-58
1957-59
1956-59
1959-62 June..
1959-62 Dec..,
1965 Feb
1966Aug
1962-67
1963-68
1964-69 June.,
1964-69 Dec..
1965-70
1966-71
1967-72 June.,
1967-72 Sept..,
1967-72 Dec..,
1985 May
1990 Feb
Total Treasury bonds.
Treasury notes:
Aug. 15, 1960-C.
May 15, 1961-B.
Feb. 15, 1963-A.
May 15, 1964-A.
Total Treasury notes.
Certificates:
Feb. 14, 1958..
Aug. 1,1958..
Dec. 1,1958..
Feb. 14,1959.,
Aug. 1, 1959.,
Nov. 15, 1959.,
Feb. 15,1960.,
Nov. 15, I960.,
Total certificates.
Treasury bills:
Tax anticipation
Other:
Due within 3 mos..
Due 3-6 mos
Due over 6 mos...
Total Treasury bills..,
Repurchase agreements.
Total holdings.
319,849
693,765
20,300
7,000
56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758
5,200
22,800
319,849
693,765
20,300
7,000
56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758
5,200
22,800
2,483,771
2,483,771
5,500,000
2,857,565
10,000
2,642,733
2,857,565
10,000
11,010,298
12,493
339,096
21,690
319,849
693,765
2,867,565
5,506,993
5,000,000
10,506,993
5,506,993'
8,142,733
5,000,000
-12,493
-339,096
-21,690
+20,300
+7,000
56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758
+5,200
+22,800
2,801,750
-317,979
+5,500,000
+2,642,733
+8,142,733
5,494,500
6,581,547
7,857,565
-5,506,993
-8,142,733
-5,000,000
+5,506,993
+5,000,000
-8,142,733
+2,857,565*
+ 10,000
+2,867,565
-5,494,500
-6,581,547
-7,857,565
+5,506,993
+8,142,733
+5,000,000
18,649,726
19,933,612
-1,283,886
2,162,000
380,365
16,400
2,233,950
16,500
983,573
-71,950
+ 363,865
+ 16,400
+ 1,250,377
+ 16,500
2,605,765
41,500
2,250,450
95,000
983,573
519,350
+355,315
-53,500
+ 1,266,877
-424,350
26,648,327
26,346,512
24,238,285
+301,815
+2,108,227
+47,000
47,000
112
NO. 4 —FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY
CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-591
[In millions of dollars]
Date
Amount
1953—Mar. 18
19
20
21
•22
23
24
25
26
June 5
6
•7
8
9
10
Date
Date
Amount
110 1953—June 11
104
12
189
13
189
•14
189
15
333
16
186
17
63
18
49
19
196
20
196
*21
196
22
374
23
491
24
451
Amount
358 1954__jan. 14
506
15
506
16
506
•17
999
18
1,172
19
823
20
364
21
992
22
992
23
992
•24
908
25
608
26
296
Date
Amount
22 1954—Mar. 15
134
169
16
190
169
169
323 1955 )
424 1956 > no transactions
323 1957 )
306
283
283 1958—Mar. 17
143
283
18
207
203
3
1959—no transactions
• Sunday or holiday.
1
Under authority of Section 14(b) of the Federal Reserve Act. On Nov. 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 14 per cent through Dec. 3, 1957, and lA per cent below prevailing discount rate
of Federal Reserve Bank of New York thereafter. Rate on purchases in 1958 was 2 per cent. For data
for prior years beginning with 1942, see previous Annual Reports. No holdings on dates not shown.
NO. 5 — VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL
RESERVE BANKS, 1955-59
[Number in thousands; amounts in thousands of dollars]
Operation
1959
1958
1956
1957
1955
NUMBER OF PIECES
HANDLED 1
Discounts and advances2 . . ,
Currency received and
counted
Coin received and counted .
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
26
14
25
23
21
4,631,081
9,929,912
4,547,668
9,574,474
4,631,676
9,089,460
4,466,739
8,610,821
4,282,562
8,430,796
393,860
279,939
3,257,839
388,541
295,350
3,085,185
469,158
324,161
2,974,940
539,359
2,822,589
503,516
347,351
2,643,549
13,915
20,853
13,564
20,429
12,546
19,308
11,997
17,813
12,301
16,368
196,063
2,695
193,665
2,426
207,246
2,302
198,519
2,123
191,922
1,960
342,313
AMOUNTS HANDLED
114,469,820
41,306,072
109,665,475
105,058,505
Discounts and advances 2 ...
Currency received and
29,596,570
29,926,319
29,104,496
30,730,461
counted
956,235
922,742
887,418
1,022,660
Coin received and counted .
Checks handled:
99,942,372
102,062,972
114,173,132
U.S. Govt. checks
,
106,724,118
5,297,341
5,796,279
5,941,097
Postal money orders
5,078,641
Allother3
, 1,130,235,860 1,044,984,066 1,044,553,457 ,003,202,371
Collection items handled:
3,032,805
2,563,075
3,866,402
3,695,458
U.S. Govt. coupons paid..
5,663,684
5,495,317
5,758,976
All other
,
5,838,199
Issues, redemptions, and
exchanges of U.S. Govt.
421,612,394
545,489,154
526,037,271
493,391,267
securities
,
Transfers of funds
1,882,069,626 1,643,532,069 1,345,185,037 1,233,509,550
1
2
Two or more checks, coupons, etc.* handled as a single item are counted as one piece.
Exclusive of industrial loans.
3 Exclusive of checks drawn on the Federal Reserve Banks.
113
88,436,422
27,461,048
862,022
123,215,681
5,814,754
927,648,399
2,595,305
5,354,604
429,701,960
1,091,608,891
NO. 6—EARNINGS AND EXPENSES OF FEDERAL ]RESERVE BANKS DURING 1959
Item
Total
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas
City
Dallas
San
Francisco
CURRENT EARNINGS
Discounts and advances $27,727,975
Acceptances
1,075,451
U.S. Govt. securities... 857,027,803
All other
394,887
$1,100,020 $6,123,532
1,075,451
'46,405,883 217,110,107
22,316
62,675
$1,492,831 $2,051,006
$1,559,502 $3,154,478
48,848,408 74,376,718
17,098
28,230
54,981,403 44,762,291 148,276,884 34,803,214 19,181,826 36,792,290 34,008,358 97,480,423
18,329
75,653
49,873
14,996
27,908
33,821
16,252
27,734
$4,913,984
$759,478 $1,105,828 $2,893,655 $1,281,935 $1,291,725
Total current earnings 886,226,116
47,528,219 224,371,765
50,358,337 76,455,954
56,559,234 47,992,422 153,240,741 35,577,689 20,315,562 39,719,766 35,306,545 98,799,882
CURRENT EXPENSES
Salaries:
Officers
Employees
Directors' & other fees.
Retirement contrib
Traveling expenses....
Postage and expressage.
Telephone & telegraph.
Printing, stationery,
and supplies
Insurance
Taxes on real estate...
Depreciation (building)
Light, heat, power,
and water
Repairs and alterations.
Rent
Furniture & equipment:
Purchases
Rentals
All other
Interbank expenses..
6,330,587
82,700,989
525,206
10,242,106
1,813,271
18,254,889
1,471,241
371,085
5,075,485
22,763
613,936
102,753
1,536,002
76,753
1,134,763
18,751,092
62,463
2,209,005
300,278
2,671,911
310,298
386,549
4,329,373
29,218
540,891
85,908
929,962
66,759
544,501
7,251,732
47,972
901,131
165,067
1,408,547
116,077
6,604,851
1,593,582
4,219,629
5,453,240
493,523
96,418
652,740
414,858
1,291,090
267,948
775,780
478,325
334,887
72,525
141,126
268,149
474,184
146,556
352,257
894,687
432,893
140,174
181,477
527,338
1,672,307
1,107,327
194,081
108,070
72,314
5,516
245,112
213,903
7,059
100,183
59,124
5,361
173,708
129,178
16,376
138,137
231,784
142,323
360,634
68,931
49,853
158,706
431,785
369,736
69,063
1,840,005
5,932,257
1,861,954
151,817,523
Subtotal
6,384,083
F. R. currency
Assessment for expenses
6 470,600
of Board of Governors
Total.
164,672,206
458,897
88,242
41,844
772,941
352,839
-512,116
10,369,335
406,681
29,564,476
1,034,845
357,900
1,809,000
11,133,916
32,408,320
7,971,756 13,651,262
385,901
342,799
427,100
583,000
8,741,656 14,620,162
506,975
526,231
5,419,367 5,277,927
64,841
35,151
684,691
694,178
139,747
154,440
1,798,195 1,561,536
156,744
108,311
622,651
12,483,214
43,624
1,534,729
210,654
2,481,289
170,240
472,544
4,644,333
31,969
585,563
104,753
984,791
83,578
334,250
2,635,708
35,770
323,909
96,025
640,432
54,272
522,662
137,431
243,506
390,920
1,015,098
200,260
587,764
623,994
425,109
108,963
168,300
342,624
202,972
78,646
298,277
324,352
400,429
105,534
192,684
168,473
335,274
82,337
166,493
265,706
676,730
156,790
459,225
753,814
157,401
151,418
2,506
111,962
51,826
2,384
219,148
40,007
95,302
126,470
123,717
1,594
86,614
105,750
111
129,828
61,463
78
89,118
20,723
55,853
124,693
77,904
1,941
103,932
401,127
89,598
-8,880
289,568
425,796
117,796
39,430
125,393
1,035,771
274,230
112,997
133,861
318,938
82,261
29,761
174,625
198,425
86,285
18,767
73,036
388,681
108,314
31,721
72,702
319,902
98,689
40,921
195,938
819,360
125,033
86,639
10,914,858 10,725,742
500,821
678,761
21,876,365
1,341,334
8,769,130
325,944
5,695,191
191,963
955,200
241,500
153,000
24,172,900
9,336,573
321,400
304,800
11,737,079 11,709,302
6,040,154
487,394 406,721
536,923
4,321,201 3,817,818 8,693,739
67,661
37,289
46,485
575,648
511,683 1,066,742
116,835
113,608 223,203
1,102,283 935,756 2,204,185
86,083
96,883
145,243
8,417,345 7,467,476 16,394,587
277,935
325,910 571,190
251,100
337,600
729,000
8,946,380 8,130,986 17,694,777
Less reimbursement for
certain fiscal agency
and other expenses.
19,969,500
1,051,471
3,400,581
144,702,706
10,082,446
29,007,740
1,873,578
1,092,912 1,486,985
3,457,458
1,230,950
630,258
1,500,846 1,130,417 2,148,381
7,775,992 12,746,585
10,644,167 10,222,318
20,715,442
8,105,623
5,409,896
7,445,534 7,000,569 15,546,396
965,663
PROFIT AND LOSS
Current net earnings... 741,523,410
Additions to current
net earnings:
Profits on sales of
U.S. Govt. securities (net)
Transferred from
reserves for contingencies (net)..
All other
37,445,773 195,364,026
42,582,344 63,709,370
189,930
10,414
47,981
11,277
16,502
97,658,503
851,294
6,786,590
3,063
20,968,889
953
7,207,970
3,008
Total additions.
Deductions from current net earnings...
98,699,727
6,800,067
21,017,823
452,473
113,088
288,283
Net additions
98,247,253
6,686,980
20,729,540
Net earnings before
payments to U.S.
Treasury
839,770,663
22,721,687
Dividends paid
Paid U.S. Treasury (interest on F. R. notes) 910,649,768
Transferred to surplus. -93,600,791
Surplus, January 1 . . . . 868,408,591
Surplus, December 3 1 . . 774,807,800
44,132,753 216,093,566
1,121,379
6,546,841
54,795,062 227,544,018
9,766
33,137
7,864
4,325
9,083,117
4,506
6,500,112 5,573,662
1,289
266
12,966,576
27,654
5,691,670
3,044
3,964,289
1,071
5,206,431 5,002,666 8,706,533
2,946
802,638
857
7,222,255
9,104,125
6,512,123 5,584,717
13,027,366
5,702,578
3,969,685
5,217,568 5,011,032 9,530,388
2,677
178
416
449
989
1,420
7,219,578
9,103,947
6,510,738 5,584,301
13,026,917
5,701,588
3,968,264
49,801,923 72,813,317
1,349,401
2,150,830
62,421,267 74,774,987
11,746
1,385
8,191
38,589
7,509
4,409
21,216
592
5,178,979 5,006,624 9,529,796
52,425,805 43,354,406 145,552,216 33,173,654 18,873,930 37,453,211 33,312,599 92,783,282
1,016,950 1,163,437
3,110,883
760,610
518,245
928,427 1,307,562 2,747,120
61,688,735 41,359,271 167,266,066 40,296,779 21,560,985 37,739,576 30,796,437 90,406,584
831,697 -24,824,734 -7,883,735 -3,205,300 -1,214,792 1,208,601 -370,423
-11,783,688 -17,997,293 -13,968,746 -4,112,500 -10,279,880
50,115,888 238,901,893 59,606,846 76,642,500 44,845,980 39,474,103 132,158,534 33,746,035 20,785,000 32,934,892 43,436,299 95,760,623
38,332,200 220,904,600
NOTE.—Details may not add to totals because of rounding.
45,915,067 37,770,104 132,525,299 27,472,066 14,905,666 32,274,232 28,305,976 83,253,486
45,638,100 72,530,000
34,566,100 40,305,800 107,333,800 25,862,300 17,579,700 31,720,100 44,644,900 95,390,200
NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-59
Current
earnings
Period or Bank
All Federal Reserve Banks,
by years:
1914-15.
1916
1917
1918
1919
Net earnings
before payments to
U.S. Treasury1
2,173,252 $
5,217,998
16,128,339
67,584,417
102,380,583
2,320,586 $
2,273,999
5,159,727
10,959,533
19,339,633
181,296,711
122,865,866
50,498,699
50,708,566
38,340,449
28,258,030
34,463,845
29,559,049
29,764,173
28,431,126
149,294,774
82,087,225
16,497,736
12,711,286
3,718,180
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
36,424,044
29,701,279
50,018,817
49,487,318
48,902,813
1935
1936
1937
1938
1939
$
-141,459 $
2,750,998
9,582,067
52,716,310
78,367,504
Dividends
paid
217,463
1,742,774
6,804,186 $
5,540,684
5,011,832
Franchise tax
paid to U.S.
Treasury
Paid to U.S.
Treasury
(Sec. 13b)
Transferred
to surplus
(Sec. 13b)
Paid to U.S.
Treasury
(interest on
F. R. notes)
1,134,234
Transferred
to surplus
(Sec. 7)
2,703,894
1,134,234
48,334,341
70,651,778
5,654,018
6,119,673
6,307,035
6,552,717
6,682,496
60,724,742
59,974,466
10,850,605
3,613,056
113,646
82,916,014
15,993,086
-659,904
2,545,513
-3,077,962
9,449,066
16,611,745
13,048,249
32,122,021
36,402,741
6,915,958
7,329,169
7,754,539
8,458,463
9,583.913
59,300
818,150
249,591
2,584,659
4,283,231
2,473,808
8,464,426
5,044,119
21,078,899
22,535,597
28,342,726
27,040,664
26,291,381
29,222,837
29,241,396
7,988,182
2,972,066
22,314,244
7,957,407
15,231,409
10,268,598
10,029,760
9,282,244
8,874,262
8,781,661
17,308
2,011,418
42,751,959
37,900,639
41,233,135
36,261,428
38,500,665
31,577,443
29,874,023
28,800,614
28,911,608
28,646,855
9,437,758
8,512,433
10,801,247
9,581,954
12,243,365
8,504,974
7,829,581
7,940,966
8,019,137
8,110,462
1940
1941
1942
1943
1944
43,537,805
41,380,095
52,662,704
69,305,715
104,391,829
29,165,477
32,963,150
38,624,044
43,545,564
49,175,921
25,860,025
9,137,581
12,470,451
49,528,433
58,437,788
8,214,971
8,429,936
8,669,076
8,911.342
9,500,126
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
1920
1921
1922
1923
1924
£T
°^
Current
expenses
1925
1926
1927
. . . .
1928
1929
1930
1931
1932
1933
1934
.
...
$
-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
607,422
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...
1958...
1959...
412,487,931
595,649,092
763,347,530
742,068,150
886,226,116
110,060,023
121,182,496
131,814,003
137,721,655
144,702,706
302,162,452
474,443,160
624,392,613
604,470,670
839,770,663
17,711,937
18,904,897
20,080,527
21,197,452
22,721,687
251,740,721
401,555,581
542,708,405
524,058,650
910,649,768
32,709,794
53,982,682
61,603,682
59,214,569
-93,600,791
8,176,893,581
2,281,943,114
5,936,077,097
453,205,899
149,138,300
2,188,893
4,428,067,660
-3,657
2 903,480,002
Aggregate for each
Federal Reserve Bank,
1914-59:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
499,495,368
2,089,099,388
531,388,692
734,990,304
494,428,051
423,940,733
162,506,023
507,468,324
151,178,168
209,845,595
150,736,302
128,765,871
340,908,156
1,597,771,407
386,627,854
527,353,355
346,166,040
294,966,975
28,359,265
148,484,948
36,313,146
44,574,397
19,567,434
17,973,974
7,111,395
68,006,262
5,558,901
4,842,447
6,200,189
8,950,561
280,843
369,116
722,406
82,930
172,493
79,264
256,594,214
1,123,183,321
283,774,417
392,099,695
279,851,532
222,385,343
135,411
-433,413
290,661
-9,906
-71,517
5,491
48,427,025
258,161,171
59,968,322
85,763,793
40,445,908
45,572,340
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
1,293,530,852
369,818,690
222,105,322
372,387,064
330,242,356
815,466,762
320,388,345
125,546,485
77,621,400
122,768,636
104,074,419
221,043,548
974,845,604
244,388,968
146,454,556
250,916,059
227,581,303
598,096,818
55,840,360
15,623,389
10,606,350
16,207,994
18,298,584
41,356,054
25,313,526
2,755,629
5,202,900
6,939,100
560,049
7,697,341
151,045
7,464
55,615
64,213
102,083
101,421
770,866,435
195,047,072
109,067,908
191,853,376
159,642,872
443,701,474
11,682
-26,515
64,874
-8,674
55,337
-17,089
122,662,554
30,981,928
21,456,913
35,860,050
48,922,378
105,257,617
8,176,893,581
2,281,943,114
5,936,077,097
453,205,899
149,138,300
2,188,893
4,428,067,660
-3,657
903,480,002
Total 1914-59
Total
1 Current earnings less current expenses, plus and minus profit and loss additions and deductions.
2 The $903,480,002 transferred to surplus was reduced by direct charges of $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation, $500,000 for
charge-off on bank premises, and $3,657 net upon elimination of surplus (Sec. 13b), and was increased by $11,131,013 transferred from reserves for contingencies, leaving a balance of
$774,807,800 on Dec. 31, 1959.
NOTE.—Details may not add to totals because of rounding.
NO. 8—MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—END OF YEAR 1918-59 AND END OF MONTH 1959
[In millions of dollars]
Deposits, other than
member bank reserves,
with F. R. Banks
Reserve Bank credit outstanding
End of
year or
month
i
U.S. Government
securities
Total
Bought
outright
Held
under
repurchase
agreement
Discounts
and
advances
Float
1918
1919
_
^
£
239
300
239
300
1,766
2,215
199
201
1920
1921
1922
1923
287
234
436
134
540
287
234
436
80
536
54
4
2,687
1,144
618
723
320
1924
All
other1
Gold
stock2
Total
Treasury
currency
outstanding3
Currency
in
circulation
Treasury
cash
holdings4
Other
Federal
ReForserve
Treaseign
acury
Other
deposits deposits deposits counts 5
Member bank
reserves
Total
2,498
3,292
2,873
2,707
1,795
1,707
4,951
5,091
288
385
51
31
96
73
25
28
118
208
1,636
1,890
119
40
78
27
52
294
575
262
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
218
214
225
213
211
57
96
11
38
51
5
12
3
4
19
18
15
26
19
20
298
285
276
275
258
1,781
1,753
1,934
1,898
2,220
Required6
Excess6
1,585
1,822
51
68
1,654
99
1,884
2,161
14
59
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
375
315
617
228
511
367
312
560
197
488
8
3
57
31
23
643
637
582
1,056
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
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
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
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
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
I
5
3
10
4
7
12
39
19
17
91
38
28
19
16
11
2,486
2,500
2,612
2,601
2,593
10,125
11,258
12,760
14,512
17,644
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
142
923
634
29
99
172
199
397
226
160
235
242
256
253
261
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
1940
1941
1942
1943
1944
2,184
2,254
6,189
11,543
18,846
2,184
2,254
6,189
11,543
18,846
3
3
6
5
80
80
94
471
681
815
8
10
14
10
4
2,274
2,361
6,679
12,239
19,745
21,995
22,737
22,726
21,938
20,619
3,087
3,247
3,648
4,094
4,131
8,732
11,160
15,410
20,449
25,307
2,213
2,215
2,193
2,303
2,375
368
867
799
579
440
1,133
774
793
1,360
1,204
599
586
485
356
394
284
291
256
339
402
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
249
163
85
223
78
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
977
393
870
1,123
821
862
508
392
642
767
446
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
562
1,499
1,202
1,018
53
196
663
598
44
67
19
156
28
143
1,368
1,184
967
935
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
761
796
668
247
389
346
563
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
1,172
389
-570
763
258
24,391
24,610
23,719
26,252
394
305
519
95
108
50
55
64
1,585
1,665
1,424
1,296
29
70
66
49
26,507
26,699
25,784
27,755
21,690
21,949
22,781
20,534
5,008
5,066
5,146
5,234
31,158
31,790
31,834
32,193
767
775
761
683
394
441
481
358
402
322
356
272
554
426
246
391
925
901
998
1,122
19,005
19,059
19,034
18,504
18,903
19,089
19,091
18,574
102
-30
-57
-70
25,611
25,295
25,497
25,623
25,905
26,025
26,408
26,650
26,563
26,537
26,894
26,607
104
55
462
632
327
500
984
421
1,229
692
330
877
833
458
979
999
862
943
860
846
772
779
951
933
1,158
1,590
41
39
30
30
28
26
25
21
20
28
34
75
27,197
27,020
26,716
27,176
27,777
27,337
28,569
28,181
27,865
28,469
28,946
28,771
20,476
20,479
20,442
20,305
20,188
19,705
19,626
19,524
19,491
19,585
19,566
19,456
5,235
5,241
5,247
5,257
5,273
5,279
5,280
5,283
5,289
5,298
5,307
5,311
31,125
31,129
31,250
31,349
31,638
31,914
31,898
31,973
31,848
31,905
32,489
32,591
721
718
689
711
694
394
397
392
377
396
401
391
447
492
398
539
567
535
522
537
704
488
582
504
274
310
308
266
291
294
278
252
312
284
332
345
345
334
388
341
369
363
337
329
448
335
358
694
1,118
1,215
1,180
1,136
1,219
1,181
1,138
1,260
1,196
1,127
1,242
841
18,878
18,540
18,192
18,396
18,459
17,640
18,905
18,245
17,760
18,818
18,415
7 18,484
18,355
17,972
17,815
18,201
17,975
18,054
18,308
18,140
18,175
18,305
18,050
18,629
523
568
377
195
484
-414
597
105
-415
513
365
-145
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...
1956...
1957...
1958...
24,785
24,915
24,238
26,347
25,715
25,350
25,497
25,703
25,905
26,044
26,543
26,690
26,563
26,631
26,922
26,648
1959—
Jan..
Feb..
Mar.
vo
May*.
June.
July.
Aug.
Sept.
Oct..
Nov.
Dec.
80
19
135
40
94
28
41
1 Principally acceptances and industrial loans; authority for industrial loans expired Aug. 21, 1959.
2 Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation.
3 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.
4
Gold other than that held against gold certificates and gold certificate credits, including the reserve against United States notes and Treasury notes of 1890, monetary silver other
than that held against silver certificates and Treasury notes of 1890, and the following coin and paper currency held in the Treasury: subsidiary silver and minor coin, United States
notes, Federal Reserve notes, Federal Reserve Bank notes, and national bank notes.
5 The total of Federal Reserve Bank capital paid in, surplus, other capital accounts, and other liabilities and accrued dividends, less the sum of bank premises and other assets.
6
These figures are estimated. Prior to 1929 available only on call dates (in 1920 and 1922, the call dates were December 29).
7 Beginning with December 1959, includes cash allowed as reserves.
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, 1959
Cost
Federal Reserve Bank or
branch
Land
Net
book value
Buildings
(including
vaults)!
Fixed machinery and
equipment
Total
$1,628,132
$5,929,169
$2,977,084
$10,534,385
$4,327,764
New York.
Annex...
Buffalo
5,215,656
592,679
406,049
12,183,528
1,451,569
2,550,437
4,886,521
665,908
1,562,577
22,285,705
2,710,156
4,519,063
4,760,865
923,092
4,174,423
Philadelphia.
1,884,357
4,839,506
2,154,452
8,878,315
4,036,175
Cleveland.
Cincinnati.
Pittsburgh.
1,295,490
400,891
1,619,870
6,683,492
1,164,915
2,953,531
3,104,307
1,418,983
2,427,377
11,083,289
2,984,789
7,000,778
2,464,048
1,535,720
5,315,499
Richmond.
Baltimore.
Charlotte..
469,944
250,487
117,479
4,164,663
2,009,381
1,069,026
2,431,502
1,062,747
607,294
7,066,109
3,322,615
1,793,799
3,110,959
2,152,519
1,387,436
Atlanta
Annex
Birmingham..
Jacksonville..
Nashville
New Orleans.
633,387
93,931
331,284
164,004
592,104
277,078
1,722,115
137,100
3,082,345
1,686,250
1,474,678
762,456
362,731
103,867
70,511
694,291
1,009,863
265,700
2,718,233
334,898
3,484,140
2,544,545
3,076,645
1,305,234
1,116,135
298,860
2,965,278
1,832,150
2,946,165
383,791
Chicago.
Detroit..
6,019,757
1,147,734
14,298,893
2,837,712
2,799,699
1,214,162
23,118,349
5,199,608
12,202,173
3,394,464
St. Louis...
Little Rock.
Louisville..
Memphis...
1,675,780
241,105
523,353
128,542
3,171,719
391,611
2,859,819
287,469
2,152,202
198,365
1,003,708
152,627
6,999,701
831,081
4,386,880
568,638
2,182,620
446,102
4,156,924
250,267
Minneapolis.
Helena
600,521
15,709
4,545,592
126,401
2,581,567
62,977
7,727,680
205,087
4,981,678
77,750
Kansas City
Denver
Oklahoma City.
Omaha
545,764
592,271
65,021
445,663
3,521,181
523,041
421,252
1,491,117
1,316,319
86,910
97,588
723,843
5,383,264
1,202,222
583,861
2,660,623
1,310,087
758,026
159,449
2,408,942
Dallas
El Paso
Houston....
San Antonio.
686,243
262,477
695,615
448,596
5,841,096
787,728
1,408,574
1,400,390
466,692
393,301
744,758
570,847
6,994,031
1,443,506
2,848,947
2,419,833
5,171,454
1,333,337
2,669,314
2,164,813
San Francisco..
Annex
Los Angeles...
Portland
Salt Lake City.
Seattle
476,768
247,201
736,867
207,380
480,222
274,772
3,783,530
124,000
4,074,380
1,678,512
1,878,238
1,891,564
1,458,028
30,000
1,491,100
649,432
707,575
642,239
5,718,326
401,201
6,302,347
2,535,324
3,066,035
2,808,575
1,163,612
395,721
4,073,723
1,696,582
2,957,712
1,890,079
Total.
32,490,183
111,207,980
45,349,654
189,047,817
99,575,708
Boston
OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES
Richmond
Kansas Citv..
Oklahoma C i t y . . . .
Los Angeles
Total
146,550
757,491
2 396,219
2 498,005
78,812
40,747
317,336
29,464
112,111
1,917,824
346,800
112,111
146,550
757,491
396,219
498,005
508,259
70,211
146,550
757,491
396,219
498,005
101,416
70,211
2,376,735
1,969,892
1 Includes expenditures incident to construction programs carried in unallocated accounts pending
completion of programs and subsequent allocation of costs to appropriate accounts.
2 Includes cost of building on property.
120
NO. 10—NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF
FEDERAL RESERVE BANKS
[December 31, 1959]
President
Federal Reserve
Bank (including
branches)
Annual
salary
Employees1
Other officers
Number
Annual
salaries
Number
Total
Number
Annual
salaries
Annual
salaries
$35,000
60,000
35,000
35,000
22
57
25
35
$317,800
1,041,500
351,500
498,250
1,358
3,798
992
1,543
$5,144,392
18,868,763
4,182,518
7,137,130
1,381
3,856
1,018
1,579
$5,497,192
19,970,263
4,569,018
7,670,380
Richmond
Atlanta
Chicago
St. Louis
35,000
35,000
50,000
35,000
36
36
39
33
487,500
453,742
544,226
446,700
1,356
1,379
2,838
1,106
5,236,272
5,127,240
12,132,040
4,396,143
1,393
1,416
2,878
1,140
5,758,772
5,615,982
12,726,266
4,877,843
Minneapolis
Kansas City
Dallas
San Francisco
35,000
35,000
35,000
35,000
22
33
31
40
299,250
447,500
384,800
504,000
661
1,055
969
2,024
2,607,771
4,179,929
3,733,686
8,407,378
684
1,089
1,001
2,065
2,942,021
4,662,429
4,153,486
8,946,378
$460,000
409
$5,776,768
19,079
$81,153,262
19,500
$87,390,030
Boston
New York
Philadelphia
Cleveland
Total
1
Includes 871 part-time employees.
NO. 11—FEDERAL RESERVE BANK DISCOUNT RATES
In effect December 31, 1959 1
[Per cent per annum]
Discounts for and advances to member banks
Federal Reserve
Bank
Advances secured by
Government obligations
and discounts of and
advances secured by
eligible paper
(Sees. 13 and 13a)2
Other secured advances
[Sec. 10(b)]
Advances to individuals,
partnerships, or corporations other than member
banks secured by direct
obligations of the U.S.
(last par. Sec. 13)
Boston
New York....
Philadelphia..
Cleveland....
Richmond....
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
San Francisco
1
2
For changes during year, see record of policy actions of the Board of Governors.
Rates shown also apply to advances secured by obligations of Federal intermediate credit banks
maturing within 6 months.
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.
121
NO. 12 —MEMBER BANK RESERVE REQUIREMENTS
[Per cent of deposits]
Net demand deposits1
Time deposits
Effective date of change
Central
reserve
city banks
1917—June 21
1936—Aug.
1937—Mar.
May
1938—Apr.
16
1
1
16
1941_Nov.
1942—Aug.
Sept.
Oct.
1
20
14
3
1948—Feb.
June
Sept.
1949—May
June
Aug.
Aug.
Aug.
Sept.
1951—Jan.
Jan.
1953_july
1954—June
July
27
11
16,24*
1,5*
30, July 1*
1,11*
16, 18*
25
1
11, 16*
25, Feb. 1*
1,9*
16, 24*
29, Aug. 1*
h
2234
26
24
22
20
22
24
26
24
23
24
22
21
20
Reserve
city banks
Central
reserve and
reserve city
banks
Country
banks
10
7
Country
banks
3
15
17%
20
17%
10%
4%
8*
20
12
6
5
6
f
4
6
14
22
21
20
19%
19
18%
18
19
20
19
16
15
14
13
12
18
12
1958—Feb. 27, Mar. 1*
Mar. 20, Apr. 1*
Apr. 17
Apr. 24
8*
ii*
18
6
6
6
5
5
11
5
5
7
14
3
6
3
6
13
14
13
16%
5
16%
In effect Jan. 1, 1960
6
5
Present legal requirements:
Maximum
2 10
2 22
10
2 22
• First-of-month or midmonth dates are changes at country banks, and other dates (usually Thursday)
are at central reserve or reserve city banks.
* Demand deposits subject to reserve requirements which, beginning with Aug. 23, 1935, have been
total demand deposits minus cash items in process of collection and demand balances due from domestic
banks (also minus war loan and Series E bond accounts during the period Apr. 13, 1943-June 30, 1947).
2
Prior to July 28,1959, the minimum and maximum legal requirements against net demand deposits of
central reserve city banks were 13 and 26 per cent, respectively, and the maximum for reserve city banks
was 20 per cent.
NO. 13 —MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS
[Per cent per annum]
Type of deposit
Nov. 1, 1933—
Jan. 31, 1935
Feb. 1, 1935—
Dec. 31, 1935
Jan. 1, 1936—
Dec. 31, 1956
Effective
Jan. 1, 1957
Savings deposits
3
2%
2%
3
Postal savings deposits
3
2%
2%
3
Other time deposits payable:
In 6 months or more
In 90 days to 6 months....
In less than 90 days
3
3
3
2%
m
1
3
2%
NOTE.—Maximum rates that may be paid by member banks as established by the Board of Governors
under provisions of Regulation Q. Under this Regulation the rate payable by a member bank may not in
any event exceed the maximum rate payable by State banks or trust companies on like deposits under the
laws of the State in which the member bank is located. Effective Feb. 1, 1936, maximum rates that may be
paid by insured nonmember commercial banks, as established by the F.D.I.C., have been the same as those
in effect for member banks.
122
NO. 14 —MARGIN REQUIREMENTS*
Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities
Exchange Act of 1934
Per cent of market value]
Jan. 17,
1951Feb. 20,
1953
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. 20,
1953Jan. 4,
1955
Jan. 4,
1955Apr. 22,
1955
Apr. 23,
1955Jan. 15,
1958
Jan. 16,
1958Aug. 4,
1958
Aug. 5,
1958Oct. 15,
1958
Effective
Oct. 16,
1958
75
75
50
50
60
60
70
70
50
50
70
70
90
90
75
50
60
70
50
70
90
i 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 Reports
for 1948, p. 77, and 1953, p. 76.
NO. 15 —FEES AND RATES ESTABLISHED UNDER REGULATION V ON LOANS
GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950
[In effect December 31, 1959]
Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan
Guarantee fee
(percentage of
interest payable
by borrower)
75
80
85
90
95
Over 95
Percentage of
any commitment
fee charged
borrower
10
15
20
25
30
35
40-50
Percentage of loan guaranteed
10
15
20
25
30
35
40-50
Maximum Rates Financing Institution May Charge Borrower
[Per cent per annum]
Interest rate
Commitment rate.
123
NO. 16—PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF ALL BANKS, BY CLASSES, DECEMBER 31, 1959 AND 1958 i
[In millions of dollars]
Mutual savings banks
Commercial banks
All
banks
Item
Member banks
Totaiz
Total
National
State
Insured
nonmember
Noninsured
Total
Insured
Noninsured
December 31, 1959 3
Loans and investments, total
Loans
Investments
U.S. Govt. obligations
Other securities
Cash assets
228,620
137,170
91,450
65,470
25,980
48,820
190,980
112,000
78,980
58,600
20,380
47,990
158,780
95,850
62,930
46,680
16,250
42,330
102.770
60,580
42,190
31,370
10,820
26,880
56,010
35,270
20,740
15,310
5,430
15,450
30,650
15,610
15,040
11,290
3,750
5,360
1,570
550
1,020
640
380
300
37,640
25,170
12,470
6,870
5,600
830
30,570
20,970
9,600
4,980
4,620
670
7,070
4,200
2,870
1,890
980
160
Deposits, t o t a l . . . .
252,660
16,830
135,220
100,610
23,090
217,670
16,830
135,190
65,650
19,700
183,030
16,100
114,330
52,600
16,370
118,610
9,300
73,120
36,190
10,380
64,420
6,800
41,210
16,410
5,990
33,150
460
19,960
12,730
2,980
1,520
270
900
350
360
34,990
28,460
6,530
30
34,960
3,390
30
28,430
2,670
6,530
720
13,991
13,474
6,233
4,542
1,691
6,878
366
517
268
249
.
Other demand
Other time
to Total capital accounts
4
December 31, 1958
Investments
U.S. Govt. obligations
Other securities
Interbank
••
Total capital accounts
1
221,485
121,571
99,914
73,641
26,273
49,911
185,165
98,214
86,951
66,376
20,575
48,990
154,865
84,061
70,804
54,299
16,504
43,188
99,277
52,627
46,650
35,714
10,936
26,781
55,588
31,435
24,153
18,585
5,568
16,407
28,759
13,682
15,077
11,381
3 696
5,504
1,568
484
1,084
707
377
301
36,320
23,357
12,963
7,265
5,698
921
28,980
19,180
9,800
5,215
4,585
752
7,341
4,177
3,163
2,050
1,113
169
250,057
18,174
134,385
97,498
21,705
216,017
18,171
134,353
63,493
18,486
182,816
17,414
114,270
51,132
15,460
116,714
9,802
72,100
34,812
9,643
66,102
7,612
42,170
16,320
5,817
31,696
448
19,185
12,063
2,696
1,532
309
898
325
332
34,040
3
32
34,006
3,219
27,277
2
31
27,243
2,473
6,763
1
6,762
746
14,020
Loans and investments, total
13,501
6,312
4,578
1,734
6,793
399
519
241
278
All banks in the United States. Figures for Dec. 31, 1959, include data for 17 commercial banks in Alaska (including six national members) and 11 commercial banks in Hawaii
(including one national member); previously only one national bank in Alaska and one in the Virgin Islands that became members in 1954 and 1957, respectively, had been included.
2
Total for commercial banks excludes three member.mutual savings banks.
3 Partly estimated.
NO. 17 — MEMBER BANK EARNINGS, BY CLASS OF BANK, 1959 AND 1958 i
Central reserve city banks
Total
Item
New York
1959
1958
1959
1958
Chicago
1959
1958
Reserve
city banks
1959
1958
Country
banks
1959
1958
In millions of dollars
Earnings
On U.S. Govt. securities...
On other securities
On loans
Allother
8,061 7,127
1,394 1,266
411
5,008 4,326
1,123
Exp
Salaries and wages
Interest on deposits
Allother
5,131
4,617
1,981
1,123
1,512
2,930
2,510
Net current earnings before
income taxes
Recoveries and profits2 3
Losses and charge-offs ...
Net addition to valuation
reserves
1,306 1,164
170
182
61
699
814
234
308
60
699
636
300
110
227
158
142 2,031
68
25
49
1,823 2,244
777
474
572
607
528
150
130 1,160
1,012 1,013
754
315
182
272 3,190 2,835 3,257 2,856
647
58
478
560
505
17
151
183
157 2,049 1,759 1,964 1,712
40
447
401
325
113
112
25
2,016
836
515
664
840
262
157
39
25
171
Profits before income taxes...
Taxes on net income
2,031 2,606
780 1,148
411
171
576
276
140
69
822 1,053
490
315
707
258
837
313
Net profits
Cash dividends declared4
1,252
705
240
166
300
160
507
292
563
258
448
218
524
202
342
1,457
646
108
In per cent
Ratios:
Net current earnings before
income taxes to—
Average total capital
accounts
Average total assets
Net profits t o Average total capital
accounts
Average total assets
Average return on U.S. Govt.
securities
Average return on loans
18.4
1.48
16.6
1.32
18.4
1.77
16.4
1.55
20.2
1.73
18.4
1.51
19.5
1.48
18.1
1.35
17.2
1.33
15.0
1.16
7.9
.63
9.7
.77
7.2
.70
9.3
.88
7.6
.65
9.9
.82
8.5
.65
10.1
.75
7.6
.59
9.4
.72
2.78
5.63
2.45
5.35
2.84
4.82
2.39
4.40
2.64
4.86
2.37
4.47
2.73
5.63
2.45
5.39
2.82
6.15
2.49
5.94
1
Data for 1959 are preliminary; final figures will be published later in the Federal Reserve Bulletin,
2 Includes recoveries credited to valuation reserves.
3
Includes losses charged to valuation reserves.
4
Includes interest on capital notes and debentures.
125
NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES IN THE
UNITED STATES DURING 1959 1
Commercial and stock savings banks
and nondeposit trust companies
Type of office and
type of change
All
banks
Member
banks
Total
Number of banks, Dec. 31,1958... 14,020
Changes during 1959
13,501
Nonmember
banks
National 1
State
member2
Insured
Noninsured 2
Insured 2
Noninsured
4,578
1,734
6,793
399
241
278
+ 1_I7
Consolidations and absorptions:
Banks converted into branches..
Other
Voluntary liquidations4
Conversions:
National into State
Federal Reserve membership ;5
Admissions of national banks
Admission of national bank in
Hawaii
Withdrawals of State banks.. .
Federal Deposit insurance:6
Admissions of State banks
Other* Alaska
Hawaii
. . . . . .
Net increase or decrease
Mutual
savings
banks
+1
2l
+23
+4
+75
+ 15
-148
-20
-3
-148
-18
-3
-64
-7
-27
-3
-1
-56
-5
-1
-3
—2
—2
+7
+6
+1
+6
+1
+6
+1
-6
+5
-15
+ 11
+ 10
-29
+ 11
Number of banks, Dec. 31,1959... 13,991
13,474
i
j
+2
-3
-2
+ 15
+50
-50
+28
-28
-36
-43
it
+5
-•y
+27
-29
4,542
1,691
+85
366
268
249
39
305
120
+ 19
9,038
8,613
4,341
2,360
6,878
1,873
Changes during 1959
+617
De novo branches
Banks converted into branches.... + 148
-59
+ 584
+ 148
-48
+ 141
+ 142
+4
+ 14
?
±\
+ 18
+73
+775
-39
-11
+18
+73
+797
+297
+75
-26
+42
+ 15
+25
+428
+ 130
9,835
9,388
4,769
248
248
193
Number of branches and additional
offices, Dec. 31,1958 ?
Hawaii
•
Number of branches and additional
offices, Dec. 31,1959 7
Number of banking facilities,
Dec 31 1958 9
Changes during 1959
Established .
Interclass change
Other* Alaska
.
...
Hawaii
Net increase or decrease
Number of banking facilities,
Dec 31 1959 9
+ 10
+ 14
-9
+i
+ 10
-10
+214
+1
+3
+ 13
+9
2,490
2,087
42
318
129
30
25
-2
+4
+6
264
264
+d
-1
+1
•itt
+6
+
-2
-1
it
204
29
31
+6
1 One national member bank in Alaska with no branches and one in the Virgin Islands with one branch
have been included in this series since 1954 and 1957, respectively. Other banks in territories and possessions
are excluded.
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, and vice versa.
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.
8 For details of interclass branch changes, see Federal Reserve Bulletin, for February 1960, p. 222
9 Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department.
126
NO. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT
ON PAR LIST, DECEMBER 31, 19591
On par list
Total 2
Federal
Reserve
district, State,
or other area
DISTRICT
Boston
New York 2
Philadelphia
Cleveland
Richmond .
Atlanta
Chicago
St Louis . . .
Minneapolis
Dallas
San Francisco...
Total
STATE
Arizona
Arkansas
Colorado
Connecticut
Delaware
Dist of Col
Florida
Georgia
Hawaii
Idaho
Illinois.
....
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Massachusetts..
Michigan
Minnesota
Mississippi
Montana
Nebraska
Nevada
New Hampshire.
New Jersey
New M e x i c o . . . .
New York
North Carolina..
North Dakota...
Ohio
Oklahoma
Pennsylvania....
Rhode Island....
South Carolina..
South D a k o t a . . .
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Vireinia
Wyoming
Puerto R i c o 2 . . . .
Virgin Islands 2 ...
Member
Total
Not on par list
(nonmember)
Nonmember
Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches
& offices
& offices
& offices
& offices
& offices
415
602
651
938
948
1,337
2,464
1,474
1,298
1 774
1,117
367
13,385
415
602
651
938
797
780
2,464
1,184
701
1,768
1,036
359
714
1,786
635
897
975
446
1,060
230
87
78
125
2,392
276
507
499
572
447
403
1,005
488
477
755
633
165
570
1,558
511
777
631
368
639
152
39
57
91
2,116
139
95
152
366
350
377
1,459
696
224
1,013
403
194
144
228
124
120
344
78
421
78
48
21
34
276
151
557
156
46
290
597
6
81
8
76
42
9,757 11,695
9,425
6,227
7,509 5,468
1,916
1,690
332
153
10
8
129
110
161
68
20
12
241
136
6
77
22
146
21
1,552
7
185
53
64
13
85
77
92
7
4
75
60
95
34
5
9
117
65
1
84
8
1
1
107
20
43
277
2
32
951
449
671
591
81
4
276
172
18
18
524
226
169
215
358
79
53
140
167
383
288
54
564
115
420
7
74
255
52
412
132
134
121
226
354
533
6
64
9
1
2
36
3
398
49
108
53
34
63
124
219
209
35
174
86
140
5
52
217
35
361
714
1 786
635
897
1,131
492
1,060
306
129
78
136
2,393
237
18
8
236
110
161
68
20
12
284
413
6
32
952
449
671
593
78
23
146
41
1 552
7
185
53
64
14
87
77
81
4
276
172
18
358
187
53
140
167
383
686
193
619
115
420
7
74
255
52
412
183
156
132
162
121
226
354
533
6
132
9
1
2
36
3
398
49
1,297
452
27
588
387
52
716
9
145
173
295
988
49
56
309
87
183
554
53
10
1
598
18
179
740
90
134
54
196
28
70
33
255
268
152
1
118
5
102
58
588
381
52
716
9
77
72
217
954
49
56
308
87
182
554
53
10
1
1,297
303
8
43
40
598
373
18
179
740
90
223
17
548
5
127
31
183
31
60
83
28
70
33
255
577
20
32
200
268
34
112
158
39
152
1
118
5
1
73
21
121
17
1,391
6
144
24
58
11
71
26
75
4
185
11
13
61
3
4
54
50
66
34
15
3
124
71
5
14
427
223
502
376
4
1
25
4
161
1
41
29
6
2
14
51
6
91
106
83
134
295
438
6
38
7
1
2
32
2
357
27
1,229
164
2
519
16
158
636
68
96
24
137
28
61
18
179
261
250
26
19
77
43
164
79
19
390
29
280
2
22
38
17
51
59
18
41
28
38
92
59
95
24
1
13
5
215
158
35
168
4
46
12
134
377
29
24
108
53
70
396
14
10
91
161
5
11
1
1
2
108
28
26
2
398
139
55
68
4
1
41
22
68
139
6
81
98
149
19
79
2
21
104
22
31
7
46
9
15
76
7
6
68
101
78
34
7
23
13
1
i28
105
i Virgin
Islands.
2
Puerto Rico and the Virgin Islands assigned to the New York District for check clearing and collection
purposes. Member branches in Puerto Rico and all except one in the Virgin Islands are branches of New
York banks.
127
NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM
DURING 1959
[In millions of dollars]
Net change in
holdings
Month
January
March
April
May
July
August
September....
October
November
December....
Total
U.S.
Government
securities
and
acceptances
U.S.
Government
securities
-640
-367
+ 139
+206
+ 199
+ 137
+498
+ 142
-127
+76
+297
-232
+328
Repurchase
agreements
Outright
transactions
Gross
market
purchases
Gross
market
sales
Cash
redemptions
-632
-365
+ 147
+206
+202
+ 139
+499
+ 147
-126
+68
+291
-273
260
36
236
247
354
146
383
346
22
179
386
272
474
309
33
19
73
18
427
43
104
41
139
28
373
+302
2,866
1,610
i Less than $500,000.
NOTE.—Details may not add to totals because of rounding.
Bankers*
acceptances
U.S. Government securities
128
Gross
chases
Net
outright
Net
repurchases
-3
-4
+2
Gross
sales
393
113
459
524
369
94
435
402
383
238
395
189
-2
-1
-5
C1)
+1
+2
186
402
64
404
604
289
113
551
306
344
332
328
203
+11
+lo
901
3,939
3,993
+1
+25
102
8
68
67
I1]
-6
FEDERAL RESERVE DIRECTORIES
AND MEETINGS
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
[December 31, 1959]
W M . M C C . MARTIN, JR., of New York, Chairman
C. CANBY BALDERSTON of Pennsylvania, Vice Chairman
M. S. SZYMCZAK of Illinois
A. L. MILLS, JR., of Oregon
J. L. ROBERTSON of Nebraska
Term Expires
January 31, 1970
January 31, 1966
January 31, 1962
January 31, 1972
January 31, 1964
CHAS. N. SHEPARDSON of Texas
January 31, 1968
G. H. KING, JR., of Mississippi
January 31, 1960
WINFIELD W. RIEFLER, Assistant to the Chairman
WOODLIEF THOMAS, Economic Adviser to the Board
JEROME W. SHAY, Legislative Counsel
CHARLES MOLONY, Assistant to the Board
CLARKE L. FAUVER, Assistant to the Board
MERRITT SHERMAN, Secretary
KENNETH A. KENYON, Assistant Secretary
ELIZABETH L. CARMICHAEL, Assistant Secretary
HOWARD H. HACKLEY, General Counsel
DAVID B. HEXTER, Assistant General Counsel
G. HOWLAND CHASE, 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
SUSAN S. BURR, Associate Adviser, Division of Research and Statistics
ALBERT R. KOCH, Associate Adviser, Division of Research and Statistics
KENNETH B. WILLIAMS, Associate Adviser, Division of Research and Statistics
LEWIS N. DEMBITZ, Research Associate, Division of Research and Statistics
ARTHUR W. MARGET, Director, Division of International Finance
J. HERBERT FURTH, Associate Adviser, Division of International Finance
A. B. HERSEY, Associate Adviser, Division of International Finance
ROBERT L. SAMMONS, Associate Adviser, Division of International Finance
JOHN R. FARRELL, Director, Division of Bank Operations
GERALD M. CONKLING, Assistant Director, Division of Bank Operations
M. B. DANIELS, Assistant Director, Division of Bank Operations
JOHN N. KILEY, JR., Assistant Director, Division of Bank Operations
FREDERIC SOLOMON, Director, Division of Examinations
ROBERT C. MASTERS, Associate Director, Division of Examinations
C. C. HOSTRUP, Assistant Director, Division of Examinations
FRED A. NELSON, Assistant Director, Division of Examinations
GLENN M. GOODMAN, Assistant Director, Division of Examinations
HENRY BENNER, Assistant Director, Division of Examinations
JAMES C. SMITH, Assistant Director, Division of Examinations
LLOYD M. SCHAEFFER, Chief Federal Reserve Examiner, Division of Examinations
EDWIN J. JOHNSON, Director, Division of Personnel Administration
H. FRANKLIN SPRECHER, JR., Assistant Director, Division of Personnel Administration
JOSEPH E. KELLEHER, Director, Division of Administrative Services
HARRY E. KERN, Assistant Director, Division of Administrative Services
J. J. CONNELL, Controller, Office of the Controller
SAMPSON H. BASS, Assistant Controller, Office of the Controller
http://fraser.stlouisfed.org/
INNIS D. HARRIS, Coordinator, Office of Defense Planning
Federal Reserve Bank of St. Louis
>•> r \
FEDERAL OPEN MARKET COMMITTEE
[December 31, 1959]
MEMBERS
WM. M C C . 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)
FREDERICK L. DEMING (Elected by Federal Reserve Banks of Minneapolis, Kansas
City, and San Francisco)
J. A. ERICKSON (Elected by Federal Reserve Banks of Boston, Philadelphia, and
Richmond)
DELOS C. JOHNS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and
Dallas)
G. H. KING, JR. (Board of Governors)
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)
OFFICERS
WINFIELD W. RIEFLER, Secretary
MERRITT SHERMAN, Assistant Secretary
KENNETH A. KENYON, Assistant Secretary
HOWARD H. HACKLEY, General Counsel
WOODLIEF THOMAS, Economist
HOMER JONES, Associate Economist
ARTHUR W. MARGET, Associate Economist
GEORGE W. MITCHELL, Associate Economist
FRANKLIN L. PARSONS, Associate Economist
ROBERT V. ROOSA, Associate Economist
PARKER B. WILLIS, Associate Economist
RALPH A. YOUNG, Associate Economist
AGENT
FEDERAL RESERVE BANK OF N E W YORK
ROBERT G. ROUSE, Manager of System
Open Market Account
During 1959 the Federal Open Market Committee met at least every three
weeks, as indicated in the Record of Policy Actions taken by the Committee
(see pp. 31-65 of this Report).
131
FEDERAL ADVISORY COUNCIL
[December 31, 1959]
MEMBERS
District No. 1—LLOYD D. BRACE, Chairman of the Board, The First National Bank
of Boston, Boston, Massachusetts.
District No. 2—JOHN J. MCCLOY, Chairman of the Board, The Chase Manhattan
Bank, New York, New York.
District No. 3—CASIMIR A. SIENKIEWICZ, President, Central-Penn National Bank
of Philadelphia, Philadelphia, Pennsylvania.
District No. 4—REUBEN B. HAYS, Chairman of the Board, The First National
Bank of Cincinnati, Cincinnati, Ohio.
District No. 5—JOHN S. ALFRIEND, Chairman of the Board, National Bank of
Commerce, Norfolk, Virginia.
District No. 6—JOHN A. SIBLEY, Chairman of the Executive Committee, Trust
Company of Georgia, Atlanta, Georgia.
District No. 7—HOMER J. LIVINGSTON, President, The First National Bank of
Chicago, Chicago, Illinois.
District No. 8—WILLIAM A. MCDONNELL, Chairman of the Board, First National
Bank in St. Louis, St. Louis, Missouri.
District No. 9—GORDON MURRAY, President, First National Bank of Minneapolis,
Minneapolis, Minnesota.
District No. 10—R. OTIS MCCLINTOCK, Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Oklahoma.
District No. 11—WALTER B. JACOBS, Chairman of the Board, The First National
Bank of Shreveport, Shreveport, Louisiana.
District No. 12—CHARLES F. FRANKLAND, President, The Pacific National Bank of
Seattle, Seattle, Washington.
EXECUTIVE COMMITTEE
HOMER J. LIVINGSTON, ex officio
JOHN J. MCCLOY
LLOYD D. BRACE, ex officio
CASIMIR A. SIENKIEWICZ
GORDON MURRAY
OFFICERS
President, HOMER J. LIVINGSTON
Vice President, LLOYD D. BRACE
Secretary, HERBERT V. PROCHNOW
Assistant Secretary, WILLIAM J. KORSVIK
Meetings of the Federal Advisory Council were held on February 16-17, April
27-28, September 14-15, and November 16-17, 1959. The Board of Governors
met with the Council on February 17, April 28, September 15, and November 17.
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.
132
FEDERAL RESERVE BANKS AND BRANCHES
[December 31, 1959]
CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS
Federal Reserve Bank of—
Chairman and
Federal Reserve Agent
Deputy Chairman
Boston
Robert C. Sprague
Nils Y. Wessell
New York
John E. Bierwirth
Forrest F. Hill
Philadelphia
Henderson Supplee, Jr.... Lester V. Chandler
Cleveland
Arthur B. Van Buskirk... Joseph H. Thompson
Richmond
Alonzo G. Decker, Jr
D. W. Colvard
Atlanta
Walter M. Mitchell
Harllee Branch, Jr.
Chicago
Bert R. Prall
J. Stuart Russell
St. Louis
Pierre B. McBride
J. H. Longwell
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 that meets from time to time to consider matters of common interest
and to consult and advise the Board of Governors. A meeting of the Conference
of Chairmen was held on December 3-4, 1959, and was attended by members of
the Board of Governors and also by the Deputy Chairmen of the Federal Reserve
Banks.
Mr. Smith, Chairman of the Federal Reserve Bank of Dallas, was elected
Chairman of the Conference and of the Executive Committee in December 1958.
Mr. Mitchell, Chairman of the Federal Reserve Bank of Atlanta, and Mr. Perrin,
Chairman of the Federal Reserve Bank of Minneapolis, served with Mr. Smith
as members of the Executive Committee, Mr. Mitchell also serving as Vice
Chairman of the Conference.
At the meeting held in December 1959, Mr. Mitchell was elected Chairman
of the Conference and of the Executive Committee. Mr. Van Buskirk, Chairman
of the Federal Reserve Bank of Cleveland, was elected Vice Chairman and a
member of the Executive Committee, and Mr. McBride, Chairman of the Federal
Reserve Bank of St. Louis, was elected as the other member of the Executive
Committee.
133
134
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—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:
William D. Ireland
Arthur F. Maxwell
William M. Lockwood
Class B:
Milton P. Higgins
Stanley M. Cooper
Eugene B. Whittemore
Class C:
Nils Y. Wessell
Robert C. Sprague
Erwin D. Canham
Dec. 31
President, Second Bank-State Street Trust
Company, Boston, Mass
1959
President, The First National Bank of Biddeford, Biddeford, Maine
1960
President, The Howard National Bank and
Trust Company, Burlington, Vt..
1961
President, Norton Company, Worcester, Mass. 1959
Chairman of the Board, The Fafnir Bearing
Company, New Britain, Conn
1960
President and Treasurer, The Morley Company,
Portsmouth, N. H
1961
President, Tufts University, Medford, Mass... 1959
Chairman and Treasurer, Sprague Electric
Company, North Adams, Mass
1960
Editor, The Christian Science Monitor, Boston,
Mass
1961
District 2—New York
Class A:
Charles W. Bitzer
Cyrus M. Higley
Chairman, City Trust Company, Bridgeport,
Conn
1959
President and Trust Officer, The Chenango
County National Bank and Trust Company
of Norwich, Norwich, N. Y
1960
FEDERAL RESERVE SYSTEM
135
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Henry C. Alexander
Class B:
Lansing P. Shield
Augustus C. Long
Philip D. Reed
Class C:
John E. Bierwirth
Forrest F. Hill
James DeCamp Wise
Dec. 31
Chairman of the Board, Morgan Guaranty
Trust Company of New York, New York,
N. Y
1961
President, The Grand Union Company, East
Paterson, N. J
1959
Chairman of the Board, Texaco Inc., New
York, N. Y
1960
Formerly Chairman of the Board, General
Electric Company, New York, N. Y
1961
Chairman, National Distillers and Chemical
Corporation, New York, N. Y
1959
Vice President, The Ford Foundation, New
York, N. Y
1960
Chairman of the Board, Bigelow-Sanford Carpet Company, Inc., New York, N. Y
1961
Buffalo Branch
Appointed by Federal Reserve Bank:
Vernon Alexander
President, The National Bank of Geneva,
Geneva, N. Y
E. Perry Spink
President, Liberty Bank of Buffalo, Buffalo,
N. Y
John W. Remington
President, Lincoln Rochester Trust Company,
Rochester, N. Y
Denton A. Fuller
President, The Citizens National Bank of
Wellsville, Wellsville, N. Y
1959
1960
1961
1961
Appointed by Board of Governors:
Raymond E. Olson
President, Taylor Instrument Companies,
Rochester, N. Y
1959
Thomas E. Lamont
Farmer, Albion, N. Y
1960
Whitworth Ferguson
President, Ferguson Electric Construction Co.,
Inc., Buffalo, N. Y
1961
District 3—Philadelphia
Class A:
Geoffrey S. Smith
William B. Brosius
O. Albert Johnson
Class B:
R. Russell Pippin
President, Girard Trust Corn Exchange Bank,
Philadelphia, Pa
1959
President, National Bank of Chester County
and Trust Company, West Chester, Pa
1960
President, The First National Bank of Eldred,
Eldred, Pa
1961
Treasurer, E. I. du Pont de Nemours & Company, Wilmington, Del
1959
136
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Bayard L. England
Frank R. Palmer
Class C.Lester V. Chandler
Walter E. Hoadley, Jr
Henderson Supplee, Jr
Dec. 31
Chairman, Atlantic City Electric Company,
Atlantic City, N. J
1960
Chairman, The Carpenter Steel Company,
Reading, Pa
1961
Professor of Economics, Princeton University,
Princeton, N. J
1959
Treasurer, Armstrong Cork Company, Lancaster, Pa
1960
President, The Atlantic Refining Company,
Philadelphia, Pa
1961
District 4—Cleveland
Class A:
John A. Byerly
Paul A. Warner
Ray H. Adkins
Class B:
George P. MacNichol, Jr
Joseph B. Hall
Charles Z. Hardwick
Class C.Joseph H. Thompson
Aubrey J. Brown
Arthur B. Van Buskirk
President, Fidelity Trust Company, Pittsburgh,
Pa
1959
President, The Oberlin Savings Bank Company,
Oberlin, Ohio
1960
President, The National Bank of Dover, Dover,
Ohio
1961
President, Libbey Owens Ford Glass Company, Toledo, Ohio
1959
President, The Kroger Co., Cincinnati, Ohio.. 1960
Executive Vice President, The Ohio Oil Company, Findlay, Ohio
1961
President, The M. A. Hanna Company, Cleveland, Ohio
1959
Professor of Agricultural Marketing and Head
of Department of Agricultural Economics,
University of Kentucky, Lexington, Ky
1960
Vice President and Governor, T. Mellon and
Sons, Pittsburgh, Pa
1961
Cincinnati Branch
Appointed by Federal Reserve Bank:
Franklin A. McCracken
Executive Vice President and TrustfOfficer,
The Newport National Bank, Newport, Ky..
Roger Drackett
President, The Drackett Company, Cincinnati,
Ohio
Thomas M. Wolfe
President, The Athens National Bank, Athens,
Ohio
Frank J. Van Lahr
President, The Provident Savings Bank and
Trust Company, Cincinnati, Ohio
1959
1960
1960
1961
Appointed by Board of Governors:
H. E. Whitaker
Chairman, Mead Corporation, Dayton, Ohio.. 1959
FEDERAL RESERVE SYSTEM
137
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
W. Bay Irvine
Ivan Jett
Dec. 31
President, Marietta College, Marietta, Ohio... 1960
Farmer, Georgetown, Ky.
1961
Pittsburgh Branch
Appointed by Federal Reserve Bank:
Frank C. Irvine
Vice President, The Union National Bank of
Pittsburgh, Tarentum Office, Tarentum, Pa..
Lawrence O. Hotchkiss
President, The First National Bank of Mercer,
Mercer, Pa.
Irving W. Wilson
Chairman of the Board, Aluminum Company
of America, Pittsburgh, Pa
A. B. Bowden
Vice President, Mellon National Bank and
Trust Company, Pittsburgh, Pa
1959
1960
1960
1961
Appointed by Board of Governors:
John T. Ryan, Jr
President, Mine Safety Appliances Company,
Pittsburgh, Pa
1959
John C. Warner
President, Carnegie Institute of Technology,
Pittsburgh, Pa
1960
William A. Steele
President, Wheeling Steel Corporation, Wheeling, W. Va
1961
District 5—Richmond
Class A:
Robert Gage
Denver L. Morgan
A. Scott Offutt
Class B:
Wm. A. L. Sibley
Robert O. Huffman
L. Vinton Hershey.
Ciass C:
Alonzo G. Decker, Jr
D. W. Colvard
Edwin Hyde
President, The Commercial Bank, Chester,
S. C
1959
Executive Vice President, The Charleston
National Bank, Charleston, W. Va
1960
President, Anacostia National Bank of Washington, Washington, D. C
1961
Vice President and Treasurer, Monarch Mills,
Union, S. C
1959
President, Drexel Furniture Company, Drexel,
N.C
1960
President, Hagerstown Shoe Company, Hagerstown, Md
1961
Executive Vice President, The Black & Decker
Manufacturing Company, Towson, Md
1959
Dean of Agriculture, North Carolina State
College of Agriculture and Engineering,
Raleigh, N. C
1960
President, Miller & Rhoads, Inc., Richmond,
Va
1961
138
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec. 31
Baltimore Branch
Appointed by Federal Reserve Bank:
James W. McElroy
President, First National Bank of Baltimore,
Baltimore, Md
J. N. Shumate
President, The Farmers National Bank of
Annapolis, Annapolis, Md.
Harvey E. Emmart
Senior Vice President and Cashier, FidelityBaltimore National Bank, Baltimore, Md...
John W. Stout
President, The Parkersburg National Bank,
Parkersburg, W. Va
1959
1960
1961
1961
Appointed by Board of Governors:
Gordon M. Cairns
Dean of Agriculture, University of Maryland,
College Park, Md
1959
Clarence R. Zarfoss
Vice President, Western Maryland Railway
Company, Baltimore, Md
1960
J. T. Menzies, Jr
President, The Crosse & Blackwell Company,
Baltimore, Md
1961
Charlotte Branch
Appointed by Federal Reserve Bank:
Charles D. Parker
Vice Chairman of the Board and First Executive
Vice President, First Union National Bank of
North Carolina, Charlotte, N. C
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
1959
1960
1961
1961
Appointed by Board of Governors:
William H. Grier
President, Rock Hill Printing & Finishing Company, Rock Hill, S. C
1959
George H. Aull
Agricultural Economist, Clemson College,
Clemson, S. C
1960
Clarence P. Street
Secretary and General Manager, McDevitt &
Street Company, Charlotte, N. C
1961
District 6—Atlanta
Class A:
Roland L. Adams
W. C. Bowman
William C. Carter
President, Bank of York, York, Ala.....
. 1959
Chairman of the Board, The First National
Bank of Montgomery, Montgomery, Ala... 1960
Chairman and President, Gulf National Bank,
Gulfport, Miss
1961
FEDERAL RESERVE SYSTEM
139
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Class B:
McGregor Smith
Pollard Turman
Donald Comer
Class C:
Harllee Branch, Jr
Henry G. Chalkley, Jr
Walter M. Mitchell
Dec.
31
Chairman of the Board, Florida Power & Light
Company, Miami, Fla
1959
President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga
1960
Chairman of the Board, Avondale Mills, Birmingham, Ala
1961
President, The Southern Company, Atlanta,
Ga
1959
President, The Sweet Lake Land & Oil Company, Lake Charles, La
1960
Vice President, The Draper Corporation,
Atlanta, Ga
1961
Birmingham Branch
Appointed by Federal Reserve Bank:
R. J. Murphy
Executive Vice President, Citizens-Farmers &
Merchants Bank, Brewton, Ala
John C. Persons
Chairman of the Board, The First National
Bank of Birmingham, Birmingham, Ala
George W. Hulme
Senior Vice President, First National Bank,
Alexander City, Ala
Marshall Dugger
Vice President and Cashier, First National
Bank, Tuscumbia, Ala
1959
1960
1961
1961
Appointed by Board of Governors:
Adolph Weil, Sr
President, Weil Brothers-Cotton, Inc., Montgomery, Ala
1959
Selden Sheffield
Cattleman, Greensboro, Ala
1960
John E. Urquhart
Chairman, Woodward Iron Company, Woodward, Ala
1961
Jacksonville Branch
Appointed by Federal Reserve Bank:
James G. Garner
President and Chairman, Little River Bank and
Trust Company, Miami, Fla
C. B. McLeod
President, Bank of Crestview, Crestview, Fla...
Roger L. Main
Chairman and President, Florida National
Bank of Jacksonville, Jacksonville, Fla
A. L. Ellis
Chairman of the Board, First National Bank in
Tarpon Springs, Tarpon Springs, Fla
1959
1960
1961
1961
Appointed by Board of Governors:
Claude J. Yates
Vice President and General Manager, Southern
Bell Telephone and Telegraph Company,
Jacksonville, Fla
1959
140
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec. 31
J. Wayne Reitz
President, University of Florida, Gainesville,
Fla
1960
President, Minute Maid Corporation, Orlando,
Ha
1961
John M. Fox
Nashville Branch
Appointed by Federal Reserve Bank:
Jo H. Anderson
President, Park National Bank of Knoxville,
Knoxville, Tenn
P. D. Houston, Jr
President, First American National Bank,
Nashville, Tenn
C. A. Whelchel
President, First Farmers and Merchants National Bank of Columbia, Columbia, Tenn...
W. E. Newell
President, The First National Bank, Kingsport,
Tenn
1959
1960
1961
1961
Appointed by Board of Governors:
Frank B. Ward
Dean, College of Business Administration,
University of Tennessee, Knoxville, Tenn... 1959
W. N. Krauth
President and General Manager, Colonial
Baking Company of Nashville, Nashville,
Tenn
1960
V. S. Johnson, Jr
Chairman of the Board and President, Aladdin
Industries, Inc., Nashville, Tenn
1961
New Orleans Branch
Appointed by Federal Reserve Bank:
J. Spencer Jones
President, The Citizens National Bank in
Hammond, Hammond, La
D. U. Maddox
President, The Commercial National Bank and
Trust Company of Laurel, Laurel, Miss
W. P. McMullan
Chairman of the Board, Deposit Guaranty
Bank and Trust Company, Jackson, Miss...
Wallace M. Davis
President, The Hibernia National Bank in New
Orleans, New Orleans, La
1959
1960
1961
1961
Appointed by Board of Governors:
E. E. Wild
Rice grower, Midland, La
1959
Frank A. Godchaux, III
Vice President, Louisiana State Rice Milling
Company, Inc., Abbeville, La
1960
Gerald L. Andrus
President, New Orleans Public Service, Inc.,
New Orleans, La
1961
District 7—Chicago
Class A:
Vivian W. Johnson
President, First National Bank, Cedar Falls,
Iowa
1959
FEDERAL RESERVE SYSTEM
141
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Walter J. Cummings
John H. Crocker
Class B:
William A. Hanley
G. F. Langenohl
William J. Grede
Class C:
J. Stuart Russell
Bert R. Prall
Robert P. Briggs
Dec.
Chairman of the Executive Committee, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111
Chairman of the Board and President, The
Citizens National Bank of Decatur, Decatur,
111
Director, Eli Lilly and Company, Indianapolis,
Ind
Treasurer and Assistant Secretary, Allis-Chalmers Manufacturing Company, Milwaukee,
Wis
President, Grede Foundries, Inc., Milwaukee,
Wis
Farm Editor, The Des Moines Register &
Tribune, Des Moines, Iowa
Winnetka, 111
Executive Vice President, Consumers Power
Company, Jackson, Mich
31
1960
1961
1959
1960
1961
1959
1960
1961
Detroit Branch
Appointed by Federal Reserve Bank:
Ira A. Moore
General Vice President, Old Kent Bank and
Trust Company, Grand Rapids, Mich
William A. Mayberry
Chairman of the Board, Manufacturers National Bank of Detroit, Detroit, Mich
Ernest W. Potter
President, Citizens Commercial & Savings
Bank, Hint, Mich
Donald F. Valley
Chairman of the Board, National Bank of
Detroit, Detroit, Mich
Appointed by Board of Governors:
J. Thomas Smith
President, Dura Corporation, Oak Park, Mich..
John A. Hannah
President, Michigan State University, East
Lansing, Mich
C. V. Patterson
Executive Vice President, The Upjohn Company, Kalamazoo, Mich
1959
1960
1960
1961
1959
1960
1961
District 8—St. Louis
Class A:
Kenton R. Cravens
H. Lee Cooper
Arthur Werre, Jr
President, Mercantile Trust Company, St.
Louis, Mo
President, Ohio Valley National Bank of Henderson, Henderson, Ky
Executive Vice President, First National Bank
of SteeleviUe, Steeleville, 111
1959
1960
1961
142
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Class B:
Harold O. McCutchan
Leo J. Wieck
S. J. Beauchamp, Jr
Class C.Pierre B. McBride
Jesse D. Wooten
J. H. Longwell
Dec.
31
Executive Vice President, Mead Johnson &
Company, Evansville, Ind
1959
Vice President and Treasurer, The May Department Stores Co., St. Louis, Mo
1960
President, Terminal Warehouse Co., Little
Rock, Ark
1961
President, Porcelain Metals Corporation, Louisville, Ky
1959
Executive Vice President, Mid-South Chemical
Corporation, Memphis, Tenn
1960
Director, Division of Agricultural Sciences,
University of Missouri, Columbia, Mo
1961
Little Rock Branch
Appointed by Federal Reserve Bank:
Donald Barger
President, Peoples Exchange Bank, Russellville,
Ark
J. W. Bellamy, Jr
President, National Bank of Commerce of Pine
Bluff, Pine Bluff, Ark
E. C. Benton
President, Fordyce Bank and Trust Company,
Fordyce, Ark
J. V. Satterfleld, Jr
Chairman of the Board, The First National
Bank in Little Rock, Little Rock, Ark
1959
1960
1960
1961
Appointed by Board of Governors:
T. Winfred Bell
President, Bush-Caldwell Company, Little
Rock, Ark
1959
(Vacancy)
1960
Waldo E. Tiller
President, Tiller Tie and Lumber Company,
Inc., Little Rock, Ark
1961
Louisville Branch
Appointed by Federal Reserve Bank:
Merle E. Robertson
Chairman of the Board and President, Liberty
National Bank and Trust Company of Louisville, Louisville, Ky
W. Scott Mclntosh
President, State Bank of Hardinsburg, Hardinsburg, Ind
John G. Russell
President, The Peoples First National Bank &
Trust Company of Paducah, Paducah, Ky...
John R. Stroud
Executive Vice President, The First National
Bank of Mitchell, Mitchell, Ind
Appointed by Board of Governors:
David F. Cocks
Vice President and Treasurer, Standard Oil
Company (Kentucky), Louisville, Ky
1959
1960
1960
1961
1959
FEDERAL RESERVE SYSTEM
143
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec. 31
Philip Davidson
President, University of Louisville, Louisville,
Ky
1960
Farmer, Oakland, Ky
1961
J. D. Monin, Jr
Memphis Branch
Appointed by Federal Reserve Bank:
John K. Wilson
John E. Brown
Simpson Russell
J. H. Harris
President, The First National Bank of West
Point, West Point, Miss
President, Union Planters National Bank of
Memphis, Memphis, Tenn
President, The National Bank of Commerce of
Jackson, Jackson, Tenn
President, The First National Bank of Wynne,
Wynne, Ark
1959
1960
1960
1961
Appointed by Board of Governors:
John D. Williams
S. L. Kopald, Jr
Frank Lee Wesson
Chancellor, The University of Mississippi,
University, Miss
1959
Executive Vice President, HumKo Division,
National Dairy Products Corporation, Memphis, Tenn
1960
President, Wesson Farms, Inc., Victoria, Ark.. 1961
District 9—Minneapolis
Class A:
Harold N. Thomson
Harold C. Refling
John A. Moorhead
Vice President, Farmers & Merchants Bank,
Presho, S. D
1959
Cashier, First National Bank in Bottineau,
Bottineau, N. D
1960
President, Northwestern National Bank of
Minneapolis, Minneapolis, Minn
1961
Class B:
J. E. Corette
Ray C. Lange
T. G. Harrison
Class C.Leslie N. Perrin
O. B. Jesness
John H. Warden
President and General Manager, Montana
Power Company, Butte, Mont
1959
President, Chippewa Canning Company, Inc.,
Chippewa Falls, Wis
1960
Chairman of the Board, Super Valu Stores, Inc.,
Hopkins, Minn
1961
Director, General Mills, Inc., Minneapolis,
Minn
1959
Agricultural Economist, St. Paul, Minn
1960
President, Upper Peninsula Power Company,
Houghton, Mich
1961
144
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec. 31
Helena Branch
Appointed by Federal Reserve Bank:
O. M. Jorgenson
Chairman, Security Trust and Savings Bank,
Billings, Mont
1959
Roy G. Monroe
President, The First State Bank of Malta,
Malta, Mont
1960
Harald E. Olsson
President, Ronan State Bank, Ronan, Mont... 1960
Appointed by Board of Governors:
John M. Otten
Farmer and rancher, Lewistown, Mont
1959
John D. Stephenson
Partner, Jardine, Stephenson, Blewett, &
Weaver, Attorneys, Great Falls, Mont
1960
District 10—Kansas City
Class A:
W. L. Bunten
Harold Kountze
W. S. Kennedy
Class B:
K. S. Adams
Max A. Miller
E. M. Dodds
Class C.Oliver S. Willham
Joe W. Seacrest
Raymond W. Hall
Director, Goodland State Bank, Goodland,
Kans
1959
Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo
1960
President and Chairman of the Board, The
First National Bank of Junction City, Junction City, Kans
1961
Chairman of the Board, Phillips Petroleum
Company, Bartlesville, Okla
1959
Livestock rancher, Omaha, Neb
1960
Refrigeration consultant, Kansas City, Mo
1961
President, Oklahoma State University, Stillwater, Okla
1959
President, State Journal Company, Lincoln,
Neb
1960
.Hillix, Hall, Hasburgh, Brown & Hoffhaus,
Attorneys, Kansas City, Mo
1961
Denver Branch
Appointed by Federal Reserve Bank:
Stewart Cosgriff
Chairman of the Board, Denver United^States
National Bank, Denver, Colo
J. H. Bloedorn
President, The Farmers State Bank of Fort
Morgan, Colorado, Fort Morgan, Colo
Cale W. Carson
President, First National Bank in Albuquerque,
Albuquerque, N. Mex
Appointed by Board of Governors:
Aksel Nielsen.
President, The Title Guaranty Company, Denver, Colo
Ray Reynolds
Cattle feeder and farmer, Longmont, Colo...
1959
1960
1960
1959
1960
FEDERAL RESERVE SYSTEM
145
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec.
31
Oklahoma City Branch
Appointed by Federal Reserve Bank:
C. P. Stuart
Chairman of the Board and President, The
Fidelity National Bank & Trust Company,
Oklahoma City, Okla
1959
R. L. Kelsay
Chairman of the Board and President, The
First National Bank in Hobart, Hobart,
Okla
1960
C. L. Priddy
President, The National Bank of McAlester,
McAlester, Okla
1960
Appointed by Board of Governors:
Davis D. Bovaird
President, The Bovaird Supply Company,
Tulsa, Okla
1959
Don H. Dennis
Rancher, Grady, Okla
1960
Omaha Branch
Appointed by Federal Reserve Bank:
George J. Forbes
Chairman of the Board and President, Bank of
Laramie, Laramie, Wyo
1959
C. Wheaton Battey
President, The Continental National Bank of
Lincoln, Lincoln, Neb
1959
John F. Davis
President, First National Bank, Omaha, Neb... 1960
Appointed by Board of Governors:
James L. Paxton, Jr
President, Paxton-Mitchell Company, Omaha,
Neb
1959
Homer A. Scott
Vice President and District Manager, Peter
Kiewit Sons' Company, Sheridan, Wyo
1960
District 11—Dallas
Class A:
John M. Griffith
Sam D. Young
J. Edd McLaughlin
Class B:
John R. Alford
D. A. Hulcy
H. B. Zachry
Class C.Hal Bogle
Robert J. Smith
Lamar Fleming, Jr
President, The City National Bank of Taylor,
Taylor, Tex
1959
President, El Paso National Bank, El Paso, Tex. 1960
President, Security State Bank & Trust Company, Rails, Tex
1961
Industrialist and farmer, Henderson, Tex
1959
Chairman of the Board, Lone Star Gas Company, Dallas, Tex
1960
President, H. B. Zachry Co., San Antonio, Tex. 1961
Rancher and feeder, Dexter, N. Mex
1959
President, Pioneer Hydrotex Industries, Inc.,
Dallas, Tex
1960
Chairman of the Board, Anderson, Clayton &
Co., Inc., Houston, Tex
1961
146
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec.
31
El Paso Branch
Appointed by Federal Reserve Bank:
F. W. Barton
President, The Marfa National Bank, Marfa,
Tex
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
Joseph F. Irvin
President, Southwest National Bank of El Paso,
El Paso, Tex
1959
1960
1960
1961
Appointed by Board of Governors:
D. F. Stahmann
Chairman of the Board and Treasurer, Stahmann Farms, Inc., Las Cruces, N. Mex
1959
William R. Mathews
Editor and Publisher, The Arizona Daily Star,
Tucson, Ariz
1960
Dysart E. Holcomb
Director of Research, El Paso Natural Gas
Company, El Paso, Tex
1961
Houston Branch
Appointed by Federal Reserve Bank:
I. F. Betts
President, The American National Bank of
Beaumont, Beaumont, Tex
W. B. Callan
President, The Victoria National Bank, Victoria, Tex
Marvin K. Collie
President, The National Bank of Commerce of
Houston, Houston, Tex
J. W. McLean
President, Texas National Bank of Houston,
Houston, Tex
1959
1960
1960
1961
Appointed by Board of Governors:
A. E. Cudlipp
Vice President and Director, Lufkin Foundry
and Machine Company, Lufkin, Tex
1959
John C. Flanagan
Vice President and General Manager, Texas
Distribution Division, United Gas Corporation, Houston, Tex
1960
Tyrus R. Timm
Head, Department of Agricultural Economics
and Sociology, A. & M. College of Texas,
College Station, Tex
1961
San Antonio Branch
Appointed by Federal Reserve Bank:
E. C. Breedlove
President, The First National Bank of Harlingen, Harlingen, Tex
1959
J. W. Beretta
Director, First National Bank of San Antonio,
San Antonio, Tex
1960
Donald D. James
Vice President, The Austin National Bank,
Austin, Tex
1960
FEDERAL RESERVE SYSTEM
147
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Burton Dunn
Dec. 31
Chairman of the Executive Committee, Corpus
Christi State National Bank, Corpus Christi,
Tex
1961
Appointed by Board of Governors:
Clarence E. Ayres
Professor of Economics, The University of
Texas, Austin, Tex
1959
Alex R. Thomas
Vice President, Geo. C. Vaughan & Sons, San
Antonio, Tex
1960
Harold Vagtborg
Chairman of the Board, Southwest Research
Center, San Antonio, Tex
1961
District 12—San Francisco
Class A:
M. Vilas Hubbard
Carroll F. Byrd
John A. Schoonover
Class B:
N. Loyall McLaren
Joseph Rosenblatt
Walter S. Johnson
Class C:
A. H. Brawner
Philip I. Welk
Y. Frank Freeman
President and Chairman of the Board, Citizens
Commercial Trust and Savings Bank of
Pasadena, Pasadena, Calif.
1959
Chairman of the Board and President, The
First National Bank of Willows, Willows,
Calif.
1960
President, The Idaho First National Bank,
Boise, Idaho.
1961
Partner, Haskins & Sells, San Francisco, Calif.. 1959
President, The Eimco Corporation, Salt Lake
City, Utah
1960
Chairman of the Board, American Forest
Products Corporation, San Francisco, Calif.. 1961
Chairman of the Board, W. P. Fuller & Co.,
San Francisco, Calif.
1959
Vice President, Centennial Mills, Inc., Portland, Ore
1960
Vice President, Paramount Pictures Corporation, Hollywood, Calif.
1961
Los Angeles Branch
Appointed by Federal Reserve Bank:
Joe D. Paxton
Chairman of the Advisory Board, Santa Barbara Main Office, Crocker-Anglo National
Bank, Santa Barbara, Calif.
1959
Robert S. Beasley
President, The Beverly Hills National Bank &
Trust Company, Beverly Hills, Calif.
1960
Roy A. Britt
President, Citizens National Bank, Los Angeles,
Calif.
1960
148
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
Term
expires
DIRECTORS—Cont.
Dec. 31
Appointed by Board of Governors:
Robert J. Cannon
. .President, Cannon Electric Company, Los
Angeles, Calif.
1959
John D. Fredericks
President and Chief Executive Officer, Pacific
Clay Products, Los Angeles, Calif.
1960
Portland Branch
Appointed by Federal Reserve Bank:
C. B. Stephenson
President, The First National Bank of Oregon,
Portland, Portland, Ore
1959
D. S. Baker
President, The Baker-Boyer National Bank,
Walla Walla, Wash
1960
J. H. McNally
President, The First National Bank of Bonners
Ferry, Bonners Ferry, Idaho
1960
Appointed by Board of Governors:
Warren W. Braley
Partner, Braley and Graham Buick, Portland,
Ore
1959
Raymond R. Reter
Reter Fruit Company, Medford, Ore.
1960
Salt Lake City Branch
Appointed by Federal Reserve Bank:
Oscar Hiller
President, Butte County Bank, Arco, Idaho... 1959
Russell S. Hanson
Executive Vice President, The First National
Bank of Logan, Logan, Utah
1960
Reed E. Holt
President, Walker Bank & Trust Company,
Salt Lake City, Utah
1960
Appointed by Board of Governors:
Howard W. Price
Executive Vice President and General Manager,
The Salt Lake Hardware Co., Salt Lake City,
Utah
1959
Thomas B. Rowland
Rowland Bros. Dairy, Pocatello, Idaho
1960
Seattle Branch
Appointed by Federal Reserve Bank:
Joshua Green, Jr
President, Peoples National Bank of Washington, Seattle, Wash
1959
S. B. Lafromboise
President, The First National Bank of Enumclaw, Enumclaw, Wash
1960
James Brennan
President, First National Bank in Spokane,
Spokane, Wash
1960
Appointed by Board of Governors:
Henry N. Anderson
President, Twin Harbors Lumber Company,
Aberdeen, Wash
1959
Lyman J. Bunting
President, Rainier Fruit Company, Yakima,
Wash
1960
FEDERAL RESERVE SYSTEM
149
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
PRESIDENTS AND VICE PRESIDENTS
Federal Reserve President
First Vice President
Bank of—
Vice Presidents
Benjamin F. Groot
D. H. Angney
Dana D. Sawyer
Ansgar R. Berge
O. A. Schlaikjer
George H. Ellis
Robert G. Rouse
H. A. Bilby
Alfred Hayes
New York
Charles A. Coombs Walter H. Rozell, Jr.
William F. Treiber
M. A. Harris
H. L. Sanford
T. G. Tiebout
H. H. Kimball
Robert V. Roosa
R. B. Wiltse
Joseph R. Campbell P. M. Poorman
Karl R. Bopp
Philadelphia
J. V. Vergari
W. M. Catanach
Robert N. Hilkert
David P. Eastburn Richard G. Wilgus
Murdoch K. Goodwin
Dwight L. Allen
L. Merle Hostetler
W. D. Fulton
Cleveland
Martin Morrison
Donald S. Thompson Roger R. Clouse
E. A. Fink
Paul C. Stetzelberger
C. Harrell
Upton S. Martin
N. L. Armistead
Hugh Leach
Richmond
J. M. Nowlan
J. Dewey Daane
Edw. A. Wayne
James M. Slay
Aubrey N. Heflin
L. B. Raisty
J. E. Denmark
Malcolm Bryan
Atlanta
John L. Liles, Jr.
Earle L. Rauber
Lewis M. Clark
J. E. McCorvey
S. P. Schuessler
Harold T. Patterson
E. T. Baughman
Robert C. Holland
Carl E. Allen
Chicago
W. R. Diercks
C. T. Laibly
C. J. Scanlon
A. M. Gustavson
George W. Mitchell
H. J. Helmer
H. J. Newman
Paul C. Hodge
Harry S. Schultz
H. H. Weigel
Homer Jones
Delos C. Johns
St. Louis
Geo. E. Kroner
Darryl R. Francis
J. C. Wotawa
Dale M. Lewis
C. W. Groth
H. G. McConnell
Minneapolis.... Frederick L. Deming
M. B. Holmgren
A. W. Mills
M.H.Strothman,Jr.
A. W. Johnson
John T. Boysen
Kansas City..... H. G. Leedy
E. U. Sherman
George H. Clay
Henry O. Koppang
Clarence W. Tow
Joseph S. Handford D. W. Woolley
James L. Cauthen T. W. Plant
Watrous H. Irons
Dallas
T. A. Hardin
Harry A. Shuford
L. G. Pondrom
G. R. Murff
Morgan H. Rice
J. L. Barbonchielli R. H. Morrill
San Francisco.. H. N. Mangels
H. E. Hemmings
Eliot J. Swan
John A. O'Kane
A. B. Merritt
O. P. Wheeler
E. R. Millard
Boston
J. A. Erickson
E. 0 . Latham
150
ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont.
VICE PRESIDENTS IN CHARGE OF BRANCHES
Federal Reserve Bank of—
New Y o r k . . .
Cleveland
Richmond....
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
San Francisco
Branch
Buffalo
Cincinnati
Pittsburgh
Baltimore
Charlotte
Birmingham
Jacksonville
Nashville
New Orleans
Detroit
Little Rock
Louisville
Memphis
Helena
Denver
Oklahoma City
Omaha
El Paso
Houston
San Antonio
Los Angeles
Portland
Salt Lake City
Seattle
Chief Officer
I. B. Smith
R. G. Johnson
J. W. Kossin
D. F. Hagner
T. I. Storrs
H. C. Frazer
T. A. Lanford
R. E. Moody, Jr.
M. L. Shaw
R. A. Swaney
Fred Burton
Donald L. Henry
E. Francis DeVos
Kyle K. Fossum
Cecil Puckett
R. L. Mathes
P. A. Debus
Howard Carrithers
J. L. Cook
Carl H. Moore
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 that meets from time to time to consider matters of common interest
and to consult with and advise the Board of Governors.
Mr. Erickson, President of the Federal Reserve Bank of Boston, and Mr. Johns,
President of the Federal Reserve Bank of St. Louis, who were elected Chairman
of the Conference and Vice Chairman, respectively, in February 1958, were
re-elected as such in March 1959, and continued to serve until the meeting in
June 1959. At that meeting Mr. Johns was elected Chairman of the Conference
and Mr. Bryan, President of the Federal Reserve Bank of Atlanta, was elected
Vice Chairman.
Mr. Loring C. Nye, Assistant Cashier of the Federal Reserve Bank of Boston,
served as Secretary of the Conference from February 1958 to June 1959. Mr.
Gerald T. Dunne, Counsel and Assistant Secretary of the Federal Reserve Bank
of St. Louis, was appointed Secretary of the Conference in July 1959.
BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES
Aug. 2h 1959
at (o THE FEDERAL RESERVE SYSTEM g)
Legend
•"•"—• Boundaries of Federal Reserve Districts
Boundaries of Federal Reserve Branch Territories
© Board of Governors of the Federal Reserve System
® Federal Reserve Bank Cities
• Federal Reserve Branch Cities
NOTE.—Alaska and Hawaii were added to the Twelfth Federal Reserve District in 1959, as of January 3 and
August 21, respectively. Alaska became part of the Seattle Branch Territory and Hawaii part of the Head"Office
Territory of that District. 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.
151
INDEX
Page
Acceptance powers granted member banks
89
Acceptances, bankers':
Federal Reserve Bank holdings
99, 106, 108
Open market transactions during 1959
128
Alaskan Statehood
93
Assets and liabilities:
Banks, by classes
124
Board of Governors
102
Federal Reserve Banks
106-11
Bank holding companies:
Board actions with respect to
88
Litigation
94
Bank Holding Company Act of 1956, proposed amendments
94
Bank premises, Federal Reserve Banks and
branches
100, 106, 108, 110, 120
Bank supervision by Federal Reserve System
86
Banking offices:
Changes in number
126
On, and not on, Par List, number
127
Board of Governors:
Audit of accounts of
101
Income and expenses
101-03
Litigation and hearings
94
Members and officers
130
Policy actions
66-85
Regulations (See Regulations)
Branch banks:
Domestic:
Board's branch authority, litigation regarding
94
Changes in number
126
Federal Reserve (See Federal Reserve Banks)
Foreign
90
Capital accounts:
Banks, by classes
124
Federal Reserve Banks:
Actions by Board of Governors with respect to
83, 97
Condition statement
107, 109, 111
Central reserve city classification, provision for termination of
27, 93
Chairmen of Federal Reserve Banks
133
Charts:
Debt outstanding
18
Interest rates
7, 8, 9
Saving in financial form
13
Commercial banks:
Assets and liabilities
124
Banking offices, changes in number
126
Number, by classes
124
Condition statement of Federal Reserve Banks
106-11
Consumer financial saving
20
Continental Bank and Trust Company, Salt Lake City, Utah,
administrative proceeding involving
95
152
INDEX
153
Page
Defense production loans
95, 123
Deposits:
Banks, by classes
124
Federal Reserve Banks
107, 109, 111, 118
Savings deposits, grace periods for, amendment of
Section 3(d) of Regulation Q
77
Savings and other time deposits, maximum rates
122
Deputy Chairmen of Federal Reserve Banks
133
Directors, Federal Reserve Banks and branches
134
Discount rates at Federal Reserve Banks:
Increases in
5, 66, 73, 78
Table of
121
Discounts and advances by Federal Reserve
Banks
4, 99, 106, 108, 110, 118
Dividends:
Federal Reserve Banks
96, 97, 115, 116
Member banks
125
Dollar exchange, permission granted member banks to accept
drafts or bills drawn for purpose of furnishing
89
Earnings:
Federal Reserve Banks
96, 99, 114, 116
Member banks
125
Economic activity, interest rates, and saving
6-25
Examinations:
Federal Reserve Banks
86
Foreign banking and financing corporations
91
Holding company affiliates
89
Member banks
86
State member banks
87
Expenses:
Board of Governors
101-03
Federal Reserve Banks
.96, 114, 116
Member banks
125
Federal Advisory Council
132
Federal Open Market Committee:
Meetings
31, 131
Members and officers
131
Policy actions
31-65
Review of continuing authorities or statements of policy
36
Federal Reserve Act:
Industrial loan authority under Section 13b, termination of
77
Reserves of member banks, amendments with respect to
25, 92
Statehood of Alaska and Hawaii
76, 93
Federal Reserve Banks:
Assessment for expenses of Board of Governors
103, 114
Bank premises
100, 106, 108, 110, 120
Branches:
Bank premises
101, 120
Directors
134
Vice Presidents in charge of
150
Capital accounts:
Actions by Board of Governors with respect t o . .
83, 97
154
INDEX
Page
Federal Reserve Banks—Continued
Chairmen and Deputy Chairmen
133
Condition statement
106-11
Directors
134
Discount rates:
Increases in
5, 66, 73, 78
Table of
121
Dividends
96, 97, 115, 116
Earnings and expenses
96, 99, 114, 116
Examination of
86
Fiscal agents for Inter-American Development Bank
93
Foreign and international accounts
99
Officers and employees, number and salaries
114, 121
Presidents and other officers
149
Profit and loss
83, 115
Reserve for contingencies, discontinuance of
83, 97
Reserve for registered mail losses, discontinuance of
83
Section 13b loan authority, termination of
77
Special certificates purchased direct from Treasury
113
Surplus accounts, actions by Board of Governors with respect t o . . 83, 97
U.S. Government securities:
Holdings of
99, 106, 108, 110, 112, 113, 118
Open market transactions during 1959
128
Volume of operations
95, 113
Federal Reserve districts:
Twelfth District, readjustment to include Hawaii
76
Federal Reserve notes:
Condition statement data
106-11
Cost of issue, printing, and redemption
103
Interest paid to Treasury
84, 96, 97, 115, 116
Federal Reserve policy:
Digest of principal policy actions
30
Interest rates and monetary policy
22
Record of policy actions:
Board of Governors
66-85
Federal Open Market Committee
31-65
Summary of principal policy actions
2-6
Federal Reserve System:
Bank supervision by
86
Map of
151
Membership, changes in
87
First Bank Stock Corporation, litigation under Bank Holding
Company Act
94
Foreign banking and financing corporations
91
Foreign branches of member banks
90
Gold certificate reserves of Federal Reserve Banks
106, 108, 110
Gold outflow
3
Government securities (See U.S. Government securities)
Hawaiian Statehood:
Actions by Board of Governors incident to
76
Amendments to Federal Reserve Act
76, 93
INDEX
155
Page
Hawaiian Statehood—Continued
Twelfth District, inclusion of Hawaii in
76
Holding company affiliates:
Examination of
89
Regulation P, amendment of Section l(d)
66
Reserves of readily marketable assets
93
Voting permits and Section 301 determinations
89
Industrial loans by Federal Reserve Banks:
Condition statement data
108, 110
Termination of authority
77
Insured commercial banks
124, 126
Inter-Agency Bank Examination School
92
Interest rates:
Discount rates at Federal Reserve Banks:
Increases in
5, 66, 73, 78
Table of
121
Economic activity, saving, and interest rates
6-25
Regulation V loans
123
Savings and other time deposits, maximum rates
122
Investments (See also specific types of investments):
Banks, by classes
124
Federal Reserve Banks
106, 108, 110
Legislation:
Bank Holding Company Act of 1956, proposed amendments
94
Federal Reserve Banks as fiscal agents for Inter-American
Development Bank
93
Member banks dealing in obligations of T.V.A. and InterAmerican Development Bank
93
National banks, amendments to laws affecting
93
Reserves of member banks, Public Law 86-114
25, 92
Statehood of Alaska and Hawaii
93
Litigation and hearings
94
Loans (See also specific types of loans):
Banks, by classes
124
Federal Reserve Banks
99, 106, 108, 110, 118
Margin requirements:
Regulations T and U, amendments to
6, 68, 70
Table of
123
Member banks:
Acceptance powers
89
Assets, liabilities, and capital accounts
124
Banking offices, changes in number
126
Earnings, expenses, and dividends
125
Examination of
86
Foreign branches, number in operation
90
Number
88, 124, 126
Obligations of T.V.A. and Inter-American Development
Bank, transactions in
93
Reserve requirements:
Amendments made by Public Law 86-114
25, 92
Regulation D, amendments to
28, 81
156
INDEX
Page
Member banks—Continued
Reserve requirements—Continued
Statutory range of
27, 28
Table of
122
Vault cash
5, 26, 28, 81, 92
Reserves:
Regulation D, amendments to
28, 81
Total, required and excess
118
Membership in Federal Reserve System, changes in
87
Mutual savings banks
124, 126
National banks:
Assets and liabilities
124
Banking offices, changes in number
126
Foreign branches, number in operation
90
Laws affecting, amendments to
93
Number
88, 124, 126
Trust powers
89
Nonmember banks
124, 126, 127
Old Kent Bank and Trust Company, Grand Rapids, Mich.,
litigation involving
94
Open market operations
3, 31-65, 128
Par List, banking offices on, and not on, number
127
Policy actions, Board of Governors:
Capital accounts of Federal Reserve Banks, actions with
respect to
83
Discount rates at Federal Reserve Banks:
Increases in
66, 73, 78
Hawaiian Statehood, actions incident to
76
Regulation D, Reserves of Member Banks:
Amendments related to use of vault cash in meeting reserve
requirements
81
Regulation P, Holding Company Affiliates—Voting Permits:
Amendment of Section l(d)
66
Regulation Q, Payment of Interest on Deposits:
Amendment of Section 3(d)
77
Regulation R, Relationships with Dealers in Securities:
Amendment of Section 2
80
Regulation S, Industrial Loans by Federal Reserve Banks:
Termination of
77
Regulation T, Credit by Brokers, Dealers, and Members of
National Securities Exchanges, amendments to
68
Regulation U, Loans by Banks for the Purpose of Purchasing
or Carrying Registered Stocks, amendments to
70
Policy actions, Federal Open Market Committee:
Authority to effect transactions in System Account
31-36, 38-65
Review of continuing authorities or statements of policy
36
Presidents of Federal Reserve Banks:
Conference of, and meetings
150
List of
149
Salaries
121
INDEX
157
Page
Profit and loss, Federal Reserve Banks:
Statement of
115
Transfer of reserve for contingencies to
83
Record of policy actions {See Policy actions)
Regulations, Board of Governors:
Amendments incident to admission of Hawaii to Statehood
76
D, Reserves of Member Banks:
Amendments related to use of vault cash in meeting
reserve requirements
5, 28, 81
P, Holding Company Affiliates—Voting Permits:
Amendment of Section l(d)
66
Q, Payment of Interest on Deposits:
Amendment of Section 3(d)
77
R, Relationships with Dealers in Securities:
Amendment of Section 2
80
S, Industrial Loans by Federal Reserve Banks:
Termination of
77
T, Credit by Brokers, Dealers, and Members of National
Securities Exchanges:
Amendments to
6, 68
U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks:
Amendments to
6, 70
Repurchase agreements:
Bankers' acceptances
106, 108, 128
U.S. Government securities
106, 108, 112, 118, 128
Reserve requirements, member banks:
Amendments made by Public Law 86-114
25, 92
Regulation D, amendments to
28, 81
Statutory range of
27, 28
Table of
122
Vault cash
5, 26, 28, 81, 92
Reserves:
Federal Reserve Banks:
Condition statement data
106-11
Reserve for contingencies, discontinuance of
83, 97
Reserve for registered mail losses, discontinuance of
83
Member banks:
Regulation D, amendments to
28, 81
Total, required and excess
118
Salaries:
Board of Governors
103
Federal Reserve Banks
114, 121
Saving, interest rates, and economic activity
6-25
Savings deposits {See also Deposits):
Grace periods, amendment of Section 3(d) of Regulation Q
77
Securities companies, interlocking directorates with member
banks, amendment of Section 2 of Regulation R
80
State member banks:
Assets and liabilities
124
Banking offices, changes in number
126
Examination of
87
158
INDEX
Page
State member banks—Continued
Foreign branches, number in operation
90
Litigation regarding Board's branch authority
94
Number
88, 124, 126
Proceeding regarding capital adequacy of State member b a n k . . . . 95
Surplus accounts of Federal Reserve Banks:
Actions by Board of Governors with respect to
83, 97
Statistical data
107, 109, 111, 115, 116
System Open Market Account:
Audit of
86
Authority to effect transactions in
31-36, 38-65
Territory of Federal Reserve Banks and branches:
Twelfth District, inclusion of Hawaii in
76
Time deposits (See Deposits)
Trust powers of national banks
89
U.S. Government securities:
Bank holdings, by class of bank
124
Federal Reserve Bank holdings
99, 106, 108, 110, 112, 113, 118
Member bank holdings
124
Open market operations
31-65, 128
Special certificates purchased direct from Treasury
113
V-loans
95, 123
Vault cash of member banks, authority to permit use in meeting
reserve requirements
5, 26, 28, 81, 92
Voting permits issued to holding company affiliates
89
Wachovia Bank and Trust Company, Winston-Salem, N.C.,
litigation involving
94
@FedFRASER