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FORTY-NINTH

Annual Report
OF THE

BOARD OF GOVERNORS
of the Federal Reserve System

* • *

COVERING OPERATIONS FOR THE YEAR

1962

Letter of Transmittal

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,

Washington, March 6, 1963.
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-ninth Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1962.

Yours respectfully,
W M . M C C . MARTIN, JR.,

Chairman.

Contents
Page
DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, 1962
MONETARY POLICY

Operations in Government securities
Foreign exchange operations
Other actions
FLOWS OF FINANCING

Consumers
Business
State and local governments
Federal Government
Savings institutions
Commercial banks
Balance of market forces

8
10
12
13

finance

INTERNATIONAL PAYMENTS PROBLEM

14
17
19
20
21
21
29
31

Balance of payments
Exchange markets

32
36

Foreign currency operations

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 mergers
Bank holding companies
Banking Markets Unit
Trust powers of national banks
Foreign branches of member banks

45
111
122

122
122
123
124
125
125
126
126

Page
Bank Supervision by the Federal Reserve System—Cont.
Acceptance powers of member banks
Foreign banking and financing corporations
Bank Examination School
LEGISLATION ENACTED

127
127
129
129

Exemption of interest on foreign time deposits
Powers of foreign branches of national banks
Authority over trust powers of national banks
Authority for Federal Reserve branch bank buildings
Extension of authority of Federal Reserve Banks to purchase Government obligations
Extension of Defense Production Act of 1950
Bank Service Corporation Act
Real estate and construction loans by national banks

130
131
131
131

PROPOSED AMENDMENTS TO THE BANK HOLDING COMPANY A C T

131

LITIGATION

133

The Continental Bank and Trust Company, Salt Lake City,
Utah
Whitney Holding Corporation, New Orleans, Louisiana
First Oklahoma Bancorporation, Oklahoma City, Oklahoma
Northwest Bancorporation, Minneapolis, Minnesota
RESERVE BANK OPERATIONS

129
130
130
130

133
134
135
135
135

Earning and expenses
Holdings of loans and securities
Volume of operations
Loan guarantees for defense production
Foreign and international accounts
Bank premises
BOARD OF GOVERNORS—INCOME AND EXPENSES

135
137
138
138
139
140
140

TABLES:

1. Statement of Condition of All Federal Reserve Banks
Combined (in detail), Dec. 31, 1962
2. Statement of Condition of Each Federal Reserve Bank,
Dec. 31, 1962 and 1961

144
146

Page
TABLES—Cont.

3. Federal Reserve Holdings of U.S. Government Securities, Dec. 31, 1960-62
4. Federal Reserve Bank Holdings of Special Short-Term
Treasury Certificates Purchased Directly from the
United States, 1953-62
5. Open Market Transactions of the Federal Reserve System during 1962
6. Bank Premises of Federal Reserve Banks and Branches,
Dec. 31, 1962
7. Earnings and Expenses of Federal Reserve Banks during 1962
8. Earnings and Expenses of Federal Reserve Banks,
1914-62
9. Number and Salaries of Officers and Employees of
Federal Reserve Banks, Dec. 31, 1962
10. Volume of Operations in Principal Departments of
Federal Reserve Banks, 1959-62
11. Federal Reserve Bank Discount Rates, Dec. 31, 1962
12. Maximum Interest Rates Payable on Time and Savings
Deposits
13. Margin Requirements
14. Fees and Rates under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950,
Dec. 31, 1962
15. Member Bank Reserve Requirements
16. Member Bank Reserves, Federal Reserve Bank Credit,
and Related Items, End of Year 1918-62 and End
of Month 1962
17. Principal Assets and Liabilities, and Number of Commercial and Mutual Savings Banks, by Class of Bank,
Dec. 28, 1962 and Dec. 30, 1961
18. Member Bank Income, Expenses, and Dividends, by
Class of Bank, 1962 and 1961
19. Changes in Number of Banking Offices in the United
States during 1962
20. Number of Banking Offices on and not on Federal Reserve Par List, Dec. 31, 1962

150

151
152
153
154
156
158
158
159
159
160

160
161

162

164
165
166
167

Page
TABLES—Cont.

21. Description of Each Merger, Consolidation, Acquisition of Assets or Assumption of Liabilities Approved
by the Board of Governors during 1962

169

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

202
204
205
206

M A P OF FEDERAL RESERVE DISTRICTS

228

INDEX

229

VIH

Annual Report of The Board of Governors
of The Federal Reserve System
*

HE year 1962 was one of further increase in domestic economic activity, record expansion in private borrowing, and another large deficit in the U.S. balance of payments. Monetary
and credit policy was expansive throughout the year, although
subject to constraints imposed by the balance of payments deficit and the importance of avoiding disruptive movements of
short-term funds.
With credit readily available there was a record volume of
borrowing by the nonfinancial sectors. Funds raised totaled $58
billion, $12 billion more than in 1961. Most of the increase
represented private demands. Saving in financial form increased,
and holdings of liquid assets rose faster than gross national
product—an unusual development for a period of high-level
economic activity.
For the year as a whole gross national product in constant
dollars was up more than 5 per cent from 1961, and industrial
production was up nearly 8 per cent. Nevertheless, utilization
of resources continued below desired levels, with unemployment
averaging 5.6 per cent of the civilian labor force. Competition
among suppliers—both domestic and foreign—was keen, and
average wholesale prices remained at the level prevailing since
early 1959.
During the year gains in economic activity slowed. Industrial production, nonagricultural employment, and the rate of
unemployment showed no improvement after mid-1962, but
gross national product, personal income, and retail sales rose
further. At the end of the year industrial production was only
3.5 per cent above its level in December 1961. Nonfarm employment was up 2 per cent, and the unemployment rate was a
little lower; growth in the labor force was relatively small.

ANNUAL REPORT OF BOARD OF GOVERNORS

Sluggish growth during the year contributed to, and to some
extent reflected, swings in expectations. Moderate optimism
about economic prospects began to wane following negotiations
on wages and prices in the steel industry in March and April.
In May and June stock market prices, which had been tending
downward since December 1961, broke sharply. The break was a
factor during the summer in causing widespread business expectations of an early recession. These expectations, together with
concern about the slow rate of growth and the higher unemployment rates of recent years, focused public attention on proposals
for tax reduction and reform.
In late October the Cuban crisis confronted the world with
immediate threat of nuclear war. Early withdrawal of Soviet
missiles from Cuba lessened the severe strain in the international
situation. The absence at that time of serious disturbances in foreign exchange markets provided welcome evidence that cooperative defenses against speculative capital movements had been
strengthened. At home, resolution of the crisis apparently had a
firming effect on consumer purchases, and business expectations
of imminent recession faded. By the year-end stock market prices
had recovered about half of their decline in the first half of the
year.
The slowdown in the rate of economic expansion during the
year was attributable in part to a sharp decline in inventory accumulation. In late 1961 and early 1962 the rate of inventory
investment was high, reflecting heavy purchases of steel as a
hedge against the possibility of a strike at midyear. Following
agreement on a labor-management contract in the steel industry
in late March, steel users made efforts to reduce their excess
inventories.
Incentives for other inventory investment were weaker than
in earlier postwar expansions. Supplies of materials were large;
there was a greater margin of unutilized industrial capacity; industrial prices were stable; and inventory management had improved. Late in the year total net inventory accumulation was

FEDERAL RESERVE SYSTEM

very small, even though the working down of steel stocks was at
a slower pace.
Business outlays for fixed capital were 9 per cent larger than
in 1961, but the rise in outlays slowed markedly during the
year. At the year-end, such spending—after allowance for price
changes—had still not advanced above the record level reached
in early 1957.
After faltering early in 1962, residential construction activity
recovered. Housing starts in the fourth quarter were at an annual
rate of more than 1.5 million units, considerably above the rate
in late 1961. For the year as a whole, the number of units started
was exceeded only by the number in 1959. Compared with
earlier postwar expansions, housing starts had risen less sharply
but were holding up longer.
Disposable personal income and consumer purchases of goods
and services rose slowly during the year, and consumers spent
about the same proportion of their income as in 1961. Spending
for nondurable goods and services continued to rise fairly
steadily. Purchases of durable goods fluctuated during the first
3 quarters around the advanced levels of late 1961, but expanded in the fourth quarter as sales of new autos rose sharply
to near-record levels.
Government purchases of goods and services were an expansive force throughout 1962. State and local government spending maintained its steady upward trend, and Federal purchases
also rose further. The increase in Federal outlays during 1961
and 1962 was larger and more sustained than at any other time
since the Korean War.
Consumer prices drifted up further during the year but
declined very slightly in December. Average wholesale prices of
industrial commodities continued unchanged at about the level
prevailing since early 1959. Stability in prices of industrial
products over this period reflected various influences: ample
manpower and industrial capacity, gains in productivity, and
strong competitive pressures from abroad. In manufacturing,
labor costs per unit of output have changed little in recent years.

ANNUAL REPORT OF BOARD OF GOVERNORS

In 1962, wage increases in manufacturing, including fringe
benefits, were no larger than the rise in output per manhour.
Corporate profits were about unchanged at the improved
fourth-quarter 1961 level until late in 1962 when they rose
somewhat. Depreciation allowances continued to expand, and
internal funds—the sum of retained earnings and depreciation
charges—were above the 1961 total. In order to stimulate
domestic investment, the Treasury liberalized depreciation schedules, and Congress enacted an investment tax credit program.
With more internal funds available, and with capital investment programs comparatively moderate, corporations reduced
their demands on long-term credit markets by almost one-fifth
from 1961. But they increased their borrowing in short-term
markets. Consumers expanded their instalment debt, and expansion in home and other mortgage borrowing was the largest on
record. Bond offerings of State and local governments were in
about the same record volume in 1962 as they had been the
preceding year. The net issuance of U.S. Government debt was
also roughly unchanged.
The increase in borrowing was financed in large part from an
increase in saving. Expansion in time and savings deposits at
commercial banks was particularly large, in part because banks
were permitted—effective January 1—to pay higher rates of
interest. Deposits at mutual savings banks, share capital of
savings and loan associations, and life insurance and pension
fund reserves also showed large gains. However, direct purchases
of corporate stock and State and local government obligations
declined during the year.
The privately held money supply showed little change on
balance during the first 3 quarters of 1962, then rose at a seasonally adjusted annual rate of more than 8 per cent in the
fourth quarter. For the year as a whole it rose by 1.5 per cent.
On the other hand, a broader measure of liquidity—holdings
of all types of liquid assets by the public—rose substantially
during the year.

FEDERAL RESERVE SYSTEM

With the Federal Reserve making reserves readily available,
commercial banks increased their outstanding loans and investments by a record $19 billion during the year, a gain of 8.5 per
cent. The increase in loans amounted to $14 billion. Their holdings of State and local government securities also increased, but
holdings of U. S. Government securities declined slightly.
With funds ample to meet increased demands, long-term
interest rates generally declined and at the year-end were below
a year earlier. Short-term interest rates, however, fluctuated
within a narrow range and at the year-end were above their late
1961 level. Treasury and Federal Reserve actions helped to keep
short-term rates up, in order to restrain outflows of interestsensitive, short-term funds to other countries.
Progress toward equilibrium in external receipts and payments
was limited. Exports reached a new high in the second quarter
but then declined and in the second half were about the same as
a year earlier. Merchandise imports rose about as rapidly as
gross national product from late 1961 to late 1962. Despite an
increase in investment income receipts, net exports of goods and
services were smaller in 1962 than in 1961. Recorded net outflows of private U.S. capital declined from about $4 billion in
1960 and 1961 to about $3 billion in 1962.
The payments deficit was $2.2 billion compared with $2.4 billion in 1961. It would have been much larger except for sizable
debt prepayments from European countries and some U. S.
Treasury borrowing from Italy and Switzerland late in the year.
U. S. official reserves of gold and convertible foreign currencies
declined by $900 million, somewhat more than in 1961 but less
than in each of the 3 years before 1961.
During the year the Federal Reserve System entered into a
number of arrangements with central banks abroad allowing it
to obtain foreign currencies. Foreign currencies drawn under
these arrangements were used to moderate exchange-rate fluctuations and, on several occasions, to reduce or postpone foreign
purchases of gold.

DIGEST OF PRINCIPAL FEDERAL

Period
JanuaryFebruary

February
Marchmid-June

Action
Reduced System holdings of U. S. Government
securities by about $500 million through net
sales and redemptions. Member bank borrowings from the Reserve Banks averaged
less than $100 million.
Authorized open market transactions in foreign
currencies.
Increased System holdings of U. S. Government securities by about $1.3 billion, of
which half represented purchases of securities with maturities of more than 1 year.
Member bank borrowings from Reserve Banks
continued to average less than $100 million.

Mid-JuneIncreased System holdings of U. S. Governlate October ment securities by about $200 million with
net sales and redemptions of Treasury bills
of about $700 million being more than offset
by purchases of coupon issues, of which twothirds were issues maturing in more than 1
year. Member bank borrowings from Reserve
Banks averaged less than $100 million.
July
Reduced margin requirements on loans for
purchasing or carrying listed securities from
70 to 50 per cent of market value of
securities.
October
Reduced reserve requirements against time deposits from 5 to 4 per cent, effective
October 25 for reserve city banks and November 1 for other member banks, thereby
releasing about $780 million of reserves.
Late October- Increased System holdings of U. S. GovernDecember
ment securities by about $1.0 billion, with
more than half of the net increase in issues
maturing in more than 1 year. Member
bank borrowing from the Reserve Banks
rose gradually over period, but only to an
average of about $200 million.

POLICY ACTIONS,

1962

Purpose of action
To permit further bank credit and monetary expansion by
absorbing only part of seasonal inflow of reserve funds,
mainly from post-holiday return of currency from circulation, while minimizing downward pressures on short-term
interest rates.
To moderate and offset short-term pressures on the dollar in
the foreign exchange market.
To promote further bank credit and monetary expansion while
avoiding sustained downward pressures on short-term
interest rates.

To permit moderate increase in bank credit and money supply while avoiding redundant bank reserves that would
encourage capital outflows, taking into account gradual improvement in domestic economy and possibilities for further advance, while recognizing the bank credit growth of
past year and continuing adverse balance of payments.
To take into account the recent sharp reduction in stock
market credit and the abatement in speculative psychology
in the stock market.
To help meet seasonal needs for reserves, while minimizing
downward pressures on short-term interest rates, and to
provide for the longer-term growth in bank deposits needed
to facilitate the expansion in economic activity and trade.
To help further in meeting seasonal needs for reserve funds
while encouraging moderate further increase in bank credit
and the money supply and avoiding money market conditions unduly favorable to capital outflows internationally.
In mid-December open market operations were modified to
provide a somewhat firmer tone in money markets and to
offset the anticipated seasonal easing in Treasury bill rates.

ANNUAL REPORT OF BOARD OF GOVERNORS
MONETARY POLICY

Federal Reserve actions in 1962 continued to encourage bank
credit and monetary expansion. The System supplied reserves to
commercial banks in appreciable volume, and bank loans, investments, and deposits rose sharply.
Throughout the year the Federal Reserve faced two problems.
One was the slackening in the pace of expansion in the domestic
economy; the other, the continuing large deficit in the nation's
balance of international payments. In coping with these problems, the System undertook to provide reserves to the banks in
sufficient volume to facilitate a strengthening of forces of domestic expansion but to do so in ways that would minimize downward pressures on short-term interest rates, thereby keeping these
rates in closer competitive alignment with short-term rates in
major foreign money markets. The System aimed also at avoiding so great an expansion in bank credit as might undermine stability of the price level.
Operations in Government securities. During 1962 the Federal
Reserve continued to use open market operations in U.S. Government securities as the principal means by which it influenced
the course of bank credit and money expansion and conditions
in the money and capital markets. As shown in the record of the
Federal Open Market Committee, open market policy remained
stimulative throughout the year, but at times the degree of stimulus was lessened slightly because of concern about the persistence and severity of the balance of payments problem.1 No substantial reduction in the degree of stimulus was undertaken,
however, because the Committee thought that further expansion
in bank reserves, bank credit, and money was necessary to encourage domestic economic growth in view of the continuing
underutilization of manpower and machines, and that such expansion could be fostered in the absence of general inflationary
pressures in the economy.
No alteration in the expansive posture of monetary policy was
made by the Federal Open Market Committee through mid-June
1

See pp. 45 ff. of this REPORT.

FEDERAL RESERVE SYSTEM

of 1962. Slight changes in emphasis developed, however, in
recognition of the lull in economic activity early in the year and
the shift from hesitation to modest further advance in the spring.
Steady conditions in money markets were the primary aim of
policy during periods of Treasury financing and at the time of
the break in stock prices in late May and early June.
In mid-June the Committee sought to lessen slightly the existing degree of monetary stimulation. The main reason for this
minor modification in policy was to avoid redundant bank reserves that would tend to encourage an outflow of short-term
funds from the United States. In addition, it was thought that a
policy of monetary ease if pursued too long and too vigorously
would stimulate unwise speculation and financial excesses. Note
was taken of financial developments associated with the sharp
decline in stock prices. Finally, the Committee believed that
financial resources were readily available to permit further advance in domestic economic activity, an advance that had been
continuing on a gradual basis thus far in 1962.
From mid-June to mid-December 1962, monetary policy
again was unchanged except for minor, temporary shifts in emphasis. For example, following the Cuban crisis in October, as in
May following the stock market break, the Committee focused
its operations on achieving a steadying influence in financial
markets.
Throughout the last half of the year there was growing awareness of the lack of satisfactory progress in balancing the nation's
international accounts and of the sharp expansion in bank reserves, bank credit, and money that was developing in an atmosphere of somewhat more optimism about domestic economic
prospects. Reflecting these developments, in mid-December, the
Committee by a 7 to 5 vote adopted a policy that was slightly
less stimulative, yet still directed toward expansion since the
level of economic activity prevailing at the time was still unsatisfactory, substantial amounts of physical resources continued idle,
and general inflationary pressures remained absent.
The moderate character of the changes in monetary policy in
1962 reflected the opposing pull of domestic and international

ANNUAL REPORT OF BOARD OF GOVERNORS

economic considerations. Although there was a greater than
usual diversity of views among members of the Federal Open
Market Committee regarding policy, the differences in their
views were typically quite narrow. The Committee was in general agreement about the seriousness of both the balance of payments problem and the lack of vigorous growth in the domestic
economy. As a result, it generally also agreed on the broad
range of relative monetary ease to be sought.
During 1962 the Federal Reserve continued to conduct its
open market operations throughout the maturity range of U. S.
Government securities in order to help minimize downward pressures on short-term interest rates while at the same time seeking
to encourage sufficient bank credit and monetary expansion to
stimulate domestic economic activity. Inasmuch as its purchases
of short-term issues were about equal to sales and redemptions,
nearly all of the $1.9 billion increase in System holdings of
Government securities represented net purchases of issues maturing in more than a year; about four-fifths of these had maturities
of 1 to 5 years. In 1961 the System had purchased on balance $2.6 billion of securities with maturities of more than
a year.
The Treasury also purchased a moderate amount of longerterm Government securities for its agency and trust accounts in
1962. During much of the year the Treasury helped to maintain
upward pressures on short-term interest rates by raising most of
the cash it needed through the sale of Treasury bills. Over the
year the amount of bills outstanding increased by about $5 billion. The net increase in the total debt maturing within a year,
however, was only $1.4 billion, because of debt lengthening
through advance and regular refundings, particularly in the latter
part of the year.
Foreign exchange operations. After prolonged Study and discussion of the role of the dollar in the international payments system, the Federal Open Market Committee, in early 1962,
decided to undertake open market transactions in foreign currencies. This decision was based on three considerations:

FEDERAL RESERVE SYSTEM

1. The importance to the United States and the rest of the
world of an efficient and orderly world payments system, which
made it imperative for the Federal Reserve—as the central bank
of the world's leading industrial and financial power—to take
an active part in international efforts to maintain and improve
this system.
2. The need to supplement the relatively small resources
which the Treasury Stabilization Fund had available and had
been using to defend the dollar from speculative attack in the
foreign exchange markets since early 1961.
3. A realization that today's world payments system calls
not only for multilateral cooperation through the International
Monetary Fund and other international institutions but also for
continuing bilateral cooperation among the monetary authorities
of the leading trading nations.
The Committee recognized that official intervention could be
no substitute for basic action to eliminate the U.S. payments
deficit. But restoration of payments equilibrium was likely to
take time; and in the interim, it was important to minimize any
danger that political and economic disturbances might unsettle
foreign exchange markets and generate speculative pressures. As
the operations of the Treasury Stabilization Fund during 1961
had demonstrated, timely official intervention could do much to
moderate such pressures.
The main focus of System foreign currency operations in 1962
was the negotiation of reciprocal credit, or swap, arrangements
with central banks in nine major countries and with the Bank
for International Settlements. Under the arrangements consummated by the end of the year, the System was in a position to
acquire on call as much as $900 million of convertible foreign
currencies for dollars.
During the year some $660 million of foreign currencies were
drawn under these arrangements, partly on a pilot basis to test
their technical provisions. On December 31, outstanding drawings totaled $265 million, with the remaining reciprocal credit

ANNUAL REPORT OF BOARD OF GOVERNORS

facilities continuing on a standby basis. At the year-end System
holdings of foreign currencies were equivalent to $81 million.
Other actions. With reserve funds readily available, member
banks had little need to borrow from the Federal Reserve System
in 1962. Daily average borrowings amounted to slightly more
than $100 million, only little higher than a year earlier.
The rate charged by Federal Reserve Banks for member bank
borrowing remained at 3 per cent throughout the year. This rate
has been in effect since the late summer of 1960. The Federal
funds rate, the interest rate on excess reserve balances lent among
member banks, generally fluctuated between 2.75 per cent and
the discount rate. Late in the year the Federal funds rate moved
toward the upper part of this range.
There were two changes in 1962 affecting bank reserve requirements. In late October and early November the Board
lowered from 5 to 4 per cent the reserves against savings and
time deposits that member banks are required to maintain. This
action reduced total required reserves of member banks by about
$780 million. The Board took this action mainly to assist in
supplying the banking system's heavy seasonal needs for reserves
in the closing months of the year and to supply these reserves in
a way that minimized downward pressures on short-term market
rates of interest. In addition, it considered that the reserves so
supplied would help to provide for the longer-term growth in
bank deposits needed to facilitate the expansion of economic
activity and trade.
A second change, in July, was structural in nature and involved the abolition of the central reserve city classification of
banks in New York City and Chicago as required by law. This
reclassification resulted in no change in the volume of required
reserves, however, because the requirement for central reserve
city banks had been reduced to that of banks in reserve cities in
December 1960. Since July there have been but two classes of
member banks for reserve requirement purposes, reserve city
banks with a reserve requirement against demand deposits of

FEDERAL RESERVE SYSTEM

per cent and country banks with a requirement of 12 per
cent.
The Board of Governors also took one margin requirement
action in 1962. In July it reduced from 70 to 50 per cent the
equity required on credit used for purchasing and carrying stock
market securities. This action followed a decline in stock market
credit outstanding from $5.6 billion at the beginning of the year
to $4.9 billion at the end of June. Most of this decline accompanied the sharp stock market break in late May and June.
Effective January 1, 1962, maximum permissible rates of interest payable by member banks of the Federal Reserve System
and by other insured banks on savings deposits and on time
deposits and certificates in the longer maturity ranges were
raised. These actions had been authorized late in 1961 by the
Board of Governors and by the directors of the Federal Deposit
Insurance Corporation and were described in last year's ANNUAL
REPORT, pages 9 and 101-04.
FLOWS OF FINANCING

Continued ease in monetary conditions, large inflows of funds
to commercial banks and other savings institutions, and rather
heavy credit demands stand out as major features of financial
markets in 1962.
About $58 billion, net, was raised in credit markets in 1962.
This was more than in any previous postwar year and exceeded
by $5 billion the comparable figure for 1959, when the total was
the second highest for any year. Private demands were particularly large. With bank reserves readily available because of
monetary policy actions and with consumer financial saving in
substantial volume, the supply of funds available to potential
borrowers was ample. In consequence, credit conditions eased
as long-term interest rates declined, lending terms became more
liberal, and credit was more readily available.
Individuals, who generally supply the bulk of funds entering
credit markets, placed a large portion of their saving in highly
liquid claims on savings institutions, such as time and savings

ANNUAL REPORT OF BOARD OF GOVERNORS

deposits of banks and shares in savings and loan associations.
Businesses also supplied somewhat more funds to credit markets
in 1962 than in the year before.
Commercial banks and other savings institutions channeled
their large inflows of funds more to long- than to short-term
sectors of the credit market. Under these conditions demands for
long-term financing—particularly by borrowers on mortgages
and by State and local governments—were satisfied at reduced
RECORD AMOUNT raised in credit markets in 1962

NOTE.—Flow of funds data; figures for 1962 are preliminary. Represents
net funds raised by nonfinancial sectors of the economy.

interest rates. Funds were also in ample supply to meet expanded
short- and intermediate-term credit demands of businesses and
consumers. Short-term market rates advanced slightly, however.
Capital flows between the United States and foreign countries
are discussed beginning on page 31 of this REPORT.
Consumers. Consumers acquired an estimated $41 billion of
financial assets in 1962, about one-fifth more than in 1961.

FEDERAL RESERVE SYSTEM

In order to finance increased spending on homes and durable
goods, consumers also expanded their borrowing. Despite the
rise in their borrowing, consumers as a group continued to be
large net lenders to other sectors of the economy.
Financial assets and liquidity. Practically all of the increase in
financial assets acquired by consumers during 1962 involved
greater inflows of funds to commercial banks and savings institutions. The largest relative increase over 1961 was in the flow
of saving into time and savings deposits at commercial banks.
Responding quickly to increases early in the year in interest
rates paid on these deposits, consumers more than doubled the
flow of funds into these accounts in the first quarter of 1962
compared with the fourth quarter of 1961 after allowance for
seasonal variation. This pace was not maintained, but the growth
in consumer time and savings deposits at commercial banks over
the full year was about $12 billion, or some $5 billion more than
the previous annual high in 1961. Consumers also built up their
demand deposits at a faster rate than in 1961.
Despite the spurt in deposits at commercial banks, theflowof
consumer saving into savings and loan associations and into
savings banks increased. Net acquisitions of savings at these
institutions rose to a new high for the third consecutive year,
although the rate of gain declined a little.
With the large expansion in claims on commercial banks and
other savings institutions, consumer liquidity, as indicated by the
ratio of liquid assets to income, rose to about 89 per cent of disposable personal income, at an annual rate, in the fourth quarter
of 1962, as compared with 86 per cent in the last quarter of
1961. This ratio has been rising fairly steadily since the previous
cyclical peak in economic activity was reached in mid-1960.
In contrast, during the two previous economic cycles, consumer
liquidity had risen in downturns but declined in the expansionary
phases of cycles. The recent behavior is explained in part by continuation of ease in bank reserve availability for a longer period,

ANNUAL REPORT OF BOARD OF

GOVERNORS

CONSUMER UQUID ASSETS jrow faster than income in 1962

**********
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,', \ ,',.

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NOTE.—Dept. of Commerce data for income and flow of funds data for
liquid assets, both seasonally adjusted. Liquid assets represent currency,
demand deposits, savings deposits and shares, and U.S. Govt. securities.
Figures for 1962 are preliminary.

favorable yields on liquid assets, and the moderateness of the
rise in consumer spending.
Consumer net purchases of securities were comparatively
small in 1962, as they had been in 1961. In contrast with the
higher returns offered on deposits at financial institutions, particularly commercial banks, yields on most types of credit market
instruments either changed little or declined during 1962. The
yield on equities rose, however. Nevertheless, consumers in 1962
had less incentive to invest in securities, especially in view of
economic uncertainties during much of the year.

FEDERAL RESERVE SYSTEM

There was a marked shift by consumers away from municipal
bonds. Consumers' net purchases of corporate stocks were also
lower, reflecting partly a decline in net new stock issues and
partly a decline in net purchases of mutual fund shares. Larger
purchases of corporate bonds in part offset these smaller purchases of municipals and stocks. Meanwhile, consumer purchases
of U.S. Government securities were light, as in 1961.
Borrowing. Increased financing through short- and intermediate-term consumer credit contributed to the advance in consumer borrowing. Such credit outstanding rose by $5.8 billion
in 1962, about 3V2 times as much as in the preceding year but
still less than in 1955 or in 1959.
Automobile credit accounted for nearly half of the net increase in instalment credit outstanding. Instalment credit terms
changed little on balance during 1962, although there was some
increased lending on 36-month paper. Extensions rose to a new
record high, as did repayments. Throughout the year repayments
continued to account for about 13 per cent of disposable personal income, the same as in 1961.
With mortgage funds abundant and with interest rates and
credit conditions easing, consumer borrowing on new and used
homes continued at the high rate reached in late 1961, so that
indebtedness rose by a record amount for 1962 as a whole. In
fact, consumer mortgage borrowing rose more than did purchases of new homes. This suggests not only that downpayments
on new houses were lowered but also that trading in existing
houses was active and that trades could be readily financed.
Business finance. Funds available to nonfinancial corporations
from retained earnings and depreciation allowances reached a
new peak in 1962. Corporate profits before taxes, at a record
$51 billion, were above their previous peak of almost $48 billion
in 1959. With a continued rise in dividend payments, however,
retained earnings were somewhat below the 1959 level, although
a fifth larger than in 1961. Depreciation allowances continued
to rise.
Outlays on plant, equipment, and inventories rose slightly

ANNUAL REPORT OF BOARD OF GOVERNORS

more than did the amount of internal funds available. Despite
the rise in tangible investment, demands of corporations on longterm capital markets dropped off markedly in 1962. Gross corporate bond and stock sales in 1962 were almost $11 billion or
about one-fifth smaller than in 1961, with offerings of companies
in all major types of activity down. Stocks accounted for more
than four-fifths of the decline in security sales. The volume of
both publicly offered and privately placed bonds was only moderately smaller than in 1961.
The decline in equityfinancingduring 1962 was partly a reaction to the large volume of stock sold in 1961, but it also resulted
from unfavorable market conditions generated by the sharp drop
in common stock prices that occurred in the spring. Equity
financing during the second half of the year was especially light.
Open-end investment companies also sold fewer shares.
During 1962 corporations placed increasing emphasis on borrowing in short-term markets to meet their needs for external
funds. Businesses borrowed more from banks than in 1961, with
borrowing demand strongest in the second half of the year.
Finance companies and other businesses also sold a large volume
of open market paper.
Demand for business loans at banks in the second half of the
year can be explained only in part by the course of economic
activity or inventory stocking. The early changeover to new automobile models and the unexpectedly large sales of new autos in
the fourth quarter may have entailed an unusually large demand
for loans. In addition, some corporations may have substituted
bank credit for capital market financing because they found
more favorable terms at banks or because they expected a further
decline in longer-term market rates of interest.
As a result of the increased use of bank credit and other
short-term borrowing, corporate liquidity—as measured by the
ratio of cash and U.S. Government security holdings to current
liabilities—declined to a new low in 1962. Nevertheless, holdings of liquid assets expanded more in 1962 than in 1961. The
increase in holdings of commercial bank time deposits was es-

FEDERAL RESERVE SYSTEM

pecially large, as yields were favorable and as banks continued
to offer marketable time certificates of deposit.
Corporations also continued to use available funds to finance
their customers and to invest in short-term securities other than
CORPORATE liQUIDJTY RATIO declines farther

TOTAL CURRENT LIABILITIES^

^ACCOUNTS RECEIVABLE

CASH AND U. S. GOVT. SECURITIES

CASH AND GOVT.
SECURITIES

CURRENT
LIABILITIES

NOTE.—Securities and Exchange Commission estimates.

U.S. Governments. Such developments in previous years have
contributed to the downward trend of this liquidity ratio since
1955.
State and local governments. State and local governments issued
about the same amount of long-term bonds to raise new capital
in 1962 as in 1961, when issues were a record $8.5 billion.
Meanwhile, their expenditures for construction and other purposes rose moderately.

ANNUAL REPORT OF BOARD OF GOVERNORS

The cost of market financing for State and local governments
declined more during 1962 than the cost of other types of financing. Most of the decline occurred early in the year, when commercial banks sharply stepped up their acquisitions of municipal
bonds. An unusually large portion of total offerings took place
in the first half of the year.
Federal Government. While State and local governments are
generally net borrowers in credit markets, the Federal Government's position in relation to the credit market varies from year
to year in line with fluctuations in its cash budget and in its cash
balance. The cash budget is influenced mainly by tax receipts
and expenditures, but it also reflects Governmental lending activities. Variations in the cash balance depend on the timing of
cash borrowing operations as well as on temporary variations in
expenditures and receipts.
In the calendar year 1962 the Federal Government had a cash
deficit of about $5.5 billion, which was about $1 billion less than
the previous year's deficit. Cash spending was higher than in
1961, but this was more than offset by larger cash receipts, reflecting the continued growth of personal and corporate incomes.
For the first half of the year the cash surplus was $3.5 billion.
Economic expansion was less than anticipated, however, and as
a result revenues lagged, and the cash deficit in the last 6 months
of the year amounted to about $9.0 billion. There is normally a
substantial deficit in the second half of each calendar year, but
this was the largest half-year total since 1958.
The Treasury borrowed $6.5 billion on balance during the
year. This not only financed the deficit but also added almost $1
billion to the Treasury's cash balance. Borrowing operations
were timed to take advantage of favorable market conditions and
to help maintain interest rates at levels that would not aggravate
short-term capital outflows from this country.
While issuing short-term securities to fend off downward rate
pressures in that area of the market, the Treasury also issued
longer-term securities in regular and advance refundings in order
to achieve a better balanced debt structure. Outstanding Treas-

FEDERAL RESERVE SYSTEM

ury bills held by the public rose by more than $5 billion, but the
increase in total marketable securities maturing within 1 year
was less than $1 billion because of a decline in the outstanding
amount of coupon issues maturing within 1 year.
Debt outstanding in the 1-5 year category declined, but the
amount maturing in over 5 years rose sharply. This resulted
mainly from lengthening of the debt through regular and advance refundings. On balance the average maturity of the marketable public debt lengthened from 4 years 7 months at the end
of December 1961 to 4 years 11 months at the end of calendar
year 1962.
Savings institutions. Net increases in both deposits at mutual
savings banks and share capital at savings and loan associations
reached new highs in 1962. This reflected in part some upward
adjustment in interest rates paid to savers by these institutions
to meet the higher interest rates paid by commercial banks.
The increase in share capital of savings and loan associations
during 1962 was about $9.5 billion, 9 per cent more than in
1961. This year-to-year gain, however, was somewhat smaller
than in some other recent years. Mutual savings banks' deposits
rose by more than $3 billion, about 60 per cent over the increase
in 1961. These two types of institutions specialize in mortgage
investments, and the continued large supply of funds contributed
to ease in mortgage markets.
Continuing the steady upward trend of past years, the flow of
saving to life insurance companies and pension funds increased
further in 1962. The bulk of these funds, as usual, were invested
in corporate securities. However, life insurance companies increased their holdings of mortgages more than in 1961. They
also purchased a small amount of U.S. Government securities,
in contrast to net sales in nearly all recent years.
Commercial banks. Outstanding loans and investments of commercial banks increased by an estimated $19 billion in 1962, a
record for the postwar period. The composition of bank credit
varied from earlier years, partly because the structure of demand
for funds was somewhat different but more importantly because

ANNUAL REPORT OF BOARD OF GOVERNORS

banks adapted their investments to the changing composition of
their liabilities.
Demand deposits increased by less than in 1961, but net inflows to time and savings deposits were well above previous
record amounts. With interest rates on such deposits raised,
banks put more emphasis on longer-term, higher-yielding investments than they had in other recent years, thereby contributing
to the downward interest-rate pressures in long-term sectors of
the market.
Time and savings deposits. About $15 billion, net, flowed into
time and savings deposits of commercial banks during 1962.
This represents an increase of more than 18 per cent, the highest
for any postwar year. During 1961 these deposits had increased
by about 13 per cent.
Time and savings deposits responded quickly to the higher
interest rates offered by commercial banks early in 1962, and
in the first quarter the annual rate of increase accelerated
to 25 per cent. After the first quarter the rate of increase slowed
and returned to a rate that was just slightly above that of the
preceding year, although there was a more rapid rise toward the
year-end. In view of these developments, the rapid first-quarter
increase to a large extent may have represented a restructuring
of existing consumer and business asset holdings in reaction to the
higher interest rates that commercial banks were permitted to
offer.
Sources of time deposit rise. Because shifts by the public of
the assets they hold influence the over-all availability of credit—
including credit available from banks, from other financial institutions, and from the public directly—it is important to determine the source of increase in time deposits. Although it is
difficult to come to firm conclusions on the basis of existing data,
the broad outline of developments can be seen.
For example, the distribution of the increase in time and savings deposits between passbook savings and other time deposits
provides a basis for analyzing the source of net inflows. Passbook
savings are held primarily by individuals, while other time de-

FEDERAL RESERVE SYSTEM

posits include holdings of businesses, individual investors, State
and local governments, and foreign banks and official institutions. A part of the greater increase in time and savings accounts during the first quarter of 1962 represented additional
passbook savings. Net inflows of such funds remained high
throughout the year, although tapering off from first-quarter rates.
Passbook savings compete rather directly with deposits in
mutual savings banks and with shares in savings and loan associations. But only a small part of the increase in passbook
savings accounts either in the first quarter or subsequently
seemed to represent funds diverted from, or that would otherwise have gone into, these institutions. As noted earlier, funds
continued to flow into these institutions in large volume during
1962. To the extent that individuals diverted saving from one
asset to another, it would appear to have been more a movement
away from marketable securities and also perhaps from demand
deposits.
Most of the increased inflow to time and savings deposits in
the first quarter was accounted for by a turnaround in other
time deposit accounts of individuals, partnerships, and corporations. These accounts increased sharply in the first quarter of
1962, after declining in the fourth quarter of 1961. Some of the
increase may have represented funds of individuals, but business
funds constituted a substantial, if not the major, portion of the
rise. Such funds might otherwise have been left in demand accounts or invested in short-term market instruments. There were,
apparently, large declines in corporate demand deposit holdings
in both the first and second quarters of the year, after allowance
for seasonal variation. In the meantime corporate acquisitions
of Federal obligations were moderate.
After the first quarter of the year, the net flow of funds into
other time deposits was sharply curtailed. In late October and
November there was a relatively large increase in time deposits
of foreign governments and official institutions. This was in response to congressional action, effective October 15, which
exempted such deposits from regulation as to maximum interest

ANNUAL REPORT OF BOARD OF GOVERNORS

GROWTH ia time «»* *»yltf$ deposit! rapid flr«*gfcfttft 1962;

no"
MONEY SUPPLY

-too

! J-

-i to'

TIME DEPOSITS

,!„„

NOTE.—Semimonthly averages of daily figures, seasonally adjusted. Money
supply is currency and demand deposits. Currency represents holdings outside the Treasury, Federal Reserve, and commercial banks. Demand deposits
are those other than domestic commercial interbank and U.S. Govt., less
cash items in process of collection and F.R. float; foreign demand balances
at F.R. Banks are included. Time deposits represent time and savings deposits
other than domestic interbank and U.S. Govt. at all commercial banks.

rate for a period of 3 years. In consequence, some banks raised
interest rates paid, but rates were apparently raised mainly on
deposits maturing within 3 months, to make deposits competitive
with 3-month Treasury bills.
On balance, this review of developments suggests that there
may have been some diversion of funds to time and savings deposits from marketable securities and from demand deposits,

FEDERAL RESERVE SYSTEM

particularly in the early part of the year by businesses and individual holders having larger balances than currently needed.
There may also have been some small diversion to commercial
banks of funds that would otherwise have gone into savings and
loan associations. Such shifts as did occur, however, were within
the context of an enlarged flow of financial saving, especially
from consumers.
Demand deposits and money supply. A continued but comparatively moderate rise in demand deposits held by private sectors of the economy accompanied their strong preference for
time and savings deposits during 1962. Privately held demand
deposits and currency in circulation together—the two components of the active money supply—increased by about 1.5 per
cent over the year. This is about the same as the average annual
rate of increase for the past 10 years.
The increase in the money supply was concentrated in the
last few months of the year. Earlier, the money supply had declined slightly. This was associated in part with the strong rise
in time and savings deposits early in the year and also with a
larger than usual build-up in U.S. Government deposits, which
reached a peak in early summer. Government deposits generally
remained high until early fall, when they were drawn down to
lower levels. This decline in Government deposits, together with
strengthened demand for bank loans, contributed to the money
supply growth over the last few months of the year.
With growth in demand deposits moderate, and with preferences for other liquid assets strong, existing demand deposits
were used more intensively to support growth in income and
transactions in the economy. The turnover of money at 343
centers, other than New York, rose. In the last quarter of 1962
it averaged about 8 per cent higher than a year earlier.
Loans and investments. The bulk of the record net increase in
bank credit during 1962 was in loans. Holdings of non-U.S.
Government securities, principally State and local government
issues, rose by $5 billion, an unusually large amount. Holdings
of U.S. Government securities, on the other hand, declined

ANNUAL REPORT OF BOARD OF GOVERNORS

slightly on balance. This contrasts sharply with 1958 and 1961,
when a rapid expansion of total bank credit represented in large
part a growth in holdings of U.S. Government securities. In
those years demand for bank loans was not so strong, and banks
were in the process of rebuilding liquidity.
BANK LENDING large in 1962

NOTE.—Based on data for all commercial banks for Dec. 31. Figures for
1962 estimated. Interbank loans excluded.

As noted earlier, there was a rather large net increase in business loans at banks during 1962. Consumer loans of banks increased moderately and, after allowance for seasonal variation,
rather steadily throughout the year. Loans for purchasing or
carrying securities also rose over the year. Advances were large
in early 1962 in connection with Treasury financing operations
and in December when dealers held unusually large inventories
of U.S. Government securities.
Banks were particularly active in the mortgage area, as they
expanded higher-yielding long-term investments in line with the
accelerated inflow of interest-bearing time and savings deposits.
Real estate loans increased on balance by considerably more

FEDERAL RESERVE SYSTEM

than in any other postwar year, with loans on commercial and
industrial properties showing the largest relative increase. The
record amount of State and local government securities purchased by banks was another indication of the greater emphasis
they placed on longer-term investments in 1962.
Banks also showed a preference for longer-term U.S. Government securities in their transactions. They were generally net
sellers of securities maturing within a year, but they added to
their holdings of longer-term issues through participation in
Treasury financings and through market purchases. Passage of
time, however, brought some existing holdings of U.S. Government securities into the "within 1 year" category, which in part
offset the effect on short-term holdings of market sales and redemptions.
Reserve availability. The ability of banks to expand credit and
deposits was sustained by the continued availability of reserves.
The total reserves of banks actually declined. But if adjustment
is made for reserves released by the reduction in time deposit
reserve requirements, total reserves adjusted of member banks
rose by about $700 million during 1962. This was more than the
rise in adjusted reserves in other recent years, although less than
in 1958 or 1961. The greater increase in time deposits, for
which much lower reserves are required than for demand deposits, contributed to the growth in bank credit during 1962.
Excess reserves of member banks fluctuated during the year
but changed little on balance. Meanwhile their borrowings from
Federal Reserve Banks stayed near minimal levels for much of
the time, although these rose in midsummer and again late in the
year. As a result, their net free reserves—excess reserves less
borrowings from Federal Reserve Banks—fluctuated between
$370 million and $470 million on a monthly average basis after
the early part of the year and then declined some in December.
Bank borrowings have been less than excess reserves during the
whole course of economic expansion since the early 1961
cyclical trough.
The discount rate, which is the cost of reserves borrowed from

ANNUAL REPORT OF BOARD OF GOVERNORS

Federal Reserve Banks, was unchanged at 3 per cent during
1962, but the cost of borrowing reserve funds through the Federal funds market rose. Early in the year the Federal funds rate
had generally remained below the discount rate, as it was for
most of the time in the last part of 1960 and in 1961. In the
latter part of 1962, however, it was frequently at or near the discount rate, as demand for reserve funds rose relative to the
supply of excess reserves that commercial banks were willing to
lend, mainly to other banks.
Liquidity. With the supply of their reserves generally ample to
meet expanded demands for bank credit, commercial banks'
liquidity position remained fairly comfortable through 1962. The
BANK LIQUIDITY declines as buns rise
/0

LOANS/TOTAL DEPOSITS

NOTE.—Loans exclude interbank loans. Liquid assets include U.S. Govt.
securities maturing within a year and free reserves (excess reserves less
borrowings from F.R. Banks). Deposits are net of cash items in process of
collection. Credit and deposit data are for all commercial banks; free reserves,
member only.

FEDERAL RESERVE SYSTEM

ratio of loans to deposits rose, but at the year-end it was still
somewhat below the peak reached in mid-1960.
The ratio of bank holdings of liquid assets—short-term U. S.
Government securities together with net free reserves—to demand deposits is another indicator of their liquidity position, and
it remained comparatively high during the year. The ratio fell,
however, in the last few months, partly because of the spurt in
loan demand and partly because banks continued to lengthen
maturities of security holdings.
Banks' needs for liquid assets were influenced by the growth
and changing pattern of their time and savings deposit liabilities
as well as by growth in demand deposits. A part of the increase
in time and savings deposits represented potentially volatile
funds from businesses and large investors, and uncertainties
about future movements of such funds added to the basic need
for short-term assets.
In general, banks did not have enough of a surplus in liquidity, in view of credit demand, to bring about a decline in lending
rates on short-term business loans. Lending rates on longer-term
loans, however, were apparently reduced somewhat.
Balance of market forces. The balancing of supplies with demands for funds during 1962 entailed a decline in long-term
interest rates. The heavy inflow of saving to long-term sectors of
the market exerted downward pressures on the cost of funds
there. The largest decline was in yields on State and local government securities, which responded to the sharp increase in
commercial bank demands, especially in the early part of the
year. Interest rates on mortgages were also under downward
pressure, and other mortgage terms and conditions eased.
Rates on intermediate- and long-term U.S. Government issues
also declined. Yields on high-grade corporate bonds declined to
some extent in sympathy with reductions in other long-term
rates, as investors switched among securities in response to
emergent yield differentials. They declined also because of the
reduction in corporate demands for new long-term funds.
Yields on equities rose considerably in the spring of 1962,

ANNUAL REPORT OF BOARD OF GOVERNORS

when there was a sharp break in stock prices, but later drifted
downwards. At the year-end these yields were still above 1961
levels but about the same as they had been in 1959 and 1960.

SHORT-mi Merest rates firm;

RATE P

BANK PRIME

H"/
•OB

- f*

V\
/

1
TF. R. DISCOUNT RATE

-" 4

N. Y.

\
- %

/TREASURY BILLS

,..!

- 1
j

LONG-TERM rates decHne some

CORPORATE

NOTE.—Monthly averages. Treasury bills, market yields on 3-month bills.
Corporate and State and local Govt. bonds, Moody's Investors Service. U.S.
Govt. bonds, issues maturing or callable in 10 years or more. Bank prime
rate, rate charged by large banks on short-term loans to business borrowers
of the highest credit standing.

FEDERAL RESERVE SYSTEM

The general downward movement of long-term bond yields
contrasts with a small advance in short-term rates. To some extent, this narrowing of yield spreads is explained by the large
inflow of saving to long-term markets and by the reduced
liquidity preference of banks as they sought higher earnings.
In addition, new Treasury issues of bills at times served to offset
downward pressures on short-term rates. And Federal Reserve
operations to supply the bank reserves necessary for economic
expansion were conducted in such a way as to minimize downward pressures on short-term interest rates.
The decline in long-term rates occurred while economic activity was still advancing—which was unusual in postwar experience. With employment at unsatisfactory levels in 1962, however, these lower long-term rates provided one incentive for
further domestic spending. Continued stability of short-term
market rates, on the other hand, helped to restrain outflows of
interest-sensitive short-term capital from this country. At the
same time, bank and other short-term credit was available in
ample supply to meet domestic short-term financing demands.
INTERNATIONAL PAYMENTS PROBLEM

The U.S. deficit in international transactions in 1962 was the
fifth in a series of large deficits. Last year's deficit was smaller
than those of preceding years, and underlying competitive forces
were still moving in a favorable direction. But the improvement
during the year was less than had been hoped for, and the disparity between receipts and payments remained a matter of
serious concern.
Nevertheless, the world payments system demonstrated a
high degree of resilience, as cooperative international arrangements were extended and strengthened. The Federal Reserve
System joined with the U.S. Treasury and foreign monetary authorities in operations to minimize disturbances in exchange
markets and to make the existing international payments system
more flexible and viable.

ANNUAL REPORT OF BOARD OF GOVERNORS
Balance of payments. The U.S. gold stock declined by another
$0.9 billion in 1962, and there was an increase in liquid liabilities to foreign countries and international institutions of $1.3
billion. The deficit was thus $2.2 billion, only slightly smaller
than in 1961 though much less than in the years 1958-60.
Two special factors played important roles in reducing the
1962 payments deficit. First, as in 1961, foreign governments
made prepayments of $0.7 billion on long-term debts to the
United States. Second, in contrast to previous years, the U.S.
Government increased its medium-term liabilities to foreign
authorities by a substantial amount.
During the year the balance of payments underwent impor-

TRADE SURPLUS declines as
$sgwrfs I$v*I J*U In If it
25

1956

NOTE.—Three-month weighted moving averages of Bureau of the Census
seasonally adjusted data. Exports exclude shipments under military aid
programs.

FEDERAL RESERVE SYSTEM

tant transitory changes associated with the Canadian exchange
crisis, which culminated at midyear. From changes in Canadian
reserves, it seems reasonable to infer that the U.S. payments
position was improved by between $0.5 billion and $1 billion
in the first half of the year and adversely affected to a similar
extent in the second half.
The net recorded outflow of private funds into short-term
foreign currency assets remained small in 1962, but there were
apparently also continuing outflows of kinds that are not covered
by the existing reporting system.
Goods, services, and U.S. Government economic aid. Transactions on current account and for economic aid—for goods and
services, donations, and U.S. Government grants and loans less
normal repayments—gave rise to nearly equal U.S. payments to
and receipts from the rest of the world in 1962. This had also
been true in the second half of 1961, following the recovery in
our imports after the 1960-61 recession. In that period such
payments to the rest of the world had exceeded receipts by $0.4
billion, seasonally adjusted annual rate. In 1962 the excess of
such payments was even smaller, according to preliminary estimates. In comparison with the full year 1961, however, the balance worsened by about $ 1 billion.
Both imports and exports were larger in 1962 than in the
second half of 1961. Despite a drop in export sales to Japan,
and despite some falling off in exports to Europe after midyear,
the merchandise trade surplus was only moderately lower—an
estimated $4.4 billion as compared with an annual rate of $4.7
billion in the earlier period.
U.S. Government nonmilitary grants and loans, less normal
repayments received, were about $3.7 billion, little changed from
the advanced level to which they had risen in the course of the
two preceding years. For investment income, travel, transportation, and other nonmilitary services, the surplus of U.S. receipts
over payments increased considerably. There was also a rise in
military sales of goods and services, while gross U.S. military
expenditures remained near $3 billion.

ANNUAL REPORT OF BOARD OF GOVERNORS

Private capital movements. Despite the continuing ready availability of credit from banks and other sources and the large flow
of domestic saving in 1962, the net outflow of loan and investment funds to the rest of the world was not so large as in 1961.
In particular, the recorded outflow of short-term U.S. capital
was sharply reduced, from $1.5 billion in 1961 to less than half
as much in 1962 according to preliminary estimates. In both
years some additional outflow was probably included in the
"errors and omissions" item in the balance of payments accounts.
The slowing of the short-term capital outflow was most noticeable in bank loans and acceptance credits. Whereas in 1961
extensions of short-term bank credit to foreigners exceeded repayments by $0.9 billion, in 1962 the net outflow was only $0.3 billion. Much of this change was connected with the improvement
in Japan's international payments position. As its imports declined and exports rose, Japan no longer found it necessary to
obtain additional short-term credit abroad to balance its accounts. Outstanding U.S. short-term bank credit to Japan had
risen by $500 million in 1960 and $600 million in 1961, and it
rose by $200 million more in the first quarter of 1962. The outstanding volume then stabilized.
Outflows of private U.S. long-term investment and loan funds
in 1962 are estimated to have been nearly equal to the $2.5 billion recorded for 1961. Movements of direct investment capital
to affiliated companies abroad were apparently a little below the
1961 outflow, and purchases of outstanding securities were also
smaller, but there was a sharp increase in new foreign security
issues in the U.S. capital market primarily by Canadian, European, and Japanese borrowers.
Inflows to the United States of foreign long-term capital and
commercial credits were much smaller than in 1961, when they
had amounted on balance to $0.6 billion. Net purchases of U.S.
common stocks by foreigners averaged $30 million a month
through May. But in the rest of the year there were small net
sales.
In summary, the net outflow of private capital that is counted

FEDERAL RESERVE SYSTEM

PRIVATE CAPITAL OUTFLOWS decline
as bank credit onflow shrinks in 19*2

NOTE.—Dept. of Commerce data. Long- and short-term capital outflows are
net of recorded inflows of foreign private capital other than into liquid assets
in the United States. Data for 1962 are partly estimated by Federal Reserve.

as contributing to the over-all deficit in the U.S. balance of payments was about $2.8 billion, as against $3.3 billion in 1961.
Increases in U.S. liquid liabilities are counted not as reducing
the deficit in the U.S. balance of payments but as a means of
financing the deficit. Liquid liabilities to private foreigners other
than commercial banks continued to increase moderately in
1962. Also, international development lending institutions added
to their reserves held in liquid and nonliquid U.S. Government
securities and as time deposits in the United States.
Liquid liabilities to foreign commercial banks decreased by
$0.2 billion during 1962. They had risen $0.6 billion during the
preceding year as German banks placed funds in the Euro-dollar
market in response to special incentives provided by the German
monetary authorities.

ANNUAL REPORT OF BOARD OF GOVERNORS

Official settlements. In 1962, as in 1961, $0.9 billion of the
payments deficit was financed by a decline in the U.S. gold stock.
Of the remaining $1.3 billion, $1.1 billion was reflected in increases in U.S. liquid liabilities to foreign central banks and
governments and to the International Monetary Fund, compared
with $0.5 billion in 1961.
The United Kingdom and other countries used a substantial
amount of dollars in 1962 to repay drawings they had previously
obtained from the International Monetary Fund. Such repayments raised U.S. liabilities to the Fund by $0.6 billion and
brought the Fund's holdings of dollars close to 75 per cent of the
U.S. quota in the Fund.
Partly because dollars were paid to the Fund—and also because of other official transactions that included prepayments of
debt to the U.S. Government, borrowings of foreign currencies
by the U.S. Treasury, and commitments of foreign funds for
military purchases in the United States—the increase in U.S.
liquid liabilities to foreign central banks and governments in
1962 was limited. Liabilities to Canada and Japan increased,
while the total to other countries declined.
Exchange markets. The dollar's rate of exchange against
leading foreign currencies during 1962 continued to reflect the
substantial external deficit of the United States and the corresponding surpluses of a number of Western European countries,
particularly France. Throughout the year the French franc and
also the Italian lira remained very close to their respective ceilings against the dollar.
Rates on other leading European currencies were generally
below their ceilings, reflecting the closer balance in the external
accounts of European countries other than France. Spot and
forward rates for these currencies were affected from time to
time during the year by flows of bank funds between European
domestic markets and the Euro-dollar market. In addition to
window-dressing transfers, such flows reflected fluctuations in
internal credit conditions and changing yields in the Euro-dollar
market.

FEDERAL RESERVE SYSTEM

The recorded net movement of U.S. private funds into shortterm foreign currency investments remained small in 1962.
The flows that occurred were mainly to Canada and the United
Kingdom. The smallness of the net flow to Britain reflected the
narrowing spread between money market rates in London and
New York—following successive reductions in the Bank of England's discount rate—together with a roughly offsetting discount
on forward sterling during most of the year. At the end of
October this discount narrowed, and the covered flow of funds
into sterling rose sharply for a brief period.
In the second half of the year, a moderate amount of U.S.
corporate funds was invested in short-term assets denominated
in Canadian dollars. This movement stemmed from the sharp
rise in Canadian short-term interest rates as a result of the
Canadian stabilization program. Yields on Canadian money
market paper were significantly higher than yields on U.S.
paper, even after allowance for the cost of exchange cover.
Capital flows of a speculative nature were associated mainly
with three developments—the worldwide break in stock market
prices in late May, speculation against the Canadian dollar in
the first half of 1962, and the Cuban crisis in October.
The widespread decline in stock prices in late May generated
a fairly heavy flow of funds into Switzerland as investors sought
the haven of Swiss francs or of gold and gold shares bought
through that currency. Although their official dollar holdings
rose substantially as a result of this inflow, the Swiss authorities
refrained from buying gold from the U.S. Treasury during this
period of uncertainty, as such purchases might have had a particularly disturbing impact on confidence at this juncture. The
dollar holdings of the Swiss authorities were reduced in part by
forward sales of Swiss francs by the U.S. Treasury, which provided forward cover for investments in U.S. Treasury bills by
the Swiss Confederation. In July their remaining uncovered
dollar holdings were further reduced when the Federal Reserve
utilized $100 million of Swiss francs, acquired under swap arrangements with the Swiss National Bank and with the Bank for

ANNUAL REPORT OF BOARD OF GOVERNORS

International Settlements, to purchase dollars from the Swiss
National Bank.
The most striking development in foreign exchange markets
during 1962 was the speculative attack on the new par value of
the Canadian dollar. During the first 4 months of 1962, the
Canadian authorities maintained the value of the Canadian
dollar just above $0.95 in the face of a growing belief in exchange markets that this rate was going to be lowered in the
near future. As a substantial volume of adverse leads and lags
in commercial payments accumulated, the Canadian authorities
were forced to supply large amounts of U.S. dollars to the
market to support the exchange rate. On May 2, with the approval of the International Monetary Fund, the Canadian Government established a new par value of $0,925 for its dollar,
nearly 3 cents below the rate in the first 4 months of the year
and 9 cents below the rate prevailing a year earlier.
Nevertheless, the market feared a further devaluation. Speculative pressures intensified, accelerating the drain on Canadian
reserves. Confronted with this situation, the Canadian Government undertook a decisive program to defend the new par value
without resort to exchange or capital controls (although import
surcharges, announced as temporary, were imposed). This program was reinforced by large-scale international assistance;
altogether, the IMF, the U.S. Export-Import Bank, the Federal
Reserve System, and the Bank of England made more than
$1 billion available to Canada.
These measures turned the tide of speculative sentiment.
Gradually, and then in increasing volume, the leads and lags in
commercial payments were unwound and short- and long-term
funds began to flow back into Canada. During the second half
of the year Canadian reserves rose more than they had earlier
declined, and the arrangements between the Bank of Canada
and the Federal Reserve, and between the Bank of Canada and
the Bank of England, were put on a standby basis.
International financial cooperation received a further major
test with the outbreak of the Cuban crisis. This development
caused some continental banks to take short positions in the

FEDERAL RESERVE SYSTEM

Euro-dollar market, and it also led to a renewed flow of funds
to Switzerland. Although the Federal Reserve System sold about
$10 million of Swiss francs for its own account, the Swiss authorities were forced to absorb about $50 million through exchange market intervention. Cooperative arrangements between
the U.S. and Swiss monetary authorities, however, prevented
these accruals from causing additional sales of U.S. gold.
Considering its gravity, the Cuban crisis generated a remarkably small volume of speculative flows. This may have reflected
in part the realization that no country was likely to be a safe
haven for funds in the event of a nuclear war. But the absence
of massive capital flows also seemed to indicate a growing appreciation of the impressive resources that can be mobilized by
national monetary authorities and the IMF in coordinated defense of a currency coming under speculative attack.
Leading central banks and treasuries continued their cooperative intervention in the London gold market throughout the year
to prevent any sharp run-up in the price of gold during periods
of uncertainty such as were associated with the stock market
declines in late May and the Cuban crisis in October. Speculative buying in the London market shrank substantially in the
closing weeks of the year, and the gold price fell well below its
October peak.
Foreign currency operations. Against the background of a continuing large deficit in the U.S. balance of payments and the
possibility that sudden changes in payments flows might disrupt
exchange markets, the Federal Open Market Committee on
February 13, 1962, authorized the Federal Reserve Bank of
New York to undertake transactions in foreign currencies for
System Account.2 The Committee expressed its specific aims
as follows:
1. To offset or compensate, when appropriate, the effects on
U.S. gold reserves or dollar liabilities of disequilibrating fluctua2
For the text of the authorization and for changes in it, see record of
policy actions of the Federal Open Market Committee on pp. 45-109 of this
REPORT, particularly pp. 57-61 and 103-04.

ANNUAL REPORT OF BOARD OF GOVERNORS

tions in the international flow of payments to or from the United
States and especially those that are deemed to reflect temporary
forces or transitional market unsettlement.
2. To temper and smooth out abrupt changes in spot exchange rates and moderate forward premiums and discounts
judged to be disequilibrating.
3. To supplement international exchange arrangements such
as those made through the International Monetary Fund.
4. In the long run, to provide a means whereby reciprocal
holdings of foreign currencies may contribute to meeting needs
for international liquidity as required in terms of an expanding
world economy.
At its February 13 meeting, the Committee approved a
general authorization for System foreign currency operations;
designated a senior officer of the Federal Reserve Bank of New
York to be Special Manager of the Open Market Account for
foreign currency operations; and approved a set of guidelines
under which transactions might be executed by the Special
Manager under the Committee's continuing supervision.3 On the
same day the Board of Governors authorized the opening and
maintenance of accounts with the central banks of a number of
leading industrial countries.
The National Advisory Council on International Monetary
and Financial Problems on February 28 approved the System's
decision to enter the foreign currency field. Pursuant to this action, information on System operations, as well as those conducted by the Treasury, has been supplied to the Council on a
regular basis.
From the beginning, System foreign currency operations have
been closely coordinated with Treasury operations at all levels
of policy determination and execution. In particular, the two
agencies established a procedure for a daily review and discussion of market developments and official operations. Coordinated action has been greatly facilitated by the fact that the
3

See pp. 61-63; also pp. 103-04.

FEDERAL RESERVE SYSTEM

Federal Reserve Bank of New York acts as agent for both the
System and the Treasury in their respective foreign exchange
operations.
Operations in foreign currencies have necessarily been conducted in close collaboration with foreign central banks. Because
the Federal Reserve Bank of New York had for many years
acted as their agent in the New York exchange market, a close
working relationship with foreign central banks existed even before the U.S. Treasury began foreign exchange operations in
March 1961. During 1962, the Federal Reserve System endeavored to extend its cooperative relations with the central
banks of leading industrial countries. Its officials attended
monthly meetings of the Bank for International Settlements in
Basle and participated in U.S. delegations to meetings of committees and working parties of the Organization for Economic
Cooperation and Development in Paris.
At the time of its decision to undertake foreign currency
operations, the System already owned nominal balances with
central banks in Canada, Britain, and France. Additional
balances were placed in February with central banks in Germany, Switzerland, the Netherlands, and Italy through the purchase of modest amounts of marks, Swiss francs, guilders, and
lire from the U.S. Stabilization Fund. Foreign currencies
acquired from the Stabilization Fund during the year amounted
to the equivalent of $33.5 million.
Most of the foreign currencies acquired by the System during
1962 were obtained through drawings under reciprocal credit,
or swap, facilities arranged with nine foreign central banks and
with the Bank for International Settlements. Under each such
arrangement, the System can acquire on call up to a specified
amount of a foreign currency in exchange for a corresponding
dollar credit in favor of the other party. Each party is protected
against loss should there be a devaluation or revaluation of the
other's currency while a drawing is outstanding. Both parties
receive the same rate of interest on invested balances; foreign
owned balances have generally been invested in special U.S.

ANNUAL REPORT OF BOARD OF GOVERNORS

Treasury certificates, and Federal Reserve balances have been
placed in interest-earning deposits abroad. As occasion arises,
either party may use its balances for transactions in the exchange market or with foreign central banks. Swap arrangements
are generally for 3- or 6-month periods but are renewable upon
mutual agreement; during 1962, all arrangements were renewed
at maturity.
In entering into swap arrangements, the Federal Reserve has
had three needs in view. First, in the short run, swap arrangements can provide the System with foreign exchange that can
be sold in the market to counter speculative attacks on the
dollar or to cushion market disturbances that threaten to become
disorderly.
Second, swap arrangements can provide the Federal Reserve
with resources for avoiding a bunching of U.S. gold losses that
may result when foreign central banks rapidly accumulate dollars in excess of the amounts they wish to hold during a period
of uncertainty—especially if these accumulations are likely to
be reversed in a foreseeable period. Swap arrangements, however, are not designed to avoid gold losses resulting from a persistent payments deficit.
Third, when the U.S. balance of payments has returned to
equilibrium, swap arrangements with foreign central banks may
be mutually advantageous as a supplement to outright foreign
currency holdings in furthering a longer-run increase in world
liquidity, should this be needed to accommodate future expansion of the volume of world trade and finance.
The 10 swap agreements entered into during 1962 put the
System in a position to draw on call up to $900 million of
foreign currencies. The details of these various agreements and
of the drawings made under them are summarized in the accompanying table.
Drawings and repayments under these agreements followed a
varied pattern. The first agreements were those with the Bank
of France and the Bank of England. The System promptly drew
$50 million under each of these agreements in order to test com-

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE RECIPROCAL CURRENCY AGREEMENTS,

1962

(In millions of dollars)

Other party to agreement

Date (of
original
agreement)

Drawings
Total
facility

During
year 1

Outstanding
at end
of year

Bank of France
Bank of England
Netherlands Bank
National Bank of Belgium
Bank of Canada

Mar.
May
June
June
June

1
31
14
20
26

50
50
50
50
250

50
50
20
50
250

10
50

Bank for International Settlements 2 . . .
Swiss National Bank
German Federal Bank
Bank of Italy
Austrian National Bank.

July
July
Aug.
Oct.
Oct.

16
16
2
18
25

100
100
50
3 150
50

80
50

55
50

50
50

900

650

265

Total
1
2
3

Excluding renewals.
Allows the System to draw Swiss francs.
Increased from $50 million on Dec. 6.

munications, investment procedures, and other operational arrangements. In the absence of any immediate need to use the
balances acquired under these drawings, these two agreements
were subsequently placed on a standby basis.
No drawings were made under the $50 million arrangement
with the German Federal Bank. This agreement was maintained
on a standby basis from its inception in early August.
The System entered into a $250 million swap arrangement
with the Bank of Canada on June 26, 1962, as part of a broad
program to bolster Canada's official reserve position following
the massive speculative attack on the Canadian dollar's new
parity. Had this speculative attack forced a further Canadian
devaluation, there might also have been serious speculative
pressures on the U.S. dollar. As the Canadian dollar strengthened during the second half of the year, Canadian reserves rose

ANNUAL REPORT OF BOARD OF GOVERNORS

sharply and the Bank of Canada repaid, in three instalments,
its $250 million drawing, putting the arrangement on a standby
basis at the end of the year.
The Federal Reserve drew on all six of the remaining agreements during 1962 in order to reduce or postpone U.S. gold
sales to foreign central banks and support the dollar in the exchange market. Total drawings during the year under these six
arrangements amounted to $300 million, of which $265 million
were outstanding at the end of the year.
On December 31 the System owned foreign currency balances
of $81 million, of which $51 million were in the particular currencies in which it had outstanding swap drawings. The amounts
held in various currencies at the end of the year are shown in
the accompanying tabulation.
In millions
of dollars
3
27.0
4.0
10.7
5
6
35.6
2.1
80.8

Currency
Pound sterling
German mark
Swiss franc
Netherlands guilder
Italian lira
French franc
Belgian franc
Canadian dollar
All currencies

FEDERAL RESERVE SYSTEM
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 on 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 each such action, and that it shall include in its ANNUAL REPORT to the Congress a full account of such actions.
In the pages that follow, there are entries with respect to the
policy actions taken at the 19 meetings of the Federal Open
Market Committee during the calendar year 1962, including the
votes on the policy decisions made at those meetings as well as a
resume of the basis for the decisions, as reflected by the minutes
of the Committee.
It will be noted from the record of policy actions that in some
cases the decisions were by unanimous vote, and that in other
cases dissents were recorded. Further, as this record indicates,
the fact that a decision in favor of a general policy was by a
large majority, or even that it was by unanimous vote, does not
necessarily mean that all members of the Committee were equally
agreed as to the reasons for the particular decision or as to the
precise operations in the open market that were called for to implement the general policy.
As explained in the record of policy actions, in 1962 the Federal Reserve System entered into a program of foreign currency
operations, in which connection the Federal Open Market Committee issued certain authorizations, guidelines, and directives.
Both the Manager of the System Open Market Account and
the Special Manager of the Account for foreign currency opera-

ANNUAL REPORT OF BOARD OF GOVERNORS

tions attend the meetings of the Committee and obtain guidance
for the conduct of their operations.
The policy directives of the Federal Open Market Committee
are issued to the Federal Reserve Bank of New York as the
Bank selected by the Committee to execute transactions for the
System Open Market Account. During the year 1962 the Bank
operated in the area of domestic open market operations under
two separate directives from the Open Market Committee—a
continuing authority directive and a current economic policy
directive, this separation of directives having been decided upon
by the Committee at its meeting on December 19, 1961, for
reasons set forth on pages 91-94 of the Board's ANNUAL REPORT
for 1961. At the beginning of the 1962 calendar year, the continuing authority directive was in the form set forth in the policy
record entry for the meeting on January 9, 1962. This directive
was changed only once during the year, as described in the
policy record entry for the meeting on March 6, 1962. On the
other hand, the current economic policy directive was changed
frequently during the course of the year, as shown in the respective policy record entries. The current economic policy directive
that was in effect at the beginning of 1962 instructed the Federal Reserve Bank of New York as follows:
It is the current policy of the Committee to permit further bank credit
and monetary expansion so as to promote fuller utilization of the economy's resources, together with money market conditions consistent with
the needs of both an expanding domestic economy and this country's
international balance of payments problem.
To implement this policy, operations for the System Open Market
Account shall be conducted with a view to providing reserves for bank
credit and monetary expansion (with allowance for the wide seasonal
movements customary at this time of the year), but with a somewhat
slower rate of increase in total reserves than during recent months. Operations shall place emphasis on continuance of the 3-month Treasury bill
rate at close to the top of the range recently prevailing. No overt actions
shall be taken to reduce unduly the supply of reserves or to bring about a
rise in interest rates.

FEDERAL RESERVE SYSTEM

January 9, 1962
Authority to effect transactions in System Account.

The domestic economic situation, as it appeared from national
and regional reports at this first meeting of the Federal Open
Market Committee in 1962, continued to be characterized by
growth in output and spending, stability in average prices, and a
reduced but still relatively high level of unemployment. There
was a continuing sizable deficit in the U.S. balance of payments.
Domestically, preliminary data indicated that the industrial
production index for December would show a further 1 or 2
point rise to 115-116 per cent of its 1957 average. While total
construction activity dipped in December from its sharply advanced November rate, it remained at a high level and, within
the total, private residential construction continued to rise. Retail
sales had moved up vigorously in October and November, and
department store sales in December were at record levels. Automobile sales, however, declined from their high November levels.
Incomplete evidence on price developments in December suggested continued stability in the averages. It appeared that the
seasonally adjusted unemployment rate in December remained
at about the level of 6.1 per cent to which it had dropped in
November from the rates near 7 per cent that had persisted
through most of 1961.
Bank credit increased sharply in December, with the rise in
loans close to or above the record increase of December 1960.
At year-end the money supply (conventionally defined to include
currency in circulation and privately held demand deposits) was
3 per cent larger than at the beginning of the year and had
shown an annual rate of increase of over 6 per cent since
August. Incomplete figures for the week ended January 3 showed
a rather large decline in loans and investments at city banks, and
it was not clear at the time of the meeting whether the sharp
December expansion was a transitory development or was indicative of a longer-run tendency. Short-term money market rates

ANNUAL REPORT OF BOARD OF GOVERNORS

rose somewhat to their highest levels since mid-1960, while longterm bond yields remained fairly steady after their advances of
November and early December.
Shortly before this meeting the Treasury had announced plans
to raise between $1.5 billion and $1.75 billion in new cash during the month of January, partly by offering $2 billion in 1-year
bills to replace $1.5 billion in such bills maturing during the
month, and partly by a supplementary cash financing the terms
of which were to be announced later.
With respect to the U.S. balance of payments, what evidence there was of developments in December indicated continued
deterioration in this country's position. Although December
balance of payments figures had usually shown some improvement because of year-end debt payments by foreign countries
to the U.S. Treasury, preliminary and fragmentary figures for
December 1961 indicated a deficit of about the same magnitude
as in the two preceding months. The net decline in the gold
stock in the fourth quarter, although only about half that in
the last quarter of 1960, exceeded the total for the first 9 months
of 1961.
It was the judgment of the Committee that both the economic
situation and the desirability of maintaining an "even keel" in
the money market during the period of the Treasury financing
warranted making no change for the coming 2 weeks in the basic
policy that had been decided upon at the previous meeting of
the Committee (December 19, 1961). Accordingly, the following current economic policy directive was issued to the Federal
Reserve Bank of New York:
It is the current policy of the Committee to permit further bank credit
and monetary expansion so as to promote fuller utilization of the economy's resources, together with monetary conditions consistent with the
needs of an expanding domestic economy, taking into account this country's adverse balance of payments as well as the Treasury financing
calendar.
To implement this policy, operations for the System Open Market Account during the next 2 weeks shall be conducted with a view to main-

FEDERAL RESERVE SYSTEM
taining current money market conditions, without action to alter the level
of interest rates.
Votes for this action: Messrs. Martin, Balderston, Irons,
King, Mills, Mitchell, Robertson, Shepardson, Swan, Wayne,
Fulton, and Treiber. Votes against this action: None.

No change was made in the continuing directive, first adopted
at the meeting on December 19, 1961, when new procedures
calling for separate continuing and current economic policy
directives were instituted. The continuing directive, which remained in effect, read as follows:
1. The Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York, to the extent necessary to carry out
the current economic policy directive adopted at the most recent meeting
of the Committee:
(a) To buy or sell U.S. Government securities in the open market
for the System Open Market Account at market prices and, for such
Account, to exchange maturing U.S. Government securities with the
Treasury or allow them to mature without replacement; provided that
the aggregate amount of such securities held in such Account (including forward commitments, but not including such special short-term
certificates of indebtedness as may be purchased from the Treasury
under paragraph 2 hereof) shall not be increased or decreased by more
than $ 1 billion during any period between meetings of the Committee;
(b) To buy or sell prime bankers' acceptances in the open market
for the account of the Federal Reserve Bank of New York at market
discount rates; provided that the aggregate amount of bankers' acceptances held at any one time shall not exceed $75 million or 10 per
cent of the total of bankers' acceptances outstanding as shown in the
most recent acceptance survey conducted by the Federal Reserve Bank
of New York;
(c) To buy U.S. Government securities with maturities of 24
months or less at the time of purchase, and prime bankers' acceptances,
from nonbank dealers for the account of the Federal Reserve Bank of
New York under agreements for repurchase of such securities or acceptances in 15 calendar days or less, at rates not less than (a) the
discount rate of the Federal Reserve Bank of New York at the time
such agreement is entered into, or (b) the average issuing rate on the
most recent issue of 3-month Treasury bills, whichever is the lower.

ANNUAL REPORT OF BOARD OF GOVERNORS
2. The Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York to purchase directly 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 $500 million.

January 23, 1962
1. Authority to effect transactions in System Account.

Available evidence indicated little change in the basic economic situation in the 2-week period since the previous meeting
of the Committee. While the demand for bank loans appeared
to have moderated somewhat following the large increase in
December, an expansion in domestic activity evidently was continuing, with prices generally stable. There appeared to be
enough unused capacity to accommodate a further increase in
production without creating strong pressures on resources or
prices.
In the period since the previous meeting, and particularly in
the past week, there had inadvertently been a somewhat greater
degree of monetary ease than was contemplated by the Committee, as indicated by some downward drift in Treasury bill rates
from the levels reached early in the month, lower Federal funds
rates, and a relatively large volume of free reserves. This situation had resulted mainly from unexpectedly high levels of Federal Reserve float and a greater than seasonal decline in required
reserves.
An announcement was expected on February 1 of the terms
of a Treasury financing to be carried out later in the month, and
the Committee considered it desirable to maintain steady money
market conditions during the financing. There was some senti-

FEDERAL RESERVE SYSTEM

ment at the meeting for moving toward a moderately less easy
monetary policy in the period before the financing, in view of the
continued expansion of the domestic economy and the persisting
deficit in the U.S. balance of international payments. An opposing view was also expressed, however, reflecting a judgment that
current domestic developments made any firming actions less
appropriate than they might have appeared earlier. On balance,
the Committee favored no change in the basic monetary policy
that had been in effect for the past several weeks, and the following current economic policy directive was issued to the Federal
Reserve Bank of New York:
It continues to be the current policy of the Committee to permit further
bank credit and monetary expansion so as to promote fuller utilization of
the economy's resources, together with monetary conditions consistent
with the needs of an expanding domestic economy, taking into account
this country's adverse balance of payments as well as the Treasury
financing calendar.
To implement this policy, operations for the System Open Market Account during the next 3 weeks shall be conducted with a view to maintaining a supply of reserves adequate for further credit expansion, while
minimizing downward pressures on short-term interest rates. In view of
the imminence of Treasury financing, emphasis shall be placed on maintaining a steady money market.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Irons, King, Mills, Mitchell, Robertson, Shepardson, Swan,
Wayne, and Fulton. Votes against this action: None.
2. Authority for program of System foreign currency operations.

At this meeting the Federal Open Market Committee approved a motion that the Committee go on record as favoring in
principle the initiation on an experimental basis of a program of
System foreign currency operations; that representatives of the
Committee be authorized to explore with the U.S. Treasury, on
behalf of the Committee, needed guidelines for actual operations, drawing on the experience of the Treasury Stabilization
Fund, and to develop plans for effective working relations in the
foreign exchange field between the Federal Reserve and the

ANNUAL REPORT OF BOARD OF GOVERNORS

Treasury; and that Chairman Martin be authorized to refer to
this development in his testimony before the Joint Economic
Committee scheduled for January 30, 1962.
Votes for this motion: Messrs. Martin, Hayes, Balderston,
Irons, King, Mills, Shepardson, Swan, Wayne, and Fulton.
Votes against this motion: Messrs. Mitchell and Robertson.

(Note: See Record of Policy Actions taken by the Committee
on February 13, 1962, for entry covering the action of the Committee instituting the program of foreign currency operations
through the approval of certain authorizations, guidelines, and
directives.)
February 13, 1962
1. Authority to effect transactions in System Account.

Reports at this meeting suggested that, while the prospects for
continued economic expansion remained good, there had been
some recent hesitation in the forward movement of the economy.
Retail trade figures showed slight declines from the advanced
November level in both December and January after adjustment
for usual seasonal changes, and preliminary indications were
that the industrial production index for January would be not
above—possibly below—the December figure. In surveys of consumer buying intentions the demand for automobiles appeared
stronger than a year earlier, but this was counterbalanced by
apparent weakness in demand for household durable goods. A
slight further reduction in the unemployment rate was attributed
to lack of growth in the labor force rather than to strength in
employment. Prices continued stable.
Total loans and investments of commercial banks had declined about the usual seasonal amounts in recent weeks, after
the large December increase. On balance, during the past 2 or 3
months bank credit continued to show a moderate expansion,
when allowance was made for the wide seasonal movements occurring around the turn of the year. The most striking develop-

FEDERAL RESERVE SYSTEM

ment in banking since the year-end was a sharp increase in time
deposits, accompanied by a smaller but substantial decline in
demand deposits, after seasonal adjustment. In the last half of
January the conventionally defined money supply was about
$1 billion less than in the second half of December on a seasonally adjusted daily average basis, and about 2.5 per cent larger
than in the comparable period of the preceding year. The total
of the money supply and time deposits at commercial banks,
however, was about 7 per cent above a year earlier.
Interest rates for the most part remained firm. Treasury bill
rates declined less than seasonally after rising more than seasonally in December, yields on medium- and long-term U. S. Government securities generally maintained the higher levels reached
in December or early January, and high-grade corporate bond
yields continued to show little change. Yields on State and local
government bonds declined sharply, however, apparently partly
as a result of heightened bank interest in longer-term tax-exempt
issues as a medium for investment of their growing time deposits.
Yields on long-term U.S. Government bonds exceeded those on
high-grade municipals by the largest margin in many years.
In the money market, Federal Reserve float declined from the
high levels that had been partly responsible for an unanticipated
degree of market ease prior to the January 23 meeting of the
Committee. Open market operations since then had been directed
mainly at maintaining steady conditions while the Treasury completed its scheduled refunding. There were reports at this meeting that the Treasury might engage in an advance refunding
operation shortly.
With respect to the international accounts, incomplete data
indicated that net transfers of gold and dollars to foreigners declined sharply in January and early February from the average
fourth-quarter rate. The accounts still showed an adverse balance, however, and remained a source of serious concern. Net
gold sales to foreigners evidently were continuing to run in the
neighborhood of $100 million per month.
After considering these domestic and international develop-

ANNUAL REPORT OF BOARD OF GOVERNORS

ments, the Committee concluded that it would be appropriate to
continue its recent credit policy for the coming 3 weeks. On the
one hand, domestic developments did not appear to be of such
nature as to require a shift toward greater ease. On the other
hand, the apparent pause in the forward progress of the economy
militated against a move toward lesser ease such as might have
otherwise been indicated on the basis of balance of payments
considerations. The possibility of a Treasury advance refunding
also was a factor in favor of holding the posture of monetary
policy unchanged. Accordingly, the Committee issued the following current economic policy directive to the Federal Reserve
Bank of New York:
It continues to be the current policy of the Committee to permit further
bank credit and monetary expansion so as to promote fuller utilization
of the economy's resources, together with monetary conditions consistent
with the needs of an expanding domestic economy, taking into account
this country's adverse balance of payments as well as a possible Treasury
financing.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to maintaining a supply of reserves adequate for further credit expansion, while
minimizing downward pressures on short-term interest rates. In view of
the possibility of a Treasury financing, emphasis shall be placed on maintaining a steady money market.
Votes for this action: Messrs. Martin, Balderston, Irons,
King, Mills, Mitchell, Robertson, Shepardson, Swan, Wayne,
Fulton, and Treiber. Votes against this action: None.
2, Authority for program of System foreign currency operations.

Since March 1961 the U.S. Treasury, through its Stabilization Fund and with the Federal Reserve Bank of New York acting as agent, had been conducting foreign exchange operations
as part of a cooperative effort by treasuries and central banks
on both sides of the Atlantic to create a first line of defense
against disorderly speculation in the foreign exchange markets.
For several months prior to this meeting the Federal Open
Market Committee had been studying the question of the desir-

FEDERAL RESERVE SYSTEM

ability of instituting a program of Federal Reserve operations in
foreign currencies, which would be supplemental to and in
collaboration with the activities of the Treasury. At the Committee meeting on January 23, 1962, a motion had been approved
(with Messrs. Mitchell and Robertson dissenting) favoring in
principle the initiation of such a program on an experimental
basis. That motion also authorized representatives of the Committee to consult with the Treasury for the purpose of exploring
guidelines for such operations, in light of the recent Treasury
experience, and developing plans for effective working relations
in this field between the Treasury and the Federal Reserve. The
results of the discussions that had been authorized were reported
at this meeting. Accordingly, after further deliberation the Committee approved, effective immediately, an authorization regarding open market transactions in foreign currencies, a statement
of guidelines for System foreign currency operations, and a continuing authority directive on System foreign currency operations. The authorization, the guidelines, and the continuing
authority directive, in the form in which they were adopted by
the Committee, are shown at the conclusion of this policy record
entry. As to each of the items, the vote of the Committee was as
follows:
Votes for the action: Messrs. Martin, Balderston, Irons,
King, Mills, Mitchell, Robertson, Shepardson, Swan, Wayne,
Fulton, and Treiber. Votes against the action: None.

Although Messrs. Mitchell and Robertson had dissented at the
meeting on January 23, 1962, from the motion approving in
principle the initiation of a program of System foreign currency
operations, they voted affirmatively on the actions taken at this
meeting. Their affirmative votes were on the ground that the
actions taken by the Committee at this meeting involved merely
the implementation of a basic decision that had already been
made by a majority of the Committee.
Mr. Mitchell's dissent at the January 23 meeting from the
motion favoring in principle the initiation of a program of Sys-

ANNUAL REPORT OF BOARD OF GOVERNORS

tern foreign currency operations had been based on his belief
that the institution of any such program by the System should
be preceded by analysis by outside experts, public discussion,
and legislative clarification of the System's statutory authority to
acquire, hold, and sell foreign currency assets.
Mr. Robertson's dissent had been based on both legal and
economic considerations. He regarded the legality of the proposed operations in foreign currencies as questionable, inasmuch
as the Federal Reserve Act provided no general and positive
authorization therefor. He felt that an incidental power—such
as the power to maintain foreign accounts—should not be relied
upon as an authorization to exercise the broad policy functions
contemplated by this proposal. Furthermore, he believed the
operations would be inconsistent with the express intent of Congress to confer upon the Treasury's Exchange Stabilization Fund
a limited authority for operations to stabilize the exchange value
of the dollar. Over and above such questions as to authority, Mr.
Robertson thought it would be unwise for two separate agencies
of the U.S. Government to be engaged in buying and selling
foreign exchange, and he felt that the balance of considerations
clearly favored any such operations being conducted by the
Treasury.
Mr. Robertson also believed that a number of practical economic factors argued against instituting Federal Reserve operations in foreign currencies. Acquisitions by the United States of
foreign exchange in such operations would be matched by an
increase in foreign claims on the dollar. With the U.S. balance
of payments currently in deficit, and with foreign recipients of
increased dollar claims already taking a portion of such increases
in gold, actions that would add to such dollar claims would run
the risk of aggravating rather than minimizing the drains on U.S.
gold reserves. In the foreign exchange markets themselves, he
felt that any continual central bank intervention could have
damaging influences upon private market processes, perhaps
stimulating new phases of speculative activities and doing more
to reduce confidence in the dollar than the reverse. He believed

FEDERAL RESERVE SYSTEM

that the best defense of the dollar consisted of continuance of
Treasury maintenance of a fixed buying and selling price for
gold, accompanied, if necessary, by action by the Exchange
Stabilization Fund (augmented, if desirable, by congressional
appropriation) on any occasions of dangerously disorderly foreign exchange markets, and undergirded by sound policies designed to eliminate unsustainable deficits in the U.S. balance of
payments.
The majority of the Open Market Committee favored initiation of an experimental program of System foreign currency
operations on the ground that such operations held the promise
of being useful in accomplishing the basic purposes and specific
aims set forth in the Authorization of the Committee, as cited
hereinafter. As to the question of legal authority, the majority
noted an opinion of the Committee's General Counsel, which
had been concurred in by the General Counsel of the Treasury
and the Attorney General of the United States, that the Federal
Reserve Banks were authorized under existing law to engage in
open market transactions in foreign exchange subject to the
direction and regulation of the Federal Open Market Committee
and, for this purpose, to open and maintain accounts with foreign banks subject to the consent and under regulations of the
Board of Governors of the Federal Reserve System.
The documents hereinbefore referred to as having been approved by the Federal Open Market Committee at this meeting
were as follows:
AUTHORIZATION REGARDING OPEN MARKET TRANSACTIONS
IN FOREIGN CURRENCIES

Pursuant to Section 12A of the Federal Reserve Act and in accordance
with Section 214.5 of Regulation N (as amended) of the Board of Governors of the Federal Reserve System, the Federal Open Market Committee takes the following action governing open market operations
incident to the opening and maintenance by the Federal Reserve Bank
of New York (hereafter sometimes referred to as the New York Bank)
of accounts with foreign central banks.

ANNUAL REPORT OF BOARD OF GOVERNORS
I. Role of Federal Reserve Bank of New York
The New York Bank shall execute all transactions pursuant to this
authorization (hereafter sometimes referred to as transactions in foreign
currencies) for the System Open Market Account, as defined in the Regulation of the Federal Open Market Committee.
II. Basic Purposes of Operations
The basic purposes of System operations in and holdings of foreign
currencies are:
(1) To help safeguard the value of the dollar in international exchange
markets;
(2) To aid in making the existing system of international payments
more efficient and in avoiding disorderly conditions in exchange
markets;
(3) To further monetary cooperation with central banks of other
countries maintaining convertible currencies, with the International Monetary Fund, and with other international payments
institutions;
(4) Together with these banks and institutions, to help moderate
temporary imbalances in international payments that may adversely affect monetary reserve positions; and
(5) In the long run, to make possible growth in the liquid assets available to international money markets in accordance with the needs
of an expanding world economy.
III. Specific Aims of Operations
Within the basic purposes set forth in Section II, the transactions shall
be conducted with a view to the following specific aims:
(1) To offset or compensate, when appropriate, the effects on U.S.
gold reserves or dollar liabilities of those fluctuations in the international flow of payments to or from the United States that are
deemed to reflect temporary disequilibrating forces or transitional
market unsettlement;
(2) To temper and smooth out abrupt changes in spot exchange rates
and moderate forward premiums and discounts judged to be disequilibrating;
(3) To supplement international exchange arrangements such as those
made through the International Monetary Fund; and
(4) In the long run, to provide a means whereby reciprocal holdings
of foreign currencies may contribute to meeting needs for international liquidity as required in terms of an expanding world
economy.

FEDERAL RESERVE SYSTEM
IV. Arrangements with Foreign Central Banks
In making operating arrangements with foreign central banks on System holdings of foreign currencies, the New York Bank shall not commit
itself to maintain any specific balance, unless authorized by the Federal
Open Market Committee.
The Bank shall instruct foreign central banks regarding the investment
of such holdings in excess of minimum working balances in accordance
with Section 14(e) of the Federal Reserve Act.
The Bank shall consult with foreign central banks on coordination of
exchange operations.
Any agreements or understandings concerning the administration of
the accounts maintained by the New York Bank with the central banks
designated by the Board of Governors under Section 214.5 of Regulation N (as amended) are to be referred for review and approval to the
Committee, subject to the provision of Section VIII, paragraph 1, below.
V. Authorized Currencies
The New York Bank is authorized to conduct transactions for System
Account in such currencies and within the limits that the Federal Open
Market Committee may from time to time specify.
VI. Methods of Acquiring and Selling Foreign Currencies
The New York Bank is authorized to purchase and sell foreign currencies in the form of cable transfers through spot or forward transactions
on the open market at home and abroad, including transactions with the
Stabilization Fund of the Secretary of the Treasury established by Section 10 of the Gold Reserve Act of 1934 and with foreign monetary
authorities.
Unless the Bank is otherwise authorized, all transactions shall be at
prevailing market rates.
VII. Participation of Federal Reserve Banks
All Federal Reserve Banks shall participate in the foreign currency
operations for System Account in accordance with paragraph 3 G (1) of
the Board of Governors' Statement of Procedure with Respect to Foreign
Relationships of Federal Reserve Banks dated January 1, 1944.
VIII. Administrative Procedures
The Federal Open Market Committee authorizes a Subcommittee consisting of the Chairman and the Vice Chairman of the Committee and
the Vice Chairman of the Board of Governors (or in the absence of the
Chairman or of the Vice Chairman of the Board of Governors the mem-

ANNUAL REPORT OF BOARD OF GOVERNORS
bers of the Board designated by the Chairman as alternates, and in the
absence of the Vice Chairman of the Committee his alternate) to give
instructions to the Special Manager, within the guidelines issued by the
Committee, in cases in which it is necessary to reach a decision on operations before the Committee can be consulted.
All actions authorized under the preceding paragraph shall be promptly
reported to the Committee.
The Committee authorizes the Chairman, and in his absence the Vice
Chairman of the Committee, and in the absence of both, the Vice Chairman of the Board of Governors:
(1) With the approval of the Committee, to enter into any needed
agreement or understanding with the Secretary of the Treasury
about the division of responsibility for foreign currency operations between the System and the Secretary;
(2) To keep the Secretary of the Treasury fully advised concerning
System foreign currency operations, and to consult with the Secretary on such policy matters as may relate to the Secretary's responsibilities;
(3) From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary
and Financial Problems.
IX. Special Manager of the System Open Market Account
A Special Manager of the Open Market Account for foreign currency
operations shall be selected in accordance with the established procedures
of the Federal Open Market Committee for the selection of the Manager
of the System Open Market Account.
The Special Manager shall direct that all transactions in foreign currencies and the amounts of all holdings in each authorized foreign currency be reported daily to designated staff officials of the Committee, and
shall regularly consult with the designated staff officials of the Committee
on current tendencies in the flow of international payments and on current developments in foreign exchange markets.
The Special Manager and the designated staff officials of the Committee shall arrange for the prompt transmittal to the Committee of all
statistical and other information relating to the transactions in and the
amounts of holdings of foreign currencies for review by the Committee
as to conformity with its instructions.
The Special Manager shall include in his reports to the Committee a
statement of bank balances and investments payable in foreign currencies,
a statement of net profit or loss on transactions to date, and a summary
of outstanding unmatured contracts in foreign currencies.

FEDERAL RESERVE SYSTEM
X. Transmittal of Information to Treasury Department
The staff officials of the Federal Open Market Committee shall transmit all pertinent information on System foreign currency transactions to
designated officials of the Treasury Department.
XI. Amendment of Authorization
The Federal Open Market Committee may at any time amend or
rescind this authorization.
GUIDELINES FOR SYSTEM FOREIGN CURRENCY OPERATIONS

1. Holdings of Foreign Currencies
Until otherwise authorized, the System will limit its holdings of foreign
currencies to that amount necessary to enable its operations to exert a
market influence. Holdings of larger amounts will be authorized only
when the U.S. balance of international payments attains a sufficient surplus to permit the ready accumulation of holdings of major convertible
currencies.
Holdings of a currency shall generally be kept sufficient to meet forward contracts in that currency (exclusive of contracts made under
parallel arrangements with foreign monetary authorities which provide
their own cover) expected to mature in the following 3-week period.
Foreign currency holdings above a certain minimum shall be invested
as far as practicable in conformity with Section 14(e) of the Federal
Reserve Act.
2. Exchange Transactions
System exchange transactions shall mainly be geared to pressures of
payments flows so as to cushion or moderate disequilibrating movements
of volatile funds and their destabilizing effects on U.S. and foreign official
reserves and on exchange markets.
The New York Bank shall, as a usual practice, purchase and sell authorized currencies at prevailing market rates without trying to establish
rates that appear to be out of line with underlying market forces.
If market offers to sell or buy intensify as System holdings increase or
decline, this shall be regarded as a clear signal for a review of the
System's evaluation of international payments flows. This review might
suggest a temporary change in System holdings of a particular convertible
currency and possibly direct exchange transactions with the foreign central bank involved to be able to accommodate a larger demand or supply.
Starting operations at a time when the United States is not experiencing
a net inflow of any eligible foreign currency may require that initial Sys-

ANNUAL REPORT OF BOARD OF GOVERNORS
tern holdings (apart from sums that might be acquired from the Stabilization Fund) be purchased directly from foreign central banks.
It shall be the practice to arrange with foreign central banks for the
coordination of foreign currency transactions in order that System transactions do not conflict with those being undertaken by foreign monetary
authorities.
3. Transactions in Spot Exchange
The guiding principle for transactions in spot exchange shall be that,
in general, market movements in exchange rates, within the limits established in the International Monetary Fund Agreement or by central bank
practices, index affirmatively the interaction of underlying economic
forces and thus serve as efficient guides to current financial decisions,
private and public.
Temporary or transitional fluctuations in payments flows may be
cushioned or moderated whenever they occasion market anxieties, or undesirable speculative activity in foreign exchange transactions, or excessive
leads and lags in international payments.
Special factors making for exchange market instabilities include (i) responses to short-run increases in international political tension, (ii) differences in phasing of international economic activity that give rise to
unusually large interest-rate differentials between major markets, or
(iii) market rumors of a character likely to stimulate speculative transactions.
Whenever exchange market instability threatens to produce disorderly
conditions, System transactions are appropriate if the Special Manager,
in consultation with the Federal Open Market Committee, or in an emergency with the members of the Committee designated for that purpose,
reaches a judgment that they may help to re-establish supply and demand
balance at a level more consistent with the prevailing flow of underlying
payments. Whenever supply or demand persists in influencing exchange
rates in one direction, System transactions should be modified, curtailed,
or eventually discontinued pending a re-assessment by the Committee
of supply and demand forces.
4. Transactions in Forward Exchange
Occasion to engage in forward transactions will arise mainly when
forward premiums or discounts are inconsistent with interest-rate differentials and are giving rise to a disequilibrating movement of short-term
funds, or when it is deemed appropriate to supplement existing market
facilities for forward cover as a means of encouraging the retention or
accumulation of dollar holdings abroad.

FEDERAL RESERVE SYSTEM
Proposals of the Special Manager to initiate forward operations shall
be submitted to the Committee for advance approval.
For such operations, the New York Bank may, where authorized, take
over from the Stabilization Fund outstanding contracts for forward sales
or purchases of authorized currencies.
5. Exchange Rates
Insofar as practicable, the New York Bank shall purchase a currency
through spot transactions at or below its par value, and should lower the
rate at which it is prepared to purchase a currency as its holdings of that
currency approach the established maximum.
The Bank shall also, where practicable, sell a currency through spot
transactions at rates at or above its par value, and should raise the rate
at which it is prepared to sell a currency as its holdings of that currency
approach zero.
Spot transactions at rates other than those set forth in the preceding
paragraphs shall be specially authorized by the members of the Committee designated in Section VIII of the Authorization for Open Market
Transactions in Foreign Currencies.
CONTINUING AUTHORITY DIRECTIVE
ON SYSTEM FOREIGN CURRENCY OPERATIONS

The Federal Reserve Bank of New York is authorized and directed to
purchase and sell through spot transactions any or all of the following
currencies in accordance with the Guidelines on System Foreign Currency
Operations issued by the Federal Open Market Committee on February 13, 1962:
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Total foreign currencies held at any one time shall not exceed $500
million.

March 6, 1962
1. Authority to effect transactions in System Account.

The data on the domestic economy presented at this meeting
showed mixed tendencies and suggested in general that the hesi-

ANNUAL REPORT OF BOARD OF GOVERNORS

tation noted at the preceding meeting was continuing. There
evidently was some modest improvement in employment in February, and the seasonally adjusted unemployment rate declined
to 5.6 per cent from 5.8 per cent in the previous month. Construction activity was off slightly from a January level that had
been revised downward since earlier reports. February production figures were available as yet for only a few products, including steel ingots and automobiles, both of which showed declines.
It appeared likely, however, that the over-all index of industrial
production in February would recover the 1 point loss of January, or at least would not decline. New orders received by manufacturers of durable goods had risen to a new high in January
and were appreciably above sales in that month.
Partial figures for banks in leading cities suggested that total
bank credit might have increased in February, after adjustment
for usual seasonal changes. Time deposits at commercial banks
continued to expand rapidly, although the rate of increase probably was not so high as earlier. Demand deposits increased on a
seasonally adjusted basis in the first half of the month, but the
situation in the second half was still uncertain.
The Treasury extended the maturities of about $5 billion of
its securities in an advance refunding operation during the latter
part of February, after refunding some $11 billion of maturing
securities earlier in the month. The security markets also absorbed a substantial volume of new corporate issues and an exceptionally large volume of State and local government issues.
Yields on high-grade corporate bonds continued to show little
change, and those on long-term municipal bonds firmed at low
relative levels in the second half of February after their earlier
sharp declines. Long-term Government security yields declined
somewhat in the latter part of the month but medium-term yields
declined more, with the difference reflecting in part the shift of
securities from the medium- to the long-term area in the advance
refunding. Treasury bill rates also declined after the middle of
February, but later rose somewhat.
Incomplete data on the U.S. international payments situation

FEDERAL RESERVE SYSTEM

suggested a marked improvement in the first 2 months of 1962,
with the available figures indicating a deficit close to zero in
January and relatively low in February. It was not clear, however, to what extent this improvement was real and to what extent transitory; many of the underlying figures, including those
for exports and imports, were not yet available for the months in
question. Some of the January improvement was due to a reversal of the earlier recorded outflow reflecting short-term lending,
and some to a reversal of the year-end window dressing by foreign banks. It was noted that figures for the first quarter had
appeared reassuring in 1961 also, and that there might be seasonal forces favoring the first-quarter picture.
There were no marked differences among Committee members with respect to the type of policy called for by these developments. However, some members while not advocating a
substantial shift in policy, were impressed by the probability of
continuing deficits in the international accounts and by the underlying elements of strength that they saw in the domestic economy. Therefore, they leaned toward a slightly reduced degree of
ease. Others felt that in view of the recent domestic hesitation
and the apparent improvement in the international accounts it
would be appropriate to increase the degree of ease slightly, with
less emphasis on minimizing downward pressures on short-term
rates. The majority favored no change in policy, and at the conclusion of its deliberations the Committee voted unanimously to
issue the following current economic policy directive to the Federal Reserve Bank of New York:
In view of the continued underutilization of resources, and particularly
of the evidence of some hesitation in the pace of business activity, it remains the current policy of the Federal Open Market Committee to promote further expansion of bank credit and the money supply, while giving
recognition to the country's adverse balance of payments and the need to
maintain a viable international payments system.
To implement this policy, operations for the System Open Market Account during the next 3 weeks shall be conducted with a view to maintaining a supply of reserves adequate for further credit expansion, taking

ANNUAL REPORT OF BOARD OF GOVERNORS
account of the desirability of avoiding undue downward pressures on
short-term interest rates.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, Mitchell, Robertson, and
Shepardson. Votes against this action: None. (Mr. King
stated subsequently that if he had been present at the point
in the meeting when this action was taken he would have
voted in favor of the directive.)
2. Review of continuing authorizations.

This being the first meeting of the Federal Open Market Committee after the election of new members from the Federal
Reserve Banks for the year beginning March 1, 1962, the Committee followed its customary practice of reviewing all of its
continuing authorizations and directives. Among other actions,
it voted unanimously to reaffirm the authorization to the Federal
Reserve Bank of New York covering open market transactions
in foreign currencies and the continuing authority directive for
these operations, both of which were first adopted at the meeting
of February 13, 1962, and are quoted in the entry for that date.
The Committee also decided to consolidate the substance of its
previous continuing authority directive covering operations in
U. S. Government securities and bankers' acceptances, first
adopted on December 19, 1961, with that of several separate
authorizations last reaffirmed on March 7, 1961. The latter included authorizations relating to repurchase agreements in Government securities, transactions in bankers' acceptances, the rate
to be charged on special certificates of indebtedness purchased
directly from the Treasury, and the effecting of transactions on a
cash as well as a regular delivery basis. Accordingly, the following new continuing authority directive was issued to the Federal
Reserve Bank of New York:
1. The Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York, to the extent necessary to carry out
the current economic policy directive adopted at the most recent meeting
of the Committee:

FEDERAL RESERVE SYSTEM
(a) To buy or sell U.S. Government securities in the open market, from or to Government securities dealers and foreign and international accounts maintained at the Federal Reserve Bank of New
York, on a cash, regular, or deferred delivery basis, for the System
Open Market Account at market prices and, for such Account, to
exchange maturing U.S. Government securities with the Treasury or allow them to mature without replacement; provided that
the aggregate amount of such securities held in such Account (including forward commitments, but not including such special shortterm certificates of indebtedness as may be purchased from the Treasury under paragraph 2 hereof) shall not be increased or decreased
by more than $1 billion during any period between meetings of the
Committee;
(b) To buy or sell prime bankers' acceptances of the kinds designated in the regulation of the Federal Open Market Committee in the
open market, from or to acceptance dealers and foreign accounts maintained at the Federal Reserve Bank of New York, on a cash, regular,
or deferred delivery basis, for the account of the Federal Reserve Bank
of New York at market discount rates; provided that the aggregate
amount of bankers' acceptances held at any one time shall not exceed
$75 million or 10 per cent of the total of bankers' acceptances outstanding as shown in the most recent acceptance survey conducted by
the Federal Reserve Bank of New York;
(c) To buy U.S. Government securities with maturities of 24
months or less at the time of purchase, and prime bankers' acceptances
with maturities of 6 months or less at the time of purchase, from nonbank dealers for the account of the Federal Reserve Bank of New
York under agreements for repurchase of such securities or acceptances in 15 calendar days or less, at rates not less than (a) the discount rate of the Federal Reserve Bank of New York at the time such
agreement is entered into, or (b) the average issuing rate on the most
recent issue of 3-month Treasury bills, whichever is the lower; provided that in the event Government securities covered by any such
agreement are not repurchased by the dealer pursuant to the agreement or a renewal thereof, they shall be sold in the market or transferred to the System Open Market Account; and provided further that
in the event bankers' acceptances covered by any such agreement are
not repurchased by the seller, they shall continue to be held by the
Federal Reserve Bank or shall be sold in the open market.
2. The Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York to purchase directly from the Treasury for the account of the Federal Reserve Bank of New York (with dis-

ANNUAL REPORT OF BOARD OF GOVERNORS
cretion, 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 rate charged
on such certificates shall be a rate V\ of 1 per cent below the discount
rate of the Federal Reserve Bank of New York at the time of such purchases; and provided further that the total amount of such certificates
held at any one time by the Federal Reserve Banks shall not exceed $500
million.

Mr. Robertson dissented from the foregoing action for the
same reasons that he dissented on December 19, 1961, from the
adoption of the continuing authority directive. In substance, he
felt that it was an inadequate directive, without sufficient guidance and restrictions. A detailed statement of his views is set
forth on pages 93-94 of the ANNUAL REPORT of the Board of
Governors for the year 1961.
March 27, 1962
Authority to effect transactions in System Account.

The domestic economic situation continued in February and
early March to reflect expansion in over-all activity but at a
much slower rate than in the final quarter of 1961. Some key
monthly series, including industrial production and nonfarm employment, recovered in February following declines in January,
and the unemployment rate declined slightly further. The decline
in housing starts continued in February. Preliminary information
indicated little change in retail sales, though with some evidence
of more than a seasonal rise in department store and automobile
sales appearing in the early weeks of March. Gross national
product was tentatively estimated at an annual rate of $548
billion to $550 billion for the first quarter of 1962, compared
with $542 billion in the fourth quarter of 1961.
The performance of the economy thus far in 1962 appeared
sluggish in relation to the high rates of increase that had been
projected in late fall and early winter, and in relation to what
was needed for satisfactory reduction in levels of unemployment.

FEDERAL RESERVE SYSTEM

To some extent this sluggishness appeared attributable to temporary factors, such as unusually severe weather conditions.
The slower rate of economic expansion had been reflected in
credit markets. Bank loan expansion had been large, but not unusually so for the March tax period. Bank investments in U. S.
Government securities had declined more than usual for this
time of year, but holdings of other securities had increased.
While time deposits at banks continued to show sharp gains, demand deposits, seasonally adjusted, appeared to be little changed.
The volume of public offerings of corporate and municipal
securities had not been so large during March as in February,
but those offered had been generally well received and a larger
volume appeared in prospect for April. Prices of common stocks
had shown little net change, with trading volume moderate.
Despite the fact that the money market had been relatively
firm because of seasonal and liquidity needs, yields on U.S.
Government and other fixed-income securities declined. Yields
on long-term Treasury bonds dropped below 4 per cent for the
first time since November 1961, and average yields on 3-5
year issues were the lowest since May 1961. Treasury bill yields
had declined from mid-February levels but remained close to
the 1961 highs reached at the end of the year. Rates on Federal funds were generally at or only slightly below 3 per cent.
Free reserves had averaged a little lower in March than in February, partly because of a tendency for actual reserve levels to
turn out below projections. In addition, intermittent downward
pressures on short-term interest rates exercised some restraining
influence on System operations to supply reserves.
Preliminary information on the U.S. balance of payments in
the first quarter suggested a marked reduction in net payments
as compared with the fourth quarter of 1961, but the deficit
appeared slightly larger than in the first quarter of 1961. The
improvement from the preceding quarter apparently reflected
mainly a smaller volume of short-term capital outflows, partly
for technical reasons related to year-end window-dressing operations by banks abroad. The trade surplus, judging by the

ANNUAL REPORT OF BOARD OF GOVERNORS

January data (the latest available), was running below both the
fourth quarter and the first quarter of 1961.
The outflow of gold approximated $300 million in the current
quarter, although some part of that amount might be viewed as
offset by an increase in U.S. holdings of foreign convertible currencies. Reductions in the United Kingdom bank rate suggested
a decrease in British interest-rate levels, but it was not clear
whether or to what extent funds hitherto attracted to the United
Kingdom would flow to New York.
Differences among Committee members with respect to the
type of policy called for by these developments were generally
small. Most members felt that the balance of payments situation
continued to call for a domestic interest-rate structure that would
not encourage outflows of funds, and thus were concerned about
the declining tendency in interest rates. This tendency, it was
noted, might well be accentuated by continuing to provide reserve availability to facilitate expansion in bank credit domestically, which most members also regarded as desirable. Some of
the members, having in mind the modest nature of the expansion
in domestic activity, were inclined to ease slightly. A few members, in fact, would have preferred taking more decisive easing
action, but one member recommended a policy of less ease. The
majority, however, concluded that on balance no significant
change in policy should be made. The two changes made in the
wording of the current economic policy directive were intended
to make clear that the general policy in effect in the preceding
period and now being continued was designed to effect slightly
more expansion in reserve availability than had actually developed. The policy directive issued to the Federal Reserve Bank of
New York read as follows:
In view of the modest nature of recent advances in the pace of economic activity and the continued underutilization of resources, it remains
the current policy of the Federal Open Market Committee to promote
further expansion of bank credit and the money supply, while giving
recognition to the country's adverse balance of payments and the need to
maintain a viable international payments system.

FEDERAL RESERVE SYSTEM
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to maintaining a supply of reserves adequate for further credit and monetary
expansion, taking account of the desirability of avoiding sustained downward pressures on short-term interest rates.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Ellis, Mitchell, Robertson, Shepardson, Clay, Scanlon, and
Treiber. Vote against this action: Mr. Mills.

Mr. Mills dissented on the ground that the long maintained
high level of free reserves had forced excessive liquidity into the
economy and thereby had laid the foundation for future inflationary difficulties. Moreover, he felt that monetary policy by
its declared purpose of holding interest rates on Treasury bills
at a level intended to deter transfer of funds abroad had set a
floor under bill rates and, in his opinion, had encouraged speculative operations in all maturities of U.S. Government securities.
Mr. Mills felt that these and other difficulties could have been
avoided by policy objectives geared solely to providing adequate
credit availability—an amount that would have resulted in a
somewhat firmer interest-rate structure but which still would
have permitted sufficient bank credit expansion. He believed that
the assumption that there must be close coordination between
growth in the money supply and growth in gross national product
was erroneous, and monetary policy should pay close attention to
encouraging constructive commercial bank lending and investing
practices.

April 17, 1962
Authority to effect transactions in System Account.

Information regarding developments in the domestic economy
that had become available in the period since the preceding
meeting of the Committee provided some definite signs of improvement. However, uncertainties remained about the course
of developments in a number of strategic areas, such as resi-

ANNUAL REPORT OF BOARD OF GOVERNORS

dential and other construction, consumer durable goods other
than autos, and business investment in new plant and equipment.
For residential building, March statistics on the number of housing units started had not yet become available, but starts in
February had shown a further decline to a relatively low level.
The Board's industrial production index was reported to have
risen 1 point further in March to a new high of 116 per cent of
the 1957 average. Nonagricultural employment and the length
of the factory workweek also increased in March, and the rate
of unemployment edged down from 5.6 per cent to 5.5 per cent
of the civilian labor force. The labor force, however, was no
higher than a year earlier, and resumption of normal growth in
the labor force in the near future might limit declines in unemployment even under conditions of expanding employment.
Sales of new autos had picked up considerably in March and
early April, and sales at department stores also had risen.
Commodity prices had continued to show little change in the
weeks immediately preceding this meeting. Announcement of the
recision of the rise in steel prices served to reduce whatever expectations there might otherwise have been of imminent upward
general price changes, but the view was expressed that this action might have added to uncertainties of a different sort. Stock
market prices had declined in early April, while markets for
fixed-income securities had continued strong.
Bank reserves available as backing for private deposit expansion and total bank credit had both increased more than seasonally since the March 27 Committee meeting. Free reserves in the
past 3 weeks had averaged moderately higher than in the preceding period, while total reserves and required reserves had
increased substantially after a sluggish performance in February
and March. Time deposits at banks continued to increase sharply,
and available information indicated that savings in other financial
institutions had also continued to increase. Demand deposits had
moved upward, following several weeks of little change, and the
seasonally adjusted money supply was indicated to have risen in
the first half of April.

FEDERAL RESERVE SYSTEM

Yields on 3-month Treasury bills continued to fluctuate in a
narrow range as increased demands in credit markets and additions to weekly bill offerings counteracted a steady investor
demand for short-term securities. Federal funds remained in the
2% to 3 per cent range. Yields on longer-term Treasury issues
declined further. Despite a large volume of new financing in
March and a prospectively larger volume in April, yields on corporate and municipal bonds continued at the low levels reached
earlier or declined further. Mortgage rates also drifted down
further.
The balance of payments situation in March, and fragmentary
indications for early April, suggested little or no improvement.
The March deficit was estimated at $360 million, including net
gold sales of $150 million, and was higher than for January and
February combined. The trade surplus in February had been
quite large, with exports at a record annual rate of nearly
$22 billion and imports continuing at $15.75 billion. The rate of
outflow of capital remained large in March but was smaller than
in the final quarter of 1961. There was in prospect a heavy
calendar of foreign security issues in the U.S. market.
The majority of the Committee members agreed, although
with some differences of interpretation and emphasis, that no
change was indicated at this time in monetary and credit policy
or in the wording of the current directive, particularly in view
of the imminence of a substantial Treasury financing program.
As a result, the Committee issued a current economic policy
directive to the Federal Reserve Bank of New York in the same
form as the directive issued at the meeting on March 27, 1962.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mills, Mitchell, Robertson, and
Shepardson. Vote against this action: Mr. Hayes.

Mr. Hayes dissented because he felt that the degree of liquidity
of the economy, coupled with recent signs of a somewhat improved rate of business expansion, would warrant placing a little
more emphasis on the troublesome international aspects of the

ANNUAL REPORT OF BOARD OF GOVERNORS

country's current economic problems. He noted that the country's
ability to withstand heavy balance of payments deficits and accompanying gold drains was not unlimited and that he had yet
to see any convincing evidence of a real turn in the tide. He expressed particular concern about the volume and breadth of
foreign borrowing in the United States, both from banks and
through bond offerings. In these circumstances, he felt that the
System should edge toward a moderately less easy reserve position, thus encouraging the development of a somewhat higher
structure of interest rates, particularly short-term rates.
Another member of the Committee (Mr. Mills) continued of
the view he had expressed at previous meetings that afirmingof
policy was indicated. At the moment, however, he felt that the
imminent Treasury financing precluded policy changes such as
he had advocated.

May 8, 1962
Authority to effect transactions in System Account.

The economy had continued to register moderate gains in
over-all activity, with little change in commodity prices. One
factor of significant improvement was a sharp rise in March in
the number of new housing units started, following 4 months of
decline of much more than seasonal proportions. Another was
the expansion of business plans for fixed capital outlays, as reported by a recent survey. This survey indicated a prospective
rise in such outlays of 11 per cent for 1962, as compared with
a rise of 8 per cent reported by a different survey taken several
weeks earlier. Although data had not yet become available for
total retail sales and industrial production in April, incomplete
weekly and other information suggested moderate further advances. There was no significant change in the rate of unemployment.

FEDERAL RESERVE SYSTEM

Less favorable to economic prospects were the early indications of corporate profits for the first quarter. Although substantially above year-earlier levels, such profits had apparently
failed to hold the rise achieved in the fourth quarter of 1961.
Also, the volume of new orders received by durable goods producers had declined somewhat further in March from the advanced level reached at the beginning of the year. Stock market
prices continued to decline.
Bank reserves available to support private deposit expansion
had risen more than seasonally in April. Excess reserves had
increased, while the small amount of member bank borrowing
had been further reduced. Free reserves averaged moderately
higher than in March. Total bank loans and investments rose
again in April, with the sharpest increase in bank holdings of
securities other than U.S. Governments. Both total and business
loans had shown moderate strength.
The seasonally adjusted money supply, which increased somewhat in March, rose substantially further in April. Time and
savings deposits at commercial banks had continued to rise, but
at a somewhat less rapid pace than in other recent months.
Capital market financing had accelerated in April, and new
corporate issues were substantially above the first-quarter average. Municipal issues held at the relatively high first-quarter
average. Both corporate and municipal issues were expected to
be in smaller volume in May.
Money markets had been generally steady in the 3 weeks preceding the meeting. Federal funds were traded in the 21/i-3 per
cent range, with the bulk of the trading at 2% per cent. Yields
on U.S. Government securities had been unusually stable, while
yields on corporate and municipal bonds had continued to edge
lower.
In the first quarter of 1962, the U.S. balance of payments
position was far more favorable than in the preceding quarter
(partly reflecting seasonal factors), but less favorable than in the
first quarter of 1961. The balance of payments deficit dropped
sharply between March and April, but some of the improvement

ANNUAL REPORT OF BOARD OF GOVERNORS

appeared to have been temporary, probably reflecting movements of capital from Canada preceding the abandonment of
flexible exchange rates and the establishment on May 2 of a new
par value of 92.5 U.S. cents for the Canadian dollar.
Economic expansion in Western Europe was reported as continuing, possibly at an accelerated rate, while conditions elsewhere appeared to have shown little change.
Upon consideration of these mixed developments, it was the
majority view that the current posture of monetary policy continued to be appropriate, pending the availability of further information on the strength of the improvement in economic
conditions and on the state of business and financial confidence.
Accordingly, the Committee re-issued the current policy directive to the Federal Reserve Bank of New York that had been
issued at the two preceding meetings of the Committee.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mitchell, Robertson, Shepardson, and Treiber. Vote against this action: Mr. Mills.

In dissenting from this action, Mr. Mills took the position that
a protracted period of credit ease featured by heavy Federal
deficit financing through the banking system had developed an
increasingly unsatisfactory financial situation that urgently required remedial attention. In his opinion, policy actions were
called for that, by moderately reducing the supply of reserves
and by simultaneously shifting emphasis away from pegging the
level of Treasury bill rates, would facilitate return to a free
market concept for the conduct of monetary and credit policy.
The kind of policy revision which he visualized would, in Mr.
Mills' belief, result in a somewhat firmer interest-rate structure
that would serve as an incentive for broader private investment in approaching offerings of new issues of Treasury securities, thereby implying less resort to Federal deficit financing
through the banking system, and would also be regarded abroad
as a desirable central bank action for countering this nation's
balance of payments problems.

FEDERAL RESERVE SYSTEM

May 29, 1962
1. Authority to effect transactions in System Account.

Following improvement in April, some additional gains in
economic conditions were indicated for May. The April index
of industrial production moved 1 percentage point higher to a
record 117 per cent of the 1957 average, and the index for May
appeared likely to hold at that level or rise slightly further.
A major exception to the moderately improved performance
of the domestic economy was the continued decline in stock
market prices. On May 28, the day preceding the meeting of the
Committee, stock prices broke sharply and at the close had
fallen to a level 24 per cent below the high reached in December
1961. In addition, and almost apart from the stock market decline and its possible ramifications, questions were being raised
about the strength of general economic prospects over the
months ahead. Certain leading business cycle indicators, including data on profit margins and business purchasing policies, were
being interpreted by some analysts as signs that economic expansion would not continue long.
Bank loans rose more than seasonally during May, while investments were little changed. Further increases occurred in real
estate and consumer loans, but security loans declined. Loans to
construction firms had been moving up briskly since March,
paralleling the pick-up in building activity.
Bank reserves required to support private deposits declined
considerably more than seasonally in the first 3 weeks of May,
in contrast with a larger than seasonal rise in April. Average
free reserves, however, continued relatively high and were not
significantly different from the April level.
Recent developments in the U.S. balance of payments, although still unsatisfactory, were viewed as mildly encouraging.
However, gold and foreign exchange markets, after having been
relatively quiet for some time, recently had shown some nervousness with consequent unfavorable effects on the U.S. dollar.

ANNUAL REPORT OF BOARD OF GOVERNORS

Economic activity abroad continued satisfactory in most industrially developed countries and mixed elsewhere.
There was some opinion within the Committee that monetary
policy had contributed about as much as it could to domestic
economic expansion and that a gradual reorientation of policy
toward somewhat less ease would be salutary from the balance
of payments standpoint without significantly affecting the domestic use of credit. A view also was expressed, however, that the
degree of ease that had prevailed was still needed to facilitate
further domestic expansion.
In recognition of the sharp decline in the stock market, there
was general agreement that no change of policy should be made
at this meeting of the Committee. It was thought desirable, however, to modify the wording of the current policy directive, principally to make clear that the Committee recognized the stock
market decline as a factor contributing to its decision to continue
policy unchanged at this point. Accordingly, the Committee issued the following current economic policy directive to the Federal Reserve Bank of New York:
In view of the modest nature of recent advances in the pace of economic activity, the continued underutilization of resources, and the uncertainties created by the disturbed conditions in some financial markets,
it remains the current policy of the Federal Open Market Committee to
promote further expansion of bank credit and the money supply, while
giving recognition to the country's adverse balance of payments.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to maintaining a supply of reserves adequate for further credit and monetary
expansion, taking account of the desirability of avoiding sustained downward pressures on short-term interest rates.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, Mills, Mitchell, Robertson, and Shepardson. Votes against this action: None.
2. Authority to purchase and sell foreign currencies.

As originally adopted by the Federal Open Market Committee on February 13, 1962, and reaffirmed on March 6, 1962,

FEDERAL RESERVE SYSTEM

the continuing authority directive to the Federal Reserve Bank
of New York with respect to System foreign currency operations
did not authorize the purchase and sale of Belgian francs. In
view of the prospective execution of a reciprocal currency
(swap) agreement between the Federal Reserve and the National Bank of Belgium, in addition to those already entered into
by the System with other foreign central banks, the continuing
authority directive was amended as follows, effective immediately, to add the Belgian franc to the list of currencies authorized to be purchased and sold:
The Federal Reserve Bank of New York is authorized and directed to
purchase and sell through spot transactions any or all of the following
currencies in accordance with the Guidelines on System Foreign Currency Operations issued by the Federal Open Market Committee on
February 13, 1962:
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Belgian francs
Total foreign currencies held at any one time shall not exceed
$500 million.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, Mills, Mitchell, Robertson, and Shepardson. Votes against this action: None.

June 19, 1962
Authority to effect transactions in System Account.

Available economic information confirmed the further moderate gains in activity in May suggested by the incomplete data
available at the May 29 meeting. The index of industrial production rose to a record 118 per cent of the 1957 average from
117 per cent in April. Private housing starts also rose further in

ANNUAL REPORT OF BOARD OF GOVERNORS

May, following a sharp advance in April. Nonagricultural employment showed a small additional gain, and the unemployment rate was down slightly.
The sharp stock market break at the end of May was followed
by additional declines in the first part of June. Department store
and auto sales apparently were affected somewhat unfavorably
in early June by the stock market reaction, but it was too early
to judge whether economic activity as a whole would be significantly affected.
Total commercial bank credit rose again in May and early
June. The demand for business loans, however, continued moderate. Reserve availability appeared ample, and banks continued
to seek outlets for their funds among foreign as well as domestic
borrowers. Federal funds were traded at 2.75 per cent most of
the time, while the 3-month Treasury bill rate ended the 3-week
period slightly above 2.70 per cent. Yields on Treasury notes
and bonds showed no decisive trend.
The U.S. balance of payments position continued to be unsatisfactory. Although the deficit all but disappeared in May and,
according to tentative and partial figures, in the first half of June,
much of the improvement appeared to have reflected an inflow
of funds traceable to flight from the Canadian currency. While
the U.S. gold stock had not suffered any decline for 5 weeks,
gold and foreign exchange markets remained nervous, particularly with respect to the dollar.
In view of the continuing concern for the international position of the dollar and the further, even though gradual, improvement in the domestic economy, a majority of the Committee
concluded that a time had been reached when a slightly less easy
monetary policy was indicated. The substantial degree of liquidity existing in the banking system was noted, and doubt was
expressed whether continued additions to reserve availability at
more than a moderate rate would induce additional gains for the
domestic economy. A minority of the Committee weighed the
balance of domestic and foreign considerations somewhat differ-

FEDERAL RESERVE SYSTEM

ently from the majority and were in favor of continuing undiminished the current degree of monetary ease.
Reflecting the majority view that monetary policy should
shift toward slightly less ease, the following directive was issued
to the Federal Reserve Bank of New York:
It is the current policy of the Federal Open Market Committee to
permit the supply of bank credit and money to increase further, but at
the same time to avoid redundant bank reserves that would encourage
capital outflows internationally. This policy takes into account, on the
one hand, the gradualness of recent advance of economic activity, the
availability of resources to permit further advance in activity, and the
unsettlement of financial markets resulting from the sharp decline in
stock prices. On the other hand, it gives recognition to the bank credit
expansion over the past year and to the role of capital flows in the country's adverse balance of payments.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall, to the extent consistent with the
behavior of financial markets, be conducted with a view to providing a
somewhat smaller rate of reserve expansion in the banking system than
in recent months and to fostering a moderately firm tone in money
markets.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, Mills, and Shepardson. Votes
against this action: Messrs. King and Robertson.

Mr. King's dissent was based on the view that recent stock
market developments had reduced economic visibility to such an
extent that it would be unwise to change policy in the least. He
would have preferred to wait until there was a clearer indication
of the direction in which the economy might turn.
Mr. Robertson noted that, in view of the labor and material
resources still unutilized, greater domestic expansion was needed
and could be readily accommodated without inflationary consequences. The recent stock market break, he pointed out, had
added a further degree of uncertainty to economic prospects, and
in his view the improvement recently achieved in the U.S. balance of payments offered an opportunity for monetary policy to

ANNUAL REPORT OF BOARD OF GOVERNORS

accord a higher priority to domestic goals. In his judgment, this
was the wrong time to shift toward a policy calling for any lesser
degree of monetary ease.

June 21, 1962
Authority to purchase and sell foreign currencies.

At this meeting, held by telephone, the continuing authority
directive to the Federal Reserve Bank of New York with respect
to System foreign currency operations, as adopted by the Federal
Open Market Committee on February 13, 1962, and amended
May 29, 1962, was further amended, effective immediately, to
add the Canadian dollar to the list of foreign currencies that the
New York Bank was authorized and directed to purchase and
sell. This action was taken in view of the imminent prospect of
a reciprocal currency (swap) agreement being entered into between the Federal Reserve System and the Bank of Canada as
part of a broad package of financial assistance—including assistance from the International Monetary Fund, the Bank of
England, and the U.S. Export-Import Bank—designed to reinforce the Canadian Government's efforts to defend the Canadian
dollar against a speculative wave that threatened to force the
Canadian dollar off its recently established par value. As
amended, the continuing authority directive read as follows:
The Federal Reserve Bank of New York is authorized and directed to
purchase and sell through spot transactions any or all of the following
currencies in accordance with the Guidelines on System Foreign Currency Operations issued by the Federal Open Market Committee on
February 13, 1962:
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Belgian francs
Canadian dollars

FEDERAL RESERVE SYSTEM
Total foreign currencies held at any one time shall not exceed $500
million.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, Mills, Robertson, and
Shepardson. Votes against this action: None.

July 10, 1962
1. Authority to effect transactions in System Account.

Economic activity, as interpreted in reports at this meeting,
appeared to be in a period of hesitation. Although advances had
continued in May and early June, they tended to be smaller than
in earlier months, and adverse trends were reported for some key
series. The unemployment rate, for example, was up slightly in
June.
Retail sales, which were off slightly in May, appeared on the
basis of weekly data to have declined again in June. Business
inventory accumulation continued in April and May, but at
sharply reduced rates. On the other hand, a survey conducted in
late June indicated that business plans for new plant and equipment outlays this year were still largely unchanged, suggesting
that they had not been adversely affected by the decline in stock
prices. Construction activity continued to rise in June, with
gains widely spread among major types of construction.
A principal feature offinancialdevelopments since the June 19
meeting was the less easy tone in the money market. The 3month Treasury bill rate rose to just under the Reserve Bank
discount rate (3 per cent), and Federal funds traded at the discount rate most of the time. Yields also had risen on municipal
and corporate bonds as well as on U. S. Government bonds.
Member bank borrowing at Federal Reserve Banks increased
moderately, and free reserves of member banks were somewhat
lower than in the preceding 3 weeks.
Bank credit outstanding increased in June, with the increase
centered more in loans than investments; the loan increase was
widely distributed among types of loans. Loans to brokers and

ANNUAL REPORT OF BOARD OF GOVERNORS

others against stock market collateral, however, declined considerably. Effective July 10, 1962, margin requirements for stock
market credit were reduced from 70 per cent to 50 per cent by
the Board of Governors of the Federal Reserve System.
The international financial situation remained unsatisfactory
as the dollar weakened further in international exchange, and
gold markets became more active. The balance of payments continued its improved position, and transfers to foreigners of gold
and other liquid assets in the second quarter were considerably
smaller than in the first quarter. To an extent as yet undeterminded, however, it appeared that much of the improvement
might have been due to the large Canadian reserve losses. With
the Canadian position becoming stabilized, some reversal of flows
in favor of Canada was expected.
Members of the Committee were in general agreement that
domestic economic expansion had lost much of its momentum
since spring, and some question was raised as to whether the
cyclical upswing, which began in early 1961, might be topping
out. At the same time, continuing concern was expressed about
the U. S. international financial situation.
Within the Committee, there were some differences of emphasis and interpretation in relating domestic and international
developments to current monetary policy. The consensus, however, was for continuation of the degree of ease contemplated by
the policy adopted at the June 19 meeting. A minority view
placed greater emphasis on the advantages of an easier policy
for stimulating the slackened rate of expansion in domestic
activity and questioned the usefulness of a less easy policy for
dealing with current international financial problems.
In order to make clear that no further reduction from the
present degree of ease was intended, the wording of the current
policy directive was modified to clarify that intent. Accordingly,
the following directive was issued to the Federal Reserve Bank
of New York:
It is the current policy of the Federal Open Market Committee to permit the supply of bank credit and money to increase further, but at the

FEDERAL RESERVE SYSTEM
same time to avoid redundant bank reserves that would encourage capital
outflows internationally. This policy takes into account, on the one hand,
the gradualness of recent advance in economic activity, the availability
of resources to permit further advance in activity, and the unsettlement of
financial markets. On the other hand, it gives recognition to the bank
credit expansion over the past year and to the role of capital flows in the
country's adverse balance of payments.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall, to the extent consistent with the
behavior of financial markets, be conducted with a view to providing
moderate reserve expansion in the banking system and to fostering a
moderately firm tone in money markets.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mills, Shepardson, and Treiber.
Votes against this action: Messrs. Mitchell and Robertson.

In dissenting from this action, Mr. Mitchell expressed the
view that the behavior of the economy indicated sufficient
danger of another abortive recovery to call for a more stimulative monetary policy. Since the domestic economic outlook had
been worsening and the balance of payments position had been
improving, an easier monetary policy seemed to him both desirable and feasible. He did not agree that monetary ease had been
pursued so far that it would be useless to expect further easing
to do any good. Interest rates did not indicate this to be the case.
Moreover, bank credit expansion had not been excessive. Effective credit expansion was, in his judgment, less than shown in
the statistics because the change in Regulation Q effective as of
the first of this year, permitting higher rates on time and savings
deposits, had resulted in shifting some funds to commercial
banks from other financial intermediaries.
Mr. Mitchell felt that even the slight move toward lesser ease
at the preceding meeting had had unfavorable repercussions on
yields. He also doubted that moderately higher short-term rates
would in fact significantly improve the balance of payments position. In the circumstances, he favored a policy directed toward
increasing free reserves and permitting bill yields to fall—perhaps to 2.5 per cent—which would add to downward pressure
on longer-term yields.

ANNUAL REPORT OF BOARD OF GOVERNORS

Mr. Robertson, who dissented for the same reasons he had
expressed at the June 19 meeting, stated that he was in full
agreement with Mr. Mitchell's position. He felt that the economic information presented to the Committee indicated that
the date of such meeting was precisely the wrong time for
adopting a less easy monetary policy and that the move should
now be reversed.
2. Authority to purchase and sell foreign currencies.

The continuing authority directive to the Federal Reserve
Bank of New York with respect to System foreign currency
operations, as adopted by the Federal Open Market Committee
on February 13, 1962, and most recently amended by the Committee on June 21, 1962, was further amended at this meeting,
effective immediately, to increase from $500 million to $750
million the maximum amount of foreign currencies authorized to
be held at any one time. By this date, reciprocal currency (swap)
agreements totaling $450 million had been entered into by the
Federal Reserve System with five foreign central banks—the
Bank of France, the Bank of England, the Netherlands Bank,
the National Bank of Belgium, and the Bank of Canada; and
there was in prospect the execution of similar agreements with
the Bank for International Settlements, the Swiss National Bank,
and the German Federal Bank that would, if executed, raise the
total U.S. dollar equivalent of foreign currencies involved in such
agreements to $700 million. In addition, the System held some
$33.5 million equivalent of foreign currencies acquired from
the Treasury Stabilization Fund at the outset of the Federal Reserve program of foreign currency operations.
As amended, the continuing authority directive read as
follows:
The Federal Reserve Bank of New York is authorized and directed to
purchase and sell through spot transactions any or all of the following
currencies in accordance with the Guidelines on System Foreign Currency Operations issued by the Federal Open Market Committee on
February 13, 1962:

FEDERAL RESERVE SYSTEM
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Belgian francs
Canadian dollars
Total foreign currencies held at any one time shall not exceed $750
million.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mills, Mitchell, Robertson,
Shepardson, and Treiber. Votes against this action: None.

July 31, 1962
Authority to effect transactions in System Account.

Incomplete and scattered data for July suggested mild improvement in the economy, following indications of a slackened
pace of expansion in June. The unemployment rate was down
slightly, auto and department store sales recovered to about the
May levels, and early clues as to the course of industrial production offered hope of some increase. On the other hand, manufacturers' appropriations for fixed capital purposes were indicated to have declined in the second quarter.
In credit and money markets the atmosphere was one of considerable uncertainty. Bank credit, seasonally adjusted, declined
substantially in July, partly because Treasury cash financing was
much smaller than usual for that month. Security loans for all
purposes were sharply lower. Business loan demand showed little
change, while bank holdings of real estate loans and of securities
other than U.S. Governments continued to increase substantially.
The private money supply, although aided by shifts from Government to private deposits, remained at roughly the level that
had been maintained since late 1961. Time and savings deposits
(not included in the money supply, as conventionally defined)
apparently continued to grow in July, but at a slower pace than

ANNUAL REPORT OF BOARD OF GOVERNORS

earlier in the year. Because of smaller demand deposit growth,
reserves required to support private deposits, after moving up
during the first 3 weeks of July, turned down again in the latest
week. Free reserves had shown large week-to-week fluctuations
since the preceding meeting of the Committee but had averaged
about $450 million. Money market conditions, however, had
been slightly less easy than might have been expected with that
average level of free reserves; Federal funds traded mostly in the
2% -3 per cent range, while short-term Treasury bills fluctuated
within the 2% -3 per cent range.
The over-all balance of payments deficit for the second quarter
turned out to have been larger than estimated earlier. Much of
the improvement from the first quarter reflected a temporary
capital inflow stemming from deterioration of confidence in the
newly established rate for the Canadian dollar. The outlook for
the third quarter appeared to be for little or no improvement in
the U.S. payments position, partly because it would be adversely
affected by the reflow to Canada that was beginning to set in
following the provision of special credits to Canada by the International Monetary Fund, the United States, and the United
Kingdom. The London market for gold was unusually active,
and official support to the market was heavy throughout much
of the 3-week period preceding this meeting. On July 23 the
President, in the course of a news conference that was telecast
to Europe, reaffirmed the intent of the United States not to devalue its dollar. Thereafter, gold and foreign exchange markets
were less active, and the position of the U.S. dollar in European
centers improved.
A minority of the Committee favored a policy of greater
monetary ease as a means of stimulating domestic economic expansion or of helping to stave off possible setback in the economy. However, the majority, after weighing such considerations
as the continued evidence of adequate domestic liquidity on one
side and the unsatisfactory prospects for the balance of payments
on the other, and noting that a Treasury financing was currently
in progress, concluded that an "even keel" policy was appropriate

FEDERAL RESERVE SYSTEM

for the forthcoming period. Accordingly, the current policy directive issued to the Federal Reserve Bank of New York was in the
same form as the directive issued at the meeting on July 10, 1962.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, Mills, and Shepardson.
Votes against this action: Messrs. Mitchell and Robertson.

In dissenting, Mr. Robertson expressed the view that greater
recognition should be given to the possibility of deteriorating
domestic economic activity, and that in present circumstances
monetary policy could and should be providing additional stimulus. The accumulation of evidence suggested to him that the
recent shift in policy toward less monetary ease was generating
contractive reserve pressures. He regarded this as incurring real
risks in pursuit of illusory benefits; he had seen no evidence of
beneficial effects of higher U.S. money rates upon international
gold and dollar flows that would justify the domestic economic
hazards entailed, in his view, by such a policy. It seemed to him
that a more liberal policy of encouraging further expansion in
bank reserves, credit, and money, even if accompanied by easier
money market conditions, would better serve the long-run objective of a growing, prosperous, and internationally competitive
U.S. economy.
Mr. Mitchell dissented largely on the grounds set forth at the
meeting on July 10. The economy was continuing to drift along
in lacklustre fashion, and in his view the odds were long and
lengthening against a vigorous advance in the last half of the
year. He believed that a significant obstacle to further expansion
in the domestic economy was a protracted imbalance in the
money and capital markets created by the continuing effort to
use monetary policy to deal with the balance of payments situation. According to his analysis, debt management and monetary
policy had created a highly artificial situation in the money and
capital markets by holding up the short-term money rate. This
had created expectations that long-term rates would rise, despite
a preponderance of historical and analytical evidence that they

ANNUAL REPORT OF BOARD OF GOVERNORS

had passed their sustainable peak. He saw a serious threat to the
domestic economy, which he felt should be recognized by supplying reserves somewhat more freely, by making it clear that
there was no possibility of a discount rate increase under current
conditions, and by being prepared to see the short-term rate decline by as much as half of a percentage point.
August 2 1 , 1962
Authority to effect transactions in System Account.
Domestic economic developments in July, as reviewed by the
Committee at this meeting, were more favorable than those in
the immediately preceding months, and somewhat more favorable than had been suggested by evidence available at the preceding meeting of the Committee. Available data indicated widespread, if moderate, gains in activity. The industrial production
index rose nearly a full point; new orders received by durable
goods manufacturers rebounded sharply; and personal income,
retail trade, and other important measures showed increases.
Scattered figures for early August suggested that the July gains
in production and sales were being maintained. On the less favorable side, housing starts failed to reverse the drop of June, and
final figures for manufacturers' capital appropriations confirmed
the sharp second-quarter curtailment that had been reported
earlier. Also, while the seasonally adjusted rate of unemployment dropped slightly further in July to 5.3 per cent of the
civilian labor force, the lack of growth in the labor force itself
was viewed as a cause for concern.
Business loans at banks had apparently expanded somewhat
in recent weeks, but the over-all private demand for bank credit
continued to be relatively moderate. Required reserves and the
money supply both declined in the first half of August, and
there was a marked slowdown in growth of time deposits other
than savings accounts. Yields on intermediate- and longer-term
Treasury securities, which had risen in late June and early July,
had declined substantially in the period since the end of July, and

FEDERAL RESERVE SYSTEM

heightened investor interest was apparent in all instruments from
Treasury bills to long-term corporate bonds. One reason for the
previous advance in yields had been the widespread belief that
an early tax cut and a consequent substantial expansion of Federal debt were distinct possibilities. Correspondingly, a major
factor in the decline in yields was the fading of this prospect,
particularly after the President's statement on tax policy a week
before the meeting. The Treasury was reported to be considering
undertaking an advance refunding shortly after Labor Day, in
view of the currently favorable market circumstances.
International payments of the United States in July were affected favorably by advance debt repayments on the part of
France and Italy, and in July and early August were affected
unfavorably by the reflux of funds to Canada. After allowance
for these extraordinary factors, it appeared that the deficit in the
payments balance was running at a rate smaller than in the third
quarter of 1961 but larger than had been expected for the third
quarter of 1962. It appeared to be at least as high as the adjusted second-quarter deficit, which also had been in excess of
advance estimates. However, the position of the dollar in foreign
exchange markets appeared to have improved somewhat, and
private demand for gold in the London market evidently had
declined.
In sum, recent domestic developments appeared moderately
encouraging while those with respect to the balance of payments
were disappointing; there continued to be substantial room for
improvement on both fronts. A majority of the Committee concluded that, on balance, circumstances warranted a continuation
of recent monetary policy. Accordingly, the following current
policy directive, which reflected no change from the previous
directive except to eliminate references to unsettled behavior in
financial markets in view of the steadier performance of those
markets, was issued to the Federal Reserve Bank of New York:
It is the current policy of the Federal Open Market Committee to permit the supply of bank credit and money to increase further, but at the
same time to avoid redundant bank reserves that would encourage capital

ANNUAL REPORT OF BOARD OF GOVERNORS
outflows internationally. This policy takes into account, on the one hand,
the gradualness of recent advance in economic activity and the availability of resources to permit further advance in activity. On the other
hand, it gives recognition to the bank credit expansion over the past year
and to the role of capital flows in the country's adverse balance of
payments.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering
a moderately firm tone in money markets.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Fulton, King, Mills, Shepardson, and Treiber. Votes
against this action: Messrs. Mitchell and Bopp.

Messrs. Mitchell and Bopp dissented because they would have
preferred a directive indicating a greater willingness to encourage monetary expansion, substantially like that adopted at the
meeting of May 29, 1962. They thought that monetary policy
could make a greater contribution to economic expansion without risking significantly adverse effects on the balance of payments. In their opinion, the virtual elimination of any prospect
for a Federal tax cut in 1962 increased the importance of adopting a more stimulative monetary policy. Mr. Mitchell also expressed concern about the lack of growth in the money supply
since November 1961 which, he felt, had interfered with economic expansion. In his view there had been no monetary
expansion since late 1961. The rise in time deposits and total
bank assets that had taken place thus far in 1962 was due to the
growth of banks as savings institutions or financial intermediaries
and not to monetary creation brought about by Federal Reserve
policy. Recent policy, therefore, implicitly denied the need for
the money supply to grow with an expanding economy.

September 11, 1962
Authority to effect transactions in System Account.

It appeared that the improved performance of the economy in
July was not continuing. Reports to the Committee at this meet-

FEDERAL RESERVE SYSTEM

ing, based partly on preliminary estimates, indicated that industrial production and retail sales had leveled off in August. Also,
the seasonally adjusted unemployment rate had risen to 5.8 per
cent, although this was reportedly due in part to special or technical influences. Surveys of consumer buying intentions and of
business plans for inventory restocking and capital outlays suggested little change or only moderate gains in spending over the
coming months.
After contracting in July, bank credit expanded markedly in
August and grew slightly further in early September. Nevertheless, private demand deposits declined substantially in August.
Treasury balances remained unusually high, and time and savings deposits at commercial banks continued to grow but at
their recently reduced pace. The conventionally defined private
money supply was at a level about 1 per cent below that at the
end of 1961, after allowance for usual seasonal variations.
Long-term security yields were steady in early September,
after declining during much of August. An advance refunding
operation undertaken by the Treasury was still in progress at the
time of the meeting, with early indications that it was being well
received.
The international economic scene was reported to have
changed little in recent weeks, with the deficit in the U.S. balance of payments about the same in August as in July (after
allowing for the sizable foreign debt prepayments in July). Preliminary figures for late August and early September suggested
some improvement, but it was too early to tell whether they indicated a trend.
A majority of the Committee concluded that, in view of continued evidence of adequate domestic liquidity and continuing
indications of unsatisfactory progress with respect to the balance
of payments, monetary policy should remain unchanged for the
next 3 weeks. It was recognized that maintenance of the same
general atmosphere of credit availability might require somewhat
larger amounts of bank reserves than earlier, because of the
concentration of money market pressures arising from large

ANNUAL REPORT OF BOARD OF GOVERNORS

dealer financing requirements connected with the Treasury refunding superimposed upon seasonal needs for funds associated
with corporate tax and dividend payments. Because of these
developments, it was agreed that the Account Manager would
have to give particular emphasis to the tone and feel of the
market in managing the System Account. The current policy
directive issued to the Federal Reserve Bank of New York was
as follows:
It is the current policy of the Federal Open Market Committee to permit the supply of bank credit and money to increase further, but at the
same time to avoid redundant bank reserves that would encourage capital
outflows internationally. This policy takes into account, on the one hand,
the gradualness of recent advance in economic activity and the availability
of resources to permit further advance in activity. On the other hand, it
gives recognition to the bank credit expansion over the past year and to
the role of capital flows in the country's adverse balance of payments.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering
a moderately firm tone in money markets.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, and Shepardson. Votes
against this action: Messrs. Mills, Mitchell, and Robertson.

In explaining his dissent, Mr. Mills said that he considered the
forestalling of further declines in the money supply to be an
overriding necessity. In his view, therefore, a higher level of free
reserves should be an objective of System policy. Mr. Mitchell
dissented for reasons similar to those he had expressed at recent
meetings. Mr. Robertson felt that greater monetary ease at this
juncture could stimulate additional employment of resources
domestically without prejudicing the international position of the
dollar. In the credit field, he believed there was room for more
aggressive loan competition among banks, at lower rates of interest. In his view, the ability of the economy to accommodate
such additional credit stimulus was demonstrated, in part, by the
relative absence of the kinds of credit abuses that could be engendered or remedied by changes in general credit controls. In

FEDERAL RESERVE SYSTEM

the field of public liquidity, he observed there was a clear need
for renewed growth in the money supply. Although there had
been times this year when the effects of a lagging money supply
might have been cushioned by accelerated growth in time deposits and other liquid assets, such growth had since slowed.
Furthermore, the channeling of private saving into financial
claims, especially short-term Treasury securities, meant that the
funds of businesses and consumers were being funneled into
something less than the most stimulating channels, and Mr.
Robertson felt that the prevailing interest-rate structure—fostered
by existing monetary policy—must bear some of the responsibility for such a deflationary orientation of savings flows. He believed that greater monetary stimulation at this time—when
there were unutilized human and material resources and when
the gold stock was ample to protect against rumor-spawned
speculative raids on the dollar—would contribute to a prosperous and more rapidly growing economy that would command
renewed and more deeply rooted respect for both this country's
economic system and its currency.
October 2, 1962
1. Authority to effect transactions in System Account.
Hesitation in the economy, apparent at the preceding meeting
of the Committee, became clearer as final reports of August developments were examined, and the limited information available
for September suggested little or no improvement in that month.
The economy appeared rather delicately balanced between forces
making for mild contraction and those making for further modest
expansion. Unemployment, which rose in August to 5.8 per cent
of the labor force, continued at that higher rate in September.
Business psychology was appraised as not being optimistic; there
was renewed weakness of stock market prices, and business fixed
capital investment was indicated as lacking in vigor.
Consumer buying also was showing little significant change,
with preliminary estimates suggesting a slight decline in total

ANNUAL REPORT OF BOARD OF GOVERNORS

retail sales in September. Industrial commodity prices had not
been rising, and wage increases were indicated to have been
smaller than in earlier postwar expansions.
In the financial area, total bank credit expansion in August
was fairly sizable and business loans showed somewhat more
strength. Private demand deposits, which had declined in August,
rose somewhat in the first half of September. Time and savings
deposits continued to expand.
In capital markets, the volume of new municipal and corporate offerings was relatively light, and yields tended to slide off
from summer levels. Yields on Treasury notes and bonds also
tended downward, while 3-month bill rates ended the period at
about the 2.75 per cent level, little changed from the start of the
period. The effective rate on Federal funds continued in the
2.75-3 per cent area.
Improvement in the U.S. balance of payments this year was
viewed as likely to be disappointingly small. In the first 3 quarters of the year, the deficit continued uncomfortably large and
would have been even larger if substantial debt prepayments had
not been received. Moreover, the deficit involved a greater gold
loss than in 1961.
Some sentiment expressed during this meeting favored a modification of monetary policy in the direction of additional ease because of concern about the lack of vigor in the domestic economy. However, after taking into account the continuing balance
of payments deficit as well as the supply of bank credit already available to meet credit demands, the majority view
favored a continuation of current policy for the next 3 weeks.
This policy contemplated that reserves needed for seasonal purposes would be supplied freely and that the Account Management, in conducting open market operations, would continue to
be guided to a considerable extent by money market developments. The current policy directive issued to the Federal Reserve
Bank of New York was in the same form as that issued at the
meeting on September 11.

FEDERAL RESERVE SYSTEM
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, and Shepardson. Votes against
this action: Messrs. Mills and Mitchell.

Messrs. Mills and Mitchell concurred in the generally held
view regarding the seriousness of the balance of payments problem. However, with the domestic economy operating below desired levels of resource utilization and future trends uncertain,
they saw justification in moving toward a somewhat greater degree of monetary ease than was implied in a continuation of
current policy, even though this might result in some downward
pressure on short-term interest rates.
2. Authority to purchase and sell foreign currencies.

The continuing authority directive to the Federal Reserve
Bank of New York with respect to System foreign currency
operations, as originally adopted by the Federal Open Market
Committee on February 13, 1962, and most recently amended
by the Committee on July 10, 1962, was further amended at this
meeting, effective immediately, to increase from $750 million to
$1 billion the maximum amount of foreign currencies authorized to be held at any one time and to add the Austrian schilling
to the list of foreign currencies that the New York Bank was
authorized and directed to purchase and sell. At this date the
Federal Reserve System had reciprocal currency (swap) agreements outstanding in the total amount of $700 million with the
Bank of France, the Bank of England, the Netherlands Bank, the
National Bank of Belgium, the Bank of Canada, the Bank for
International Settlements, the Swiss National Bank, and the
German Federal Bank. In addition, there was in prospect the execution of similar agreements with the Bank of Italy and the Austrian National Bank that, if entered into on the basis contemplated, would increase to $800 million the total U.S. dollar
equivalent of foreign currencies involved in such arrangements.
In addition, the System continued to hold a modest quantity of
foreign currencies acquired from the Treasury Stabilization Fund

ANNUAL REPORT OF BOARD OF GOVERNORS

at the outset of the Federal Reserve program of foreign currency
operations.
As amended, the continuing authority directive read as follows:
The Federal Reserve Bank of New York is authorized and directed to
purchase and sell through spot transactions any or all of the following
currencies in accordance with the Guidelines on System Foreign Currency
Operations issued by the Federal Open Market Committee on February 13, 1962:
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Belgian francs
Canadian dollars
Austrian schillings
Total foreign currencies held at any one time shall not exceed $1
billion.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, Mills, Mitchell, and Shepardson. Votes against this action: None.

October 23, 1962
Authority to effect transactions in System Account.

During the evening preceding this meeting of the Committee,
the President had announced emergency actions to deal with the
crisis that had developed due to the build-up of offensive military
weapons in Cuba. The crisis had become apparent suddenly, but
in the short time available to receive reports it appeared that the
reaction in markets was cautious, though nervous, with the result
that no waves of selling or buying had developed. In the corporate security market one large financing proceeded as scheduled
the morning of the meeting. The Special Manager of the System Open Market Account for foreign currency operations had

FEDERAL RESERVE SYSTEM

contacted the monetary authorities of major industrial countries
by the time of the meeting, and those authorities stood prepared
to coordinate such intervention in foreign exchange markets as
might become necessary to cushion the impact of any unusual
flows of funds that might develop internationally.
The Committee discussion reflected grave concern about possible consequences of the Cuban crisis, but until further information became available no change in monetary policy seemed
called for on that account. Economic and financial tendencies,
as they had been developing prior to the President's statement,
had led to some comment in business and financial quarters
about a possible early cyclical turndown in activity. While the
general view was that information available to date did not support such a conclusion, at the same time it was clear that the
economy at best had been moving sideways in recent weeks. The
margin of unutilized manpower and industrial capacity continued large.
In financial markets the impact of the recently announced reduction by the Board of Governors of 1 percentage point in reserve requirements on time and savings deposits at member
banks, to become effective shortly, remained to be seen, and the
Cuban crisis rendered appraisal of the situation particularly difficult. Sluggishness in the economy, however, appeared to be
generating an increasing volume of business and consumer
liquidity without a corresponding change in private credit demands. As a consequence, both short- and long-term interest
rates had continued to ease prior to the Cuban crisis.
The U.S. balance of payments position deteriorated in the
third quarter and even more so in the first half of October. The
net capital outflow on private account continued large, especially
to Canada. Exports had declined in August contrary to expectations, and the export surplus was the smallest in many years.
Increasing concern was reported about prospects for a continuation of economic expansion in Europe; if the European boom
should be topping out, U.S. exports would be adversely affected.
In view of the uncertainties presented by the international

ANNUAL REPORT OF BOARD OF GOVERNORS

crisis and the imminence of a Treasury refunding, there was
unanimous agreement that no change should be made in policy
at this meeting, although the Committee should be prepared to
deal promptly with whatever problems might arise. While, as indicated, the policy decision was to maintain the status quo at this
time, the wording of the current economic policy directive was
changed to reflect awareness of the Cuban emergency situation
and to take account of the forthcoming Treasury financing. As
changed, the directive issued to the Federal Reserve Bank of
New York read as follows:
It is the current policy of the Federal Open Market Committee to
encourage moderate further increase in bank credit and the money supply,
while avoiding money market conditions unduly favorable to capital outflows internationally. It is also the Committee's policy to cushion such
unsettlement in money markets as may stem from international developments of an emergency or near emergency character. This policy takes
into account the potential financial effects of the Government's quarantine
on armament imports into Cuba, the imminence of a large Treasury
refinancing, and the recent stability of economic activity, with a margin
of underutilized resources and an absence of inflationary pressures.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering
a steady tone in money markets.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Deming, Ellis, Fulton, King, Mills, Mitchell, Shepardson, and
Irons. Votes against this action: None.

November 13, 1962
1. Authority to effect transactions in System Account,

The Cuban crisis, although far from settled, had eased appreciably by the time of this meeting. While the performance of
the domestic economy was still unsatisfactory in terms of utilization of manpower and other resources, the economic atmosphere
appeared to have improved. The more encouraging domestic

1Q0

FEDERAL RESERVE SYSTEM

indications included a high rate of auto sales in October following the introduction of new models; preliminary reports from
the October survey of consumer buying plans showing increased
strength in plans to purchase new cars and household durable
goods; and the results of a recent survey of business plans for
new plant and equipment outlays for 1963, showing a modest
rise over the estimated 1962 total.
In most domestic financial areas a somewhat more stimulative
tone had developed in October and early November. Bank credit
had again expanded at a rapid rate in October. Business loan
expansion continued larger than seasonal, following a strong
showing in August and September. The money supply had risen
appreciably in October, and there was a further rapid rise in time
and savings deposits. Member bank borrowing from Reserve
Banks continued moderate, and free reserves averaged above the
$400 million level. The large consumer financial savings and
corporate cash flows were sources of downward pressure on interest rates. Treasury, corporate, and municipal bond yields had
receded during October to around the lows reached in the spring
of the year. However, large Treasury financing operations and
Federal Reserve open market operations had contributed by early
November to raising short-term rates above the low levels of late
October.
Preliminary information on the October balance of payments
position of the United States was unfavorable, indicating an
over-all deficit of $900 million or more. This was the largest for
any month on record and more than double the third-quarter
monthly average deficit, owing in part to extraordinary transactions including large transfers to Canada, a large royalty payment to Venezuela, and probably some outflow of U.S. funds
caused by the Cuban crisis. Some improvement in the balance
of payments was indicated for the first week of November.
Despite the sharp deterioration in the October payments position, the dollar remained relatively steady in foreign exchange
markets and no serious pressure developed in the London gold
market, reflecting in part the increasingly close cooperation

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ANNUAL REPORT OF BOARD OF GOVERNORS

among leading central banks. Gold sales to foreigners in October
were small in relation to the deficit in the balance of payments in
that month.
Within the Committee, differences in views were more clearly
marked than for some time as to the appropriate course for
monetary and credit policy. Some members of the Committee
favored moving in the direction of slightly less ease, Their views
reflected serious concern about the balance of payments problem,
which they believed could be alleviated to some extent by moderately higher interest rates in this country. They suggested that
monetary ease had already provided ample liquidity to the
domestic economy and that greater ease would be more likely to
find expression in speculative tendencies and increased outflows
of funds to other countries than in significant stimulation of economic expansion. On the other hand, other members of the Committee emphasized the protracted sluggishness in the domestic
economic situation and the absence of inflationary tendencies.
Also, they felt that small increases in interest rates would be of
little help in dealing with the balance of payments problem.
Hence, these members were inclined toward somewhat more ease
than currently prevailed. A third group, constituting a majority
of the Committee, felt that recent changes in domestic and international conditions had not yet been so pronounced as to call
for any change at this time in the current Committee policy,
which called for encouraging a moderate further increase in
bank credit and the money supply, while avoiding money market
conditions unduly favorable to capital outflows.
After extensive discussion of these various views, the following current economic policy directive was issued to the Federal
Reserve Bank of New York:
In view of the recent stability of economic activity, with a margin of
underutilized resources and an absence of inflationary pressures, it is the
current policy of the Federal Open Market Committee to encourage
moderate further increase in bank credit and the money supply, while
avoiding money market conditions unduly favorable to capital outflows
internationally, It is also the Committee's policy to cushion such unsettle-

102

FEDERAL RESERVE SYSTEM
ment in money markets as may stem from international developments of
an emergency or near emergency character.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering
a steady tone in money markets.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mills, Mitchell, and Robertson.
Vote against this action: Mr. Hayes.

In voting on the directive, Messrs. Balderston and Fulton indicated that they would have preferred a lesser degree of ease,
while Messrs. Mills and Mitchell indicated they would have preferred a greater degree of ease. They voted for the directive,
however, on the ground that its wording would permit the degree
of change that they would have preferred.
In voting against the adoption of the directive, Mr. Hayes
called attention to the slightly better performance of the domestic
economy in the recent period, the substantial recent increases in
bank credit, the downward market pressures on interest rates of
all maturities, and the lack of significant progress with regard to
the balance of payments. In his view, with the international balance of payments problem so pressing, and with the nation's
liquidity so ample, he could see no reason for pursuing a policy
only slightly less easy than at the bottom of a recession nearly 2
years earlier. Accordingly, he advocated making a modest but
definite move toward less ease.
2. Amendment of Authorization and Guidelines for System foreign currency operations.

The Committee's Guidelines for System Foreign Currency
Operations and its Authorization Regarding Open Market
Transactions in Foreign Currencies (approved on February 13,
1962, and reaffirmed on March 6, 1962) were amended in
minor respects to provide for somewhat greater flexibility of
operations and to provide expressly for reciprocal currency arrangements on a standby basis. The amendment in the Guide-

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ANNUAL REPORT OF BOARD OF GOVERNORS
lines took the form of deleting certain words in the first paragraph of Section 2, Exchange Transactions, and inserting two
subsequent paragraphs, with the result that the first three paragraphs of the Section were changed to read as follows:
System exchange transactions shall be geared to pressures of payments
flows so as to cushion or moderate disequilibrating movements of funds
and their destabilizing effects on U.S. and foreign official reserves and on
exchange markets.
In general, these transactions shall be geared to pressures connected
with movements that are expected to be reversed in the foreseeable future; when expressly authorized by the Federal Open Market Committee,
they may also be geared on a short-term basis to pressures connected
with other movements.
Subject to express authorization of the Committee, the Federal Reserve
Bank of New York may enter into reciprocal arrangements with foreign
central banks on exchange transactions ("swap" arrangements), which
arrangements may be wholly or in part on a standby basis.
The changes in the Authorization were in paragraph (1) of
Section III, relating to specific aims of foreign currency operations. As amended, paragraph (1) provided that such operations
were to be conducted, within the basic purposes set forth in
Section II:
To offset or compensate, when appropriate, the effects on U.S. gold
reserves or dollar liabilities of disequilibrating fluctuations in the international flow of payments to or from the United States, and especially
those that are deemed to reflect temporary forces or transitional market
unsettlement.
Votes for this action: Messrs. Martin, Hayes, Balderston,
Bryan, Deming, Ellis, Fulton, King, Mills, Mitchell, and
Robertson. Votes against this action: None.

December 4, 1962
Authority to effect transactions in System Account.

A distinct improvement in business psychology had developed
in the weeks preceding this meeting, although key measures of

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FEDERAL RESERVE SYSTEM

economic activity continued to show little change from the levels
existing since midyear. The change in business and financial
sentiment both reflected and contributed to the sharp rise that
had occurred in stock market prices since late October. Also,
both sentiment and stock prices presumably had been influenced
by the release of tension as the Cuban crisis eased, as well as
by speculation about the effect of an anticipated tax reduction.
Total retail sales advanced again in November. New car purchases were at a very high level, although below the October
rate.
Other economic information becoming available since the preceding meeting of the Committee was mixed. The industrial production index in October remained at the level at which it had
been since July. New orders received by durable goods producers rose in October, and new housing starts recovered most of
their September decline. On the other hand, the rate of unemployment rose fractionally in November, returning to the high
August-September level. Plans for business investment showed
no change in outlays from the third to the fourth quarter, but
indicated a small decline for the first quarter of 1963. Commodity price averages continued to register little change; the
flurry of advances in some sensitive prices during the Cuban
crisis had been largely reversed.
Total bank credit and business loan expansion remained
strong. The private money supply in October and November rose
sharply above the level existing for many months, and time and
savings deposits also rose substantially further.
In contrast to bank credit, capital market financing continued
light. Estimates for the fourth quarter indicated declines from a
year earlier of one-fourth in corporate security offerings and of
one-fifth in State and local financing.
Money markets continued generally steady, with interest rates,
particularly in the short-term area, tending to move up slightly.
It was noted that, beginning about mid-December and continuing
for several months, seasonal forces would be working toward
lower interest rates as demands for financing usually are low

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early in the year and the flow of investment funds normally is
large.
The November balance of payments deficit was sharply lower
than the record October figure, which had been affected considerably by temporary factors. For the year to date, however, the
deficit was only a little short of that for 1961, and there was still
no indication that the basic accounts in the payments balance
had improved significantly. Foreign exchange and gold markets
had remained calm in recent weeks, and the net gold outflow
was small.
At this meeting, as at the preceding one, there were varied
judgments as to the precise degree of monetary ease to be sought.
A large minority—taking into account the relatively high level
of domestic activity, the degree of liquidity in the economy and
the banking system, and the desirability of help with the balance
of payments problem—felt that it was important to follow a policy
of slightly less ease. A smaller number of members, influenced
more by the persistently low rates of manpower and other resource utilization, felt that a little more ease could help to stimulate domestic employment; this group also questioned whether
slightly less ease could contribute significantly to the solution of
the balance of payments deficit. After discussion, the majority of
the Committee members, including in the end some of those who
initially had indicated a preference for shadings of slightly more
or slightly less ease, voted in favor of no change at this time
from the policy adopted at the November 13 meeting. The
wording of the current economic policy directive; was changed
to delete, as no longer needed, the reference to international
emergency conditions contained in the last sentence of the first
paragraph of the November 13 directive and to recognize the
2-week, instead of 3-week, interval before the next meeting. The
policy directive issued to the Federal Reserve Bank of New York
was as follows:
In view of the recent stability of economic activity, with a margin of
underutilized resources and an absence of inflationary pressures, it is the

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FEDERAL RESERVE SYSTEM
current policy of the Federal Open Market Committee to encourage
moderate further increase in bank credit and the money supply, while
avoiding money market conditions unduly favorable to capital outflows
internationally.
To implement this policy, operations for the System Open Market
Account during the next 2 weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering
a steady tone in money markets.
Votes for this action: Messrs. Martin, Balderston, Bryan,
Deming, Ellis, Fulton, King, Mills, Mitchell, Robertson, and
Shepardson. Vote against this action: Mr. Hayes.

Mr. Hayes voted against this directive for essentially the same
reasons that he had opposed the directive at the previous meeting—namely, that in view of ample domestic liquidity and an
unsatisfactory balance of payments situation a somewhat less
easy policy was appropriate.

December 18, 1962
Authority to effect transactions in System Account.

Information that had become available in the 2 weeks since
the preceding meeting of the Committee confirmed the mixed
picture of the economic situation. The feeling of increased business optimism with regard to prospects appeared to be continuing, but evidence of solid additional achievement was still limited.
Retail sales, as expected, proved to be higher in November
than in October; steel output rose; average weekly hours of work
at factories increased; and new orders for machinery advanced
again. Automobile sales continued relatively strong in November
and early December, and stocks of cars in dealers' hands were
low. Early Christmas buying, however, appeared to be somewhat
disappointing. Industrial production in November remained unchanged, and nonagricultural employment showed no improvement, both being at about midyear levels. Wholesale commodity
price averages continued unchanged.

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Gross national product was estimated at a seasonally adjusted
annual rate of $562 billion to $563 billion for the fourth quarter,
compared with $555 billion in the third quarter. If realized, the
fourth-quarter rate would be 4.5 per cent above a year earlier
and 11 per cent above the preceding cyclical peak in the spring
of 1960.
Bank credit continued to expand vigorously in November, although the rise was less rapid than in the preceding 3 months.
The money supply rose substantially further and apparently continued upward in early December. Time deposits continued their
rapid rise. Free reserves in the 2 weeks preceding this meeting
were at the lowest level in 2 years, but their decrease apparently
produced no undue restraining effect in central money markets.
Short-term interest rates continued more or less stable, and member bank borrowing at the Reserve Banks held around the somewhat higher level reached in November.
A time of year was approaching when seasonal factors, which
for some weeks had been exerting an upward influence on shortterm rates, would normally begin to exert a downward influence.
For this reason, a slightly firmer tone in money markets might
become necessary if the current level of short-term interest rates
were to be maintained.
The balance of payments deficit in November showed a sharp
drop from the record level of October, when certain temporary
factors were at work. In the first half of December the improvement observed in November seemed to continue. Gold and foreign exchange markets remained generally calm, and the monetary gold stock had not declined for several weeks.
The shadings of policy preference expressed at this meeting
were relatively limited, with no Committee member recommending a decisive move in the direction of either more or less monetary ease. There continued to be some differences of opinion,
however, as among policies of slightly more ease, slightly less
ease, or the same degree of ease that had prevailed, the reasons
for these views being largely the same as those expressed at other
recent meetings. At those meetings, several members who sup-

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ported a continuation of prevailing policy had at the same time
expressed the view that a somewhat less easy policy might be
appropriate after the economy had passed the peak of seasonal
credit demand. This now proved to be the majority position.
The majority position took into account the anticipated downward pressures on short-term rates of a seasonal nature, it being
felt that a continuation of the current degree of monetary ease
in an environment of substantial seasonal decline in interest rates
might have unfavorable effects, especially from the standpoint of
the balance of payments. The majority also noted the relatively
high rate of increase in bank reserves in recent weeks and the
degree of liquidity in the economy. In their view, monetary and
credit policy had made a significant contribution to the stimulation of domestic economic expansion.
The position taken by the minority reflected doubt that net
capital outflows would be much affected by some seasonal easing
of U.S. interest rates in the present slightly improved atmosphere
in international financial markets. Those holding this view preferred to continue undiminished the prevailing financial stimulus
to domestic activity.
To reflect the views of the majority, the current economic
policy directive issued to the Federal Reserve Bank of New York
was modified to read as follows:
It is the current policy of the Federal Open Market Committee to accommodate moderate further increases in bank credit and the money
supply, while aiming at money market conditions that would minimize
capital outflows internationally. This policy takes into account the lack
of any significant improvement in the U.S. balance of payments and the
recent substantial increase in bank credit, but at the same time recognizes
the unsatisfactory level of domestic activity, the continuing underutilization of resources, and the absence of inflationary pressures.
To implement this policy, operations for the System Open Market
Account during the next 3 weeks shall be conducted with a view to offsetting the anticipated seasonal easing of Treasury bill rates, if necessary
through maintaining a firmer tone in money markets, while continuing to
provide moderate reserve expansion in the banking system.

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Votes for this action: Messrs. Martin, Hayes, Balderston,
Ellis, Fulton, King, and Shepardson. Votes against this action: Messrs. Bryan, Deming, Mills, Mitchell, and Robertson.

Mr. Robertson, one of those who dissented from the action
taken by the Committee, believed that it would be a mistake to
undertake a firming of the money market simply in order to offset anticipated declines in Treasury bill rates. With the pace of
domestic business activity still undesirably slow and short-term
internationalfinancialflowsless troublesome than earlier, he felt
that it would be appropriate to maintain reserve availability at a
level that would sustain a gradual further monetary expansion
even if some seasonal decline in short-term interest rates
developed.

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RECORD OF POLICY ACTIONS
BOARD OF GOVERNORS

February 13, 1962
Amendment to Regulation N, Relations with Foreign Banks and Bankers.
Effective February 13, 1962, Regulation N was amended to regulate,
as contemplated by statute, the opening and maintenance by Federal
Reserve Banks of accounts with foreign banks, and to provide that
negotiations and agreements, contracts, or understandings entered into
by a Federal Reserve Bank with foreign banks were to be subject to such
authorizations, directions, regulations, and limitations as might be prescribed by the Federal Open Market Committee to the extent necessary
to effectuate the conduct of open market transactions by the Federal
Reserve Banks through such foreign accounts.
Votes for this action: Messrs. Martin, Balderston, Mills,
Shepardson, King, and Mitchell. Vote against this action:
Mr. Robertson.

For some time the Board and the Federal Open Market Committee had been studying the question of initiating a program
of System operations in foreign currencies. Although the contemplated transactions would be in the nature of open market
operations subject to the jurisdiction of the Federal Open Market
Committee, they would also involve the opening and maintenance by a Federal Reserve Bank of accounts with foreign
banks; and under Section 14(e) of the Federal Reserve Act
the establishment of such accounts was authorized only "with
the consent or upon the order and direction of the Board
of Governors of the Federal Reserve System and under regulations to be prescribed by said Board." In addition, such transactions would involve relationships and transactions with foreign
banks; and Section 14(g) of the Federal Reserve Act both
required the Board to exercise special supervision over all relationships and transactions of any kind entered into with foreign
banks and provided that such relationships and transactions
would be subject to such regulations, conditions, and limitations
as the Board might prescribe. Under the law, these responsi-

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OF GOVERNORS

bilities of the Board could not be delegated to the Federal Open
Market Committee. However, it appeared that, consistent with
the law, the Board could by regulation consent to the supervision
by the Committee of transactions in foreign accounts to the
extent that they involved open market operations. With the
adoption by the Board of this amendment to Regulation N, the
Federal Open Market Committee authorized a program of
System operations in foreign currencies, as described on pages
54-63 of this ANNUAL REPORT.
Governor Robertson's dissent from the action to amend Regulation N reflected his view that the Federal Reserve System
should not initiate a program of foreign currency operations.
The reasons for that view are described in the record of policy
actions of the Federal Open Market Committee, specifically on
pages 56-57 of this REPORT.

March 21, 1962
Amendment to Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks.
Effective May 1, 1962, paragraphs (f), (g), and (h) of Section 221.2 of
Regulation U were amended in order to prevent credit that might be
extended by banks under exemptions from the margin requirements and
other requirements of Section 221.1 provided in those paragraphs from
being used to finance transactions in "special cash accounts" under
Section 220.4 of the Board's Regulation T, Credit by Brokers, Dealers,
and Members of National Securities Exchanges.
Votes for this action: Messrs. Martin, Balderston, Mills,
Robertson, Shepardson, and King. Votes against this action:
None.

This action was intended to block a loophole that permitted
so-called "free riding" by speculators through improper use of
"special cash accounts" established pursuant to Section 220.4(c)
of Regulation T. ("Free riding" involves a purchase of securities
in expectation of a rise in the market price before the settlement
date, so that payment may be made from the proceeds of a
consequent profitable sale before that date.) Although the

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Board's authorization of special cash accounts was not intended
to facilitate such transactions, it appeared that certain lenders
were financing their customers' free riding through bank loans
extended under the enumerated paragraphs of Section 221.2,
particularly paragraph (f).
The foregoing amendments had been the subject of a notice
of proposed rule making, published in the Federal Register, and
were adopted by the Board after consideration of relevant views
and arguments received from interested persons.
July 9, 1962
Reduction in margin requirements.

Effective July 10, 1962, the Supplements to Regulation T, Credit by
Brokers, Dealers, and Members of National Securities Exchanges, and
to Regulation U, Loans by Banks for the Purpose of Purchasing or
Carrying Registered Stocks, were amended to reduce the margin requirements from 70 per cent to 50 per cent, these requirements to be applicable
both to purchases of securities and to short sales.
Votes for this action: Messrs. Martin, Balderston, Shepardson, King, and Mitchell. Votes against this action: Messrs.
Mills and Robertson.

Margin requirements are established by the Board of Governors, pursuant to authority contained in the Securities Exchange Act of 1934, "for the purpose of preventing excessive
use of credit for the purchase or carrying of securities." The
present change in the margin requirements was the first since
July 28, 1960, when the requirements were reduced from 90
per cent to 70 per cent.
In making this change, the Board noted that there had been
a sharp reduction in stock market credit in recent weeks, with
an abatement in speculative psychology. In June, bank loans
to customers for the purpose of purchasing or carrying registered
stocks had declined more than 5 per cent to a level of $1.3
billion. Furthermore, preliminary data indicated a decline of
$600 million in borrowing by stock exchange member firms
from banks on customer collateral, the largest monthly decline

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reported in the postwar period. Thus, when final figures became
available for June, a substantial decline would be shown in
customer debit balances and in total stock market customer
credit. In these circumstances, the Board concluded that a
70 per cent margin requirement was not necessary to prevent
the excessive use of credit for the purchase or carrying of
securities.
Governor Mills dissented from this action because in his view
the lower margin requirement would constitute an inducement
for unsophisticated investors to enter the stock market in a
period of unsettled economic and market conditions, with the
result that they would be exposed to possible speculative losses
in their transactions. According to his interpretation, the responsibility of the Board of Governors under the statute for preventing the "excessive use of credit for the purchase or carrying of
securities" included the responsibility for limiting access to
market trading, through the use of market credit, by individuals
unfamiliar with the risks involved in such practices. He also
was apprehensive that a margin requirement reduction at this
time would be regarded by many as an action on the part of the
Board to give a psychological lift to business that was not based
on a firm foundation, in which event the action could be more
damaging than helpful to business confidence.
Governor Robertson believed the timing of the action was
unwise. He felt that the action, coming on the heels of the
recent break in stock market prices, might serve (1) to encourage people to enter the market now, with more borrowed funds
and less of their own—and possibly to their detriment, and
(2) to encourage public belief that adjustments of margin
requirements are made for the purpose of affecting market prices
of stocks, rather than for the purpose specified in the law. The
possible benefits to be derived from action at this moment were,
in his view, insufficient to offset these adverse possibilities.

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July 11, 1962
Amendments to Regulation D, Reserves of Member Banks.

Effective July 28, 1962, Regulation D and the Supplement thereto were
amended in order (1) to make the changes necessary to reflect the termination of the "central reserve city" classification, (2) to incorporate in
the Regulation the factors considered by the Board in acting upon
requests from individual member banks in reserve cities for permission
to carry the lower reserves applicable to member banks not located in
such cities, and (3) to make certain minor clarifying changes.
Votes for this action: Messrs. Martin, Balderston, Mills,
Robertson, Shepardson, King, and Mitchell. Votes against
this action: None.

Public Law 86-114, approved July 28, 1959, provided among
other things for termination of the classification "central reserve
cities" on July 28, 1962. Accordingly, one purpose of the
present amendments to Regulation D and its Supplement was
to conform them to the law in this respect.
Public Law 86-114 also authorized the Board of Governors
to permit a member bank located in a central reserve or reserve
city (reserve cities only beginning with July 28, 1962) to carry
lower reserves than other member banks in the same city, based
on the character of the bank's business. The previous basis for
acting upon such a request from a member bank had been the
geographical location of the bank concerned within the particular city. One purpose of the current amendments was to
incorporate into the Regulation factors taken into account by
the Board in considering requests of this kind. The factors
included, but were not limited to, the amount of the member
bank's total assets, the amount of its total deposits, the amount
of its total demand deposits, the amount of its demand deposits
owing to banks, the nature of its depositors and borrowers, the
rate of activity of its demand deposits, the bank's geographical
location within the city, and its competitive position with relation to other banks in the city. These standards had been the
subject of a notice of proposed rule making published in the
Federal Register, and they were incorporated into the Regulation

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after consideration by the Board of relevant views and arguments
received from interested persons.
Certain minor clarifying amendments also were made to the
Regulation in respect to reserve computation periods and the
counting of vault cash as reserves.

July 11, 1962
Amendment to Rule for Classification of Reserve Cities.
Effective July 28, 1962, a paragraph was added to the Board's 1947
Rule for Classification of Reserve Cities to make possible the termination
of the reserve city designation of certain cities, and certain technical
changes also were made in the Rule.
Votes for this action: Messrs. Martin, Balderston, Mills,
Robertson, Shepardson, King, and Mitchell. Votes against
this action: None.

At the time of the triennial designation of reserve cities effective March 1, 1957, five cities that did not fall within the
standards of classification as reserve cities under the Board's
1947 Rule for Classification of Reserve Cities were nevertheless
continued as reserve cities at the request of member banks in
those cities, as permitted by the Rule in such circumstances.
The cities were Pueblo, Colorado; Kansas City, Kansas; Topeka,
Kansas; Wichita, Kansas; and Toledo, Ohio. Under the 1947
Rule, as then in effect, member banks in those cities were
entitled to assume that they would have an opportunity to reconsider the situation at the time of the triennial review in 1960.
However, on February 10, 1960, the Board suspended until
further notice the provisions of the 1947 Rule calling for triennial reviews. Consequently, it seemed inequitable to require the
designation of the five cities as reserve cities to be continued
indefinitely, if such designation was contrary to the wishes of
member banks in such cities, and it was known that member
banks in some of the cities would now welcome termination of
the reserve city designation.
Accordingly, the Board's Rule was amended to provide that

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in any case in which a city was classified as a reserve city solely
by reason of the continuance of its designation as such, effective
March 1, 1957, pursuant to the request of member banks in
the city, the reserve city designation of such city would be terminated, effective at such time as the Board might prescribe, if
a written request for such termination was received by the
Federal Reserve Bank of the district in which the city was located
from one or more member banks with head offices in such city
and if such request was granted by the Board of Governors.
Subsequent to the amendment of the Board's Rule, requests
for termination of the reserve city designation of Kansas City,
Topeka, and Wichita, Kansas, were received from member banks
in those cities and were approved by the Board.
Certain technical amendments to the Rule for Classification
of Reserve Cities also were necessary because of the termination
of the central reserve city classification on July 28, 1962,
pursuant to the provisions of Public Law 86-114.

September 27, 1962
Amendment to Regulation J, Check Clearing and Collection.

Effective September 27, 1962, Section 210.2(a) of Regulation J was
amended by substituting at two places the term "nonmember banks" for
the term "nonmember State banks."
Votes for this action: Messrs. Balderston, Mills, Robertson,
Shepardson, King, and Mitchell. Votes against this action:
None.
As amended, Section 210.2(a) read as follows:
(a) In pursuance of the authority vested in it under these provisions
of law, the Board of Governors of the Federal Reserve System, desiring
to afford both to the public and to the various banks of the country
a direct, expeditious, and economical system of check collection and
settlement of balances, has arranged to have each Federal Reserve
Bank exercise the functions of a clearing house and collect checks for
such of its member banks as desire to avail themselves of its privileges
and for such nonmember banks and trust companies as may maintain
with the Federal Reserve bank balances sufficient to qualify them

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ANNUAL REPORT OF BOARD OF GOVEENORS
under the provisions of Section 13 to send items to Federal Reserve
Banks for purposes of exchange or of collection. Such nonmember
banks and trust companies will hereinafter be referred to as nonmember clearing banks.

Prior to this amendment, Section 210.2(a) had referred to
the availability of nonmember clearing accounts to "nonmember
State banks and trust companies." However, the language of
the first paragraph of Section 13 of the Federal Reserve Act
refers to "nonmember banks and trust companies." Circumstances had arisen indicating that differences of interpretation
might arise from this difference in terminology, and the Regulation therefore was amended to conform to the language of
the statute.
October 3, 1962
Termination of Regulation F, Trust Powers of National Banks.

Effective September 28, 1962, Regulation F was terminated.
Votes for this action: Messrs. Martin, Balderston, Mills,
Shepardson, and Mitchell. Votes against this action: None.

Public Law 87-722, approved September 28, 1962, repealed
Section l l ( k ) of the Federal Reserve Act and transferred from
the Board of Governors to the Comptroller of the Currency the
authority to grant trust powers to national banks and to regulate
the exercise of such powers. Accordingly, Regulation F was
terminated effective as of the same date. Also effective the same
date, the Comptroller of the Currency issued! a regulation
regarding trust powers of national banks.
October 10, 1962
Amendment to Regulation Q, Payment of Interest on Deposits.

Effective October 15, 1962, Section 217.3(a) of Regulation Q was
amended by the addition of a sentence exempting, for a period of 3 years,
deposits of foreign governments, monetary and financial authorities of
foreign governments when acting as such, or international financial institutions of which the United States is a member, from the provisions of
the Regulation specifying maximum rates of interest that member banks
of the Federal Reserve System may pay on time deposits.

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Votes for this action: Messrs. Martin, Balderston, Mills,
and Shepardson. Votes against this action: None.

Public Law 87-827 amended Section 19 of the Federal
Reserve Act so as to exempt, for a period of 3 years, deposits
of foreign governments and certain foreign and international
financial institutions from regulation by the Board of Governors
as to rates of interest that member banks may pay on time
deposits. In prospect of the enactment of this legislation, Section 217(3)(a) of Regulation Q was amended to conform to
the change in the statute, such amendment to become effective
as of the date of approval of the legislation. The legislation was
subsequently approved October 15, 1962.
The amendment to the law and to Regulation Q related only
to the rates of interest payable on certain foreign time deposits;
such deposits continued to be subject to other requirements of
the law and of Regulation Q, such as restriction on payment of
time deposits before maturity.
Public Law 87-827 included a similar amendment to Section
18(g) of the Federal Deposit Insurance Act, applicable to
deposits in nonmember insured banks.

October 18, 1962
Amendment to Regulation D, Reserves of Member Banks.

Effective as to member banks in reserve cities at the opening of business October 25, 1962, and as to other member banks at the opening
of business November 1, 1962, the Supplement to Regulation D was
amended to reduce the reserve requirement against time deposits from
5 per cent to 4 per cent.
Votes for this action: Messrs. Martin, Balderston, Mills,
Shepardson, and Mitchell. Votes against this action: None.

In announcing this reduction of the reserves against time and
savings deposits required to be maintained by member banks
with Federal Reserve Banks, the Board made the following
statement:

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ANNUAL REPORT OF BOARD OF GOVERNORS
This action will reduce member bank required reserves by an estimated $767 million, $410 million at reserve city banks and $357
million at all other member banks. The release of these reserves,
coming at this time, will assist in meeting the heavy seasonal needs
for reserves that the banking system experiences in the closing months
of the year. In addition, the reserves thus supplied will h§lp in providing for the longer-term growth in bank deposits needed to facilitate
the expansion of economic activity and trade.
Reserves supplied in this manner substitute for a corresponding
amount of reserves supplied through Federal Reserve purchases of
Government securities in the open market, most of which, because
of the characteristics of the market, would necessarily be in short-term
securities. Thus, this method of supplying reserves will minimize
downward pressures from System purchases upon short-term market
rates, which is desirable in the present circumstances in order to keep
incentives for short-term capital flows abroad from becoming stronger.
In addition, the reduction in the requirement will make reserves available directly to banks throughout the country, to be used by them as
their own local circumstances dictate to support seasonal or other
changes in earning assets and deposits.
In taking this action, the Board took into account the character of
the growth in deposits at commercial banks this past year. Net
increases in savings and time deposits during 1962 have been comparatively large, in response to widespread offering by banks of higher
rates of interest for such deposits. In these circumstances, the Board
felt a lower requirement behind these deposits would be appropriate.

December 20, 1962
Revision of Regulation I, Issue and Cancellation of Capital Stock of
Federal Reserve Banks (title changed from Increase or Decrease of
Capital Stock of Federal Reserve Banks and Cancellation of Old and
Issue of New Stock Certificates).

Effective February 1, 1963, Regulation I was revised in certain technical respects.
Votes for this action: Messrs. Martin, Balderston, Mills,
Robertson, Shepardson, King, and Mitchell. Votes against
this action: None.

The purposes of the revision of the Regulation were to eliminate obsolete provisions with respect to duties of the Federal

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Reserve Agent; to provide procedures to be followed in case
of merger or consolidation of a member bank with a nonmember
bank, conversion of a national bank into a nonmember bank,
and involuntary termination of membership; and to authorize
the issuance of two stock certificates in order to indicate stock
issued before March 28, 1942. (Under present law, income on
Federal Reserve Bank stock issued on or after March 28, 1942,
is not exempt from Federal income tax.)
This revision had been the subject of a notice of proposed rule
making published in the Federal Register.

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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 JJection 21 of
the Federal Reserve Act. In conjunction with the 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, operated at that Bank in accordance with policies formulated by the Federal Open Market
Committee, and rendered a report thereon to the Committee.
The techniques and procedures employed by the Board's examiners were surveyed and appraised by a private firm of certified public accountants.
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 because the law charges the Comptroller
of the Currency directly with that responsibility. The Comptroller
makes reports of examinations of national banks available to the
Board of Governors in Washington, and each Federal Reserve
Bank obtains from the Comptroller copies of such reports of
examinations of national banks in its district as it may need.
State member banks are subject to examinations made by
direction of the Federal Reserve Banks of the district in which
they are situated by examiners selected or approved by the Board.
The established policy is to conduct at least one regular examination of each State member bank, including its trust department,
during each calendar year, with additional examinations if considered desirable. Wherever practicable, joint examinations are
made in cooperation with the State banking authorities, or alternate independent examinations are made by agreement with State
authorities. The Board of Governors makes available to the
Federal Deposit Insurance Corporation its reports of examination
of State member banks, and the Corporation in turn conducts
examinations of insured nonmember State banks and makes its

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FEDERAL RESERVE SYSTEM

reports available to the Board. All but 40 of the 1,544 State
member banks were examined under the Federal Reserve System's 1962 program.
In its supervision of State member banks, the Board receives,
reviews, and analyzes reports of examination of all State member
banks and coordinates and evaluates the examination and supervisory functions of the System. In addition, under provisions of
the Federal Reserve Act and other statutes, the Board passes on
applications for admission to membership in the System and for
permission, among other things, to (1) merge banks, (2) form
or expand bank holding companies, (3) establish domestic and
foreign branches, (4) accept drafts or bills of exchange, (5)
establish foreign banking and financing corporations, or (6) invest in bank premises in excess of 100 per cent of a bank's
capital stock. Comments with respect to some of the more
important of these actions appear below.
Federal Reserve membership. At the end of 1962, member
banks accounted for 45 per cent of the number of all commercial banks in the United States and held approximately 84 per
cent of the total deposits in such banks. State member banks
accounted for 18 per cent of the number of all State commercial
banks, occupied 31 per cent of the banking offices, and held
65 per cent of the deposits.
Of the 6,047 member banks of the Federal Reserve System at
the end of 1962, 4,503 were national and 1,544 were State
member banks. There were net declines of 10 and 56, respectively, in these two classes during the year. The declines were
due largely to consolidations, mergers, and withdrawals; 6
national banks converted to nonmember State banks, and 26
State banks withdrew from membership. Membership losses were
partly offset by 63 newly established national and 4 newly
established State member banks, the conversion of 10 nonmember banks to national banks, and the admission of 5 nonmember banks to membership.
At the end of the year member banks were operating 9,404
branches—751 more than at the close of 1961. This increase

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ANNUAL REPORT OF BOARD OF GOVERNORS

reflected mainly the establishment of 641 de novo branches
but also includes banks that merged into and became branches
of other banks.
Detailed figures on changes in the banking structure for 1962
are shown in Table 19, page 166.
Bank mergers. Under Section 18 (c) of the Federal Deposit
Insurance Act, as amended May 13, 1960, the Board passes
upon each merger, consolidation, acquisition of assets, or assumption of liabilities in which the acquiring, assuming, or resulting
bank is to be a State member bank. Unless the Board finds that
it must act immediately to prevent the probable failure of one
of the participating banks, it must request reports from the
Attorney General, the Comptroller of the Currency, and the
Federal Deposit Insurance Corporation on the competitive factors involved in each transaction. The Board in turn responds
to requests by the Comptroller or the Corporation for reports
on competitive factors involved when the acquiring, assuming,
or resulting bank is to be a national bank or an insured State
nonmember bank.
During 1962 the Board approved 37 and disapproved 5
mergers, consolidations, acquisition of assets, or assumptions of
liabilities. During the year the Board submitted 94 reports on
competitive factors to the Comptroller of the Currency and 38
to the Federal Deposit Insurance Corporation. As required by
Section 18(c) of the Federal Deposit Insurance Act, a description of each of the 37 cases approved by the Board, together with
other pertinent information, is shown in Table 21 on pages
169-201.
Statements and orders of the Board with respect to all bank
merger and bank holding company applications, whether approved or disapproved, are released immediately to the press
and the public and are published later in the Federal Reserve
Bulletin. These include comprehensive presentations of the
factors considered, the conclusions reached, and the vote of
each Board member present. Dissenting statements, if any, are
appended.

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Bank holding companies. During 1962, pursuant to Section
3 (a) (1) of the Bank Holding Company Act of 1956, the Board
approved 5 applications for prior approval to become a bank
holding company and denied 2 applications. Pursuant to Section
3 (a) (2) of the Act, the Board approved the acquisition by 7
bank holding companies of voting shares in 16 banks and denied
applications by 3 holding companies with respect to 3 banks.
To provide necessary current information, annual reports for
1961 were obtained from all registered bank holding companies.
During 1962, pursuant to the Banking Act of 1933, the Board
authorized the issuance to holding company affiliates of member
banks of 14 voting permits for general purposes and 6 for limited
purposes. In accordance with established practice, a number of
holding company affiliates were examined by examiners for the
Federal Reserve Banks in whose districts the principal offices of
the holding companies are located.
Section 301 of the Banking Act of 1935 provides that the
term "holding company affiliate" shall not include—except for
the purposes of Section 23A of the Federal Reserve Act which
restricts loans to and loans on or investments in the stock or
obligations of affiliates—any organization that 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. The
Board made such determinations with respect to 20 organizations
during 1962.
Banking Markets Unit. To assist in developing background information for consideration of bank merger and holding company applications, the Board has instituted a research program
for analysis of the banking structure and competition. Under this
program the Board of Governors has established a new unit, the
Banking Markets Unit, within its Division of Research and Statistics. To assist in developing a program of coordinated research
projects, it has also arranged for consultations with academic
authorities in fields relating to banking and industrial organization. The object is to stimulate a variety of research projects both

125

ANNUAL REPORT OF BOARD OF GOVERNORS
inside and outside of the Federal Reserve System in order to promote understanding of economic influences in banking markets.
Trust powers of national banks. An Act of Congress approved
September 28, 1962 (Public Law 87-722), transferred from the
Board of Governors to the Comptroller of the Currency authority
to grant trust powers to national banks and to regulate the
exercise of such powers, and to regulate common trust funds in
State and national banks subject to the provisions of Section 584
of the Internal Revenue Code.
During 1962 the Board granted to 51 national banks authority
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 9 banks that previously had
been granted certain trust powers. Three national banks acquired
trust powers as a result of consolidation, and trust powers of 23
national banks were terminated, 21 by consolidation or merger
and 2 by voluntary liquidation. On September 28, 1962, 1,785
national banks held permits to exercise trust powers issued by
the Board.
Foreign branches of member banks. At the end of 1962, 10 member banks had in active operation a total of 145 branches in
39 foreign countries and overseas areas of the United States: 5
national banks were operating 111 of these branches, and 5 State
member banks were operating 34. The branches were located
as follows:
Latin America
Argentina
Bahamas
Brazil
Chile .
Colombia
f>™*or • •
Jam?lca
Mexico
£anama
Paraguay
Peru

•

66
Dominican Republic
2
15
Uruguay
2
2
Venezuela
4
15
Virgin Islands (British) . . 1
2 continental Europe
9
;• f
Belgium
2
}
France
3
\
Germany
2
4
*
j
Jtal
I
Netherlands
1
3
1 England
14
126

FEDERAL RESERVE SYSTEM
Africa
Liberia
Nigeria
v ,
K1
Near East
Lebanon
Saudi Arabia .
v - <

3
1
2
o
3
2
1
T7

Pakistan
Philippines
Singapore
Thailand
U.S. Overseas Areas and
Trust Territories
Canal Zone

2
5
2
1
23
2

!!
Guam
Far East
27
G
u
a
m
Hong Kong
2
Puert0 Rico
15
\ndm
3
Truk Islands
1
J
^Pan
0
Virgin Islands
4
&
Malaya
1
Okinawa
1
Total
145
Under the provisions of the Federal Reserve Act (Section 25
as to national member banks and Sections 9 and 25 as to State
member banks), the Board during 1962 approved 21 applications made by member banks for permission to establish branches
in foreign countries.
During the year a member bank opened a branch in Amsterdam, The Netherlands; another opened a branch in Santo
Domingo, Dominican Republic; and a third opened a branch
in London, England. A fourth opened branches in Brussels,
Belgium; Santo Domingo, Dominican Republic; Hong Kong,
Colony of Hong Kong; Madras, India; Milan, Italy; and Asuncion, Paraguay. One of these branches had been authorized
before 1962.
Acceptance powers of member banks. Under the provisions of
Section 13 of the Federal Reserve Act, the Board approved during the year applications of 5 member banks for permission to
accept drafts or bills of exchange drawn for the purpose of
furnishing dollar exchange as required by the usages of trade
in such countries, dependencies, or insular possessions of the
United States as may have been designated by the Board of
Governors.
Foreign banking and financing corporations. At the end of 1962
there were 4 corporations operating under agreements with the
Board pursuant to Section 25 of the Federal Reserve Act relating
to investment by member banks in the stock of corporations

127

ANNUAL REPORT OF BOARD OF GOVERNORS

engaged principally in international or foreign banking. One
"agreement" corporation had ceased operations upon the acquisition of its assets and assumption of its liabilities by a newly organized banking corporation operating under the provisions
of Section 25(a).
During the year examiners for the Board examined 4 "agreement" corporations with head offices in New York. Two of these
each has an English fiduciary affiliate. Another has a branch in
England and owns the stock of 2 banks organized under the
laws of, and operating in, Liberia and the Republic of South
Africa, and a trust company organized under the laws of the
Bahamas. The fourth is a national member bank in the Virgin
Islands, which is owned by a State member bank in Philadelphia
and which operates as an "agreement" corporation.
During 1962, under the provisions of Section 25 (a) of the
Federal Reserve Act, the Board issued final permits to 10 corporations to engage in international or foreign banking or other
international or foreign financial operations. There were 5 new
foreign banking corporations and 6 new foreign financing corporations that commenced operations in 1962; 3 of the 11 had
received final permits in 1961. At the end of 1962 there were
22 corporations in active operation under Section 25(a); 10 of
these are "banking corporations," and 12 are "financing corporations." Of these corporations, 17 have home offices in New York
City, 1 in Boston, 2 in Philadelphia, and 2 in Chicago. Examiners for the Board of Governors examined 19 of the corporations during the year.
Fourteen of these corporations have no subsidiaries or foreign
branches. One has a Canadian subsidiary, a branch in France,
and an English fiduciary affiliate that has a branch in Canada.
Another owns the stock of a bank organized under the laws of,
and operating in, the Republic of South Africa, a trust company
organized under the laws of the Bahamas, and a Brazilian corporation that holds stock of a Brazilian bank. Another operates
branches in France, Germany, Guatemala, Hong Kong, Lebanon,
Malaya, and Singapore; it also has an agency in Guatemala and

128

FEDERAL RESERVE SYSTEM

owns substantially all of the stock of a bank organized under the
laws of, and operating in, Italy. One has a subsidiary organized
under the laws of Panama with headquarters in Bermuda; one
has an Argentine finance company subsidiary; one has a
Bahaman subsidiary; and another has a French investment
banking subsidiary.
Bank Examination School. In 1962 one of the two sessions of
the School for Examiners and three of the four sessions of the
School for Assistant Examiners were conducted within the framework of the Inter-Agency Bank Examination School, established
in 1952 by the three Federal bank supervisory agencies. Following the withdrawal of the Office of the Comptroller of the Currency from the jointly operated educational program in the latter
part of the year, the name of the school was changed to Bank
Examination School, under which title it continues to be conducted in Washington by the Board of Governors of the Federal
Reserve System and the Federal Deposit Insurance Corporation.
Since the establishment of this program in 1952, 1,960 men
have attended the various sessions. This number includes representatives of the Federal bank supervisory agencies; another
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, Rhode Island, Virginia, and Washington; the Treasury
Department of the Commonwealth of Puerto Rico; and two
foreign countries.
LEGISLATION ENACTED
Exemption of interest on foreign time deposits. The Act of Congress approved October 15,1962 (Public Law 87-827), amended
Section 19 of the Federal Reserve Act (12 U.S.C. 371b) to
exempt for 3 years deposits of foreign governments and certain
foreign institutions from regulation by the Board of Governors
of the Federal Reserve System as to rates of interest that member
banks may pay on time deposits. The Act included a similar

129

ANNUAL REPORT OF BOARD OF GOVERNORS

amendment to Section 18 (g) of the Federal Deposit Insurance
Act (12 U.S.C. 1828 (g)) with respect to such deposits in nonmember insured banks.
Powers of foreign branches of national banks. By Act: of Congress
approved August 15, 1962 (Public Law 87-588), Section 25 of
the Federal Reserve Act (12 U.S.C. 601 et seq.) was amended
to authorize the Board of Governors of the Federal Reserve System, by regulation, to permit foreign branches of national banks
to exercise such further powers, with certain exceptions, as may
be usual in connection with the transaction of the business of
banking in the places where such branches operate.
Authority over trust powers of national banks. The Act of Congress approved September 28, 1962 (Public Law 87-722),
vested authority over trust powers of national banks in the
Comptroller of the Currency and repealed Section 11 (k) of
the Federal Reserve Act (12 U.S.C. 248 ( k ) ) , which had placed
such authority in the Board of Governors of the Federal Reserve
System. Also, Section 584 of the Internal Revenue Code was
amended to provide that future tax benefits for common trust
funds would be derived by compliance with rules and regulations
of the Comptroller of the Currency pertaining to the collective
investments of trust funds by national banks.
Authority for Federal Reserve branch bank buildings,, The Act of
Congress approved August 31, 1962 (Public Law 87-622),
amended Sections 3 and 10 of the Federal Reserve Act (12
U.S.C. 521, 522) so as to require a Federal Reserve Bank to
obtain the approval of the Board of Governors of the Federal
Reserve System before contracting for the erection of a branch
bank building, and to increase from $30 million to $60 million
the aggregate amount that may be expended for such buildings.
Extension of authority of Federal Reserve Banks to purchase Government obligations. By Act of Congress approved June 28, 1962
(Public Law 87-506), the authority of Federal Reserve Banks
under Section 14(b) of the Federal Reserve Act (12 U.S.C.
355) to purchase and sell direct or fully guaranteed obligations

130

FEDERAL RESERVE SYSTEM

of the United States directly from or to the United States was
extended until June 30, 1964.
Extension of Defense Production Act of 1950. An Act of Congress
approved June 28, 1962 (Public Law 87-505), extended until
June 30, 1964, the termination date of the Defense Production
Act of 1950 (50 U.S.C. App. 2166), Section 301 of which is
the basis for guarantees of loans for defense production.
Bank Service Corporation Act. The Act of Congress approved
October 23, 1962 (Public Law 87-856), authorized banks that
are subject to examination by either the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, or the
Board of Governors of the Federal Reserve System, as the case
may be, to invest—subject to limitation—in bank service corporations furnishing data-processing or other clerical, bookkeeping,
or statistical services for banks. In addition, the Act conditioned
the performance of bank services for Federally supervised banks,
either by a bank service corporation or by others, upon the
furnishing of assurances that the performance thereof will be
subject to regulation and examination by the appropriate Federal
banking agency.
Real estate and construction loans by national banks. By Act of Congress approved September 28, 1962 (Public Law 87-717), Section 24 of the Federal Reserve Act (12 U.S.C. 371) was
amended to increase from 60 to 70 per cent the proportion of
a national bank's time deposits that may be invested in real
estate loans, and to increase from 9 to 18 months the permissible
maturity of their construction loans on residential and farm buildings.
PROPOSED AMENDMENTS
TO THE BANK HOLDING COMPANY ACT

The Board is required by Section 5(d) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844) to include in its
ANNUAL REPORT to Congress any recommendations for changes
in that Act that the Board thinks would be desirable. In a special
report submitted to Congress on May 7, 1958, and published

131

ANNUAL REPORT OF BOARD OF GOVERNORS

in the Federal Reserve Bulletin of July 1958, the Board recommended a number of amendments that would enhance the effectiveness of the Act, facilitate its administration, and clarify
ambiguities. The Board believes that the suggested amendments
(with the exception of Recommendation 15, which was withdrawn in the Board's ANNUAL REPORT for 1960) merit early
congressional consideration and legislative action.
The Board particularly emphasizes the desirability of prompt
amendment of the Holding Company Act in the following
respects:
1. The present definition of "bank holding company" covers
only situations involving 2 or more banks. In the Board's judgment, this definition is not adequate to control certain potential
evils toward which the Act is directed, in that it permits common
corporate control of banking and nonbanking interests. Accordingly, the Board reiterates its recommendation (1958 Special
Report, Recommendation 1) that the Act be amended to subject
a corporation to regulation as a bank holding company if it
controls 25 per cent or more of the stock of a single bank.
2. The Act exempts a company that was registered under
the Investment Company Act of 1940 before May 15, 1955,
and certain of its related corporations. As pointed out in Recommendation 7 of the 1958 Special Report, this exemption has no
logical basis. It has been actively utilized to expand a bank holding company system, free from regulatory control, in a manner
inconsistent with the basic principles of the Bank Holding Company Act. The Board therefore urges prompt amendment of the
Act to eliminate this unwarranted exemption.
The Act also excludes from its coverage (a) companies with
most of their resources "in the field of agriculture" and (b) companies "operated exclusively for religious, charitable, or educational purposes." However, the principal dangers with which the
statute is concerned—unregulated expansion of corporate ownership of banks and ownership of banking and nonbanking interests
by the same organization—are not obviated by the fact that a
holding company is engaged chiefly in agriculture or is operated

132

FEDERAL RESERVE SYSTEM

for religious, charitable, or educational purposes. Accordingly,
these exemptions also should be repealed.
3. In administering the Act the Board has confirmed its view
(explained in Recommendation 23 of the 1958 Special Report)
that Section 6 of the Act should be repealed or, at least, amended.
That provision, broadly speaking, prohibits intrasystem investments and extensions of credit by banks in holding company
systems. This constitutes a severe and, in the Board's judgment,
an unnecessary restriction upon the operations of banks controlled by holding companies, and therefore should be repealed
or amended as soon as possible.
4. Before enactment of the Bank Holding Company Act of
1956, Federal regulation of bank holding companies was based
principally on provisions of the Banking Act of 1933 relating to
"holding company affiliates." As pointed out in Recommendation
25 of the 1958 Special Report, the effectiveness of the laws
relating to holding company affiliates is open to question and it
is doubtful whether, in view of the enactment of the Bank Holding Company Act, these laws are sufficiently useful to justify
their retention. Eliminating them would remove the confusion
and the administrative burden that result from the existence of
two sets of laws relating to the same general subject but based
on different definitions of what constitutes a holding company.
LITIGATION
The Continental Bank and Trust Company, Salt Lake City, Utah.

On May 3, 1962, the U.S. Court of Appeals for the District of
Columbia unanimously affirmed the U.S. District Court's orders
(1) dismissing, on procedural grounds, a suit against the Board
wherein The Continental Bank and Trust Company had challenged the Board's statutory authority to require changes in the
capital structure of a member bank and (2) denying a motion
to alter, amend, or vacate the judgment of dismissal.
A hearing at which the bank was required to show cause why
its membership in the System should not be forfeited (ANNUAL

133

ANNUAL REPORT OF BOARD OF GOVERNORS

for 1961, pages 114-15) was ordered by the Board subsequent to the U.S. District Court's dismissal of the case and
prior to the bank's appeal. That hearing, which the Board had
postponed until after the Court of Appeals decision, was held
before a hearing examiner on October 29, 1962, at the Federal
Reserve Bank of San Francisco. During the hearing the bank submitted a plan for increasing its capital accounts. Also received in
evidence was a letter from the Board of Governors to the bank
stating that consummation of the plan would constitute sufficient
cause for terminating the administrative proceeding.
Thereafter, on October 30, 1962, the Board ordered the
capital adequacy proceeding terminated on condition that by
the end of 1962 or a reasonable period of time thereafter the
bank shall have furnished satisfactory evidence of substantial
accomplishment of the plan to increase its capital accounts. The
Board's order specified that if the bank failed to furnish such
evidence, the October 30 order would be deemed to be of no
effect and the Board might re-open the record of the show-cause
hearing or take such other action as might be appropriate under
existing circumstances. By letter of January 2, 1963, the President of the bank advised the Board that the bank had complied
with the terms of the plan it had submitted.
Whitney Holding Corporation, New Orleans, Louisiana. In May 1962
the Board approved, under Section 3 ( a ) ( l ) of the Bank Holding
Company Act, the acquisition by this company of substantially
all of the voting stock of the Crescent City National Bank, New
Orleans (a proposed new bank into which the existing Whitney
National Bank of New Orleans would be consolidated), and
of the Whitney National Bank in Jefferson Parish. Louisiana (a
proposed new bank).
On June 30, 1962, the Bank of New Orleans and Trust Company and the Guaranty Bank and Trust Company located, respectively, in the Parish of Orleans and Lafayette Parish, Louisiana,
filed in the U.S. Court of Appeals for the Fifth Circuit (New
Orleans) a petition for review of the Board's order permitting
REPORT

134

FEDERAL RESERVE SYSTEM

the aforementioned acquisitions by Whitney Holding Corporation.
Later, the same banks obtained an order from the U.S. District
Court for the District of Columbia permanently enjoining the
Comptroller of the Currency from issuing a certificate authorizing Whitney National Bank in Jefferson Parish to open for
business. No date has been set for arguments on the appeal from
the Board's order.
First Oklahoma Bancorporation, Oklahoma City, Oklahoma. An appeal
was filed in the U.S. Court of Appeals for the Tenth Circuit
(Denver, Colorado) from a November 30, 1962, order of the
Board, under the Bank Holding Company Act, approving a program whereby First Oklahoma Bancorporation, Inc., would
become a bank holding company through the acquisition of
stock of The First National Bank and Trust Company of Oklahoma City and The Idabel National Bank, Idabel, Oklahoma.
The appeal was taken by 2 banks that had participated in the
Board's public hearing in this case. Simultaneously with the filing
of their appeal, the banks sought unsuccessfully a stay of the
Board's order approving Bancorporation's acquisition of stock
of the 2 Oklahoma banks. Bancorporation was permitted to
intervene in the appeal and has filed a motion to dismiss it.
Arguments on the appeal are expected to be held early in 1963.
Northwest Bancorporation, Minneapolis, Minnesota. In June 1962,
the U.S. Court of Appeals for the Eighth Circuit (St. Louis,
Missouri) unanimously affirmed the Board's action in denying an
application by Northwest Bancorporation, a registered bank
holding company, for approval of Bancorporation's acquisition of
stock of the First National Bank of Pipestone, Minnesota. The
Court's affirmance of the Board's action was accompanied by an
extensive opinion relating in part to the scope of the Board's
powers and discretion under the Act.
RESERVE BANK OPERATIONS
Earnings and expenses. Current earnings, current expenses, and
the distribution of net earnings of each Federal Reserve Bank

135

ANNUAL REPORT OF BOARD OF GOVEELNORS

during 1962 are shown in detail in Table 7 on page 154, and
a condensed historical statement is shown in Table 8 on page
156. The accompanying table summarizes the earnings, the
expenses, and the distribution of net earnings for 1962 and 1961.
EARNINGS, EXPENSES, AND DISTRIBUTION OF N E T EARNINGS
OF FEDERAL RESERVE BANKS, 1962 AND 1961

(In thousands of dollars)
Item

1962

1961

1,048,508
176,136

941,648
161,275

872,372

780,373

-56

3,482

Net earnings before payments to Treasury.

872,316

783,855

Dividends paid
Paid Treasury (interest on F. R. notes).

27,412
799,366

25,570
687,393

45,538

70,892

Current earnings.
Current expenses.
Current net earnings.
Net deductions from (-) or additions to
current net earnings *

Transferred to surplus.

i Includes net profits on sales of U.S. Govt. securities of $1,990,000 in 1962 and $3,466,000 in 1961.

Current earnings of $1,049 million in 1962 were 11 per cent
more than in 1961, reflecting increases of $102 million on U.S.
Government securities and of $2 million on discounts and advances due mainly to a rise in average holdings. In addition, earnings on foreign currencies amounted to $4 million. Current
expenses of $176 million were about 9 per cent higher than in
1961. Current net earnings amounted to $872 million, 12 per
cent more than in 1961.
The effect on current net earnings of profit and loss additions
and deductions was negligible. Net earnings before payments to
the Treasury totaled $872 million, an increase of 11 per cent
from 1961.
Statutory dividends to member banks amounted to $27 million, about $2 million more than in 1961. This rise reflected an

136

FEDERAL RESERVE SYSTEM

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 Treasury as interest on Federal Reserve notes
amounted to $799 million, 16 per cent more than in 1961. The
remaining $46 million of net earnings was added to Reserve
Bank surplus accounts in order to bring them up to the level of
subscribed capital.
Expenses of the Federal Reserve Banks include costs of $9,415
for 37 regional meetings in connection with the Treasury Department Savings Bond program.
Holdings of loans and securities. Average daily holdings of loans
and securities during 1962 amounted to $29,703 million, reflecting increases over 1961 of $2,131 million in holdings of U.S.
Government securities and of $54 million in discounts and
advances. The average rate of interest on Government securities
RESERVE BANK EARNINGS ON LOANS AND SECURITIES,

Total

Item and year

Discounts
and
advances

Acceptances

1960-62
U.S.
Government
securities

In millions of dollars
1

Average daily holdings:
I960
1961
1962
Earnings:
I960
1961
1962

26,847
27,517
29,703

438
83
137

39
41
42

26,371
27,393
29,524

1,103
941
1,045

17
3
4

1.4
1.2
1.3

1,085
938
1,039

In per cent
Average rate of interest:
I960
1961
1962
1

3.80
3.01
3.02

4.11
3.42
3.52

Based on holdings at opening of business.

137

3.60
2.83
2.97

4.11
3.42
3.52

ANNUAL REPORT OF BOARD OF GOVERNORS

increased slightly, from 3.42 to 3.52 per cent; the rate on discounts and advances remained about the same. The accompanying table shows holdings, earnings, and average interest rates on
loans and securities held by the Federal Reserve Banks during the
past 3 years.
Volume of operations. Table 10 on page 158 shows the volume
of operations in the principal departments of the Federal Reserve
Banks for 1959-62. The volume of checks handled! continued to
rise and reached a new record high in 1962. Some of the manual
burden of processing these checks was relieved by converting
part of this work to electronic check-handling equipment. By the
end of the year 9 Federal Reserve Banks and 3 branches were
using such equipment.
The number of issues, redemptions, and exchanges of U.S.
Government securities was the highest since 1957, and the
dollar value of these transactions reached a new peak.
The number of pieces of currency received and. counted and
the aggregate dollar value thereof increased—approximating the
1960 level of activity. Coin received and counted also increased
in aggregate dollar value but declined in number, reflecting a
continuing shortage of coin; most of the shortage in 1962 was
in minor coin. The dollar value of discounts and advances increased moderately but was still much lower than the 1959-60
level.
Loan guarantees for defense production. Under the Defense Production Act of 1950, the Departments of the Army, Navy, Air
Force, Commerce, Interior, Agriculture, the Defense Supply
Agency of the Department of Defense, the General Services
Administration, the National Aeronautics and Space Administration, and the Atomic Energy Commission are authorized to
guarantee loans for defense production made by commercial
banks and other private financing institutions. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies
under the Board's Regulation V.
During 1962 the agencies authorized the issuance of 14
guarantee agreements covering loans totaling $49 million. Loan

138

FEDERAL RESERVE SYSTEM

authorizations outstanding on December 31, 1962, totaled $177
million, of which $147 million represented outstanding loans and
$30 million additional credit available to borrowers. Of total
loans outstanding, 74 per cent on the average was guaranteed.
During the year approximately $235 million was disbursed on
guaranteed loans, most of which are revolving credits.
Authority for the V-loan program, unless extended, will
terminate on June 30, 1964.
Foreign and international accounts. Assets held for foreign account
at the Federal Reserve Banks increased by $1,577 million in
1962. At the end of the year they amounted to $18,746 million:
$10,896 million of earmarked gold; $6,990 million of U.S.
Goverment securities (including securities payable in foreign
currencies); $247 million in dollar deposits; $86 million of
bankers' acceptances purchased through Federal Reserve Banks;
and $527 million of miscellaneous assets. The latter item includes
mainly dollar bonds issued by foreign countries and international
organizations. Assets held for international organizations rose
by $894 million to $8,029 million.
New accounts were opened in 1962 in the names of the
central banks of Jamaica, Laos, Spain, and Syria.
The gold collateral loan of $15 million outstanding at the
beginning of the year was repaid. New arrangements—including
a standby commitment—amounted to $96 million, of which
$1 million was outstanding at the end of the year. Loans on
gold are made to foreign monetary authorities to help them
meet dollar requirements of a clearly temporary nature.
The Federal Reserve Bank of New York continued to act as
depositary and fiscal agent for international organizations. As
fiscal agent of the United States, the Bank continued to operate
the Exchange Stabilization Fund pursuant to authorization and
instructions of the Secretary of the Treasury. Also on behalf of
the Treasury Department, it continued to administer foreign
assets control regulations pertaining to assets in the United States
of Communist China and North Korea and their nationals, and
transactions with those countries and their nationals.

139

ANNUAL REPORT OF BOARD OF GOVERNORS

Pursuant to the decision of the Federal Open Market Committee on February 13, 1962, to extend the scope of its operations to include operations in foreign exchange, the Federal Reserve Bank of New York opened accounts with the central banks
of Austria, Belgium, Germany, Italy, the Netherlands, Switzerland, and with the Bank for International Settlements. Accounts
were already in existence with the central banks of Canada,
France, and England. In connection with the reciprocal currency
agreement with the National Bank of Belgium, the Federal Reserve Bank of New York also opened an account with the Societe
Nationale de Credit a l'lndustrie in order to be able to place
Belgian franc funds in an interest-bearing deposit account (guaranteed by the National Bank of Belgium).
System operations in foreign currencies during 1962 are
described on pages 39-44.
Bank premises. During the year the Board authorized the construction of an addition to the Federal Reserve Bank building
in Atlanta.

BOARD OF GOVERNORS—INCOME AND EXPENSES

The accounts of the Board for the year 1962 were audited by
the public accounting firm of Haskins & Sells.
ACCOUNTANTS' OPINION

Board of Governors
of the Federal Reserve System:
We have examined the balance sheet of the Board of Governors of the
Federal Reserve System as of December 31, 1962 and the related statement of assessments and expenditures for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the accompanying financial statements present fairly
the financial position of the Board of Governors of the Federal Reserve

140

FEDERAL RESERVE SYSTEM
System at December 31, 1962 and its 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.
Haskins & Sells
Washington, D. C.
January 23, 1963

BALANCE SHEET, DECEMBER 31,

1962

ASSETS
OPERATING FUND:

Cash
Miscellaneous receivables and travel advances
Stockroom and cafeteria inventories—at cost

$ 736,715
12,231
20,669

Total operating fund

769,615

PROPERTY FUND—At cost:

Land and improvements
Building
Furniture and equipment

792,852
4,063,017
666,524

Total property fund

5,522,393

TOTAL

$6,292,008
LIABILITIES AND FUND BALANCES

OPERATING FUND :

Current liabilities:
Accounts payable and accrued expenses
Income taxes withheld
Accrued payroll
Fund balance:
Balance, January 1, 1962
Excess of expenditures over assessments for the year..

$ 279,556
213,561
108,572

$ 601,689

336,710
168,784

167,926

Total operating fund

769,615

PROPERTY FUND:

Fund balance, January 1,1962
Expenditures for additions
Property adjustments and disposals

5,411,147
123,572
(12,326)

Total property fund

5,522,393

TOTAL

$6,292,008

141

ANNUAL REPORT OF BOARD OF GOVERNORS
STATEMENT OF ASSESSMENTS AND EXPENDITURES
FOR THE YEAR ENDED DECEMBER 31, 1962
ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS:

For Board expenses and additions to property
$ 6,654,900
For expenditures made on behalf of the Federal Reserve Banks....
6,635,364
Total assessments

13,290,264

EXPENDITURES:

For printing, issue and redemption of Federal Reserve notes,
paid on behalf of the Federal Reserve Banks
For expenses of the Board:
Salaries
$4,475,576
Retirement and insurance contributions
658,719
Traveling expenses
356,373
Economic surveys:
Consumer Buying Intentions
97,528
Consumer Finances
90,000
Other
19,183
Chain banking survey
10,839
Legal, consultant and audit fees
71,218
Other contractual services
72,011
Printing and binding—net
234,747
Equipment and other rentals
199,572
Telephone and telegraph
109,354
Postage and expressage
73,349
Stationery, office and other supplies
58,453
Heat, light and power
55,302
Operation of cafeteria—net
50,250
Repairs, maintenance and alterations
24,142
Books and subscriptions
20,297
Insurance
1,974
Miscellaneous—net
20,725

6,635,364

6,700,112

For property additions

123,572

Total expenditures

13,459,048

EXCESS OF EXPENDITURES OVER ASSESSMENTS FOR THE YEAR

142

168,784

1. DETAILED STATEMENT OF CONDITION OF ALL FEDERAL RESERVE BANKS
COMBINED, DECEMBER 31, 1962
(In thousands of dollars)
ASSETS
Gold certificates on hand:
Held by Federal Reserve Banks
1,016,055
Held by Federal Reserve Agents
1,800,000
Gold certificates due from U.S. Treasury:
Interdistrict Settlement Fund
5,770,588
Federal Reserve Agents' Fund
5,843,000 14.429,643
Redemption fund for Federal Reserve notes

1,266,423

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

15,696,066
488,703
27,776
229,469
7,766
522
21,058
286,591
32,242

5,000
1,000

Total discounts and advances
Acceptances:
Bought outright
Held under repurchase agreement
U.S. Government securities:
Bought outright:
Bills
Certificates
Notes
Bonds

6,000
38,242
52,562
57,692

2,442,009
13,181,939
10,717,281
4,136,757

Total bought outright

30,477,986

Held under repurchase agreement

342,000

Total U.S. Government securities

30,819,986

Total loans and securities
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:
Denominated in foreign currencies
Assets acquired—industrial loans
Less valuation allowances

30,968,482
7,091,000
207,945
816,978
,
101,749
57,827
159,576
79,393

8,115,923

25,041

80,183
105,224

25
25

Net
Reimbursable expenses and other items receivable
Interest accrued
Premium on securities
Deferred charges
Real estate acquired for banking house purposes
Suspense account
All other
Total other assets

80,650

3,556
238,804
29,268
1,880
1,397
800
1,310
357,665

Total assets

32,242

56,018,654

144

DETAILED STATEMENT OF CONDITION OF ALL FEDERAL RESERVE BANKS
COMBINED, DECEMBER 31, 1962—Continued
(In thousands of dollars)
LIABILITIES
Federal Reserve notes:
Outstanding (issued to Federal Reserve Banks)
32,119,050
Less: Held by issuing Federal Reserve Banks
1,266,054
Forwarded for redemption
208,944
1,474,998
Federal Reserve notes, net (includes notes held by
U.S. Treasury and by Federal Reserve Banks
other than issuing Bank)
Deposits:
Member bank reserves
U.S. Treasurer—General account
Foreign
Other deposits:
Nonmember bank—clearing accounts
Officers* and certified checks
Reserves of corporations doing foreign banking or
financing
International organizations 1
All other

30,644,052
17,451,821
596,566
246,881
62,758
8,628
27,094
93,161
234,918

Total other deposits

426,559

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

18,721,827
5,183,882
185
61,658
5,235
1,015
23

Total other liabilities

68,116

Total liabilities

54,617,877
CAPITAL ACCOUNTS

Capital paid in
Surplus
Other capital accounts 2

466,926
933,851

Total liabilities and capital accounts

56,018,654

Contingent liability on acceptances purchased for foreign correspondents

85,521

Includes Inter-American Development Bank, International Bank for Reconstruction and
Development,
International Finance Corporation, International Monetary Fund, etc.
2
During the year this item includes the net of earnings, expenses, profits, etc., which are closed
out on Dec. 31; see Table 7, pp. 154-55.
NOTE.—Amounts in boldface type are those shown in the Board's weekly statement in millions of
dollars.

145

STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK, DECEMBER 31, 1962 and 1961
(In millions of dollars unless otherwise indicated)
Total

Item

New York

Boston

Philadelphia

Cleveland

Richmond

1962

1961

14,430
1,266

15,445
1,170

892
72

936
70

3,395
303

3,479
279

918
76

907
71

1,255
112

1,306
105

895
100

1,088
95

15,696

16,615

964

1,006

3,698

3,758

994

978

1,367

1,411

995

1,183

492
288

503
320

45
24

35
20

95
42

108
55

53
16

44
12

28
20

35
26

37
26

41
21

32
6

115
15

*
*

*
1

15
1

102
4

1
*

1
1

•
•

1
1

1
*

*
1

52
58

48
3

52
58

48
3

30,478
342

28,722
159

1,473

1,351

7,527
342

7,103
159

1,679

1,659

2,451

2,435

2,068

1,862

30,968

29,062

1,473

1,352

7,995

7,419

1,680

1,661

2,451

2,437

2,069

1,863

8,115
104

1,605
8

476
3

439
4

721
7

514
6

5
15

4
19

*
15

13,532

13,050

3,242

3,152

S
22
4,624

581
8
*
21

572

1,644
9
*
57

4,519

3,727

3,643

1962

1961

1962

1961

1962

1961

1962

1961

1962

ASSETS
Redemption fund for F R. notes
Total gold certificate reserves

4
ON

Discounts and advances:
Secured by U.S. Govt. securities
Other
Acceptances:
Held under repurchase agreement
U.S. Govt. securities:
Held under repurchase agreement
Total loans and securities • • •
Cash items in process of collection • • • •
Bank premises
Other assets:
Denominated in foreign currencies

.
.

721
3

81
276

7,481
111
*
237

4
13

569
4
*
11

56,020

54,329

3,247

2,997

122

LIABILITIES
F.R. notes
Deposits:
U.S. Treasurer
Foreign
Other

General account...

Total deposits
Deferred availability cash items
Other liabilities
Total liabilities

30,643

29,305

1,797

1,704

7,235

6,751

1,863

1,890

2,680

2,625

2,525

2,380

17,454
597
247
424

17,387
465
279
320

829
46
12
4

789
16
13
3

4,644
117
i 58
289

4,517
129
188
229

825
45
15
5

829
11
16
3

1,201
38
24
15

1,301
37
25
4

761
28
12
10

760
50
12
6

18,722
5,181
73

18,451
5,181
59

891
489
4

5,108
795
18

4,963
956
16

890
404
4

859
323
3

1,278
531

1,367
398
4

811
320
5

828
371
4

54,619

52,996

3,181

821
406
3
2,934

13,156

12,686

3,161

3,075

4,494

4,394

3,661

3,583

467
934

445
888

22
44

21
42

125
251

121
243

27
54

26
51

43
87

42
83

22
44

20
40

56,020

54,329

3,247

2,997

13,532

13,050

3,242

3,152

4,624

4,519

3,727

3,643

31.8%

34.8%

35.9%

39.8%

30.0%

32.1%

36.1%

35.6%

34.5%

35.3%

29.8%

36.9%

126

124

136

32,117

30,593

1,876

1,768

7,513

7,046

1,935

1,962

2,864

2,789

2,646

2,460

1,474

1,288

278

295

184

164

121

30,643

29,305

1,797

1,704

7,235

6,751

1,863

1,890

2,680

2,625

2,525

2,380

7,643
16
25,179

8,375
10
22,925

535

585

1,600

6,000

5,600

570
1
1,500

770

1,235

465
1
1,500

670

1,365

2,250

2,050

688
1
1,964

1,715

32,838

31,310

1,900

1,820

7,600

7,200

1,966

2,071

2,920

2,820

2,653

2,470

CAPITAL ACCOUNTS
Capital paid in
Surplus
Total liabilities and capital accounts
Ratio of gold certificate reserves to deposit and
F.R. note liabilities combined
Contingent liability on acceptances purchased
FEDERAL RESERVE NOTE STATEMENT
F.R. notes:
Issued to F.R. Bank by Federal Reserve
Less held by issuing Bank, and forwarded
for redemption
F.R. notes, net 1
Collateral held by Federal Reserve Agent for
notes issued to Bank:
Gold certificate account
Eligible paper
U.S. Govt. securities
Total collateral
For notes see end of table.

755

2. STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK, DECEMBER 31, 1962 and 1961—Continued
(In millions of dollars unless otherwise indicated)
Atlanta

Item

1962

Chicago

1961

St. Louis

1962

1961

1962

Minneapolis

1961

1962

Kansas City

1961

1962

San Francisco

Dallas

1961

1962

1961

1962

1961

1,821
139

2,072
107

ASSETS
Gold certificate account
Redemption fund for F.R. notes

...

Total gold certificate reserves
F R. notes of other Banks
Other cash
,_*
^v
ZT

Discounts and advances:
Secured by U.S. Govt. securities
Other

789
71

863
70

2,364
221

2,565
212

576
53

860

933

2,585

2,777

47
22

57
26

44
51

39
58

•

1
1

1
*

1
2

1,757

1,579

5,160

4,907

1,260

1,166

1,762

1,581

5,161

4,910

1,260

1,168

606
13

1,239
24
*
40

306
7

3
11

3,331

3,156

1,329
24
11
46
9,251

287
6

4
17

531
14
*
14

9,087

2,231

2,210

361
28
389

346
27

624
51

665
51

540
40

629

631
48
679

373

675

716

580

587
35
622

1,960

2,179

20
15

22
18

32
10

18
9

15
10

17
11

19
10

29
15

57
42

58
49

•

14
*

7
1

616

1,241

1,316

1,239

1,167

3,995

3,561

628

616

1,255

1,324

1,239

1,168

3,995

3,563

209
4

200
5

360
7

309
13

820
11

•

3
12

4
12

296
13
*
10

920
11

2
6

342
6
*
11

11
36

*
29

1,280

1,226

2,337

2,427

2,186

2,153

7,032

6,709

Acceptances:
Held under repurchase agreement
U.S. Govt. securities:
Held under repurchase agreement
Total loans and securities
Cash items in orocess of c o l l e c t i o n . . . . . . . .
Other assets;
Denominated in foreign currencies
All other
Total assets

628

LIABILITIES
F.R. notes
Deposits:
Member bank reserves
U.S. Treasurer—General account
Foreign
Other
Total deposits
Deferred availability cash items
Other liabilities
Total liabilities

1,791

1,717

5,528

5,362

1,295

1,269

577

579

1,222

1,193

911

869

3,219

2,966

906
28
14
9

892
12
14
5

2,672
86
36
19

2,540
66
37
13

650
32
9
4

628
18
9
2

432
33
6
1

443
16
6
1

826
21
11
5

872
37
12
5

960
35
15
4

932
23
15
3

2,748
88
35
59

2,884
50
32
46

957
502
4

923
442
3

2,813
699
13

2,656
874
9

695
190
3

657
235

472
196
2

466
148
3

863
189
3

926
250
2

1,014
178

973
234

2,930
688
9

3,012
544
7

3,254

3,085

9,053

8,901

2,183

2,164

1,247

1,196

2,277

2,371

2,106

2,078

6,846

6,529

26
51

24
47

66
132

62
124

16
32

15
31

11
22

10
20

20
40

19
37

27
53

25
50

62
124

60
120

3,331

3,156

9,251

9,087

2,231

2,210

1,280

1,226

2,337

2,427

2,186

2,153

7,032

6,709

31.3%

35.3%

31.0%

34.6%

31.6%

35.3%

37.1%

35.7%

32.4%

33.8%

30.1%

33.8%

31.9%

36.5%

1,883

1,792

5,721

5,522

1,368

1,333

672

659

1,268

1,227

970

918

3,401

3,117

182

151

911

869

3,219

2,966

235

800

1,000

CAPITAL ACCOUNTS
Capital paid in

Total liabilities and capital accounts.
Ratio of gold certificate reserves to deposit
and F.R. note liabilities combined
Contingent liability on acceptances purchased for foreign correspondents
FEDERAL RESERVE NOTE
STATEMENT
F.R. notes:
Issued to F.R. Bank by Federal Reserve
Agent and outstanding
Less held by issuing Bank, and forwarded for redemption
F.R. notes, net

Collateral held by Federal Reserve Agent
for notes issued to Bank:
Elidible oaDer
Total collateral

193

160

1,791

1,717

5,528

5,362

1,295

1,269

577

579

1,222

1,193

500

475

1,400

1,500

350

130

160
510

325
7
950

215

550

290
14
1,000

800

705

2,800

2,200

680

670

1,304

1,282

1,015

940

3,600

3,200

1,400

4,500

4,100

1,050

400
2
960

1,900

1,875

5,900

5,600

1,400

1,362

* Less than $500,000.
1
Includes F.R. notes held by U.S. Treasury and by F.R. Banks other than the issuing Bank.

FEDERAL RESERVE HOLDINGS OF U.S. GOVERNMENT SECURITIES
DECEMBER 31, 1960-62
(In thousands of dollars)

Type of issue
and date

Treasury bonds:
1959-62 June.
1959-62 Dec..
1961 Sept
1961 Nov
1962-67
1963 Aug
1963-68
1964 Feb
1964-69 June.
1964-69 Dec..
1965 Feb
1965-70
1966-71
1966 May
1966 Aug
1966 Nov
1967-72 June.
1967-72 Sept..
1967 Nov
1967-72 Dec..
1968 May
1968 Aug
1969 Feb
1969 Oct
1971 Aug
1971 Nov
1972 Feb
1972 Aug
1974 Nov
1975-85
1978-83
1980 Feb
1980 Nov
1985 May
1987-92
1990 Feb
1998 Nov
Total.
Treasury notes:
May 15,1961—B.
Aug. 1,1961—A.
Oct. 1,1961—EO
Feb. 15,1962—A.
Feb. 15,1962—D.
Feb. 15,1962—F.
Apr. 1,1962—EA
May 15,1962—E.
Aug. 15,1962—G.
Nov. 15,1962—C.
Nov. 15,1962—H.
Feb. 15,1963—A.
Feb. 15,1963—E.
May 15,1963—B.
May 15,1963—D.
Nov. 15,1963—C.
May 15,1964—A.
May 15,1964—D.
Aug. 15,1964—B.
Aug. 15,1964—E.
Nov. 15,1964—C.
Apr. 1,1965—EA
May 15,1965—A.
Nov.15,1965—B.
Feb. 15,1966—B.
Aug. 15,1966—A.
Aug. 15,1967—A.
Total

Rate of
interest
(per cent)

Increase or decrease (—)
during—

December 31
1962

1961

1960

1962

395,849
375,765

319,849
693,765
16,500
42,800
56,610

395,849
375,765

107,560
348,500
146,085
90,750
296,740
325,199
407,100
572,540
144,007
210,500
27,850
165,600
52,766
40,052
533,950
79,358
226,200
29,900
13,000
23,450
45,100
44,000
23,500
32,200
33,400
4,250
500
16,300
18,400
20,800
4,000
43,450
9,750

81,110
16,500
143,085
88,250
261,340
315,199
234,600
561,540
140,007
113,500
17,850
109,600
52,766
20,052
496,450
76,958
210,200

4,136,757

3,845,721

122,585
203,890
266,999
20,300
521,490
132,707
7,000

49,266
2,552
58,758

18,450

31,400
4,250
500
7,600
14,900
8,800
41,450
7,750

5,200

' 22,866"
2,543,071

26,450
332,000
3,000
2,500
35,400
10,000

172,500
11,000
4,000
97,000
10,000
56,000
20,000
37,500
2,400
16,000
29,900
13,000
5,000
45,100
44,000
23,500
32,200
2,000
8,700
3,500
12,000
4,000
2,000
2,000
291,036

2,815,565
15,000
5,000

224,566'
173,500
52,500
814,600
188,039
2,796,383
219,000
118,550
1,794,400
2,310,400
15,000
185,100
17,000
114,000
1,605,159
89,150
10,717,281

13,000
11,500
4,756,982
25,000
139,300
3,641,493
10,600
3,228,950
142,500
43,500
30,500
743,600
15,584
2,777,383
201,500
91,550
1,700,900
2,266,400
143,600

Vo',666'

-11,500
-4,756,982
-25,000
-139,300
-3,641,493
-10,600
- 3,228,950
82,000
130,000
22,000
71,000

2,642,733

2,000,000

76,000
-318,000
-16,500
-42,800
24,500
16,500
20,500
88,250
57,450
48,200
214,300
40,050
7,300

113,500
10,850
109,600
3,500
17,500
496,450
18,200
210,200
18,450

31,400
4,250
500
7,600
14,900
3,600
18,650
7,750
1,302,650
2,815,565
-15,000
-5,000

-13,000

4,993,000

1961

][ 72,455
19,000
17,500
27,000
93,500
44,000
15,000
41,500
17,000

13,000

11,500
-236,018
25,000
139,300
3,641,493
10,600
3,228,950
132,500
43,500
30,500
743,600
15,584
134,650
201,500
91,550
1,700,900
266,400
143,600

114,000

1,605,159
89,150
19,983,842

150

12,481,298 -9,266,561

7,502,544

FEDERAL RESERVE HOLDINGS OF U.S. GOVERNMENT SECURITIES
DECEMBER 31, 1960-62—Continued
(In thousands of dollars)

Type of issue
and date

Certificates:
Feb. 15, 1961
May 15, 1961
Aug. 1, 1961
May 15, 1962
Feb. 15, 1963
May 15, 1963
Aug. 15, 1963
Nov. 15, 1963

Rate of
interest
(per cent)

1961

Treasury bills:
Other, due—
Within 3 mos
After 6 mos
Total
Repurchase agreements.
Total holdings
Maturing—
Within 90 days
Over 1 year to 5 years.
Over 5 yrs. to 10 yrs...

1960

1,699,500

1962

1961

3,582,993
34,500
5,442,250

-3,582,993
-34,500
-5,442,250
1,699,500
- i ,699,500
3,402,482
2,393,149
3,731,493
3,654,815

9,059,743

11,482,439 -7,360,243

1,699,500

"3,402,482*
2,393,149
3,731,493
3,654,815
13,181,939

Total

1962

Increase or decrease (—)
during—

December 31

108,000

174,500

65,623

-66,500

108,877

1,666,922
446,735
220,352

2,158,281
692,305
168,000

2,035,400
652,350
146,800

-491,359
-245,570
52,352

122,881
39,955
21,200

2,442,009

3,193,086

2,900,173

-751,077

292,913

342,000

159,000

400,000

183,000

-241,000

30,819,986

28,881,149

27,384,285

1,938,837

1,496,864

5,917,404
11,850,183
10,807,452
2,094,097
150,850

7,196,763
10,453,262
8,737,317
2,227,381
266,426

6,069,016 -1,279,359
1,127,747
9,185,765
1,396,921
1,267,497
10,679,647
2,070,135 -1,942,330
1,178,574
-133,284
1,048,807
271,283
-115,576
-4,857

FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY
CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-62
(In millions of dollars)
Date

Amount

1953—Mar. 18
19
20
21
22*
23
24
25
26
June 5
6
7*
8
9
10

110
104
189
189
189
333
186
63
49
196
196
196
374
491
451

Date

Amount

1954—Jan. 14
15
16
17*
18
19
20
21
22
23
24*
25
26
Mar. 15
16

22
169
169
169
323
424
323
306
283
283
283
203
3
134
190

Amount

358
1953—June 11
12
506
13
506
14* 506
15
999
16 1,172
17
823
18
364
19
992
20
992
21*
992
22
908
23
608
24
296

Date

Amount

1955)
1956 > no transactions
1957)

1958—Mar. 17
18

143
207

1959}
1960 ( n o
19611
transactions

1962J

* Sunday or holiday.
NOTE.—Under authority of Section 14(b) of the Federal Reserve Act. On Nov. 9, 1953, the F.R.
Banks sold directly to the Treasury $500 million of Treasury notes; this is the only use that has been
made under the same
authority to sell U.S. Govt. securities directly to the United States.
Interest rate lA per cent through Dec. 3, 1957, and lA per cent below prevailing discount rate of
F.R. 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. N O holdings on dates not shown.

151

OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1962
(In millions of dollars)
Outright transactions in U.S. Govt. securities by maturity
Treasury bills

Total
Month
Gross
purchases

Gross
sales

January....
February...
March
April
May
June
July
August
September..
October
November..
December..

510
534
1,112
542
1,136
747
1,679
868
804
878
568
451

527
646
380
333
622
702
1,200
339
914
575
322
162

Total....

9,829

6,721

Redemptions

Gross
purchases

474
522
380
333
622
625
1,117
339
914
575
259
53

1,353

6,813

6,211

174
185
70
311
175

1-5 years

Gross
purchases
January....
February...
March
April
May
June
July
August
September..
October
November..
December..
Total

Gross
sales

173
61
156
36
174
185
70
311
175

10
132
54
11
307
152
234
130

Exch.
or
maturity
shifts

42
49

347

1,569

108

608

1,307
—793
81
-334

Repurchase agreements
(U.S. Govt. securities)

Gross
purchases

Gross
sales

Exch.
or
maturity
shifts

Gross
sales
53
124

-1,307
793

70
73

334

39
3
15

21
61

183

1,353

1,085

402

5-10 years

14
23
357
50
127
136
136
165
140
56
246
122

7
10

Gross
Redemp- purtions
chases

Gross
sales

486
380
691
471
702
459
1,310
558
615
755
124
262

173
61
156
36

Others within 1 year

Over 10 years
Exch.
or
maturity
shifts

Gross
purchases

Gross
sales

Exch.
or
maturity
shifts

10
10
-53

28
14
47
25
172
48

-530
79

4
23
5

326

-459

Net change
in U.S.
Govt.
securities

Gross
purchases

Gross
sales

January....
February...
March
April
May
June
July
August
September..
October
November..
December..

278
60
670
942
264
648
58
331
221
533
1,280
831

437
60
545
993
338
478
228
218
334
284
1,274
743

-349
-172
701
121
440
40
124
572
-533
376
252
366

Total....

6,115

5,932

1,939

Bankers' acceptances;

-20
-79
-152

Net change
in U.S. Govt.
securities and
acceptances

Net
outright

Net
repurchases

-3
-2
-2
-6

-3

1
8
-7
1
-2
4
15

26
-24
-1

-355
-174
699
115
436
67
107
564
-533
375
256
439

1,998

NOTE.—Sales, redemptions, and negative figures reduce System holdings; all other figures increase
such holdings. Details may not add to totals because of rounding.

152

6. BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES,
DECEMBER 31, 1962
(In dollars)
Cost
F.R. Bank
or branch

Land

Buildings
(including
vaults)*

Fixed machinery and
equipment

Total

Net
book value

Boston

1,628,132

5,929,169

2,966,116

10,523,417

3,205,436

New York
Annex
Buffalo

5,215,656
592,679
406,069

12,186,897
1,451,569
2,555,197

4,886,521
673,458
1,565,400

22,289,074
2,717,706
4,526,666

4,190,854
662,974
3,559,456

Philadelphia....

1,884,357

4,839,506

2,154,452

8,878,315

3,282,548

Cleveland.
Cincinnati
Pittsburgh

1,295,490
400,891
1,656,418

6,568,271
1,163,869
2,975,831

3,428,397
1,552,730
2,523,357

11,292,158
3,117,490
7,155,606

1,612,652
1,108,364
4,554,081

Richmond
Baltimore
Charlotte

469,944
250,487
117,479

4,164,663
2,009,381
1,069,026

2,483,977
1,068,445
625,121

7,118,584
3,328,313
1,811,626

2,234,181
1,718,213
1,163,772

Atlanta
,
Annex
,
Birmingham...
Jacksonville
Nashville
,
New Orleans...

957,855
93,931
338,917
164,004
592,342
277,078

3,703,718
137,100
1,982,184
1,699,032
1,474,678
762,456

1,701,369
103,867
948,236
708,208
1,016,213
265,700

6,362,942
334,898
3,269,337
2,571,244
3,083,233
1,305,234

6,079,776
259,474
2,607,349
1,549,248
2,560,308
349,210

Chicago
Detroit
St. Louis
Little R o c k . . .
Louisville
Memphis

6,275,490
1,147,734
1,675,780
241,105
700,075
128,542

17,389,287
2,845,585

9,343,255
1,309,732
2,154,782
206,575
1,003,708
167,755

33,008,032
5,303,051

20,830,019
2,976,622

7,069,138
839,291
4,597,030
611,590

1,898,412
425,318
3,894,372
233,558

Minneapolis...
Helena

4,689,718
126,401

4,219,774
65,931

3,521,181
523,041
2,534,917
1,491,117

2,688,921
62,977
1,316,319
86,910
97,589
723,843

7,979,160
205,087

Kansas City...
Denver
Oklahoma City
Omaha

600,521
15,709
545,764
592,271
2 563,025
445,663

5,383,264
1,202,222
3,195,531
2,660,623

1,148,447
735,556
2,750,583
2,107,028

Dallas
El Paso
Houston
San Antonio..

713,302
262,477
695,615
448,596

4,804,886
787,728
1,408,574
1,400,390

3,570,804
393,301
744,758
570,847

9,088,992
1,443,506
2,848,947
2,419,833

7,140,823
1,168,083
2,361,373
1,909,536

San Francisco.
Annex
Los Angeles...
Portland
Salt Lake City.
Seattle

470,481
247,201
777,614
207,380
480,222
274,772

3,783,530
124,000
4,103,844
1,678,512
1,878,238
1,896,541

1,458,028
30,000
1,592,708
649,432
707,575
661,987

5,712,039
401,201
6,474,166
2,535,324
3,066,035
2,833,300

931,733
361,281
3,523,782
1,494,239
2,632,746
1,717,238

Total...

33,851,068

116,498,764

58,213,373

208,563,205

105,224,350

3,238,576
391,611
2,893,247
315,293

OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES
Richmond.
New Orleans
Kansas City
Total

157,953
842,829
3 396,219

157,953
842,829
396,219

1,397,001

1 May include expenditures in construction account pending allocation to appropriate accounts.
Includes cost of building on site of addition.
Includes cost of building on property.

2
3

153

7. EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1962
(In dollars)

Item

Total

Boston

New
York

Cleveland

Philadelphia

Richmond

Atlanta

Chicago

St. Louis

Minneapolis

Kansas
City

Dallas

San
Francisco

CURRENT EARNINGS
Discounts and advances
Acceptances
U.S. Govt. securities...
Foreign currencies
Allother

53,485
366,300 269,378
144,619
238,006 235,404
875,033
4,131,703
211,180 1,059,944
155,057 215,615
307,682
1,256,123
1,256,123
1,039,308,345 53,177,710 258,585,831 58,879,903 87,613,782 67,479,038 56,157,918 175,591,640 41,509,385 21,999,161 45,468,307 42,036,531 130,809,139
80,555
147,100 196,133
119,079
185,626
486,831
3,502,378
164,612
959,652 203,138 329,224
157,607
472,821
11,501
10,376
30,060
18,072
22,166
25,104
309,786
15,310
13,388
44,435
32,536
69,855
16,983

Total

1,048,508,335 53,568,812 261,931,405 59,255,081 88,180,787 67,888,039 56,604,052 176,997,939 41,783,459 22,144,702 46,011,767 42,520,114 131,622,178
CURRENT EXPENSES

Salaries:
Officers
Employees
Retirement and other benefits.
Fees—Directors and others
Traveling expenses
Postage and expressage
Telephone and telegraph
Printing and supplies
Insurance
Taxes on real estate
Depreciation (building)
Light, heat, power, and v/ater.
Repairs and alterations
Rent
Furniture and equipment:
Purch3.se
-. i
Rentals
All other
Inter-Bank expenses
Subtotal
F.R. currency
Assessment for expenses of
Board of Governors
Total.

566,717 407,250 541,427 447,369
7,062,662
627,475
401,138 1,370,883 475,632 593,547 535,840 548,6i0
546,774
95,592,862 5,936,672 22,400,775 4,886,087 7,919,279 6,265,040 5,673,421 13,993,493 5,226,166 3,144,641 5,007,635 4,081,128 11,058,525
557,993 939,235 764,874 1,948,728
16,649,188 1,010,221 3,679,983 876,069 1,395,365 1,154,385 1,052,408 2,346,374 923,553
37,361
49,116
26,850
36,895
35,323
545,108
63,203
87,318
75,872
24,234
37,977
20,734
50,225
136,744
135,843
113,726
132,333
2,073,512
181,136
178,036
242,465
329,803
94,334
154,912
120,532
253,648
19,941,300 1,672,284 2,697,255 969,838 1,606,532 1,840,828 1,718,292 2,726,481 1,095,003 740,231 1,255,778 1,001,622 2,617,156
60,483
102,684
119,523
128,943
183,366
95,457
1,758,454
117,891
200,642
93,988
386,033
77,755
191,689
551,683 1,245,726 439,324 244,194 483,907 365,136
7,760,954
527,909
577,681 1,584,215 446,238 574,959
719,982
20,694
28,975
33,233
34,901
10,285
357,332
36,611
30,692
36,415
28,850
40,222
14,630
41,824
271,074
181,247 334,379 203,526 269,887
4,742,684
749,888
645,461
841,790 153,972 396,539 201,031
493,890
168,853 692,696
521,939 1,323,687 239,228
344,037
6,451,769
413,761
488,050 270,528 950,616 546,369
492,005
145,864
129,491
137,127
137,417
95,074
1,890,550
172,893
159,618
293,969
118,902
255,725
100,407
144,063
80,102
47,236
53,084
148,135
1,462,343
171,597
93,464
76,745
332,523
33,579
236,762 110,447
78,669
5,044
1,965
1,509
119,550
29,676
10,042
1,571
4,962
6,384
6,648
7,768
37,038
6,943
4.341.484
8^035346
2,847,248

109.530
75^305
115,157
47,935

933.445
978^60
654,562
-689,060

421.541
449,148
99,847
58,616

450.403
614;211
443,419
95,275

413.863
472;075
113,206
-13,820

499.895
512,569
141,434
57,841

227.881
1,395,464
490,052
141,474

274.589
323,724
103,888
36,603

87,259
281,345
102,147
24,008

320,708
524,656
172,517
45,125

89,979
448,779
212,780
58,244

512,391
1,278,010
198,239
137,755

181,632,542 12,108,692 36,270,959 9,535,971 15,824,204 12,659,048 12,255,033 26,460,163 9,895,165 6,734,047 10,185,411 8,933,333 20,770,516
175,781
8,030,028
820,290 1,250,370 347,608 245,504 457,249
902,342
557,926 1,544,290 434,062 610,137 684,469
6,654,900

315,200

1,817,000

383,300

623,300

301,900

355,900

927,100

228,000

152,100

280,200

374,700

896,200

196,317,470 |12,981,818 39,632,249 10,353,333 17,057,641113,645,417 13,431,223 28,637,633 10,470,773 7,131,651 10,922,860 9,483,814 22,569,058

Less reimbursement for certain
fiscal agency and other expenses
Net expenses.

II
20,181,336
176,136,13

1,128,939

3,516,910

952,464 1,913,784 1,117,061 1,401,607

3,806,210 1,252,806

634,389 1,500,994

11,852,879 36,115,339 9,400,869 15,143,857 12,528,356 12,029,616 24,831,423 9,217,967 6,497,262! 9,421,866

936,767
8,547,047

2,019,405
20,549,653

PROFIT AND LOSS
Current net earnings
Additions to current net
earnings:
Profits on sales of U.S.
Govt. securities (net)....
All other
Total additions.

872,372,199 41,715,933 225,816,066 49,854,212 73,036,931 55,359,683 44,574,436 152,166,516 32,565,491 15,647,439 36,589,901 33,973,067 111,072,524

1,990,257
699,764

102,782
42,533

492,364
119,711

110,867
35,128

167,498
50,035

130,618
32,588

107,685
20,488

336,027
130,050

79,230
16,637

41,395
20,958

86,574
49,429

80,701
129,938

254,516
52,269

163,206

128,173

466,077

95,867

62,353

136,003

210,640

306,785

2,690,022

145,315

612,075

145,995

217,533

Deductions from current net
earnings

2,745,800

208,816

408,192

84,103

177,976

66,024 1,111,068

226,167

86,140

34,417

62,605

82,713

197,579

Net deductions from (—) or
additions to current net
earnings

-55,779

-63,501

203,884

61,891

39,557

97,181 -982,895

239,910

9,727

27,936

73,398

127,927

109,206

Net earnings before payments
to Treasury

872,316,422 41,652,432 226,019,950 49,916! 103 73,076,488 55,456,865 43,591,542 152,406,426 32,575,218 15,675,375 36,663,299 34,100,994 111,181,730

Dividends paid
Paid Treasury (interest on F.R.
notes)

799,365,981 37,797,780 210,885,742 45,863,269 66,832,373 50,222,987 381,318,568
139,999,295 30,331,971 13,564,350 33,264,791 28,872,781 103,412,074
:

Transferred to surplus.
Surplus, January 1

45,538,200 2,558,100
888,313,200

Surplus, December 31.

933,851,400 44,670,100 250,711,100 53,769,400 86,968,400 44,102,300 51,244,600 132,072,500 31,706,300 21,709,200 39,625,000!53,464,000 123,808,500

27,412,241

,296,552

7,419,208 1,565,035 2,547,615

3,849,832

940,346

634,325 1,157,408 1,573,113

3,673,856

7,715,000 2,487,800 3,696,500 3,960,900 3,791,000 8,557,300 1,302,900 1,476,700 2,241,100 3,655,100 4,095,800
1,281,600
123,515,200 30,403^400 20,232,500 37,383^900 49,808^900 119,712,700

NOTE.—Details may not add to totals because of rounding.

1,272,977 1,481,974

EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-62
(In dollars)

Period or Bank

Current
earnings

Current
expenses

Net earnings
before payments to
Treasury l

Dividends
paid

Franchise tax
paid to
Treasury

Paid to
Treasury
(Sec. 13b)

Paid to
Treasury
(interest o n
F.R. notes)

Transferred
to surplus
(Sec. 13b)

Transferred
to surplus
(Sec. 7)

All F.R. Banks,
by years:
1914-15
1916.
1917
1918
1919

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

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

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

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

2,703,894

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

1920
1921
1922.
1923
1924.

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

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

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

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

1925.
1926
1927.
1928
1929

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

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

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

1930
1931.
1932
1933
1934

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

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

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
-60,323

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

1935
1936.
1937
1938
1939

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

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

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

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

297,667
227,448
176,625
119,524
24.579

27,695
102,880
67,304
-419,140
-425.653

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

1940
1941
1942
1943
1944

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

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

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

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

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

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

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

1945
1946
1947
1948
1949

142,209,546
150,385,033
158,655,566
304,160,818
316,536,930

48,717,271
57,235,107
65,392,975
72,710,188
77,477,676

92,662,268
92,523,935
95,235,592
197,132,683
226,936,980

10,182,851
10,962,160
11,523,047
11,919,809
12,329,373

247,659
67,054
35,605

262,133
27,708
86,772

81,969,625
81,467,013
8,366,350
18,522,518
21,461,770

1,134,234

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

1960.
1961.
1962.

1,103,385,257
941,648,170
1,048,508,335

153,882,275
161,274,575
176,136,134

963,377,684
783,855,223
872,316,422

23,948,225
25,569,541
27,412,241

896,816,359
687,393,382
799,365,981

42,613,100
70,892,300
45,538,200
-3,657 2 1,062,523,602

11,270,435,343

2,773,236,098

8,555,626,426

530,135,906

149,138,300

2,188,893

6,811,643,382

Aggregate for each
F.R. Bank, 1914-62:
Boston
New York
Philadelphia
Cleveland

661,938,955
2,863,366,261
707,499,474
996,917,511

195,423,962
607,111,677
178,354,582
252,200,518

471,796,118
2,275,930,043
536,780,443
748,306,657

32,075,090
169,749,591
40,749,398
51,701,873

7,111,395
68,006,262
5,558,901
4,842,447

280,843
369,116
722,406
82,930

377,428,450
1,750,270,815
421,359,455
591,487,120

135,411
-433,413
290,661
-9,906

54,764,925
287,967,671
68,099,622
100,202,193

Richmond.
Atlanta...
Chicago...
St. Louis..

691,250,302
592,933,985
1,820,976,862
493,929,249

185,870,269
162,345,692
390,529,498
151,912,859

509,496,294
430,605,320
1,435,038,705
342,847,450

23,092,169
22,113,228
66,637,347
18,227,822

6,200,189
8,950,561
25,313,526
2,755,629

172,493
79,264
151,045
7,464

430,120,850
342,945,634
1,195,523,851
285,057,122

-71,517
5,491
11,682
-26,515

49,982,108
56,511,140
147,401,254
36,825,928

Minneapolis..
Kansas City..
Dallas
San Francisco.

292,087,873
507,695,751
455,527,352
1,186,311,769

95,695,466
148,504,082
128,769,866
276,517,629

198,812,568
361,331,472
329,047,576
915,633,775

12,373,640
19,450,824
22,707,040
51,257,879

5,202,900
6,939,100
560,049
7,697,341

55,615
64,213
102,083
101,421

155,529,130
291,121,058
247,881,589
722,918,307

64,874
-8,674
55,337
-17,089

25,586,413
43,764,950
57,741,478
133,675,917

Total

11,270,435,343

2,773,236,098

8,555,626,426

530,135,906

149,138,300

2,188,893

6,811,643,382

-3,657

1,062,523,602

Total 1914-62.

1
Current earnings less current expenses, plus and minus profit and loss additions
and deductions.
2
The $1,062,523,602 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 $933,851,400 on Dec. 31, 1962.
NOTE.—Details may not add to totals because of rounding.

NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF
FEDERAL RESERVE BANKS, DECEMBER 31, 1962
Federal Reserve
Bank (including
branches)

President

Other officers

Employees1

Total

Annual
salary

Number

Annual
salaries

$ 33,000
70,000
35,000

24
69
29

$ 365,000
1,324,000
440,000

1,409
3,984
987

$ 5,848,320
22,115,819
4,720,518

1,434
4,054
1,017

$ 6,246,320
23,509,819
5,195,518

Cleveland
Richmond
Atlanta

40,000
35,000
35,000

35
35
39

525,000
503,500
524,050

1,528
1,410
1,321

7,680,933
6,294,973
5,519,180

1,564
1,446
1,361

8,245,933
6,833,473
6,078,230

Chicago
St. Louis
Minneapolis

50,000
35,000
35,000

40
37
26

596,500
548,500
372,250

2,974
1,142
726

13,448,206
5,014,344
3,081,250

3,015
1,180
753

14,094,706
5,597,844
3,488,500

Kansas City
Dallas
San Francisco

32,500
35,000
35,000

35
30
41

490,700
405,950
532,250

1,173
962
2,312

4,935,327
4,085,333
10,264,005

1,209
993
2,354

5,458,527
4,526,283
10,831,255

$470,500

440

$6,627,700

19,928

$93,008,208

20,380

$100,106,408

Boston
New York
Philadelphia

Total

Number

Annual
salaries

i Includes 997 part-time employees.

10. VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL
RESERVE BANKS, 1959-62
(Number in thousands; amounts in thousands of dollars)
Operation

1962

1961

1960

1959

NUMBER OF PIECES
HANDLED 1
Discounts and advances
Currency received and counted
Coin received and counted
Checks handled:
U.S. Govt. checks
Postal money orders
All other 2
Collection items handled:
U.S. Govt. coupons paid
All other
Issues, redemptions, and exchanges
of U.S. Govt. securities
Transfers of funds

7
4,734,419
10,213,309

7
4,618,346
10,276,927

19
4,746,665
9,767,544

26
4,631,081
9,929,912

3,873,341

443,271
247,400

430,829
259,209
3,630,936

407,333
270,307
3,419,093

393,860
279,939
3,257,839

15,879
25,327

16,431
23,144

16,357
21,513

13,915
20,853

198,123
3,318

192,366
3,038

197,825
2,918

196,063
2,695

19,685,050
31,621,061
1,140,009

14,657,545
30,670,620
1,133,470

58,057,685
31,553,482
1,095,870

105,058,505
30,730,461
1,022,660

125,431,359
4,701,516
1,283,430,670

115,009,063
4,860,182
1,198,461,186

105,212,842
5,029,890
1,154,120,907

106,724,118
5,078,641
1,130,235,860

4,755,819
6,940,394

4,717,259
6,553,424

4,798,446
5,793,218

3,866,402
5,838,199

639,755,488
3,168,359,313

560,263,435
2,706,716,007

527,444,784
2,428,083,100

545,489,154
1,882,069,626

AMOUNTS HANDLED
Discounts and advances
Currency received and counted....
Coin received and counted
Checks handled:
U.S. Govt. checks
Postal money orders
All other 2
Collection items handled:
U.S. Govt. coupons paid
All other
Issues, redemptions, and exchanges
of U.S. Govt. securities
Transfers of funds
1
2

Packaged items handled as a single item are counted as one piece.
Exclusive of checks drawn on the F.R. Banks.

158

11.

FEDERAL RESERVE BANK DISCOUNT RATES,
DECEMBER 31, 1962
(Per cent per annum)
Discounts for and advances to member banks

Federal Reserve
Bank

Advances and
discounts under
Sees. 13 and 13a *

Advances to all others
under last par. Sec. 13 3
Advances under
Sec. 10(b) 2

Boston
New Y o r k . . .
Philadelphia..
Cleveland....
Richmond
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
San Francisco

Advances secured by U.S. Govt. securities and discounts of and advances secured by eligible
paper. Rates shown also apply to advances secured by securities of Federal intermediate credit banks
maturing within 6 months. Maximum maturity: 90 days except that discounts of certain bankers'
acceptances and of agricultural paper may have maturities not over 6 months and 9 months, respectively,
and advances
secured by FICB securities are limited to 15 days.
2
Advances secured to the satisfaction of the F.R. Bank. Maximum maturity: 4 months.
3 Advances to individuals, partnerships, or corporations other than member banks secured by
U.S. Govt. direct securities. Maximum maturity: 90 days.

12.

MAXIMUM INTEREST RATES PAYABLE ON TIME AND SAVINGS DEPOSITS
(Per cent per annum)
Effective date
Type of deposit
Nov. 1,
1933

Feb. 1,
1935

Jan. 1,
1936

Jan. 1,
1962

Jan. 1,
1957

Savings deposits held for—
1 year or more
Less than 1 year

} ^

2*4

1 4
X Vh

Postal savings deposits held for—
1 year or more
Less than 1 year

} ^

2%
2
1

3
2%

Other time deposits payable in— 1
1 year or more
6 months-1 year
90 days-6 months
Less than 90 days

> ;

2V>

It
1

* For exceptions see p. 129.
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.

159

13. MARGIN REQUIREMENTS
(Per cent of market value)
Effective date
Regulation

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. 5,
1945

July 5,
1945

Jan. 21, Feb. 1,
1946
1947

50
50

75
75

100
100

75
75

50
50

75
75

50
50

100

Mar. 30, Jan. 17, Feb. 20,
1949
1951
1953

Effective date
Jan. 4,
1955
Regulation T:
For extension of credit by
brokers and dealers on
listed securities
For short sales
Regulation U:
For loans by banks on stocks..

Apr. 23, Jan. 16, Aug. 5, Oct. 16, July 28, July 10,
1958
1955
1960
1958
1958
1962

60
60

70
70

50
50

70
70

90
90

70
70

50
50

NOTE.—Regulations T and U, prescribed in accordance with Securities Exchange Act of 1934,
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 extension; margin requirements are
the difference between the market value (100%) and the maximum loan value. Changes on Feb. 20,
1953, and Jan. 4, 1955, were effective after close of business on these dates.
For earlier data, see Banking and Monetary Statistics, Table 145, p. 504.

14. FEES AND RATES UNDER REGULATION V ON LOANS
GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950,
DECEMBER 31, 1962
Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan

Percentage of loan guaranteed

70 or less
75
80
85
90
95
Over 95.

Guarantee fee
(percentage of
interest payable
by borrower)

Percentage of
any commitment
fee charged
borrower

10
15
20
25
30
35
40-50

Maximum Rates Financing Institution May Charge Borrower
6l

per cent per annum
/i per cent per annum

Interest rate
Commitment rate.

160

15. MEMBER BANK RESERVE REQUIREMENTS
(Per cent of deposits)
Net demand deposits 1
Effective date

1917—June
1936—Aug.
1937—Mar.
May
1938_Apr.
1941_Nov.
1942_Aug.
Sept.
Oct.
1948—Feb.
June
Sept
1949

21
16
1
1
16
1
20
14
3
27
11
16
24
May 1..

Central
reserve
city banks 2
13
19Vi
22^4
26
2234
26
24
22
20
22
24

10
15

June 30
July 1
Aueg 1

n:::::::::::::

16
18
25
Sept. 1
1951—Jan. 11
16
25
Feb 1
1953 July 1
9
1954 June 16
24
July 29
Aug 1
1958—Feb. 27
Mar 1
20......
Aor 1
p
I960—Sept.
Nov.
Dec.
1962 Oct.
Nov.

7
10i/i

12
14

Central
reserve and
reserve city
banks 2

Country
banks

16
15
21
20
191/2

19
18i/ 2
18
19

Country
banks

\fA

23i/2

23
24

21
20

191/2

171/2

14
13

71/2
71/2
7
7
6
6
5

14
13
5
5
12

n:::::::::::::

24
1
24.
1
25
1

161/i

In effect Jan. 1, 1963

Reserve
city banks

Time deposits

18
17i/i

11%
11

I6I/2
12
4
4
16&

Present legal requirements:
3 10
3 22

7
14

3
6

1 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, 1943June2 30, 1947).
Authority of the Board of Governors to classify or reclassify cities as central reserve cities was
terminated effective July 28, 1962.
3 From Aug. 23, 1935, 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.
NOTE.—All required reserves were held on deposit with Federal Reserve Banks, June 21, 1917,
until late 1959. Since then, member banks have
also been allowed to count vault cash as reserves, as
follows: Country banks—in excess of 4 and 2l/% per cent of net demand deposits effective Dec. 1, 1959,
and Aug. 25, 1960, respectively. Central reserve city and reserve city banks—in excess of 2 and 1 per
cent effective Dec. 3, 1959, and Sept. 1, 1960, respectively. Effective Nov. 24, 1960, all vault cash.

161

16. MEMBER BANK RESERVES, FEDERAL RESERVE BANK CREDIT, AND RELATED ITEMS — END OF YEAR 1918-62 AND END OF MONTH 1962
(In millions of dollars)
Factors absorbing reserve funds

Factors supplying reserve funds
F.R. Bank credit outstanding
Period

U.S. Govt. securities

Total

Discounts
Repur- and
adBought chase
outagree- vances
right
ments

Float

All
other i

Total

Gold
stock 2

Treasury
currency
outstanding 3

Currency
in
circulation

Treasury
cash
hold-4
ings

Deposits,
other than member
bank reserves,
with F.R. Banks

Treas- Forury eign

Oth-

Other
F.R.
accounts 5

Member bank reserves

With
F.R.
Banks

Ex-7

51
68

1,654

1,884
2,161

14
59

2,212
2,194
2,487
2,389
2,355

2,256
2,250
2,424
2,430
2,428

-44
-56
63
-41
-73

375
354
355
360
241

2,471
1,961
2,509
2,729
4,096

2,375
1,994
1,933
1,870
2,282

96
-33
576
859
1,814

226
160
235
242
256

253
261
263
260
251

5,387
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

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

239
300

1,766
2,215

199
201

294
575

2,498
3,292

2,873
2,707

1,795
1,707

4,951
5,091

288
385

51
31

96
73

25
28

118
208

1,636
1,890

1920.
1921.
1922.
1923.
1924.

287
234
436
134
540

287
234
436
80
536

54
4

2,687
1,144
618
723
320

119
40
78
27
52

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

1925.
1926.
1927.
1928.
1929.

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

1930.
1931.
1932.
1933.
1934.

729
817
1,855
2,437
2,430

686
775
1,851
2,435
2,430

43
42
4
2

251
638
235
98
7

21
20
14
15
5

372
378
41
137
21

1,373
1,853
2,145
2,688
2,463

4,306
4,173
4,226
4,036
8,238

2,027
2,035
2,204
2,303
2,511

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

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

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

i0ti25
11,258
12,760
14,512
17,644

2,476
2,532
2,637
2,798
2,963

5,852
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

1940.
1941.
1942.
1943.
1944.

2,184
2,254
6,189
11,543
18,846

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 1,133
867
774
799
793
579 1,360
440 1,204

Required 7

1,585
1,822

1918.
1919.

6
5
80

Currency
and
coin 6

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

977
2,287
393
2,272
870
1,336
1,123
1,325
821
1,312

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
808

3
5
4
2
1

22,216
25,009
25,825
26,880
25,885

22,706
22,695
23,187
22,030
21,713

4,636
4,709
4,812
4,894
4,985

27,741
29,206
30,433
30,781
30,509

1,293
1,270
1,270
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
26,607

394
305
519
95
41

108
50
55
64
458

1,585
1,665
1,424
1,296
1,590

29
70
66
49
75

26,507
26,699
25,784
27,755
28,771

21,690
21,949
22,781
20,534
19,456

5,008
5,066
5,146
5,234
5,311

31,158
31,790
31,834
32,193
32,591

767
775
761
683
391

394
441
481
358
504

402
322
356
272
345

554
426
246
391
694

925
901
998
1,122
841

19,005
19,059
19,034
18,504
18,174

310

18,903
19,089
19,091
18,574
18,619

102
-30
-57
-70
-135

27,384
28,881

26,984
28,722

400
159

33
130

1,847
2,300

74
51

29,338
31,362

17,767
16,889

5,398
5,585

32,869
33,918

377
422

485
465

217
279

533
320

941
1,044

17,081
17,387

2,544
2,823

18,988
20,114

637
96

28,532
28,360
29,061
29,182
29,622
29,663
29,786
30,358
29,825
30,201
30,454
30,820

28,532
28,360
28,936
29,108
29,622
29,493
29,786
30,246
29,825
29,953
30,200
30,478

129
139
115
120
131
76
73
101
48
219
71
38

906
1,385
1,006
1,303
919
1,462
1,138
1,124
1,781
1,171
1,885
2,903

45
44
42
36
33
60
43
35
36
34
38
110

29,612
29,928
30,224
30,641
30,705
31,261
31,040
31,618
31,690
31,625
32,448
33,871

16,815
16,790
16,608
16,495
16,434
16,435
16,147
16,098
16,067
15,978
15,977
15,978

5,584
5,587
5,590
5,592
5,596
5,598
5,603
5,548
5,551
5,554
5,557
5,567

32,774
32,880
33,018
33,159
33,518
33,770
33,869
33,932
33,893
34,109
34,782
35,338

446
425
425
404
398
379
404
394
390
399
381
380

362
449
403
569
526
612
390
478
400
513
585
597

229
204
221
230
223
334
248
168
229
182
203
247

286
389
356
373
376
293
355
311
318
309
305
393

1,044
1,151
1,024
955
1,080
700
642
871
756
827
1,078
1,007

16,872

3,160
3,073
2,353
2,548
3,090
2,459
3,056
3,075
2,521
3,302
3,346
P 3,234

19,276
19,116
19,057
19,296
19,202
19,753
19,391
19,492
19,749
19,024
19,202
19,935

756
765
268
287
502
-88
550
693
93
1,099
792

1945...
1946...
1947...
1948...
1949...

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...
1959...

24,785
24,915
24,238
26,347
26,648

I960...,
1961...,
1962—
Jan...
Feb..,
Mar.,
Apr.,
May..
June.,
July..
Aug..
Sept..
Oct...
Nov..
Dec.

125
74
170
"ill
248
254
342

p Preliminary.
1 Principally acceptances and industrial loans; authority for industrial loans expired
Aug. 21, 1959.
2 Before Jan. 30, 1934, included gold held by F.R. 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, F.R. 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 F.R.
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

16,972
17,035
16,614
17,206
16,885
17,110
17,321
16,821
16,648
17,454

P753

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,5 United States notes, F.R. notes, F.R. Bank notes, and national bank notes.
The total of F.R. Bank capital paid in, surplus, other capital accounts, and other
liabilities and accrued dividends, less the sum of bank premises and other assets.
<• Part allowed as reserves Dec. 1, 1959-Nov. 23, 1960; all allowed thereafter.
7 These figures are estimated through 1958. Before 1929 available only on call dates
(in 1920 and 1922, the call dates were Dec. 29).
NOTE.—For description of figures and discussion of their significance, see "Member
Bank Reserves and Related Items," Section 10 of Supplement to Banking and Monetary
Statistics, Jan. 1962.

17.

PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF COMMERCIAL AND MUTUAL SAVINGS BANKS, BY CLASS OF BANK,
DECEMBER 28, 1962, AND DECEMBER 30, 1961
(In millions of dollars)
Commercial banks
All
banks

Item

Member banks

Insured
nonmember

Total i
Total

11 National
II

Mutual savings banks

Noninsured

State

Total

Insured

Noninsured

December 28, 19622
Loans and investments, total
Loans
Investments
U.S. Govt. securities....
Other securities
Cash assets

280,110
172,820
107,290
72,270
35,020
54,500

235,660
140,170
95,490
66,180
29,310
53,620

195,700
118,630
77,070
52,980
24,090
47,420

127,250
75,540
51,710
35,670
16,040
29,680

68,450
43,090
25,360
17,310
8,050
17,740

38,210
20,660
17,550
12,760
4,790
5,970

1,750
880
870
440
430
230

44,450
32,650
11,800
6,090
5,710
880

38,450
28,730
9,720
4,530
5,190
770

6,000
3,920
2,080
1,560
520
110

Deposits, total
Interbank
Other demand
Other time
Total capital accounts

303,220
16,540
147,670
139,010
28,020

261,660
16,540
147,610
97,510
24,080

219,460
15,670
124,080
79,710
19,850

142,820
9,280
79,810
53,730
12,750

76,640
6,390
44,270
25,980
7,100

40,790
560
22,830
17,400
3,950

1,410
310
700
400
280

41,560

35,750

5,810

60
41,500
3,940

60
35,690
3,340

5,810
600

13,940

13,429

6,049

4,505

1,544

7,072

308

511

331

180

Number of banks

December 30, 1961

Loans and investments, total
Loans
Investments
U.S. Govt. securities
Other securities
Cash assets

256,700
154,318
102,382
72,715
29,667
57,368

215,441
124,925
90,516
66,578
23,937
56,432

179,599
106,232
73,366
54,058
19,308
49,579

116,402
67,309
49,094
36,088
11 QQg
31^078

63,196
38,924
24,273
17,971
6 302

34,320
18,123
16,197
11,972
4,225
6,508

1,536
577
959
553
406
346

41,259
29,393
11,866
6,136
5,730
936

35,660
25,812
9,848
4,690
5,!58
828

5,600
3,581
2,018
1,446
572
108

Deposits, total
Interbank
Other demand
Other time
Total capital accounts

287,176
18,396
148,131
120,648
26,227

248,689
18,395
147,865
82,429
22,459

209,630
17,498
124,975
67,157
18,638

135,511
10,464
79,606
45,441
11,875

74,119
7,034
45,369
21,716
6,763

37,560
573
22,009
14,979
3,452

1,513
324
881
307
370

38,487
1
266
38,220
3,768

33,400
1
262
33,137
3,191

5,087

13,946

13,432

6,113

4,513

1,600

6,997

323

514

330

184

Number of banks

„

i Excludes 1 member mutual savings bank in 1961.

2 Estimated.

4
5,083
577

NOTE.—All banks in the United States.

18.

MEMBER BANK INCOME, EXPENSES, AND DIVIDENDS, BY CLASS
OF BANK, 1962 AND 1961
Reserve city banks
Total

New York
Cityi

Item
1962

1961

1962

1961

City of
Chicago *
1962

Country
banks

Other

1961

1962

1961

1962

1961

In millions of dollars
Revenue
10,129 9,217 1,644 1,492
On U.S. Govt.
1,682 1,537
228
securities
215
On other securities...,
628
106
513
81
On loans
6,420 5,870 1,017
918
293
All other
277
1,398 1,297

406

354 3,873 3,583 4,206 3,788

65
33
250
57

60
590
798
711
551
210
23
169
279
241
221 2,534 2,365 2,620 2,365
498
539
50
509
471

Expenses
Salaries and wages
Interest on deposits...,
All other
,

7,030 6,074
2,496 2,363
2,359 1,720
2,175 1,990

1,010
385
277
347

848
360
188
300

255
85
95
76

188 2,690 2,334 3,075 2,703
949
75
915 1,076 1,013
947
49
679 1,040
804
793
64
740
959
886

Net current earnings
before income taxes....

3,098 3,143

634

643

151

166 1,183 1,248 1,131 1,085

Recoveries and profits 32 . .
Losses and charge-offs . ,
Net increase (or decrease,
+ ) in valuation
reserves
Net income before
related taxes
Taxes on net income....
Net income
Cash dividends declared 4

578
412

96
64

50
11

229
161

204
176

347

115

100

2,793 2,962
1,104 1,250
1,689 1,712
793
828

575
241
334
191

593
257
336
182

133
49
83
33

155 1,059 1,201 1,026 1,013
76
448
533
366
384
79
611
668
661
629
31
331
321
272
257

In per cent
Ratios:
Net current earnings
before income taxes
toAverage total capital
accounts
Average total assets.
Net income to—
Average total capital
accounts
Average total assets.
Average return on U.S.
Govt. securities
Average return on loans.

16.2 17.5
1.34 1.46

16.9 17.8
1.52 1.66

16.9
1.49

19.8 16.6
1.82 1.33

18.9 15.5
1.51 1.25

8.9
.73

9.6
.80

8.9
.80

9.3
.87

9.3
.82

9.4
.86

8.6 10.1
.68
.81

9.0
.73

3.21
5.91

3.05
5.84

3.15
5.17

2.93
5.07

3.17
5.34

3.11
5.06

3.15
5.85

3.28
6.40

3.05
5.88

15.9
1.29
9.2
.75
3.08
6.26

1
Banks in these cities were reclassified from central reserve city to reserve city banks during 1962.
In addition, current figures include 3 banks in N.Y.C. and 3 in the city of Chicago not included in
1961.2 These banks had about $7.5 million in net current earnings in 1962.
Includes recoveries credited to valuation reserves.
3 includes losses charged to valuation reserves.
4
Includes interest on capital notes and debentures.
NOTE.—Data for 1962 are preliminary; final figures will be published later in the F. R. Bull.

165

19. CHANGES IN NUMBER OF BANKING OFFICES IN THE
UNITED STATES DURING 1962 1
Commercial banks (incl. stock savings
banks and nondeposit trust companies)
Type of office and change

All
banks
Total

Banks, Dec. 31,1961

13,946

Changes during 1962
183
New banks 3
-2
Suspensions
Reopenings T T ,
1
T
Consolidations and absorptions:
Banksconverted into branches - 1 6 7
-18
Other
-4
Voluntary liquidations 4
—1
Interclass changes:
Nonmember to State member
State member to nonmember
National to State
State to national

Nonmember

Member
National 1 State 2

Mutual
savings
banks

Insured

Noninsured 2

Insured

Noninsured

330

184

-1

-2

13,432

4,513

1,600

6,997

323

183
-2
1

103

13
-2
1

-164
-18
-4
-1

-72
-8

-31
-5

-59
-4
-1

5
-26

-5
25
6
-8
18

-2
-18

-6
13

-3

-2
—1
-3
-1

-10

-56

-15

-4

Number of banks Dec. 31,1962 13,938

13,427

4,503

1,544

7,072

308

331

180

Branches and additional offices,
Dec. 31,1961
11,620

11,077

5,827

2,826

2,380

427

116

918
167
-50

874
164
-47
991

155
34
-9
-25
155

225
33
-11
-13
234

1,035

486
97
-27
40
596

-2
6

38
1
-1
1
39

6
2
-2
-1
5

Number of branches and additional offices, Dec. 31, 1962.. 12,655

12,068

6,423

2,981

2,614

466

111

276

217

8
-7

6
-7
1

277

Net change

Changes during 1962
De novo •
Interclass changes—net °"

Banking facilities, Dec. 31,
1961 7
Changes during 1962
Established
Interclass chances
Net change
Number of banking facilities,
Dec 31 1962

217

2
-1
-1

Includes a national bank (2 branches) in the Virgin Islands; other banks or branches located in
the possessions
are excluded.
2
State member bank figures include and noninsured bank figures exclude 2 noninsured trust cos.
without
deposits.
3
Exclusive of new banks organized to succeed operating banks.
4
Exclusive of liquidations incident to the succession, conversion, or absorption of banks.
5
Ceased banking operations.
6 For details see Feb. 1963 F. R. Bull, p. 266.
7
Provided at military and other Govt. establishments through arrangements made by the Treasury.

166

20. NUMBER OF BANKING OFFICES ON AND NOT ON FEDERAL RESERVE
PAR LIST, DECEMBER 31, 1962
On par list

Total
F. R. district,
State, or
other area

Member

Total

Not on par list
(nonmember)

Nonmember

Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches
& offices
& offices
& offices
& offices
& offices
DISTRICT
391
547
592
883
763
864
2,499
1,200
710
1,796
1,104
375

886
2,180
807
1,134
1,406
599
1,287
364
114
155
180
3,015

253
451
456
527
421
430
1,005
474
470
764
632
162

138
696
96
1,917
136
631
356
982
342
909
434
494
806 1,494
726
242
240
64
110 1,032
472
117
213
2,699

12,459 11,724

12,127

6,045

9,667 5,679

886
2,180
807
1,134
1,535
662
1,287
445
161
155
192
3,015

391
Boston • . .
New Y o r k . . .
547
Philadelphia .
592
Cleveland
883
Richmond...
881
Atlanta
1,405
Chicago
2,499
St. Louis
1,476
Minneapolis . 1,312
Kansas City . 1,799
Dallas
1,179
377
San Francisco
Total.... 13,341

190
263
176
152
497
105
481
122
50
45
63
316

118
541

129
63

276
602
3
75
2

81
47

2,460 1,617

332

STATE
Alabama....
Alaska . . .
Arizona
Arkansas....
California...
Colorado...
Connecticut..
Delaware
District of
Columbia..
Florida

239
12
10
241
123
174
62
19

108
43
203
67
1,964
7
231
56

158
10
10
137
123
174
62
19

105
43
203
45
1,964
7
231
56

94
5
4
78
62
105
29
6

96
35
164
39
1,821
6
183
28

64
5
6
59
61
69
33
13

9
8
39
6
143
1
48
28

12
337

72
16

12
297

72
15

9
140

65
12

3
157

7
3

Georgia.
Hawaii . . .
Idaho

419
7
31
996
438
671
593
351
196
44

141
105
93
4
366
194
38
184
203
152

144
7
31
995
438
671
593
351
93
44

133
105
93
4
366
194
38
184
170
152

68
2
17
525
225
163
212
99
54
28

123
38
86
4
249
22
27
124
133
106

76
5
14
470
213
508
381
252
39
16

10
67
7
117
172
11
60
37
46

121

301

121

301

185

116

162
371
693
192
623
122
421
7

162
371
291
58
571
122
421
7

365
547
6
52
26
3
16
39

49
157
84
24
402
34
285
2

78
125

443
672
6
86
44
3
19
45
3

113
214
207
34
169
88
136
5

443
672
6
162
44
3
19
45
3

239
60
370

517
69
1,580

239
60
370

517
69
1,580

204
37
318

461
38
1,501

35
23
52

56
31
179

156

609

489

263

157
564
391
48
633
10

33
744
32
213
946
104

60
564
387
48
633
10

11
744
32
213
946
104

40
357
228
13
482
5

5
649
28
184
784
73

20
207
159
35
151
5

Indiana
Iowa
...
Kansas
Kentucky....
Louisiana
Maine
Maryland....
Massachusetts
Michigan....
Minnesota
Mississippi...
Missouri
Montana • . .
Nebraska
Nevada
New Hampshire
New Jersey..
New Mexico.
New Y o r k . . .
North
Carolina...
North
Dakota
Ohio
Oklahoma...
Oregon
Pennsylvania.
Rhode Island

For notes see end of table.

167

81
2

104

275

103

402
134
52

226

120

6
95
4
29
162
31

34
18
3
6

20. NUMBER OF BANKING OFFICES ON AND NOT ON FEDERAL RESERVE
PAR LIST, DECEMBER 31, 1962 — Continued
On par list
F. R. district,
State, or
other area

Not on par list
(nonmember)

Total
Total

Member

Nonmember

Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches
& offices
& offices
& offices
& offices
& offices
STATE—
Cont.
South
Carolina...
South Dakota
Tennessee....
Texas
Utah
Vermont
Virginia
Washington..
West
Virginia...
Wisconsin...
Wyoming....

142
171
293
1,045
49
50
292
92

186
69
255
44
83
40
367
323

182
569
56

162
1

84
68
1,016
49
50
292
92

177
44
242
44
83
40
367
323

32
56
81
574
21
29
193
34

182
569
56

162
1

109
159
41

221

126
36
174
25
68
19
270
308

58
103
72
29

52
12
140
442
28
21
99
58
73
410
15

9
25
13

131

OTHER
AREA
Puerto Rico 2
Virgin
Islands 2 ...

131

116

1 Includes 3 N.Y.C. branches of 2 insured nonmember Puerto Rican banks.
2
Puerto Rico and the Virgin Islands assigned to the N.Y. District for check clearing and collection purposes. All member branches in Puerto Rico and all except 2 in the Virgiin Islands are branches
of New York City banks. Nonmember branches in Puerto Rico include 6 branches of Canadian banks.
NOTE.—All commercial banking offices on which checks are drawn, including 277 banking facilities. Number of banks and branches differs from that in Table 19 because this table includes banks in
Puerto Rico and the Virgin Islands but excludes banks and trust cos. on which no checks are drawn.

168

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY
THE BOARD OF GOVERNORS DURING 19621
Name of bank, and type of transaction2
(in chronological order of determination)

No. 1—The Hackensack Trust Company,
Hackensack, N J .
to merge with
The Bank of Saddle Brook & Lodi,
Saddle Brook, N J .

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

53.2

10.3

SUMMARY REPORT BY ATTORNEY GENERAL (10-9-61)

The merger of Hackensack Trust and Bank of Saddle Brook & Lodi
would unite the third and sixth largest banks among the 7 in the area
served by the 2 banks without any change in position of the remaining
banks. The proposal was initiated by the smaller bank, which sought a
means of supplying its need for management personnel, and which sought
a remedy for the inadequacy of its capital funds. Competition eliminated
as a result of the merger does not appear to be substantial in light of the
competition afforded by the other large banks serving the restricted service
area. Therefore, the effect of the proposed merger on competition does not
appear to be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-17-62)

Saddle Brook is a mixed residental and industrial community with an
estimated population of some 14,000. It has experienced substantial growth
in recent years and prospects for further expansion are favorable. Bank
of Saddle Brook & Lodi provides the only commercial banking office in
Saddle Brook. Lodi, with an estimated population of 23,500, is contiguous
to Saddle Brook on the south. It is served by an office of the Saddle Brook
bank and an office of a large commercial bank. An urban renewal program offers fair prospects for municipal growth.
Saddle Brook bank, sixth largest of 7 area banks, is 3.6 miles from
Hackensack Trust, the third largest. The merger would provide the Saddle
Brook area with a broader range of banking services and would solve the
problems Saddle Brook bank has encountered in obtaining management
personnel and capital funds commensurate with its rate of growth. The
primary service areas of the merging banks do not overlap and competition which would be eliminated by the merger would not be of significance. Entry of the larger Hackensack Trust into the Saddle Brook-Lodi
area would result in increased competition since that bank would then be
in a better position to compete more effectively with the offices of other
banks in and near that area, particularly those of the 2 largest area banks.
For notes see p. 201.

169

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY
THE BOARD OF GOVERNORS DURING 19621—Continued
Name of bank, and type of transaction2
(in chronological order of determination)

No. 2—The Citizens Central Bank,
Arcade, N.Y.
to merge with
Bank of Delevan, Delevan, N.Y.

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

14.2

3.8

i •

SUMMARY REPORT BY ATTORNEY GENERAL (1-12-62)

Citizens Central, with assets of approximately $13.8 million as of June 30,
1961, seeks to acquire by merger the Bank of Delevan, with assets which
would appear to be approximately $4 million. The Board of Governors
has found that an emergency exists requiring expeditious action on the
proposal.
Although some competition exists between the 2 banks, the application
indicates that greater competition comes from other larger commercial
banks and from several branches of the strong Buffalo banks. The existing
emergency situation at the Bank of Delevan and the distance of 5 miles
from its office to the Arcade office of Citizens Central and 20 to 30 miles
to its other offices indicate that the proposed merger would not have a substantial adverse effect on competition.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-24-62)

Bank of Delevan, serving a community of about 800 and a surrounding
agricultural area in which some 3,000 persons reside, experienced a serious
depletion of its capital accounts through the acts of a depositor-borrower.
The proposed merger with Citizens Central of Arcade, about 6 miles distant, was made to remedy a situation requiring expeditious action.
While a merger of these banks might have some adverse effect on
competition, the significance of this lessening of competition is more
than offset by the need of averting any further deterioration in the condition of Bank of Delevan and for insuring the continuance of banking
facilities in Delevan.
No. 3—Columbus Junction State Bank,
Columbus Junction, Iowa.
to acquire the assets and assume the
liabilities of
Louisa County National Bank,
Columbus Junction, Iowa.

3.9

1.8

SUMMARY REPORT BY ATTORNEY GENERAL (12-5-61)

The only banks in the small town of Columbus Junction, with $3.9 million and $1.8 million in total assets, respectively, seek to combine. The
closest banks to the 2 banks involved in the transaction are located in surrounding towns varying in distances from 9 to 28 miles. Thus it is doubtful
if such other banks offer much, if any, effective competition to the combining banks.
For notes see p. 201.

170

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY
THE BOARD OF GOVERNORS DURING 1962—Continued
Name of bank, and type of transaction2
(in chronological order of determination)

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

It is our view that the acquisition, creating monopoly banking in the
town of Columbus Junction, thereby eliminating all competition between
the 2 banks and depriving the people in that town of an alternate source
for banking service, would have an adverse effect on competition.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-24-62)

Subject banks serve Columbus Junction, a small agricultural community
of some 1,000 persons, and a common trade area containing an estimated
population of 3,500. Competition is afforded by 10 other banks located
from 9 to 21 miles from Columbus Junction. Although only 1 rather than 2
banks will exist in Columbus Junction after the acquisition, this small
community as well as the larger surrounding farm area apparently will
be adequately served by the remaining Columbus Junction State Bank
and the numerous banks in other nearby communities.
The rather conservatively operated Louisa County National has done
little to meet the borrowing needs of the area, and it apparently does not
offer active competition to the State bank. Combining these 2 banks would
provide the acquiring bank with additional loanable funds which the
National bank has been unable or unwilling to utilize effectively, thereby
improving the continuing bank's ability to serve the credit needs of the
customers of both banks.
No. 4—Springfield Safe Deposit and Trust
Company, Springfield, Mass.

42.1

to consolidate with

Hadley Falls Trust Company, Holyoke,
Mass., and change its title to
The Safe Deposit Bank and Trust
Company.

36.7

SUMMARY REPORT BY ATTORNEY GENERAL (11-22-61)

The proposed consolidation of Springfield Safe Deposit and Trust,
holding about 12 per cent of deposits and loans among the banks in the
area, with Hadley Falls Trust, holding about 10 per cent, will result in
the formation of a bank intermediate in size between the 2 large banks
in the area, accounting for about 34 per cent and 30 per cent, respectively,
of the banking business, and the 3 smaller banks accounting for less than
7 per cent, 4 per cent, and 3 per cent each.
Since the 2 consolidating banks do not appear to have much direct competition between them, it would appear that the lessening of competition
which may result from the proposed consolidation would not be substantial.
For notes see p. 201.

171

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION. ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY
THE BOARD OF GOVERNORS DURING 19621-—Continued
Name of bank, and type of transaction2
(in chronological order of determination)

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-2-62)

Springfield Safe Deposit and Trust, serving a trade area containing about
300,000 persons, is the third largest commercial bank in the SpringfieldHolyoke metropolitan area. The bank operates 4 offices in Springfield and
adjacent communities. Hadley Falls Trust is located about 10 miles north
of Springfield and serves an area containing more than 160,000 persons.
Hadley operates 6 branches in Holyoke and nearby communities.
There are 4 commercial banks (total IPC 3 deposits $216 million and
loans $133 million), and 5 mutual savings banks (total IPC deposits $292
million and loans $218 million), located within Safe Deposit's service area.
As of June 30, 1961, Safe Deposit held 14.9 per cent of the total deposits
of these 4 commercial banks and 6.3 per cent of the deposits of all 9
banks. There are 4 commercial banks (total deposits $56 million and loans
$32 million), and 6 mutual savings banks (total deposits $190 million and
loans $142 million) in Hadley's service area. As of June 30, 1961, Hadley
Falls held 51.7 per cent of the total deposits of the 4 commercial banks
and 11.8 per cent of deposits of all 10 banks. In the combined area, the
resulting bank would hold 22.5 per cent of commercial bank deposits and
8.1 per cent of deposits of all banks.
The proposed consolidation would produce an institution with greater
management stability, larger resources, and lending limits better able to
compete with the larger commercial banks in supplying the needs of the
larger local firms. The consolidation may be expected to result in improved
banking services throughout the area now served by the 2 banks. Although
slight overlapping of trade areas of the consolidating banks is present,
each of the 2 essentially serves different sections of the metropolitan area.
For this reason and because of the intense competition from other banks
and financial institutions in the area, the vigor of competition should not
be adversely affected by the consolidation. On the contrary, competition
between the resulting bank and the 2 larger area banks should be increased.
No. 5—Bank of Idaho, Boise, Idaho.
to merge with
First National Bank of Bonners Ferry,
Bonners Ferry, Idaho

59.2

5.8

SUMMARY REPORT BY ATTORNEY GENERAL (12-8-61)

There is presently no competition between the 2 banks, the nearest
branch office of Bank of Idaho being approximately 170 miles to the south
of the office of First National. First National has no competition in its
service area and Bank of Idaho will retain effective competition from 2
larger banks. Thus, the effect upon competition would not be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-16-62)

First National of Bonners Ferry (population 2,000) is located about
260 miles north of Boise and serves principally Boundary County (populaFor notes see p. 201.

172

Resources
(in millions
of dollars)

Banking offices
In
operation

To be
operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

tion 5,800). First has had heavy losses in recent years, and improvement
is needed in its asset condition. Lack of a strong collection policy, illness
of its chief executive officer, and apparent dissension among its directors
pose further difficulties for First. The proposed merger would provide a
solution of these problems.
There appears to be no competition between the banks proposed to be
merged; and Bonners Ferry may benefit through the availability to the
community of a larger, stronger bank. The extension of the area served
by Bank of Idaho and the increment in its financial resources which would
result from the merger would have little effect on the relative competitive
positions of the largest banks operating branch systems in the State.
No. 6—United California Bank,

Los Angeles, Calif.
to merge with
The Southwest Bank, Inglewood, Calif.

2,376.1

134
4 138

19.9

SUMMARY REPORT BY ATTORNEY GENERAL (5-23-61)

The past and immediate history of United California Bank clearly
establishes a pattern of more and more acquisitions. While this particular
merger does not appear to be inimical to the competitive situation in California, its cumulative effect must be considered. As a result, it would
appear that the present and long-term effects of this acquisition on competition would be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-16-62)

There are at present 71 bank offices within the Adams-Inglewood economic area of Los Angeles, a densely populated, highly industrialized
section situated southwest of the downtown Los Angeles Civic Center. The
head office and 3 branches of The Southwest Bank are located generally in
the western half of this area, while the 4 offices of United California
Bank operate in the eastern half. Although all 8 offices are within the
Adams-Inglewood area, the primary service area of each office generally
does not exceed a radius of 2 miles, and as a whole the combined primary
service area of the 2 banks covers somewhat less than the entire economic
area.
Within this Adams-Inglewood economic area, there are 8 banks operating 64 banking offices in the primary service areas of United and Southwest, including 25 offices of Bank of America N. T. and S. A., 19 offices
of Security First National, and 8 offices of Citizens National. Their total
deposits exceed $620 million. Southwest Bank (deposits $14.7 million),
and Pacific State Bank, Hawthorne (deposits $14.9 million), the latter
operating its head office and 2 of 3 branches within the primary service
areas of United and Southwest, are the only independent banks in the
For notes see p. 201.

173

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

Adams-Inglewood section of Los Angeles. None of the offices of either
United or Southwest is nearer than 2 miles from an office of the
other bank with the exception of the latter's Western and 88th Street
Office, which is only about 1 mile from United's Manchester and Vermont
Office. At present, competition between the 2 merging banks is not substantial. United states that only about 7 per cent of Southwest's business
originates in the service areas of its offices, and less than 1 per cent of
United's business is derived from Southwest's service areas. United now
holds 6.2 per cent of the banking offices and 5.9 per cent of bank deposits,
and Southwest holds 4.7 per cent of offices and 2.4 per cent of deposits of
banks operating within their primary service areas.
United California, with its network of 125 offices in 29 of 58 counties,
is the fourth largest bank in the State and third largest in the Los Angeles
Metropolitan Area. While the proposed merger would eliminate existing
and potential competition between United and Southwest, the resulting
bank would have only 8 of 65 offices (including 1 of Southwest which has
been approved but is not yet in operation), and only about 8.3 per cent
of total deposits in the Adams-Inglewood Area within 2 miles of each
of the offices of the merging banks. The over-all effect on competition
would not be adverse. Undoubtedly competition between the remaining
banks and branches would be intensified.
Southwest has a serious management-succession problem, which has
been aggravated by recent deaths and illnesses among its senior executives
and the inability of the bank to find able, experienced bankers to fill these
senior executive positions. The resulting bank would provide present
customers of Southwest with a competently and aggressively managed
institution offering a complete range of banking services and greater lending limits comparable to the nearby offices of the large banking organizations, which would be in the public interest.
No. 7—Liberty Bank and Trust Company,
Buffalo, N.Y.
to merge with
Bank of Orchard Park, Orchard Park, N.Y.

199.0

7.7

SUMMARY REPORT BY ATTORNEY GENERAL (11-27-61)

Liberty is the third largest of 5 banks in Buffalo; as of Dec. 31, 1960,
the largest bank had total assets of $790 million; the second bank had
total assets of $507 million; Liberty had total assets of $176 million; the
fourth bank had total assets of $42.6 million; and the fifth bank had total
assets of $9 million.
In the service area of Bank of Orchard Park, there are 3 competitive
banks operating 6 banking offices. Four of these offices are operated by
the largest bank in the area.
For notes see p. 201.

174

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES 1APPROVED BY
THE BOARD OF GOVERNORS DURING 1962 —Continued
Name of bank, and type of transaction 2
(in chronological order of determination)

Resources
(in millions
of dollars)

Banking offices
In
operation

To be
operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

As between the 2 merging banks Orchard Park had 35 loans totaling
$197,000 originating in Liberty's service area. Liberty had 282 loans
totaling $1.4 million originating in Orchard Park's service area, including
65 mortgages totaling $913,000.
Orchard Park had 145 IPC deposit accounts (out of 7,279 accounts)
with deposits of $135,000 originating in Liberty Bank's service area.
Liberty had 570 IPC deposit accounts (out of 104,973 accounts) with
deposits of $730,000 (out of $161 million in deposits) originating in
Orchard Park's service area.
In view of the existence of a relatively small amount of competition
between the merging banks and the competitive situation in the western
New York area, it does not appear that there would be a substantially
adverse effect on competition in commercial banking in the area as a
result of this proposed merger.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-28-62)

Liberty is 1 of 5 commercial banks in Buffalo and 1 of 12 commercial
banks in Erie County. It currently ranks third in size in both Buffalo and
Erie County and would continue to do so after the merger. Liberty is
subject to very keen competition from the 2 largest banks in the county,
which together hold over 75 per cent of the deposits in that area as compared to Liberty's 15 per cent. There appears to be very little competition
between Liberty and Bank of Orchard Park, as their service areas barely
overlap and neither obtains much business from the area of the other.
Liberty's branch nearest Orchard Park is about 7 miles away. The 2 largest
Buffalo banks have 4 branches within 6 miles of Orchard Park.
The proposed merger would provide more complete banking services
to the service area of Orchard Park, while at the same time eliminating
little, if any, competition. Liberty will be in a better position to compete
more effectively with the 2 largest banks in Buffalo and Erie County.
No. 8—Union Trust Company of Maryland,
30
269.8
Baltimore, Md.
32
to merge with
Kingsville Bank, Kingsville, Md.
10.1
SUMMARY REPORT BY ATTORNEY GENERAL (1-12-62)

The proposed merger of Kingsville Bank into Union Trust would not
have significant adverse competitive effects.
Competition between the 2 banks does not appear to exist to a substantial degree. Kingsville Bank serves a farm and residential area as
evidenced by its loans, while the banking activities of Union Trust are
directed chiefly to serving commercial and industrial accounts as indicated
by its loans. Moreover, the merging bank will soon face competition from
a branch of the largest bank in the Baltimore area.
For notes see p. 201.

175

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-20-62)

Kingsville Bank operates, in addition to its head office, a branch at
Perry Hall. These offices are 12 and 16 miles, respectively, northeast of
downtown Baltimore. The service areas of Union Trust and Kingsville
Bank do not overlap, and there is very little competition between these
banks.
Union Trust will make immediately available to the areas served by
Kingsville Bank broader services and larger resources, which should contribute substantially to the convenience and need of this rapidly expanding
section of the Baltimore metropolitan area. Competition in the Perry Hall
area should be increased as the largest bank in the State, Maryland
National Bank, is in process of establishing a branch in Perry Hall.
No. 9—First Trust Company of Albany,
Albany, N.Y.
to merge with
The Broadalbin Bank, Broadalbin, N.Y.

92.1
3.2

SUMMARY REPORT BY ATTORNEY GENERAL (12-13-61)

First Trust, the fourth largest bank within the service area of the
merging banks, had total assets of $92.1 million, total capital accounts
of $6 million, total deposits of $83.9 million, and loans and discounts of
$42.3 million, as of Sept. 27, 1961.
As of the same date Broadalbin Bank, the smallest bank within the
service area, had total assets of $3.2 million, total capital accounts of
$0.4 million, total deposits of $2.8 million, and loans and discounts of
$1.6 million.
The service area is already marked by a concentration of banking
resources, with the 2 largest commercial banks accounting for 64.7 per cent
of the IPC deposits and 67.7 per cent of the loans of the area. First
Trust, as a result of the proposed merger, will hold 8.6 per cent of the
IPC deposits and 8.5 per cent of the loans, representing an increase of
0.4 per cent in each category.
While the proposed merger will increase the concentration of banking
resources within the service area and will result in the elimination of a
degree of competition between the merging banks, in view of the relative
size of the merging banks as compared with other banks within the service
area, it does not appear that the effect on competition will be substantially
adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-20-62)

The village of Broadalbin, some 35 miles northwest of Albany, has a
population of about 1,400 and serves a trade area of about 3,500 people.
The Broadalbin Bank is in satisfactory condition, but its earnings prospects
are uncertain and strengthened management is needed which, the bank
For notes see p. 201.

176

Resources
(in millions
of dollars)

Banking offices
In
operation

To be
operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

feels, it cannot afford. First Trust's nearest branch is located 10 miles west
of Broadalbin Bank and, with little overlap of service areas, there is
negligible competition between the 2 banks.
The banking factors strongly support approval of the proposal. The
need for improved management at Broadalbin Bank would be fulfilled
by consummation of the merger, whereas there is no evidence that this
need might be otherwise resolved. The Broadalbin area would be supplied
with more varied and improved banking services.
No. 10—The Peru Trust Company, Peru, Ind.
to merge with
Farmers State Bank, Mexico, Ind.

12.0
1.1

SUMMARY REPORT BY ATTORNEY GENERAL (3-1-62)

The proposed merger of Farmers State into Peru Trust will eliminate,
as an independent banking facility, 1 of the 5 banking establishments in
the service area. Although it unites a bank offering limited banking services with a bank offering a larger variety of banking services, the merger
will further increase the heavy concentration of banking services in a few
operating units in the area.
Because it is not likely that a bank with loans and discounts of only
$277,000 can be a vigorous factor in competition, we do not believe that
the effect of the elimination of the competition presently offered by
Farmers will be substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-23-62)

These 2 banks, situated 5 miles apart, are not strong competitors. The
smaller institution, which pays no interest on time deposits and has only
a small volume of loans, has not been progressive in serving the needs
of its community. Consummation of the proposed merger will provide
broader banking services to the Mexico area and may also enable the
applicant to compete more effectively with its principal and slightly larger
competitor. The merger would also eliminate any management succession
problem at Farmers State.
No. 11—City Trust Company,
Bridgeport, Conn.
to merge with
The West Side Bank, Bridgeport, Conn.

153.0
14.7

SUMMARY REPORT BY ATTORNEY GENERAL (11-3-61)

City Trust has total assets of about $151 million, West Side assets of
about $15.5 million. These represent 29 per cent and 3 per cent, respecFor notes see p. 201.

177

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

tively, of the 4 banks in the area. The largest bank has assets of $199.7
million, about 38 per cent, and the second largest bank Jissets of $163.7
million, about 30 per cent.
The acquisition of the fourth bank by the third largest; of 4 banks in
the service area of the acquired bank appears to be another step in the
increasing concentration in commercial banking in this area. It would also,
of course, eliminate substantial competition between the merging banks.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-23-62)

There are 4 commercial banks with over $481 million of deposits and
11 offices serving Bridgeport. In terms of deposits, City Trust ranks third
in size and West Side ranks fourth. In addition to the commercial banks,
there are 3 savings banks with about $423 million of deposits and 8 offices
serving the city. Due to their broad powers under Connecticut law, the
savings banks are able to offer the commercial banks keen competition.
West Side, which is about 1.3 miles from the main office; of City Trust,
serves a highly industrialized and densely populated section of about 2
square miles which lies within the service area of City Trust. Part of this
area is undergoing an extensive redevelopment program, which will contribute substantially to the city's economy and growth. The largest Bridgeport bank is now establishing a branch in this area about: 3 blocks from
West Side.
While the proposed merger would eliminate some competition between
the merging banks, such competition is not of the magnitude frequently
existing between banks so situated. Permitting City Trust to enter this
area served by West Side via merger will inject into the area a large bank
capable of satisfying the expanding banking needs which will accompany
the redevelopment program. Competition should be intensified.
No. 12—Farmers and Merchants Bank of
Long Beach, Long Beach, Calif.
to acquire the assets and assume the
liabilities of
Farmers and Merchants Bank of Southern
Counties, Long Beach, Calif.

110.3

30.6

SUMMARY REPORT BY ATTORNEY GENERAL (1-11-62)

Of the 9 banks operating in the Long Beach metropolitan area, the
acquiring bank is the second largest and the acquired bank the fourth
largest. As a result of the proposed acquisition, the acquiring bank will
remain in second place but will increase its advantage over the next largest
bank. Direct competition between the acquired and the acquiring bank
is not real.
For notes see p. 201.

178

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

In fact the acquired bank split off from the acquiring bank in 1955.
At present, the former is wholly managed by the latter and there is
common ownership of more than 90 per cent of the 2 banks. Under these
circumstances, the acquired bank appears to be more of a subsidiary than
a competitor of the acquiring bank.
Therefore, the effect of the proposed acquisition on competition does
not appear to be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-28-62)

Very little competition exists between these commonly owned and
managed banks. As consummation of the proposal would have virtually no
effect on competition, combining them in a single unit would be in the
public interest.
N o . 13—Commerce Union Bank,

Nashville, Term.
to merge with
Broadway National Bank,

Nashville, Tenn.

165.5

24.2

SUMMARY REPORT BY ATTORNEY GENERAL (4-4-62)

The acquiring bank is the third largest in the city of Nashville. It owns
80 per cent of the stock of the acquired bank. Twenty-eight shareholders
own the remaining stock of the acquired bank; of these, 18 also hold stock
in the acquiring bank. In addition, there is considerable common management. Under this state of affairs the participating banks do not appear to
be real competitors. Therefore, the effect of the proposed merger on
competition does not appear to be substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (5-2-62)

Virtually no competition exists between these 2 banks. One has long
been owned by the other, and the 2 have a common management.
Consummation of this merger would eliminate administrative duplication
and tend to increase efficiency, with probable benefits to the customers of
the resulting bank, which would be in a position to compete more effectively with the larger banks in the area.
For notes see p. 201.

179

No. 14—The People's Savings and Trust
Company, Hazleton, Pa.
to acquire the assets and assume the
liabilities of
First National Bank in Freeland,

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

13.1

3.4

Freeland, Pa.

SUMMARY REPORT BY ATTORNEY GENERAL (11-21-61)

People's Savings and Trust, with its only office in Hazleton, had $13.1
million of assets, $1.5 million of capital accounts, $7.5 million of net
loans and discounts, and $11.2 million of total deposits as of June 30,
1961. As of the same date, First National, which has its only office in
Freeland, had assets of $3.4 million, total capital accounts of $0.4 million,
net loans and discounts of $1.3 million, and total deposits of $2.9 million.
The resulting bank, presently the fourth largest in a service area with a
population of 80,000, would become the third largest of the 9 banks remaining, with 14 per cent of the IPC deposits and 14.9 per cent of the
total loans of the service area. This represents an increase of 2.9 per cent
in IPC deposits and 2.2 per cent in loans over the percentages presently
held by People's Sayings and Trust. However, in view of the strength and
number of the remaining banks within the service area and in view of the
lack of substantial competition between the acquiring and acquired banks,
it does not appear that the proposed acquisition would have a substantial
adverse effect on competition or would result in an undue concentration
of banking resources.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (5-10-62)

Freeland (population about 5,000) is located 9 miles northeast of
Hazelton and is served by First National and 1 other larger institution.
There is only minor overlapping of the service areas of People's and
First, and neither bank actively solicits accounts in the service area of the
other. If the proposal is effected, People's would make available in the
Freeland area the facilities of its complete consumer loan and trust departments, higher rates of interest on savings deposits, and a greater
loan limit. Effecting the proposal would not eliminate any significant
amount of competition between the 2 banks involved in the transaction.
Competition in the Freeland area will probably be stimulated.
For notes see p. 201.

180

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY
THE BOARD OF GOVERNORS DURING 19621—-Continued
Name of bank, and type of transaction 2
(in chronological order of determination)

No. 15—The Bank of Wood County Company,
Bowling Green, Ohio.
to consolidate with
The Perrysburg Banking Company,
Perrysburg, Ohio.

Resources
(in millions
of dollars)

Banking offices
In
operation

16.7

2.0

To be
operated

SUMMARY REPORT BY ATTORNEY GENERAL (4-24-62)

Competition between Bank of Wood County and Perrysburg Banking
Company appears to be insubstantial.
The consolidation will enable Bank of Wood County to increase
its position as the largest of the 3 other banks operating in its service area.
However, in light of the relatively small size of the Perrysburg Bank
and its apparent inability to keep pace with the growth of the area it
serves, the effect of the consolidation on competition does not appear to
be substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-8-62)

The proposed consolidation will eliminate only nominal competition
which exists between these 2 banks situated 13 miles apart, and other
banks in the service area of the continuing institution will not be adversely
affected by the proposal. A successor-management problem and declining
earnings plaguing Perrysburg Bank will be resolved by the proposed
consolidation. Customers of Perrysburg Bank would be provided with a
more complete range of banking services than those presently at their
disposal.
No. 16—Southern Bank and Trust Company,
Richmond, Va.
to merge with
Citizens Bank of Chesterfield,
Bon Air, Va.

46.8

0.3

SUMMARY REPORT BY ATTORNEY GENERAL (5-3-62)

In view of the fact that the majority of the stockholders of the Southern
Bank and Trust Company and Citizens Bank of Chesterfield are the same
and the president of both banks is the same and the majority of the directors of the Citizens Bank are the same as those of the Southern Bank,
this merger would not adversely affect competition. Furthermore, it should
be noted that the Citizens Bank is not presently engaged in business.
Finally, it should be noted that the Southern Bank is not of such a size
in the service area in which the 2 banks operate that this merger would
adversely affect competition.
For notes see p. 201.

181

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-13-62)

Citizens Bank (not yet open for business) was organized by stockholders
of Southern Bank with the expectation that it would be merged into and
operated as a branch of Southern after operating for 5 years as a unit
bank, as then required under State law. Recent changes in State law have
obviated the waiting period and, accordingly, immediate merger and conversion to branch status is proposed.
There is no potential competition between the 2 institutions. The resulting bank might be able to compete more effectively with existing banking
facilities in the Bon Air area than would Citizens Bank as an independent
unit, and it would be able to serve more adequately the credit needs of
the Bon Air community.
No. 17—The Hillsboro Bank and Savings
Company, Hillsboro, Ohio.
to acquire the assets and assume the
liabilities of
The Citizens Bank and Savings Company
of Leesburg, Leesburg, Ohio.

3.2

2.5

SUMMARY REPORT BY ATTORNEY GENERAL (5-4-62)

The proposed purchase of assets and assumption of liabilities of Citizens
Bank, one of the smaller banks competing in the area, by Hillsboro Bank
would not appear to have an adverse effect on competition. Both banks
are relatively small, located in communities 18 miles apart, and facing
competition from a number of larger banks. The purchase of assets and
assumption of liabilities will not involve the elimination of any significant
competition nor will it result in a dominant bank in the service area
involved.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-18-62)

The proposed acquisition would eliminate little competition, since competition between the 2 banks involved is nominal. There should be no
adverse effect on any of the banks that compete in the service area of
the resulting bank, and in certain sections of such service area competition
would probably be stimulated. The banking factors support approval of
the proposed acquisition, and customers of both Hillsboro Bank and
Citizens Bank would benefit from the increased lending limit and broader
banking services the continuing institution could provide. Customers in
Leesburg would be provided with a banking facility that could serve their
credit needs more adequately than is being done at the present time.
For notes see p. 201.

182

No. 18—Windber Bank and Trust Company,
Windber, Pa.
to acquire the assets and assume the
liabilities of
Central City National Bank,
Central City, Pa.

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

10.9

2.2

SUMMARY REPORT BY ATTORNEY GENERAL (4-6-62)

The participating banks are located in 2 small towns 10 miles apart.
Central City National has not been a significant competitive factor in the
area for some time. In fact it has been unable to increase its deposits
during the past 5 years. There is no substantial competition between the
participating banks. Moreover, the resulting bank will have only 10 per
cent of total loans and discounts in the area, while the 2 largest banks
located in Johnstown, 8 miles northwest of the acquiring bank, have 45
and 19 per cent, respectively. Likewise, the resulting bank will have only
12 per cent of total time deposits, while the aforementioned larger banks
will have 36 and 23 per cent, respectively.
The effect of the proposed acquisition on competition would not appear
to be substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-21-62)

Both Windber (population about 7,000), located about 10 miles south
of Johnstown (population about 54,000), and Central City (population
about 1,600), 20 miles south of Johnstown, are located in a severely
depressed coal mining section of Pennsylvania. The 2 banks, situated
some 10 miles apart and separated by a hilly and sparsely populated
area, do not compete to any significant degree.
Management of Central City National, the only bank in Central City,
is desirous of retiring, and the bank's earnings are insufficient to attract
adequate replacement management. Consummation of the proposal would
have the effect of providing improved earning power and strengthened
management, thereby assuring residents of Central City of uninterrupted
banking services. The continuing bank would not derive a noticeable
advantage over its other competitors, and the over-all effect on competition
would not be detrimental.
For notes see p. 201.

183

No. 19—Wilmington Trust Company,
Wilmington, Del.
to acquire the assets and assume the
liabilities of
Townsend Trust Company, Townsend, Del.

Resources
(in millions
of dollars)

361.7

Banking offices
In
To be
operation operated
14
15

0.5

SUMMARY REPORT BY ATTORNEY GENERAL (5-7-62)

Wilmington Trust is the largest commercial bank in Wilmington, and
conducts a general banking business through 14 offices located in Wilmington and northern New Castle County.
Townsend Trust is the smallest bank in southern New Castle County.
It is located 27 miles south of the head office and 14 miles south of the
nearest branch office of Wilmington Trust, and there is little, if any,
competition between the 2 banks. Townsend Trust, however, is in competition with branches of 3 other Wilmington banks, each of which is
many times larger than itself. Difficulties brought about by its inability to
compete with these banks account in part for the acquisition proposal.
In view of the size of Townsend Trust as compared with other banks in
its service area, the difficulty it has had in competing with those banks,
and the lack of any significant competition between the; acquiring and
acquired banks, it does not appear that the proposed acquisition will have
a substantially adverse effect on banking competition.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-21-62)

The nearest offices of these 2 banks are 16 miles apart, and little competition exists between them. Within 7 miles of Townsend the other 3 of
Delaware's 4 largest commercial banks operate offices, and consummation
of this proposal would probably stimulate competition among Delaware's
large banks. Acquisition of Townsend Trust by Wilmington Trust will
not only make available broader banking services in Townsend but also
will assure that town of continued banking services.
No. 20—Union Trust Company of Maryland,
Baltimore, Md.
to merge with
Farmers and Merchants' Bank,
Salisbury, Md.

301.3

17.6

SUMMARY REPORT BY ATTORNEY GENERAL (5-4-62)

By this merger, Union Trust is seeking to follow its larger competitor,
Maryland National Bank, into the growing Salisbury area. Farmers and
Merchants' has been serving the Salisbury area for 70 years, and there is
no indication that it cannot continue as a strong competitor in that area.
For notes see p. 201.

184

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

The proposed merger will eliminate no competition between Union Trust
and Farmers since none presently exists, nor will it presently tend toward
monopoly, considering the commercial banking situation in the area and
the State generally. However, it can be expected that the merger will have
anti-competitive effects on banking in the Salisbury area. It would result
in 2 of the 3 local banks being branches of very large Baltimore banks
and thus having significant competitive advantages over the Salisbury
National Bank, the sole remaining independent in town, and 6 small
independent banks located around Salisbury. We believe this merger will
tend to lessen banking competition in the Salisbury area and therefore
will have adverse competitive effects.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-25-62)

Farmers and Merchants' Bank is located in the geographical center of
the Eastern Shore Peninsula, about 100 miles from the nearest office of
Union Trust. The population of Farmers' trade area, which includes all
the southern portion of the Eastern Shore, is approximately 225,000.
Salisbury—supported by several substantial industries, truck farming,
poultry production and processing—serves as the largest retail and wholesale distribution center in the area. The growth and economic prospects
of the area are favorable and will be enhanced by completion of construction of the bridge-tunnel, which will connect Norfolk, Virginia, with
the southern tip of the Eastern Shore. Farmers has been unable to handle
credit requirements of the size requested by some local industries; and it
may be expected, due to expanding industrialization, that requests for
credit beyond the capacity of Farmers will increase.
Union Trust is the third largest bank in the State, a position that would
not be altered by consummation of the merger. Union Trust would become
a competitor in Salisbury of Maryland National Bank, the largest bank
in the State, which operates 61 banking offices with deposits of about
$550 million. The proposed merger would also bring Union Trust into
competition with Salisbury National Bank (deposits about $19 million),
but the effects on the latter bank should not be of serious consequence.
The 6 small banks located in Wicomico County outside of Salisbury
serve principally the needs of their immediate communities, and the
proposed merger should not seriously affect their competitive positions.
The proposed merger would provide the business concerns and residents
of this area with another bank possessing capable, experienced management, which could service all sizes of business accounts and offer a more
complete line of banking services, including those of a strong trust department. The service areas of the 2 banks involved overlap only slightly and
the elimination of the competition between them would not be significant.
For notes see p. 201.

185

No. 21—The Peoples Bank & Trust Company,
Grand Haven, Mich.

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

13.8

5.8

to consolidate with

Spring Lake State Bank, Spring Lake, Mich.

i•

SUMMARY REPORT BY ATTORNEY GENERAL (4-17-62)

The proposed consolidation between Peoples Bank & Trust and Spring
Lake State Bank will have significant adverse competitive effects.
Competition between the 2 banks appears to be substantial. The consolidation will, of course, eliminate that competition and reduce from 3
to 2 the number of banks competing in the Grand Haven-Spring Lake area.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-25-62)

Grand Haven (population about 11,000) is situated on the shore of
Lake Michigan 2 miles south across the mouth of the Grand River from
Spring Lake (population about 2,000). The area is served chiefly by
Peoples Bank & Trust and the only other Grand Haven bank, Security
First Bank and Trust. Spring Lake State Bank is considered to be within
the service area of Peoples Bank & Trust and Security First Bank and
Trust. Because of the competition from these larger banks and of its
geographical location, Spring Lake Bank's prospects are limited. It is
unlikely that more industry will be located in the essentially residential
area of Spring Lake. Because of this and the prospective growth of the
environs south of Grand Haven—an area which Spring Lake Bank cannot
service—it is probable that such competition as Spring Lake Bank has been
able to offer will progressively decrease.
Consummation of the transaction would benefit principally the residents
of Spring Lake. The resulting bank would offer services that have not been
available to these residents from a banking facility in their immediate
locality, such as a trust department, mortgage warehousing facilities, and
a higher lending limit. It would thereby be in a better position to compete
more effectively with Security First and other financial institutions in the
general area. The benefits that would flow from the proposal would more
than offset any diminution in competition.
No. 22—The State Bank of Salem, Salem, Ind.

4.4

to acquire the assets and assume the
liabilities of

State Bank of Hardinsburg,
Hardinsburg, Ind.

1.2

SUMMARY REPORT BY ATTORNEY GENERAL (7-13-62)

The proposal by State Bank of Salem to acquire the assets and assume
the liabilities of State Bank of Hardinsburg would not appear to have any
For notes see p. 201.

186

Banking offices
Resources
(in millions
of dollars)

To be
In
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

significant adverse competitive effect.
The banks involved are located about 18 miles apart, and it is doubtful
if significant competition exists between them. There are also a number
of other banks located in the general area served by the 2 institutions.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-13-62)

Salem (population about 4,600) and Hardinsburg (population 220) are
located about 18 miles apart in Washington County, an area dependent primarily upon agriculture. State Bank of Hardinsburg offers limited types of
loans and services to its trade area and does not accept savings deposits.
Consummation of the proposed transaction would make available to
customers of the Hardinsburg Bank a larger loan limit and a more complete range of banking services.
The proposed acquisition would eliminate little competition, since competition between the 2 banks involved is nominal. The proposal should not
adversely affect any of the banks that compete in the service area of the
resulting bank, and in certain sections of such service area competition
would be stimulated.
No. 23—United California Bank,
Los Angeles, Calif.

2,376.1

140

4.2

to merge with

Farmers and Merchants Bank,
Blythe, Calif.

141

SUMMARY REPORT BY ATTORNEY GENERAL (5-15-62)

United California Bank is the fourth largest bank in the State with
total assets of $2.4 billion. Farmers and Merchants Bank, with total assets
of $4.2 million, operates an office about 250 miles southeast of Los
Angeles in an agricultural area. United's nearest office is at El Centro,
about 165 miles southwest of Blythe.
Security First National Bank, the State's second largest bank, presently
operates a branch in Blythe, and this is the only other banking office within
70 miles of Farmers and Merchants.
The application states that this is the final phase of United's merger
program, and United expects generally to follow the policy of expansion
by de novo branches.
While this is another in a large number of acquisitions of independent
banks by major banks in California, the circumstances are such that it
does not appear that competition may be substantially lessened.
For notes see p. 201.

187

Banking offices
Resources
(in millions
of dollars)

In
operation

To be
operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-20-62)

The Palo Verde Valley is an isolated region located some 250 miles
east of Los Angeles. In this area agriculture is the most important activity,
and loan requirements for crop and livestock operations are often quite
large. Farmers and Merchants Bank and a branch of Security First
National Bank, Los Angeles, also at Blythe, are the only banks located
in this area. The nearest office of United California Bank is some 160
miles distant.
With the size of agricultural units rapidly increasing, there is demand
for larger loans for the development and reclamation of additional land
for agricultural use under irrigation, as well as for crop and livestock
financing. Farmers and Merchants is able to satisfy no more: than a small
amount of these requirements.
The proposed merger would provide another bank which, under experienced and capable management, could offer the farmers and ranchers a
wider range of banking services, including the much larger loans needed
in this area. Virtually no competition would be eliminated, and a healthy
increase in competition between United and Security First National Bank
should result.
No. 24—The Citizens Bank of Perry, N.Y.,
Perry, N.Y.
to merge with
The First National Bank of Perry, N.Y.,
and change its title to The Bank of
Perry, N.Y.

3.7

4.9

SUMMARY REPORT BY ATTORNEY GENERAL (5-4-62)

The proposed merger would join the 2 existing banks in the village of
Perry. It is contended that the village is incapable of supporting 2 banks
and the resulting bank with its higher lending limit and more efficient
utilization of personnel and services will be better able to compete with
banks in the surrounding communities. The resulting institution will not
dominate the banking business in the area but will continue to be faced
with competition from 6 area banks located from 6 to 14 miles from
Perry. While the merger leaves the resulting bank without competition
in Perry, we believe that the over-all effect on competition will not be
substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-23-62)

These 2 banks serve the village of Perry and the surrounding agricultural area in which some 7,500 persons reside. While neither the population nor available employment of the area has shown Einy significant
increase in the past decade, credit demands have increased substantially in
recent years and the merging banks have frequently participated with
For notes see p. 201.

188

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

each other in order to meet these expanded credit needs. The present
prospects for growth of the 2 banks, however, are not encouraging.
While the 2 banks serve a common area, the unusually large volume
of loan participations between them suggests that competition is not
particularly vigorous. In addition, Citizens has concentrated on commercial
and instalment loans, while the greatest volume of First's loans has been
in the real estate field. Accordingly, less competition would be eliminated
by the proposed merger than would normally be expected when combining the only 2 banks in a community.
The proposed merger would provide the area with a bank having a
larger loan limit and able also to offer a broader and more efficient range
of banking services than is now available in Perry. The transaction should
have no serious competitive effects on the 8 remaining banks located within
the service area of the Perry banks.
No. 25—The Connecticut Bank and Trust

Company, Hartford, Conn.
to merge with

453.1

10.0

The Wallingford Bank and Trust Company,

Wallingford, Conn.

SUMMARY REPORT BY ATTORNEY GENERAL (6-14-62)

Applicant, Connecticut Bank and Trust, is 1 of the 2 largest banks in
Connecticut with total deposits of $387.5 million, net loans and discounts
of $222.6 million, and assets of $453 million. It operates a total of 31
offices located throughout central and eastern Connecticut.
Other Bank, Wallingford Bank and Trust Company, is an independent
unit bank with total deposits of $8.5 million, net loans and discounts of
$5.7 million, and assets of $10 million. In our view the proposed transaction would (a) eliminate a slight degree of existing competition between
Applicant and Other Bank, (b) increase the competitive advantage which
Applicant Bank already holds over smaller banks in the WallingfordMeriden area, and (c) open the town of Wallingford to new branches,
but force the smaller banks opening such new branches to compete at a
disadvantage with an established branch of Applicant.
For these reasons we feel that the effect of the proposed transaction
on competition would be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-17-62)

Wallingford (population about 30,000), in New Haven County (population about 660,000), is located some 23 miles south of Hartford (population about 162,000). Both the Wallingford and Hartford communities are
highly industrialized and both have experienced substantial growth in
population and industry. Prospects for further expansion are favorable.
For notes see p. 201.

189

Banking offices
Resources
(in millions
of dollars)

To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

Wallingford is presently served by Wallingford Bank, a branch of Union
and New Haven Trust Company (total deposits $75.6 million), and by
the main office of Dime Savings Bank (total deposits $16.6 million). There
is evidence that the area generates a greater demand for credit than the
present banks reasonably accommodate. Because of legal restrictions,
commercial banks operating outside the town of Wallingford cannot establish new branches in the town. The proposed merger would provide
broader and more convenient banking services and facilities needed in
the Wallingford area to meet the demands generated by substantial growth
both in population and industry. The transaction would eliminate no competition except the small amount now existing between Connecticut Bank
and Wallingford Bank and at the same time should result in an increase in
the over-all competition among the banking offices now operating in the
Wallingford area.
No. 26—Lawrence Savings and Trust Company,
New Castle, Pa.
to acquire the assets and assume the
liabilities of
First National Bank in Wampum,
Wampum, Pa.

28.5

1.9

SUMMARY REPORT BY ATTORNEY GENERAL (6-25-62)

The proposed purchase of assets and assumption of liabilities of First
National Bank in Wampum by Lawrence Savings and Trust would not
appear to have substantial adverse effects upon competition.
As a result of the acquisition, applicant would increase its dominant
position in the Ellwood area and increase slightly its position as a competitor in the other areas it serves. The competition existing between the
2 banks would, of course, be eliminated as well as a small bank serving the
Ellwood City area. However, because of the small size of the selling
bank, its lack of growth and the existence of 2 competitors in the Ellwood
area after the acquisition, the effect on competition does not appear to be
substantially adverse. Further, it does not appear that effective competition exists between the institutions involved since the president and 2
directors of Lawrence own 731 of 2,000 of the outstanding shares of
Wampum and 2 directors of Lawrence are also directors of Wampum.
The application indicates that the purchase of stock in the selling bank
by the president and 2 other directors of the applicant bank and the
placing of 2 of its directors on the board of the selling bank were designed
to place applicant in a favorable position to bring about the combining
of the 2 banks. The applicant admits that it did indirectly what it was
forbidden to do directly.
For notes see p. 201.

190

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

The practice of commercial banks acquiring stock interests in, and
having interlocking directorates with, competitors through officers and
directors and by other means appears to warrant considerable concern by
both the Department of Justice and the bank regulatory authorities. The
indirect acquisition of the stock of a competitor is, of course, within
Section 7 of the Clayton Act where the effect may be substantially to
lessen competition or to tend to create a monopoly in any line of commerce. Moreover, indirect acquisitions appear to be susceptible of use as a
means of evading the reporting and approval requirements of the Bank
Merger Act of 1960. Recent applications have indicated that this practice
is sufficiently widespread that a full report by all commercial banks to the
appropriate Federal regulatory authorities on all outstanding interests of
this type may be warranted. It may also be appropriate to require all
such transactions to be reported at the time they are made. The opportunity for evasion of congressionally imposed merger restrictions and for
abuses of the type intended to be forbidden by SEC regulations applicable
to other businesses would seem to be readily apparent and within the
powers of the bank regulatory agencies to correct.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-22-62)

New Castle (population about 44,000) is located in Lawrence County
(population about 113,000) some 8 miles from Wampum (population
1,100). The proposed acquisition would have the effect of adding management strength and earning power to what has been the operation of First
National Bank, where earnings have been declining in recent years. For 2
years or more before the Bank Merger Act of 1960, there existed between
the 2 banks substantial common ownership and interlocking directorates,
thus despite some overlapping of service areas very little actual competition exists between the banks. The Wampum community would be provided with a branch of a progressive bank capable of serving its banking
needs more fully. The effect on the competitive position of other banks
in the area would not be adverse.
No. 27—State-Planters Bank of Commerce
and Trusts, Richmond, Va.
to merge with
The Suburban Bank, Henrico County
(Richmond), Va.

244.7

4.0

SUMMARY REPORT BY ATTORNEY GENERAL (7-24-62)

The proposed merger of State-Planters Bank and Suburban Bank would
appear to have no adverse effects upon competition.
For notes see p. 201.

191

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION
OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY
THE BOARD OF GOVERNORS DURING 1962'—Continued
Name of bank, and type of transaction2
(in chronological order of determination)

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-22-62)

The 3 offices of Suburban Bank are situated near the western limits of
the city of Richmond and serve a rapidly expanding suburban area. StatePlanters Bank has 9 of its 15 offices in the Richmond area, but none of
these offices is in the service area of Suburban. The proposed merger
would unite 2 banks affiliated through ownership, otherwise closely related,
and between which there is no significant competition. This would increase efficiency and provide more effective competition for other banks
with offices in the area served by Suburban.
No. 28—Farmers and Merchants Bank of
Lawrenceville, Lawrenceville, Va.

to merge with
Bank of Alberta, Alberta, Va.

10.8

1.8

SUMMARY REPORT BY ATTORNEY GENERAL (7-19-62)

The proposed merger of Farmers and Merchants Bank and Bank of
Alberta will eliminate 1 of the 2 small banks that operates within the
primary service area of Farmers and Merchants Bank.
The unsatisfactory net operating income for the past 5 years, small loan
limit, and low ratio of loans to deposits of the Bank of Alberta indicate
it was not a vigorous factor in competition. We believe the effect of the
elimination of the competition offered by Alberta Bank will be slightly
adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-27-62)

Lawrenceville (population about 2,000) is the seat and principal business center of Brunswick County (population about 18,000). Alberta
(population about 500) is situated in Brunswick County, 10 miles north of
Lawrenceville. Both communities are economically dependent on agriculture, and, while the economic prospects for Lawrenceville are favorable,
Alberta has a limited growth potential. The merger would eliminate 1
of the 2 banks now in Brunswick County and existing competition between them. However, Bank of Alberta with its small loan limit and low
ratio of loans to deposits has not been a strong competitor of Farmers and
Merchants Bank in recent years, and has had below average net operating
income.
Consummation of the proposed transaction would not reduce the number of banking offices available to the public or have an adverse effect
on other banks which would continue to compete for business from the
service areas of the 2 banks involved. The proposal would bring to the
area served by Bank of Alberta, the broader facilities of a bank better
able to satisfy the local banking needs.
For notes see p. 201.

192

No. 29—Peoples Union Bank and Trust
Company, McKeesport, Pa.
to merge with
The Bank of Glassport, Glassport, Pa.

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

123.1

6.2

SUMMARY REPORT BY ATTORNEY GENERAL (9-19-62)

The participating banks are located 3 miles apart. Figures submitted by
Applicant indicate a relatively substantial amount of competition between
the participating banks, and these figures appear to be understated. With
35.1 per cent of total IPC deposits and 39.9 per cent of all loans, Peoples
Union Bank is the second largest in the area. After the merger the resulting bank would appear to be as large or slightly larger than Western
Pennsylvania National Bank, insofar as the latter is represented in the
service area. Western Pennsylvania National, with 39.9 per cent of total
IPC deposits and 43.3 per cent of all loans, is presently the largest bank
in the area. The resulting bank would have 40.5 per cent of total IPC
deposits and 42.5 per cent of all loans in the area. These percentages do
not include deposits and loans of the branch offices of the acquiring bank
and the Western Pennsylvania bank in the service area. If these are considered, the resulting bank would appear to be the largest in the service
area since it has more than $60 million in IPC deposits in these branches
while the Western Pennsylvania National has less than $6 million. The
remaining banks in the area are not substantial competitive factors.
In view of these factors, and in view of the recent heavy merger activity
of the acquiring bank and other banks in the general area, the effect of the
proposed transaction on competition appears to be substantially adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-5-62)

McKeesport (population 45,489) is about 14 miles southeast of Pittsburgh. Glassport (population 8,418) is 3 miles southwest of McKeesport.
While consummation of the proposed merger would eliminate the moderate
amount of competition between the 2 banks involved, it would provide
the customers of Glassport Bank with a wider range of banking services
and would solve the serious management-succession problem of the bank.
Peoples Union Bank is the second largest bank in McKeesport, and this
position would not be altered by the proposal. There would be little, if
any, effect upon the competitive position of other banks in the McKeesport-Glassport area.
For notes see p. 201.

193

No. 30—The Union and New Haven Trust
Company, New Haven, Conn.
to merge with
The Madison Trust Company,

Madison, Conn.

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

81.8

4.4

SUMMARY REPORT BY ATTORNEY GENERAL (8-23-62)

The merger of the Union and New Haven Trust, the third largest bank
in the service area, and Madison Trust may have an adverse effect on competition. The 2 banks, although 19 miles apart, do draw customers from
each other's area.
The merger would not appear to substantially affect the banks located in
New Haven. It would eliminate a degree of competition between the
merging banks and result in the substitution of a branch of a much larger
bank for Madison Trust, the result of which may cause serious difficulties
for the small banks located in nearby Clinton and Guilford.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-9-62)

The proposed merger of Union and New Haven Trust and Madison
Trust would eliminate very little competition inasmuch as there are several
banking facilities between the nearest offices of the 2 banks, which are 19
miles apart. Madison (population about 4,500) is a rapidly growing
residential and resort community, and there is every prospect its expansion
will continue. Madison Trust is the only bank, commercial or savings, in
Madison. As Connecticut law prohibits the establishment by commercial
banks of de novo branches in another city in which any commercial bank
has its head office, Madison Trust is the only bank which may now legally
establish branches in Madison. The growing Madison area would benefit
by the proposed merger as broader banking services would thereby be
made available and a basis laid for bringing other competitive banking
services into the community.
N o . 31—Union Trust Company of Maryland,

Baltimore, Md.
to merge with
The Liberty Bank, Easton, Md.

318.9

35
38

7.6

SUMMARY REPORT BY ATTORNEY GENERAL (8-17-62)

Union Trust is the third largest bank in Maryland with 35 banking
offices in the State. During the past several years it has acquired 3 formerly
independent banks with 6 offices and deposits exceeding $32: million.
Liberty Bank operates 3 of the 6 banking offices in the agricultural area
of Talbot County. It has had a history of growth during the past decade
and can be expected to continue its development absent the proposed
merger.
For notes see p. 201.

194

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

SUMMARY REPORT BY ATTORNEY GENERAL—Cont.

Although the direct competition between the banks which will be
eliminated is not substantial, the merger will have anticompetitive effects
in the area and in the State since it marks the further encroachment of large
Baltimore banks into the rural areas of Maryland by acquisition. The
future of small independent local banks in this area is dim, since only 1
small bank will remain to compete against Maryland National Bank, the
largest in the State, and Union Trust. This will lessen banking competition
in the area and have serious competitive effects.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-12-62)

This merger, which would increase Union Trust's holdings of total
commercial bank deposits of the State by only 0.2 per cent, would enable
it to provide more effective competition in Easton for Maryland National
Bank (the largest bank in Maryland). The over-all effect upon competition
for other banks in the area should not be appreciably adverse. The
nearest offices of Union Trust and Liberty Bank are some 38 miles apart,
and there is virtually no competition between them. Consummation of
the proposal would provide the people within the service area of Liberty
a choice of broader banking services available from large banks and would
solve the management-succession and capital problems of Liberty.
No. 32—Gary Trust and Savings Bank,
Gary, Ind.
to merge with
Lake County State Bank, East Gary, Ind.,
and change its title to Bank of Indiana

28.7
4.9

SUMMARY REPORT BY ATTORNEY GENERAL (8-8-62)

The participating banks are the smallest 2 of the 3 banks in the Gary
area. If the proposed merger were accomplished, the resulting bank would
have about 20 per cent of the deposit and loan business in the service
area, as compared with 80 per cent in the largest bank, the Gary National
Bank.
While the merger will enable the merged institution to compete better
with the dominant bank in the area, it will result in the elimination of 1
of 3 banks, thus increasing the already highly concentrated banking structure in the Gary area. On balance, we believe the effect of the merger
on competition will be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-30-62)

Gary, a highly industrialized community of about 178,000 population,
is served by Gary Trust and Gary National Bank. East Gary (population
about 9,300), situated about 7 miles east of downtown Gary, is chiefly
For notes see p. 201.

195

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

residential in character and is served by 1 bank, Lake County State Bank.
Gary National, operating 12 of the 17 offices of the 2 Gary banks and the
Lake County Bank and holding 82 per cent of the total IPC deposits of
these 3 banks, has long been the dominant institution in the Gary metropolitan area. Very little competition will be eliminated by the proposed
merger, and a basis would be provided for the resulting bank, with
stronger management, to compete more effectively with the much larger
bank, which presently competes directly with both of the merging banks. In
addition, broader and more complete banking services would be provided
in the city of East Gary.
No. 33—The County Trust Company,

565.2

19.8

White Plains, N.Y.
to merge with
The Gramatan National Bank and Trust
Company, Bronxville, N.Y.

SUMMARY REPORT BY ATTORNEY GENERAL (8-31-62)

County Trust, with assets of $565.2 million and operating 43 offices is
by far the largest bank in Westchester County. Gramatan National, with
assets of almost $20 million, is the seventh largest bank in the county.
County Trust's main office is but 9 miles from the main office of Gramatan
and it has 3 branch offices located from 1.3 to 3 miles from Gramatan's
2 offices.
Gramatan appears to be in active and substantial competition with
County Trust and other branches of other banks located only a short
distance from Gramatan's offices. The merger, of course, would eliminate
that competition and remove by merger still another independent bank
from competition in a rapidly growing area. It would also add to the
dominant position already occupied by County Trust in Westchester
County. Therefore, the effect of the merger on competition would be substantially adverse. It would also tend toward monopoly in banking in
Westchester County.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (11-7-62)

County Trust, the largest commercial bank with its main office in
Westchester County (population about 809,000) proposes to merge with
Gramatan National, which is located in Bronxville about 9 miles south of
White Plains and serves an area in which 40,000 persons reside. If the
merger were consummated, County Trust would hold 49 per cent of the
total IPC deposits held by all commercial banks in the county. While
this would be an increase of 1.6 per cent, County Trust's size has had
no adverse effect upon the other county-headquartered banks, which now
For notes see p. 201.

196

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

hold a larger percentage of commercial banking business in the county
than they held at the end of 1956. Furthermore, 5 of these other banks
show a much higher rate of growth than County Trust. This, together
with the present activity of New York City banks in establishing branches
in Westchester County, substantially lessens any tendency toward dominance of county banking by County Trust.
The slight increase in banking concentration that would result from
the proposed merger would be more than offset by the positive benefits
that would flow therefrom. Gramatan has not provided all normal banking
services to Bronxville and its environs. For many years about 90 per cent
of the bank's loan portfolio has consisted of instalment loans originating,
not in Westchester County, but in the eastern and southeastern parts of
the United States. Such loans as are made by Gramatan within the Bronxville area carry higher interest rates than do similar loans at County
Trust; and consequently, consummation of the proposed merger would
provide to the Bronxville area a source of credit at lower rates and would
eliminate the "home office protection" which, under New York law, now
prevents other banks from establishing new branches in Bronxville. The
result should be increased competition. In addition, the proposed merger
would solve the management succession problem at Gramatan, which is
closely related to the bank's unusual type of business, and would enable
County Trust to provide a full range of banking services at the present
offices of Gramatan.
No. 34—Genesee Merchants Bank & Trust
Co., Flint, Mich.
to consolidate with
Davison State Bank, Davison, Mich.

165.6

21
24

10.3

SUMMARY REPORT BY ATTORNEY GENERAL (9-27-62)

Genesee Merchants is the smallest of the 3 banks operating in the city
of Flint although during the past 10 years it has acquired 6 formerly independent banks with 12 offices and more than $44 million in deposits.
Davison State is the only bank in the city of Davison, which is located
10 miles from Flint. There is substantial competition between the banks,
which will be eliminated by this consolidation.
If consolidation with 1 of the large banks in Flint is necessary to
preserve a soundly operated bank in the areas wherein Davison State has
its offices, the proposed consolidation with Genesee Merchants is least
likely of those banks operating in the service area to cause adverse competitive effects.
For notes see p. 201.

197

Banking offices
Resources
(in millions
of dollars)

To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS (11-20-62)

Prospects for the continuance of successful operations by Davison State
have been seriously weakened by certain irregularities in that bank that
resulted in losses depleting its capital structure from approximately $1
million to about $330,000. As Davison State has been competitive with
other banks serving the Flint-Davison area, the effect of the proposed
consolidation on competition would probably not be favorable; however,
consummation of the proposal would assure continuance of operations of
the only banking offices located in the 3 communities served by Davison
State. This consideration clearly offsets any adverse effect from the transaction upon competition.
No. 35—Walker Bank & Trust Company,

Salt Lake City, Utah.

234.5

8.2

to merge with
First National Bank of Price,

Price, Utah.
SUMMARY REPORT BY ATTORNEY GENERAL (8-8-62)

The proposed merger of Walker Bank & Trust and First National Bank
of Price would appear to have adverse effects upon competition.
The merger would bring into Price a bank so much larger than the 2
remaining banks in that area as to cause serious doubts about the vigor of
competition. The merger would eliminate the second largest bank in the
Price area and unite it with the second largest bank in the State. Finally,
the present domination of the 2 largest banks in the State would be
enhanced.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (11-21-62)

Price is the county seat of Carbon County and is separated from Salt
Lake City and the central Utah valley by the Wasatch mountain range.
By road, the 2 cities are 121 miles apart. Walker's nearest branch is 67
miles from Price. Together, Carbon County and adjoining Emery County
form a natural trade and economic area. There are 3 banks now serving
the 2-county area: Price Bank, Carbon Emery Bank (also located in the
city of Price), and Helper State Bank, which is located in the town of
Helper, 7 miles north of Price, and is affiliated with Price Bank through
common stock ownership. When Price Bank is merged into Walker,
Helper State Bank will be an independent, unaffiliated unit bank.
The Price Bank has suffered during recent years from the effects of apparently irreconcilable differences of opinion between 2 groups of shareholders who together own the controlling interest in the bank. These
differences have been responsible for deterioration in the bank's general
condition and have made it very difficult for the board of directors to
For notes see p. 201.

198

Resources
(in millions
of dollars)

Banking offices
In
To be
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

agree on management policies for the bank. In the circumstances, successor
management would be almost impossible to attract.
It appears that Price Bank will be strengthened as a result of the proposed merger and that services to the communities concerned will be somewhat improved. Virtually no competition exists between the merging
banks, and consequently little or no competition will be eliminated.
Neither the position of Walker Bank in Salt Lake City nor its position in
Price, as compared with the present position of Price Bank, will be enhanced to a degree which would damage the competitive position of other
banks in the respective communities. In addition, as a result of the merger,
there would be 3 alternative sources of banking facilities in the 2-county
area served by the Price Bank, in contrast to 2 as at present, in view
of the common ownership of Price and Helper State Bank.
No. 36—Central Trust Company Rochester,
N.Y., Rochester, N.Y.
to merge with
Pittsburgh State Bank, Prattsburg, N.Y.

124.0

2.4

SUMMARY REPORT BY ATTORNEY GENERAL (9-28-62)

The merger would not eliminate any significant competition between the
banks seeking to merge. It would not appreciably change the competitive
position of Central Trust in the Rochester area. The merger represents
the replacement of still another small independent bank by a branch of a
much larger Rochester bank that may further affect the ability of the
remaining small banks in Prattsburgh's service area to effectively compete
with branches of the large Rochester banks. However, we do not believe
that the over-all effect of the proposed merger on competition would be
significantly adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (11-23-62)

The condition of Prattsburgh Bank was regarded as reasonably satisfactory until 1957. Since then, however, the bank has had difficulties resulting largely from poor crop prices, that led to deterioration in the asset
condition of the bank, and from poor loan administration. The capital structure of Prattsburgh Bank is reasonably adequate and its earnings have been
satisfactory, but heavy losses on loans have absorbed a large percentage
of earnings. Consummation of the transaction would provide the office of
Prattsburgh Bank, as a branch of Central Trust, with strengthened management and resources in dealing with the problems confronting the bank.
Broader banking services would be offered to the banking public in Prattsburg and vicinity without a significant effect upon banking competition.
For notes see p. 201.

199

No. 37—Liberty Bank and Trust Company,

Buffalo, N.Y.
to merge with
The First National Bank of Batavia,

Resources
(in millions
of dollars)

Banking offices
To be
In
operation operated

242.3

15.7

Batavia, N.Y.
SUMMARY REPORT BY ATTORNEY GENERAL (10-4-62)

Liberty is the third largest bank in Buffalo operating 28 banking offices
throughout the greater Buffalo area with resources in excess of $240
million. Since 1961 it has merged with 4 formerly independent banks,
acquiring 5 offices, deposits exceeding $32 million, and loans exceeding
$19 million.
First National is the only remaining independent bank in the city of
Batavia, the other 2 banks each being a branch of the 2 largest banks
in Buffalo. It has a history of prosperous and sound operations and has
paid dividends continuously since its organization in 1864.
Considering Liberty's and its chief rivals' recent history of acquisitions
and the existing concentration of banking resources in the: Buffalo area,
this merger will accelerate the trend towards concentration, eliminate a
degree of competition between the merging banks, eliminate independent
banking from Batavia, and enhance the competitive imbalance existing
between the larger and smaller banks in the area. Thus, the effect of the
merger on competition will be adverse.
BASIS FOR APPROVAL BY BOARD OF GOVERNORS (12-20-62)

Until recent years, the rate of growth of Liberty lagged substantially
behind that of the 2 larger Buffalo banks, Marine Trust of Western New
York, with deposits of $800.8 million, and Manufacturers and Traders
Trust, with deposits of $515 million. Marine is a subsidiary of Marine
Midland Corporation, a bank holding company which operates banking
offices in all 9 banking districts in New York. While Marine and Manufacturers were establishing branches or merging with small independent
banks in good locations, Liberty remained static, with many of its in-town
branches located in areas which are deteriorating or where economic
growth has ceased.
Liberty has recently developed a program designed to acquire deposits,
add banking facilities, modernize and relocate existing offices, and improve customer relations. New branches have been established in expanding suburban areas, and several other branches have been acquired
by mergers with 4 relatively small banks in the Buffalo area. Because of
State law, merger is the only means by which Liberty may enter Batavia,
a community of some 18,000, located about 40 miles east of Buffalo and
served by First National and branches of the 2 largest Buffalo banks.
There is moderate competition between First National and Liberty's
branch at Oakfield, some 7 miles north of Batavia. By consummation of
the merger, such competition will be eliminated and customers who now
For notes see the following page.

200

Banking offices
Resources
(in millions
of dollars)

To be
In
operation operated

BASIS FOR APPROVAL BY BOARD OF GOVERNORS—Cont.

choose among 4 banks, that is, among First and branches of the 3
largest Buffalo banks, will have their range of choice narrowed to 3.
On the other hand, analysis of the situation in Buffalo indicates a genuine
need for a third large bank to compete vigorously with Marine and Manufacturers. Acquisition of First should be of some material assistance to
Liberty in its current effort to place itself in a better competitive position
vis-a-vis Marine and Manufacturers.
1
During 1962 the Board disapproved 5 mergers, etc. However, under Section 18(c) of the Federal
Deposit Insurance Act, only those transactions approved by the Board must be described in its annual
report
to the Congress.
2
Except where specifically stated, the merger, etc., was effected under the charter of the first named
bank.
3
The abbreviation "IPC" is used to define deposits of individuals, partnerships, and corporations.
4 All figures are as of Dec. 31, 1961.

201

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
(December 31, 1962)
W M . M C C . MARTIN, JR., of New York, Chairman
C. CANBY BALDERSTON of Pennsylvania, Vice Chairman
A. L. MILLS, JR., of Oregon
J. L. ROBERTSON of Nebraska

Term expires
January 31, 1970
January 31, 1966
January 31, 1972
January 31, 1964

CHAS. N. SHEPARDSON of Texas

January 31, 1968

G. H. KING, JR., of Mississippi

January 31, 1974

GEORGE W. MITCHELL of Illinois

January 31, 1976

RALPH A. YOUNG, Adviser to the Board
CHARLES MOLONY, Assistant to the Board
ROBERT L. CARDON, Legislative Counsel
CLARKE L. FAUVER, Assistant to the Board
OFFICE OF THE SECRETARY
MERRITT SHERMAN, Secretary

KENNETH A. KENYON, Assistant Secretary
ELIZABETH L. CARMICHAEL, Assistant Secretary
LEGAL DIVISION

HOWARD H. HACKLEY, General Counsel

DAVID B. HEXTER, Assistant General Counsel
G. HOWLAND CHASE, Assistant General Counsel
THOMAS J. O'CONNELL, Assistant General Counsel
JEROME W. SHAY, Assistant General Counsel
WILSON L. HOOFF, Assistant General Counsel
DIVISION OF RESEARCH AND STATISTICS

GUY E. NOYES, Director
ALBERT R. KOCH, Associate Director
DANIEL H. BRILL, Adviser
FRANK R. GARFIELD, Adviser
ROBERT C. HOLLAND, Adviser
KENNETH B. WILLIAMS, Adviser

LEWIS N. DEMBITZ, Associate Adviser
DIVISION OF INTERNATIONAL FINANCE
RALPH A. YOUNG, Director
J. HERBERT FURTH, Adviser

A. B. HERSEY, Adviser
ROBERT L. SAMMONS, Adviser

SAMUEL I. KATZ, Associate Adviser
RALPH C. WOOD, Associate Adviser

202

FEDERAL RESERVE SYSTEM
BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM—Cont.
DIVISION OF BANK OPERATIONS
JOHN R. FARRELL, Director

GERALD M. CONKLING, Assistant Director

M. B. DANIELS, Assistant Director
JOHN N. KILEY, JR., Assistant Director
DIVISION OF EXAMINATIONS
FREDERIC SOLOMON, Director

ROBERT C. MASTERS, Associate Director
GLENN M. GOODMAN, Assistant Director
HENRY BENNER, Assistant Director
JAMES C. SMITH, Assistant Director
BRENTON C. LEAVITT, Assistant Director
ANDREW N. THOMPSON, Assistant Director

LLOYD M. SCHAEFFER, Chief Federal Reserve Examiner
DIVISION OF PERSONNEL ADMINISTRATION
EDWIN J. JOHNSON, Director

H. FRANKLIN SPRECHER, JR., Assistant Director
DIVISION OF ADMINISTRATIVE SERVICES
JOSEPH E. KELLEHER, Director

HARRY E. KERN, Assistant Director
OFFICE OF THE CONTROLLER

J. J. CONNELL, Controller
SAMPSON H. BASS, Assistant Controller
OFFICE OF DEFENSE PLANNING
INNIS D. HARRIS, Coordinator

203

FEDERAL OPEN MARKET COMMITTEE
(December 31, 1962)
MEMBERS
WM. MCC. MARTIN, JR., Chairman (Board of Governors)
ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New
York)
C. CANBY BALDERSTON (Board of Governors)

MALCOLM BRYAN (Elected by Federal Reserve Banks of Atlanta, St. Louis,
and Dallas)
FREDERICK L. DEMING (Elected by Federal Reserve Banks of Minneapolis,
Kansas City, and San Francisco)
GEORGE H. ELLIS (Elected by Federal Reserve Banks of Boston, Philadelphia,
and Richmond)
W. D. FULTON (Elected by Federal Reserve Banks of Cleveland and Chicago)
G. H. KING, JR. (Board of Governors)
A. L. MILLS, JR. (Board of Governors)
GEORGE W. MITCHELL (Board of Governors)

J. L. ROBERTSON (Board of Governors)
CHAS. N. SHEPARDSON (Board of Governors)

OFFICERS
RALPH A. YOUNG, Secretary
MERRITT SHERMAN,

J. HERBERT FURTH,

Assistant Secretary

Associate Economist

KENNETH A. KENYON,

GEORGE GARVY,

Assistant Secretary

Associate Economist

HOWARD H. HACKLEY,

W. BR\DDOCK HICKMAN,

General Counsel

Associate Economist

DAVID B. HEXTER,

ROBERT C. HOLLAND,

Assistant General Counsel

Associate Economist

GUY E. NOYES,

ALBERT R. KOCH,

Economist

Associate Economist

HARRY BRANDT,

FRANKLIN L. PARSONS,

Associate Economist

DANIEL H. BRILL,

PARKED B. WILLIS,

Associate Economist
Associate Economist
ROBERT W. STONE, Manager, System Open Market Account
CHARLES A. COOMBS, Special Manager, System Open Market Account
During 1962 the Federal Open Market Committee met approximately
every three weeks as indicated in the Record of Policy Actions taken by the
Committee (see pp. 45-110 of this REPORT).

204

FEDERAL ADVISORY COUNCIL
(December 31, 1962)
MEMBERS
District No. 1—OSTROM ENDERS, Chairman, Hartford National Bank and
Trust Company, Hartford, Connecticut.
District No. 2—GEORGE A. MURPHY, Chairman of the Board, Irving Trust
Company, New York, New York.
District No. 3—HOWARD C. PETERSEN, President, Fidelity-Philadelphia Trust
Company, Philadelphia, Pennsylvania.
District No. 4—REUBEN B. HAYS, Chairman of the Board, The First National
Bank of Cincinnati, Cincinnati, Ohio.
District No. 5—ROBERT B. HOBBS, Chairman of the Board, First National Bank
of Baltimore, Baltimore, Maryland.
District No. 6—J. FINLEY MCRAE, President, Merchants National Bank, Mobile,
Alabama.
District No. 7—KENNETH V. ZWIENER, President, Harris Trust and Savings
Bank, Chicago, Illinois.
District No. 8—SIDNEY MAESTRE, Chairman of the Executive Committee, Mercantile Trust Company, St. Louis, Missouri.
District No. 9—JOHN A. MOORHEAD, President, Northwestern National Bank of
Minneapolis, Minneapolis, Minnesota.
District No. 10—M. L. BREIDENTHAL, Chairman of the Board, Security National
Bank of Kansas City, Kansas City, Kansas.
District No. 11—I. F. BETTS, President, The American National Bank of Beaumont, Beaumont, Texas.
District No. 12—ELLIOTT MCALLISTER, Chairman of the Board, The Bank of
California National Association, San Francisco, California.
OFFICERS
GEORGE A. MURPHY, President
REUBEN B. HAYS, Vice President
HERBERT V. PROCHNOW, Secretary
WILLIAM J. KORSVIK, Assistant Secretary

EXECUTIVE COMMITTEE
GEORGE A. MURPHY, ex officio
REUBEN B. HAYS, ex officio
OSTROM ENDERS
ROBERT B. HOBBS
KENNETH V. ZWEINER

Meetings of the Federal Advisory Council were held on February 19-20,
April 4, April 30-May 1, September 17-18, and November 19-20, 1962. The
Board of Governors met with the Council on February 20, April 4, May 1,
September 18, and November 20. 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.

205

FEDERAL RESERVE BANKS
AND BRANCHES
(December 31, 1962)
CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS

Federal Reserve Bank of—

Chairman and
Federal Reserve Agent

Deputy Chairman

Boston

Nils Y. Wessell

Erwin 3D. Canham

New York

Philip D. Reed

James DeCamp Wise

Philadelphia

Walter E. Hoadley

David C. Bevan

Cleveland

Joseph B. Hall

Joseph H. Thompson

Richmond

Alonzo G. Decker, Jr

Edwin Hyde

Atlanta

Jack Tarver

Henry G. Chalkley, Jr.

Chicago

Robert P. Briggs

James H. Hilton

St. Louis

Pierre B. McBride

J. H. Longwell

Minneapolis

Atherton Bean

Judson Bemis

Kansas City

Homer A. Scott

Oliver S. Willham

Dallas

Robert O. Anderson

Lamar Fleming, Jr.

San Francisco

F. B. Whitman

John D. Fredericks

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 with and advise the Board of Governors. A meeting
of the Conference of Chairmen was held on November 29-30, 1962, and was
attended by members of the Board of Governors and also by the Deputy
Chairmen of the Federal Reserve Banks.
Mr. Reed, Chairman of the Federal Reserve Bank of New York, who was
elected Chairman of the Conference and of the Executive Committee in
December 1961, served in that capacity until the close of the 1962 meeting.
Mr. Decker, Chairman of the Federal Reserve Bank of Richmond, and Mr.

206

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont
Whitman, Chairman of the Federal Reserve Bank of San Francisco, served
in 1962 with Mr. Reed as members of the Executive Committee, Mr. Decker
also serving as Vice Chairman of the Conference.
At the meeting held on November 30, 1962, Mr. Whitman, Chairman of
the Federal Reserve Bank of San Francisco, was elected Chairman of the
Conference and a member of the Executive Committee to serve for the succeeding year; Mr. Briggs, Chairman of the Federal Reserve Bank of Chicago, was
elected Vice Chairman and a member of the Executive Committee; and Mr.
Bean, Chairman of the Federal Reserve Bank of Minneapolis, was elected as
the other member of the Executive Committee.
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 5 or 7 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.

DIRECTORS
Class A:
William D. Ireland

District 1 — Boston

Term
expires
Dec. 31

Chairman of the Executive Committee, State
Street Bank and Trust Company, Boston,
Mass
1962
Arthur F. Maxwell
President, The First National Bank of Biddeford,
Maine
1963
William M. Lockwood.. .President, The Howard National Bank and
Trust Company, Burlington, Vt
1964

207

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.
Class B:
Milton P. Higgins
William R. Robbins
James R. Carter
Class C:
Nils Y. Wessell
William Webster
Erwin D. Canham

District 1 — Boston — Cont.

Term
expires
Dec. 31

Chairman of the Board, Norton Company,
Worcester, Mass
1962
Vice President and Controller, United Aircraft
Corporation, East Hartford, Conn.
1963
President, Nashua Corporation, Nashua, N.H.. 1964

President, Tufts University, Medford, Mass
1962
President, New England Electric System, Boston,
Mass
1963
Editor, The Christian Science Monitor, Boston,
Mass
1964

District 2 —New York
Class A:
Cesar J. Bertheau
A. Leonard Mott
George Champion

Class B:
Kenneth H. Hannan
Albert L. Nickerson
B. Earl Puckett

Class C.Philip D. Reed
Everett N. Case
James DeCamp Wise

Chairman of the Board, Peoples Trust Company
of Bergen County, Hackensack, N.J
1962
President, The First National Bank of Moravia,
N.Y
1963
Chairman of the Board, The Chase Manhattan
Bank, New York, N.Y
1964

Executive Vice President, Union Carbide Corporation, New York, N.Y
1962
Chairman of the Board, Socony Mobil Oil Company, Inc., New York, N.Y
1963
Chairman of the Board, Allied Stores; Corporation, New York, N.Y
1964

Formerly Chairman of the Board, General Electric Company, New York, N.Y
1962
President, Alfred P. Sloan Foundation, New
York, N.Y
1963
Formerly Chairman of the Board, Bigelow-Sanford, Inc., Frenchtown, N.J
1964

208

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 2 — New York — Cont.

Term
expires
Dec, 31

Buffalo Branch

Appointed by Federal Reserve Bank:
Howard N. Donovan
President, Bank of Jamestown, N.Y
John M. Galvin
Chairman, Executive Committee, The Marine
Trust Company of Western New York,
Buffalo, N.Y
Anson F. Sherman
President, The Citizens Central Bank, Arcade,
N.Y
Elmer B. Milliman
President, Central Trust Company Rochester
N.Y
Appointed by Board of Governors:
Raymond E. Olson
President, Taylor Instrument Companies, Rochester, N.Y
Thomas E. LaMont
Farmer, Albion, N.Y
Whitworth Ferguson
President, Ferguson Electric Construction Co.,
Inc., Buffalo, N.Y

1962
1963
1964
1964

1962
1963
1964

District 3 — Philadelphia
Class A:
Frederic A. Potts
J. Milton Featherer
Eugene T. Gramley
Class B:
R. Russell Pippin
Leonard P. Pool
Frank R. Palmer

President, The Philadelphia National Bank,
Philadelphia, Pa
1962
Executive Vice President and Trust Officer, The
Penn's Grove National Bank and Trust Company, Penns Grove, N.J
1963
President, Milton Bank and Safe Deposit Company, Milton, Pa
1964
Treasurer, E. I. du Pont de Nemours and Company, Wilmington, Del
1962
President, Air Products and Chemicals, Inc.,
Allentown, Pa
1963
Chairman of the Board, The Carpenter Steel
Company, Reading, Pa
1964

dass C.David C. Bevan
Walter E. Hoadley
Willis J. Winn

Vice President, Finance, The Pennsylvania Railroad Company, Philadelphia, Pa
1962
Vice President and Treasurer, Armstrong Cork
Company, Lancaster, Pa
1963
Dean, Wharton School of Finance and Commerce, University of Pennsylvania, Philadelphia, Pa
1964

209

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31., 1962 — Cont.

DIRECTORS — Cont.
Class A:
Francis H. Beam
Paul A. Warner
C. N. Sutton
Ciass B:
W. Cordes Snyder, Jr
Edwin J. Thomas
David A. Meeker

District 4 — Cleveland

Term
expires
Dec. 31

Chairman of the Board, The National City Bank
of Cleveland, Ohio
1962
President, The Oberlin Savings Bank Company,
Oberlin, Ohio
1963
President, The Richland Trust Company, Mansfield, Ohio
1964
Chairman of the Board and President, BlawKnox Company, Pittsburgh, Pa
1962
Chairman of the Board and Chief Executive
Officer, The Goodyear Tire & Rubber Company, Akron, Ohio
1963
President, The Hobart Manufacturing Company,
Troy, Ohio
1964

Class C.Joseph H. Thompson.... Chairman of the Board, The Hanna Mining
Company, Cleveland, Ohio
1962
Aubrey J. Brown
Professor of Agricultural Marketing and Head
of Department of Agricultural Economics,
University of Kentucky, Lexington, Ky
1963
Joseph B. Hall
Chairman of the Board, The Kroger Co., Cincinnati, Ohio
1964
Cincinnati Branch

Appointed by Federal Reserve Bank:
LeRoy M. Miles
President, First Security National Bank and
Trust Company of Lexington, Ky..
Logan T. Johnston
President, Armco Steel Corporation., Middletown, Ohio
H. W. Gillaugh
President, The Third National Bank and Trust
Company of Dayton, Ohio
G. Carlton Hill
Chairman of the Board and President, The Fifth
Third Union Trust Co., Cincinnati, Ohio

1962
1963
1963
1964

Appointed by Board of Governors:
Howard E. Whitaker
Chairman of the Board, The Mead Corporation,
Dayton, Ohio
1962
Walter C. Langsam
President, University of Cincinnati, Ohio
1963
Barney A. Tucker
President, Burley Belt Plant Food Works, Inc.,
Lexington, Ky
1964

210

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 4 — Cleveland — Cont.

Term
expires
Dec. 31

Pittsburgh Branch

Appointed by Federal Reserve Bank:
Samuel R. Evans
President and Trust Officer, Windber Trust
Company, Windber, Pa
Chas. J. Heimberger
President, The First National Bank of Erie, Pa..
S. L. Drumm
President, West Penn Power Company, Greensburg, Pa
James B. Grieves
President, Commonwealth Bank and Trust Company, Pittsburgh, Pa

1962
1963
1963
1964

Appointed by Board of Governors:
F. L. Byrom
President, Koppers Company, Inc., Pittsburgh,
Pa
1962
G. L. Bach
Maurice Falk Professor of Economics and Social
Science, Carnegie Institute of Technology,
Pittsburgh, Pa
1963
William A. Steele
Chairman of the Board and President, Wheeling
Steel Corporation, Wheeling, W.Va
1964
District 5 — Richmond
Class A:
H. H. Cooley
Addison H. Reese
J. McKenny Willis, Jr
Class B:
R. E. Salvati
Robert E. L. Johnson
Robert R. Coker
Class C:
Alonzo G. Decker, Jr
William H. Grier
Edwin Hyde

President, The Round Hill National Bank,
Round Hill, Va
1962
President, North Carolina National Bank, Charlotte, N.C
1963
Director, Maryland National Bank (Baltimore),
Easton, Md
1964
Chairman of the Board, Island Creek Coal Company, Huntington, W.Va
1962
Chairman of the Board, Woodward & Lothrop,
Incorporated, Washington, D.C
1963
President, Coker's Pedigreed Seed Company,
Hartsville, S.C
1964
President, The Black & Decker Manufacturing
Company, Towson, Md
1962
President, Rock Hill Printing & Finishing Company, Rock Hill, S.C
1963
President, Miller & Rhoads, Inc., Richmond, Va. 1964

211

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31 1962 — Cont.

DIRECTORS — Cont.

District 5 — Richmond — Cont.

Term
expires
Dec. 31

Baltimore Branch

Appointed by Federal Reserve Bank:
James W. McElroy
Director, The First National Bank of Maryland,
Baltimore, Md
J. N. Shumate
President, The Farmers National Bank of
Annapolis, Md
Harvey E. Emmart
Senior Vice President and Cashier, Maryland
National Bank, Baltimore, Md
Martin Piribek
Executive Vice President, The First National
Bank of Morgantown, W.Va

1962
1963
1964
1964

Appointed by Board of Governors:
Gordon M. Cairns
Dean of Agriculture, University of Maryland,
College Park, Md
1962
Harry B. Cummings
Vice President & General Manager, Metal Products Division, Koppers Company, Inc., Baltimore, Md
1963
Leonard C. Crewe, Jr
President and Treasurer, Maryland Fine & Specialty Wire Company, Inc., Cockeysville, Md. 1964

Charlotte Branch

Appointed by Federal Reserve Bank:
G. Harold Myrick
Executive Vice President and Trust Officer, The
First National Bank of Lincolnton, N.C
W. W. McEachern
President, The South Carolina National Bank,
Greenville, S.C
Joe H. Robinson
Senior Vice President, Wachovia Bank and
Trust Company, Charlotte, N.C
Wallace W. Brawley
President, The Commercial National Bank of
Spartanburg, S.C

1962
1963
1964
1964

Appointed by Board of Governors:
J. C. Cowan, Jr
Vice Chairman of the Board, Burlington Industries, Inc., Greensboro, N.C
1962
George H. Aull
Agricultural Economist, Clemson College, Clemson, S.C
1963
Clarence P. Street
President, McDevitt & Street Company, Charlotte, N.C
1964

212

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.
Class A:
M. M. Kimbrel
George S. Craft
D. C. Wadsworth, Sr
Class B:
McGregor Smith
W. Maxey Jarman
James H. Crow, Jr
Class C:
J. M. Cheatham
Henry G. Chalkley, Jr
Jack Tarver

District 6 — Atlanta

Term
expires
Dec. 31

Chairman of the Board, First National Bank,
Thomson, Ga
1962
President, Trust Company of Georgia, Atlanta,
Ga
1963
President, The American National Bank, Gadsden, Ala
1964
Chairman of the Board, Florida Power & Light
Company, Miami, Fla
1962
Chairman, Genesco, Inc., Nashville, Tenn
1963
Vice President, The Chemstrand Corporation,
Decatur, Ala
1964
President, Dundee Mills, Incorporated, Griffin,
Ga
1962
President, The Sweet Lake Land & Oil Company, Lake Charles, La
1963
President, Atlanta Newspapers, Inc., Atlanta,
Ga
1964
Birmingham Branch

Appointed by Federal Reserve Bank:
R. J. Murphy
Executive Vice President, Citizens-Farmers &
Merchants Bank, Brewton, Ala
Frank A. Plummer
Chairman of the Board and President, Birmingham Trust National Bank, Birmingham, Ala..
John H. Neill, Jr
President, Union Bank & Trust Co., Montgomery, Ala
W. H. Mitchell
President, The First National Bank of Florence,
Ala

1962
1963
1964
1964

Appointed by Board of Governors:
Jack W. Warner
Chairman of the Board and President, Gulf
States Paper Corporation, Tuscaloosa, Ala... 1962
Selden Sheffield
Cattleman, Greensboro, Ala
1963
C. Caldwell Marks
Chairman of the Board, Owen-Richards Company, Inc., Birmingham, Ala
1964

213

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 6 — Atlanta — Cont.

Term
expires
Dec. 31

Jacksonville Branch

Appointed by Federal Reserve Bank:
Leonard A. Usina
Chairman of the Board, Peoples National Bank
of Miami Shores, Fla
Godfrey Smith
President, Capital City National Bank of Tallahassee, Fla
J. T. Lane
Chairman of the Board, The Atlantic National
Bank, Jacksonville, Fla
Harry Fagan
President, First National Bank in Fort Myers,
Fla

1962
1963
1964
1964

Appointed by Board of Governors:
Claude J. Yates
Vice President and General Manager, Southern
Bell Telephone and Telegraph Company,
Jacksonville, Fla
1962
J. Ollie Edmunds
President, Stetson University, DeLand, Fla..... 1963
Harry T. Vaughn
President, United States Sugar Corporation,
Clewiston, Fla
1964

Nashville Branch

Appointed by Federal Reserve Bank:
D. L. Earnest
President, The Blount National Bank of Maryville, Tenn
D. W. Johnston
Executive Vice President, Third National Bank
in Nashville, Tenn
Travis Hitt
President, Farmers National Bank, Winchester,
Tenn
Harry M. Nacey, Jr
President, Hamilton National Bank, Knoxville,
Tenn

1962
1963
1964
1964

Appointed by Board of Governors:
Andrew D. Holt
President, University of Tennessee, Knoxville,
Tenn
1962
W. N. Krauth
President and General Manager, Colonial Baking Company of Nashville, Tenn,
1963
V. S. Johnson, Jr
Chairman of the Board and President, Aladdin
Industries, Inc., Nashville, Tenn
1964

214

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 6 — Atlanta — Cont.

Term
expires
Dec. 31

New Orleans Branch

Appointed by Federal Reserve Bank:
Frank A. Gallaugher
President, Jeff Davis Bank & Trust Company,
Jennings, La
Giles W. Patty
President, First National Bank, Meridian, Miss.
Lewis Gottlieb
Chairman of the Board, City National Bank,
Baton Rouge, La
John Oulliber
President, The National Bank of Commerce in
New Orleans, La

1962
1963
1964
1964

Appointed by Board of Governors:
J. O. Emmerich
Editor, Enterprise-Journal, McComb, Miss
1962
Frank A. Godchaux, III. .Vice President, Louisiana State Rice Milling
Company, Inc., Abbeville, La
1963
Kenneth R. Giddens
President, WKRG-TV, Inc., Mobile, Ala
1964
District 7 — Chicago
Class A:
Vivian W. Johnson
David M. Kennedy
John H. Crocker
Class B:
William A. Hanley
G. F. Langenohl
William E. Rutz
Class C.James H. Hilton
John W. Sheldon
Robert P. Briggs

Chairman of the Board, First National Bank,
Cedar Falls, Iowa
1962
Chairman of the Board, Continental Illinois
National Bank and Trust Company of Chicago, 111
1963
Chairman of the Board, The Citizens National
Bank of Decatur, 111
1964
Director, Eli Lilly and Company, Indianapolis,
Ind
1962
Treasurer and Assistant Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis. 1963
Director, Giddings & Lewis Machine Tool Company, Fond du Lac, Wis
1964
President, Iowa State University of Science and
Technology, Ames, Iowa
1962
President, Chas. A. Stevens & Co., Chicago, 111. 1963
Executive Vice President, Consumers Power
Company, Jackson, Mich
1964

215

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 —- Cont.

DIRECTORS — Cont.

District 7 — Chicago — Cont.

Term
expires
Dec. 31

Detroit Branch

Appointed by Federal Reserve Bank:
C. Lincoln Linderholm.. .President, Central Bank, Grand Rapids, Mich...
William A. Mayberry
Chairman of the Board, Manufacturers National
Bank of Detroit, Mich
Franklin H. Moore
President, The Commercial and Savings Bank,
St. Clair, Mich
Donald F. Valley
Chairman of the Board, National Bank of
Detroit, Mich

1962
1963
1963
1964

Appointed by Board of Governors:
J. Thomas Smith
President, Dura Corporation, Oak Park, Mich.. 1962
Max P. Heavenrich, Jr.. .President and General Manager, Heavenrich
Bros. & Company, Saginaw, Mich.
1963
James William Miller
President, Western Michigan University, Kalamazoo, Mich
1964
District 8 — St. Louis
Class A:
Kenton R. Cravens
H. Lee Cooper
Arthur Werre, Jr

Chairman of the Board, Mercantile Trust Company, St. Louis, Mo
1962
President, Ohio Valley National Bank of Henderson, Ky
1963
Executive Vice President, First National Bank
of Steeleville, 111
1964

Class B:
Harold O. McCutchan... Senior Executive Vice President, Mead Johnson
& Company, Evansville, Ind
1962
Edgar M. Queeny
Chairman of the Finance Committee and member of Board of Directors, Monsanto Chemical
Company, St. Louis, Mo
1963
Raymond Rebsamen
Chairman of the Board, Rebsamen & East, Inc.,
Little Rock, Ark
1964
Class C.Pierre B. McBride
Jesse D. Wooten
J. H. Longwell

President, Porcelain Metals Corporation, Louisville, Ky
1962
Executive Vice President, Mid-South Chemical
Corporation, Memphis, Term
1963
Director, Special Studies and Programs, College
of Agriculture, University of Missouri, Columbia, Mo
1964

216

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 8 — St. Louis — Cont.

Term
expires
Dec. 31

Little Rock Branch
Appointed by Federal Reserve Bank:

H. C. Adams
J. W. Bellamy
R. M. LaGrone, Jr
Ross E. Anderson

Executive Vice President, The First National
Bank of De Witt, Ark
President, National Bank of Commerce of Pine
Bluff, Ark
President, The Citizens National Bank of Hope,
Ark
President, The Commercial National Bank of
Little Rock, Ark

1962
1963
1963
1964

Appointed by Board of Governors:

T. Winfred Bell
Frederick P. Blanks
Waldo E. Tiller

President, Bush-Caldwell Company, Little Rock,
Ark
1962
Planter, Parkdale, Ark
1963
President, Tiller Tie and Lumber Company, Inc.,
Little Rock, Ark
1964

Louisville Branch
Appointed by Federal Reserve Bank:

Merle E. Robertson
Ray A. Barrett
John G. Russell
John R. Stroud

Chairman of the Board and President, Liberty
National Bank and Trust Company of Louisville, Ky
President, The State Bank of Salem, Ind
President, The Peoples First National Bank &
Trust Company of Paducah, Ky
Executive Vice President, The First National
Bank of Mitchell, Ind

1962
1963
1963
1964

Appointed by Board of Governors:

William H. Harrison
Philip Davidson
Richard T. Smith

President, Taylor Drug Stores, Inc., Louisville,
Ky
1962
President, University of Louisville, Ky
1963
Farmer, Madisonville, Ky
1964

Memphis Branch
Appointed by Federal Reserve Bank:

Charles R. Caviness
John E. Brown
Simpson Russell
Leon C. Castling

President, National Bank of Commerce of
Corinth, Miss
President, Union Planters National Bank of
Memphis, Tenn
Chairman of the Board, The National Bank of
Commerce of Jackson, Tenn
President, First National Bank at Marianna, Ark.

217

1962
1963
1963
1964

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 8 — St. Louis — Cont.

Term
expires
Dec. 31

Memphis Branch — Cont.

Appointed by Board of Governors:
William King Self
President, Riverside Industries, Marks, Miss
1962
Edward B. LeMaster
President, Edward LeMaster Company, Inc.,
Memphis, Term
1963
Frank Lee Wesson
President, Wesson Farms, Inc., Victoria, Ark... 1964
District 9 — Minneapolis
Class A:
Harold N. Thomson
Harold C. Refling
Rollin O. Bishop
Class .B.Alexander Warden
Ray C. Lange
T. G. Harrison
Class C:
Atherton Bean
JudsonBemis
John H. Warden

Vice President, Farmers & Merchants Bank,
Presho, S. Dak
1962
Cashier, First National Bank in Bottineau,
N. Dak
1963
Chairman of the Board, The American National
Bank of Saint Paul, Minn
1964
Publisher, Great Falls Tribune-Leader, Great
Falls, Mont
1962
President, Chippewa Canning Company, Inc.,
Chippewa Falls, Wis
1963
Chairman of the Board, Super Valu Stores, Inc.,
Minneapolis, Minn
1964
President, International Milling Company,
Minneapolis, Minn
1962
President, Bemis Bro. Bag Co., Minneapolis,
Minn
1963
President, Upper Peninsula Power Company,
Houghton, Mich
1964
Helena Branch

Appointed by Federal Reserve Bank:
Roy G. Monroe
Chairman of the Board and President, The First
State Bank of Malta, Mont
Harald E. Olsson
President, Ronan State Bank, Ronan, Mont
O. M. Jorgenson
Chairman of the Board, Security Trust; and Savings Bank, Billings, Mont
Appointed by Board of Governors:
Harry K. Newburn
President, Montana State University, Missoula,
Mont
John M. Otten
.Farmer and rancher, Lewistown, Mont

218

1962
1962
1963

1962
1963

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.
Class A:
Burton L. Lohmuller
Harold Kountze
W. S. Kennedy

Class B:
K. S. Adams
Max A. Miller
Robert A. Olson

Class C.Oliver S. Willham
Homer A. Scott
Dolph Simons

District 10 — Kansas City

Term
expires
Dec. 31

President, The First National Bank of Centralia,
Kans
1962
Chairman of the Board, The Colorado National
Bank of Denver, Colo
1963
President and Chairman of the Board, The First
National Bank of Junction City, Kans
1964

Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla
1962
Livestock rancher, Omaha, Nebr
1963
President, Kansas City Power & Light Company, Kansas City, Mo
1964

President, Oklahoma State University, Stillwater,
Okla
1962
Vice President and District Manager, Peter
Kiewit Sons' Company, Sheridan, Wyo
1963
Editor and President, The Lawrence Daily Journal-World, Lawrence, Kans
1964

Denver Branch

Appointed by Federal Reserve Bank:
J. H. Bloedorn
President, The Farmers State Bank of Fort
Morgan, Colo
1962
Cale W. Carson
Chairman of the Board, First National Bank in
Albuquerque, N. Mex
1962
Eugene H. Adams
President, The First National Bank of Denver,
Colo
1963
Appointed by Board of Governors:
R. A. Burghart
Ingle Land and Cattle Company, Colorado
Springs, Colo
1962
Robert T. Person
President, Public Service Company of Colorado,
Denver, Colo
1963

219

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 10 — Kansas City — Cont.

Term
expires
Dec. 31

Oklahoma City Branch

Appointed by Federal Reserve Bank:
R. L. Kelsay
Chairman of the Board and President, The First
National Bank in Hobart, Okla
1962
C. L. Priddy
President, The National Bank of McAlester,
Okla
1962
C. P. Stuart
Chairman of the Board, The Fidelity National
Bank & Trust Company, Oklahoma City,
Okla
1963
Appointed by Board of Governors:
Otto C. Barby
Attorney and rancher, Beaver, Okla
1962
James E. Allison
President, Warren Petroleum Co rporation,
Tulsa, Okla
1963
Omaha Branch

Appointed by Federal Reserve Bank:
John F. Davis
President, First National Bank, Omaha, Nebr...
R. E. Barton
President, The Wyoming National Bank of
Casper, Wyo
Henry D. Kosman
Chairman of the Board and President, Scottsbluff National Bank, Scottsbluff, Nebr
Appointed by Board of Governors:
Clifford Morris Hardin... Chancellor, The University of Nebraska, Lincoln, Nebr
John T. Harris
Merchant and cattleman, McCook, Nebr

1962
1963
1963

1962
1963

District 11 — Dallas
Class A:
John M. Griffith
Roy Riddel
J. Edd McLaughlin
Class B:
J. B. Perry, Jr
D. A. Hulcy
H. B. Zachry

President, The City National Bank of Taylor,
Tex
1962
President, First National Bank at Lubbock, Tex.. 1963
President, Security State Bank & Trust Company, Rails, Tex
1964
President and General Manager, Perry Brothers,
Inc., Lufkin, Tex
1962
Chairman of the Board, Lone Star Gas Company, Dallas, Tex
1963
President and Chairman of the Board, H. B.
Zachry Co., San Antonio, Tex
1964

220

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.
Class C:
Robert O. Anderson
Morgan J. Davis
Lamar Fleming, Jr

District 11 — Dallas — Cont.

Term
expires
Dec. 31

President, Hondo Oil & Gas Company, Roswell,
N. Mex
1962
Chairman of the Board, Humble Oil & Refining
Company, Houston, Tex
1963
Member, Board of Directors, Anderson, Clayton & Co., Inc., Houston, Tex
1964
El Paso Branch

Appointed by Federal Reserve Bank:
Chas. B. Perry
President, First State Bank, Odessa, Tex
Floyd Childress
Vice Chairman of the Board, The First National
Bank of Roswell, N. Mex
Dick Rogers
President, First National Bank in Alpine, Tex...
Joseph F. Irvin
President, Southwest National Bank of El Paso,
Tex

1962
1963
1963
1964

Appointed by Board of Governors:
Roger B. Corbett
President, New Mexico State University, University Park, N. Mex
1962
William R. Mathews
Editor and Publisher, The Arizona Daily Star,
Tucson, Ariz
1963
Dysart E. Holcomb
Director of Research, El Paso Natural Gas
Products Company, El Paso, Tex
1964
Houston Branch

Appointed by Federal Reserve Bank:
M. M. Galloway
President, First Capitol Bank, West Columbia,
Tex
J. A. Elkins, Jr
President, First City National Bank of Houston,
Tex
John E. Gray
President, First Security National Bank of Beaumont, Tex
J. W. McLean
President, Texas National Bank of Houston,
Tex

1962
1963
1963
1964

Appointed by Board of Governors:
A. E. Cudlipp
Vice President and Director, Lufkin Foundry &
Machine Company, Lufkin, Tex
1962
Max Levine
President, Foley's, Houston, Tex
1963
Edgar H. Hudgins
Ranching — Partner in Hudgins Division of
J. D. Hudgins, Hungerford, Tex
1964

221

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 11 — Dallas — Cont.

Term
expires
Dec. 31

San Antonio Branch

Avpointed by Federal Reserve Bank:
Dwight D. Taylor
President, Pan American State Bank, Brownsville, Tex
Donald D. James
Vice President, The Austin National Bank,
Austin, Tex
Forrest M. Smith
President, National Bank of Commerce of San
Antonio, Tex
Max A. Mandel
President, The Laredo National Bank, Laredo,
Tex

1962
1963
1963
1964

Appointed by Board of Governors:
John R. Stockton
Professor of Business Statistics and Director of
Bureau of Business Research, The University
of Texas, Austin, Tex
1962
G. C. Hagelstein
President and General Manager, Union Stock
Yards San Antonio, Tex
1963
Harold D. Herndon
Independent Oil Operator, San Antonio, Tex
1964
District 12 — San Francisco
Class A:
M. Vilas Hubbard
Carroll F. Byrd
Charles F. Frankland
Class B:
N. Loyall McLaren
Joseph Rosenblatt
Walter S. Johnson
Class C:
F. B. Whitman
John D. Fredericks
Frederic S. Hirschler

President and Chairman of the Board, Citizens
Commercial Trust and Savings Bank of Pasadena, Calif.
1962
Chairman of the Board and President, The First
National Bank of Willows, Calif.
1963
President, The Pacific National Bank of Seattle,
Wash
1964
Partner, Haskins & Sells, San Francisco, Calif.. 1962
President, The Eimco Corporation, Salt Lake
City, Utah
1963
Chairman of the Board, American Forest Products Corporation, San Francisco, Calif.
1964
President, The Western Pacific Railroad Company, San Francisco, Calif.
1962
President, Pacific Clay Products, Los Angeles,
Calif.
1963
President, The Emporium Cap well Company,
San Francisco, Calif.
1964

222

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.

DIRECTORS — Cont.

District 12 — San Francisco — Cont.

Term
expires
Dec. 31

Los Angeles Branch

Appointed by Federal Reserve Bank:
Douglas Shively
President, Citizens State Bank of Santa Paula,
Calif.
1962
Roy A. Britt
President, Citizens National Bank, Los Angeles,
Calif.
1962
Ralph V. Arnold
President, First National Bank of Ontario,
Calif.
1963
Appointed by Board of Governors:
S. Alfred Halgren
Vice President and Director, Carnation Company, Los Angeles, Calif.
1962
Robert J. Cannon
President, Cannon Electric Company, Los
Angeles, Calif.
1963
Portland Branch

Appointed by Federal Reserve Bank:
D. S. Baker
President, The Baker-Boyer National Bank,
Walla Walla, Wash
1962
E. M. Flohr
President, The First National Bank of Wallace,
Idaho
1962
C. B. Stephenson
Chairman of the Board, The First National
Bank of Oregon, Portland, Oreg
1963
Appointed by Board of Governors:
Raymond R. Reter
Reter Fruit Company, Medford, Oreg
1962
Graham J. Barbey
President, Barbey Packing Corporation, Astoria,
Oreg
1963
Salt Lake City Branch

Appointed by Federal Reserve Bank:
J. E. Brinton
President, The First National Bank of Ely, Nev. 1962
Reed E. Holt
President, Walker Bank & Trust Company,
Salt Lake City, Utah
1962
Oscar Hiller
President, Butte County Bank, Arco, Idaho
1963
Appointed by Board of Governors:
Thomas B. Rowland
President and General Manager, Rowland's,
Inc., Pocatello, Idaho
1962
Howard W, Price
Executive Vice President, The Salt Lake Hardware Co., Salt Lake City, Utah
1963

223

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 3!L, 1962 —Cont.

D I R E C T O R S — Cont.

District 12 — San Francisco — Cont.

Term
expires
Dec. 31

Seattle Branch

Appointed by Federal Reserve Bank:

Chas. H. Parks
M. F. Hastings
Joshua Green, Jr

Executive Vice President, Seattle-First National
Bank, Spokane and Eastern Division, Spokane, Wash
1962
President, The First National Bank of Ferndale,
Wash
1962
Chairman of the Board, Peoples National Bank
of Washington, Seattle, Wash
1963

Appointed by Board of Governors:

Lyman J. Bunting
Henry N. Anderson

President, Artificial Ice & Fuel Company,
Yakima, Wash
1962
President, Twin Harbors Lumber Company,
Aberdeen, Wash
1963

224

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.
PRESIDENTS AND VICE PRESIDENTS

Federal
Reserve
Bank of—
Boston

Vice Presidents

President
First Vice President
George H. Ellis
E. O. Latham

D. Harry Angney O. A. Schlaikjer
Charles E. Turner
Ansgar R. Berge
Benjamin F. Groot G. Gordon Watts

New York... Alfred Hayes
William F. Treiber

Harold A. Bilby
Charles A. Coombs
Howard D. Crosse
Marcus A. Harris
Alan R. Holmes
Herbert H.Kimball

Robert G. Rouse
Walter H. Rozell, Jr.
H. L. Sanford
Robert W. Stone
Todd G. Tiebout

Philadelphia. Karl R. Bopp
Robert N. Hilkert

Hugh Barrie
John R. Bunting
Joseph R. Campbell
Norman G. Dash
David P. Eastburn

Murdoch K. Goodwin
Harry W. Roeder
James V. Vergari
Richard G. Wilgus

Roger R. Clouse
Cleveland... W. D. Fulton
Donald S. Thompson E. A. Fink
W. Braddock
Hickman
Richmond... Edward A. Wayne
Aubrey N. Heflin

Martin Morrison
Paul C. Stetzelberger

Joseph M. Nowlan
Robert P. Black
J. G. Dickerson, Jr. Benj. U. Ratchford
Upton S. Martin R. E. Sanders, Jr.
John L. Nosker

Atlanta

Malcolm Bryan
Harold T. Patterson

J. E. Denmark
J. E. McCorvey
L. B. Raisty

Brown R. Rawlings
Charles T. Taylor

Chicago

C. J. Scanlon
Hugh J. Helmer

E. T. Baughman
A. M. Gustavson
Paul C. Hodge
L.H. Jones
C. T. Laibly

Richard A. Moffatt
H. J. Newman
Leland M. Ross
Harry S. Schultz

St. Louis

Harry A. Shuford
Darryl R. Francis

Marvin L. Bennett Howard H. Weigel
Joseph C. Wotawa
Homer Jones
Dale M. Lewis
Orville O. Wyrick

225

ANNUAL REPORT OF BOARD OF GOVERNORS
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.
PRESIDENTS AND VICE PRESIDENTS—Cont.

Federal
Reserve
Bank of—

President
First Vice President

Vice Presidents

Minneapolis. Frederick L. Deming
A. W. Mills

Kyle K. Fossum
C. W. Groth
M. B. Holmgren
A. W. Johnson

H. G. McConnell
F. L. Parsons
M. H. Strothman, Jr.

Kansas City. George H. Clay
Henry O. Koppang

John T. Boysen
C. A. Cravens
J. R. Euans
F. H. Larson

L. F. Mills
Clarence W. Tow
J. T. White

James L. Cauthen
Ralph T. Green
Thomas A. Hardin
G. R. Murff

James A. Parker
Thomas W. Plant
W. M. Pritchett
Thomas R. Sullivan

Dallas

Watrous H. Irons
Philip E. Coldwell

San Francisco Eliot J. Swan
H. E. Hemmings

J. L. Barbonchielli A. B. Merritt
John A. O'Kane
Paul W. Cavan
D. M. Davenportx
E. H. Galvin

Assigned to Los Angeles Branch.

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. Fulton, President of the Federal Reserve Bank of Cleveland, and Mr.
Irons, President of the Federal Reserve Bank of Dallas, were elected Chairman
of the Conference and Vice Chairman, respectively, in March 1962, and served
in those capacities during 1962.
Mr. Lester M. Selby of the Federal Reserve Bank of Cleveland and Mr.
Robert H. Boykin of the Federal Reserve Bank of Dallas were appointed
Secretary of the Conference and Assistant Secretary, respectively, in March
1962, and served as such during the remainder of the year.

226

FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1962 — Cont.
VICE PRESIDENTS IN CHARGE OF BRANCHES

Branch

Federal Reserve Bank of—

Vice President

New York....

Buffalo

I. B. Smith

Cleveland

Cincinnati
Pittsburgh

F. O. Kiel
Clyde Harrell

Richmond

Baltimore
Charlotte

D. F. Hagner
E. F. MacDonald

Atlanta

Birmingham
Jacksonville
Nashville
New Orleans

H. C. Frazer
T. A. Lanford
R. E. Moody, Jr.
M. L. Shaw

Chicago

Detroit

R. A. Swaney

St. Louis

Little Rock
Louisville
Memphis

Fred Burton
Donald L. Henry
E. Francis DeVos

Minneapolis..

Helena

C. A. Van Nice

Kansas City..

Denver
Oklahoma City
Omaha

Cecil Puckett
H. W. Pritz
P. A. Debus

Dallas

El Paso
Houston
San Antonio

Roy E. Bohne
J. L. Cook
Carl H. Moore

San Francisco

Los Angeles
Portland
Salt Lake City
Seattle

C. H. Watkins
J. A. Randall
A. L. Price
E. R. Barglebaugh

227

THE FEDERAL RESERVE SYSTEM
BOUNDARIES OP W D E R A t RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES

HAWAII

- •"
Legend
* Boundaries of Federal Reserve Districts
** Boundaries of Federal Reserve Breach Territories
. ;
0 Board of Governors of the Federal Reserve System
<•> Federal Reserve Bank Cities
• Federal Reserve Branch Cities
NOTE.—District and branch territories described in ANNUAL REPORT for 1953, p. 24; later changes in branch territories, in ANNUAL

m*™?^ inr- 10^4 r> S7 and in Federal Reserve Bulletin for Januarv 1959. r>. 17. and SeDtember 1959. D. 1141.

Index
Page
Acceptance powers of member banks
127
Acceptances, bankers':
Authority to purchase, and to enter into repurchase agreements
49, 66
Federal Reserve Bank holdings
137, 144, 146
Open market transactions during 1962
152
Assets and liabilities:
Banks, by classes
164
Board of Governors
141
Federal Reserve Banks
144-49
Balance of payments
32
Bank Examination School
129
Bank holding companies:
Board actions with respect to
125
Litigation
134, 135
Bank Holding Company Act, proposed amendments
131
Bank mergers and consolidations
124, 169
Bank premises, Federal Reserve Banks and branches. .130, 140, 144, 146, 148, 153
Bank reserves {See Reserves)
Bank Service Corporation Act
131
Bank supervision by Federal Reserve System
122
Banking Markets Unit, establishment of
125
Banking offices:
Changes in number
166
On, and not on, Par List, number
167
Board of Governors:
Audit of accounts
140
Banking Markets Unit
125
Income and expenses
140-42
Litigation
133
Members and officers
202
Policy actions
111-21
Regulations {See Regulations)
Branch banks:
Banks, by classes, changes in number
166
Federal Reserve:
Bank premises
153
Buildings, amendments to Sections 3 and 10 of Federal Reserve A c t . . . . 130
Directors
207
Vice Presidents in charge of
227
Foreign branches:
Member banks, number
126
National banks, powers of
130

229

INDEX
Page
Buildings of Federal Reserve branch banks, amendments to Sections 3 and 10
of Federal Reserve Act
130
Capital accounts:
Banks, by classes
164
Federal Reserve Banks
145, 147, 149
Capital stock of Federal Reserve Banks, issue and cancellation of, revision of
Regulation 1
120
Central reserve city classification, termination of
12, 115
Chairmen of Federal Reserve Banks
206
Check clearing and collection:
Check mechanization program
138
Nonmember clearing accounts with Federal Reserve Banks, amendment of
Section 210.2(a) of Regulation J
117
Volume of operations
158
Commercial banks:
Assets and liabilities
164
Banking offices, changes in number
166
Number, by classes
164
Common trust funds
126, 130
Condition statement of Federal Reserve Banks
,
144-49
Continental Bank and Trust Company, Salt Lake City, Utah, litigation, and
termination of administrative proceeding
133
Defense Production Act, extension of
131
Defense production loans
138, 160
Deposits:
Banks, by classes
164
Federal Reserve Banks
145, 147, 149, 162
Foreign time deposits, interest on, amendment to Federal Reserve Act and
Regulation Q
118, 129
Time and savings deposits, maximum permissible rates
13, 159
Deputy Chairmen of Federal Reserve Banks
206
Directors, Federal Reserve Banks and branches
207
Discount rates at Federal Reserve Banks
159
Discounts and advances by Federal Reserve Banks
137, 144, 146, 148, 162
Dividends:
Federal Reserve Banks
136, 155, 156
Member banks
165
Earnings:
Federal Reserve Banks
135, 137, 154, 156
Member banks
165
Economic review
1
Examinations:
Federal Reserve Banks
122
Foreign banking corporations
128
Holding company affiliates
125
Member banks
122
State member banks
122

230

INDEX
Page
Expenses:
Board of Governors
140-42
Federal Reserve Banks
135, 154, 156
Member banks
165
Federal Advisory Council
205
Federal Open Market Committee:
Foreign currency operations:
Authorization and guidelines
51, 54-63, 66, 103
Directive
63, 66, 78, 82, 86, 97
Regulation N, amendment to
Ill
Review of operations
5, 10, 39, 140
Meetings
45, 204
Members and officers
204
Policy actions
45-110
Review of continuing authorizations
66
Federal Reserve Act:
Sections 10 and 3, amendments with respect to Federal Reserve branch bank
buildings
130
Section ll(k), with respect to trust powers of national banks, repeal of
130
Section 14(b), authority of Federal Reserve Banks to purchase Government
obligations direct from the U. S., extension of
130
Section 19, amendment with respect to interest on foreign time deposits... 129
Section 24, amendment with respect to real estate and construction loans by
national banks
131
Section 25, amendment with respect to powers of foreign branches of national banks
130
Federal Reserve Agents
206
Federal Reserve Banks:
Accounts with foreign banks, amendment to Regulation N
Ill
Assessment for expenses of Board of Governors
142
Bank premises
140, 144, 146, 148, 153
Branches {See Branch banks, Federal Reserve)
Capital accounts
145, 147, 149
Capital stock, issue and cancellation of, revision of Regulation 1
120
Chairmen and Deputy Chairmen
206
Check mechanization program
138
Condition statement
144-49
Directors
207
Discount rates
159
Dividends
136, 155, 156
Earnings and expenses
135, 137, 154, 156
Examination of
122
Foreign and international accounts
139
Officers and employees, number and salaries
158
Presidents and First Vice Presidents
225
Profit and loss
155

231

INDEX
Page
Federal Reserve Banks—Continued
U. S. Government securities:
Authority to purchase direct from the U. S., extension of
130
Holdings of
137, 144, 146, 148, 150, 162
Open market transactions during 1962
152
Special certificates purchased direct from Treasury
151
Volume of operations
138, 158
Federal Reserve notes:
Condition statement data
144-49
Cost of issue, printing, and redemption
142
Interest paid to Treasury
136, 155, 156
Federal Reserve System:
Bank supervision by
122
Foreign currency operations (See Foreign currency operations)
Map of Federal Reserve Districts
228
Membership
123
Financial market developments
13
First Oklahoma Bancorporation, litigation involving
135
Foreign banking and financing corporations
127
Foreign branches:
Member banks, number
126
National banks, powers of
130
Foreign currency operations:
Authorization and guidelines
51, 54-63, 66, 103
Directive
63, 66, 78, 82, 86, 97
Regulation N, amendment to
Ill
Review of operations
5, 10, 39, 140
Foreign time deposits, interest on, amendment to Federal Reserve Act and
Regulation Q
118, 129
Gold certificate reserves of Federal Reserve Banks
144, 146, 148
Government securities (See U. S. Government securities)
Holding company affiliates
125, 133
Income, expenses, and dividends, member banks
165
Insured commercial banks
164, 166
Interest rates:
Discount rates at Federal Reserve Banks
159
Foreign time deposits, amendment to Federal Reserve Act and Regulation
Q
118, 129
Regulation V loans
160
Time and savings deposits, maximum permissible rates
13, 159
International payments problem
31
Investments:
Banks, by classes
164
Federal Reserve Banks
144, 146, 148
Legislation:
Authority of Federal Reserve Banks to purchase Government obligations
direct from the U. S., extension of
130

232

INDEX
Page
Legislation—Continued
Bank Holding Company Act, proposed amendments
131
Bank Service Corporation Act
131
Defense Production Act, extension of
131
Federal Reserve branch bank buildings
130
Foreign branches of national banks, powers of
130
Interest on foreign time deposits
129
Real estate and construction loans by national banks
131
Litigation
133
Loans:
Banks, by classes
164
Federal Reserve Banks
137, 144, 146, 148, 162
National bank real estate and construction loans, amendment to Section 24
of Federal Reserve Act
131
Regulation V loans
138, 160
Margin requirements:
Reduction in
13, 113
Special cash accounts, amendments to Regulation U to prevent improper
use of credit to finance transactions in
112
Table of
160
Member banks:
Acceptance powers
127
Assets, liabilities, and capital accounts
164
Banking offices, changes in number
166
Examination of
122
Foreign branches, number
126
Income, expenses, and dividends
165
Number
123, 164, 166
Reserve requirements:
Reduction in
12, 119
Table of
161
Reserves:
Regulation D and Supplement, revision of
115
Reserves and related items
162
Membership in Federal Reserve System
123
Mergers {See Bank mergers and consolidations)
Monetary policy:
Digest of principal policy actions
6
Review of
8
Mutual savings banks
164, 166
National banks:
Assets and liabilities
164
Banking offices, changes in number
166
Foreign branches:
Number
126
Powers of
130

233

INDEX
Page
National banks—Continued
Number
123, 164, 166
Real estate and construction loans, amendment to Section 24 of Federal Reserve Act
131
Trust powers:
Number of banks granted powers by Board
126
Termination of Board's Regulation F
118
Transfer of authority to Comptroller of the Currency
126, 130
Nonmember banks:
Assets and liabilities
164
Banking offices, changes in number
166
Clearing accounts with Federal Reserve Banks, amendment of Section
210.2(a) of Regulation J
117
Northwest Bancorporation, litigation under Bank Holding Company Act
135
Open Market Committee {See Federal Open Market Committee)
Open market operations:
Foreign currency operations {See Foreign currency operations)
U. S. Government securities
8, 45-110, 152
Par List, banking offices on, and not on, number
167
Policy actions, Board of Governors:
Regulation D, Reserves of Member Banks:
Reserve requirements, reduction in
119
Revision of
115
Regulation F, Trust Powers of National Banks:
Termination of
118
Regulation I, Issue and Cancellation of Capital Stock of Federal Reserve
Banks:
Revision of
120
Regulation J, Check Clearing and Collection:
Nonmember clearing accounts, amendment of Section 210.2(a)
117
Regulation N, Relations with Foreign Banks and Bankers:
Accounts with foreign banks, amendment with respect to
Ill
Regulation Q, Payment of Interest on Deposits:
Interest on foreign time deposits, amendment with respect to
118
Regulation T, Credit by Brokers, Dealers, and Members of National Securities Exchanges:
Margin requirements, reduction in
113
Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying
Registered Stocks:
Amendments to prevent improper use of credit to finance transactions in
special cash accounts
112
Margin requirements, reduction in
113
Rule for Classification of Reserve Cities, amendment to
116
Policy actions, digest of
6
Policy actions, Federal Open Market Committee:
Authority to effect transactions in System Account
„
45-110

234

INDEX
Page
Policy actions, Federal Open Market Committee—Continued
Foreign currency operations:
Authorization and guidelines
51, 54-63, 66, 103
Directive
63, 66, 78, 82, 86, 97
Review of continuing authorizations
66
Presidents of Federal Reserve Banks:
Conference of
226
List
225
Salaries
158
Profit and loss, Federal Reserve Banks
155
Record of policy actions (See Policy actions)
Regulations, Board of Governors:
D, Reserves of Member Banks:
Reserve requirements, reduction in
12, 119
Revision of
115
F, Trust Powers of National Banks:
Termination of
118
I, Issue and Cancellation of Capital Stock of Federal Reserve Banks:
Revision of
120
J, Check Clearing and Collection:
Nonmember clearing accounts, amendment of Section 210.2(a)
117
N, Relations with Foreign Banks and Bankers:
Accounts with foreign banks, amendment with respect to
Ill
Q, Payment of Interest on Deposits:
Interest on foreign time deposits, amendment with respect to
118
T, Credit by Brokers, Dealers, and Members of National Securities Exchanges :
Margin requirements, reduction in
13, 113
U, Loans by Banks for the Purpose of Purchasing or Carrying Registered
Stocks:
Amendments to prevent improper use of credit to finance transactions in
special cash accounts
112
Margin requirements, reduction in
13, 113
Repurchase agreements:
Bankers' acceptances
49, 66, 144, 146, 152
U. S. Government securities
49, 66, 144, 146, 152, 162
Reserve cities:
Central reserve city classification terminated
12, 115
Rule for classification of, amendment to
116
Termination of designation of Kansas City, Topeka, and Wichita, Kansas. 117
Reserve requirements, member banks:
Reduction in
12, 119
Regulation D and Supplement, revision of
115
Table of
161
Reserves:
Federal Reserve Banks
144-49

235

INDEX
Page
Reserves—Continued
Member banks:
Regulation D and Supplement, revision of
115
Reserve requirements:
Reduction in
12, 119
Table of
161
Reserves and related items
162
Rule for Classification of Reserve Cities, amendment to
116
Salaries:
Board of Governors
142
Federal Reserve Banks
158
Savings bond meetings
137
Savings deposits {See Deposits)
State member banks :
Assets and liabilities
164
Banking offices, changes in number
166
Examination of
,
122
Foreign branches, number
,
126
Litigation
133
Mergers and consolidations
124, 169
Number
123, 164, 166
System Open Market Account:
Audit of
122
Authority to effect transactions in
45-110
Time deposits {See Deposits)
Trust powers of national banks:
Number of banks granted powers by Board
126
Termination of Board's Regulation F
118
Transfer of authority to Comptroller of the Currency
126, 130
U. S. Government securities:
Authority of Federal Reserve Banks to purchase direct from the U. S., extension of
130
Bank holdings, by class of bank
164
Federal Reserve Bank holdings
137, 144, 146, 148, 150, 162
Open market operations
8, 45-110, 152
Repurchase agreements
49, 66, 144, 146, 162
Special certificates purchased direct from Treasury
151
V loans
138, 160
Voting permits issued to holding company affiliates
125
Whitney Holding Corporation, litigation involving
134

236

Full text of Annual Report of the Board of Governors of the Federal Reserve System : 1962

FRASER