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V Fifteenth Annual Report of the Federal Reserve Bank of Boston for the year ended December 31, 1929 °£ ISoston, zJXCassachusetts FEDERAL RESERVE BANK OF BOSTON OFFICERS AND DIRECTORS December 31, 1929 OFFICERS FREDERIC H. CURTISS, Federal W. P. G. HARDING, Governor Reserve Agent WILLIAM W. PADDOCK, Deputy Governor CHARLES F. GETTEMY, Assistant Federal WILLIAM WILLETT, Cashier Reserve Agent KRICKEL K. CARRICK, Secretary HARRY F. CURRIER. Auditor ELLIS G. HULT, Assistant Cashier ERNEST M. LEAVITT, Assistant Cashier L. WALLACE SWEETSER, Assistant Cashier DIRECTORS Class and Group Term Expires December 31 A 1 ALFRED L. RIPLEY, A 2 F. S. CHAMBERLAIN, Chairman of the Board, Boston, Mass. 1932 The Merchants National Bank, President, New Britain National Bank, New Britain, Ct. 1931 A 3 EDWARD S. KENNARD, Vice-President and Cashier, The Rumford National Bank, Rumford, Me. B 1 PHILIP R. ALLEN, President, Bird & Son, Inc. E. Walpole, Mass. 1932 B 2 ALBERT C. BOWMAN, President, John T. Slack Corporation, Springfield, Vt. 1931 B 3 A. FARWELL BEMIS, Chairman, Bemis Bro. Bag Co. Boston, Mass. 1930 C FREDERIC H. CURTISS, Chairman, Boston, Mass. 1932 C ALLEN HOLLIS, Deputy-Chairman, Lawyer, Concord, N. H. 1930 C CHAS. H. MANCHESTER , President, Providence Gas Co., Providence, R. I. 1931 GENERAL COUNSEL ARTHUR H. WEED, Boston, Mass. MEMBER OF FEDERAL ADVISORY COUNCIL 1930 ARTHUR M. HEARD President, The Amoskeag National Bank, Manchester, N. H. FIFTEENTH ANNUAL REPORT OF THE Federal Reserve Bank of Boston For the year ended December 31, 1929 BOSTON, MASSACHUSETTS LETTER OF TRANSMITTAL BOSTON, MASS., January 28, 1930. HON. ROY A. YOUNG, Governor, Federal Reserve Board, Washington, D. C. SIR: I have the honor to submit herewith the Fifteenth Annual Report of the Federal Reserve Bank of Boston, covering industrial and credit conditions in New England, and the operations of the bank for the period January 1, 1929 to December 31, 1929. Respectfully yours, FREDERIC H. CURTISS, Chairman and Federal Reserve Agent. FIFTEENTH ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON NEW ENGLAND BUSINESS CONDITIONS DURING 1929 • During 1929 the general level of industrial activity in New England was higher on the average than in any previous year; thus, this district shared in the general activity which prevailed throughout the country during the year. During the first quarter of 1929 general business activity in New England increased at a rapid rate, and continued rising throughout the second quarter. After mid-year, however, there was evidence that business was slowing down, such evidence being visible previous to the period of drastic stock market liquidation during October and November. Throughout the third quarter of 1929 there was a moderate recession in business activity, which continued in October. During the last two months of the year, however, sharp curtailment in most lines of New England industry brought the general level at the close of the year to a point considerably under any which had prevailed since 1924. There were no particularly outstanding events in New England industrial conditions during the year, the rise to new high levels being the result of generally healthy expansion, which usually proceeds by a series of spurts, expansion (supply) outrunning consumption (demand), followed by a readjustment period, during which demand grows up to supply. The closing months of 1929 witnessed a readjustment period. There was a continued diversification of New England industry during 1929, and whereas the textile and boot and shoe industries were predominating factors in former years, at the present time these two industries comprise a relatively small percentage of the total New England industrial activity. New England industry is now supplemented by a newer form of activity in developing and utilizing the recreational facilities of this section of the country. This new activity is a rapidly growing business, which has become of substantial value to New England welfare. The condition of New England agriculture during the year 1929 showed a substantial improvement over the previous year. The unusually large potato crop of Aroostook County, Maine, sold at higher prices, contributed substantially to the increase in total crop values between 1928 and 1929, while the cranberry crop, produced largely in Massachusetts, and the tobacco crop, raised principally in Connecticut, were also contributing factors. The agricultural situation in New England at the beginning of 1930 is excellent. ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON Building activity, more especially the speculative feature, continued the decline which started in the middle of 1928. The volume of retail sales reported by New England stores during 1929 was slightly larger than that reported during the previous year, the increase being 1.3 per cent. Conditions in the New England textile industry during 1929 were somewhat more satisfactory on the average than those which prevailed in 1928. New England boot and shoe production during 1929 was greater than in 1928, although toward the latter part of the year considerable curtailment was reported. The allied metal trades and machine tool industries in New England reported unusual activity during 1929. While production in New England has no doubt been affected indirectly by the profits made in the security market, this district, on the other hand, has few, if any, industries which have been directly stimulated by those profits. During the year 1929, the manufacturer, merchant, and farmer, have been able to get ample credit at reasonable rates to meet their requirements, and while member banks have taken advantage of the high yield on security loans, this apparently was not done at the expense of the merchant and the farmer. The decline in industrial activity in November was unusually sharp, and the extent of the recession which has taken place since midsummer may have been accentuated by the decline in the security markets of October and November. The level of industrial activity at the close of 1929 was considerably under the level which prevailed at the end of the preceding year. Employment: Employment conditions throughout New England during the past year have been on the whole exceptionally good. Not only has there been a fairly high demand for workers, INDEXES OF EMPLOYMENT MASSACHUSETTS AND UNITED STATES b u t most industries have been relatively free of labor disturbances. Records of the leading public employment offices show an increase of over six per cent in the demand for employees, principally for skilled workers and m a c h i n i s t s in the metal and machine tool trades. Since 1923 the trend in the total num ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON bers employed in reporting manufacturing establishments throughout NewEngland has been downward. From the point of view of industry the movement represents a period of resuscitation. Over-capacity and overproduction are being gradually eliminated, and obsolete equipment is being replaced with labor-saving machinery. Thus, operatives affected by these economic changes have become engaged in departments or trades which furnish such equipment, or have entered other fields of industry wheie opportunity is less restricted. The greatest outlet for New England enterprise has been in the growth and development of its recreational activities, which are constantly drawing upon an increasing number of employees. Cotton: In 1929 New England mills consumed 6.7 per cent more raw cotton than during 1928, and cotton consumption for the entire country was 7.0 per cent larger TEXTILE ACTIVITY in 1929. The increase NEW ENGLAND which tool place in 1923 1924 1925 1926 1927 1928 1929 New England, however, was simply an improvement over a very small volume of consumption in 1928, a year during which less cotton was consumed in New England than in anv other post-war year. The improvement was not sufficient to bring the New England total up to the levels of recent years other than 1928. For the entire country, cotton consumption in 1929 was only slightly less than the largest post-war annual volume of 1927. Cotton consumption in New England during the past 10 years has shown a declining tendency, and there probably are three principal factors which have influenced the trend: — liquidation of mills and transfer of operations to other sections of the country; the fact that rayon has been used in increasing quantities by cotton mills in mixture with cotton fibre; and the frequent condition in which New England finishing mills have found it advantageous to purchase gray cloth from southern mills. Production of fine cotton goods in New Bedford increased more than 65 per cent in 1929 over 1928, but the strike in 1928 curtailed production sharply during that year. Total production in New Bedford, however, ANNUAL REPORT OF T H E FEDERAL RESERVE BANK OF BOSTON in 1929 was larger than in 1925, 1926, and 1928, and was about 11 per cent less than in 1927. The New England cotton textile trade, although more satisfactory in 1929 than in 1928, could not be considered among those industries of this district which shared in an unusually high level of activity during IO 2 - 9Wool: The amount of raw wool consumed by New England mills in 1929 was larger than in any year since 1923, and yet during the year wool prices declined steadily. In November and December there was a sharp decrease in New England consumption, as compared with the corresponding months in 1928, but a decline was general throughout most lines of activity during the last two months of 1929, and was not confined to the textile industry. During each of the first nine months of 1929 there was a larger per cent of wool machinery active in New England than during the corresponding months a year ago, but throughout the fourth quarter there was less activity. Although activity in the woolen industry was greater on the average during 1929 than in 1928, profit margins were reported to be small, and in some instances practically nil. The Wool Institute, however, is becoming more and more of a factor in aiding the industry to become stabilized. The outlook for the woolen industry, while far from satisfactory, appears to be more encouraging. Building: The year 1929 closed with the lowest total value of new construction contracts awarded since 1924, both in the country as a whole and in New VALUE OF BUILDING CONTRACTS AWARDED England. The value of NEW ENGLAND contracts awarded in 1926 1927 1928 1929 New England has been declining steadily durE H ALL OTHER COMMERCIAL i ing the past two years, RESIDENTIAL — and for the year 1929 was $98,198,600, or 20 per cent below that of the preceding year. The general tendency in recent years has been for the total value of building to increase gradually in a cyclical manner, with the peaks occurring approximately every three years. A 12 months' moving average of total value of new contracts awarded for New England indicates that 8 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON the peaks during the post-war decade have occurred in 1922, 1925, and 1928. The years since 1919 have been so replete with various factors relative to rehabilitation, reorganization, and new economic tendencies, that none of these distinct periods of building has been exactly identical with any other. The decline from the high level of building operations reached during 1928 has been attributed for the most part to the conditions prevalent in the money market and some apparent over-capacity existing in office and apartment house types of buildings. The interest in speculative activity resulted in increasing the cost and decreasing the volume of money available for real estate operations through the attractiveness of collateral loans, but at the same time attracted funds which normally were deposited in savings and co-operative banks. These institutions find their chief source of investment in real estate loans and mortgages, particularly of the residential type, which has been one of the principal causes of weakness in the construction industry during 1929. Metals: It is in the metal trades and machine tool industry of New England that the greatest percentage of increased activity has occurred during the past year. This increase has been the natural accompaniment of the high rate of production in the automotive and kindred industries throughout the country. With the industrial output of the nation at the highest level ever recorded during a period when the country was at peace, the demand for copper, brass, and their fabricated products has been proportionately large. The increasing output of industrial products has inevitably stimulated a demand for newer and more efficient types of machine tools. This demand, however, encountered some difficulty in the third quarter, with the declining tendency of the volume of industrial output and the constantly rising interest rates, w*hich operated to check the further investment in equipment. The metal-rolling mills and fabricating plants of the Naugatuck Valley, the machine tool industry of Massachusetts, Rhode Island, and Connecticut, and the specialty products shops throughout New England have experienced during the past 18 months the most sustained production schedules in recent years. Current employment figures throughout the year have indicated full-time and overtime operations to be in force, mill orders indexes have given evidences of a substantial backlog of new business on the books, and the prices of the leading metals have been firm. Changes that have occurred during the closing months of 1929 within this group of industries are the result of influences which are causing similar reductions throughout all lines of activity, and have not materially affected the outstanding record of 1929. ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON Boots and Shoes: Total boot and shoe production in New England during 1929 was slightly less than one per cent ahead of the previous year's record and proSHOE PRODUCTION portionately below the NEW ENGLAND increase of 4.5 per cent 1923 1924 1925 1926 1 9 2 7 1928 1929 shown in the figures for the total output of the country. While this h moderate rise in the • ', > j i volume of shoe produci ' \ / '., j \ tion in New England u > \~f~t" •i \ indicates that the shoe '< \ ~i V y 1 industry has not been a considerable factor in 1TUAL the high rate of indusMONTHS trial activity that characterized the past year, t h e performance of each industry must be appraised by the economic forces operative within that particular industry. The annual output of shoes within the New England states from 1924 to 1928 increased 13.8 per cent, whereas the corresponding record for the entire country showed a gain of only 9.9 per cent. When the respective percentage increases in total annual production during the five-year period, 1924-1929, are compared, however, New England registers an increase of 14.9 per cent against a gain of 15.3 per cent for the United States, which relationship represents a more balanced distribution of output, in view of the industrial growth of the country and the location of the principal marketing areas. Shoe shipments from Brockton during 1929 were larger on the average than in the preceding year, and for the entire period gained nearly 15 per cent. Wholesale prices of hides and leather products were distinctly lower at the end of 1929 than at the end of 1928. J W J AAV v A \'c MOVING AVERAGE Trade: The volume of retail trade in 1929 reported to the Federal Reserve Bank of Boston by 89 New England stores was about one per cent larger than the aggregate business of these firms during 1928. Sales of Boston department stores were 1.8 per cent larger in 1929 than in 1928, and were approximately equal in volume to the record year of 1927. As a matter of fact, since 1920 the percentage increases or decreases in annual volumes from year to year have been relatively small, especially during the past three years. The following table indicates the annual percentage changes since 1919: \ IO ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON From From From From From From From From 1919 1920 1921 1922 1923 1924 1925 1926 to to to to to to to to 1920 1921 1922 1923 1924 1925 1926 1927 +16.2 —0.6 +3-8 -j- 6.6 —0.7 + 1.5 -j- 4.0 +0.5 From 1927 to 1928 From 1928 to 1929 —1.9 + 1.8 The total sales volume of an identical number of Boston stores increased 34.5 per cent between 1919 and 1929. The growth during recent years, however, has been smaller than in the early part of the period, as will be noticed from the above table. It seems significant that Boston department store sales in December, 1929, were only one-tenth of one per cent less than the record December business of 1928. The above data are based upon aggregate net sales, however, and may not be indicative of trends of profits. Commercial failures, as reported by R. G. Dun & Company, increased 1.8 per cent in number during 1929, compared with the preceding year, while during the same period total liabilities were 12.6 per cent larger. Although liabilities for the entire country were 4.2 per cent greater in 1929 than in 1928, the number of failures declined about 3.5 per cent. The following table presents the changes which have taken place in many New England business activities between 1928 and 1929. The table does not necessarily contain all available business data pertaining to this district, but does furnish a cross-section sufficiently comprehensive to be indicative of economic changes in New England: BUSINESS INDICES—NEW ENGLAND Change Change 1929 to 1928 GENERAL BUSINESS : 1929 1. New Incorporations—Massachusetts 2. Electric Power Production (Kwh.) 3. Carloadings (Mdse., l.c.l., and Misc.) 4. Residential Building Contracts Awarded 5. Commercial and Industrial Building Contracts Awarded 6. Total Construction Contracts Awarded 1928 1928 to 1927 —0.6 +15.7 2,717 2,733 6,647,619,000* 5,953,75i,ooo + 117 +9-6 1,969,629 1,979,564 —0.5 +0.3 $ 153,269,000 $ 203,349,000 —24.6 +9.7 $ 108,014,000 $ 149,132,000 —27.6 +75-O $ 398,382,400 $ 495,581,000 —20.0 +20.3 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON II BUSINESS INDICES—NEW ENGLAND—Continued Change Change 1929 1929 to 1928 1928 1928 to 1927 INDUSTRIAL CONDITIONS : 1. Cotton Consumption (bales) 2. Production — Fine Cotton Goods (pieces) 3. Average Cotton Spindles in Place 4. Average Cotton Spindles Active 5. Wool Consumption (lbs.). 6. Activity—Woolen Spindles (% of Single Shift Capacity) 7. Activity—Worsted Spindles (% of Single Shift Capacity) 8. Shoe Production (pairs) . . 9. Orders of Paper Mills.... (% of 1923-25 Mo. Ave.) 10. Machine Tools—Net Orders —U. S (% of 1923-25 Mo. Ave.) 11. Orders of Metal Trades.. (% of 1926 Mo. Ave.) 12. Average Number Employed (Reporting Mass. Establishments) 13. Average Monthly Payrolls (Reporting Mass. Establishments) 14. Labor Demand at Public Employment Offices—8 Cities. 15. Silk Machinery Activity (% Capacity) 16. Fish Receipts—3 Ports (pounds) 1,415,671 1,326,800 + 6.7 —21.1 5,185,352 3,135,814 +65.3 —44-8 14,702,500* 15,635,908 -5-6 -7.8 11,126,000* 297,733,000* 74.1* 10,840,534 268,207,000 75-8 68.5* 63.3 +8.3 -9.6 122,088,000* 109.5* 122,012,000 92.7 +0.8 + 18.2 +8.0 277.6 226.5 +22.6 +65./ 116.4* 101.3 + 14.8 218,671 209,058 +4-6 —IO.I $5,469,689 $5,151,018 +6.2 —9.6 74,509 70,813 + 5-2 + 1.8 81.7 91.9 —II.I 321,561,000* 277,993,000 +2.6 —19.0 + 11.1 —2.4 —2.2 —2.1 + 5-7 +11.2 +15.8 +5-3 + i-3 —i-5 TRADE : 1. Department Stores Sales.. (% of 1923-25 Mo. Ave.) 2. Sales of New Motor Cars 3. Number of Commercial Failures (R. G. Dun & Co.) 4. Liabilities of Commercial Failures (R. G. Dun & Co.) 106.6 105.1 260,205 214,854 2,601 2,555 + 1.8 +3-6 $54,623,125 $48,521,219 + 12.6 -76 202,111,000 $143,784,000 104.9 105.8 +21.1 +25.0 AGRICULTURE : 1. Value of Farm C r o p s . . . . (Dec. 1, 1929, Prices) 2. Average Level of Farm Prices (B.L.S.—1926 = 100) *Preliminary. +37-O —12.4 —0.9 +6.4 12 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON MONEY AND BANKING From early in April, 1928, to the end of May, 1929, the reporting member banks in the New England district, both those in Boston and outside of Boston, experienced a continuous drop in deposits. This drop probably was caused in a large measure by withdrawals in connection with the security market, depositors withdrawing money for investment purposes or attracted by the high rates prevailing on loans against securities in New York. Both time and demand deposits of the reporting banks showed substantial declines. During this same period commercial loans steadily declined in these banks, and this decline continued in the outside banks until the end of the year. While the Boston banks showed an upward trend in commercial loans from May until November, 1929, this change was due in a large measure not so much to strict commercial loans, as to loans to other banks, — savings banks and co-operative banks, — which are included in these figures; also, in November, the purchase of acceptances and brokers' commercial paper was an important factor. Both the Boston and outside reporting member banks showed a steady increase in collateral loans, largely to their depositors, culminating on October 30, and a steady decline in security holdings. From early June to the end of the year the total deposits of all reporting banks increased until the loss in the early months of the year had been entirely offset in November, the improvement, however, being made mostly by the Boston banks. During the spring the pressure on the Reserve Bank for rediscounts from the member banks was heavy, the pressure being more from the Boston banks than from the outside banks, and during the latter part of the year more from the country banks than from those in Boston. About three-quarters of the 1929 expansion in loans and investments of Boston member banks was eliminated during the readjustment which took place following the severe drop in the stock market. Outside of Boston the changes which took place in the loans of reporting member banks were substantially similar to those in Boston until November. Following the stock market crash late in October and early in November, the outside reporting member banks were less able to liquidate their position than were the Boston banks, the latter being assisted in improving their position in part by the redeposit by depositors of funds recalled from the stock exchange, and in part by the continuous liquidation of their investment holdings, supplemented at the end of the year by a decrease in collateral loans. Late in October and early in November the member banks of Boston utilized their improved position and liquidated their indebtedness to the Federal Reserve Bank. After having reduced such borrowings to a minimum, the lowest since 1926, they still found ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON MEMBER BANK CREDIT REPORTING MEMBER BANKS l900r 1925 1800 926 SITUATION IN FEDERAL RESERVE DISTRICT I 1927 LOANS AND INVESTMENTS NET DEMAND DEPOSITS 1928 1929 13 14 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON themselves with excess funds, which they invested to a large extent in the open market, purchasing bankers' acceptances, and brokers' commercial paper, on a scale unknown for a long time. Late in November and in December when deposits in the Boston banks declined sharply, they first liquidated these temporary open market investments and later increased their borrowings seasonally at the Reserve Bank, but on a much smaller scale than usual. A significant characteristic of New England banking in recent years has been the increasing trend on the part of member banks toward what is ordinarily considered savings bank activities. The 385 country banks in the First Federal Reserve District, taken in the aggregate, have over half of their deposits invested in bonds, stocks, and long term real estate loans. Even in the Boston member banks the proportion of holdings of bonds, stocks, and mortgages currently absorb about 30 per cent of the loanable deposits. The development of this trend coincides closely with the growth in time deposits from 1924 to 1927. When time deposits began to decline early in 1928, both country and city banks began to liquidate their security holdings and continued to do so in 1929. LOANS TO MEMBER BANKS The pressure on the member banks was reflected in the demand for rediscounts and advances at the Reserve Bank. Following the seasonal January contraction the loans to member banks at the Reserve Bank mounted rapidly until on May 29 this institution was advancing $109,000,000 to its member banks. This amount was considerably higher than at any time since the Spring of 1921, — the highest for advances made to the Boston banks since 1921 and to the outside banks since 1920. The demand from the member banks for rediscounts has already been referred to and was caused by the decrease in their deposits, accompanied for the most part by demands of their depositors for loans against collateral. The situation was such that the directors of the Reserve Bank became convinced that it could best be met by an increase in the discount rate and they accordingly so voted at their meeting on March 27, and reaffirmed this vote for several weeks. This increase was not approved by the Federal Reserve Board. The strain on the member banks continued unabated with an increasing demand by them for advances from the Reserve Bank. On May 4 a letter was received from the Federal Reserve Board asking the cooperation of the Reserve Bank in communicating with such member banks as had been unable to adjust their position; this letter was presented at the directors' meeting on May 8 and a resolution was adopted instructing ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON the Governor and Chairman to confer with the executives of such banks as might be considered to come within the scope of the letter, for the purpose of obtaining their opinion as to the best methods of dealing with the subject as it bore on their particular situation and on the district as a whole. Every executive of each member bank interviewed not only expressed his willingness to co-operate but pointed out that he and his associates had been using every endeavor to adjust his bank's position, explaining the problems that confronted him with the falling off of his bank's deposits, the difficulty of liquidating his bank's security holdings without loss, and the constant pressure from his depositors for loans on collateral. Notwithstanding these efforts the loans and discounts of member banks continued to rise through May and again in June. When the advances to the member banks began to decline, the decline continued almost steadily until the end of the year, the improvement being brought about by continually increasing deposits of the Boston banks and the heavy liquidation reported by those banks in security holdings. During the first half of the year the reserve ratio of the Reserve Bank of Boston was not only below the average for the System, but for a time it was the lowest of any of the Reserve Banks, namely 51.3%. But from the middle of the year onward the reserve percentage steadily increased, until, on December 4 the bank had a reserve of 87.7 per cent, and for several weeks the reserve ratio was not only higher than the average for the System as a whole but higher than that of any other Reserve Bank. It is probable that this high reserve may be connected somewhat with the replacing of FEDERAL RESERVE BANK OF BOSTON fLUCTUATION OF PRINCIPAL ITEMS _L92_k 1927 192 9 i6 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON gold certificates by Federal Reserve notes during the summer and fall, during and after the exchanging of the new currency issues of reduced size, as well as from the reduction in advances to member banks. TOTAL BILLS AND SECURITIES The average volume of reserve credit extended by the Boston Reserve Bank during 1929 was only slightly less than in the previous year, an increase in loans to member banks and a decrease of bankers' acceptances and government securities being shown. The volume of government securities held varied slightly during the greater part of the year or until the bank's participation in purchases made through the open market committee from October to the end of the year, incidental to the movement of gold out of the country and to the break in the security market, when the volume steadily increased. THE ACCEPTANCE MARKET The average volume of acceptances purchased by the Reserve Bank of Boston during 1929 was considerably less than in 1928. This was due to a more satisfactory distribution of bills in ACCEPTANCE LIABILITIES ALL BANKS AND ACCEPTANCE CORPORATIONS NEW ENGLAND AND UNITED STATES the outside m a r k e t 1927 19 28 1929 among banks and investors, the volume of a c c e p t a n c e s made showing a heavy increase during the year over previous years, not only in the Boston district but in the country as a whole. During the first half of 1929 the volume of acceptances carried by the Reserve Bank declined from a high point on January 16 of $74,000,000 to a low point on June 26 of $8,000,000. The usual seasonal upward movement in acceptance holdings, which as a rule is continuous from the middle of August until the end of December, lasted only until the middle of October, 1929, following which there was a substantial contraction which brought the holdings of acceptances of the Reserve Bank on November 27 to less than $5,000,000, the lowest since 1924. It is especially significant that the low point ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON 17 occurred at the season of the year when ordinarily acceptance holdings in the Reserve Bank are close to their peak, the reduction being caused by the outside demand for acceptances, especially from the Boston banks which utilized their surplus funds for their purchase. The following table shows acceptance liabilities in the New England district at the end of each month in 1929 and at similar periods during the past three years as reported to the American Acceptance Council. ACCEPTANCE LIABILITY Of All Banks and Acceptance Corporations in Federal Reserve District 1 January 31 February 28 March 31 April 30 May 31 June 30 July 31 August 31 September 30 October 31 November 30 December 31 1928 $137,000,000 134,000,000 136,000,000 132,000,000 127,000,000 122,000,000 112,000,000 112,000,000 112,000,000 120,000,000 137,000,000 145,000,000 1929 $143,000,000 131,000,000 127,000,000 123,000,000 116,000,000 115,000,000 111,000,000 117,000,000 118,000,000 146,000,000 163,000,000 171,000,000 1927 $ 86,000,000 86,000,000 90,000,000 90,000,000 82,000,000 82,000,000 82,000,000 86,000,000 91,000,000 110,000,000 122,000,000 138,000,000 1926 $ 94,000,000 99,000,000 96,000,000 90,000,000 84,000,000 77,000,000 71,000,000 66,000,000 64,000,000 58,000,000 71,000,000 82,000,000 BUYING RATES ON ACCEPTANCES *January I, 1929 4,1929 21, I929 February 15,1929 March 21, I929 March 26, I929 July 12, I929 August IO, I929 October 25, I929 November I, 1929 November 15, 1929 November 22, 1929 * In effect on. January January I-I5 Days 4/% 4*4 43A 16-30 Days 4*4% 4/2 4/8 31-45 Days 4/2% 437A 4A 46-90 Days 4*4% 4 3 /4 5 5% S$& 91-120 Days 4%% 5/2 5*4 5*4 5*6 5*6 5 5 5*4 53A 5*4 5*4 5% 5 5Vs 5*4 5% 5 5*4 5*6 5*4 5JA 454 4*4 4^4 4*4 4*4 43A 4*4 4 4 4 4 5 5*4 5 5 47A 5 121-180 Days 5% 5 5 5*4 5*4 5/2 5^8 4*4 4 53A 5*4 5*4 5*4 5 4*4 4*4 MEMBER BANK RESERVE DEPOSITS The average deposits representing the reserves of the member banks in the Reserve Bank of Boston varied little during the year, averaging some $4,000,000 less than in 1928. The low point of the year was on June 19 when the total member bank reserve deposits were $138,000,000, —the high point being on December 4 when they reached $155,000,000, this rise corresponding largely with the growth in deposits in the Boston member banks during the second half of the year. i8 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON FEDERAL RESERVE NOTES The average volume of Federal Reserve notes of the Federal Reserve Bank of Boston outstanding during the year 1929 was $24,000,000 greater than in 1928. Nevertheless the volume, as well as the trend, of this currency was similar to that in 1928 during the first half of the year, but greatly increased from July 10 coincident with the change in size of currency by the Treasury Department. This increase was due in a great measure to the replacement of gold certificates in circulation by the Federal Reserve notes largely in connection with payroll currency. MONEY RATES AND DISCOUNT RATES Two distinct movements took place in the Boston money market during 1929. The first half of the year was characterized by rising money rates while during the last half of the year, more especially during the last quarter, money rates declined sharply. This easing was not as marked as in either 1924 or 1921 and was limited largely to those classes of money most sensitive to open market influence. Notwithstanding the relatively small supply of brokers' prime commercial paper the rate ran to 6% per cent in October due to inactive demand, but fell to 5>4 per cent about the middle of November and later to 5 per cent early in December, when the Boston banks were buying paper more liberally than in recent years. As a whole the year closed with rates for customers' loans at the Boston banks substantially the same as at the beginning of the year both BOSTON MONEY MARKET NINETY DAY SECURITIES 1921 1922 192 3 1924 1925 1926 1927 1928 FEDERAL RESERVE BANK OF BOSTON REDISCOUNT RATE BANKERS' ACCEPTANCES UNITED STATES TREASURY CERTIFICATES OF INDEBTEDNESS 1929 ANNUAL REPORT OF T H E FEDERAL RESERVE BANK OF BOSTON 19 in the case of commercial loans and secured loans. On the other hand, the rates for brokers' quick call loan^ and prime bankers' acceptances, United States Treasury short-time securities, and commercial paper were substantially lower than at the opening of the year. During the entire year customers' loans for commercial and agricultural purposes were made by the banks freely and at reasonable rates, irrespective of the attractiveness of the yield of stock exchange loans. In past years the credit strain on the member banks in New England has generally come in the last three months of the year and the easing of money rates this year was occasioned by the sharp decline in the stock market in October and November. During the year 1929 there was only one change in the discount rate of the Reserve Bank of Boston. On November 21 the prevailing discount rate of 5 per cent which had been maintained since July 19, 1928 was reduced to 4 ^ per cent. The reserve bank rate of 5% was below the ruling money rates on all bank investments except short time United States securities as will be seen from the following table: BOSTON MONEY MARKET—1929 Prevailing Rates on 90 Day Maturities as of 15th of Each Month Month January February March April May June July August September October November December U. S. Treasury Time Loans Loans Certificates Secured by Customers' to Corof Accept- Brokers' Bonds & Commercial respond- Indebted- ances Commercial Stocks Loans ent Banks ness (Asking Rate) Paper 6-6/% 5/-6% 5/-6% 424% 5% 6-6/ 5'/ 5^ 4/4 5/ 5/ : 6-6/ 5i/-5 24 5/-6 424 5/4 SZA : 3 6-624 5Z-524 5 /-6 4A 5^4 6 6-7 524-6 $/v-b 5 5/ 6 6-7 524-6 53^-6 454 sV& 6 6-7 ' 5^4 5Z-6 4J4 sVs, 6 6-7 524-6 6 424 5 / 6 6/-7 6 • 6 4/ 5^ 6 6-7 524-6 " 6 4]/. 5% 6% 6-6/ 6 524-6 5'/-6 S/-6 5</-6 3 2^ 4% 3^ 524 5 The following table presents the changes which have taken place in many phases of New England banking and credit during the calendar year 1929: 2O ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON BANKING INDICES—NEW ENGLAND Data as of last reporting date each year (Amounts in Millions of Dollars) Change in One Year 1928 Amount Percentage 1929 REPORTING MEMBER BANKS:— In Boston:— 1. Commercial Loans 2. Real Estate Loans 3. Collateral Loans 4. Total Loans 5. U. S. Securities 6. All other Securities owned 7. Total Bonds and Stocks 8. Total Loans and I n v e s t m e n t s . . . 9. Net Demand Deposits 10. U. S. Government Deposits 11. Time Deposits 12. Total Deposits 13. % of Reserve to total deposits 14. % of Loans and discounts to total deposits $432 $400 + $32 + 8.0% 93 9 6 — 3 —3.1 396 347 + 49 +14.1 921 843 + 78 + 9 . 3 62 91 — 29 —31.9 89 115 — 26 —22.6 151 206 — 55 —26.7 1,072 1,049 + 23 + 2 . 2 736 695 + 41 + 5 . 9 4 5—1 —20.0 271 279 — 8—2.9 1,011 979 + 32 + 3.3 7.7% 8.0% — 0.3 points 91.1% 86.1% + 5.0 points Outside of Boston:— 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. Commercial Loans Real Estate Loans Collateral Loans Total Loans U. S. Securities All other Securities owned Total Bonds and Stocks Total Loans and Investments.. Net Demand Deposits U. S. Government Deposits Time Deposits Total Deposits :. % of Reserve to total deposits % of Loans and discounts to total deposits $174 $197 — 85 8 4 + 205 166 + 464 447 + 84 8 8 — 109 136 — 193 224 — 657 671 — 353 336 + * 1 — 262 274 — 615 611 + 4.6% 5.9% — $23 1 39 17 4 27 31 14 17 1 12 4 1.3 75.4% 73.2% + 2.2 points MONEY RATES:—(Boston) Open Market:— 29. 30. 31. 32. Brokers'Prime Commercial P a p e r . . Bankers'Prime 90-day Acceptances. Treasury Certificates of Indebtedness (June 15 maturity) Call Money (Boston) y2 5% 4 3.04 6 4.37 12 1.33 6 —11.7% +1.2 +23.5 +3.8 —4.5 —19.9 —13.8 — 2.1 +5.1 — — 4.4 + .7 points ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON 21 BANKING INDICES—NEW ENGLAND—Continued IQ2Q At Member Banks:— 33. Prime Commercial Loan Rate 34. Time Collateral Loan Rate At Federal Reserve Bank of Boston:— 35. Discount Rate 36. Buying Rate on Acceptances Change in One Year IQ28 Amount Percentage 5^-6% 5^-6% 6 6-6^ — 4y2 4 0% 5 — y2 4^2 — Vz MISCELLANEOUS:— 37. Acceptance Liabilities (F. R. District 1) Mutual Savings Banks:— 38. Deposits in 63 reporting banks in 6 N. E. states Check Transactions {year's totals) :— 39. Boston 40. 15 Outside New England Cities.... 41. Total—16 Cities *Less than $500,000. $171 $145 + 1,614 1,596 + 27,540 25,268 12,635 11,507 40,175 36,775 $26 +17.9% 18 + 1.1 +2,272 +1,128 +3,400 + 9.0 +9.8 + 9.2 22 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON COMPARATIVE STATEMENT OF CONDITION RESOURCES Dec. 31,1929 CASH RESERVES held by this bank against its deposits and note circulation: Gold held by the Federal Reserve Agent as part of the collateral deposited by the bank when it obtains Federal Reserve notes. This gold is lodged partly in the vaults of the bank and partly with the Treasurer of the United States $224,917,080.00 Gold redemption fund in the hands of the Treasurer of the United States to be used to redeem such Federal Reserve notes as are presented to the Treasury for redemption 6,928,201.64 Gold and gold certificates in vault 31,007,387.86 Gold in the gold settlement fund lodged with the Treasurer of the United States for the purpose of settling current transactions between Federal Reserve districts 4,359,473.68 Legal tender notes, silver, and silver certificates in the vaults of the bank (available as reserve only against deposits) 16,771,061.00 TOTAL CASH RESERVES Non-reserve cash, consisting largely of National bank notes and minor coin Dec. 31,1928 $08,304,180.00 9,807,877.81 36,246,463.83 27,592,095.40 17,755,791.00 $283,984,104.18 $189,706,408.04 $10,001,913.17 $11,537,544.46 $i3,355-i43-8i $28,816,300.00 13,289,145.09 29,878,460.49 40,427,973.79 54,618,933.83 25,850,000.00 1,000,000.00 8,173,000.00 LOANS AND INVESTMENTS : Loans to member banks : On the security of obligations of the United States By the discount of commercial or agricultural paper or acceptances Acceptances bought in the open market United States Government bonds, notes, certificates of indebtedness and bills Federal Farm Loan bonds TOTAL LOANS AND INVESTMENTS $83,372,749.39 $132,036,207.62 MISCELLANEOUS RESOURCES : Bank premises Checks and other items in process of collection All other miscellaneous resources $3,5799^6.75 78,858,882.03 133,938.71 $3,701,084.50 70,000,497.93 131,379-36 TOTAL MISCELLANEOUS RESOURCES.... $82,572,757.49 $74,823,861.79 TOTAL RESOURCES $460,831,524.23 $408,104021.91 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON 23 COMPARATIVE STATEMENT OF CONDITION LIABILITIES Dec. 31,1929 Dec. 31,1928 CURRENCY IN CIRCULATION :— Federal Reserve notes in actual circulation, payable on demand. These notes are secured in full by gold and discounted and purchased paper $206,557,720.00 $161,292,328.00 Total Currency in Circulation $206,557,720.00 $161,292,328.00 DEPOSITS : Reserve deposits maintained by member banks as legal reserves against the deposits of their customers $141,547,279.89 $146,177,118.84 United States Government deposits carried at the Reserve Bank for current requirements of the Treasury 2,012,548.99 1,103,204.32 Other deposits including foreign deposits, deposits of non-member banks, etc 481,998.78 568,073.60 Total Deposits $144,041,827.66 $147,848,396.76 MISCELLANEOUS LIABILITIES : Deferred items, composed mostly of uncollected checks on banks in all parts of the country. Such items are credited as deposits after the average time needed to collect them elapses, ranging from 1 to 8 days All other miscellaneous liabilities Total Miscellaneous Liabilities $76,694,547.51 194,042.21 $68,752,254.45 436,377-57 $76,888,589.72 $69,188,632.02 $11,592,500.00 $10,155,800.00 21,750,886.85 19,618,865.13 $33,343,386.85 $29,774,665.13 $460,831,524.23 $408,104,021.91 CAPITAL AND SURPLUS : Capital paid in, equal to 3 per cent of the capital and surplus of member banks Surplus—That portion of accumulated net earnings which the bank is legally required to retain Total Capital and Surplus TOTAL LIABILITIES Reserve percentage against combined Federal Reserve notes and deposit liabilities 81.0% 61.4% 24 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON The principal changes in the resources and liabilities of the Federal Reserve Bank of Boston as of December 31, 1929, compared with December 31, 1928 as shown by these statements are as follows: 1. Loans to member banks show a decrease of $42,600,000. 2. Bankers' acceptances bought in the open market show a decrease of $24,700,000. 3. United States securities show an increase of $17,700,000. 4. Total gold reserves show an increase of $95,300,000. 5. Capital stock and surplus show an increase of $3,600,000. 6. Deposits show a decrease of $3,800,000. 7. Federal Reserve notes show an increase of $45,300,000. 8. Reserve percentages against combined Federal Reserve notes and deposit liability are increased from 61.4% to 81.0%. The gross earnings for the year 1929 were $695,000 more than in 1928, this increase coming almost entirely as a result of increased loans to member banks, the income from acceptances and government securities owned being less than in 1928. The expenses of current bank operations increased $77,000, due largely to the increased volume of operations in the Discount, Transit and Currency Departments, as shown in the succeeding table. The cost of Federal Reserve notes, incidental to the change in size of currency, increased $284,508 over the preceding year. After the usual depreciation on bank building equipment, etc., had been set up, the net income was sufficient to pay the usual 6% dividend to stockholding member banks and to add to surplus $2,132,021.72. ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON 25 INCOME AND DISBURSEMENTS EARNINGS :— 1929 From loans to member banks and paper discounted for them From acceptances owned From U. S. Government obligations owned.... Other earnings Total Earnings Additions to earnings Total income applicable to expenses and other deductions 1928 $3,448,828.36 1,283,931.80 301,687.94 126,382.94 $2,465,266.04 1,485,605.17 454,142.46 60,328.34 $5,160,831.04 IQ.751.58 $4,465,342.01 2.531.42 $5,180,582.62 $4,467,873.43 $1,908,662.50 $1,831,063.73 323,446.68 182,339.66 38,938.92 281,348.88 $2,414,448.84 $2,151,351.53 $2,766,133.78 $2,316,521.00 $634,112.06 $590,830.04 2,132,021.72 1,725,691.86 $2,766,133.78 $2,316,521.90 DEDUCTIONS FROM TOTAL INCOME:— For the expense of current bank operation, (including the non-reimbursable expense incurred as Fiscal Agent of the U. S.) For Federal Reserve currency, mainly the cost of printing new notes to replace worn notes in circulation, and to maintain supplies unissued and on hand, and the cost of redemption.... For depreciation, reserves, losses, etc Total Deductions NET INCOME available for Dividends, additions to Surplus, and payment to the U. S. Government DISTRIBUTION OF NET INCOME :— Dividends paid to member banks at the rate of 6 per cent on paid-in capital Additions to Surplus (the bank is required by law to accumulate out of net earnings, after payment of dividends, a surplus amounting to 100 per cent of the subscribed capital; and, after such surplus has been accumulated, to pay into surplus each year 10 per cent of the net income remaining after paying dividends) Any net income remaining after paying dividends and making additions to surplus (as above) is paid to the U. S. Government as a franchise tax. No balance remained for such payments in 1929 or 1928. Total net income distributed 26 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON VOLUME OF OPERATIONS The following table shows the volume of operations in the principal departments of the bank during the year compared with the similar items for the preceding year: NUMBER OF PIECES HANDLED :— 1929 Bills Discounted:— Applications Notes discounted Bills purchased in open market for own account Currency received and counted Coin received and counted Checks handled Collection Items Handled:— U. S. Government coupons paid All other U. S. Securities:— Issues, redemptions and exchanges by Fiscal Agency department Transfers of funds 1928 10,665 72,614 9.252 65,671 27,402 254,503,000 323,286,000 93,123,000 47,5^7 242,601,805 213,018,130 86,246,000 1,473,000 409,000 2,191,238 409,105 101,000 63,00c 449,476 61,960 $3,952,081,000 $4,284,601,886 419,214,000 1,630,441,000 34,139,000 21,747,140,000 748,364,260 1,527,458,227 23,580,002 21,510,491,590 39,291,000 764,321,000 41,421,127 796,097,527 283,203,000 9,208,537,000 454,273,190 8,070,296,636 AMOUNTS HANDLED:— Bills discounted Bills purchased in open market for own account Currency received and counted Coins received and counted Checks handled Collection Items Handled:— U. S. Government coupons paid All other U. S. Securities:— Issues, redemptions and exchanges by Fiscal Agency department Transfer of funds MEMBERSHIP On January 1, 1929, there were 408 member banks. Eight new national banks were organized during the year, and four state banks were added. There was a loss of 14 national bank members, principally through consolidations and mergers, and two state bank members withdrew. On December 31, 1929, there were 404 members, a net loss of four for the year. The state banks which withdrew were the Hadley Falls Trust Company, Holyoke, Mass., and The Thames Bank, Norwich, Connecticut, the latter being consolidated with a non-member bank. While the number of ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON member banks showed a decrease, the paid-in capital of the Federal Reserve Bank increased over $1,400,000. The tendency to establish branches was less marked in 1929 than in the preceding year, but the formation of groups of banks proceeded at a greatly accelerated pace. On December 31, 1929, there were nine groups of banks in this district, comprising 65 individual banks with total assets of $1,440,000,000, according to the latest figures available. The outstanding banking event of the year was the affiliation of The First National Bank of Boston and the Old Colony Trust Company of Boston in December. While this brought together two hitherto entirely independent banking units, it was not, strictly speaking, a consolidation in the usual and technical sense of the term, since each institution continues its separate corporate existence, but so far as practicable and compatible with the wishes of interested parties the fiduciary business of the two will be handled by the Old Colony Trust Company and the commercial banking business will be conducted by The First National Bank. Each corporation has its own board of directors, the personnel of which is identical. The stock of the Old Colony Trust Company and of The First National Old Colony Corporation will be held for the pro rata benefit of the stockholders of The First National Bank. The various changes in membership are classified in detail in the following table: National Banks 373 Members January 1, 1929 State Banks Total 35 GAINS :— New national banks New state members 381 LOSSES:— Absorption of national bank by state bank member ,.. . . Consolidation of national banks Liquidation and consolidation with nonmember bank Voluntary liquidation succeeded by nonmember state bank Voluntary liquidation succeeded by new national bank National banks converted to state member banks Withdrawal of state bank members 4 4 39 420 1 8 1 1 1 2 14 2 367 37 404 28 ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON FIDUCIARY POWERS Twenty-five permits were issued to national banks to exercise fiduciary powers under authority of Section 11 (k) of the Federal Reserve Act, as amended, during 1929. Eighteen of the permits were issued to banks which had never exercised trust powers, three were granted additional powers, and four were confirmatory after consolidation. CONNECTICUT First National Bank *Naugatuck National Bank National Whaling Bank First National Bank Uncas-Merchants National Bank MAINE Camden National Bank Thomaston National Bank Middletown Naugatuck New London New Milford Norwich Camden Thomaston MASSACHUSETTS Abington Abington National Bank Millers River National Bank Athol Cohasset Cohasset National Bank Haverhill Essex National Bank Haverhill Haverhill National Bank Newburyport First & Ocean National Bank Peabody Warren National Bank Pittsfield **Pittsfield-Third National Bank & Trust Somerville Somerville National Bank **Springfield-Chapin National Bank & Trust Springfield Westfield Hampden National Bank Worcester 10/21/29 **Worcester County National Bank Worcester 11/22/29 **Worcester County National Bank NEW HAMPSHIRE Rockingham National Bank *Laconia National Bank National Bank of Lebanon Wilton National Bank Exeter Laconia Lebanon Wilton VERMONT Merchants National Bank St. Johnsbury * Supplementary powers. * Confirmatory. The total number of national banks in each state which had been authorized to exercise trust powers at the end of the year was as follows: Connecticut 31, Maine 33, Massachusetts 102, New Hampshire 35, Rhode Island 5, and Vermont 28. ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON 29 BANK ORGANIZATION AND PERSONNEL Directors: On December 31, 1929, the terms of Mr. Alfred L. Ripley as Class A director, Mr. Philip R. Allen as Class B director and Mr. Frederic H. Curtiss as Class C director expired. Mr. Ripley and Mr. Allen were re-elected for three-year terms by the member banks in Group 1, — banks having a combined capital and surplus in excess of $999,000, — and Mr. Curtiss was reappointed by the Federal Reserve Board for a similar term of three years. The Federal Reserve Board also redesignated Mr. Frederic H. Curtiss as Chairman and Federal Reserve Agent and Mr. Allen Hollis as Deputy Chairman for the year 1930. Personnel: No change in the official staff occurred during the year 1929. The number of employees on December 31, 1929, other than officers was 768 compared with 715 on December 31, 1928. Advisory Council: At a meeting of the Board of Directors held on January 4, 1929, Mr. Arthur M. Heard, President of the Amoskeag National Bank of Manchester, New Hampshire, was reappointed as a member of the Federal Advisory Council to represent the First Federal Reserve District for the year ending December 31, 1929. 3O ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON STOCKHOLDERS' MEETING The Seventh Annual Meeting of the member banks was held at the Federal Reserve Bank of Boston on November 8, 1929, with 350 representatives from 257 member banks registering. The Chairman of the Stockholders' Advisory Committee, Mr. Charles S. Hichborn, President of the First National Granite Bank of Augusta, Maine, presided. He introduced the Chairman of the Board of Directors, who extended the official welcome of the bank and gave a brief address, discussing the trend in member bank credit as shown by charts covering changes in loans, investments, and deposits for the three years ending June 29, 1929, and presenting and analyzing a liquidity chart, which had been developed in the bank as a guide for member banks wishing to lay out a policy of bank operation. In the absence of Hon. Carter Glass, who was expected to deliver the principal address but was detained at the last minute by official duties, the Governor of the bank addressed the meeting at length, first reviewing the condition of the bank and then discussing the distribution of Federal Reserve Bank earnings, which wras to have been the subject of Senator Glass' address. The special committee appointed pursuant to a resolution adopted at the Stockholders' Meeting in J928, to investigate the subject of a more equitable participation by member banks in the earnings of the Federal Reserve Banks, reported and submitted resolutions embodying the conclusions of the committee. The resolutions proposed that the Congress be petitioned to amend Section 7 of the Federal Reserve Act so as to provide that after the payment of expenses and a 6 per cent cumulative dividend to stockholders, the remaining net earnings of each Federal Reserve Bank shall be distributed as follows: 25 per cent of such earnings to the United States as a franchise tax, 50 per cent to member banks, and 25 per cent to the surplus of such Federal Reserve Bank until the surplus shall amount to 100 per cent of the subscribed capital of the Federal Reserve Bank, any portion of such 25 per cent not needed for the creation of such a surplus to be distributed to the member banks. The resolutions also proposed a further amendment of Section 7 by which, in the event of the dissolution or liquidation of a Federal Reserve Bank, any surplus remaining after the payment of all debts and obligations shall be distributed among the stockholding member banks in proportion to their capital stock holdings in the Federal Reserve Bank. The report of the committee was accepted and the resolutions submitted by it were unanimously adopted.