View original document

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

Thirteenth Annual Report

Federal Reserve Bank
of New York
For the Year Ended December 31,1927

m
Federal Reserve Agent
Second Federal Reserve District




Thirteenth Annual Report

Federal Reserve Bank
of New York
For the Year Ended December 31, 1927

Federal Reserve Agent
Second Federal Reserve District







Contents
PAGE

Letter of Transmittal
The Year's Credit Changes
Comparison with the Reserve System

4
5
6

Changes in Gold Reserves

7

Total Bills and Securities

9

Bills Discounted

10

Government Securities Held

11

Bills Purchased

12

Federal Reserve Notes

13

Member Bank Deposits

13

Bank Policy

16

Foreign Relations

17

Movement of Funds To and From the New York Money Market

18

Membership Changes in 1927

20

Reports of Operation

21

Statement of Condition

21

Income and Disbursements

22

Volume of Operations

24

Changes in Directors

25

Member of Advisory Council

25

Officers and Staff

26

Directors and Officers




27

F E D E R A L
OF

R E S E R V E
N E W Y O R K

B A N K

New York, February 2, 1928

SIRS:

I have the honor to submit herewith the thirteenth annual report of
the Federal Reserve Bank of New
York, covering the year 1927.
Respectfully yours,
GATES W. MCGARRAH,

Chairman and Federal Reserve Agent.

FEDERAL RESERVE BOARD,

Washington, D. C.




Thirteenth Annual Report
Federal Reserve Bank of New York
The Year's Credit Changes
The statement of condition of the Federal Reserve Bank of New
York at the year-end reflects at a number of points the unusual
economic movements of the year. In particular, a large outflow of
gold is reflected in a decrease in the bank's gold reserves and an
increase in its total extensions of credit. Federal Reserve policy
is reflected in an increase in holdings of Government securities.
Some recession in business activity and an accompanying decrease
in industrial payrolls is reflected in a decrease in Federal Reserve
notes in circulation. An expansion in bank credit based in part on
gold imports early in the year, together with moderately easy money
conditions, is reflected in an increase in the reserve deposits of
member banks.
The extent of these various changes is shown in the following
summary of the principal items of the statement of condition. The
figures shown are the average daily figures for the last week of each
year rather than for the last day of the year, which is frequently
subject to chance fluctuations.
PRINCIPAL RESOURCES AND LIABILITIES OP FEDERAL RESERVE BANK OF NEW YORK

(Figures are averages for last 7 days of each year—In millions of dollars)
1926




5

503

+135

386

- 32

960
4
11

+ 90
- 8
- 20

913

Total deposits

+ 42
- 12
+105

870
12
31

Deposits:
Reserve deposits of member banks
Government deposits
All other deposits

237
95
171

418

Principal Liabilities
Federal Reserve notes in circulation

-107

368

Total bills and securities

875

195
107
66

Bills and Securities:
Loans to member banks
Acceptances purchased
United States securities purchased

Change

982

Principal Resources
Gold Reserves

1927

975

+ 62

THIRTEENTH ANNUAL REPORT
COMPARISON WITH THE RESERVE SYSTEM

One interesting fact with regard to the changes in condition of
the Federal Reserve Bank of New York in the past year is that the
year's changes for the System as a whole have in considerable
measure been concentrated in New York, due probably to the fact
that the major influence during the year has been the movement
of gold, and most of the gold movement customarily flows through
the Port of New York. The following table compares the changes
shown above for the New York Bank with changes similarly computed for the Federal Reserve System as a whole. It indicates
that in the case of gold reserves the New York Bank has shown an
even larger loss than the total for the entire System, and correspondingly that member bank borrowing at the New York Bank
provided more than its proportionate share of the increased requirement for credit which has resulted largely from gold exports. The
increase in Government securities on the other hand (by arrangement between the Reserve Banks) has been more evenly distributed through the System, as has also the decrease in currency
and the increase in reserve balances of member banks.
CHANGES PROM END OF 1926 TO END OP 1927 IN PRINCIPAL RESOURCES AND LIABILITIES
OP ALL FEDERAL RESERVE BANKS COMBINED AND FEDERAL RESERVE BANK OF
NEW YORK

(Changes are based on averagefiguresfor last 7 days of each year—In millions of dollars)

All Federal
Reserve Banks
Principal Resources
Gold reserves
Bills and Securities:
Loans to member banks
Acceptances purchased
United States securities purchased
Total bills and securities
Principal Liabilities
Federal Reserve notes in circulation
Deposits:
Reserve deposits of member banks
Government deposits
All other deposits
Total deposits

Federal Reserve
Bank of
New York

- 70

-107

+ 1
+287

-139

+ 42
- 12
+105

+148

+135

- 69

- 32

+180
- 21
- 22

+ 90
- 8
- 20

+137

+ 62

The important changes shown by these statements are analyzed
in further detail in succeeding paragraphs.



FEDERAL RESERVE BANK OF NEW YORK

7

CHANGES IN GOLD RESERVES

The gold movements of the year were larger than in any year
since 1921. Most of these movements were centered in New York
City and involved in one way or another the Federal Reserve Bank
of New York. The year began with net imports (and a gain through
changes in earmarking) of over $100,000,000 in the first four months.
In May and June there were two unusual operations in the purchase
of $62,000,000 of gold abroad to prevent its import into this
country, and an increase of $95,000,000 in the amount of gold set
aside in the vaults of the Federal Reserve Bank of New York earmarked for foreign account. The gold purchased abroad was later
sold, and in the last four months of the year a net amount of
$82,000,000 was set aside under earmark. In September there also
began a gold export movement which by the end of December had
exceeded imports in that period by $141,000,000. The net effect
of all these transactions was a net loss of more than $150,000,000 of
gold during the year, though this was partly offset in Reserve
Bank holdings by some retirement of gold certificates from circulation and additions from domestic gold production; so that
Federal Reserve gold holdings were reduced only $70,000,000.
Gold movements are shown by months in the following table.
The figures for exports and imports are for the country as a whole,
though all but $62,000,000 were made to or from New York. The
earmarking operations were all at the Federal Reserve Bank of New
York, which handles foreign accounts for the Reserve System.
GAIN OR LOSS THROUGH GOLD MOVEMENTS*

{In millions of dollars)

1927

Net Change
Net Change
Through Released
EarThrough
from
Imports Exports
Imports
Earmark marked Earmarking
or
Exports

January
FebruaryMarch
April
May
June
July
August
September
October
November
December

$ 59
22
17
15
34
15
11
8
13
2
2
10

$ 15

$+44

2
6
3
2
2
2
2
24
11
55

+20
+11
+12
+32
+13

Total

$208

$ 21
5

$ 1

78

-53
-68

2
7

2
2
1
100
1
3
4
9
29
42
15

$202

$+ 6

$ 49

$209

+ 9
+ 6

5
3
2

-11

- 9

$+ 20
+ 3

- 2
- 1
- 95
- 1
- 2
- 9
- 25
- 40
- 8
$-160

Total
Change

$+
+
+
+
+
+
+
-

64
23
9
11
63
12
9
4
20
34
93
76

$-154

* Excludes $62,000,000 in gold purchased abroad during May and June and later sold.



THIRTEENTH ANNUAL REPORT
The following table shows the principal sources of imports and
the destinations of exports.
Net Imports From
Great Britain
Canada
Australia
France
Japan
Chile
Netherlands
Ecuador
Peru

Net Exports To

$31,000,000
33,000,000
22,000,000
11,000,000
20,000,000
7,000,000
7,000,000
2,000,000
2,000,000

Argentina
Brazil
Germany
Poland
China and Hong Kong
Belgium
British Malaya
India
Uruguay
Venezuela
Sweden

$62,000,000
34,000,000
14,000,000
5,000,000
5,000,000
2,000,000
3,000,000
3,000,000
2,000,000
1,000,000
1,000,000

The net loss of gold in 1927 brings the country's gold stock down
to the level of 1925 and well below the level of late 1924. The accompanying diagram of the gold stock shows that there have been
comparatively minor changes since the autumn of 1924 in contrast
with a vigorous import movement up to then.
ISILUQNSofVQLLARS

r
S7Z)CKc fGC )LD
WV I

J
/

J

\

1

1914
1.

1916

1918

1920

1922

J924

I92<o 27

The loss of gold at the end of the year brought the country's gold stock to the level of
192S and considerably below that of late 1924

The effects of the year's gold movements upon the gold reserves
of the Federal Reserve Bank of New York and of the whole Federal
Reserve System are shown in the following diagram.



FEDERAL RESERVE BANK OF NEW YORK
MILLIONS tfLVLlMtS
1200

J9Z7

-

1100
1000
1926

900
600

NEWYORf

J

2.

F

M

A

M

J

J A S

O N D

J

F

M

A

M

J

J A 5

O N D

A comparison of gold reserves for the New York Bank and for the System indicates
that the decline in gold reserves for the System was concentrated in New York

For the first seven months of the year the gold reserves of the
New York Bank were substantially higher than in 1926 but after
the discount rate was reduced, early in August, there was a decline
in gold reserves which continued, with some interruptions, until the
end of the year and resulted in a net reduction of approximately
$200,000,000. The first hundred million of this decline was due
principally to a movement of funds from New York to other districts
in which higher discount rates were maintained for a time. A return
movement occurred subsequently, but was more than offset by
heavy gold exports and earmarking transactions; so that the decline
continued to the end of the year. At the end of the year the gold
reserves of the bank were $100,000,000 under the figure for the end
of 1926.
A comparison of the reserves of the New York Bank and of the
System indicates that all of the decline occurring in gold reserves
for the System as a whole was concentrated in New York where all
of the earmarking took place and most of the exports. The gold
reserves of Federal Reserve Banks do not fully reflect the loss of gold
during the year, due to the retirement from circulation of about
$40,000,000 of gold certificates which were absorbed in the System's gold reserves.
TOTAL BILLS AND SECURITIES

The total amount of credit extended by the Federal Reserve
Bank of New York followed very much the same course as in 1926,
until the last quarter of the year when the volume of credit was
increased to provide banks with the resources to meet the drain of
gold exports. At the end of the year the total bills and securities, or
total earning assets, of the bank were larger than at any time since
June 1921.



THIRTEENTH ANNUAL REPORT

10

J l f M A M J J A S

A

5

0

N

D

3. Total Bills and Securities followed much the same course as in 1926, except for an
increase at the end of the year to provide banks with funds to meet gold exports

For the System, as a whole, total credit extensions were considerably less than in 1926, until the last quarter of the year, reflecting gold imports and the reduction in currency requirements.
In the last quarter of the year, however, the total volume of Reserve
Bank credit extended increased to new high levels since October
1921, reflecting largely the loss of gold, although reflecting in part
also a rapid expansion of loans and investments of member banks
which led to an increase in their requirements for reserves. As the
loss of gold toward the end of the year was largely concentrated
in New York, so the additional demand for credit due to gold
exports, as has been indicated, fell particularly upon New York
and a large part of the increase in the total volume of Federal
Reserve credit in use took the form of an increase in the total bills
and securities of the Federal Reserve Bank of New York.
BILLS DISCOUNTED

The volume of bills discounted by the New York Reserve
Bank during 1927 was not far different from the volume in 1926
although the figures tended to be slightly lower in the spring of the
year and in the late summer. For the System as a whole, however,
NEW YORK
1

1

1/926

I

\f

19Z7

w

J F n A M J J A S O N D
J F M A M J J A 5 0 N D
4. Bills discounted for member banks in the New York district were close to the volume
of 1926, while the discounts for the System were substantially lower



FEDERAL RESERVE BANK OF NEW YORK

11

bills discounted were substantially lower than in 1926 during the
major part of the year. A part of this reduction may be ascribed
to the smaller aggregate demand for Federal Reserve credit until
late in the year, but a part of it also reflected an increase in holdings
of Government securities by the Reserve Banks which placed funds
in the hands of the member banks which they employed to liquidate
indebtedness at the Reserve Banks. Although most of the securities
were purchased in the New York market the principal liquidation
of indebtedness took place in the interior districts. The extent of
liquidation by banks in interior districts as compared with the New
York district is indicated by the following table of the average
amounts of bills discounted at the several Federal Reserve Banks
for the month of October 1927, compared with October 1926.
(In thousands of dollars)
October
1926

Change

Per Cent
Change

42,180
164,579
49,918
70,386
45,664
55,681
89,224
42,163
11,145
12,455
19,451
62,720

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

October
1927
33,290
126,862
38,425
43,720
28,888
25,999
36,483
21,484
2,672
15,730
7,151
43,709

- 8,890
-37,717
-11,493
-26,666
-16,776
-29,682
-52,741
-20,679
- 8,473
+ 3,275
-12,300
-19,011

-21.1
-22.9
-23.0
-37.9
-36.7
-53.3
-59.1
-49.0
-76.0
+26.3
-63.2
-30.3

GOVERNMENT SECURITIES HELD

The United States Government securities held by the Federal
Reserve Bank of New York increased during 1927 from approximately $65,000,000 to $170,000,000, an increase which was roughly
proportional to the increase for the System as a whole.
SYSTEM

NEW YORK

1

1

1

Jl

0
19ZI

J T M A M J J A S O N D
5.

J

7

M

A

M

J

J

A

S

O

N

D

Government security holdings of the Federal Reserve Bank of New York and all Federal
Reserve Banks increased in the second half of the year and furnished the
market with much of the funds needed to replace gold exports




THIRTEENTH ANNUAL REPORT

12

These increases in security holdings represented largely a joint
purchase of securities by all the Reserve Banks. The principal
transactions in Government securities in the System account were
as follows:
Sales of $65,000,000—
Purchases of
Purchases of
Purchases of
Purchases of

Early in May to offset the effect on the money market of
purchases of gold abroad.
$100,000,000—Between early in May and early in June to offset the earmarking of gold for foreign account.
$ 79,000,000—Between the first of June and the middle of August in connection with reductions in discount rates at a number of the
Federal Reserve Banks.
$ 60,000,000—Between late August and early October for the purpose of
offsetting sales of Federal Reserve holdings abroad.
$ 45,000,000—During the latter part of October and early November,
offsetting in part the effect of gold exports and earmarkings.

The other changes in security holdings shown by the diagram
represented either temporary accommodation to the Treasury Department through the purchase of special one-day certificates of
indebtedness to provide funds to redeem maturing securities, or
accommodation given to dealers in Government securities through
the purchase of securities under sales contract, by the terms of which
dealers agree to repurchase the securities within a period of fifteen
days.
BILLS PURCHASED

The course of bills purchased both by the Federal Reserve Bank
of New York and by the Federal Reserve System followed in 1927
very much the same course as in 1926. At times there was a slight
increase over 1926, but in general the amounts held were little larger
despite the fact that the volume of bills outstanding in the market
during the past autumn was between two and three hundred million
dollars larger than during the autumn of 1926, and about the largest
yet attained in this market. Thus the Federal Reserve Banks held
during 1927 a somewhat smaller proportion of the total acceptances
outstanding than in 1926. With money somewhat easier during
l"JU10NSq)JXILLAR5

NEW" t>RK

.

\

/9ZTJ

A/
V

/926

J F M A M J J A S O N D

O

N

D

6. Bills held by the Reserve Banks in 1927 were no larger than in 1926 despite a
considerably larger volume of bills outstanding



FEDERAL RESERVE BANK OF NEW YORK

13

the past year the market for acceptances was somewhat better,
particularly the market made by foreign funds in this market. The
rates at which this bank stood ready to purchase prime bills from
member banks and dealers during the year were as follows:
Date Put Into
Effect

1-15
days

16-45
days

46-90
days

91-120
days

121-150
days

151-180
days

January 1, 1927
July
29, 1927
Augustf 5, 1927
August 22, 1927

sy2

3M
3H

3%
3K
3M
3H

3%

4
3M
3%
3%

4
3%
3%
3%

3M
3
3

sy8
3

Wz

W%

FEDERAL RESERVE NOTES

A decline in the amount of Federal Reserve notes in circulation
reported both for the Federal Reserve Bank of New York and for
the System reflected a decrease in the total amount of money in
circulation, which was after the first four months of the year about

J

A

S

O

N

D

7. Federal Reserve notes in circulation decreased during the second half of 1927
reflecting some reduction in business activity and in payrolls

$60,000,000 under 1926. This decrease was only partly in the form
of Federal Reserve notes as the amount of gold certificates out
standing was also reduced by about $40,000,000 on the average.
These reductions are explainable by reference to the data for trade
and employment, and particularly the data for payrolls of industrial
establishments which in December were reported by State and
Federal authorities as 5 to 7 per cent smaller than in the corresponding month in 1926.
MEMBER BANK DEPOSITS

In the course of the year the reserve deposits of member banks
increased about $90,000,000 in the New York district and about
$180,000,000 for all districts. Since the member banks are required
by law to maintain these deposits with the Reserve Banks in fixed



THIRTEENTH ANNUAL REPORT

14

percentages of their own net demand and time deposits, and since
the member banks almost never maintain reserve deposits in any
considerable excess over the amounts legally required, an increase
in this item is an indication of an increase in bank deposits in an
amount somewhat proportionate to the increases in reserve deposits.
tnUONSefllOUMS
UOOr

NEW YORK

1000

«00

w

w-

2400

f

\r U[
1926

5

2200

O N

D

F

M

A

M

J

8. Reserve deposits of member banks increased considerably in 1927
accompanying a large increase in bank credit

The available figures in fact indicate that, accompanying a
rapid expansion of loans and investments during the course of the
year, the time and net demand deposits of member banks increased
about $2,500,000,000 and it is probable that the deposits of nonmember banks showed a somewhat similar proportional increase so
that the total increase of bank deposits for the country as a whole,
during 1927, was in the neighborhood of $3,500,000,000 or 7 per
cent. In view of the somewhat restricted volume of trade during
the year it seems clear that this increase in credit was in excess of
the increase in the ordinary requirements of business. This presumption is borne out by such analysis of the figures as is possible
from the data reported by the so-called reporting member banks
which are about 660 of the larger member banks in principal centers.
The major facts reported by these banks are illustrated in the accompanying diagram.
Commercial loans, the item carried in the reports as "All other
Loans and Discounts," which is presumed to be predominantly
commercial, have shown but slight if any increase during the year.
But on the other hand bank investments and loans on stocks and
bonds have each increased about $900,000,000 for these banks. Thus
the increases in credit during the year have been utilized largely for
financial rather than directly for business operations. It is not possible to trace how far such an increase in the use of credit finds its
way indirectly into business use of one kind or another and how far
it is merely absorbed in the increased prices of securities or properties. It may safely be said, however, that the increase in the



FEDERAL RESERVE BANK OF NEW YORK

15

volume of credit during the past year has been more rapid than can
ordinarily be utilized by the regular growth in the volume of the
country's business.
SllllOmqfDOLlARS

9.2

6.4

8.8

6.0

19
/

5.6

V

/
1926

\J
.5

. , - - " •

76

4.8
J F M A M J J A 5 O N D

BILLIONS qfDOLLARS

LOA^ 5 ON
SECUR ITIES

J F M A M J J A S O N D
BILUOtiZ of DOLLARS

6.4

6.0

5.6

5.2.

INVE5TMENT5
4.8

I

J

M
J F M A M JJ J A S O N D
J F M A I I J j A S O N D
9. The expansion In credit during 1927 as shown by the Reporting Member Banks took
the form of loans on securities and increased investments
rather than commercial loans

While in general the state of business appears to be sound and
there do not appear, for example, to be abnormal industrial inventories, there have been a number of developments in the course of
the year which would appear to deserve careful scrutiny. These
developments include a very large increase in bank loans to brokers
and dealers in securities, an unusual amount of speculation in bank



THIRTEENTH ANNUAL REPORT

16

stocks particularly, and what appears to be excessive activity in
the organization of companies to purchase bank stocks, and a disposition to establish many new banks.

Bank Policy
Federal Reserve policy in this district found its principal expression in a reduction in the discount rate of the bank from four per
cent to three and a half per cent on August 5, and in changes in the
holdings of Government securities.
The reduction in discount rate was made at a time when domestic business was beginning to show some recession and the
financial position of Europe was such that considerable financial
stringency was threatened by the continuance of a four per cent
discount rate in New York. A general increase in interest rates in
Europe during the fall season would undoubtedly have restricted
foreign purchases of American farm products.
The purchases of Government securities in the course of the year
were made in part to offset the effect on the money market of earmarking and exports of gold, and in part were made in connection
with the change of discount rate.
The reduction in discount rate by this bank and by other
Reserve Banks and purchases of Government securities in July and
August were followed by strength in the exchanges of various

COMMERCIAL
PAPER
^

A F.R.B.RATE

^

j A
\fr- —-—- -~~-~~

U
1923

1924

CCEPTAMCES

1926

19Z7

10. Money rates in New York tended to be easier during the second half of 1927



FEDERAL RESERVE BANK OF NEW YORK

17

tries and a reversal of the gold movement from net imports to net
exports.
Diagram 10 shows the course of the discount rate and the open
market rates on commercial paper and acceptances in New York.

Foreign Relations
Two definite steps were taken during the year by the Federal
Reserve Bank of New York and the other Reserve Banks in furtherance of the general return of the countries of Europe to the gold
standard.
The Federal Reserve Bank of New York in association with all
other Federal Reserve Banks participated in the credit arrangements granted by various banks of issue to the Bank Polski, the
Polish bank of issue, in furtherance of the plans which were completed for the stabilization of the Polish currency. Under the terms
of these arrangements the Federal Reserve Bank of New York
agreed, if desired, to purchase from the Bank Polski up to a total of
five and a quarter million dollars of prime commercial bills.
The Italian Government on December 22 announced the
establishment of its currency on a gold exchange basis and the legal
revaluation of the lira in terms of gold.
In accordance with the practice followed in other European
countries when returning to a gold basis and to ensure the maintenance of monetary stability, the Banca d'ltalia entered into a credit
arrangement with the principal banks of issue for $75,000,000 or its
equivalent. A separate credit was arranged by the Banca d'ltalia
with certain private bankers aggregating about $50,000,000 or its
equivalent. In connection with the credit arranged by banks of
issue the Federal Reserve Bank of New York, in association with
other Federal Reserve Banks, agreed, if desired, to purchase from
the Banca d'ltalia up to a total of $15,000,000 of prime commercial bills.
During the course of the year similar credit arrangements which
had been made in 1925 with the Bank of England and in 1926 with
the National Bank of Belgium expired. In neither case had any use
of the credit arrangements been made, though their presence undoubtedly added to the assurance with which those countries undertook their return to the gold standard.
In general, the conclusion of 1927 finds the financial, business,
and social condition of the countries of Europe more nearly normal



THIRTEENTH ANNUAL REPORT

18

than at any time since the War. All of the major countries, with
the exception of France, have effected legal stabilization of their
currencies, and the French monetary position is vastly improved
from a year ago and de facto stabilization of the franc has been
achieved for a number of months. Business and trade are more
active throughout Europe and unemployment is reduced.

Movement of Funds To and From the New York Money
Market
In recent years studies have been carried on by this bank to
determine in general the sources of funds coming into the market
and the distribution of funds withdrawn from the money market.
Since practically all inter-district transfers and settlements are now
made through the gold settlement fund of the Federal Reserve System, and since practically all currency and gold movements are at
least recorded in one form or another on the books of the bank, it has
been possible from the records of this bank to make a broad classification of the movements of funds to and from the New York
banks, which constitute the immediate source of supply of funds used
in the money market.
The largest movements of funds during 1927 were the movements to and from other districts. These are illustrated in the following diagram. It shows that both in 1926 and 1927 there was an
accumulative movement of Treasury funds to New York amounting
to 500 or 600 million dollars, which was largely offset by other
transfers, designated on the diagram as "commercial transfers,"
from New York totaling around 400 millions.
/ MtLUOHStfDOLLfiRS
-S +100r

-100

11. Transfer* of funds to New York by the Treasury to cover the redemption of maturing
securities and interest payments were made in 1927 as in previous years, but were
largely offset by withdrawals of funds by commercial banks in other districts



FEDERAL RESERVE BANK OF NEW YORK

19

Ordinarily, about two-thirds of every issue of United States
Government securities, especially the short-term issues, finds its
way to New York by the time it matures, whereas the proportion of
Federal income taxes collected in this district is about one-third of
the total for the country. Consequently, Treasury disbursements
to redeem maturing obligations regularly exceed receipts within the
district at tax periods, and the balance must be met by transferring a
part of the proceeds of tax collections in other districts to New York.
To replace the funds transferred by the Treasury, commercial banks
in other districts withdraw funds from New York after each tax
period. These funds which are withdrawn from New York probably
represent, among other things, the proceeds of securities sold or
matured in this district and the payments for merchandise exported
through New York.
The short-term fluctuations in these "commercial" transfers
appear to be closely connected with currency requirements in other
districts. There is a perceptible tendency for outward transfers to
be made in the latter half of the week when currency for weekly
payrolls and other purposes is withdrawn from the banks, and for
transfers to New York to be made in the early part of each week
accompanying the return of currency from circulation. These transfers to and fro are reflected in the amount of funds employed in New
York by out-of-town banks in the form of call loans.
The third principal group of inter-district transfers represents
settlements between Federal Reserve Banks for bill and security
transactions. When purchases of bills or securities are made in this
market for the account of other Reserve Banks, payment to the
New York Bank is made through the gold settlement fund, and
when bills or securities from the holdings of other Reserve Banks
mature in New York, the return payment similarly is made through
the fund. Apparently due to maturities in New York of bills and
securities purchased in other districts, the general tendency of these
Reserve Bank settlements seems to be to withdraw moderate
amounts from New York.
The two other principal movements of funds which affect the
position of banks in this district are increases and decreases in the
amount of currency in circulation within the district, and exports,
imports, and earmarking of gold. These have been discussed earlier
in this report.




THIRTEENTH ANNUAL REPORT

20

Membership Changes in 1927
In 1927, membership of the Federal Reserve System in this
district, continued the growth of the preceding year. The organization of new banks has again been the principal factor in this result
and fewer National banks have been converted into State nonmembers. There was a larger number of mergers and consolidations
among the member banks, which accounted for the majority of
the decreases. No loss in membership occurred due to insolvencies
or state bank withdrawals.
The accompanying tables set forth the number of banks in the
Second District classified according to their charters, whether
National or State, and give also an analysis of the causes which
brought about changes in membership during the year.
NUMBER OF MEMBER AND NONMEMBER BANKS IN SECOND FEDERAL RESERVE DISTRICT
AT END OF YEAR

DECEMBER 31,

Type of Bank

1927

DECEMBER 31,

1926

NonNonPer Cent
Per Cent
Members Members Members Members Members Members

National Banks
State Banks*.. .
Trust Companies
Total

771
55
111

0
225
186

100
20
37

750
57
106

0
232
179

100
20
37

937

411

70

913

411

69

Exclusive of savings banks.
CHANGES IN FEDERAL RESERVE MEMBERSHIP IN SECOND DISTRICT DURING 1927

Total membership beginning of year
Increases:
National Banks Organized
Conversion of nonmember banks to National
Admission of State banks
Total increases
Decreases:
Conversion of National bank to nonmember
Member banks combined with other members
Withdrawals
Insolvencies
Total decreases.
Net increase
Total membership end of year




913
28
4
9
41
1
16
0
0
17
24
937

FEDERAL RESERVE BANK OF NEW YORK

21

Reports of Operation
As complete statistics of the operations of each Reserve Bank are
published in the annual report of the Federal Reserve Board, detailed figures of the operations of this bank are omitted from this
report, with the exception of the following pages showing the statement of condition at the beginning and end of the year, the income
and disbursements during the year, and a table showing the volume
of operations in principal departments, including the Buffalo
Branch.
STATEMENT OF CONDITION
RESOURCES

CASH RESERVES held by this bank against its
deposits and note circulation:
Gold held by the Federal Reserve Agent as
part of the collateral deposited by the bank
when it obtains Federal Reserve notes.
This gold is lodged partly in the vaults of
the bank and partly with the Treasurer
of the United States
Gold redemption fund in the hands of the
Treasurer of the United States to be used
to redeem such Federal Reserve notes as
are presented to the Treasury for redemption
Gold and gold certificates in vault
Gold in the gold settlement fund lodged with
the Treasurer of the United States for the
purpose of settling current transactions
between Federal Reserve districts
Legal tender notes, silver, and silver certificates in the vaults of the bank (available
as reserve only against deposits)
Total cash reserves
Non-reserve cash consisting largely of National bank notes, and minor coin

Dec. 31, 1927

Dec. 31, 1926

$320,067,446.59

$282,987,466.59

17,171,916.69
372,076,393.63

15,197,976.79
439,891,808.03

159,285,227.90

223,474,611.35

24,598,953.00

22,523,994.00

$893,199,937.81

$984,075,856.76

$20,923,803.11

$15,893,779.00

$230,800,050.00

$146,539,450.00

50,537,894.62
97,652,134.74

37,935,764.92
101,443,211.79

181,479,900.00

58,863,750.00

$560,469,979.36

$344,782,176.71

$15,881,823.71

$16,276,254.61

193,847,416.29
6,104,632.87

188,450,357.86
1,788,471.18

$215,833,872.87

$206,515,083.65

$1,690,427,593.15

$1,551,266,896.12

LOANS AND INVESTMENTS:

Loans to member banks:
On the security of obligations of the United
States
By the discount of commercial or agricultural paper or acceptances
Acceptances bought in the open market
United States Government bonds, notes, and
certificates of indebtedness
Total loans and investments
MISCELLANEOUS RESOURCES:

Bank premises
Checks and other items in process of collection
All other miscellaneous resources
Total miscellaneous resources
Total resources




THIRTEENTH ANNUAL REPORT

22

LIABILITIES

Dec. 31, 1927

Dec. 31, 1926

$390,343,496.50

$416,874,122.50

$390,343,496.50

$416,874,122.50

NOTES IN CIRCULATION:

Federal Reserve notes in actual circulation,
payable on demand. These notes are
secured in full by gold and discounted
and purchased paper
Total notes in circulation
DEPOSITS:

Reserve deposits maintained by member
banks as legal reserves against the deposits
of their customers
$1,009,922,990.27
United States Government deposits carried at
!3| the Reserve Bank for current requirements
P$ of the Treasury
1,565,311.84
Other deposits including foreign deposits,
deposits of nonmember banks, etc
12,761,471.57
Total deposits

$835,959,724.96
498,341.80
34,844,167.75

$1,024,249,773.68

$871,302,234.51

$170,612,489.82
1,905,036.39

$162,884,891.11
2,142,447.92

$172,517,526.21

$165,027,339.03

$40,309,600.00

$36,449,250.00

63,007,196.76

61,613,950.08

$103,316,796.76

$98,063,200.08

$1,690,427,593.15

$1,551,266,896.12

MISCELLANEOUS LIABILITIES:

Deferred items, composed mostly of uncollected checks on banks in all parts of the
country. Such items are credited as deposits after the average time needed to
collect them elapses, ranging from 1 to 8
days
All other miscellaneous liabilities
Total miscellaneous liabilities
CAPITAL AND SURPLUS:

Capital paid in, equal to 3 per cent of the
capital and surplus of member banks
Surplus—That portion of accumulated net
earnings which the bank is legally required
to retain
Total capital and surplus
Total liabilities

INCOME AND DISBURSEMENTS

Gross income for the year 1927 was about the same as in 1926.
A decrease of $1,200,000 in earnings from loans to member banks
was offset by increased earnings from acceptances and United
States Government securities purchased.
Expenses of current bank operation again were smaller than in
the preceding year, notwithstanding a continued increase in the
volume of operations of the bank. The net income for the year was
sufficient to pay the six per cent dividend of $2,327,000 on capital
stock, provided by the Federal Reserve Act, and to add $1,393,000
to the surplus, which under the law must be increased by all net
income after dividends until it is equal to the total subscribed
capital stock of the bank. The total subscribed capital stock is now



FEDERAL RESERVE BANK OF NEW YORK

S3

$80,619,200, the total paid-in capital stock $40,309,600, and the
surplus after this year's payment $63,007,196. The capital increases
each year as the bank resources of the district increase, since member
banks are required to subscribe to an amount of Federal Reserve
stock equal to six per cent of their own capital and surplus and to
pay in one-half of the amount subscribed.
1927

1926

EARNINGS:

From loans to member banks and paper discounted for them
From acceptances owned
From United States Government obligations
owned
Other earnings
Total earnings

$4,614,110.43
2,558,080.10

$5,836,835.57
2,001,668.33

2,960,562.64
515,005.63

2,379,546.18
382,917.47

$10,647,758.80

$10,600,967.55

$126,074.48

$174,366.14

$5,955,030.69

$5,991,459.59

517,139.84

429,981.88

581,061.33

604,143.98

$7,053,231.86

$7,025,585.45

$3,720,601.42

$3,749,748.24

$2,327,354.74

$2,100,190.56

1,393,246.68

1,649,557.68

$3,720,601.42

$3,749,748.24

ADDITIONS TO EARNINGS:

For sundry additions to earnings, including
income from Annex Building
DEDUCTIONS FROM EARNINGS:

For current bank operation. (These figures
include most of the expenses incurred as
fiscal agent of the United States)
For Federal Reserve Currency, mainly the
cost of printing new notes to replace worn
notes in circulation, and to maintain supplies unissued and on hand, and the cost of
redemption
For depreciation, self-insurance, and other reserves, etc
Total deductions from earnings
Net income available for dividends, additions
to surplus, and payment to the United
States Government
DISTRIBUTION OF N E T INCOME:

In dividends paid to member banks, at the
rate of 6 per cent on paid-in capital
In additions to surplus—The bank is required by law to accumulate out of net
earnings, after payment of dividends, a
surplus amounting to 100 per cent of the
subscribed capital; and after such surplus
has been accumulated to pay into surplus
each year 10 per cent of the net income
remaining after paying dividends
Any net income remaining after paying
dividends and making additions to surplus
(as above) is paid to the United States
Government as a franchise tax. No balance remained for such payments in 1927
or 1926.
Total net income distributed



24

THIRTEENTH ANNUAL REPORT
VOLUME OF OPERATIONS

The two largest operations of the Reserve Banks in point of
volume are the payment and receipt of currency and the collection
of checks and non-cash items. Upon these two operations taken
together more than half of the staff of the New York Reserve Bank
is engaged. During 1927, the volume of work in these two major
functions in the New York Reserve Bank continued to increase.
There were increases in other functions as well. Bills purchased
increased considerably over the preceding year, due to unusual
activity in the bill market. A large increase in transactions in
United States Government securities, which totaled over five billion
dollars in 1927, reflected the refunding of the Second Liberty Loan
bonds. The principal decrease in operations was in bills discounted,
reflecting somewhat smaller loans to member banks. The following
table shows the volume of principal operations for the past two
years both in items and in dollar amounts.

1927
Number of Pieces Handled
Bills discounted:
Applications
Notes discounted
Bills purchased in open market for own account
Currency received and counted
Coin received and counted
Checks handled
Collection items handled:
United States Government coupons paid. .
All Other
United States securities—issues, redemptions,
and exchanges by fiscal agency department
Transfers of funds
Amounts Handled
Bills discounted
Bills purchased in open market for own account
Currency received and counted
Coin received and counted
Checks handled
Collection items handled:
United States Government coupons paid. .
All Other
United States securities—issues, redemptions,
and exchanges by fiscal agency department
Transfers of funds




14,525
31,024
99,238

1926

1,189,801,000
168,724,000

16,249
35,660
76,466
605,280,000
1,129,027,000
155,488,000

9,931,000
2,259,000

10,783,000
2,064,000

2,196,000
355,000

1,572,000
329,000

$13,854,347,000
1,975,505,000
4,159,821,000
588,422,000
100,206,587,000

$17,242,348,000
1,437,565,000
3,925,170,000
380,569,000
93,068,875,000

250,622,000
2,385,753,000

296,577,000
2,065,742,000

5,219,626,000
50,898,108,000

2,635,722,000
44,392,474,000

640,967,000

FEDERAL RESERVE BANK OF NEW YORK

25

CHANGES IN DIRECTORS

On January 13, 1927, Owen D. Young resigned his position as a
Class B director and was appointed by the Federal Reserve Board
as a Class C director for a three-year term and Deputy Chairman of
the Board for one year to succeed W. L. Saunders whose term had
expired. At a special election by the member banks in Group 1,
that is, those having a capital and surplus above $1,999,000, to fill
the unexpired term of Mr. Young as Class B director until December
81, 1928, William H. Woodin, President of the American Car &
Foundry Company, New York, was elected and took office on
April 7, 1927.
On February 10, 1927, it was announced by the Federal Reserve
Board that Gates W. McGarrah had been appointed Class C
director, Chairman of the Board, and Federal Reserve Agent. Mr.
McGarrah assumed the duties of office on May 2, 1927.
Clarence M. Woolley was reappointed by the Federal Reserve
Board to serve as Class C director for three years, beginning January
1,1928. As the result of an election held during October and November Delmer Runkle, Class A director, and Samuel W. Reyburn,
Class B director, were reelected to succeed themselves as directors,
each for a term of three years beginning January 1, 1928, by the
member banks of Group 3, those banks having capital and surplus
below $201,000.
At the Buffalo Branch, Edward A. Duerr, President of the Community National Bank, Buffalo, was appointed by the Federal
Reserve Board to fill the unexpired term of John A. Kloepfer, deceased, and Arthur Hough was reappointed by the Federal Reserve
Board as a director for a three-year term beginning January 1, 1928,
and was elected Chairman of the Board for one year. Elliott C.
McDougal was reappointed by the Federal Reserve Bank of New
York for a term of three years, beginning January 1, 1928. The
Managing Director of the Buffalo Branch, Walter W. Schneckenburger, was reappointed for the ensuing year.
MEMBER OF ADVISORY COUNCIL

On January 5, 1928, James S. Alexander of New York City, was
reelected by the Board of Directors of this bank to serve as a member
of the Advisory Council for the current year.




26

THIRTEENTH ANNUAL REPORT
OFFICERS AND STAFF

The changes which took place in the official staff of the bank during 1927, were as follows:
Herbert S. Downs was appointed Assistant Federal Reserve
Agent, in addition to his office as Manager of the Bank Relations
Department, effective February 11, 1927, and on October 1, William
H. Dillistin returned to the bank as Assistant Federal Reserve
Agent, after an absence of nearly two years, during which he was
Vice President of a member bank.
Laurence H. Hendricks, Controller of the Fiscal Agency Function, resigned January 31, 1927, and Jesse Holladay Philbin,
Assistant General Counsel and Secretary, resigned as of April 30,
1927.
It was announced in January 1928, that the office of Controller had been abolished and that of Assistant Deputy Governor
had been created. Arthur W. Gilbart, formerly Controller of Cash
and Collections, and Leslie R. Rounds, formerly Controller of Accounts, were appointed Deputy Governors. Ray M. Gidney, formerly
Controller of Loans, J. Wilson Jones, formerly Controller of Administration, Jay E. Crane, formerly Manager of the Foreign Department, and Walter B. Matteson, formerly Manager of the Securities
Department, were appointed Assistant Deputy Governors. Jay E.
Crane also was appointed Secretary. Harold V. Roelse,formerly Chief
of the Reports Division, was appointed Manager of the Reports Department and William A. Scott, formerly Chief of the Foreign
Department, was appointed Manager of the Foreign Department.
Elmer L. Theobald, Assistant Cashier of the Buffalo Branch,
has resigned, effective February 15, 1928. R. B. Wiltse has been
appointed Assistant Manager, effective February 23, 1928.




FEDERAL RESERVE BANK OF NEW YORK

27

DIRECTORS AND OFFICERS
January 1, 1928
Class Group
A

Term
Expires

DIRECTORS

Dec. SI

1 JACKSON E. REYNOLDS, New York City

1928

President, First National Bank
A

2

ROBERT H. TREMAN, Ithaca, N. Y

1929

President, The Tompkins County National Bank
A

3

DELMER RXJNKLE, Hoosick Falls, N. Y

1930

President, Peoples National Bank
B

1 WILLIAM H. WOODIN, New York City

1928

President, American Car & Foundry Company
B

2

THEODORE F. WHITMARSH, New York City

1929

President, Francis H. Leggett & Company
B

3

SAMUEL W. REYBURN, New York City

1930

President, Lord & Taylor
C

GATES W. MCGARRAH, New York City, Chairman

C

OWEN D. YOUNG, New York City, Deputy Chairman
Chairman, General Electric Company

C

1928

CLARENCE M. WOOLLEY, Greenwich, Conn

. . . .

1929
1930

Chairman, American Radiator Company

MEMBER OF FEDERAL ADVISORY COUNCIL
JAMES S. ALEXANDER

Chairman, National Bank of Commerce in New York

FEDERAL RESERVE AGENT'S FUNCTION
GATES W. MCGARRAH, Federal Reserve Agent
W. RANDOLPH BURGESS, Assistant Federal

Reserve Agent

WILLIAM H. DILLISTIN, Assistant Federal

Reserve Agent

HERBERT S. DOWNS, Assistant Federal Re-

serve Agent and Manager, Bank Relations Department

CARL SNYDER, General Statistician

HAROLD V. ROELSE, Manager, Reports
Department

EDWARD L. DODGE, General Auditor



88

THIRTEENTH ANNUAL REPORT
GENERAL OFFICERS
BENJ. STRONG, Governor

J. HERBERT CASE, Deputy Governor

Louis F . SAILER, Deputy Governor

GEORGE L. HARRISON, Deputy Governor
LESLIE R. ROUNDS, Deputy Governor

EDWIN R. KENZEL, Deputy Governor
ARTHUR W. GILBART, Deputy Governor

RAY M. GIDNEY

J. WILSON JONES,

Assistant Deputy Governor

Assistant Deputy Governor

JAY E. CRANE

WALTER B. MATTESON

Assistant Deputy Governor and Secretary

Assistant Deputy Governor

L. RANDOLPH MASON, General Counsel

JUNIOR OFFICERS
DUDLEY H. BARROWS,

CHARLES H. COE

Manager, Administration Department

Manager, Loan and Discount Departm e n t

EDWIN C. FRENCH

Manager, Cash Department
ROBERT M. O'HARA
Manager, Bill Department
WILLIAM A. SCOTT
Manager, Foreign Department
g,
g
p

ROBERT F. MCMURRAY
Manager, Collection Department
JAMES M. RICE
Manager, Accounting Department
STEPHEN S. VANSANT
M
Manager, G
Government Bond and Safe

T WARD WATPW

M^nZ^Check

k e e

Department

^ Department

BUFFALO BRANCH
DIRECTORS

Term
Expires
Dec. SI

FRANK W. CRANDALL

1928

President, National Bank of Westfield, Westfield, N. Y.
ARTHUR HOUGH, Chairman

1930

President, Wiard Plow Company, Batavia, N. Y.
EDWARD A. DUERR

.

.

1928

President, Community National Bank, Buffalo
ELLIOTT C. MCDOUGAL

1930

Chairman, Marine Trust Company, Buffalo
FRED B. COOLEY

1929

President, New York Car Wheel Company, Buffalo
HARRY T. RAMSDELL

1929

Chairman, Manufacturers and Traders Trust Company, Buffalo
WALTER W. SCHNECKENBURGER, Managing Director

1928

OFFICERS
WALTER W. SCHNECKENBURGER

CLIFFORD L. BLAKESLEE

Manager Director

Assistant Cashier

HALSEY W. SNOW, J R .

ELMER L. THEOBALD

Cashier



Assistant Cashier