Full text of Annual Report of the Federal Reserve Bank of New York : First Annual Report of the Federal Reserve Bank of New York

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

FIRST ANNUAL REPORT
OF THE

FEDERAL RESERVE BANK
OF NEW YORK




WASHINGTON
GOVERNMENT PRINTING OFFICE

1916




LETTER OF TRANSMITTAL.
J a n u a r y 1, 1916.
I have the honor to submit herewith the first annual report
of the Federal Reserve Bank of New York covering a period of about
15 months, from the time of the first meeting of its board of directors,
October 5, 1914, to the close of business December 31, 1915. The
range and the discussion of the various topics are somewhat more
full than would be ordinarily necessary since the period under review
not only covers the initial year of operations of a banking system
created wholly anew, but has also given rise to some of the most
interesting and far-reaching economic phenomena of modem times.
Respectfully,
(Signed) P ie r r e Ja y ,
Chairman of the Board and Federal Reserve Agent.
Hon. C h a r le s S. H a m l in ,
Governor Federal Reserve Board Washington D. C.
Si r :




,

,

3




TABLE OF CONTENTS.
Chapter I .— O r g a n iz a t io n :
Designation o f D istrict N o. 2 ........................................................................................
Certificate o f in corporation ............................................................................................
B oard o f directors..............................................................................................................
B y-la w s.................................................................................................................................
P aym ent o f ca p ita l...........................................................................................................
Tem porary staff and open in g o f b a n k ........................................................................
Perm anent organization..................................................................................................
D epartm ent o f th e F ed eral Reserve A g e n t..............................................................
O ffices....................................................................................................................................
Subtreasury coop eration .................................................................................................
Clearing-house coop eration ............................................................................................
M em ber o f Federal advisory co u n c il..........................................................................
Chapter I I .— D e v elo pm e n t of F un ctions a n d O p e r a t io n s T h e r e u n d e r :
A ccou nts w ith other Federal reserve b a n k s............................................................
G old settlem ent fu n d .................................................................- ...................................
Establishm ent o f rates o f d iscou n t..............................................................................
E lig ib le pap er....................................................................................................................
R ediscoun ts.........................................................................................................................
Federal reserve n otes............................... .......................................................................
Purchase o f warrants.......................................................................................................
Bankers’ acceptances.......................................................................................................
Purchase o f U n ited States b on d s.................................................................................
C ollection system ..............................................................................................................
Adm ission o f State banks and trust com panies......................................................
Fiscal agent o f th e U n ited States................................................................................
Balance sheet.....................................................................................................................
Profit and loss....................................................................................................................
E xam ination b y the Federal R eserve B o a r d .........................................................
Functions not y e t d e v e lo p e d ........................................................................................
Chapter I I I .— T h e M e m b e r B a n k s an d the F e d e r a l R e se r v e D ist r ic t :
Readjustm ent of d istrict.................................................................................................
N um ber of banks..............................................................................................................
E lection o f directors.........................................................................................................
Analysis of operations of national banks...................................................................
T im e deposits and savings accounts........................................................................... .
Loans on im proved farm lands.....................................................................................
F id u cia ry pow ers...............................................................................................................
Branches o f m em ber b a n k s............................................................................................
Characteristics of th e Federal R eserve B ank o f N ew Y o r k ................................
R elations w ith m em ber b an ks......................................................................................
N ational-bank section of the Am erican Bankers’ A ssociation ...........................
Relations w ith State b a n k s............................................................................................




5

PaSe*
7
7
7
8
9
9
9
10
10
10
11
11
12
13
14
16
17
18
20
21
23
23
26
26
26
26
27
27
28
28
28
29
31
32
32
32
33
34
36
37

6

TABLE OF CO N TE N TS.

Chapter IV.—General Conditions:
Introduction.................................................................................................
Clearing-house loan certificates....................................................................
Emergency currency....................................................................................
The New York Stock Exchange..................................................................
Foreign exchange.........................................................................................
The gold movement.....................................................................................
Imports and exports....................................................................................
Money rates in New York City....................................................................
Loans to foreign countries......... ; .......... ......................................................
The 1915 crops..............................................................................................
Immigration and emigration........................................................................
Foreign banking conditions..........................................................................
Industrial and commercial conditions..........................................................
Banking and financial conditions................................................................
Chapter V.—Summary of R esults op Operation:

page37
37
37
38
39
42
43
45
46
48
48
49
51
53

APPENDIXES.
I. By-laws of the Federal Reserve Bank of New York.................................
II. Condensed statement of condition of the Federal Reserve Bank of New
York, December 31, 1915.............................................. '.......................
III. Profit and loss statement..........................................................................
IV. Comparative statement of condition........................................................
Y. Capital account of reconciliation, November 2, 1914, to December 31,
1915.......................................................................................................
YI. Rediscounts......... ....................................................................................
VII. Maturities of investments of Federal Reserve Bank of New York, Decem­
ber 31,1915...........................................................................................
VIII. Federal reserve notes................................................................................
IX. Transit and exchange transactions between Federal Reserve Bank of New
York and other Federal reserve banks, November 16, 1914, to Decem­
ber 31,1915............................................................................................
X. Summary of gold settlement fund operations, May 19,1915, to December
31,1915..................................................................................................
XI. Fiduciary powers:
Banks granted permission to act as registrar of stocks and bonds,
New York......................................................................................
Banks granted permission to act as trustee, executor, administrator,
and registrar of stocks and bonds, New Jersey...............................
XII. Aggregate statistics of seven groups of national banks in district No. 2, as
of November 10,1915............................................................................




57
59
60
60
61
61
61
62
62
63
63

64

FIRST ANNUAL REPORT, FEDERAL RESERVE BANK OF NEW
YORK.
P ie r r e Ja y ,

Chairman and Federal Reserve Agent.

C h a p te r

I.—O r g a n i z a t i o n .

DESIGNATION OF DISTRICT NO. 2.

The designation of New York State as Federal Reserve District No. 2, with New*
York City as the location.of the Fedeial Reserve Bank, was made by the reserve bank'
organization committee on Apiil 2,1914.
CERTIFICATE OF INCORPORATION.

The certificate of incorporation, signed by the following as incorporators: The
National Commercial Bank, Albany; National Park Bank, New York; Marine National
Bank, Buffalo; First National Bank, Syracuse; Irving National Bank, New York, was
filed with the Comptroller of the Currency May 18, 1914, whereupon the Federal
Reserve Bank of New York became a body corporate.
BOARD OF DIRECTORS.

The election of the three class A and the three class B directors of the Federal
Reserve Bank of New York was conducted by the organization committee during June
and July, 1914, and announcement of the election was made August 10. The appoint­
ment of the three class C directors by the Federal Reserve Board was announced on
September 30, completing the board of directors. On October 5 the first meeting of
the board of directors was held in the office of the Bank of the Manhattan Co., 40 Wall
Street, New York. Mr. Benjamin Strong, jr., then president of the Bankers Trust
Co. of New York, was elected governor of the bank, and Mr. Leslie R. Palmer, a
member of the board, secretary pro tempore. At the second meeting of the board
the terms of office of the directors were designated as follows:
Class A, representing the member banks: Franklin D. Locke, term expires Decem­
ber 31,1915; William Woodward, term expires December 31,1916; Robert H. Treman,
term expires December 31,1917.
Class B, representing commerce, agriculture, or industry: Leslie R. Palmer, term
expires December 31, 1915; Henry R. Towne, term expires December 31, 1916;
William B. Thompson, term expires December 31, 1917.
Class C, representing the Federal Reserve Board: George Foster Peabody, term
expires December 31, 1915; Pierre Jay, term expires December 31, 1916; Charles
Starek, term expires December 31,1917.
A meeting of the directors and governors of all the reserve banks, called by the
Federal Reserve Board, was held in Washington October 20-22. At this meeting,
which was attended by over 80 directors and governors of Federal Reserve Banks,
standard by-laws were prepared, a uniform plan of accounting was tentatively approved'
on, and various problems relating to the inauguration of the system and the operation
of the banks were discussed.
7




8

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R E .

During October Mr. William Woodward, president of the Hanover National Bank
and a class A director, consented to become acting deputy governor, and Mr. James F.
Curtis was elected secretary and counsel for the bank.
On October 26 the following telegram was received:
“ P i e r r e Ja y ,

“ Chairman Board of Directors,
“ Federal Reserve Bank, New York.
“ Please call a meeting of the directors of the Federal Reserve Bank of your district
and advise them that all necessary statutory requirements having already been com­
plied with by the several Federal Reserve Banks, the Comptroller of the Currency will
forward to each bank on or before November 16,1914, the certificate authorizing such
bank to commence business as prescribed by section 4 of the Federal Reserve Act, and
the Secretary of the Treasury will, in conformity with section 19 of the Act, formally
announce the establishment of the Federal Reserve Banks in each of the Federal
reserve districts on the 16th day of November, 1914. Please also assure the directors
that this department will gladly extend to them every facility and all possible assist­
ance in opening the banks on that date and also assure them of my very best wishes
and of my earnest desire to cooperate with them in every possible manner to render
this great public service.
“ W. G. McAdoo,
“ Secretary of the Treasury.”

To this telegram the directors replied on October 28, assuring the Secretary of the
Treasury of their desire to cooperate with the plan set forth in his telegram, as
follows:
“ Hon. W. G. M cA d o o ,
u Secretary of the Treasury, Washington:
“ At the meeting of the directors of the Federal Reserve Bank of New York to-day
your telegrams of Monday to Gov. Strong and myself were presented, and I was
authorized to express to you the entire concurrence of the board of directors in the
telegraphic replies sent you on Monday by Gov. Strong and myself and to thank
you for your good wishes and offer of assistance and to assure you of their desire to
cooperate with your plan.
“ P i e r r e Ja y ,

Chairman.*9

From its first meeting until December 31,1915, the board of directors has held 50
meetings, of which 18 have been attended by the full board, 24 by eight directors,
7 by seven directors, and 1 by six directors.
The relatively small size of this Federal reserve district has made it practicable to
hold frequent meetings of the board of directors, which has therefore been a more
active body than the exec utive committee. At these meetings the affairs and develop­
ment of both the bank and the system have been discussed and considered at length.
The executive committee, consisting of the governor, as chairman, and four directors,
has held 59 meetings, of which 9 have been attended by the full committee, 10 by
five members, 22 by four members, and 18 by three members. The governor and
chairman are ex officio members of the committee. Mr. Woodward was elected a
member to serve till December 31, 1915, and all the other directors have served
upon it in turn. Mr. Starek, vice chairman, has been invited to attend all meetings
(of the committee.
During the first five months all applications for rediscount were acted on by the ex­
ecutive committee, but on April 7, 1915, the senior officers were authorized, within
certain limits, to pass upon them, since which date relatively few meetings of the com­
mittee have been held.
There have also been 13 subcommittees of the board for the consideration of special
matters, several of which have held two or more meetings.
BY-LAWS.

The by-laws of the bank were originally adopted on October 28,1914. They, have
been amended from time to time, and a copy of them in their present form is attached
hereto.




FiIRST A N N U A L REPO R T, FEDERAL RESERVE B A N K OF N E W Y O R K.

9

PAYMENT QF CAPITAL.

One-half of the subscribed capital of the bank has been called during the period
covered by this report. The Federal Reserve Board designated November 2, 1914,
as the day for the payment of the first installment of one-sixth of the subscribed amount.
This installment aggregated $3,321,950, and as the office of the bank at that time was
not suitable for the purpose it was received in a room in the New York clearing house
|t>ythe three acting assistant cashiers of the bank and a number of volunteer clerks
from New York member banks.
Two other installments, each one-sixth of the amount subscribed, have been re­
ceived, one on February 2, 1915, aggregating $3,318,183.35, and one on May 2, 1915,
segregating $3,317,516.65; On July 1, 1915, the capital subscribed by 131 banks jLn
northern New Jersey, which by the adjustment of the district became members of the
Federal Reserve Bank of New York, was received, aggregating $962,650. Sundry
increases and decreases have brought the total capital paid up to $11,063,150 on
December 31,1915.
The details of the capital account will be found in the Appendix.
TEMPORARY STAFF AND OPENING OP BANK.

On October 26, when the telegram was received from the Secretary of the Treasury
advising that he would announce the establishment of the Federal reserve banks on
November 16, no staff had been assembled, nor had a banking room been secured.
Over 2,000 applications for positions in the bank were on file, but it was obviously
impossible during the intervening three weeks to attempt the organization of a per­
manent staff. The expedient of a temporary staff was therefore determined upon.
Mr. G. E. Gregory, cashier of the National City Bank of New York, consented tobecome acting cashier of the bank, and Messrs. B. W. Jones, assistant secretary, and
R. H. Giles, assistant treasurer, respectively, of the Bankers Trust Co., and Mr. S. A.
Welldon, assistant cashier of the First National Bank, to become acting assistant
cashiers to effect the assembling and organization of a staff. Through the generous
cooperation of the subtreasury at New York and of several New York banks an
efficient volunteer staff was borrowed, each man experienced in his particular de­
partment.
On Monday, November 9, possession was obtained of the banking room at 62 Cedar
Street, which had been leased, and during the week the officers and clerfis met daily
for drill in the various branches of the work.
On November 16 the bank opened its doors with a staff of 7 officers and 85 clerks.
During the day $99,61,1,670 of reserves were taken in from 211 banks. The tellers re­
ported their accounts in balance at 5.30, and at 8 p. m. the first balance sheet of the
Federal Reserve Bank of New York was mailed to the Federal Reserve Board.
PERMANENT ORGANIZATION.

During the next eight weeks the permanent staff of the bank was gradually organized.
Mr. E. R. Kenzel was appointed assistant cashier, Mr. H. M. Jefferson auditor; Mr. L. H.
Hendricks transit manager. By the middle of January, 1915, a permanent staff of
5 officers and 36 clerks had been assembled, 9 of them having remained from the
volunteer body. June 9,1915, Mr. L. F. Sailer, assistant cashier of the National Park
Bank of New York, was elected cashier and Mr. L. H. Hendricks assistant cashier.
The staff on December 31,1915, consists of the governor, the acting deputy governor,
the secretary, the cashier, two assistant cashiers, the auditor, and 67 clerks and other
employees; the Federal Reserve Agent, deputy Federal Reserve Agent, an assistant,
and one clerk.
In assembling the permanent staff and organizing the accounting system of the bank
the plan has been to free the departments as much as possible, from mixed classes of




10

FIRST A N N U A L REPORT, FEDERAL RESERVE R A N K OF N E W Y O R K ,

duties and yet so to interlock their work that automatic checks could be established
between the departments and on the accounts generally. It has also been planned as
far as possible to educate the employees in all branches of the work in order to be
ready at all times to handle a large volume of business in any particular department.
The accounting system provides a set of records both efficient and complete, yet
understandable to the layman, and so devised as to facilitate the preparation of the
many forms of statistics which are required. All work, including the general ledger,
is subject to countercheck. Bound books of entry are provided at some point in every
chain of operations.
The principal difference between the accounting plan of this and other large banks
is the introduction of separate debiting and crediting departments, which prepare the
debit and credit journals for the bookkeepers, and to which all departments originating
debits and credits route such items. This makes possible a valuable check on the
ledger accounts.
The auditor’s department is not an operating department, but an independent
organization with authority to audit all of the departments, reporting to the directors,
the executive committee, and the officers. The proofs of all departments are audited
by it daily.
The work of the bank is divided among the following departments: Paying teller,
receiving teller, note teller, discount mail teller, securities, foreign exchange, cred­
iting, debiting, bookkeeping, general bookkeeping, credit, auditing, statistics, transit
statement, filing, stationery, stenographic, telephone, pages, floormen, and watch­
men. A separate department is also maintained by the Federal Reserve Agent.
DEPARTMENT OF THE FEDERAL RESERVE AGENT.

The Federal Reserve Agent’s department, by early agreement with the deputy, was
organized in such a way as to relieve these two statutory officers of clerical duties and
the handling of Federal reserve notes, gold, lawful money, and collateral. A respon­
sible assistant, with necessary clerical assistance from the bank, has kept all records
of the receipt and issue of Federal reserve notes, and under the responsibility of the.
agent jointly with one of the officers of the bank has had custody of all Federal reserve
notes, gold, lawful money, and collateral held by the department.
OFFICES.

A temporary office at 27 Pine Street was used from October 10 to November 9, 1914
On that day the bank occupied the office at 62 Cedar Street, which had been leased
from Messrs. Harvey Fisk & Sons, consisting of a banking room, suitable rooms for
directors, officers, and clerks, and a security vault. The bank was very fortunate,
on such short notice, to be able to obtain an office so well fitted for its initial and
organization period. But as its work progressed it became apparent that offices better
suited to its ultimate development should be obtained. The time consumed and the
inconvenience caused by the frequent visits by officers to the subtreasury and the
clearing-house vaults alone seemed to necessitate moving to an office adequately
equipped with vault accommodation. On December 16, 1915, therefore, a lease was
entered into with the Equitable Building Corporation for offices at the Pine and
Nassau Streets corner of its building, opposite the subtreasury, under which the
building corporation provides a very satisfactory banking room, vault, and working
space, including accommodations for officers of member, banks, with options on other
space to cover future expansion. The term of the lease begins May 1,1916.
SUBTREASURY COOPERATION.

Immediately after designating the date for the inauguration of the Federal Reserve.
System the Secretary of the Treasury advised this bank that the subtreasury at New
York would do everything in its power to facilitate its operations. Hon. Martin,




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

11

Vogel, assistant treasurer in New York, placed at the disposal of the bank two large
compartments in the subtreasury vaults, one for the bank and the other for the Federal
Beserve Agent, both of which have been in constant use since the day the bank began
business, requiring at each entry the presence of two members of the subtreasury
staff.
At the opening of the bank, and for a few days thereafter, the assistant treasurer
detailed a number of his most experienced money counters to assist in counting the
large volume of reserves then transferred. He also extended to the bank the facilities
of the subtreasury for cutting and mutilating Federal reserve notes unfit for circulation
as the first step in the process of their retirement. All gold coin received by the
bank has been weighed for it by the subtreasury. The attitude of the assistant treas­
urer and his staff throughout the period covered by this report has been cooperative
in every way and the assistance given by them to the bank has been material and is
gratefully acknowledged.
CLEARING-HOUSE COOPERATION.

At every step in the organization and operation of the bank the attitude of the New
York Clearing House Association has been one of active cooperation. On November
2, 1914, when the first installment of the capital stock of the bank was paid in, the
clearing house set apart a room in which the gold might be received and a vault for its
custody. The greater part of the reserves of the bank, from the day of its opening,
has been kept in the vaults of the clearing house. These vaults have been used
almost daily, and often more than once a day, each entry requiring the presence of
the manager of the clearing house as well as a representative of the chairman of the
clearing-house committee.
On November 9, 1914, the directors authorized the governor to apply for limited
membership in the clearing house as a convenience both to it and the member banks.
On November 13 the application was approved and the bank became a limited mem*
ber, for the purpose of clearing checks, but without the usual financial responsibilities.
Full acknowledgment is made of the indebtedness of this bank to the officers and
members of the clearing house for the cooperation and assistance which they have
always given it.
MEMBER OF FEDERAL ADVISORY COUNCIL.

On November 25,1914, the board of directors elected Mr. J. P. Morgan, of New York
Oity, a member of the Federal Advisory Council from Federal reserve district No. 2 for
the year 1915.
C h a p te r

II.—D e v e l o p m e n t

o f F u n c tio n s , a n d O p e r a t io n s T h e r e u n d e r .

DEPOSITARY OF THE RESERVES OF MEMBER BANKS.

The initial transfer of the reserves of 480 member banks in November, 1914, amounted
to $106,702,995.81. Of these deposits $97,954,175.84 came from banks in the city of
New York and $8,748,819.97 from other banks.
The second transfer of reserves began on November 16, 1915, and amounted to
approximately $3,700,000. The wide difference in the two amounts is due to the fact
that. New York City banks were required to transfer at the outset their entire contri­
bution of reserves, while in the case of other banks the transfer is distributed over a
period of 36 months. Most of the initial transfer was made in gold, gold certificates,
and lawful money. The second and third transfers were made largely in checks on
New York correspondents.
Outside of banks which have joined the collection system, and whose accounts are
therefore active, only about 36 banks draw on their accounts from time to time. The
accounts of the other 410 banks remain practically dormant. Of those banks whose




12

FIRST A N N U A ]. REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

Accounts are active. New York City banks usually replenish their balances by deposit­
ing their own cashier’s checks, which are settled on the following day through the
clearing house; and dther banks by transfers from New York City correspondents.
Some New York banks have been depositing items on banks in our collection system
and on the other Federal Reserve Banks. A certain volume of gold, silver, legaltender notes, and Federal reserve notes unfit for circulation is also deposited, but as
yet the bank has not accepted national-bank notes on deposit, as it is unwilling to
become practically a redemption agency for the volume of notes which would be
deposited and assume the resulting expense.
It is difficult for this bank to ascertain whether the reserves of member banks are
unimpaired, as their position is learned only from the reports made in response to the
periodical calls of the comptroller. It seems desirable not only for this purpose but as
a measure of general banking publicity that the position of all member banks with
respect to reserves, loans and discounts and deposits should be presented more fre­
quently and made public as is done by clearing houses and by a number of State
banking departments.
The total gold held by the bank and its Federal Reserve Agent on December 31,
1915, is $264,144,380, an increase of $182,610,665 over the amount held at the close
of business on the day of opening.
During the period about $110,000,000 in gold was received from member banks by
direct transactions outside of clearing house settlements.
The following statement shows, at the end of each month, the deposits of member
banks, the total reserve held, the composition of the reserve, and the gold held by
the Federal Reserve Agent. The growth in deposits is due largely to the increased
reserves which the expanding deposits of the member banks require them to carry.
Composition of reserve.
Deposits of
member banks. Total reserve. Legal-tender Silver and silver Gold and gold
notes.
certificates.
certificates.
Nov. 16,1914 $101,816,801.29 $102,933,569.00
Dec. 31,1914 110,114,812.84
99,099,258.00
93,407,196.75
Jan. 31,1915 118,587,486.21
Feb. 28,1915 124,946,634.28 112.234.489.20
Mar. 31,1915 125,306,078.26 112,393,305.55
Apr. 30,1915 131.826.629.32 107.261.027.25
May 31,1915 128,143,549.39 125,181,895.10
June 30.1915 141,929,512.72 151,345,687.40
July 31,1915 147,581,376.68 143,274,771.35
Aug. 31,1915 155,069,198.47 144.274.273.25
Sept. 30,1915 155,203,832.64 147.328.951.20
Oct. 31,1915 178,765,123.50 172,323.885.60
Nov. 30,1915 185.052.542.32 185 690,699.25
Dec. 31,1915 179,433,322.16 180,821,914.90

$10,485,613
11,854,300
2,793,650
5,154,000
3,105,200
2,417,500
4,521,545
15,066,605
4,286,275
2,542,740
7,011,435
19,153,460
23,998,035
5,691,765

$10,914,241.00
5,010,073.00
4,658,571.75
8,084,741.70
12,549,698.05
12.903.194.75
17.121.267.60
16,180,474.90
10,806,233.85
11.577.495.75
11,800,761.20
12.587.570.60
8,936,229.25
284,322.40

$81,533,715.00
82.234.885.00
85.954.975.00
98.995.747.50
96.738.407.50
91.940.332.50
103.539.082.50
120.098.607.50
128.182.262.50
130.154.037.50
129.516.755.00
140.582.855.00
152.756.435.00
174.845.827.50

Gold with
Federal
Reserve
Agent.

$9,115,000
9,370,000
11,560,550
18,833,350
26,858,700
31.660.000
40.320.000
47.520.000
52.550.000
61.350.000
70.740.000
79.010.000
89.300.000

ACCOUNTS WITH OTHER FEDERAL RESERVE BANKS.

In accordance with the decision of the conference of directors and governors at
Washington October 20-22, 1914, the Federal Reserve Bank of New York on opening
announced its readiness to receive at par for immediate credit checks on all other
Federal Reserve Banks. The New York Clearing House immediately placed such
checks on its discretionary list.
On November 19 the People’s National Bank of Brooklyn deposited a check of
$76.80 drawn on the Federal Reserve Bank of Kansas City. This was the first inter­
district transaction and the item was sent to the Federal Reserve Bank of Kansas City
for the credit of this bank. The volume of such transactions grew rapidly, and the
method of settling the resulting balances between Federal Reserve Banks became
one of the matters requiring immediate attention.




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

18

At the first conference of the governors of Federal Reserve Banks, December 10-12
1914, it was agreed that at any time debtor banks might make settlement and. creditor
banks might require settlement, in which latter case the expense of settlement should
be divided between the settling banks. It was decided to continue for a few months
the practice of receiving at par checks on Federal Reserve Banks in order to, observe
the results of facilitating in this way the transfer of money between the 1% Federal
xesferve cities. Member banks in debtor districts promptly took advantage of it to make
exchange without cost on points in creditor districts. The result was that the Federal
Reserve Banks in debtor districts soon found themselves owing large sums to reserve
banks in creditor districts. In order to prevent the further accumulation otsuch bal­
ances and avoid a heavy burden of expense, reserve banks in debtor districts charged
member banks drawing such checks with exchange thereon at the current rate for ex­
change on the points to which they were sent. This had the effect of restraining
the process and the transfer of funds returned to its normal basis.
When the gold settlement fund was established, May 19, 1915, thus providing, a
method of settling balances weekly, the total debit balances paid in by all reserve
banks in settlement of balances then unliquidated, and after six months of heavy
.transactions, were only $6,383,000.
. On June 15, by agreement between the Federal Reserve Banks and at their request*
this bank ceased receiving for immediate credit at par checks on other Federal Reserve
Banks, except those of Boston and Philadelphia, and deferred the credit of such checks
for a sufficient number of days to allow them to reach the paying bank. The New
York Clearing House, however, made no change in its rules except to impose a small
charge on checks drawn on the Federal Reserve Bank of San Francisco.
The aggregate transactions between this bank and other Federal Reserve Banks
from November 16, 1914, to December 31, 1915, have been $1,229,982,000.
Details of transactions between Federal Reserve Banks will be found in the
appendix.
GOLD SETTLEMENT FUND.

In view of the volume of transactions which had developed between Federal Re­
serve Banks during the early part of 1915 and of the proposal that they should establish^
a system of check collection, it became evident that some method must be devised
oI settling balances between them promptly, economically, and with minimum ship­
ments of coin or currency. A plan whereby each Federal Reserve Bank should de­
posit with the Federal Reserve Board in Washington a portion of its gold reserve to be
used in settling balances with other Federal Reserve Banks was put into operation
on May 19, 1915, each reserve bank being required to pay into the fund $1,000,000
and its net debit to the other reserve banks. The total initial deposits were
$18,450,000.
Deposits in and withdrawals from the fund are made by banks at the nearest sub­
treasury. At the close of business each Wednesday each bank advises the Board the
amount due by it to any other bank, and the resultant net balance is charged or credited
to it on the books of the gold settlement fund. The transfer is a bookkeeping rather
than a physical one. Many banks maintain open exchange accounts with other banks
which are not settled. ~Special Interim settlements may also be arranged between
banks when desired, and for convenience and safety in the custody and transfer of
their funds, Federal Reserve Agents are authorized to deposit gold with the gold
settlement fund.
In the domestic exchange markets which exist in several of the Federal Reserve
cities, New York is one of the principal cities on which exchange is bought and sold.
No such market for exchange on other points exists in New York. Also all the other
reserve banks receive checks on this bank at p&r for immediate credit, while New
York defers credit on all reserve bank checks save those of Boston and Philadelphia,




14

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

and more lately of Richmond. This bank therefore has been unable to secure an
offset to the large volume of New York exchange deposited with it by other reserve
banks, and it has been obliged to settle for it through the gold settlement fund in
gold, although in collecting such exchange through the clearing house it has been
paid largely in silver certificates or legal-tender notes, both of which currencies, as
well as gold, may be used by its members in paying debits. The total amount which
this bank has paid in gold to other reserve banks through the fund up to December
31, 1916, has been $83,283,000. At one time through these exchange operations of
other reserve banks it had an accumulation of $30,252,000 of silver, and $13,502,000
of legal-tender, notes, which, however, through the cooperation of member banks in
this city was later largely reduced. The neutralization of this process of drawing
out the gold of this bank, putting it in circulation In other centers, and leaving the
bank with silver in its place is one of the matters requiring study and adjustment..
Further details of the operation of the fund will be found in the appendix.
ESTABLISHMENT OF RATES OF DISCOUNT.

The Federal Reserve System was inaugurated at a time when the stringency of
money rates which had prevailed during August, September, and the early part of
October, 1914, was perceptibly easing. During these months purchases of commercial
paper by the banks had shrunk to a minimum, and the open-market rates ruled
from 6 to 7£ per cent.
The announcement on October 26 that the Federal Reserve System would be opened
in three weeks, releasing a volume of reserves estimated at over $450,000,000, the
free issue of emergency currency under the Aldrich-Vreeland Act, the steady liquida­
tion in merchandise and many commodities, and the decline in foreign exchange all
combined to reduce rates to a normal basis. The first rates established by the Federal
Reserve Bank of New York on November 16, 1914, were 5£ per cent for paper not
exceeding 30 days and 6 per cent for paper of longer maturities. At that time there
was still a substantial volume of New York Clearing House loan certificates out­
standing bearing 6 per cent interest. Surplus reserves of New York Clearing House
institutions increased from $19,200,000 on November 14, 1914, to $127,400,000 on
November 21, 1914, owing to the reductions in required reserves permitted by the
Act. This transfer of $108,200,000 in New York alone from the category of required
reserves to that of excess reserves produced an effect which was promptly felt
throughout the country. The relief felt by bankers and business men at the estab­
lishment of the reserve system, the complete retirement of clearing house loan cer­
tificates in New York, the beginning of the retirement of emergency currency, the
reopening of the stock and cotton exchanges, the return of foreign exchange sub­
stantially to normal, the dullness of trade and business, and the inevitable tendency
of bankers to put at least a portion of their surplus reserves to work led to a further
easing of the money market. On December 18 the bank rate for 30-day paper was
reduced to 5 per cent and on December 23 to 4J per cent.
In the belief that a period of easy money was at hand, the directors of the reserve
bank adopted the policy of keeping its rediscount rates slightly above the market
rates for commercial paper, sp that, unless member banks really needed them, its
resources, most of which had hitherto been kept in the vaults of the member banks,
should not be forced upon a market already oversupplied with funds. This policy
has prevailed throughout the period under review. While business dullness has
.given place to business activity, the great importations of gold have been more than
sufficient to support the credits—“ domestic and foreign” —which the various activities
and developments have required. The surplus reserves of the country have continued
to increase in spite of the unparalleled expansion of loans and the withdrawal from
circulation of $89,300,000 of gold through the issue of Federal Reserve notes against it.




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K Otf N E W Y O R K .

15

Except in time of commercial or financial crisis, the norriial aggregate borrowing
by member banks in this district seldom exceeds $5,000,000. It seems likely, there­
fore, that of the funds of this bank which will normally be put into use only a small
portion will be absorbed by rediscounts of member banks. The balance will be
invested in Government obligations, in municipal warrants, bankers’ acceptances,
and other bills purchased in the open market. The same will be true of other
reserve banks in districts where normal borrowing by member banks is light1
. The
influence of this bank on interest rates and the expansion' and contraction of credits
is likely to be exercised more through its open-market operations than through the
rediscounts of the member banks, or of other Federal Reserve Banks. But, as it
has never possessed any volume of such paper, it has thus far been unable to exert
any influence over rates.
It should be the policy of reserve banks to maintain a fairly stable rate on such
paper. Then in times of expansion or demand for credit, when market rates rise
above theirs, such paper will flow into them in substantial volume and the gold
released in payment will find its way into the reserves of member and other banks,
increasing their credit power and checking extreme advances in rates. In times of
contraction or abundant credit, when market rates fall below those of the reserve
banks, the investments of the latter will be absorbed, as they mature, by banks and
other institutions, thereby transferring gold from their reserves to the reserve banks,
reducing the credit power of the member banks and checking extreme declines in
rates.
Similarly, if a sufficient volume of bankers’ acceptances based on imports and
exports is developed to create a stable discount market in New York or elsewhere in
the United States, an international ebb and flow may be effected. When the dollar
acceptance reaches a degree of currency comparable with that of the sterling accept­
ance, its use will depend largely upon whether, on arrival in New York, it can be
discounted at a rate lower than the rate for sterling acceptances in London. Those
engaged in international business will draw on the city where their drafts can be
discounted at the lowest rate.
When the London rate rises above the New York rate, a substantial volume of
such bills will be transferred from the London to the New York market and be absorbed
by American banks. If in turn the New York rate rises above the London rate, a
substantial volume of bills formerly drawn on New York will be drawn on London,
thereby transferring the burden of absorbing them from New York to London and
raising the New York reserve percentage by reducing the volume of both loans
and deposits. The greater stability of exchange resulting from greater flexibility of
international discount markets should tend in time to reduce transfers of gold
reserves between New York and London.
Through the creation of the bankers’ acceptance an international credit instrument
has been introduced into our banking system which when developed is likely to
prove a potent influence in regulating the flow of credit between Europe and America.
It should enable America, in normal times, to regulate its credit position primarily
by recourse to the European market, thereby rendering domestic rate fluctuations
less violent. Greater stabilization of interest rates is one of the most valuable con­
tributions the system is capable of making to the orderly progress of business.




16

F IR S T A N N U A L R E P O R T , F E D E R A L R E S E R V E B A N K

OF N E W

YORK.

The rates established by .this bank have been as follows:

Date established.

10 days.

Nov. 16,1914........................................................................
Dec. 18,1914.........................................................................
Dec. 23,1914.........................................................................
Feb. 3,1915...........................................................................
Feb. 17,1915.........................................................................
June 24,1915........................................................................

11 to 30
days.

31 to do
days.

61 to 90
days.

91 days
to 6
months.

Per cent. Per cent. Per cent. Per cent. Per cent.
6
6
6
?
5
6
?
5
?
4*
5
4
4
?
4
4
4
5
. 3

SPECIAL BATES.

Feb. 17,1915, bankers’ acceptances, 2 to 4 per cent.
July 24,1915, trade acceptances, 3£ per cent.

An inquiry has recently been made concerning the effect the rates of this bank
have had on rates charged by its member banks to their customers. Outside of New
York City they are reported to have had no effect on the rates charged by member
banks. In New York City the consensus of opinion is that they have had no effect on
rates charged to commercial customers, but that member banks in this district have
had to meet the reserve bank rates of other districts, and on loans to member banks in
those districts the rates have been slightly lower than heretofore would have been
charged. On the market for acceptances and warrants the rates at which reserve
banks have been willing to buy have probably had a softening effect. This inquiry,
however, related to the direct effect of the rates officially established by this bank
and neither to the influence for lower rates exerted by the great reduction in required
reserves permitted by the act nor to the indirect influence exerted by. the mere ex­
istence of the Federal Reserve System.
ELIGIBLE PAPER.

At the inception of the Federal Reserve System no subject aroused more general
interest among the banks and the public than the kind of paper which would be defined
as eligible for rediscount with Federal Reserve Banks. Circular No. 13, issued by the
Federal Reserve Board November 10, 1914, defined paper eligible for rediscount in
such a manner as to create the impression that very strict tests would be applied to
paper submitted for rediscount, and that onerous requirements with regard to state­
ments of borrowers would be insisted upon. The general effect of the circular was to
lead country bankers to believe that their paper would not meet the requirements
and that they were without means of availing themselves of the resources of the
reserve bank. At bankers’ gatherings held in the autumn and early winter the com­
plaint was frequently heard that country banks held no paper eligible for rediscount.
Notwithstanding the general feeling with regard to the eligibility of their paper,
a number of banks, both country and city, from time to time applied for rediscounts.
The application blank required the member bank to certify the eligibility of the
paper under the terms of the Act and the regulations of the Federal Reserve Board.
The policy of this bank has been to accept such certificate without further inquiry
except in cases which indicated a possible misunderstanding of the definition of
eligible paper and to be liberal rather than technical where construction has been
necessary.
In revising and republishing the various regulations for the year 1915 the Reserve
Board simplified the regulation concerning eligible paper so as to leave no reasonable
doubt in the mind of any banker that at least a substantial part of his normal dis­
counts would fall within its terms. The revised regulation was received with great
satisfaction by the member banks. To the request of the comptroller in his call of




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

Iff

March 4, 1915, that each bank should statevapproximately how muchpaperit held
wjbich was eligible for rediscount, 81 banks replied that they held none. Shortly alter
receiving these reports letters were written by this bank to such banks inviting their
officers tp call and discuss the question of eligibility. In this way a much better
understanding of the subject was established.
As a result of several months’ experience in making rediscounts and discussing the
subject with bankers this bank, on June 19,1915, issued its circular No. 25 on eligible
paper with a view to further clarifying the subject and enabling a banker readily to
determine which of his notes could be certified as eligible.
The regulation defining eligible paper required a bank applying for rediscount®
after July 1, 1915, to state whether or not it held statements from borrowers in all
cases of rediscounts aggregating $5,000 or over, or 10 per cent of its capital, and in all
cases of purchased paper. To assist the member banks in obtaining such statements,
the reserve bank prepared four standard statement forms:
(a) For individual farmers or live-stock dealers.
(b) For individual merchants, manufacturers, etc*.
,(c) For firms.
(d) For corporations.
A large number of these were printed and offered without charge to member banks
in sufficient volume to use with all their borrowers. One hundred and ten banks
replied, taking about 38,000 of the forms. Subsequent correspondence with these
banks indicates that although the progress in getting statements from small borrowers
is slow, the fact that the statement is requested on a form bearing the name of the Fed­
eral Keserve Bank leads many to comply who have never before been willing to fur­
nish statements.
REDISCOUNTS.

The first application for rediscount, received at the opening of the bank, was for
$2,182,500 from the Chemical National Bank of New York. One other rediscount
was also made on the opening day. During the period under review there have been
received from 54 banks 277 applications for rediscounts aggregating $11,3^4,937.63.
The largest application was for $2,182,500; the smallest for $1,015. The largest piece
of paper rediscounted was $300,000; the smallest, $20.20.
Applications are acted upon on the day of receipt, and the applying bank is advised
by telegram. The lack of understanding of the requirements,‘which sometimes led to
delays at the outset, has largely disappeared, and except for slightly more formality
in making the application, there is little difference between discounting at the reserve
bank and at other banks. The impression that the operation is surrounded with
difficulties has been overcome, at least with those banks which have applied. A few
days before maturity each piece of paper is sent for collection to the bank which redis­
counted it and on the day of maturity is charged to its account. This gives the redis­
counting bank an opportunity to protect all indorsements. The provision of the Act
requiring a rediscounting bank in indorsing paper to “ include a waiver of demand,
notice, and protest, ” while intended to protect the reserve bank, really worka-against
itB interests. Being obliged to relieve the reserve bank of responsibility to protect
prior indorsements, the member banks, if rediscounting becomes general, are likely
to select for the purpose paper which has no indorsements. The reserve bank should
assume as much responsibility in this respect as any other bank.
tAlthough the normal amount of borrowing by the banks in this district is light, yet
the proportion of even this amount done at the reserve bank has been very small.
The banks naturally continue borrowing at equal or lower rates from correspondents
with whom they have had relations for years. In many cases they leave bonds on
deposit with their city correspondents against which, on telegraphic advice, they may
24803—16----- 2




18

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

borrow. Other banks which borrow on their commercial paper instead of rediscount­
ing it use it as collateral to their own notes. This is simpler for both lender and bor­
rower. It would greatly facilitate the operations of the reserve bank if member banks
were permitted to borrow from it on their own notes secured by commercial paper,
duly indorsed and certified to as to eligibility, as collateral. Not only would it greatly
reduce the accounting labor of recording and computing interest on large numbers of
small notes, a consideration of first importance in times of stress, but the margin of
collateral which commercial banks receive on such loans could be obtained by the
reserve bank, when desirable, without the formalities otherwise necessary. It would
enable member banks to borrow for short periods, which they are often unable to do at
present for lack of the proper maturities. It would provide that desirable element
-of flexibility in rediscounting relations with member banks which is entirely lacking
under the present provisions of the Act.
Further statistics of the rediscounts made during the period will be found in the
Appendix.
FEDERAL RESERVE NOTES.

On November 16,1914, the first shipment of Federal Reserve notes was received by
the Federal Reserve Agent from the Comptroller of the Currency. On November 19
the bank pledged with the Federal Reserve Agent $500,000 of commercial paper redis­
counted by member banks and received from him a similar amount of Federal Reserve
notes. These notes were not required by the banks which made the rediscounts, as
they had already withdrawn by check the credits so established. They were taken
by this bank for its general use. The issue of Federal Reserve notes gave the reserve
bank the opportunity of affording to its member banks complete interchangeability
between book and note credits. The bank therefore established the policy of issuing
Federal Reserve notes freely to any member bank desiring them whether the credit
thus withdrawn was established by it through rediscounting, or the deposit of checks,
or the deposit of gold or lawful money. In practice, however, most credits withdrawn
by notes have been established by the deposit of checks which have been collected
by this bank in gold or lawful money through the clearing house. Accordingly, the
accumulation of cover in the hands of the Federal Reserve Agent has been mainly
gold, with but a small amount of rediscounts. The processes provided by the Act
for the issue of Federal Reserve notes to the reserve bank permit complete inter­
changeability between gold and rediscounts held by the agent. Gold may be sub­
stituted for rediscounts and rediscounts for gold, in accordance with the requirements
of the reserve bank. During the entire period its requirements have been for notes
with which it might exercise its statutory right to “ exchange Federal Reserve notes
for gold, gold coin, or gold certificates. ”
The policy of the Federal Reserve Bank has resulted in greatly strengthening its
gold position and its ability to assist its member banks or other Federal Reserve
Banks should they at any future time seek credit in order to withdraw gold for domestic
or foreign uses. Through this policy also it has been able potentially, at least, to
retard the expansion of credit by impounding in the hands of the agent a large volume
of gold which might otherwise have found its way into bank reserves already super­
abundant.
Furthermore, through this policy it has been able to take the first step toward accom­
plishing one of the purposes of the Act set forth in its title, e. g., “ to furnish an elastic
currency.” There are two forms of elasticity, one of quantity and the other of quality9
both provided for in the Act.
From the point of view of cover, the gold certificate is completely inelastic. It
stands at one extreme of our currency, with a dollar of gold set aside behind each
dollar of paper. At the other extreme stands the national-bank note, with only 5
cents of gold set aside behind each dollar of paper. The assets of the issuing bank




FIB ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

19

make it good, but its elasticity is nullified by the requirement that it must be secured
dollar for dollar by Government bonds,
Between these two extremes the Federal Reserve note, a new form of currency,
hag been introduced. For each dollar of this paper there is set aside from 40 cents
to $1 of gold. As in the case of the national-bank note, the obligation of the United
States and the assets of the issuing bank secure it.
The process in which- this and other Federal Reserve Banks have been engaged is
the substitution, as a circulating medium, of a note which is elastic in quality for the
inelastic gold certificate. Gold is the most uneconomical medium of hand-to-hand
circulation since, when held in bank reserves, it will support a volume of credit
equal to four or five times its own volume. What the reserve bank does in accumu­
lating gold behind its Federal Reserve notes is to establish with the holder of each
note a credit which may be availed of whenever the occasion requires. With this
credit established it can convert at will its gold-covered notes into notes covered
partly by gold and partly by commercial paper. In times when credit is becoming
strained and bank reserves need strengthening or when gold must be exported, this
conversion will take place, and after the strain is over the gold cover will be restored
through the repayment of the rediscounts substituted for it. In this way elasticity
of quality in our currency is obtainable. But it should not be construed as in any
way a deterioration of the currency contemplated by the Act. Quite the reverse is
true. The Act provides for the issue of Federal Reserve notes in unlimited amounts,
with 40 cents of gold behind each dollar of paper. This is elasticity of quantity and
it becomes operative with the minimum of gold cover. Elasticity of quality, on the
other hand, operates with a gold cover always above the 40 per cent minimum and
ranging as high as 100 per cent.
In order to be prepared for any currency demands which might be made upon it,
the Federal Reserve Bank of New York in the spring of 1915 adopted the policy of
having printed and keeping constantly on hand a supply of Federal Reserve notes
substantially in excess of the amount of emergency currency which, experience shows,
this district might be called upon to supply. The maintenance of this policy and
of the policy of issuing Federal Reserve notes freely has entailed a heavy cost upon
this bank. Unissued Federal Reserve notes are carried at cost on the books of the
bank, and at the end of each month the amount of notes issued to the bank during the
month is charged off at cost. The shipment of notes unfit for circulation to the
Comptroller of the Currency at Washington for cancellation and destruction is a
further item of expense in connection with the maintenance of these policies. The
directors and officers of the bank, however, feel that the results accomplished amply
justify the expense incurred, and consider that the added strength furnished the
bank by the gold thus accumulated is perhaps the most important result of the opera­
tions of the period.
Some reduction has already been made in the cost of printing Federal Reserve
notes, and it is to be hoped that further experience and study will enable other sub­
stantial reductions to be made in the cost of preparing for issue what has already
become an important element of the circulating medium of the country. The Act
provides that all expenses in connection with the issue and redemption of Federal
Reserve notes shall be borne by the Federal Reserve Banks, and in view of the service
the banks are performing in accumulating gold through the medium of these notes,
the feeling is quite general among their officers that the notes should be furnished to
them at the lowest possible cost consistent with the high quality of workmanship
required.
The design of the notes is not altogether satisfactory for efficient handling. In
sorting notes it is necessary to be able readily to distinguish between notes of this
bank and notes of other reserve banks. This would be greatly facilitated if the print­
ing of the distinctive number and letter of each bank were made more general on tjie
face of the note.




20

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

While a general simplification of the various forms of currency is much to be desired,
it does not seem appropriate to enter into a discussion of the broader aspects of the
problem here. It may be suggested, however, that the denominations of silver cer­
tificates in circulation in this district during the period have not well met the needs.
At times there has been a great shortage of ones and twos and at all times there has
been a plethora of fifties. If the denominations in which silver certificates are issued
could be provided in a more flexible manner, or left to the discretion of the Secretary
of the Treasury, it is probable that the requirements of trade and commerce would
t>e better satisfied. It would also be a great convenience to reserve banks, as well
as to the member banks in the larger cities, if the gold order certificates could be
issued in denominations of $50,000 and $100,000 as well as in the $5,000 and $10,000
denominations now authorized.
Detailed figures showing the transactions in and movements of Federal Reserve
notes will be found in the Appendix. The following is a summary to December
31, 1915.
Total notes issued to bank....................................................................
$89,440,000
Less on hand.................................................................... $16,139,280
Unfit for circulation, retired.............................................
None.
----------------16,139,280
Net amount in circulation........................ .................................
73,300,720
On December 31, 1915, the Federal Reserve Agent held, against Federal Reserve
notes issued:
Rediscounts..............................................................................................
$140,000
Gold certificates........................................................................................ 89,300,000
Total...............................................................................................

89,440,000

PURCHASE OF WARRANTS.

The regulation concerning the purchase of municipal obligations issued in anti­
cipation of taxes, termed “ Warrants,” was issued December 22,1914. On December
31 this bank arranged to purchase from the comptroller of the city of New York
$5,000,000 of the city’s notes due June 4 to 10, 1915. This was its first open-market
operation under the provisions of section 14 of the Act. Shortly after this purchase
had been announced, other reserve banks asked this bank to act for them in pur­
chasing eligible warrants, New York being the primary market for a large volume
of this class of obligation. At the next conference of governors, January 20 to 23, 1915,
the purchase of such “ warrants” was thoroughly discussed and other reserve banks
appointed this bank their agent in the New York market to purchase warrants and
other securities authorized under section 14. During the period the aggregate pur­
chases of “ warrants” for this bank and for other reserve banks have been as follows:
1915

January___
February..
March.........
April...........

For itself.

For other
reserve banks.

June............
July............
August.......
September.
October___
November.
December..

$5,260,000
1.850.000
77'<, 000
700.000
1.613.000
1.885.000
3,588,500
4.644.000
422.000
100.000
5,000,000
387,027

$4,115,000
1.850.000
1.596.000
630.000
900.000
835.000
2,998,500
5.676.000
768.000
105.000

Total

26,226,527

19,761,582

M ay...........




288,082

FIR&T A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

21

The purchase of this volume of “ warrants” under the terms of the regulation has
tended toward uniformity of issue and understanding of the basis of quality on the
part of both the municipalities and the reserve banks. It seems not unlikely that
if the latter continue to purchase “ warrants” a very desirable standardization of
such obligations will gradually be brought about. To facilitate this the Federal
Reserve Bank of New York has prepared a standard form of note or revenue bond
conveniently arranged to include:
(a) The certificate, (6) certification of ordinance passed by the common council,
(c) certificate of authority, (d) certificate of corporation council, and (e) comptroller’s
certificate of facts.
The language and arrangement conform with the provisions of New York law and
the eligibility requirements of the Federal Reserve Act.
The only difficulty encountered under the regulation has been that some munici­
palities which defer the payment of taxes for many months after their assessment,
borrow in anticipation of such taxes in two periods. The earlier of these notes, many
of which are offered in this market, are rendered ineligible by the regulation which
provides that warrants must mature after the day upon which penalty attaches for
nonpayment of taxes.
Some confusion has arisen on the part of municipalities and those who deal in
their obligations concerning the meaning of the term “ warrant” as used in the regu­
lation of the Reserve Board. The obligations covered by the regulation must be
obligations of the entire municipality, but a warrant in the ordinary use of the term
is an evidence of the authority of a disbursing officer to discharge a debt of the mu­
nicipality, often from some specific fund. Possibly the use of some other term would
lead to a clearer general understanding of the class of obligation covered by the regu­
lation.
One provision of the regulation which has hardly been used is the authority to
the Reserve Bank to purchase warrants from any member bank with its indorsement.
If this provision were availed of more generally a very desirable facility might
be extended to member banks which would be of indirect advantage to their
municipalities.
b a n k e r s ’ acceptances.

The right to accept drafts was conferred on New York State banking institutions
by the act of April 16, 1914. Shortly afterwards a few acceptances were reported,
principally against securities. It was not until the derangement of international
credit facilities at the opening of the European war that American bankers’ accept­
ances, especially those relating to foreign commerce, came into existence in substantial
volume. At that time some of the trust companies with foreign connections ex­
tended credits freely to their customers to replace credits formerly granted by Euro­
pean banks which had been either withdrawn or reduced; they also accepted drafts
in large volume. On and after May 18, 1914, member banks were authorized also to
accept drafts drawn upon them involving the importation or exportation of goods.
The volume of acceptance liabilities reported by New York banks in March, June,
and September, 1915, has been as follows:
Mar. 4.

Mar. 19.

June 23.

Sept. 2.

National banks.............................................. $18,706,078
$16,721,068 ' $6,910,756
§68,’ 268; 749* 47,403,681
Trust companies............................................
1,074,607
1,003,624
State banks......................... .
l




Sept. 25.

$35,731,856
1,812,076

22

FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y OR K .

The regulation of the Federal Reserve Board defining the kind of acceptances
which are eligible for purchase by Federal Reserve Banks was published on February
12, 1915. The first bills were purchased by this bank on February 23, consisting of
$87,400.63, accepted by the National City’ Bank, having 35 to 69 days to run, at 2£
per cent.
The monthly purchases of acceptances by this bank in the New York market have
been:
For itself.

For

other Reserve
Banks.

1915
Number
; of pieces.
February..
March.........
April...........
May............
JiAe............
July............
August.......
September.
October___
November.
December..
Total.

41
140
132
106
103
89

68

115
310

Amount.

Number
of pieces.

Amount.

1,659,740.21
3,343,143.17
1,272,694.36
867,420.18
3,083,261.75
2,495,865.67
1,597,630.63
1,769,880.50
2,199,679.95
1,899,606.56
5,645,708.78

250
84
48
34
147
89
172
163
246
313

1,263,871.25
3,799,809.42
1,700,396.57
1,305,873.80
602,558.89
2,348,050.89
1,910,417.47
1,948,243.05
2,028,098.36
2,594,951.04
2,809,823.59

25,833,631.76

1,632

22,312,094.33

86

The policy pursued by this bank thus far has been to purchase good acceptances
whether or not the acceptor was a member bank. It has been suggested that by
purchasing only bills accepted by member banks the business would be driven to them.
But the broader policy was determined upon in the belief that the most important
duty of this bank, at the inception at least of the use of bankers’ acceptances in the
United States, is to assist in developing both the business and the market; that non­
member banks in extending acceptance credits are contributing to the development
of the business; and that the establishment of a stable discount market of large vol­
ume in New York will in the long run help member banks in developing their ac­
ceptance business far more than any attempt of the reserve bank to restrict the business
to them.
The reserve bank and the market rate for the discount of such bills in New York
has been for nearly a year, and is now, lower than the rate for similar bills in London.
The relatively small volume of such credits which American banks have succeeded
in making operative even under the unusually favorable opportunity which the war
presents for their extension, is evidence of the difficulty which will be encountered
in developing the acceptance business in the United States. Some of the fundamental
difficulties are:
(1) The disinclination to break old banking connections.
(2) The difficulty of educating handlers of bills in distant places as to American
credits.
(3) The lack of bill buyers in foreign countries who will quote as low rates on dollar
as on sterling bills.
(4) The natural prejudice of bill buyers in foreign countries in favor of a bill of
known currency and against a bill of as yet unknown currency.
(5) The lack of men trained to exercise the judgment and financial responsibility
required of them as managers of branches or agencies which American banks might
establish in foreign countries.
(6) The inferior communications for both goods and mail between the United States
and foreign countries as compared with those between Great Britain and foreign
countries.




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

23

Only time, experience, and patient effort will remove these handicaps to the ele­
vation of dollar exchange to its proper position in international finance. The business,
however, is developing and will continue to grow as our banking machinery and con­
nections extend throughout the world.
The Act permits member banks to accept an amount of bills not exceeding 50 per
cent of their capital and surplus. By the amendment of March 3, 1915, under certain
conditions they may be authorized by the Federal Reserve Board to accept up to 100
per cent of the capital and surplus. The following banks in this district have received
such authorization:
Amount of
capital and
surplus.

Bank of New York, New York.........................
Mechanics & Metals National Bank, New York
Atlantic National Bank, New York..................
American Exchange National Bank, New York.

$6,000,000
12,000,000
1,600,000
8,000,000

As this bank has probably been the largest single purchaser of bankers’ acceptances,
it has been able, as it gained experience, to exert some influence toward standardizing
practice and form. The acceptance of drafts in one city payable in another city has
been discouraged; insistence that bills shall be so indorsed as to leave open no ques­
tion of title will, when universally adopted, add greatly to the ready negotiability of
bills; and discussion of the terms of the regulation with acceptors and bill brokers has
led to a better understanding of the scope of the field it covers.
The amended regulation issued September 7, 1915, considerably broadened the
field of acceptances eligible for purchase and encouraged an increased volume of
these instruments. The further amended regulation issued December 4, 1915, cover­
ing the purchase of bankers’ acceptances arising out of domestic transactions relates
to a class of bills which national banks are not authorized to accept. When accepted
by institutions of high credit they have a ready market, though at a fractionally
higher rate than acceptances based on foreign transactions.
PURCHASE OP UNITED STATES BONDS.

The Act authorizes the Federal Reserve Board during each year, commencing two
years from the passage of the Act, to require reserve banks to purchase from national
banks not exceeding $25,000,000 of United States bonds used in securing circulation.
The Federal Reserve Board has ruled that the first year for such purchase begins
January 1,1916; that such year shall be divided into quarters; and that it may require
the reserve banks to purchase not exceeding $6,250,000 of such bonds in any one
quarter. A circular has been sent to member banks advising them of this ruling and
supplying them with forms upon which applications to sell such bonds may be made
to the Treasurer of the United States. Applications received not later than March
21, 1916, will be considered in connection with the purchase to be made March 31,
1916. The circular calls attention to the right of the reserve banks to anticipate such
required purchases from member banks by purchasing bonds in the open market.
COLLECTION SYSTEM.

At the meeting of directors and governors of Federal Reserve Banks held in Wash­
ington October 20 to 22, 1914, it was voted that at the outset each Federal Reserve
Bank should receive at par for immediate credit checks and drafts—
(а) On any other Federal Reserve Bank.
(б) On member banks in reserve and central reserve cities in its own district.
In this district a circular was sent to member banks on November 13 advising that
the arrangement would become effective November 18.
The only cities affected by the plan were the central reserve city of New York
(consisting of the Boroughs of Manhattan and Bronx) and the reserve cities of Albany




24

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W YORK*.

and‘Brooklyn. The transactions between the banks in these cities through the reserve
bank were naturally very limited.
'
The course ol the transactions in checks on other Federal Reserve Banks has been
already described.
The question of developing a collection system within the respective districts was
discussed at the first meeting of the governors’ conference on December 10' 1914, and
lias been an important item of discussion at each succeeding conference. It has also
been discussed frequently at meetings of the directors of this bank and been the
subject of communications between them and the Reserve Board. On February 17;
1915, the directors conferred at the office of the bank with 16 representatives* of mem­
ber banks from various parts of New York State relative to the practicability of estab­
lishing within the district a voluntary intradistrict collection system, based upon
immediate credit and debit of checks. After full consideration and with the approval
of the Reserve Board, the member banks were notified of the intention of the bank to
establish such a system and given an opportunity to join it. When the plan became
effective June 1,1915, practically all the banks in the reserve and central reserve cities
had joined, together with 32 in other places, a total of 70 banks. The directors of each
bank which joined authorized the reserve bank to charge to its account upon receipt
all items drawn upon it. About the same time a similar plan was offered to their
members by the other Federal Reserve Banks except those at St. Louis and Kansas
City, where membership was originally, involuntary, and at San Francisco, where
deferred debit and credit was adopted as a basis. On June 15 also, the receipt of
checks on other Federal Reserve Banks, except those in Boston and Philadelphia,
was changed from an immediate to a deferred-credit basis. The New York Clear­
ing House placed all banks which had joined the collection system on its discretionary
charge list. On July 1, 30 banks in northern New Jersey also joined the collection
system, and in spite of a few withdrawals the number has gradually increased to 129
on December 31, 1915.
There seem to be three main reasons why so few country banks have joined the
collection system.
The first is the practice, quite general among such banks in this district, of charging
exchange on remitting for items drawn upon them. Broadly speaking, the smaller the
bank the larger the percentage of its earnings derived from exchange. Under the pres­
ent collection system, items are not sent for collection and remittance, but are charged
4irectly against the account of the paying bank, giving it no opportunity to collect an
exchange charge. Consequently only those banks joined which were ready to forego
this charge, or did not customarily impose it.
The second consideration Tphich prevents many banks from joining is that member­
ship obliges them to carry larger reserves. Whereas the practice of the comptroller’s
office has been to figure reserves from the books of the member bank, the federal Reserve
Act contemplates that the amounts required to be kept on deposit in the reserve bank
shall be figured from the books ( f the reserve bank. The reserves of banks which keep
dormant balances with the reserve bank are maintained unimpaired, but there is con­
stant tendency to impairment of the reserves of the banks which join the collection
system, for in order to meet the checks charged against them through the system they
are required in practice to absorb the volume of checks which they have constantly
in transit to their reserve agents. Not only have the reserve balances kept with this
bank by most country members of the system been constantly impaired, the average
impairment during the first three months running as high as 31 per cent of the aggregate
amount they should have kept on deposit, but hardly a day has passed without one or
more members being actually overdrawn by the charge against them of unanticipated
items.
The third difficulty is due to the small number of banks which have joined the
system. With New York banks receiving at par for immediate credit all items drawn




FIB ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

25

on member? of our collection system, the entire volume of checks outstanding against
any member bank which joined might be regularly charged against its account by the
Foderal Reserve Bank, whereas it Gould only send as an offset checks on the few banks
in this district which had joined. This Is the principal cause of the impairment of
reserves above referred to.
Seven months* experience with the present intradistrict collection system makes It
seem reasonably clear that no substantial growth can be expected either in number of
members or volume of transactions until those banks which join the system can be
given an opportunity of adequately offsetting the items which are charged against them
through it. The question of extending the collection system across district lines has
been under active consideration for the last three months.
, The following statement shows the number, volume, and kinds of checks received
by the Federal Reserve Bank through its collection system since its inauguration
June 1, 1915;
I t e m s on New
Y o r k Clearing
House banks.

Items on member
banks.

Items on other
Federal Reserve
Banks.

Items on banks in
other Federal re­
serve cities.

Date.
Num­
ber.

July.................
August.............
September___
October.........
November___
Becember........

Amount.

13,782 $59,562,980.99
20,486 87,592,765.95
23,661 84,453,040.53
24,591 117,643,223.21
27,000 176,509,679.77
28,566 170,449.943.39
29,139 181,172,972.38

Num­
ber.

Amount.

Num­
ber.

Amount.

Num­
ber.

Amount.

64,533 $23,832,065.07 1,022 $20,950,324.00
121,847 33,349,932.90
398 15,540,402.99
144,714 36,823,358.37
306 17,296,162.46
155,231 38,744,826.39
250
9,572,274.24
552 20,053,209.12 *4*972 *$5,*843,*i80.*55
181,228 47,141,229.93
783 24,086,071.98 7,055 14,462,270.54
202,011 50,435.424.19
804 17,179,737.84 8,009 24,503,900.68
201,251 56,816,794.35

Total......... 167,225 877,384,606.22 1,070,815 287,143,631.20 4,135 124,678,182.63 20,036 44,809,351.77

The total number of checks received on deposit from member banks from Novem­
ber 16,1914, to December 31, 1915, has been 1,362,642, aggregating $1,938,810,485.
On August 9,: 1915, the New York Clearing House established a department for the
Collection of checks on out-of-town banks, which includes all banks in New York, New;
Jersey, Connecticut, Massachusetts, and Rhode Island which agree to remit at par in
Now York funds on the day of their receipt for any items sent them. Starting with
347 members, their system now has over 500 members. The volume of transactions is
about twice as large as that of the collection system of the reserve bank and, as its
sphere of operations widens, the number of par points in the territory covered will
increase. On December 30, 1915, the clearing-house offered to receive items on
ahy banks joining its system in places from which mail reaches New York over
iiight.
1The clearing-house system was organized with a desire to cooperate with the
reserve bank in improving collection conditions and the two systems have operated
entirely harmoniously. That neither has made more substantial progress in enrolling
country banks in New York State is due partly to the fact that many of the latter do
not wish tb give up the exchange charge and others do not wish to disturb present
relations with reserve agents.
Through the influence of these two agencies par remittances in the district are
gradually spreading. Where charges are made for collecting checks payable within
the district the fee is usually one-tenth of 1 per cent.




26

FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
ADMISSION OF STATE BANKS AND TRUST COMPANIES.

The regulation of the Federal Reserve Board relating to the admission of State
banking institutions to the Federal reserve system was issued on June 7, 1915.
While final action on applications of State institutions rests with the Federal
Reserve Board, the regulation requires the reserve bank to investigate thoroughly
each application and forward it, with its recommendations, to the Board. The
policy of this bank in passing on such applications conforms with the spirit of the
regulation, which contemplates the admission of only those State institutions which
will add strength to the reserve system. Mere solvency will not be a sufficient
qualification. To receive the approval of the directors of this bank, a State institution
must be not only solvent but strong, well-managed, and in a condition of liquidity
appropriate to the nature of its deposits.
The application of the Broadway Trust Co. of New York City, made several months
before the issuance of the regulation, has been approved by both the bank and
the board, and on August 4,1915, it paid in one-half of its subscription to the capital
stock, transferred the prescribed amount of reserves, and became a member bank.
FISCAL AGENT OF THE UNITED STATES.

On November 24, 1915, the Secretary of the Treasury advised this bank that he
had appointed it a fiscal agent of the United States, effective January 1, 1916. On
this date it is purposed to begin the transfer to the bank of funds of the United States,
except post-office and court funds now on deposit in national banks in New York
City. These balances at present aggregate about $1,500,000. The officers of the
bank have conferred with officials of the Treasury Department both in Washington
and New York and the details of the work have been carefully studied in order that
this function may be performed satisfactorily from its inception.
The plan contemplated provides for the regular daily deposit with this bank of the
receipts of the collectors of customs and collectors of internal revenue located in the
greater City of New York and the gradual taking over of the encashment of checks of
the Government by this bank in place of the subtreasury. It is expected that within
a few weeks all deposits of this character, as well as the payment of all checks, can
be handled by the bank without lowering in any way the efficiency with which this
branch of the Government business is handled by present methods. It will, however,
involve some increase in the clerical force and office accommodations of the bank..
BALANCE SHEET.

For purposes of comparison balance sheets of three dates are presented in the appendix.
The large increase in the deposits of member banks is due primarily to the increase in
their own deposits, elsewhere referred to, and to the fact that several are carrying
substantial excess balances with this bank. About $3,150,000 were received from the
banks in northern New Jersey during July, 1915, and about $3,674,000 were received
from member banks outside of the central reserve city of New York at the transfer
of the second installment of their reserves on November 16, 1915.
PROFIT AND LOSS.

During the early part of the period under review, certain expenses were incurred
in organizing the bank, renting temporary offices, remodeling the banking room at
62 Cedar Street, defraying the initial expenses of the Federal Reserve Board, etc.
The treatment of these expenses was carefully considered and it was determined
that beginning January 1, 1916, the amortization of organization expenses, including
the cost of the Federal Reserve notes issued up to that time should be undertaken in
not exceeding 30 monthly installments, so that they would be entirely eliminated
on or before June 30, 1918. It was also determined that unissued Federal Reserve




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

27

notes should be carried at cost in the balance sheet and that, beginning July 1,
1915, all notes should be charged at cost to current expenses.
In view of the small volume of rediscounts for member banks and of the complete
absence of rediscounts for other Federal Reserve Banks, the pol'cy of the bank has
been to purchase in the open market sufficient warrants and acceptances to cover
the cost of operation, including the issue of Federal Reserve notes. In fact most of
the reserve banks, except those in Richmond, Atlanta,, and Dallas, have had largely
to depend on such purchases to pay their expenses. Owing to the general demand
for such paper and investments, it has been impossible for this bank to secure a
sufficient volume quite to equal its expenses. The rates on such investments have
declined steadily throughout the year and are now at their lowest’ level. Realizing
the influence which the reserve bank might have upon these rates if it pressed its
funds upon the market, it has been the policy of the bank to follow rather than lead
the market in its decline. In these circumstances, no thought could be given to
earning dividends. The view generally held not only by the directors and officers
of this bank but by the member banks as well is that such a money market as has
prevailed during the period under review provides no proper basis for the earning
of dividends by a Federal Reserve Bank located in a creditor district, and that at
such a time its funds should be practically withdrawn from use.
From November 16, 1914, to December 31, 1915, total earnings from all sources
have been $345,035.33, and current expenses have been $345,146.55, leaving a deficit
for the period of $111.22. The details of the earnings and of the organization and
current expenses are set forth in full in the Appendix.
EXAMINATION BY THE FEDERAL RESERVE BOARD.

On February 8, 1916, the examiners of the Federal Reserve Board visited the bank
and conducted an examination of its affairs lasting somewhat over a week.
FUNCTIONS NOT YET DEVELOPED.

The small amount of rediscounting done by member banks thus far has not made it
necessary to consider the establishment of branches of this bank to facilitate either
deposit or discount relations with its member banks. Thus far the mail has been a
sufficient medium for the exercise of these two functions. Whether branches or
agencies will later have to be established to provide promptness and directness in the
collection system is a question which probably will not come up for solution unless
and until the collection system reaches a more general development than at present.
Of the open-market operations described under section 14 of the Act, the authority
to purchase acceptances and municipal warrants has been freely availed of; the au­
thority to open accounts, appoint correspondents, establish agencies,, and purchase
bills in foreign countries as well as to deal in foreign exchange at home, has not been
exercised and probably will not be generally availed of until conditions abroad have
cleared and normal business is resumed. As yet no bonds or notes of the United
States have been purchased, and consequently no Federal Reserve Bank notes based
on such bonds have been issued. There has been no occasion to have transactions
in gold coin or bullion.
No other Federal Reserve Bank has applied to this bank for the rediscount of any
of its paper.




28

f ir s t a n n u a l

C h a p te r

III — T h e

repo rt, fe d e ra l reserve

B A N K OF N E W Y O R K .

M em ber B a n k s an d th e F e d e r a l B e se r v e

D is tr ic t.

READJUSTMENT OF DISTRICT.

On May 4, 1915, the Federal Reserve Board voted to readjust this district so as to
include it in the following New Jersey counties:
Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Passaic,
Somerset, Sussex, Union, Warren.
The readjustment became effective July 1, 1915, and increased the number of
member banks by 131. On December 31, 1915, there were 132 member banks in
these counties contributing $984,550 to the paid in capita] of this bank and $4,849,183.87
to its deposits.
NUMBER OF BANKS.

On November 1#, 1914, the number of member banks in district No. 2 was 480, and
on December 31, 1915, 616. During the period covered by the report, 131 banks in
New Jersey were added by the readjustment of the district, 9 new national banks were
organized and became members, and 1 trust company became a member. Four
national banks withdrew from membership by liquidation, either voluntary or invol­
untary.
ELECTION OF DIRECTORS.

The separation of the banks of this district into three voting groups, in the manner
provided by the Act, results at present in the following divisions:
Group 1 .—Two hundred and five banks with capital and surplus of $185,000 and
over. (Elects directors in 1916.)
Group 9..—Two hundred and five banks with capital and surplus of from $70,000 to
$185,000. (Elects directors in 1917.)
Group S.—Two hundred and five banks with capital and surplus of $70,000 and
under. (Elected directors in 1915.)
On September 30, 1915, a circular was sent to each bank in group 3 designating
October 29 as the last day when it might file the certificate of election of its district
reserve elector and of nominations, if any, for the vacancies to be filled by the expira­
tion of the terms of Messrs. Franklin D. Locke and Leslie R. Palmer. Of the 205
banks in the group 127 chose electors and became entitled to vote. The following
candidates were nominated:
For class A director:
B. H. Howell, Garfield, N. J.; nominated by 1 bank.
Franklin D. Locke, Buffalo, N. Y.; nominated by 82 banks.
Josiah W. Place, -New York, N. Y.; nominated by 3 banks.
Walter M. Van Deusen, Newark, N. J.; nominated by 4 banks.
D. D. Woodard, Granville, N. Y., nominated by 1 bank.
For class B director:
James W. Johnson, New Brunswick, N. J.; nominated by 3 banks.
Leslie R. Palmer, Croton-on-Hudson, N. Y .; nominated by 88 banks.
Preferential ballots as provided by the Act, together with instructions, were mailed
to electors on November 15. On December 1 the polls closed and it appeared that
the fcllovnng votes had been cast in the column of first choice:
Class A director: B. H. Howell, 2; Franklin D. Locke, 105; Josiah W. Place, 4;
Walter M. Van Deusen, 9; D. D. Woodard, 2.
Class B director: James W. Johnson, 8; Leslie R. Palmer, 114.
Whereupon Mr. Locke was declared elected class A director and Mr. Palmer class B
director, each for a term of three years, beginning January 1, 1916.
Although second notices were sent out shortly before October 29 and December 1,
respectively, regarding the choice of district reserve electors and the voting upon can­
didates, nevertheless, only 122 of the 205 banks exercised their important franchise
to participate in the election of directors of this bank.




F IR ST A N N U A L REPORT, FEDERAL RESERVE, B A N K OF N E W Y O R K ,

29

ANALYSIS OF OPERATIONS OF NATIONAL BANKS.

At the suggestion of the Federal Reserve Board and for the purpose cf an analysis
of operations, the member banks in the district have been divided into seven
groups on the basis of their total resources, and certain figures from the reports of
September 2 and November 10, 1915, to the comptroller have been tabulated under
these groups:
Group 1.
Group 2.
Group 3.
Group 4.
Group 5.
Group 6.
Group 7.

Banks with total resources under $100,000..........................................
Banks with total resources between $100,000 and $200,000.................
Banks with total resources between $200,000 and $300,000................
Banks with total resources between $300,000 and $500,000.................
Banks with total resources between $500,000 and $2,500,000..............
Banks with total resources between $2,500,000 and $20,000,000..........
Banks with total resources over $20,000,000......................................

3
33
62
106
304
80
25

The figures tabulated show the relations to total capital and to total resources of the
investments, the deposits, the receipts from exchange, the net earnings, the dividends
paid, and the amount of eligible paper held.
Investments.—The following table shows the percentage of the total resources
invested in loans and discounts, in bonds and securities other than tTnited States
bonds, and in eligible paper. It seems to present no figures of especial significance
except the relatively small percentage of bonds and sec urities held by the larger
banks:
Relation to total re­
sources of—

Group.

.............................................................

1
2.......................................... ...........................................................
3......................................................................................................
4......................................................................................................
5 ......................................................................................................
6 ......................................................................................................
7............................................................................................. ........

Average total
Bonds and
resources, per
securities,
bank.
!1 Loans
not
includ­
! and dis­ ing United
counts.
States
t j|
bonds.

$60,846
162,399
254,702
387,849
917,732
6,089,073
116,342,950

Per cent.
46.68
48.23
47.95
50.48
44.21
52.98
55.54

Per cent.
11.12
18.18
20.94
23.96
24.48
' 16.89
9.01

Eligible
paper.

Per cent.
20.09
19,36
16.57
14.24
12.82
16.38
10.14

Liabilities.—The following table shows the relation of the capital, surplus, and undi­
vided profits to demand deposits and time deposits. It indicates clearly the greater
extent to which the larger banks are able to expand their liabilities: also the more
active nature of their deposits:

Group.

1

: ............................................................... .
2
,
3 1 ...............................................................................................................
4 ...................................................................................................................
5 . , ............................................................................................... ............. j
6
7
1




Average capi­
tal, surplus,
and undivided
profits pey
bank.

*26,784
34,207
51,050
76,967
168,341
971,865
12,207,560

Relation to total capital
of—
Demand ;
Time
deposits, j deposits.
Per cent.
116.99
253.63
265.26
264.97
271.93
439.81
809.31

Per cent.
11.45
60.88
78.11
99:08
117.82
55.82
8.54

30

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

Nature of deposits.—The division of the deposits between demand and time is shown
by the following table, which again emphasizes the far greater activity of the larger
banks. The banks in New York City almost without exception take no savings
accounts.

Average
total
deposits
per bank.

Group.

.............................................................................

1
$34,406
107,588
2................................................................................................................................
3.................................................................................................................................
175,296
280,202
4................................................................................................................................
5
656,111
6................................................................................................................................
4,816,866
7 . . . ........................................................................................................................... 99,841,084

.............................................................................

Relation to total
deposits of—
Demand
Time
deposits. deposits.
Per cent. Per cent.
8.92
91.08
80.64
19.36
22.75
77.25
27.22
72.78
69.72
30.28
11.15
88.85
1.04
98.96

Exchange, earnings, and dividends.—Yet the greater resources of the larger banks do
not result in earnings proportionately larger, since a very large part of the loans of the
smaller banks run at a steady 6 per cent rate, while the loans of the larger banks, par­
ticularly in New York City, are subject to the money-market rates, which seldom
reach 6 per cent. Furthermore, the more active nature of the deposits of the city
banks requires the maintenance of larger reseves, not only of cash but of readily con“
vertible paper and loans. The larger proportion of their earnings paid out in dividends
than in the case of the banks with resources under $300,000 is due probably to the fact
that the latter class of banks are largely new institutions which consider it necessary
to accumulate a substantial surplus before paying normal dividends. The table shows
the relation of gross receipts from exchange, of net earnings and of dividends to both
total capital and total resources. They are averaged from the figures reported for 1912,
1913, and 1914, but as the figures of total capital and total resources for those years are
not available the figures of November 10, 1915, are used. Therefore the averages of
figures are not correct, being smaller than they actually should be. They are suffi­
ciently accurate, however, for purposes of comparison between the larger and the
smaller banks. The smaller the bank the larger in proportion are its receipts from
exchange.
Receipts from exchange.

Group.

Net earnings.

Dividends.

Per cent
of capital,
surplus,
and undi­
vided
profits.

Per cent
of total
resources.

Per cent
of capital,
surplus,
and undi­
vided
profits.

Per cent
of total
resources.

Per cent
of capital,
surplus,
and undi­
vided
profits.

1.16
.90
.73
.45
.39
.14

0.25
.18
.15
.08
.06
.02

4.84
6.04
6.45
6.39
6.39
6.91

1.01
1.21
1.28
1.17
1.01
1.10

1.49
2.57
3.58
4.11
4.88
4.79

Per cent
of total
resources.

...............................

li
2.....................................................
3.....................................................
4.....................................................
5.....................................................
6.....................................................
7.....................................................

0.3i
.52
.71
.75
.78
.77

i The three banks composing group 1 were not in existence during these years.

Directors’ liabilities and eligible paper.—The relation of the directors’ liabilities,
direct and indirect, and of the eligible paper, to loans and discounts, is shown in the
following table. It appears that the smaller the bank the more, proportionately, are
its directors indebted to it; also the greater the proportion it holds of paper eligible for




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

31

rediscount with the Federal Reserve Bank. The figures relating to eligible paper,
however, are very approximate, since they represent merely estimates presented by
each bank according to the judgment of its officers.

Group.

.........................................................

1
2...............................................................................................
3...............................................................................................
4
5...............................................................................................
6...............................................................................................
7...............................................................................................

.........................................................

Average
loans and
discounts.

$28,405
78,327
122,276
195,813
405,748
3,226,332
64,574,549

Directors'
liability,
direct.

Directors’
liability,
indirect.

Eligible
paper.

Per cent.
27.86
6.17
5.28
5.45
5.81
4.41
1.69

Per cent.
19.57
13.70
9.40
8.25
6.01
1.40
.17

Per cent
43.40
40.15
34.52
28.21
29.00
30.92
17.90

The aggregate figuies from which the foregoing tables of percentages have been
compiled will be found in the Appendix.
The various analyses above presented indicate clearly the advantages which the
larger banks have over the smaller banks in respect of ability to do a larger volume of
business. Yet, except in the case of the very small banks, the amount earned, net,
on the total capital contribution does not vary greatly. There seems to be no indica­
tion in these figuies that small banks in a favorable location can not, if well managed,
become firmly established, pay reasonable dividends, and serve well their communi­
ties. But to reach and maintain a satisfactorily strong position much service must be
given without compensation by the senior officers, and great economy practiced at all
times. The nine new national banks established during the period under review, with
$25,000 capital each, indicates that the experience of other small banks in recent years
has not been altogether discouraging. It is desirable, however, that in this distiict,
already well provided with banking capital, careful investigation should be made of
applications to establish small banks, in order that they may not be authorized in
communities unlikely to be able to support them or already well supplied with banking
facilities.
For perhaps the most important study of banking condition the comptroller’s
reports do not present the necessary data, namely, the nature of the loans and dis­
counts of the banks. While these reports show whether the loans and discounts are
on demand or time, and are secured or unsecured, they do not indicate what propor­
tion of them is temporary and what proportion is practically permanent . The relative
liquidity of the various groups of banks can not therefore be presented. Naturally
an analysis of loans and discounts with this object in view would be difficult, and at
best only approximate, but it is believed that if some satisfactory basis for the prepa­
ration of figures can be arrived at it would be of the greatest value, not only as a con­
tribution to the study of banking conditions but as a guide to the reserve bank in
extending credit to its members.
TIME DEPOSITS AND SAVINGS ACCOUNTS.

On November 10, 1915, the member banks in this district held time deposits aggre­
gating over $140,000,000. These are mainly savings accounts, on certificates or special
pass books. They also have a considerable volume of savings accounts which are
included in their demand deposits because they are not received under contracts
which give the bank the right to require notice before withdrawal. In New York
State there are 140 mutual savings banks with total deposits on July 1, 1915, of
$1,791,524,601. There are also a number of important mutual savings banks in the
portion of New Jersey included in this district. Most of these savings banks pay
4 per cent on deposits. The influence of this rate is reflected in the rate offered by
the commercial banks, National or State, which wish to attract time and savings




32

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

accounts. The competition among banks for such accounts usually starts in the larger
centers where there is a mutual savings bank. To compete with the savings bank
they offer the same rate, and having once begun to allow it no bank feels willing to
reduce it for fear of losing business to its competitors. The effect of this is promptly
felt in the surrounding country, and the sphere of influence of these various centers
has gradually widened, so that, with a few exceptions in the more remote districts,
4 per cent is the usual rate paid by commercial banks for time and sayings accounts.
At this rate the business has a margin of profit which, for a commercial institution,
is not commensurate with the profits it should make. Furthermore, it leads in many
•cases to paying interest on demand commercial accounts. It may fairly be said
that one of the principal reasons why the country banks in this district are so sensitive
to any loss of income the reserve system is likely to entail upon them is the burden
of paying high interest rates on deposits which they have assumed and which, while
billing, they have been as yet unable to find any practical way to reduce.
Under the stimulus of the reduction of the required reserve provided by the Act
On time and savings deposits, the conversion of such accounts from demand to time
accounts which will comply with the definition established by the Act and the Reserve
Board is proceeding quite generally. During the period time deposits have in­
creased at a ratio about five times greater than the ratio of increase of demand de­
posits.
LOANS ON IMPROVED FARM LANDS.

The provision of the Act permitting loans on improved farm lands has not been
largely availed of as yet. On November 10,1915, 75 member banks reported $451,524
-of such loans.
FIDUCIARY POWERS.

The Federal Reserve Board is authorized by the Act “ to grant by special permit
to national banks applying therefor, when not in contravention of State or local law,
the right to act as trustee, executor, administrator, or registrar of stocks and bonds
under such rules and regulations as the said Board may prescribe.”
With respect to New York, counsel for the bank has rendered an opinion that it is
in contravention of State law to grant such permits except with respect to acting as
registrar of stocks and bonds. Accordingly, no general fiduciary permits have been
•granted in New York, but a number of banks have been authorized to act as registrar
of stocks and bonds.
With respect to New Jersey, counsel has rendered an opinion that it is not in contra­
vention of State law to grant such permits to banks organized prior to the passage of
the general trust company act of March 24,1899. Under this opinion, adopted by the
Federal Reserve Board, general fiduciary permits have been granted.
The Federal Reserve Board requires the Federal Reserve Bank to pass upon all such
applications before it considers them. As in the case of the admission to membership
of State institutions, the policy of both the Board and the bank is to approve only
applications of banks which appear to be strong and well managed.
The list of member banks to which permits have been granted will be found in
the Appendix.
BRANCHES OF MEMBER BANKS.

Under the authority granted by section 25 of the Act, the National City Bank of
New York has opened branches at Buenos Aires, in the Argentine Republic, and at
Rio Janeiro, Santos, and Sao Paulo, in Brazil. The Buenos Aires office h&s a subbranch
in Montevideo, Uruguay. It has also absorbed the Banco de la Habana, Habana,
Ctiba, a going concern with $1,000,000 capital, which is now operated as a branch.
The bank has assigned to these branches a capital of $3,000,000, but the provision of the
Act requiring capital to be set aside is considered undesirable, as there can be no
limitation upon the liability of the bank for liabilities contracted at its branches.




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

33

Inasmuch as British and other branch banks operating in South America report their
total capital, it seems inadvisable to have any suggestion of limited responsibility
on the part of our banks with respect to their foreign branches. The National City
Bank reports that many difficulties in the establishment of branches in foreign fields
so far from headquarters were anticipated and have been realized, but that what has
been accomplished is sufficiently encouraging to justify persistence in its policy.
The National City Co., affiliated with the National City Bank, has recently bought
control of the International Banking corporation, with head office in New York and
with a number of branches in foreign countries, mainly in the Orient.
While in some respects the European war has favored the establishment of foreign
branches, in other respects it has hampered their progress. Some business has been
diverted thereby to the United States, but on the other hand the war has so demoral­
ized trade and disturbed credits as to multiply the hazards of banking for institutions
seeking to obtain a foothold in distant countries. The difficulties, expense, and risks
attendant upon the establishment of foreign branches in cities other than the leading
European centers are such as to deter any but the largest banks from undertaking this
desirable extension of our banking facilities. The organization of special banks, as
has been frequently suggested, to transact business in foreign countries, would be in
accordance with the practice of European countries having foreign trade to finance.
If the national banks were permitted to hold stock in such banks it would offer them
an opportunity to facilitate the foreign business of their customers with a minimum of
risk and would be consistent with the policy of offering substantially equal advantages
to all national banks.
In New York a State bank or trust company is allowed considerable latitude, under
certain restrictions, in the establishment of branches in the city in which its main
office is situated. Several institutions have availed themselves of this privilege
during the past year. One, the Century Bank of New York, with 10 branches,
secured a national charter and then absorbed the Chatham & Phenix National Bank
of New York. The business of both banks and all the branches is carried on under
the name of the Chatham & Phenix Bank of the City of New York. An indirect
way has thus been found for the establishment of branches by national banks in their
own cities. This is a desirable extension of their field of usefulness which seems to give
every advantage to depositors with a minimum of disadvantages to borrowers, and it is
to be hoped that Congress will soon amend the national-bank act so as to permit the
development, under appropriate restrictions, to proceed directly and freely. At the
same time the present requirement that to each branch a certain specified portion of
the capital must be assigned should be removed. Sound banking principles and
practice require that the entire capital of the bank should protect the liabilities
wtrerever created.
CHARACTERISTICS OF THE FEDERAL RESERVE BANK OF NEW YORK.

The special characteristics of the Federal Reserve Bank of New York may be
summarized as follows:
1. It is primarily a city institution. On December 31, 1915, $7,288,650, or 65.88
per cent, of its paid-in capital is contributed by its 34 members located in the central
reserve city of New York (Boroughs of Manhattan and Bronx); the remaining
$3,774,500, or 34.12 per cent, of its paid-in capital is contributed by the 582 other
members. Of its deposits $161,794,012, or 90.18 per cent, is contributed by these city
members; the remaining $17,610,489, or 9.82 per cent, of its deposits is contributed
by the 582 other members.
2. It is located in the settling center of the country; therefore, a very large volume
of domestic exchange is likely to flow through it.
24803—16----- 3




34

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y ORK.

3. It is located in the city, upon the banks of which, in commercial or financial
crises, the principal strain has always fallen. It must, therefore, always be prepared
to grant credit promptly, in large volume and in such form as it may be required.
4. It is located in the city in which the principal gold exports and imports normally
are arranged, and must be prepared to facilitate its member banks in such trans­
actions.
5. It is located in the investment and banking center of the country, and therefore
in the most favorable field for the exercise of the open-market operations authorized
under section 14 of the Act. During the past year the bulk of investments by all
Federal Reserve Banks in municipal warrants and bankers’ acceptances have been
made through this bank, and it seems likely that when conditions permit the inaugu­
ration of transactions in foreign exchange and foreign bills by the reserve banks it
will be again called upon to act for them.
6. The exercise of these investment functions for itself and other reserve banks
requires an organization of a special nature, differing somewhat from that of other
reserve banks.
RELATIONS WITH MEMBER BANKS.

The aim of this bank at all times has been to maintain frank and friendly relations
with its member banks. At every meeting of the New York or New Jersey Bankers'
Associations, or of their groups, to which invitations have been received, one or
more of the directors or officers have been present and discussed the development of
the various functions of the system.
When the establishment of an intradistrict collection system was under consider­
ation, the directors and officers invited representative member bankers from all parts
of the district to confer with them at the office of the bank. The plan finally adopted
was thoroughly discussed in all its aspects and a consensus of opinion seemed to
prevail that it was a fair and reasonable plan.
When the conditions under which State banks should be admitted to the Reserve
System were under consideration three conferences were held by the directors and
officers of the bank, one with national bankers, one with State bankers, and one
with trust company officers, from various parts of the district, to ascertain their views
upon the question at issue. In every case the policy has been pursued of dealing
frankly with those present, in order that they might understand fully how the action
under consideration would affect them.
The officers have expressed themselves at all times as desirous of establishing per­
sonal relations with officers of member banks and have invited them to call at the
bank when in New York City. Yet a year has gone by and officers of probably not
over 15 per cent of the member banks have done sr. Many of them still have the
feeling that the bank is a branch of the Government. Their experience with the Gov­
ernment consists ptincipally of the statutory and supervisory relationship which
exists between them and the comptroller’s office. The conception of the relation of
this institution with them as cooperative makes headway slowly. The fact that the
national banks were practically compelled to join the system naturally retards the
development of the coopeiative idea. The change of attitude, upon which the success
of the system will ultimately depend, will probably come slowly, but there are
already signs, as we enter upon the second year of the system, that the banks are
getting more accustomed to it and appreciate the results it has already accomplished.
It is hoped that during the coming year, with organization pressure somewhat less­
ened, more time can be devoted by the officers to developing personal relations with
the officers of member banks.
The present attitude of the member banks toward the reserve bank may be sum
marized as follows:
The New York City banks, upon which the strain of all crises first and chiefly
falls, fully understand the value and benefits of the system. While regretting the




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

35

loss of bank deposits which will probably be drawn from them (estimated to be as high
as $250,000,000), they are nevertheless hearty supporters of the system, at all times
cooperative in their attitude.
Many of the banks in other large cities are unable to take full advantage of the
lowered reserve requirements, but in spite of the loss of interest on their reserve
balance, most of them understand what the system in its larger aspects means for
American banking and generally give it their support.
While the same may be said of many of the country banks, yet it is among the
country banks as a class that most of the apathy and hostility to the Federal Reserve
System which still persists is found. Their opportunities and earnings are relatively
small, and in order to live they must figure closely. They feel the loss of interest
on reserve deposits; the absence, as yet, of dividends on their capital contribution;
and the prospective loss cr decrease of the exchange they generally charge on remitting
for checks drawn upon them. Many banks in industrial centers are precluded by
the activity of their business from taking advantage of the reduction in the required
reserve. They believe that they will, in fact, be required to carry an even larger
reserve than heretofore in order to obtain collection service for notes, drafts, and
nonmember bank checks and the various other services now rendered by their reserve
agents, but not yet undertaken by the reserve banks. It is very natural that they
should view with reluctance the termination or diminution of long-standing business
associations with their reserve agents. Few of them, as yet, conceive of the reserve
bank as their active reserve agent, performing all the services which go with the
relationship. The dormant accounts most of the banks maintain with the reserve
bank are, perhaps, indicative of their attitude toward it. Relatively few banks
of this district are borrowers; in good times and bad they have been able when
necessary to borrow fro n their city correspondents on bonds cr on the indorsement
of their directors, two avenues which are now to be closed to them. The redis­
counting privilege has been little availed of and the larger functions of the Federal
Reserve System, such as influencing domestic rates and international gold move­
ments through the development of a discount market and by dealing in foreign bills,
appear remote from their spheres of activity. They feel that the system has few
advantages to offer in return for the cost it entails upon them.
All of these points will be felt with increasing acuteness by the country banker as
his reserve transfers approach completion and as reduced balances result in reduced
service from his city correspondent. His point of view is outlined thus frankly in
order that the difficulties he sees may be clearly recognized and steps taken gradually
to remove them. The development of a more satisfied relationship requires progress
on the part of the reserve bank and a willingness to cooperate on the part of the
country banker.
The reserve bank should organize a complete collection system embracing the han­
dling of notes, drafts, and items on nonmember banks, which eventually will bring
all the members into daily active relations with the bank. It must be ready to act
for member banks in the purchase, sale, and custody of securities; to supply credit
information on names whose paper is offered by brokers; to give its members infor­
mation concerning methods of developing the new functions which the Act author­
izes them to exercise; to perform the services now rendered by their reserve agents;
and generally to assist them in every reasonable way.
The member banks should look upon the reserve bank not as an alien but as their
own institution. They own all its capital and most of its resources, and they control
its management through the directors they elect, subject always to the supervision
of the Reserve Board. At the reserve bank they may borrow as a standing right
and not as a favoi which may be cut off. They no longer have to buy or carry bonds
to serve as security for loans; the paper of their own customers, large or small, will
now serve as their security. While panics in the past may not have affected them,




36

FIE ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

they have been disastrous to the business interests of the country, who are their
customers; and their contributions to the reserve bank should be recognized as a
form of insurance not merely for themselves but for their customers as well. If this
insurance is expensive and makes some changes in the nature vf their business, the
Act should be carefully studied with a veiw to making the most of the new functions
it provides. New avenues of activity should be looked fDr. The banks which will
get the most out of membership are those which are the first to see and develop the
opportunities it provides and to educate their customers to the protection and facili­
ties they will enjoy through the system. The occasion is a favorable one also for the
correction of abuses. Customers will do things in the name of the Federal Reserve
System which they have never done before. The experience of banks in using the
forms provided by the reserve bank to get statements from their borrowers is evi­
dence of this. The occasion should be seized also to increase the balances of deposi­
tors who carry unprofitable accounts. To assist member banks in studying their
accounts this bank has had under preparation by chartered public accountants a
reasonably simple form for analyzing accounts which may be obtained by banks
desiring to use it.
It is the duty of the directors and officers to understand not only the problems of
the reserve bank but those of the member banks as well; and it has been their
endeavor during the past year to give special study to those of the country bank.
Several suggestions for the relief of the country bank have come to their notice.
One of these, which the American Bankers’ Association at its 1915 Seattle conven­
tion favored, was to permit the 3 per cent of reserve which the member bank may
carry either in its vaults or in the reserve bank, to be deposited with member banks
not more than 300 miles distant and count as reserve. This seems to be contrary to
the spirit and intent of the Act, which is primarily to centralize reserves in Federal
Reserve Banks.
Another suggestion which seems more worthy of consideration is that the percentage
of reserve required for country banks should be somewhat further reduced. When
the reserve transfers are completed checks in transit can no longer count as reserves.
It is clear, therefore, that the reserve reduction contemplated by the Act will not be
realized in practice. A further reduction in the reserve requirements would, in the
case of many banks, result in a reserve less than the amount their business actually
required, and would enable them to carry the amount thus freed wherever it would
best serve their particular business, and, if they so desired, to maintain some rela­
tions with present city correspondents. It would lead away from the present rigidity
of bank reserves toward greater flexibility and a better understanding of their mean­
ing and purpose.
The formation of a national-bank section of the American Bankers’ Association and
the cooperative relationship which its executive committee has established with
those charged with the duty of operating the Federal Reserve System, suggests the
desirability of the formation of similar sections of State bankers’ associations. Owing
to its diverse membership, consisting of national banks, State banks, trust companies,
savings banks, and private bankers, State bankers’ associations are naturally some­
what reluctant to deal actively with the problems and development of the Federal
Reserve System. Too large a proportion of their membership is interested only aca­
demically in the system. A national-bank section of a State bankers’ association
could act as an important medium of communication between the reserve bank and
its member banks, and would be of constant value to both.
NATIONAL-BANK SECTION OF THE AMERICAN BANKERS’ ASSOCIATION.

The American Bankers’ Association at its meeting in Seattle on September 6-10,
1915, established a national-bank section. The officers and executive committee of
this section had their first meeting in New York City November 20, some of the ses­




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

37

sions of which the governor and chairman of this bank had the privilege of attending
by invitation. The cooperative attitude of the organization toward the develop­
ment of the system was apparent throughout and great satisfaction was expressed that
member banks now had an organization through which they could express their
desires and views officially to the Reserve Board and the reserve banks, and through
which the Reserve Board and reserve banks could communicate officially with the
member banks. The work of this section if carded forward on broad lines is likely
to play an important part in the development of the reserve system, and it seems
desirable that the plan should be followed in the State bankers’ association as well.
RELATIONS WITH STATE BANKS.

The attitude of the State institutions in New York City and other large cities to
the reserve system is one of friendly support and of appreciation of its meaning and
advantages to the banking and business interests of the country. They agree that
ultimately, in order to give the system the strength and influence it should have,
State institutions should join it, but they see no immediate need of doing so and are
inclined to wait and observe what advantages it will develop for them. Some have
expressed the belief that, without bearing the burdens of the system, they will,
nevertheless, be able to participate indirectly in its advantages. The officers of some
of the leading institutions have expressed a desire that before considering joining the
system their status as members should be more fully defined by law and left less to
the regulation of the Reserve Board. The attitude of State institutions in the country
districts appears to be one of complete indifference.

C h a p te r

IV.—G e n e r a l

C o n d it i o n s .

INTRODUCTION.

In view of the abnormal conditions which have prevailed and of the progress which
has been made from business depression to business activity during the period under
review, a description is presented in some detail of the main factors which have con­
tributed to the change, together with a brief summary of present industrial and bank­
ing conditions.
CLEARING-HOUSE LOAN CERTIFICATES.

Between August 3 and October 15, 1914, the New York Clearing House Association
issued to 44 of its 61 members 3,128 loan certificates, aggregating $124,695,000. The
largest amount outstanding at any one time was $109,695,000 on September 25. The
first cancellation was on August 26, and the last on November 28, 1914. The period
of time from the first issue to the final cancellation was 118 days, compared with 154
days in the panic of 1907-8 and 132 clays in 1903. The percentage of maximum
amount of certificates outstanding to total deposits of clearing-house members was
5.5 as compared with 8.28 in 1907- 8.
EMERGENCY CURRENCY.

The National Cuirenev Association of the city of New York, formed under the
Aldiich-Vreeland Act, approved 129 applications for emergency currency between
August 3 and October 6, 1914, aggiegating $145,298,960. The largest amount of
emergency currency in circulation at any one time was $137,012,260 on October 21.
The maximum amount of emergency currency which could have been issued, under
the approval of the Secretary of the Treasury, by the New York City association was
$302,905,000, which is 125 per cent of the combined capital and surplus of the member
banks. The New York City association availed itself of 47.86 per cent of the amount




38

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

which, under the law, it was possible to issue. The first cancellation was approved
October 13, 1914, amounting to $2,000,000, and the last January 25, 1915.
National currency associations were also formed in other important cities in the
district.
THE NEW YORK STOCK EXCHANGE.

On Friday morning, July 31, 1914, the New York Stock Exchange closed. It was
the last large exchange of the world to suspend trading. This action was taken after
meetings between the governors of the exchange and leading bankers, to protect the
market against demoralization and further selling of securities from abroad. The
very large volume of loans on stock exchange collateral held by the New York banks
for themselves and their correspondents became at once completely illiquid, and the
value of the collateral could not be ascertained. Even the action rooms were closed,
and the prices at which a small volume of rather urgent dealings in stocks and bonds
was carried on, were not made public. Later a minimum price list was established
and efforts made by the stock exchange committee to control the trading, which
became more active as the situation eased.
The fact that there was no market for bonds was an added unsettlement to general
business. New financing had to be postponed, and even some municipalities failed
to sell their bonds.
On November 28 the exchange was partially opened for trading in bonds at fixed
minimum prices. On December 12 trading in stocks was resumed on a restricted
basis, subject also to minimum prices. These restrictions were gradually relaxed
and were finally removed on April 1, 1915.
Trading became very active in April and the great speculation began in shares of
companies engaged in making supplies for belligerent nations. Sales of $109,934,000
bonds and 20,007,188 shares of stocks made April the most active month on the ex­
change in the past five years. A very active and rising market continued until the
sinking of the Lusitania on May 7, when a severe decline in prices set in and the
volume of dealings decreased about 50 per cent. Activity was resumed in July,
when $56,489,500 bonds and 14,326,813 shares of stocks were sold. This movement
was increased during August and September to such an extent that brokers found
difficulty in carrying out the routine work entailed by their orders. The unrestrained
nature of the speculation evoked considerable public comment. A broader market
with more general trading and activity in railroad issues came in October, when
$104,490,000 bonds and 26,639,081 shares of stock were sold. The heaviest dealings
in bonds of any month since June, 1909, occurred in November on transactions
amounting to $124,697,500.
The comparative transactions in bonds and stocks for the past five years have been
as follows:
Year.
1915............................................................................................................................
1914...........................................................................................................................
1913............................................................................................................................
1912............................................................................................................................
1911............................................................................................................................

Shares.

Bonds.

173,155,644
45.989,158
76,134,996
118,452,676
127,376,149

$955,525,200
460,472,500
497,158,600
645,300,000
878,933,700

The selling of American stocks and bonds held by European investors has been
steady and persistent throughout the year, accelerated at times by the very favorable
movement of exchanges for such sellers. Mr. L. F. Loree, president of the Delaware
& Hudson Railway Co., early in the year undertook to obtain from the railroads of
the country an estimate of the total amount of railroad securities held in foreign
countries, and published figures during the early spring showing the amount reported




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

39

as of January 31, 1915. On December 24 he published a subsequent estimate as of
July 31, showing $2,223,000,000 par value, or $1,751,000,000 market value, a decrease
in the par value of $480,000,000 during the six months. These figures do not include
any industrial or municipal securities, of which large amounts are held in foreign
countries.
In some of the European countries, notably in Great Britain, the Governments
have made arrangements with holders of American securities to borrow them for use
as collateral to loans to be placed in the United States, with authority to sell them
if occasion to do so should arise.
FOREIGN EXCHANGE.

The foreign exchange market since July, 1914, has witnessed trying conditions,
unparalleled fluctuations and extraordinary relief measures in both Europe and the
United Stafc s. On July 17,1914, demand sterling was quoted at 4.8690 with a downward tendency,
caused by offerings of grain and finance bills. Francs and marks were quoted at
5.16J and 96^, respactively. During the following week political unrest in Europe
and firmer discounts abroad caused sharp advances in rates.
Immediately after the outbreak of the European war thousands of American tourists
in the warring countries found themselves without money and unable to negotiate
letters of credit. Demands for payment of loans and credits, sales of securities, and
remittances for tourists became so great that the exchange markets were completely
demoralized and rates were not posted. Sterling cables were quoted at 7 on August 1;
checks on Paris 4.25. The Government and the bankers acted promptly by dispatch­
ing the U. S. S. Tennessee with $4,500,000 in gold, and a credit was opened through the
Bank of France by Messrs. J. P. Morgan & Co.
Shipping and export trade were greatly unsettled by war conditions. Notwith­
standing the moratoria abroad, the United States faced the necessity of settling its
maturing foreign indebtedness, which to England alone was estimated to exceed
$200,000,000. Arrangements were made by the Bank of England whereby remittances
of gold might be made for its account to Ottawa.
Credit interchanges were quickly established between New York and London, and
by August 15 nominal quotations for demand sterling declined to 5. During the
next two months exports of grain, cotton, and general merchandise became more nor­
mal and bills drawn against them were freely negotiated at rates ranging between
4.92 and 5.08. Nominal rates for French and German checks were 5.05 and 97,
respectively. The latter declined to 90J during the third week in October.
In order to cope with this extraordinary situation it was felt that joint aotion on a
comprehensive plan would become necessary. The Federal Reserve Board, in con­
junction with the Secretary of the Treasury, therefore took the initiative in calling,
September 4, a conference of representatives of the clearing houses of all the reserve
cities.
Letters signed by Messrs. James B. Forgan, Levi L. Rue, Benjamin Strong, jr.,
Thomas P. Beal, and Sol. Wexler were addressed to the Secretary of the Treasury
and the Federal Reserve Board on September 4 and September 19 recommending
the formation in New York of a gold pool through which the requirements of all parts
of the United States for foreign exchange would be fairly and impartially dealt with.
The plan was approved by the Secretary of the Treasury and the Federal Reserve
Board on September 21, and on that date the first meeting of the gold fund committee
was held at the New York Clearing House. The members were Albert EL Wiggin,
chairman; James B. Alexander, Francis L. Hine, Benjamin Strong, jr., William
Woodward, and Frank A. Vanderlip. Banks and trust companies in New York City
subscribed to the pool $45,000,000, and subscriptions amounting to $63,929,360 were




40

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y OR K.

received from banks and trust companies throughout the United States. It was
fotind unnecessary, however, to call for more than 25 per cent of the subscriptions,
and owing to the easier exchange market resulting, to a considerable extent, from the
mere existence of the pool, its activities were quite limited. Another gold pool
aggregating $100,000,000= was formed in September by New York banks to provide
gold for shipment to London to pay the indebtedness of New York City maturing
there before the close of the year, but Messrs. J. P. Morgan & Co., the managers of the
pool, found it unnecessary to call for payment in gold of more than about one-third
of the subscriptions.
During October there was an appreciable improvement in the general exchange
situation. The movement of exports was improving and call money rates in London
were about 1 per cent. At the invitation of the Secretary of the Treasury, Sir George
Paish and Basil P. Blackett, Esq., arrived from England during October and remained
about a month discussing the situation with the Government and bankers, but no
definite action resulted from their visit.
The ending of the British moratorium on November 4, the improvement in cotton
exports, and the operations of the gold pool all contributed to further ease in rates dur­
ing the first week in November. German exchange was stronger during the second
week in December, as a result of remittances for securities sold. French checks at
this time were quoted at 5.16, and in the last week of 1914 demand sterling declined
to 4.84|.
On January 9, 1915, the return movement of gold from Ottawa commenced. It
began to be generally recognized that international trade would run heavily in favor
of the United States. The managers of the gold pool met on January 22 and decided
to return to subscribers the balance of their payments.
During February more cotton bills appeared in the market and exports continued
to show a large excess over imports. The movement of supplies to the warring nations
was very heavy. On February 11 demand sterling declined to 4.82f, the lowest figure
since October, 1907. Francs declined to 5.22£ and marks to 85£. The next week
sterling receded still further to 4.79, and continental rates also followed. Notwith­
standing the low rates, gold was not imported in any large amounts. A steady sale
of American securities from abroad continued.
In April the advances in security prices on the New York Stock Exchange and the
low rates of international exchange induced increased foreign selling of securities in
this market. Exchange rates did not vary very much until the third week in May,
when a new low record of 5.43J was established for Paris checks. At the end of July
there was a very weak market, and during the second week in August sterling declined
to 4.70J in spite of large remittances of gold from London via Halifax. This weakness
continued with gradual declines which became very abrupt toward the end of August.
On September 1 the record low quotation of 4.50 to the pound was reached. From
this there was a quick recovery on moderate transactions during the next few days,
the rate being carried in a firm market to 4.72.
The Anglo-French commissioners, Lord Reading, Sir Edward H. Holden, Bart.,
Sir Henry Babington Smith, Basil P. Blackett, Esq., M. Ernest Mallet, and M.
Octave Homberg, arrived on September 10 to discuss with American bankers plans
to stabilize exchange. Further large shipments of gold were received from London
via Halifax. Rates fluctuated irregularly. During the next month a firmer tone
resulted from prospects of successful negotiations with the Anglo-French commis­
sioners, but when the underwriting of the $500,000,000 loan was announced the mar­
ket did not respond and weakness in sterling was accompanied by recessions in conti­
nental exchange. During the third week in October the publication of figures of
heavy exports and large offerings of bills caused further weakness. An irregular but
stronger market developed in November and continued during December with the




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

41

exception of German exchange, which reached the record low quotation of 75J on
December 16. It should be observed that the effects of violent fluctuations are quite
as serious as abnormal rates of foreign exchange. Our foreign commerce can not be
conducted without unusual hazard of loss to importer and exporter whether exchange
on other countries is quoted at prohibitive premiums or prohibitive discounts. The
unusual hazards of commerce in time of war are greatly magnified by violent fluctu­
ations in the cost of settling accounts whether for goods imported or exported.
The efforts of bankers have therefore been continuous since the outbreak of the
war to establish a more stable market for exchange, as well as to bring about more
normal quotations, whether the exchanges have been at prohibitive premiums, as in
the fall of 1914, or at serious discounts, as during the past few months. The difficul­
ties have been increased by the risks involved in transporting gold from one country
to another, the difficulty of obtaining insurance at reasonable rates against both
marine and war hazards, and the lack at times of neutral vessels satisfactory to ship­
pers and underwriters. In the period reviewed the range of the leading quotations,
chiefly for cables, has been:
Low.

Date.

Sterling............................................
Francs..............................................
Marks...............................................
Roubles............................................
Lire......................... ........................
Guilders...........................................




Sept. 1,1915
........do.............
Dec. 16,1915
Nov. 9,1915
Sept. 1,1915
........do.............

Rate.

4.50
6.03
•75$
32.00
6.55
.38*

High.
Dis­
count.

Date.

Per cent.
7.5
16.3
20.3
37.8
26.4
4.2

Aug. 1-8,1914
........do.............
........do.............
........do.............
........do.............
Dec. 30,1915

Rate.

7.00
4.25
1.01
.52*
4.00
.43$

Pre­
mium.
Per cent.
43.8
18.0
6.0
2.0
22.8
8.2

42

FIRST ANNUAL REPORT, FEDERAL RESERVE BANK OF NEW YORK.

The following chart shows the high and low points of sterling exchange, by months,
during 1914 and 1915:
C

o u r s e

1914 -

ot

-S

|

t c -r i - j n

1915

© 3tx

c h a n

<3e :

'

HIGH
LOW

THE GOLD MOVEMENT.

The total imports of gold into the United States for the 11 months ending November,
1915, aggregated $403,531,913, as compared with $53,279,000 in the same period last
year. Most of this came from Canada, representing the return of gold that was shipped
in the fall of 1914 from New York to Ottawa on account of the Bank of England, and
the large shipments sent from London via Halifax. The facilities at the assay office
were hardly sufficient at times to handle the great quantity of gold imported and




F IR S T A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

43

some shipments were delayed in Canada until room could be made at the assay office
foriurther receipts. A large part of the later shipments have consisted of foreign coin.
Exports of gold from the United States for the first nine months of 1915 amounted
to $19,536,133, against $222,485,000 in the corresponding months last year.
. The following chart shows the net gold movements during 1913, 1914, and 1915.
Balance of gold movement (in millions of dollars).

1913

\§\4

IMPORTS AND EXPORTS.

Compared with the exports of 1913 those of 1914 were showing a steady decrease
each month until after the outbreak of the war. From September on, a steady recovery
in the volume of exports took place, due principally to the great shipments of supplies
to the warring nations which have continued ever since in increasing volume, notwith­
standing an increase in ocean freight rates varying from 25 per cent to 250 per cent
according to the destination. The lack of adequate shipping elevators and lighterage
to handle the enormous quantity of exports has caused much congestion. During




44

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

December, 1915, approximately 45,000 carloads were held in warehouses and freight
cars in and near New York awaiting shipment. The railroads have felt obliged to
declare embargoes in some cases on all outward traffic, in others only on certain com­
modities, until the congestion can be relieved by ocean shipments. Besides the great
increase in exports to England, France, Russia, and Italy, shipments to Sweden,
Norway, Denmark, and Holland have greatly increased, but compared with the first
nine months of 1913 exports for the same period of this year to other countries show
decreases as follows:
Canada, $72,630,984; Mexico, $9,028,297; South America, $6,710,180.
The following table lists the classes of goods exported in which the largest percent­
ages of increase are shown and the export of which may be considered as due primarily
to demands arising out of the war:
Nine months ending with September.
Articles and classes.

Live animals................................................
Explosives....................................................
Wool manufactures.....................................
Zinc manufactures......................................
Brass and manufactures............................
Sugar, refined..............................................
Automobiles.................................................
Leather manufactures, other....................
Chemicals and drugs..................................
Breadstuffs...................................................
Boots and shoes.......................................... .
Cotton manufactures.................................
Meats..............................................................
Carriages.......................................................
Iron and steel manufactures.....................
Cotton, raw....................................................
Oils, mineral................................................ .
Copper and manufactures...........................
Naval stores...................................................
Wood, lumber, and other manufactures..
Agricultural implements.............................
Miscellaneous.................................................
Total........................................................................................

1915

,

1914

Per cent in­
crease ( + )
or de­
crease ( —).

$96, 200,000
84, 300.000
25, 200.000
21 500.000
31, 800.000
24, 800,000
85, 100,000
94, 100,000
54, 200,000
423, 400.000
29, 800.000
71, 100,000
194, 800,000
18, 900.000
251 100.000
307, 300.000
106, 200.000
83, 900.000
9, 300.000
40, 300.000
10, 400.000
217, 200.000

145,200,090

20.100.000

23.8
38.3
49.5
49.5

2,532,500,000

1,467,400,000

72.5

$4,000,000
4.900.000
3.500.000
3.200.000
4.900.000
5.800.000
22.700.000
2d, 700,000

20.200.000

172.800.000
12.400.000
34.100.000
97.700.000
9.500.000
152.800.000
242.200.000
108.200.000
95.600.000

.

+2,305.0
+1,620.4
620.0
571.9
549.0
327.6
277.1
254.3
168.3
145.0
140.3
108.5
99.4
98.9
64.3
26.8
1.9

12.2

12 200.000

65.300.000

From February to August, 1914, imports had shown large increases over the same
period of 1913. But in every month except one from August, 1914, to August, 1915,
there was a decrease of imports when compared with the same month a year earlier.
Total imports for the first nine months of the past three years have been as follows:
1913, $1,327,385,071; 1914, $1,410,071,874; 1915, $1,302,281,591.
The following table lists the classes of goods imported which show the largest increases
or decreases:
Nine months ending with September.
Articles and classes.

Wool manufactures..................
Breadstuffs............................
Leather and manufactures
Meat and dairy products.........
Cotton manufactures................
Iron and steel manufactures..
Animals, chiefly cattle.............
Silk, raw.....................................
Hides and skins........................
Chemicals, drugs, etc...............
Wool, raw...................................
Sugar............................................
India rubber and substitutes.
Miscellaneous.............................
Total........................................................................................




1915

$13, €00,000
100,000
400.000
22, 100.000
30, eoo.ooo
14, 800,000
13, 300.000
61, 600.000
90, 400.000
65, 200.000

1914

157, 400.000
83, 400.000
501, 300.000

$36,400,000
25.500.000
18.900.000
39.700.000
48.800.000
22.900.000
17.300.000
72.900.000
93.500.000
61.900.000
53.800.000
112,000,000
57.800.000
570,700,000

1,302,100,000

1,410,100,000

It

68, 000,000

Per cent in­
crease ( + )
or de­
crease ( —).
- 6 2 .6
-4 4 .7
- 3 9 .7
- 3 9 .3
- 3 7 .3
-3 5 .4
-2 3 .1
- 1 5 .5
- 3.3
+ 5.3
+26.4
+ 4 0.5
+ 44.3
-

12.1

-

7.6

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

45

The balance of trade in favor of the United States for the first nine months of the
past three years has been as follows: In 1913, $406,037,087; 1914, $57,330,115; 1915,
$1,227,293,504.
In considering this balance there should be remembered the large amount of money
that in normal times would be spent abroad by American tourists.
The following chart shows the balance of trade for the years 1913,1914, and the first
nine months of 1915.
Balance of trade (in millions of dollars).

1913

1914

1915

MONEY RATES IN NEW YORK CITY.

In the last week of July, 1914, before the European war, money rates in New York
ranged as follows: Call, I f to 2 per cent; time loans on collateral, 60 days to 4 months,
2} to 3J per cent; prime commercial paper, 4J per cent. Immediately following the
outbreak of war, call and time loans ranged from 6 to 8 per cent and commercial paper
5£ to 6J per cent. By the third week of August the ruling rateJor call and time money
was 8 per cent and commercial paper advanced to 6i to 7J per cent. But there was
less demand for money and slightly easier conditions in the money market in Sep­
tember brought the range of rates on time and call loans to 6 to 8 per cent with the
main volume at 7 per cent.
Early in October there was an improved demand for prime commercial paper, which
sold freely at 6| per cent. By the middle of October the highest rate for call money
was 7 per cent and in the latter part of the month the range was: Call and time 6 to 7
per cent; commercial paper, 6 to 7£ per cent.




46

FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

In November the prospect of the opening of the Federal Reserve Banks and the
consequent release of reserves brought further ease in rates. The Comptroller of the
Currency made public a list of banks that were charging only 6 per cent. Time money
was quoted 5£ to 6 per cent, commercial paper, 6 to 7 per cent. During the second
week bankers in New York were reported to be seeking loans and the call rate went
as low as 4J per cent, ranging from that to 6 per cent. Time money declined to 5J
per cent while the best commercial paper found buyers at 5£ per cent.
Light trade demands and absence of speculation caused a steady downward trend
of money rates. Up to December 19, New York City banks had retired $128,581,540
out of a total of $144,000,000 emergency currency issued to them. Call money ranged
from 2\ per cent to 4 per cent, time loans on collateral, 3J to 4 per cent, and commercial
paper, 4J to 5 per cent.
Notwithstanding the great activity in the stock market which has prevailed during
the last nine months of the year call money has ruled throughout the year at from 1$
to 2 per cent, and time loans on collateral, 2\ per cent to 3J per cent. Commercial
paper, which in January ruled from 4 per cent to 5 per cent soon broke below 4 per
cent, with a substantial volume of sales of the best names at 2\ per cent to 2} per cent*
Prime bankers’ acceptances in January ruled from 2J per cent to 2f per cent, and
declined gradually throughout the year, at the close of which they ruled from 2 per
cent to 2J per cent.
The chart on the following page shows the course by months of the New York
rates for call money, time loans, and commercial paper.
LOANS TO FOREIGN COUNTRIES.

One of the most important developments of the year has been the extension of credit
in very large amounts to foreign Governments and to bankers and merchants in foreign
countries. Most of these loans have been to enable the borrowers to pay for goods
purchased in the United States, thereby steadying the exchanges and enabling them
to continue both their ordinary and their extraordinary purchases.
The most important loan was, of course, the Anglo-French loan of $500,000,000 which
was distributed by a large syndicate of bankers formed by Messrs. J. P. Morgan & Co.
It matures in 1920, bears interest at 5 per cent, and was taken by the underwriters at
96J and offered to the public at 98. It is the only one of the foreign loans that has been
listed on the New York Stock Exchange and is actively dealt in. The other loans
were arranged by banks, private bankers, and syndicates, and most of them have not
been offered generally to the public.
While a large volume of unreported credits to foreign borrowers has been extended
by banks in the course of financing exports, the loans and credits to foreign Govern­
ments, municipalities, and banks publicly announced to have been arranged in the
United States since the European war began are approximately as follows:
Anglo-French loan............ $500,000,000
British banks....................
50,000,000
25,000,000
Italy..................................
Russia...............................
25,000,000
Russian banks............ T...
67,000,000
France...............................
75,000,000
Germany...........................
10,000,000
Greece...............................
7,000,000
Sweeden............................
5,000,000
Norway.............................
3,000,000




Switzerland......................... $15,000,000‘
Canada......................... .
45,000,000
Canadian municipalities___ 105,000,000
Argentina............................ 40,000,000
Bolivia................................
1,000,000
Panama..............................
3,000,000
Chile...................................
6,500,000
Total......................... 982,500,000

FEDERAL RESERVE B A N K OF N E W Y O R K .

Money rates at New York (monthly average).

1914

1915

2ai 5oc>; zj 6SLH>dzf fl5i e5zj 6fci - >ozd5a5z2otH>6

<u5n53D3UOOli)< u2(tj33DU, OOu< u^a^33DUOOu
•) iLS<Si>><|0OZQ>>it^<S«>-y<IOOZO«>tLS<Sti<IOOZO




47

48

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K
THE 1915 CROPS.

The 1915 harvest in the United States surpassed any before recorded in both vol­
ume and value. The value of the principal farm crops estimated by the Department
of Agriculture on the basis of December 1 prices was $5,568,773,000. This compares
with $4,974,527,000 last year, $4,966,497,000 in 1913, and $4,757,478,000 in 1912.
Because of the advance in grain prices as the war in Europe progressed, very large
areas of grain were planted, the acreage of the principal crops this year aggregating
486,570 square miles. The corn crop was the second largest ever grown and the
number of acres planted has been exceeded only once before in this country. The
value of the corn crop surpassed the previous most valuable crop ever grown by
over $30,000,000. The wheat crop for the first time was over a billion bushels. New
records were made in production by wheat, oats, barley, rye, sweet potatoes, rice,
and hay. All the principal crops except barley and tobacco established records as
being the most valuable ever grown in this country.
[000 omitted.]
Acreage.
1915

All wheat............................................
Barley..................................................
Buckwheat.........................................
Flaxseed..............................................
Potatoes..............................................
Tobacco...............................................
Cotton..................................................

108,321
59,898
40,780
7,395
2,856
806
1.367
803
3,761
50,872
1.368
30,957

1914

Total bushels.

Farm value Dec. 1.

1914

1915

2,672,804
103,435
3,054,535
53,541
891,017
1,011,505
1,141,060
38,442
1,540,362
7,565
237,000
194,953
2,541
42,779
49,190
792
16,881
15,769
13,845
13,749
1,645
694
28,947
23,649
359,103
409,921
3,711
185,225
170,071
49,145
1,224 2 1,060,587 2 1,034,679
3 11,161
36,832
a 16,135

Total.........................................

1915

1914

$1,755,859
930,302
555,569
122,499
41,295
12,408
24,080
26,212
221,104
912,320
96,041
602,393

$1,722,070
878,680
490,431
105,903
37,018
12,892
17,318
21,849
199,460
779,068
101,411
525,324

5,300,082

4,891,424

i
i Tons.

* Pounds.

* Bales.

IMMIGRATION AND EMIGRATION.

The effect of the war on immigration and emigration has been very marked. Both
arrivals and departures have decreased notably and the effect of the now almost
balanced movement can not fail to be felt in the domestic labor market if the present
industrial activity continues. For the first nine months the net immigration has
been: In 1913, 863,784; in 1914, 334,169; in 1915, 64,485.
The following chart shows the net movement by months during these years.




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W YORK.

49

Net immigration.

1913

»9I4-

1915

( FOREIGN BANKING CONDITIONS.

The outbreak of the war precipitated grave responsibilities upon the great central
banks, as well as the private banks, of the principal belligerent nations. Various
-measures were undertaken to meet the orisis which at once developed, both in credit
and in currency.
In England the Government declared various moratoria extending the date of pay­
ment of maturing bills. The Bank of England was indemnified against loss in the
purchase of bills and under this guaranty it made a practically unlimited offer to take
bills which had become unliquid by reason of war conditions. The Government
authorized the issue, through the Bank of England, of <£1 and 10 shilling notes of the
Government to relieve the currency stringency and take the place of sovereigns and
half sovereigns which disappeared from circulation. The effect of these measure®
was instantly felt. By having a vast volume of their securities made liquid English
banking firms and institutions were enabled to conduct their customary business.
The Bank of England largely increased its deposit liabilities and its investments in
bills, and a reduction in both the bank rate and the rates for bills in the open market
quickly followed.
24803— 16------- 4




50

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y ORK

In France the note issues of the Bank of France are limited in amount by law.
Increases in the limit of the note issue were authorized, enabling the bank to make
large advances to the Government and to provide notes for current circulation. To
some extent these notes were deposited with various organizations, notably the Cham­
ber of Commerce of Bordeaux, which issued notes of smaller denominations to circu­
late in place of gold coins, which promptly disappeared from circulation. These
measures were subsequently followed by appeals to the people to deposit their gold
with the Bank of France, which ultimately brought the gold holdings of the bank to
an amount in excess of $1,000,000,000.
In Germany more extensive measures were taken to meet the situation than in
either England or France. Immediate provision was made to enlarge the note issues
of the Reichsbank and local credit banks were organized at which solvent borrowers
could obtain credit upon both securities and commodities. The Reichsbank was
authorized to receive and hold notes issued by certain of these banks on a parity with
its gold reserves. Such notes were also issued in small denominations for purposes of
circulation. These efforts to maintain the gold reserve of the nation were supple­
mented by an embargo on the export of gold and by appeals to the people to surrender
their gold to the Reichsbank, thereby largely increasing its holdings.
While all these measures have many characteristics in common, provision having
been made in both England and France for the extension of date of payment of debts
and in all three countries for a wide extension of the power of note issue by the central
banks, the means employed in each case were somewhat different. The effect of
these operations are clearly reflected in the attached tables showing the changes which
have taken place in the statements of the three central banks of these countries. The
issue of Government notes in England to supplement the note issues of the Bank of
England was accompanied by an accumulation of gold reserve for their redemption,
the difference between the gold reserve and the face of the notes being covered by
Government securities and balances at the Bank of England.
The striking similarity in the demands made upon the credit systems of all the bel­
ligerent nations is equally reflected in these statements. The ability to convert
unliquid assets through the agency of a central bank and to furnish the people with a
convenient and acceptable circulating note for their daily transactions undoubtedly
saved these nations and their citizens from enormous losses that otherwise would have
been sustained by reason of credit contraction and trade stagnation.
The following tables show the principal assets and liabilities of the three Government
banks at intervals during the period:
B A N K OF ENGLAN D .
[000,000 omitted.]

Date.

Bullion.

Reserve.

1914.
July 30.............................................
Oct. 8 ...............................................
Nov. 19............................................
Dec. 31............................................

£.

£.

1915.
Feb. 1 8 ..........................................
Apr. 22............................................ iI
May 27............................................ I
June 24............................................ i
July 29............................................. 1
Aug. 26.1........................................ 1
S.ept. 30...........................................j;
Oct. 28.............................................
Nov. 25......................... .................. |
I

38
57
73
69

32
40
56
52

66
56
62
53
61
67
62
56
52

50
40
47
39
46
54
48
42
38

Govern­ Other se­
ment se­ curities.
curities.

11
28
19
15

!1
r
!
47 i!
114 j!
107 1
106

25
48
51
51
53
46
37
19
19

102 i
144 j|
139
136
191
142
132
97
98

£.

£.

Circula­
Deposits.
tion.

£.

£.
30
35
35
36

67
164
164
155

34
34
30
33
34
32
33
33
33

158
214
220
208
273
224
192
140
145

Ratio of
reserve.

Per cent.
40
24.53
34
33|
31*
18£
2H
18|
16|
24J
24}
30
27$

N o t e .— On Dec. 8, 1915, there were outstanding in addition £94,291,700 currency notes of £1 and 10shilling denominations, against which a gold reserve of $28,500,003, or 30.2 per cent, is carried, the balance
of the issue being covered by Government securities and a balance at the Bank of England.




FIR ST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

51

B A N K OF FRANCE.
[000,000 omitted.]
Date.

riscounts.

Advances.

r eposits.

Circulation.

Francs.
, 650

Francs.
2,448

Francs.
737

Francs.
1,330

Francs.
6,683

375
376
375
371
367
356
354
353

2,285
2.709
2.709
2,858
2,426
2,380
2,386
2,338
2,192

830
650
644
629
610
580
579
561
563

2,822
2,350
2,301
2,354
2,600
2,642
2,860
2,684
2,665

10,831
11,541
11,829
12,106
12,592
12,949
13,457
13,867
14,278

Gold.

Silver.

1914.
July 30......................

Francs.
4,141

1915.
Feb. 18......................
Apr. 22......................
May 27......................
June 24.....................
July 29......................
Aug. 26.....................
Sept. 30....................
Oct. 28......................
Nov. 25.....................

4,237
4,191
3,913
3,927
4,129
4,266
4,550
4,729
4,835

IM PERIAL B A N K OF GER M AN Y.
[000,000 omitted.]
Loans
and dis­
counts.

Date.

1914.
July 25......................................................... .
Aug. 22.........................................................
Dec. 4 ............................................................

Marks.
1,356
1,529
1,991

Marks.
801
4,616
2,968

1915.
F e b .10.........................................................
Apr. 30..........................................................
June 2............................................................
July 17......................................................... .
Oct. 23......................................................... .

2,156
2,366
2,377
2,390
2,430

3,379
3,807
4,163
4,482
3,924

Circula­
tion.

Marks. »
1,890
3,999
4,205
5,046
5.311
5,318
5.311
5,675

INDUSTRIAL AND COMMERCIAL CONDITIONS.

The latter half of 1914 was marked by general industrial unsettlement and depres­
sion. Securities and many commodities were undergoing liquidation, interest rates
were high, credit in demand, and both unemployment and individual and corporate
retrenchment were general. The year 1915 has brought a reversal of these conditions,
probably unequaled in its swiftness, intensity, and magnitude. The recovery had
its inception in easy money, growing export trade, reestablishment of the interna­
tional exchanges, and the return of confidence. In the autumn of 1914 large foreign
orders began to be placed in the United States for munitions and other raw and manu­
factured goods necessary for the prosecution of the European war and the main­
tenance of civil populations. These orders created centers of industrial and trade
activity and purchasing power, to which unemployed labor gravitated. In other
sections the purchasing power was maintained or increased by the sale of large crops
at very high prices. From these centers, gradually widening in area and influence
throughout the spring and summer, has developed the present general commercial
and industrial activity.
The balance of trade, which had been running against the United States for several
months preceding the war, soon began to turn in its favor through heavy shipments
of grain and other commodities. By January, 1915, the shipment of grain, cotton,
copper, live stock, meat, and other raw and manufactured articles had reached a
sufficient volume to turn the gold movement also in favor of this country. The
increased traffic of the railways and the tretnendous demand on the iron and steel
industry for the manufacture of munitions caused these two fundamental industries
to resume normal purchases. The general retrenchment practiced during the first




52

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

six months of the war was relaxed as the effects were felt of better employment of
labor, increasing commercial and industrial profits, and the great crops of 1915, mar­
keted at prices well above the normal. Even in the South the intense depression of
the winter of 1914-15 was lifted by the sale of the 1915 cotton crop, although of reduced
volume, at prices better than anticipated.
Improvement began to manifest itself in nearly all lines of industry about the begin­
ning of the year 1915. By that time a favorable balance of trade had been established;
railroad earnings had begun to improve and iron and steel to move in greater vol­
ume; bank clearings throughout the country were increasing slightly; unemployment
in New York State and the number of commercial failures throughout the country had
reached their highest points.
But while the improvement began during the first half of the year, business did not
attain its present momentum till toward the end of the summer. Inquiries recently
made of leading merchants and manufacturers throughout the country indicate very
generally that their volume has been much greater during the last than during the
first six months of the year, in many cases comparing favorably with other periods of
industrial activity. Wages have been substantially increased in industries operating
directly or indirectly under the stress of purchases by the belligerent nations. Except
in neighboring industries wage increases have not yet become general, although there
are signs that demands for higher wages are likely to spread. The reduction of immi­
gration to the lowest point in many years should have a tendency at least to prevent
unemployment. The savings banks in many parts of the North Atlantic States report
substantial gains, especially during the autumn months. Earnings of public service
corporations as a whole have shown increased gross earnings during the last half of the
year. The general retail trade of the autumn has been unprecedented in volume.
The rise in price of many raw materials, coupled with the rise in wages in certain
industries, has increased prices to the consumer and, in some cases, has had the effect
of reducing profits. The favorable market for securities has given railroads and
industrial enterprises a better opportunity to finance improvements than has pre­
vailed for many years. Except in certain lines, principally those adversely affected
by European conditions, thie business of the country may be said to be working to
capacity nearly everywhere, with many industries handling a volume never before
equaled.
Appended to this paragraph are the following charts, showing figures for 1913,1914,
and 1915, and indicating clearly the course of the present industrial revival:
Total bank clearings.
Changes in gross railroad earnings from previous year.
Iron production.
Number of commercial failures.
Unfilled tonnage, United States Steel Corporation.
Percentage of employment in New York State.
Idle car figures.




Total bank clearings in United Stales (in billions of dollars).

Unfilled tonnage, United States Steel Corporation (in millions of tons).

1913

a

1914

1915

SS&S8SSi£i!ES«&SS
j S j S j I l s E s s s i ;SkSl l<£l s^i<§H
<,^kS<S^i<NOZCl
O Z f i * h X < Xn M N O S O

7.5
7
6.5
6

5J5
5
4$

\

A
Gross railroad earnings, changesfrom previous year.

1913

19 1 4

19»S
>o j-a io iiS

3*

S^’

S3

3

Outu<L<t^3UOOU
1 b l< s^ < ii)0 zo^ s< s^ 4i)ozou !< 2 ^ < oozo

s

lit

o
5

=?!

Percentage of employment in New York Slate,

iron pro^riion (in mi'Wiows o/ ions),

1913

1914

1915

1913

1913
1914
1915
8&5!iShiN&iiiihi!iiiiii!iMii


24803—16.


(To face page 52.)

1914

1915

FIRST A N N U AL REPORT, FEDERAL RESERVE RAN K OF NEW YORK.

53

BANKING AND FINANCIAL CONDITIONS.

The most important banking and financial developments of the period under review
are—
1. R eduction of required bank reserves and steady increase of surplus reserves.

2. Great expansion of bank deposits and loans.
3. Large importations of gold.
4. Large loans to foreign countries.
5. Heavy purchases of American securities from foreign countries.
The Comptroller of the Currency in September, 19X4, published a calculation that
the total National Bank Reserves released by the act on November 16, 1914, would
aggregate $465,000,000. During 1915 several States reduced the reserves required of
their State institutions to correspond with the percentages required under the Federal
Reserve Act even though they should not join the system and secure its reserve advan­
tages. The Comptroller reports the amount of excess reserves held by the national
banks of the country on September 2,1915, at $869,000,000.
The net deposits of all national banks rose from $7,157,000,000 on October 31, 1914,
to $8,323,000,000 on September 2, 1915, an increase of $1,166,000,000, or 16 per cent.
The net deposits of national banks in New York City during the same period increased
$530,000,000, or 43 per cent. Nearly half of the increase was in the New York City
national banks, which were called on primarily to finance the country’s heavy export
trade.
The great expansion in New York is better shown by the figures month by month
of the New York clearing-house banks since the day before the Federal Reserve Sys­
tem opened, indicating an increase in deposits of 78 per cent in 13£ months.
ALL NEW YORK CLEARING-HOUSE BANKS.
[000,000 omitted.]
!
Date.

Undi­
vided
proQts.

Gold.

Le^al
ten­
ders.

Silver.

Bal­
Fed­
ance, ! Na­
eral
Fed­ tional*
eral
Re­
bank
serve
Re­
notes.
serve
notes.
Bank.

i
Net
Excess
Loans, dep
osre­
etc.
serves.

1914.
Nov. 14
Deo. 26____

175
175

300
300

1340
191

102
59

69

98

18
14

1
1

2,133
2,179

1,925
2,074

7
117

1915.
Jan. 30........
Feb.27 , ..
Mar. 27 . ..
Apr. 24____
May 29........
June 26.......
July 31........
Aus. 28..
Sept. 25___
Oct. 30..
Nov. 27 ..
Dec. 31........

175
175
175
175
175
175
176
176
177
179
176
176

298
298
302
304
304
304
309
309
306
307
310
312

209
215
239
263
291
324
295
336
369
399
39$
335

69
66
66
66
65
55
70
70
67
56
49
71

84
75
83
82
76
71
78
78
72
66
81
79

108
113
115
121
117
131
133
141
144
164
165
165

15
9
10
9
8
9
9
8
8
7
8
8

1
1
1
1
2
2
2
2
3
3
3

2,233
2,298
2,385
2,400
2,437
2,476
2,578
2,655
2,766
3,044
3,123
3.257

2,213
2,268
2,386
2,432
2,490
2,583
2,695
2,810
2.951
3,270
3,364
3,462

114
135
150
171
183
193
180
205
198
196
194
146

4

!
t
f
1
!
|

1 Specie.

The following chart shows the increase in loans and deposits of New York clearing­
house banks by years since 1903. The increase in 1911 is caused by trust companies
joining the clearing house. An expansion has occurred in one year which normally
would have been spread over nearly a decade.




FIRST AN N U AL REPORT, FEDERAL RESERVE B AN K OF NEW YORK.

Deposits and loans of New York clearing-house banks (in billions of dollars).

A

3.5

Deposits.

i

zs
z
IS
1.0
as

A
3.S
5
2S

IS
I
QS




I

Net deposits o f all United States national banks (in billions o f dollars).

New York Stock Exchange,

1914-

19 1 5

1913

1914

1915

B on d o

Tndustri

ctl f? t 'iok 3

R a ilro & d ® fe 30ijci

1913




American commodity prices (BradstreeVs Index).

1913

1914

(In dollars.)

1915

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

55

While a portion of the expansion here shown is due to industrial demands and
stock-market activity, the greater volume of it doubtless has arisen from transactions
relating to the shipment of goods, to the return of American securities, and to the
extension of credit to foreign countries.
The surplus reserves, maintained not only in New York City but throughout the
country, are evidence of the proper caution with which bankers are taking advantage
of the lowered reserve requirements in view of the abnormal conditions prevailing
here and in Europe. With such excess reserves, it has been natural that the rates for
loans in the money markets of the country should be extremely low. The demand
from banks for commercial paper has resulted in rates lower than ever before reported,
and the volume has been wholly unequal to supplying the demand.
The tremendous exports of the past year, instead of being balanced by increased
imports of consumable commodities, have been paid for largely by gold, by securities
returned to this country and by credits extended here to foreign countries. The
unusual nature of the trade activity has required a new form of financing. Instead
of financing shipments by American manufacturers to be paid for abroad, it has been
necessary to finance foreign purchasers to enable them to pay in cash in this country.
Looking outside of the banks to the conditions of agricultural productivity and
industrial activity now prevailing, prices have risen considerably for agricultural
products and minerals; many manufactured articles have advanced in price; labor
is better employed and wages in many sections and industries have risen; immigra­
tion as a net movement has practically ceased; security prices have risen generally
and in several industries notably. The requirements of American industries have
thus far consumed but little of the increased credit power of the banks. The banks
have used the added credit power given them by the inflow of gold to assist in develop­
ing foreign trade.
As long as the favorable balance of trade continues and bankers proceed with
the same caution which has characterized their course thus far, there seems to be no
present reason for concern; but the test of What must be considered as our normal
banking power will come after the war is over. If the balance of foreign trade then
continues favorable and we are enabled to retain a substantial portion of the gold
which has come here under stress of war conditions, we can continue to make advances
to our foreign trade connections. But, should the balance turn against us, or heavy
foreign demand for credit arise, the added gold is likely to return to Europe, thereby
diminishing proportionally our power to lend to foreign countries in developing trade
with them. So many factors will enter into the resultant that it is idle to attempt
to make predictions. The one safe rule for the banks of the country is to keep liquid;
to see that in the period of tremendous expansion which circumstances are forcing
upon them their increased resources do not consist of loans and securities representing
fixed assets. They should be ready at all times for a drain on their gold and a reduc­
tion of their credit power. The fact that, in spite of the growing expansion excess
reserves continue to grow even faster, is evidence that they appreciate the possibly
transient character of their increased banking power and do not intend to expand
beyond a safe and reasonable point.
The following charts indicate the expansion which is taking place not only in
banking power but in commodity and security prices: National-banks deposits, 1914
and 1915; commodity prices 1913,1914, and 1915; security prices, 1914 and 1915.




56

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
C h a p te r

V.—S u m m a ry

o f R e s u l t s o f O p e r a tio n .

What has thus far been accomplished by the Federal Reserve Bank of New York
may perhaps be briefly summarized.
The bank has been thoroughly organized, with a staff of officers and clerks expe­
rienced in the work of the particular departments to which they have been assigned.
The organization is more complete than the business actually done would seem to
xequire since it has been felt essential by the directors and officers that a complete
departmental organization should be maintained, capable, with the addition of neces­
sary clerical assistance, of performing any volume of business which might be suddenly
thrust upon it.
The bank was opened and the reserve transfer accomplished without any of the
disturbances which it was predicted would occur.
Valuable experience has been gained of the meaning and effect of the regulations
of the Federal Reserve Board governing the development of the various functions of
reserve banks, which has in turn been transmitted to the member banks.
Considerable effort has been expended in explaining to member banks the purpose
and meaning of the Federal Reserve System and the ways in which the bank can be
of service to them in quiet as well as in active times. The business community has
also had an opportunity to become informed of its development and functions. The
officers have also devoted the necessary time to furnishing information to the press in
order that the public might be correctly informed of the operations of the bank, and
the generally favorable attitude of the press has been an important factor in estab­
lishing public confidence in the system.
Federal Reserve Notes have been issued freely and become already an important
part of our currency, and through their use the bank has greatly strengthened its gold
position and its credit power.
The establishment of a market for bankers’ acceptances has been assisted by the
purchases made by this bank for itself and other reserve banks, and the study given to
the di^wing and indorsement of such bills has made more certain their ready
negotiability.
Through experience gained in discounting paper for member banks, an understand­
ing has been reached by both this bank and its member banks of the kind of paper
which is eligible for discount.
Through its collection system an important step has been taken toward effecting
cheaper and more direct check collections.
. A gold settlement fund has been established at Washington for settlements between
Federal Reserve Banks and their districts which should substantially reduce cur­
rency shipments.
Oil January 1,1916, the bank will begin acting as fiscal agent of the United Stages.
A satisfactory, trial has been made of the new form of Government supervision
requiring one-third of the directors of the bank to be appointed by the Reserve Board
and to exercise primary responsibility for all the policies and transactions of the bank.
The coordination of the work of the reserve banks by the Reserve Board has been
supplemented by conferences of their governors and of groups of other officers, and
the, development of the system is progressing along such harmonious lines as local
conditions and requirements will permit.
During this period of relative operating inactivity the officers and directors of the
reseive banks have had an opportunity to study the Act. Its ambiguities have come
to light and suggestions for amendments which seem desirable have been made to the
Reserve Board through whom they may if approved be transmitted to Congress.
The system has been enabled quietly to develop most of its important functions
and to gather not only experience but strength to respond to such calls as may be
made upon it. The experience of the principal European countries in dealing with




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

57

the conditions suddenly forced upon them at the outbreak of the war, now that it
can be seen in some perspective, should be studied during the coming year by the
officers and directors of Federal Reserve Banks. A clear understanding should be
obtained of the methods by which demoralization of credit was effectually met by
the European countries and of the methods which, under conditions peculiar to the
United States, would be likely to prove effective in maintaining its credit machinery
in any strain which might grow out of the European war or other international com­
plications. The lessons are now both clear and fresh; we should not fail to learn
them and understand their application to our own conditions.
This report would not be complete without suitable recognition and acknowledg­
ment of the work of both the temporary and permanent staffs of the bank. Those who
were temporarily employed performed their duties in the spirit of public service.
The members of the permanent staff, likewise, from the outset have worked without
regard to office hours and through the energy and devotion with which they have
undertaken the tasks assigned them the functions of the bank been developed upon
a sound and permanent basis.
A ppendix 1.—By -L aws op the F ederal R eserve Bank of N ew Y ork .
A rticle I.—Directors.
Section 1. Quorum.—A majority of the directors shall constitute a quorum for the
transaction of business, but less than a quorum may adjourn from time to time until
a' quorum is in attendance.
Sec. 2. Vacancies.—As soon as practicable after the occurrence of any vacancy in
the membership of the board the chairman of the board shall take such steps as may
be necessary to cause such vacancy to be filled in the manner provided by law*. •
Sec. 3. Meetings.—(Amended July 7,1915.) There shall be a regular meeting of the

board every Wednesday at 9.45 o’clock a. m., or, if that day be a holiday, on such day
as the board may determine at a preceding meeting (unless otherwise ordered by a
majority of the board). The chairman of the board may call a special meeting at
any time and shall do so upon the written request of any three directors or of the
governor. Notice of special meetings shall be given by mail or by telegraph. If
given by mail, such notice shall be mailed at least two days before the date of the
meeting. If given by telegraph, such notice shall be dispatched at least 24 hours
before the date of the meeting. Notic e of any meeting may be dispensed with if each
of the directors shall in writing or by telegraph waive such notice.
Sec. 4. Powers.—The business of this bank shall be conducted under the super­
vision and control of its board of directors, subject to the supervision vested by law
in the Federal Reserve Board. The board of directors shall appoint the officers and
fix their compensation.
The board may appoint legal counsel for the bank, define his duties, and fix his
compensation.
Sec. 5. Special committees.—Special business of the bank may be referred frcm
time to time to special committees, which shall exercise such powers as the board
may delegate to them.
Sec. 6. Order of business.—The board may from time to time make such regulations

as to order of business as may seem to it desirable.

A rticle I I .— Executive committee.
Section 1. How constituted.—There shall be an executive committee consisting of
the governor, the chairman, and one or more directors chosen by the board, who shall
serve during the pleasure of the board or for terms fixed by it. Not less than three
members of the committee shall constitute a quorum for the transaction of business,
&nd action by the committee shall be upon the vote of a majority of those present at
any meeting of the committee.
The committee shall have power to fix the time and place of holding regular or
special meetings and the method of giving notice thereof.
Minutes ol all meetings of the executive committee shall be kept by the secretary,
and such minutes shall be submitted to the members of the board of directors at its
next succeeding meeting. Such minutes or a digest thereof shall be read to the meet­
ing if requested by any member of the board.




58

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

Sec. 2. Powers.—Subject to the supervision and control of the board of directors,
as set forth in Article I, section 4, the executive committee shall have the following
powers:
To pass upon all commercial paper submitted for discount.
To apply for and provide for the security of such Federal Reserve notes as may,
in the judgment of the committee or of the board, be necessary for the general require­
ments of the bank.
(c) To employ or to delegate to officers of the bank authority to employ clerks and
other subordinates and to define their duties and to fix their compensations.
(d) To approve bonds furnished by the officers and employees of the bank and to
provide for their custody.
(e) To exercise such other powers as may be from time to time delegated to such
committee by the board of directors.
(/) In general, to conduct the business of the bank, subject to the supervision and
control of the board of directors.
(g) It shall recommend to the board of directors from time to time changes in the
discount rate.
A r t i c l e III.—Officers.

S

S e c t i o n 1 . The board of directors shall appoint a governor, a deputy governor, a
cashier, and a secretary, and shall have power to appoint such other officers as the
board may from time to time determine to be necessary and appropriate for the con­
duct of the business of the bank. The offices of deputy governor, cashier, and secre­
tary, or any two of them, may be held by one person, in the discretion of the board.
The officers chosen by the board shall hold office during the pleasure of the board.
S e c. 2. Federal Reserve agent.—The Federal Reserve agent, as chairman of the
board, shall preside at meetings thereof. Copies of all reports and statements made
to the Federal Reserve Board shall be filed with the Federal Reserve agent.
S e c. 3. Deputy Federal Reserve agent.— In the absence or disability of the Federal
Reserve agent his powers shall be exercised and his duties performed by the deputy
Federal Reserve agent, who may perform such other services as shall be requested by
the board of directors not inconsistent with his duties as provided by law.
S e c. 4. Governor.—Subject to the supervision and control of the board of directors,
the governor shall have general charge and control of the business and affairs of the
bank and he shall be the chairman of the executive committee. He shall have power
to make any and all transfers of securities or other property of the bank which may be
authorized to be sold or transferred by the executive committee or by the board. The
governor shall have power to prescribe the duties of all subordinate officers and agents
of the bank where such duties are riot specifically prescribed by law or by the board
of directors or by the by-laws. The governor may suspend or remove any employee
of the bank.
S e c. 5. Deputy governor.—In case of the absence or disability of the governor his
powers shall be exercised and his duties discharged by the deputy governor, and in
case of the absence or disability of the deputy governor the board shall appoint one
of the other directors governor pro tem. The duties of the deputy governor shall
otherwise be such as may be prescribed by the board of directors or by the governor.
In case the board shall deem that the business of the bank requires the appointment
of one or more assistant deputy governors, it shall have authority to appoint such
assistant deputy governor or governors and shall prescribe and define his or their
duties.
S e c. 6. Cashier.—(Amended Aug. 4, 1915.) The cashier (with such other officer
or officers as may be designated by the board of directors) shall have the custody of
all moneys, investments, and securities of the bank, subject to such rules as the board
may adopt for their safety. He shall perform such other duties as may be assigned
to him from time to time by the board of directors, the executive committee, or the
governor.
S e c. 7. Secretary.—The secretary shall keep the minutes of all meetings of the
board and of all committees thereof. He shall have custody of the seal of the bank,
with power to affix same to certificates of stock of the bank, and by authority of the
board or the executive committee to such other instruments as may from time to
time be required. The board of directors may, in the absence or disability of the
secretary, or upon other occasion where in the discretion of the board greater con­
venience can be attained, appoint a secretary pro tem. or empower one or more officers
to affix the seal of the bank to certificates of stock or other instruments. The secre­
tary shall perform such other duties as may from time to time be prescribed by the
board of directors, the executive committee, or the governor.




FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
A r tic le

59

IV .— Certificates of stock.

All certificates of stock or of payment of or on account of stock subscriptions shall
be signed by the governor or a deputy governor and the secretary or cashier, or such
other officers as may be prescribed by the board, and such certificates shall bear the
corporate seal.
A r t i c l e V . —Business hours.
The bank shall be open for business from 10 o’clock to 3 o’clock on each day except
Sundays or days or parts of days established as legal holidays.
A r tic le

VI.—Amendments.

These by-laws may be amended at any regular meeting of the board by a majority
vote of the entire board: Provided, however, That a copy oi such amendment shall have
been mailed fco each member at least five days prior to such meeting, unless waiver
thereof shall have been made in writing;

A p p e n d ix 2 .— C o n d e n s e d S t a t e m e n t o f C o n d it i o n o f F e d e r a l R e s e r v e B a n k
o f N e w Y o r k D e c . 31, 1915.
Resources.

Liabilities.

Bills
discounted—
Members..................... $236,472.08
Bills
discounted—
Bought....................... 9,546,011.06
Investments and ac­
crued interest............ 1,206,733.90

Capital paid in....................................... $11,063,150.00
Unearned discount and interest........

31,520.01

Due to member banks......................... 179,433,322.16
$10,989,217.04

Due from member
banks, overdrafts. . .
28,820.51
Due from other Federal
Reserve Banks.......... 1,932,512.64
1,961,333.15
Furniture and equipment.................

26,980.36

Expense of organization.....................

122,335.01

Cost of unissued Federal Reserve
notes...................................................

232,086.79

Expenses paid in advance................

3,965.78

Amounts aWaiting reimbursement..

2,346.40

Due to other Federal Reserve Banks.

19,818,568.18

Cashiers’ checks.....................................

841,219.44

Federal Reserve notes.........................

140,000.00

Withheld for Federal income ta x .. . .

608.15

Federal
reserve
notes on hand........ 16,139,280.00
National-bank notes
and Federal re­
serve notes of other
Federal
Reserve
Banks.....................
41,250.94
16,180,530.94
Exchanges and other
cash items..............
987,566.35
Gold............................ 174,845,827.50
5,976,087.40
Lawful money*.........
181,809,481.25
Profit and loss.....................................

.........................

Toted




111.22
211,328,387.94

Total.............................................. 211,328, 387.94
Net deposits............................................ 197,144,210.28
Per cent cash to net deposits.............

91.6

60

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
A p p e n d ix 3 .— P r o f i t a n d L o s s S t a t e m e n t .

Nov. 16, 1914, to Dec. SI, 1915.
Income.
Bills discounted—Members...................... $36,840.98
Acceptances purchased.............................# 97,054.10
Investments—Warrants............................ 191,868.68
Sundry profits............................................. 19,271.57
Excess of expenses over income carried
I l l . 22
to profit and loss.....................................

Current expense.
Directors’ fees, outside conferences, and
Federal Advisory Council...................... $18,240.72
Salaries........................................................... 154,043.05
General expense............................................ 44,472.23
Cost of T ederal Resen e notes used.......... 63,800.00
Assessment for expenses of I ederal Re­
serve Board................................................ 21,840.60

Total................................................... 345,146.55

Total.................................................... 345,146.55

Statement of organization expenses, Dec. SI, 1915, carried in assets.
Assessment for expenses of Federal Reserve Board................................................................................$41,367.72
Expense of organization—Local.................................................................................................................. 80,967.29
Furniture and equipment............................................................................................................................ 26.980.36
Cost of unissued Federal Reserve notes..................................................................................................... 232,086.79
Total....................................................................................................................................................... 381,402.16
A p p e n d i x 4 .— C o m p a r a t i v e S t a t e m e n t s

of

C o n d it io n .

Nov. 16,1914.

June 30,1915.

Bills discounted—Members................................................. •.
Bills discounted—Bought......................................................
Investments and accrued interest........................................
Due from member banks, overdrafts...................... ............
Due from other Federal Reserve Banks............................
Furniture and equipment.....................................................
Expense of organization.........................................................
Cost of Unissued Federal Reserve notes.............................
Expenses paid in advance.....................................................
Amounts awaiting reimbursement......................................
Federal Reserve notes on hand............................................
National Bank notes and Federal Reserve notes of other
Federal Reserve Banks.......................................................
Exchanges and other cash items..........................................
Gold............................................................................................
Lawful money..........................................................................
Profit and loss...........................................................................

$2,213,500.00

$543,404.99
4,664,859.76
3,697,484.16

51.20
81.533.715.00
21.399.854.00

52,122.54
1,480,378.25
120,098,607.50
31,247,079.90

41,250.94
987,566.35
174,845,827.50
5,976,087.40
111.22

Total................................................................................

105,160,521.22

171,068,822,82

211,328,387.94

Capital paid in..........................................................................
3,321,950.00
Profit and loss...........................................................................
Unearned discount and interest...........................................
8,368.81
Due to member banks............................................................ 101,816,801.29
Due to other Federal Reserve Banks...................................
Cashiers’ checks.........................................................................
13,401.12
Federal Reserve notes............................................................
Withheld for Federal income tax..........................................

9,961,650.00
43,064.21
15,718.44
141,929,512.72
18,294,279.06
644,353.43
180,000.00
244.96

11.063,150.00
31,520.01
179,433,322.16
19,818,568. IS
841,219.44
140,000.00
608.15

Total................................................................................
Net deposits..............................................................................
Per cent cash to net deposits................................................

171,068j 822.82
153,822,437.72
98.3

211,328,387.94
197,144,210.28
91.6

Dec. 31,1915.

RESOURCES.

5,565,329.74
13,401.02

186,467.38
1,613.60
3,531,475.00

$236,472.08
9,^46,011.06
1,206,733.90
28,820.51
1,-932,512.64
26,980.36
#2,335.01
232,086.7&
3,965.78
2,346.40
16,139,280.0a

LIABILITIES.




105,160,521.22
101,830,151.21
101.08

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
A p p e n d ix 5 .— C a p i t a l A c c o u n t R e c o n c i l i a t i o n ,

Nov.

61

2 , 1914, t o D e c . 3 1 , 1915

Capital paid in first installment, Nov. 2,1914....................................................................................$3,321,950.00
Capital paid in second installment Feb. 2,1915..................................................................\ ........... 3,318,183.35
Capital paid in third installment May 3,1915................................................................................... 3,317,549.98
Capital paid in by 131 banks in northern New Jersey transferred from District No. 3; first,
second, and third installments..........................................................................................................
962,650.00
10.920.333.33
Sundry increases:
Due to increases in capital and surplus of member banks...................................$44,150.00
Due to organization oi new banks............................................................................. 221,650.00
-----------------

265,800.00
11.186.133.33

Sundry decreases:
Due to decreases in capital and surplus of member banks...................................
4,983.33
Due to banks liquidated............................................................................................. 118,000.00
-----------------

122,983.33

Capital paid in Dec. 31,1915, by member banks.............................................................................. 11,063,150.00

A p p e n d i x 6 .— R e d i s c o u n t s .

Nov. 16, 1914, to Dec. SI, 1915.
277
Number of applications received.........................................................................
Amount of applications received.........................................................................................................$11,384, 037.63
Amount of applications accepted........................................................................................................ $10,746, 610.61
Amount of applications rejected..........................................................................................................
$637, 427.02
Largest application................................................................................................................................ $2,182, 500.00
Smallest application..............................................................................................................................
$1, 015.00
2,676
Number of pieces of paper discounted......................................................................... .....................
Amount discounted................................................................................................................................ $9, wo, 632.41
Largest piece of paper............................................................................................................................
$300, 000.00
$20.20
Smallest j>iece oi paper...............1
$3, 613.09
Average size of note discounted.
54
Number of banks rediscounting.

Number of pieces of paper and amount discounted, by months.
Num­
ber.
November, 1914.
December...........
January, 1915...
February............
March..................
April....................
May......................
June.....................

Num­
ber.

Amount.

209 $3,112,900.73
206 1,736,182.81
139 1,642,303.85
184 1,046,307.55
167
190,652.27
241
216,449.17
235,957.67
207
426
289,518.48

A p p e n d ix 7 .— M a t u r i t i e s

of

Amount.

July.............
August.......
September.
October—
November.
December..

259
124
107
64
132

$333,949.18
157,026.34
286,208.77
137,183.62
152,330.23
131,661.74

Total.

2,676

9,668,632.41

211

In v e stm e n ts o f F e d e r a l R e s e r v e B a n k
Y o r k , D e c . 3 1 ,1 9 1 5 .

Maturing.

Bills
discounted.

Warrants.

Acceptances.

of

N ew

Totals.

Within—
10 days.................................................................
11 to 30 days.......................................................
31 to 60 days........................................................
61 to 90 days.......................................................
91 days to 6 months..........................................

$37,980.87
97,150.20
82,422.58
18,918.43

$98,791.24
188,193.77
384,373.97
90,277.00
436,950.00

$763,548.53
1,961,806.07
1,870,083.25
4,950,573.21

$900,320.64
2,247,150.04
2,336,879.80
5,059,768.64
436,950.00

Total.................................................................

236,472.08

1,198,585.98

9,546,011.06

10,981,069.12




62

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
A p p e n d i x 8 .— F e d e r a l R e s e r v e N

otes.

Federal reserve notes issued to Federal Reserve Agent, Nov. 16, 1914, to Dec. 31, 1915.
Total amount of notes shipped to the Federal Reserve Agent.........................................................$106,240,000
Total net amount issued to the bank by the Federal Reserve Agent............................................
89,440,000
In the following denominations:
Fives................................................................................................................................ $35,600,000
Tens................................................................................................................................. 36,160,000
Twenties.......................................................................................................................... 11,280,000
Fifties...............................................................................................................................
1,600,000
Hundreds........................................................................................................................
4,800,000
Total amount in hands of Federal Reserve Agent Dec. 31,1915..........................................

16,800,000

Total of Federal reserve notes paid out by the Federal Reserve Bank of New York, by
months.
To
member
banks.
1914
November.........
December..........

$785,500
2,933,600

1915
January.............
February...........
March.................
April...................
May....................
June....................
July.................... .
August...............
September.........

3,365,600
3.393.000
6.605.000
6.453.500
5.690.000
7.487.000
6.864.500
6.394.000
8.078.000

To non­
member
banks.

To
member
banks.

To non­
member
banks.

1915
October...............
November...........
December...........

$9,897,000
9,878,500
13,236,000

$657,000
771,000
1,291,000

91,061,200
5,072,000

5,072,000

Total to nonmember banks.

96,133,200
$291,000
433.000
442.000
452.000
735.000

Total amount received from
Federal Reserve A gent.. .

89,440,000
6,693,200

The difference between the amount paid out and the amount received from the
Federal Reserve Agent represents notes which were deposited but were sufficiently
clean to be again paid out.
Movement of Federal reserve notes between Federal Reserve Bank of New York and other
Federal Reserve Banks, Nov. 16, 1914, to Dec. 31,1915.
Notes of
Federal
Reserve
Bank of
New York
received
from.
$82,285
924,655
212,200
22,530
8,50o
4,470
2,885

Atlanta................................
Boston.................................
Chicago................................
Cleveland............................
Dallas
Kansas City........................
Minneapolis........................

A

p p e n d ix

Bank

9.— T r a n s i t

of

New Y

and

1 Notes of
! Federal
Reserve
Bank of
New York
received
from.

Their notes
shipped to.

! Philadelphia....................... $1,324,615
42,810
; Richmond...........................
72,555
St. Louis..............................
108,735
j San Francisco.....................

$330,590
1,539,935
55,780
190,490

!
j

3,946,190

Their notes ;
shipped to. 1
!
$688,435
240,420
81,215
246,355
327,650
130,695
114,625

Total..........................

2,806,245

E x c h a n g e T r a n s a c t io n s B e t w e e n F e d e r a l R e s e r v e
O t h e r F e d e r a l R e s e r v e B a n k s , N ov. 16, 1914, t o

ork and

D ec. 31, 1915.
Items de­
Items sent
posited
with Fed­ by Federal
Reserve
eral Reserve Bank
of
Bank of
York
New York Newto.
by.
Atlanta................................
Boston..................................
Chicago................................
Cleveland.............................
Pallas
Kansas City........................
Minneapolis.........................




$55,353,000
112,818,000
143,797,000
18,126,000
44.286.000
28.074.000
7,817,000

$42,966,000
100,108,000
43.192.000
2.966.000
25.968.000
22.854.000
2.798.000

Items de­
Items sent
posited
with Fed­ by Federal
Reserve
eral Reserve Bank
of
Bank of
New
York
New York
to.
by.
$233,244,000
58.693.000
49.085.000
43.799.000

$83,733,000
74.221.000
23.307.000
12.777.000

Total.......................... 795,092,000

434,890,000

Philadelphia.......................
Richmond...........................
St. Louis..............................
San Francisco.....................

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .
A p p e n d i x 1 0 .— S u m m a r y

op

63

G o l d S e t t l e m e n t F u n d O p e r a t i o n s , M a y 19 , 1 9 1 5 ,
t o D e c . 31 , 1915.

Settlement of accounts.
Amount
Amount
paid in
received in
settlement of settlement of
accounts due accounts due
from other
to other
Federal Re­ Federal Re­
serve Banks. serve Banks.
Boston........... .
Philadelphia..
Cleveland____
Richmond___
Atlanta...........
Chicago..........
St. Louis.........
Minneapolis...
Kansas City...
Dallas..............
San Francisco.

$74, 357.000
676.000
589.000
60, 460.000
17, 485.000
15, 739.000
10, 719.000
2, 377.000
13, 006.000
652.000
017.000

$73,779,000
49.247.000
5.692.000
46.069.000
24.023.000
32.036.000
27.072.000
4.939.000
18.314.000
13.667.000
25.519.000

T o ta l...
Loss.................

236, 077.000
84, 280.000

320,357,000

Net gain.

Net loss.

$578,000
$19,571,000
4,103,000
14,391,000
6.538.000
16.297.000
16.353.000
2.562.000
5.308.000
5.015.000
23.502.000
14.969.000
84.280.000

99,249,000

Analysis of gold movement through gold settlementfund.
Deposited out of vault of Federal Re­
serve Bank of New York.....................$89,000,000
Special deposits account Federal Re­
serve Bank of New York by Federal
Reserve Bank of—
463,000
Atlanta................................................
Cleveland............................................
952,000
Chicago................................................
264,000
Kansas City........................................
400,000
Minneapolis.........................................
433,000
Philadelphia.......................................
1,000,000
St. Louis.............................................
87,000
San Francisco..................................... 11,624,000

Settlement loss.......................................... $84,280,000
Special deposits by Federal Reserve
Bank of New York, account Federal
Reserve Bank of—
Boston..................................................
1,000,000
Kansas City........................................
100,000
Philadelphia.......................................
13,121,000
San Francisco.....................................
5,000
Balance in fund Dec. 31,1915.................
5,717,000

Total................................................. 104,223,000

Total................................................. 104,223,000

A p p e n d i x 1 1 .— F i d u c i a r y P o w e r s .

Banks granted permission to act as registrar of stocks and bonds.
NEW YORK.
Location.
Albany............
Auburn...........
Brooklyn........
Clayton...........
Cooperstown..
Edwards.........
Far Rockaway
Geneva............
Do.............
Granville.........
Do.............
Hempstead___
Herkimer........
Lockport.........
Mineola...........
Morristown.. .
New York____
Do.............
Do.............

Name.
National Commercial Bank.
National Bank of Auburn.
Nassau National Bank.
National Exchange Bank.
Second National Bank.
Edwards National Bank.
National Bank of Far Rock­
away.
First National Bank.
Geneva National Bank.
Farmers National Bank.
W ashington County National
Bank.
First National Bank.
Herkimer National Bank.
National Exchange Bank.
First National Bank.
Frontier National Bank.
American Exchange National
Bank.
Bank of New York, N. B. A.
Bronx National Bank.




Name.
New York...........
Do...................
Do...................
Do...................
Do...................
Do...................
Do...................
Do...................
Do...................
Ovid......................
Plattsburg..........*
Do...................
Richfield Springs.
Riverhead............
Rochester.............
Saratoga Springs.
Stapleton.............
Wellsvflle.............
W e s t f i e ld .........

Chase National Bank.
Gotham National Bank.
Harriman National Bank.
Liberty National Bank.
Irving National Bank.
Lincoln National Bank.
National Bank of Commerce.
National Park Bank.
Seaboard National Bank.
First National Bank.
City National Bank.
Plattsburg National Bank.
Suffolk
County
National
Bank.
Lincoln National Bank.
First National Bank.
Richmond Borough National
Bank.
First National Bank.
National Bank of Westfield.

64

FIRST A N N U A L REPORT, FEDERAL RESERVE B A N K OF N E W Y O R K .

Banks granted permission to act as trustee, executor, administrator, and registrar of stocks
and bonds.
N E W JERSEY.
Location.

Name.

Location.

Dover........................
Hoboken..................
Long Branch...........
Newark....................
Do......................

National Union Bank.
First National Bank.
Do.
Essex County National Bank.
Merchants National Bank.

Newark...................
New Brunswick...
Plainfield...............
Rutherford............

Name.
National State Bank.
Peoples National Bank.
City National Bank.
Rutherford National Bank.

Banks granted permission to act as trustee, executor, and administrator.
N E W JERSEY.
Location.

Name.

Morristown........................................................................................................ National Iron Bank.
Newark.............................................................................................................. National Newark Banking Co.
Somerville......................................................................................................... First National Bank.

A p p e n d i x 1 2 .— A g g r e g a t e S t a t is t ic s
D is t r ic t No. 2,

of
as

S e v e n G ro u p s of N a t io n a l B a n k s
N ov. 10, 1915.

in

of

Assets and liabilities.

On basis of resources.

Under $100,000..............
$100,000 to $200,000.......
$200;000 to $300,009.......
$300,000 to $500,000.......
$500,009 to $2,500,000...
$2,500,000 to $20,000,000
$20,000,000 up................
Total....................

On basis of resources.

Num­
ber
of
ban:.s.

Liabilities of directors.
Total
resources.

Loans and
discounts.

Eligible
paper.
Direct.

Indirect.

$85,216
$182,539
$36,677
5,359,181
2,584,800
1.037.600
33
2,618,421
62
15,791,538
7,581,105
106
41,112,035
20,756,179
5.855.600
278,990,542
304
123,347,319 35,768,051
80
487,125,845
258.106,583 79,803,305
25 2,908.573,769 1,614,363,722 289,075.206

$23,679
159,353
400,208
1,131,064
7,170,748
11.370,954
27.312.153

$16,671
354,157
712,969
1,712,727
7,418,169
3,614,372
14,809.025

613 3.737,135,449 2,026,824,924 414,194,8

47,568,159

28,647,090

Bonds and
^ um­
securities,
Capital,
ber
etc., not
surplus, and
including
of
undivided
ban. s. United States profits.
bonds.

Demand
deposits.

Time

Money
borrowed.

Under $100,000..............
$100,000 to $200,000.......
$200,000 to $300,000.......
$300,000 to $500,000.......
$5HOj000 to $2,500,000...
$2,500,000 to $20,000,000
$20,000,000 up.................

62
106
304
80
25

$20,312
$80,354
$94,010
974,388
1,128,837
2 ,863,143
3.165,144
8,395,819
3,308,409
9,850.529
21,617,453
8,158,493
68,311,381 51,175,794
138,624,233
341,951.215
82,287,231 77,749,216
262,037,133 305,188,995 2,469,933,061

$9,207
687,241
2,472,528
8,084.009
60,298.666
43,398,058
26,094,057

$37,000
119,500
174,020
882,421
870,985

Total....................

613

426.789,383 446,646,833 2,983,478,934 141,043,766

2,083,926




FIR ST A N N U A L R EPOR T, FEDERAL RESERVE B A N K OF N E W Y O R K .

65

Group
No.

1
2
3
4
5
6
7

Num ber of
banks.

Losses, earnings, and dividends.

On basis of resources.

1
2
3
4
5
6
7

1912

1913

Losses on account of other loans
and discounts, not including
loans to banks.

1914

1912

1913

1914

Under $100,000....................
$100,000 to $200,000..............
$200,000 to $300,000.............
$300,000 to $500,000..............
$500,000 to $2.500,000..........
$2,500,000 to $20,000,000.. -.
$20,000,000 up.......................

3
33
62
106
304
80
25

$4,806
11,842
31,346
263,101
97,026
174,600

$4,887
10,830
43,864
388,833
143,647
273,903

$1,786
$9,871
$5,775
6,632
39,256
10,765
58,892
74,703
35,617
334>432
207,577
525,826
220,445 1,459,555 1,372,253
451,500 1,772,799 3,022,992

$3,637
29,219
29,392
426,769
1,392,727
4,098,812

Total...........................

613

582,181

865,964 1,313,516 3,487,955 4,809,205

6,018,685

o
Group
No.

Losses an account of loons to
nondepositors (bought for
investment).

On basis of resources.

Under $100,000...............
$100,000 to $200,000........
$200,000 to $300,000........
$300,000 to $500,000........
$500,000 to $2,500,000...
$2,500,000 to $20,000,000.
$20,000,000 up.................
Total.........................

Total earnings and profits after
deducting expenses and losses.

I1'

1912

Gross receipts from exchange.

1912

1913

$12,704
25,452
59,008
231,841
346,111
473,295

$13,433
28,289
60,315
234,508
300,466
417,006

$13,125
31,347
60,060
232,395
270,906
406,350

613 33,265,768 29,768,660 :27,253,920 1,148,411 1,054,017

1,014,183

1913

1914

3
$62,607
$55,181
33
$46,397
184,122
182,882
62
207,044
505,459
489,519
106
585,323
304 3,608,031 3,380,844 2,835,221
80 5,670,043 4,964,948 4,210,516
25 23,171,852 20,655,184 :19,473,175

1914

Dividends paid.
Group
No.

On basis of resources.
1912

1913

1914

Under $100,000..............
$100,000 to $200,000-----$200,000 to $300,000-----$300,000 to $500,000....
$500,000 to $2.500,000...
$2,500,000 to $20,000,000.
$20,000,000 up................

106
304
80
25

$14,900
72,640
299,350
2,069,938
3,735,524
14,343,311

$17,150
76,804
283,150
2,094,598
3,744,524
14,306,421

$18,400
94,721
294,850
2,152,338
3,912,947
15,311,442

Total.....................

613

20,535,663

20,522,647

21,784,698

24803— 16------ 5




o