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Fifteenth Annual Report Federal Reserve Bank of New York For the Year Ended December 31,1929 Federal Reserve Agent Second Federal Reserve District Fifteenth Annual Report Federal Reserve Bank of New York For the Year Ended December 31, 1929 Federal Reserve Agent Second Federal Reserve District Contents PAGE Letter of Transmittal 4 Credit Conditions and Federal Reserve Policy in 1929 5 Foreign Exchanges and Gold Movements 9 Acceptance Market in 1929 12 Change in the Currency 14 Foreign Relations 16 Membership Changes in 1929 17 Operating Statistics 21 Statement of Condition 21 Income and Disbursements 22 Volume of Operations 24 Changes in Directors and Officers 24 Changes in Directors 24 Member of Federal Advisory Council 26 Changes in Officers and Staff 26 List of Directors and Officers 27 F E D E R A L OF R E S E R V E N E W Y O R K B A N K New York, February 25, 1930 SIRS: I have the honor to submit herewith the fifteenth annual report of the Federal Reserve Bank of New York, covering the year 1929. Respectfully yours, GATES W. MCGARRAH, Chairman and Federal Reserve Agent. FEDERAL RESERVE BOARD, Washington, D. C. Fifteenth Annual Report Federal Reserve Bank of New York During 1929 the policy of the Federal Reserve Bank of New York was determined largely with reference to three major developments—an almost insatiable demand for credit for the security markets; a severe credit disturbance arising in connection with a drastic liquidation in stocks; and, in the last two months of the year, a business recession. The first nine months of the year in the money market saw largely a continuation of influences at work in 1928. With some interruptions, prices of stocks rose vigorously under the impetus of a countrywide, and in fact a world-wide, demand. This rise in stock prices was accompanied by larger issues of new securities than in any preceding year. The rise in prices and the volume of new issues created an extraordinary demand for credit beyond the amount required by the country's business. To prevent an excessive expansion of credit the Reserve System continued further the operating policies begun early in 1928. In the spring discount rates were raised in a number of the interior districts, bringing the discount rate to a uniform 5 per cent throughout the System. System holdings of Government securities were further reduced from $240,000,000 in the early part of the year to $140,000,000 in June. Holdings of bankers acceptances by the Reserve Banks were largely reduced between January and July, and as a result of these changes it became necessary for member banks to assume more largely the responsibility for the amount of Federal Reserve credit in use. Total discounts of the Federal Reserve System were increased from about $800,000,000 in January to over $1,100,000,000 in July, and borrowings of the New York City banks alone at the Federal Reserve Bank of New York rose from about $100,000,000 to Stock prices and new stock issues rose rapidly in the first nine months of 1929, continuing the tendencies of 1928, but declined abruptly in the last quarter 6 FIFTEENTH ANNUAL REPORT over $300,000,000. For a number of weeks from February to May the directors of the Federal Reserve Bank of New York voted an increase in the discount rate from 5 per cent to 6 per cent. This increase was not approved by the Federal Reserve Board. The steps taken were not wholly successful in checking the expansion in bank credit. The additional demands for credit in the security markets were met largely, however, in other ways than by increases in bank credit, principally through a more active use of the available credit outstanding. One of the methods by which this was brought about was by a continued extension of the practice which had been growing in previous years on the part of corporations and individuals of lending money to brokers through the banks acting as agents. Some years ago almost the entire amount of brokers loans was made by banks, but by the spring of 1929 more than half of the reported brokers loans were being made by others than banks. It was lending of this sort which provided the huge growth in loans to brokers during 1928 and 1929. These loans, as the diagram below shows, did not increase the amount of bank deposits, but were accompanied by an increase in the activity or velocity of deposits which enabled them to effect a larger volume and value of transactions. By their more active use, the available bank deposits were made to serve the purpose ordinarily achieved only by an actual increase in the amount of bank deposits. In some measure this large increase in loans by others than banks took the control of brokers loans away from the New York City BILLIONS OF DOLLARS 9.0 3.0 1928 1929 1928 1929 The large increase and subsequent rapid liquidation of borrowings by members of the New York Stock Exchange was not accompanied by corresponding changes in the ; amount of deposits in New York City banks, but rather by a rise and fall in the activity of bank deposits FEDERAL RESERVE BANK OF NEW YORK 7 banks and from the Federal Reserve Bank. It was true, however, that the market was only able to secure these funds from other lenders by paying very high rates. It might be presumed, perhaps, that under more normal circumstances these high rates would have the effect of checking speculative enthusiasm. But the market of 1929, encouraged by business prosperity, large industrial profits, and other evidences of economic progress, was not easily discouraged. Early in August the Federal Reserve Bank of New York adopted a policy under which the normal demand for a seasonal increase in credit for agriculture and the autumn trade might be accommodated while at the same time avoiding if possible excessive or unnecessary credit expansion. On August 9 the discount rate of the New York Bank was raised from 5 to 6 per cent, and at the same time the Bank's buying rate for bankers acceptances was reduced from 5}4 to 5 ^ per cent for the ninety day maturity, bringing the bill rate from a position slightly above the open market rate to one corresponding with the open market rate. In the following eight weeks holdings of bankers acceptances by the Federal Reserve System increased by about $250,000,000 and as a consequence the borrowings of the New York City banks from the Federal Reserve Bank of New York were reduced from about $300,000,000 to below $100,000,000. This reduction in borrowings by the New York City banks proved fortunate since it placed those banks in a position to advance funds freely when the collapse of the stock market brought with it an emergency demand for credit, and it prepared the way for a more rapid easing of money conditions after that time than would otherwise have been possible. There was no corresponding reduction in discounts of banks in other Federal Reserve Districts, however, and no immediate easing in credit throughout the country; in fact money rates rose in the six weeks following August 9. MILLIONS OF DOLLARS tooor Reserve Bank discounts for member banks in New York City fell rapidly in August and September from their July peak, while discounts elsewhere showed a later and smaller decline 8 FIFTEENTH ANNUAL REPORT But the autumn brought with it an abrupt reversal of the credit trends of the first half year and, in fact, of 1928 as well. In early October, after some decline in stock prices but before the severe break, money rates had already begun to be easier in New York and the foreign exchanges had begun to strengthen, probably reflecting some return flow of funds to Europe. But more drastic changes in credit accompanied the sharp decline in stock prices of the last week in October and the first two weeks in November. From a credit point of view the dominant factor in this change was the instability of loans made to brokers by lenders other than banks. As stock prices broke under force of the dumping on the market of successive layers of inadequately margined stock, and as rumors were circulated of a possible closing of the Stock Exchange, these lenders other than banks became fearful as to the safety and availability of their funds and asked the banks acting as their agents to call these loans. Within a week a total of $1,400,000,000 of these loans was withdrawn from the market. In addition, out-of-town banks called about $700,000,000 of such loans, a considerable part of which probably represented loans for their customers. This huge withdrawal of funds was only prevented from adding a serious money shortage to a security panic by the willingness and capacity of the New York City banks to replace with their own funds the loans withdrawn, relying upon the assurance that they could depend upon the availability of Federal Reserve credit. In this way the New York banks were called upon in a single week to increase their loans and investments by $1,400,000,000. Since the deposits of these banks increased correspondingly, their required reserves with the Federal Reserve Bank also increased proportionately and they were suddenly required to find more than $200,000,000 of additional reserve funds. It was at this point that the Federal Reserve Bank aided its members in meeting this huge demand by purchasing 120 million dollars of Government securities, in two days when the situation was most critical. Thus the banks found it necessary to meet only a part of the increased demand for credit by additional borrowing and they were able to furnish the funds needed without any increase in the money rate. The emergency demand for funds passed without serious disturbance. In the period of readjustment following the stock market crisis, sufficient amounts of credit loaned against securities were retired to enable the New York City banks to bring their loans down nearly to the level prevailing before the crisis. In fact, their loans to brokers reached levels lower than in early October, though their loans on securities direct to their customers still showed some increase. FEDERAL RESERVE BANK OF NEW YORK With the reduction in the speculative demand for credit, indicated by a decline of over $4,500,000,000 in the total of brokers loans, the principal obstacle to more normal credit conditions was removed, and a continuous easing in money rates took place, facilitated by further large purchases of Government securities by the Reserve Banks, and successive reductions in the discount rate of the Federal Reserve Bank of New York from 6 per cent to 5 per cent on November 1 and from 5 to 43^ per cent on November 15, and subsequently by reductions from 5 to 43^ per cent by the Federal Reserve Banks of Boston, Atlanta, Chicago, Kansas City, and San Francisco. By December 31 total discounts at the Federal Reserve Banks had been reduced to $632,000,000 and the discounts of the New York City banks to $113,000,000, despite the year-end demand for funds, and net gold exports and earmarkings of over $100,000,000. As the year drew to a close it was clear that business activity was declining, as indicated by reductions in industrial production, car loadings, bank debits to individual account, factory employment, and commodity prices. This decline in business activity was an important consideration in the steps taken by the Federal Reserve Bank of New York toward easier money conditions. % VV1929 -ft -.S\ V i 1928/ " INDUSTRIAL PRODUCTION aol i i i i i i i i i i i I 1927 TIME MONEY RATE i i i i i i i i i Unusually rapid declines in industrial activity, in stock prices, and in money rates occurred in the latter part of 1929 Foreign Exchanges and Gold Movements The combination of reduced foreign borrowing through capital issues in this country, and the attraction of high money rates and rapidly rising security prices in this market put heavy pressure upon the foreign exchanges during the first three quarters of 1929, and a substantial inflow of gold occurred. The first gold receipts were from Canada, and were partly seasonal, but, as one section of the accom FIFTEENTH ANNUAL REPORT 10 Foreign exchanges at New York were generally weak during much of 1929, with accompanying gold imports, but in September and October rose rapidly and gold exports followed. (Indicated gold points represent estimated levels at which gold exports or imports would be profitable) panying diagram indicates, Canadian exchange did not show the usual rally in the spring. After gold shipments from Canada had reached a rather substantial amount, the shipments to the United States virtually ceased, although Canadian exchange declined far below the theoretical gold import point to this country. The next important receipts of gold were from England and Germany. Theflowfrom England was checked after an advance in the Bank of England discount rate and in open market rates in London in February, but shipments from Germany continued into May until a-total of $47,000,000 had been received. An inflow of gold from Argentina also started in the spring of 1929, and shipments continued intermittently during most of the remainder of the year. These gold shipments, however, did not raise the Argentine exchange above the gold import point to New York, and late in the year after shipments had been made also to London, Paris, and other European centers, the Argentine National Conversion Office discontinued gold payments. Renewed gold shipments from London also occurred in the summer, and, after London had lost large amounts of gold to Berlin and Paris also, a second one per cent advance in the Bank of England rate to 6/^ per cent was made and an accompanying rise in London open market rates occurred in September. A strong recovery in sterling and other European exchanges began at about that time. FEDERAL RESERVE BANK OF NEW YORK 11 MILLIONS OF DOLLARS CHANGE IN GOLD STOCK 1927 1928 1929 An outflow of gold in the latter part of 1929 followed a decline in money rates at New York from the high levels which had been a factor tending to draw gold from other countries during the preceding year The break in the stock market and easing of money rates, together with some disturbance in foreign security markets, which tended to draw funds home, all accentuated the recovery in the exchanges to a point where several advanced above the levels at which gold shipments from New York became profitable. As a result the gold flow was reversed, and about half of the net amount of gold gained from other countries during the first ten months of 1929 was exported or earmarked for foreign account during November and December. France received the largest shipments from New York, but there were gold exports also to England, Germany, Poland, Sweden, and Switzerland. The following table summarizes the principal gold movements of the year, by country of source or destination, and the table on the next page shows the gold movements by months. Imports From Argentina England Germany Canada Australia Colombia Bolivia Exports To $72,500,000 62,400,000 46,800,000 73,900,000 4,900,000 5,300,000 3,600,000 France England Switzerland Poland Germany Sweden $65,400,000 21,100,000 10,000,000 5,000,000 2,400,000 1,300,000 FIFTEENTH ANNUAL REPORT Net Gain or Loss of Gold Through Imports, Exports, and Earmarkings (In millions of dollars) Through Net Gold Imports or Exports 1929 January February March April May June July August September October +47.1 +25.5 +24.8 +23.1 +23.6 +30.2 +34.7 + 18.4 + 17.6 + 17.5 , TOTAL November December TOTAL NET TOTAL Through Earmarkings Total +48.6 +16.1 - 7.5 -22.0 - 1.0 - 6.6 - 4.5 -17.9 +25.5 +32.3 +71.7 +39.7 +22.7 +12.7 +17.4 + 11.0 + 13.0 +262.5 -34.4 +228.1 -23.2 -64.4 + 1.0 -22.0 -22.2 -86.4 -87.6 -21.0 -108.6 + 174.9 -55.4 +119.5 -65.0 + "7.5 The return flow of funds to other countries in the latter part of 1929, which was accompanied by strength in foreign exchanges and resulting gold exports, caused a reversal of interest rates abroad, especially in Europe. Three reductions of 3^ per cent each were made in the Bank of England rate within 6 weeks, and there were accompanying reductions in the official discount rates of central banks of a number of other countries. Acceptance Market in 1929 The amount of bills outstanding through the acceptance market showed an even larger increase in 1929 than in the two preceding years, and by December 31, had reached a total volume of $1,700,000,000 which was considerably larger than at any preceding time. To some extent this increase in bills may represent the attraction of business to New York because of relatively favorable rates in New York during the autumn, and it may also reflect in part the shifting of some business from direct borrowing at banks to financing through the acceptance market, in addition to the usual growth of acceptance business. The acceptance capacity of the New York City banks has been considerably increased in recent months by increases in their capital funds. FEDERAL RESERVE BANK OF NEW YORK 13 Not only has the bill market increased in size during the year, but it has exhibited increasing independence of the Reserve Banks. At the beginning of the year Reserve Bank holdings of bills were nearly $500,000,000, or 38 per cent of the total amount of bills outstanding. Reserve Bank holdings declined rapidly to a low point of $61,000,000 in July. This decline was in conformity with a policy of seeking to diminish the open market holdings of Reserve Banks and place increasing responsibility for the amount of Federal Reserve credit in use upon the member banks. To this end the buying rate for bills was maintained relatively high, as indicated by the following table of bill buying rates. Changes in Minimum Buying Rate of Federal Reserve Bank of New York for 90 day Bankers Acceptances and Open Market Rate in Effect on Same Dates Date Effective January 4, 1929 January 21, 1929 February 15, 1929 March 21, 1929 March 25, 1929 July 11, 1929 August 9, 1929 October 25, 1929 November 1, 1929 November 15, 1929 November 22, 1929 Federal Reserve Bank Buying Rate (Indorsed Bills) 4M* 5 sy$ 5 4M 4M 4 Open Market Rate (Unindorsed Bills) 4M 5 5H-5H 5V2 5V 8 5lA 5V8 4% 4^ 4^ 3M-3K "Changed from 4J^ per cent. The success of the Reserve System, however, in effecting a reduction in its bill holdings may be ascribed in considerable measure to largely increased takings of bills by European investors, and particularly by European central banks of issue having funds to employ in this market. This increased demand represented in part a shift of these funds from investment in Government securities to investment in bills, due partly to relatively high bill rates and partly to a growing preference of a number of banks of issue for investments of a commercial rather than governmental type. During the autumn, System bill holdings increased considerably, due in part to some modification of Federal Reserve policy favorable to the taking of bills. This increase ceased abruptly, however, with the break in the stock market at the end of October. Many business corporations and others who at that time withdrew funds from the stock market sought temporary employment of these funds in some other form. As a consequence there was an unusual demand for FIFTEENTH ANNUAL REPORT 14 bankers acceptances and short Government securities, and the bill holdings of the Federal Reserve System declined instead of increasing as is usual at that time of year. At the end of November, System holdings amounted to only $256,000,000, or less than 16 per cent of the total volume of bills outstanding, a smaller proportion than at the corresponding period in any recent year. The accompanying diagram shows the changes during the past three years in Reserve Bank bill holdings, holdings of bills by the Federal Reserve Banks for account of foreign correspondents, and all other bills outstanding. MILLIONS OF DOLLARS 2,000 1.500 1,000 .500 1927 1928 1929 The total volume of outstanding bankers acceptances reached in 1929 a new high level, but the proportion held by Reserve Banks declined to a smaller percentage than in any previous year Change in the Currency An unusual temporary influence upon credit conditions during the year was a change in Federal Reserve and United States currency which involved the substitution of new and smaller sized notes for the old notes. The new sized notes were first put into circulation in limited amounts on the 10th of July. There was immediately a considerable curiosity demand for them which resulted in an increase of about $100,000,000 in the total amount of currency in circulation. Whereas the total, due probably to the increased use of checks for payrolls, had been running substantially under the figures for a year previous, the additional curiosity demand brought the total above FEDERAL RESERVE BANK OF NEW YORK 15 the 1928 figures, as shown in the diagram below. The additional demand for currency could be met only by an increase in Federal Reserve credit, and since most of this took the form of increases in the discounts of member banks, it was a far from negligible influence toward tightening the money market during July and August. After August the demand for the new notes began to subside, and by the end of the year the currency circulation was again less than in the corresponding period of 1928. The substitution of the smaller sized currency for the old currency was a gradual process since there was on hand a considerable amount of the old currency which could not be scrapped immediately without considerable wastage. It was not until January 1, 1930 that issues of the old sized currency in denominations up to $100 were discontinued. Aside from the effects on the money market, the mechanics of issuing the new currency was one of the features of the operations of the Reserve Banks during the year, and the added expense of building up a supply of new currency appears in this bank's statement of expenses. Over a term of years considerable savings to the Reserve Banks will result from reduced costs of paper, printing, and shipping for the new small sized currency. BILLIONS OF DOLLARS 5.1 f. *f 5.0 4.9 i r 4.8 4.7 \\ A; F r V, 4.6 J H >8 M A M 1929 J J A S O N D Currency circulation in the United States (luring 1929 was in general somewhat smaller than in .1928, but curiosity demand for thejnewfsmall sized currency caused a substantial, though temporary, increaseJn July 16 FIFTEENTH ANNUAL REPORT Foreign Relations As in previous years this bank continued during 1929 to extend its relationships with foreign central banks, and to cooperate with those institutions through the exchange of information respecting credit conditions and by the performance of the customary banking services. In acting as correspondent for foreign central banks, the most important service rendered by the bank continued to be the investment of their funds in this market in bankers acceptances and short term United States Government securities. Between June 1928 and May 1929 the dollar investments of the central banks handled by this bank decreased as a consequence of the movement of foreign funds to New York which weakened the foreign exchanges and made it necessary for a number of these central banks to use part of their balances in New York in support of their exchanges. On the other hand from last spring to the end of 1929 their investments made through this institution increased, probably reflecting some reverse movement of foreign monies away from New York. Nevertheless, at the end of the year they were still under their average level in the first half of 1928, when the strain upon the exchanges had not yet made itself acutely felt. As has been pointed out above in the discussion of the acceptance market, there was an appreciable shift from Government securities to bills in the investments of foreign central banks, this shift accounting in part for the ease with which the Reserve System was able to reduce its portfolio in the earlier half of the year. During the past year this bank established relations with the central banks of Bulgaria, Latvia, and Roumania and in addition to those institutions it now has more or less active relations with the central banks of Australia, Austria, Belgium, Colombia, Czechoslovakia, England, Finland, France, Germany, Greece, Hungary, Italy, Japan, Java, Netherlands, Norway, Poland, South Africa, Sweden, Switzerland, and Yugoslavia. In February 1929 the Roumanian Government, acting in concert with the National Bank of Roumania and a group of private bankers which undertook the issue of a stabilization loan of $101,000,000, passed a monetary law by virtue of which the leu is given a gold content equivalent to slightly under 6/10ths of one cent and is made convertible on the gold exchange standard into gold coin, bullion, or gold exchange bills at the option of the National Bank. In connection with this stabilization program a central bank cooperative credit of $25,000,000, to run for a period of twelve months, was extended to the National Bank by fourteen banks of issue. The Reserve System participated therein to the extent of $4,500,000, agree FEDERAL RESERVE BANK OF NEW YORK 17 ing to buy bills endorsed by the National Bank of Roumania up to this total amount. The National Bank of Roumania did not find it necessary to avail itself of this credit during the year 1929. Also in February 1929, the Governor of the National Bank of Czechoslovakia announced that an arrangement had been concluded with the Government of the Czechoslovak Republic to pass legislation stabilizing the Czech crown at a mint parity of roughly 2.9634 cents and making this unit legally convertible on the gold exchange standard. Appropriate legislation to this effect came into force on November 27, 1929. On November 21, 1929, the Imperial Japanese Government announced that the embargo on the export of gold from Japan, which had been in effect since 1917, would be lifted on January 11, 1930, and the yen would, as of that date, reassume its place among the currencies convertible into gold. Although the Japanese Government, acting through the Yokohama Specie Bank Ltd., arranged for the extension of private credits totaling some $50,000,000 in New York and London, the Bank of Japan did not deem it necessary to obtain aid abroad for the effecting of the program of stabilization. The final step in the program of monetary reform in Bolivia, which had been proceeding for some time, was the transformation of the Bank of the Bolivian Nation on July 1,1929, into a bank of issue under the name, Central Bank of Bolivia, and the coming into force of a monetary law endowing the boliviano with a mint parity of 36.5 cents and making it convertible into gold coin, bullion, or gold exchange bills at the option of the Central Bank of Bolivia. The central bank credit arranged for the Bank of Poland in 1927 and renewed in 1928, in which the Federal Reserve Banks participated, expired in October 1929. The continued adequacy of the Polish central bank's reserve position rendered it unnecessary for that bank to make use of the credit. Membership Changes in 1929 Due to a considerable number of mergers and consolidations of member banks during the past year, the number of member banks in this district was slightly smaller at the end of 1929 than a year previous. There were no withdrawals from membership nor any insolvencies among members. The following tables show the number of member and nonmember banks classified according to their charters, and indicate causes of changes in membership during the year. FIFTEENTH ANNUAL REPORT 18 NUMBER OF MEMBER AND NONMEMBER BANKS IN SECOND FEDERAL RESERVE DISTRICT AT END OF YEAR DECEMBER 31, Type of Bank 1929 DECEMBER 31, 1928 NonNonPer Cent Per Cent Members* Members Members Members* Members Members National Banks.. State Banks** Trust Companies Total 769 42 120 0 205 199 100 17 38 775 49 114 0 220 190 100 18 37 931 404 70 938 410 70 *In actual operation at end of year. **Exclusive of savings banks. CHANGES IN FEDERAL RESERVE MEMBERSHIP IN SECOND DISTRICT DURING 1929 Total membership beginning of year Increases :f National banks organized Conversion of nonmember banks to National Admission of State banks and Trust Companies Total Increases Decreases: Member banks combined with other members Conversion of National banks to nonmember State banks Absorbed by nonmembers Withdrawals. .. Insolvencies Total Decreases Net decrease Total membership end of year 938 22 2 8 32 30 2 7 0 0 39 7 931 fin addition to figures shown in this table, 14 nonmember banks were absorbed by members during the year. During the year there was a continuation of the tendency toward a concentration of banking resources, accompanied by the further establishment of branches in cities. The accompanying tables show the progress of these tendencies. Due largely to mergers the number of banks in the district operating branches has decreased from 134 on June 30,1928 to 128 on June 30,1929, but the number of branches has been increased from 652 to 747, as shown in the table on page 19. FEDERAL RESERVE BANK OF NEW YORK 19 NUMBER OF BANKS WITH BRANCHES AND NUMBER OF BRANCHES IN OPERATION IN SECOND FEDERAL RESERVE DISTRICT ON JUNE 30, EACH TEAR* (Branches discontinued prior to June 30, 1926, not included) New York City June 30 Banks with No. of Branches Branches Buffalo All other in New York State New Jersey in Second Federal Reserve District Banks No. with of Banks No. with of Banks No. with of Branches Branches Branches Branches Branches Branches Total all cities in Second Federal Reserve District Banks with No. of Branches Branches 1888 1889 1890 1891 1892. .. . 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 2 2 1 2 2 3 3 1 2 2 3 3 1893 1894... . 1895.... 1896 1897 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 1898 1899 1900 1901 1902 1 3 3 6 8 1 6 9 20 30 3 3 3 3 3 3 3 3 3 3 4 6 6 9 11 4 9 12 23 33 1903 1904 1905 1906 1907 14 16 16 19 20 44 50 57 73 82 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 3 18 20 20 23 24 48 54 61 77 86 1908 1909 1910 1911 1912 20 21 23 24 26 86 91 94 98 105 1 2 2 2 2 1 2 2 2 2 3 3 3 3 3 3 3 3 3 3 24 26 28 29 31 90 96 99 103 110 1913 1914 1915 1916. . 1917 27 27 29 29 30 115 123 130 136 145 1 1 2 5 2 2 2 2 2 2 2 2 2 2 4 7 11 11 11 4 9 16 16 16 33 36 42 43 44 121 134 148 156 168 1918 1919 1920.. 1921 1922 30 31 33 36 38 152 158 173 192 212 1 2 2 4 5 5 11 20 28 32 2 4 7 9 9 2 4 7 11 12 11 11 11 11 11 16 16 16 16 17 44 48 53 60 63 175 189 216 247 273 1923 1924 1925 1926 1927 42 46 53 57 63 242 274 315 365 418 5 5 5 5 4 47 49 53 62 59 13 15 17 18 25 18 22 25 30 45 11 11 11 11 20 17 17 17 17 34 71 77 86 91 112 324 362 410 474 556 1928 1929 58 53 469 533 5 4 62 71 29 28 52 59 42 43 69 84 134 128 652 747 *Exclusive of savings banks. 20 FIFTEENTH ANNUAL REPORT The effect of bank mergers on the banking situation in particular cities is shown in the two tables below. In New York City the number of banks decreased during the year, and on December 31, was 126 as compared with 143 at the end of 1926. The ten largest banks in New York City now hold 70 per cent of the banking resources of the city, as compared with 59 per cent in 1926, and 33 per cent in 1889. The ten largest banks now have average resources of over one billion dollars. Similar figures are given for Albany, Buffalo, Rochester, and Newark, and show a continued tendency to concentration in those centers. CHANGES IN NUMBER AND RESOURCES OP COMMERCIAL BANKS IN NEW YORK CITY SINCE 1 8 8 9 * (Dollar figures in millions) End of year Number of banks 1889. 1900.... 1914... 1920.... 1926 1929.... Total resources all banks Resources 10 largest banks Per cent 10 largest to total Average resources all banks Average resources 10 largest banks $1,028 2,111 3,911 8,441 10,370 14,710 $343 766 1,850 4,530 6,098 10,298 33 36 $7 14 30 69 73 117 $34 77 185 453 610 1,030 142 152 129 123 143 126 47 54 59 70 *Exclusive of savings banks. CHANGES IN NUMBER AND RESOURCES OF COMMERCIAL BANKS IN FOUR CITIES SINCE 1889f Number of banks Resources all banks (in millions) Resources 3 largest banks (in millions) Per cent 3 largest banks to iill banks End of year. 1889 1926 1929 1889 1926 1929 1889 1926 1929 1889 1926 1929 Albany Buffalo Rochester... Newark 10 13 9 11 5 7 8 28 5 8 7 25 t Exclusive of savings banks $20 $143 $138 31 461 601 16 245 285 19 336 394 $11 $134 $128 13 408 582 8 139 195 8 166 237 55 42 50 42 94 89 57 49 93 97 68 60 FEDERAL RESERVE BANK OF NEW YORK 21 Operating Statistics Complete statistics of the operations of each Reserve Bank are published in the annual report of the Federal Reserve Board; therefore, detailed figures of the operations of this bank are omitted from this report, except for the following statement of condition and statement of income and disbursements during the year, together with a table showing the volume of operations in principal departments, including the Buffalo Branch. STATEMENT OF CONDITION RESOURCES 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 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 Gold and gold certificates in vault 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 Legal tender notes, silver, and silver certificates in the vaults of the bank (available as reserve only against deposits) Total cash reserves Non-reserve cash consisting largely of National bank notes, and minor coin Dec. 31, 1929 Dec. 31, 1928 $238,593,918.26 $198,684,435.65 16,813,705.22 339,616,539.21 20,143,971.71 355,489,488.96 154,835,138.11 142,380,038.48 50,382,220.00 22,040,487.00 $800,241,520.80 $738,738,421.80 $12,946,493.58 $23,448,743.37 $127,012,250.00 $349,156,350.00 44,746,515.44 191,745,088.72 114,823,824.23 152,413,222.32 239,205,400.00 7,150,000.00 49,377,400.00 $609,859,254.16 $665,770,796.55 $ 15,663,777.65 $ 16,087,269.97 220,003,280.94 3,500,931.32 195,086,461.94 990,931.34 $239,167,989.91 $212,164,663.25 $1,662,215,258.45 $1,640,122,624.97 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, bills, and certificates of indebtedness Other securities Total loans and investments MISCELLANEOUS RESOURCES: Bank premises Checks and other items in process of collection All other miscellaneous resources Total miscellaneous resources Total resources FIFTEENTH ANNUAL REPORT Dec. 31, 1929 Dec. 31, 1928 Federal Reserve notes in actual circulation, payable on demand. These notes are secured in full by gold, and discounted and purchased paper $318,970,747.00 $354,182,618.25 Federal Reserve notes in circulation.... $318,970,747.00 $354,182,618.25 $985,790,644.26 $970,894,567.47 5,851,460.29 8,497,390.46 12,727,457.81 9,384,907.24 $1,004,369,562.36 $988,776,865.17 $187,720,689.22 3,851,995.58 $172,070,145.45 3,687,141.30 $191,572,684.80 $175,757,286.75 $67,301,450.00 $50,123,950.00 80,000,814.29 71,281,904.80 $147,302,264.29 $121,405,854.80 $1,662,215,258.45 $1,640,122,624.97 LIABILITIES CTJHRENCY IN CIRCULATION: DEPOSITS: Reserve deposits maintained by member banks as legal reserves against the deposits of their customers United States Government deposits carried at the Reserve Bank for current requirements of the Treasury Other deposits including foreign deposits, deposits of nonmember banks, etc Total deposits 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 7 days All other miscellaneous liabilities Total miscellaneous liabilities 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 INCOME AND DISBURSEMENTS The table on the next page shows the income and disbursements for the years 1929 and 1928. Total earnings for the year^ 1929 were about $800,000 larger than in 1928; an important factor in this increase was the higher level of money rates prevailing during most of the year. Accompanying the increase in the volume of operations in most departments of the bank, current bank operating expenses were slightly higher than in the preceding year. As previously indicated, the expense of printing currency was larger than usual because of the change to a smaller sized currency. On the other hand the 1928 currency expense had been much less than usual as stocks of large sized currency were allowed to run off. The increase in the FEDERAL RESERVE BANK OF NEW YORK 23 dollar amount of dividends reflected a large increase in the paid in capital of the bank, due to increases in the capital and surplus of member banks, which are required by law to subscribe to Reserve Bank stock equal to 6 per cent of their own capital and surplus, of which one half has been paid in. The bank's surplus was increased by $8,700,000, to $80,000,000. 1929 1928 EARNINGS: From loans to member banks and paper discounted for them From acceptances owned From United States Government obligations owned Other earnings Total earnings $12,492,641.58 3,522,642.34 $12,210,526.66 3,482,648.63 2,459,162.69 839,832.62 2,421,172.24 368,694.55 $19,314,279.23 $18,483,042.08 $546,927.82 $97,168.96 $6,313,909.95 $6,192,386.68 738,555.41 251,878.14 545,518.11 1,117,513.57 $7,597,983.47 $7,561,778.39 $12,263,223.58 $11,018,432.65 $3,544,314.09 $2,743,724.61 8,718,909.40 8,274,708.04 $12,263,223.58 $11,018,432.65 ADDITIONS TO EARNINGS: For sundry additions to earnings, including income from Annex Building DEDUCTIONS FROM EARNINGS: For current bank operation. (These figures include most of the expenses incurred as fiscal agent of the United States) 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, self-insurance, other reserves, losses, etc Total deductions from earnings Net income available for dividends, additions to surplus, and payment to the United States Government DISTRIBUTION OP N E T INCOME: In dividends paid to member banks, at the rate of 6 per cent on paid-in capital In 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 mcome remaining after paying dividends and making additions to surplus (as above) is paid to the United States Government as a franchise tax. No balance remained for such payments in 1929 or 1928. Total net income distributed FIFTEENTH ANNUAL REPORT VOLUME OF OPERATIONS The following table indicates that the volume of operations in the principal departments of the bank increased generally during the year 1929 continuing the trend of previous years. Reserve Bank operations reflect closely the year-to-year growth in the country's banking activity. The largest increases in 1929 occurred in the two largest departments in point of volume of work—the Money Department and the Check Department. 1929 Number of Pieces Handled 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: United States Government coupons p a i d . . . . All other United States securities—issues, redemptions, and exchanges by fiscal agency department Transfers of funds 1928 20,151 49,705 94,335 709,940,000 1,574,002,000 190,373,000 18,318* 38,056 95,845 666,298,000 1,341,373,000 177,303,000* 5,567,000 2,600,000 7,602,000 2,615,000 514,000 445,000 1,504,000 402,000 Amounts Handled Bills discounted $23,602,022,000 Bills purchased in open market for own account 1,999,130,000 Currency received and counted 5,285,713,000 Coin received and counted 821,479,000 Checks handled 156,641,846,000 Collection items handled: United States Government coupons paid. ... 237,610,000 All other 2,690,034,000 United States securities—issues, redemptions, and exchanges by fiscal agency department 3,155,408,000 Transfers of funds 67,426,244,000 $24,791,838,000 2,018,463,000* 4,347,922,000 668,085,000 115,192,020,000* 250,025,000 2,808,748,000* 3,985,049,000 55,469,947,000 •Revised Changes in Directors and Officers At a regular election in the fall of 1929, Thomas W. Stephens, president of the Bank of Montclair, of Montclair, New Jersey, was unanimously elected by member banks in Group 2 as a Class A director, for a term of three years, beginning January 1, 1930, to succeed Robert H. Treman, president of the Tompkins County National Bank of Ithaca, New York, whose term expired December 31, 1929. Mr. Treman had been a director of the bank continuously since its inception in 1914, representing the member banks in Group 2, and for a period of three years from 1916 to 1919, served as Deputy Governor. Mr. Treman had requested that his name be not considered for renomination. The directors passed the following resolution upon his retirement: FEDERAL RESERVE BANK OF NEW YORK 25 "For more than fifteen years, from the date of its organization until now, Robert H. Treman has served continuously as a director of the Federal Reserve Bank of New York. His term of service has been longer than that of any other director. For more than three years, from July, 1916, to November, 1919, he was also senior deputy governor of the bank. These years include a period of one year when, due to absence of the governor of the bank because of ill-health, he was the executive head of the institution. These years covered as well the entire period of this country's participation in the World War. "Mr. Treman has made an important contribution to the establishment, growth and achievement of the Federal Reserve Bank of New York. On the board of directors, his wide and general knowledge, his close acquaintance with changing business and banking conditions, and his balanced judgment have contributed to every important decision of policy, and so have aided largely in the development of Federal reserve banking principles and practices. "During the period when he was senior deputy governor of the bank it grew from a small bank with about one hundred employes to an institution with three thousand employes, capable of handling the huge task of war financing for the government. Its extensions of credit increased from a few million dollars to a billion dollars. In this period of rapid growth and new and great undertakings Mr. Treman performed with marked distinction the difficult tasks which were his. "His personality, demonstrated ability, and unfailing kindness, courtesy, and consideration won the respect and esteem of the bankers of the second district and the confidence and affection of all of his associates in the bank. "On the occasion of the termination of his active connection with the direction of the bank his associates on the board of directors wish to record their great appreciation of the unselfish and effective service Mr. Treman has rendered not only to the bank but through it, to the country, and wish to express enduringly in this minute their high regard and affection for him." Theodore F. Whitmarsh, chairman of the board of Francis H. Leggett & Company, whose term as a Class B director expired on December SI, 1929, was unanimously reelected by member banks in Group 2, for a term of three years from January 1, 1930. The Federal Reserve Board reappointed Owen D. Young as a Class C director of the bank for a term of three years from January 1, 1930, and redesignated him as a Deputy Chairman of the Board. The Federal Reserve Board redesignated Gates W. McGarrah as Chairman of the Board and Federal Reserve Agent for the year of 1930. The Federal Reserve Board reappointed Frederick B. Cooley, president of the New York Car Wheel Company of Buffalo, New York, as a director of the Buffalo Branch for a term of three years from January 1, 1930. The Federal Reserve Board appointed George G. Kleindinst, president of the Liberty Bank of Buffalo, as a director of the Buffalo Branch to fill the unexpired term ending December 31, 1931, of Edward A. Duerr, formerly Chairman of the Community National Bank of Buffalo, who resigned as a director of the Branch. 26 FIFTEENTH ANNUAL REPORT T h e board of directors of this b a n k appointed Lewis G. H a r r i m a n , president of the M & T T r u s t C o m p a n y of Buffalo, as a director of the Buffalo Branch for a t e r m of t h r e e years from J a n u a r y 1, 1930, t o succeed H a r r y T . Ramsdell, resigned, formerly honorary chairm a n , M & T T r u s t Company, Buffalo. Effective M a y 15, 1929, W a l t e r W . Schneckenburger, m a n a g i n g director of the Buffalo Branch, resigned t o accept a position as Vice President of the Seaboard N a t i o n a l B a n k of N e w Y o r k City, a n d effective on t h e same date, R o b e r t M . O ' H a r a , formerly m a n a g e r of t h e Bill D e p a r t m e n t of t h e b a n k , was appointed M a n a g i n g Director of the Buffalo B r a n c h t o succeed M r . Schneckenburger. T h e directors also reappointed M r . O ' H a r a as M a n a g i n g Director of t h e Buffalo Branch for t h e year 1930. MEMBER OF FEDERAL ADVISORY COUNCIL The directors at their meeting on January 2, 1930, reelected William C. Potter, President of the Guaranty Trust Company of New York, as the member of the Federal Advisory Council from the Second Federal Reserve District for the year 1930. CHANGES IN OFFICERS AND STAFF On May 17, 1929, Robert M. Morgan, formerly Chief of the Loan Application Division, was appointed Manager of the Bill Department. On September 30, 1929, Stephen S. Vansant, formerly Manager of the Government Bond & Safekeeping Department, resigned to accept a position with the National City Bank of New York. At the end of the year, the following changes were made in the official personnel of the bank: Walter S. Logan, formerly General Counsel, was appointed Deputy Governor and General Counsel. Jay E. Crane, formerly Assistant Deputy Governor and Secretary, was appointed Deputy Governor and Secretary. James M. Rice, formerly Manager of the Accounting Department, was appointed Assistant Deputy Governor. Wesley W. Burt, formerly Chief of the Planning Division, was appointed Manager of the Accounting Department. FEDERAL RESERVE BANK OF NEW YORK 27 DIRECTORS AND OFFICERS January 1, 1930 Term Expires Dec. SI DIRECTORS Class Group A 1 CHABLES E. MITCHELL, New York City 1931 Chairman, National City Bank of New York A 2 THOMAS W. STEPHENS, Montclair, N. J 1932 President, Bank of Montclair A 3 DELMER RUNKLE, Hoosick Falls, N. Y 1930 Chairman, Peoples National Bank of Hoosick Falls, N. Y. B 1 WILLIAM H. WOODIN, New York City 1931 President, American Car & Foundry Company B 2 THEODORE F. WHITMARSH, New York City 1932 Chairman, Francis H. Leggett & Company B 3 SAMUEL W. REYBURN, New York City 1930 President, Lord & Taylor C GATES W. MCGARRAH, New York City, Chairman 1931 C OWEN D. YOUNG, New York City, Deputy Chairman Chairman, General Electric Company 1932 C CLARENCE M. WOOLLEY, Greenwich, Conn 1930 Chairman, American Radiator and Standard Sanitary Corporation MEMBER OF FEDERAL ADVISORY COUNCIL WILLIAM C. POTTER President, Guaranty Trust Company of New York FEDERAL RESERVE AGENT'S FUNCTION GATES W. MCGARRAH, Federal Reserve Agent W. RANDOLPH BURGESS, Assistant Federal Reserve Agent WILLIAM H. DILLISTIN, Assistant Federal Reserve Agent HERBERT S. DOWNS, Assistant Federal Re- serve Agent and Manager, Bank Relations Department CARL SNYDER, General Statistician HAROLD V. ROELSE, Manager, Reports Department, and Assistant Secretary EDWARD L. DODGE, General Auditor 28 FIFTEENTH ANNUAL REPORT GENERAL OFFICERS GEORGE L. HARRISON, Governor J. HERBERT CASE, Deputy Governor EDWIN R. KENZEL, Deputy Governor JAY E. CRANE, Deputy Governor and Sec- WALTER S. LOGAN, Deputy Governor and retary General Counsel ARTHUR W. GILBART, Deputy Governor LESLIE R. ROUNDS, Deputy Governor Louis F. SAILER, Deputy Governor CHARLES H. COE, J. WILSON JONES, Assistant Deputy Governor Assistant Deputy Governor RAY M. GIDNEY, WALTER B. MATTESON, Assistant Deputy Governor Assistant Deputy Governor JAMES M. RICE, Assistant Deputy Governor JUNIOR OFFICERS DUDLEY H. BARROWS, JACQUES A. MITCHELL, Manager, Administration Department WESLEY W. BURT, Manager, Loan and Discount Dept. ROBERT M. MORGAN, Manager, Accounting Department EDWIN C. FRENCH, Manager, Bill Department WILLIAM A. SCOTT, Manager, Cash Department Manager, Foreign Department ROBERT F. MCMURRAY, I. WARD WATERS, Manager, Collection Department Manager, Government Bond and Safekeeping Department, and Manager, Check Department BUFFALO BRANCH DIRECTORS FREDERICK B. COOLEY Term Expires Dec. SI 1932 President, New York Car Wheel Company, Buffalo LEWIS G. HARRIMAN 1932 President, M & T Trust Company, Buffalo ARTHUR G. HOUGH . . 1930 President, Wiard Plow Company, Batavia, N. Y. GEORGE G. KLEINDINST 1931 President, Liberty Bank of Buffalo GEORGE F. RAND 1930 President, Marine Trust Company, Buffalo JOHN T. SYMES 1931 President, Niagara County National Bank and Trust Company, Lockport, N. Y. ROBERT M. O'HARA, Managing Director 1930 OFFICERS ROBERT M. O'HARA, Managing Director HALSEY W. SNOW, JR., Cashier R. B. WILTSE, Assistant Manager CLIFFORD L. BLAKESLEE, Assistant Cashier
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