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Twenty-ninth Annual Report

Federal Reserve Bank
of New York
For the Year Ended December 31, 1943




Second Federal Reserve District

Federal R eserve Bank
of

NEW YORK

March 31, 1944.

To the Stockholders of the
Federal Reserve Bank of New York:
I am pleased to transmit herewith the twentyninth annual report of the Federal Reserve Bank
of New York reviewing the year 1943.




A l l a n S pro tjl ,

President.

2

CONTENTS
PAGE

Production and Consumption during the War;
Control of Prices...................................................................... 5
War Financing during 1943........................................................ 12
Money Market Developments in 1943........................................ 19
Federal Reserve Policy............................................................... 24
Business and Employment in the
Second Federal Reserve District............................................ 31
Postwar International Monetary Cooperation............................. 34
Proposed Bank for Reconstruction and Development................. 39
Balance of Payments of the United States;
Capital and Gold Movements.................................................. 40
Balance of Payments.......................................................... 40
Effect of Lend-Lease............................................................ 42
Recent Capital Movements.................................................. 43
Gold Movements.................................................................. 45
Foreign Exchanges...................................................................... 47
Foreign Relations........................................................................ 49
Developments in Operations of the Bank.................................... 49
Membership Changes in 1943...................................................... 53
Financial Statements ................................................................ 55
Statement of Condition........................................................ 55
Income and Disbursements.................................................. 57
Changes in Directors and Officers.............................................. 59
Changes in Directors.......................................................... 59
Changes in Officers.............................................................. 60
Member of Federal Advisory Council.................................. 60
List of Directors and Officers...................................................... 61




3

S

E

R

V

I

N

G

T

At the end of 1943 more than 700 members of the bank’s staff had
joined the armed forces of the United States, and are now serving their
country in all branches of the services and in all parts of the world. The
directors, officers, and staff of the bank take pride in their service.
The management of the bank also appreciates the quality of the
service of the employees who continued as members of the staff during
the year.

The work of the Federal Reserve Bank of New York con­

tributes directly and indirectly to the war effort. It could not be carried
on without the understanding and the willing work of all members of
the staff.




A l l a n S proul ,

President.

4

H

E

Federal Reserve Bank of New York
Twenty-Ninth Annual Report
In 1943 this country’s war production about reached its peak.
Though there will doubtless be many adjustments within the production
program, the expansion phase seems virtually completed.

It began with

the outbreak of war in 1939, and our own defense program of June
1940, was sharply stepped up in 1942 following Pearl Harbor and our
entry into the war, and continued at a rate which diminished progres­
sively in each quarter of 1943 as full mobilization was approached.
In its totality, the increase of output has been extraordinary. Until
recent years statisticians talked of a growth trend of about three to four
per cent a year.

In the late thirties, after observation of Germany’s

achievements in building her war machine, the view was expressed that
under rigid totalitarian controls a country of high technological capacity
could for a period expand its output by as much as ten per cent a year.
But in the present war, in the four years from 1939 to 1943, our gross
national product has been increased from 88.6 billion dollars to 186.8
billion. Even allowing for the fact that the price level has risen about
one third this expansion of output surpasses anything of which the world
had any previous experience.
A companion fact scarcely less noteworthy is that, broadly speaking,
the economic conduct of the war has not been for this country a belttightening process. Despite the fact that there has been much diversion
of manpower and resources from civilian to military uses, and a virtual
elimination of consumer durable goods, the fact seems to be that American
consumption in 1943 was in the aggregate about as high as in any
previous war year and substantially above 1939.

The Department of

Commerce estimates of output of consumer goods and services rose from
61.7 billion dollars in 1939 to 74.6 billion in 1941 and 90.5 billion in
1943.

What these figures appear to indicate when corrected for the

rise in prices is that consumption rose markedly in the years prior to
our own entry into the war, when the rise in cost of living was still
only slight, and reached an all-time record in 1941; and that the apparent
further rise since that time has been about offset by the rise of prices.




5

TWENTY-NINTH ANNUAL REPORT

6

Gross National Product of the United States
BILLIONS
OF DOLLARS

250 I
—

— -------------------------------------------------------------------- r

200

(Department of Commerce estimates)

There has been much comment on the year 1941 as indicating what
a high-consumption economy the United States became under the
stimulus of the defense program but before price controls, rationing,
production controls, and taxation had begun seriously to restrain
consumption. Since 1941, however, we have had not only the controls but
an increase in war expenditure from 12.5 billion dollars to 83.7 billion
in 1943.

In accounting for the continued high level of consumption

one fact to bear in mind is that

total production for civilian use has

shown some decline, even before correction for price rise.

Gross private

capital formation has been virtually eliminated, dropping from 19 billion
dollars in 1941 to 1 billion in 1943.

Governmental nonwar expenditure,

including State and local, has also declined moderately.

How our

economy has been streamlined for the two basic purposes of war pro­
duction and consumers ’ needs is best indicated by the fact that in 1941
these two categories combined were 73 per cent of gross national product,
and in 1943, 93 per cent; war goods and services amounted to 10 per
cent and consumers’ goods and services to 63 per cent of the total in




7

FEDERAL RESERVE BANK OF NEW YORK

1941, while in 1943 the war portion was 45 per cent and the consumers’,
48 per cent of the gross national product.
One had best preserve some caution in accepting at face value the
consumption estimates of 1943.

One thing especially hard to measure

is the decline in quality of consumer goods in wartime.

Taking this into

account, cost of living has probably risen more and real consumption
been less well maintained than the figures indicate.

One must bear in

mind also the unequal impact of the war on different categories of goods.
Wholesale prices of foods and farm products have risen much more than
commodities in general, with the result that in the cost of living food
has gone up about twice as much as the index as a whole.

Within the

aggregate of consumption, moreover, some classes and income groups,
and notably the white collar workers, really have found war a belttightening process.

Yet for the community as a whole it seems a con­

servative conclusion that consumption has risen substantially since 1939;
it can only mean that the reduced consumption of some groups has been
more than offset by the increased consumption of others.

Such high

consumption in the face of the unparalleled war effort, and without
more serious inflationary pressures than have thus far appeared, must
be ascribed basically to the extraordinary powers of production of this
country which our war program has revealed.
Another outstanding, and closely related, fact about the war has
been the accumulation of wartime savings.

Though consumption has

been high, the net inflow of money incomes to the community, after
taxes and Government borrowing, has been much in excess of the con­
sumer goods and services available. That this “ inflationary gap’ ’ has
not produced more upward pressure on prices than has occurred has
been one of the most surprising developments of the war. One can
hazard tentative explanations. To some extent it may indicate a desire
to hold money idle because of uncertainties about the future. Probably
more important has been the absence of consumer durable goods.

In

the past, as between periods of low and high national income, the great
fluctuations have been in the durable goods. What the present experi­
ence seems to demonstrate is that even when such goods are not available
the expansion of consumption in other directions is comparatively
moderate.

One might well ask why the excess income does not flow into

investment, which now would mean into Government securities. To a
considerable and an increasing extent this has happened, and it should
go further in the future.




But the differences in motivation and habitua-

8

TWENTY-NINTH ANNUAL REPORT

tion as between spending and investing incomes make it a slow process
and one requiring continuing pressure. Perhaps the largest underlying
fact about wartime saving is the absence of any general popular fear
about inflation, for when that is present it practically always shows
itself in a desire to run away from money into other things even at rising
prices, and indeed because of them.

A t present the community, though

in the aggregate still well supplied with excess income, seems not inclined
to reach for goods.

But we must bear constantly in mind that a vicious

spiral of inflation, if for any reason it got started, would have much to
feed upon.
One of the most striking aspects of the great expansion of wartime
production has been its relation to the mobilization of manpower and
employment.

The total labor force from January 1941 to January 1944

increased from 54 million to 60.9 million. Of this increase it has been
estimated that about, 2 million consisted of the normal growth in the
working population and the remainder of persons who would not normal­
ly be employed — youths under the usual working age, workers past
retirement age, and women normally at home.

But from this labor

force 9.4 million were taken into the armed forces during the period,
and 1.3 million were added to Federal war agencies, leaving a net avail­
able labor force of 49 million in January 1944 as against 52.8 million* in
January 1941, or a net contraction of 3.8 million workers. Our greatest
problem has been how, with this contracting labor force, to carry through
the war production program.

That we have done it without contraction

of consumption in the aggregate makes the performance more remarkable.
The answer appears to be threefold. There has been first the taking
up of slack in employment. It is a rather astonishing fact, and one not
without significance for the future, that as late as January 1941, with
production already substantially above any previous level in our history,
it was estimated that there were still 7.7 millions of unemployed. By
January 1944 unemployment had been reduced to 800,000, which is
perhaps some 2 million less than could be expected in conditions of
normal peacetime full employment and indicates how tight the manpower
situation became by 1943.

In consequence, despite the mobilization of

the armed forces and the expansion of Federal war agencies, there was
an increase in civilian employment in the three-year period from 45.1
million to 48.2 million. A second and even more important factor has
* In January 1941, of a total labor force of 54 millions, one million was in the armed
forces and 0.2 million in Federal war agencies, leaving a total available labor force of
52.8 millions.




FEDERAL RESERVE BANK OF NEW YORK

9

been the increase in the average work week from 38.1 hours in 1940 to
45 hours in 1943. The combined increase in numbers employed and hours
worked is equivalent to an increase of about one fourth in the effective
labor force. Clearly a large part of the explanation of the increased
output is to be found in shifts to more productive employment and to
improved equipment and technique. What questions this aspect of our
experience may raise for postwar employment and national income would
carry us beyond the scope of this report.
The facts reviewed above— about production, consumption, incomes,
and manpower— are the basic economic and physical facts about the
war.
of

They have provided the underlying conditions for the operation
the

anti - inflationary

policies

of

Government.

That,

broadly

considered, these underlying conditions have been so favorable consti­
tutes the main reason for the comparative success of our anti-inflation
program.

That the program has been relatively successful is perhaps

best seen by comparisons with the last war.

In 1939-1943 wholesale

commodity prices as measured by the Bureau of Labor Statistics index
rose 38 per cent, against a rise of 102 per cent in 1914-1918. The cost of
living index in the same periods rose 26 per cent in this war and 63 per
cent in the last. The entire rise of wholesale prices last time, to the peak
in 1920, was 148 per cent over 1914 and in cost of living 110 per cent.
How we shall fare at the end of an equal period remains to be seen, but
thus far the record has been markedly better. It should be noted too
that, at their first World War peak, Federal expenditures probably
amounted to less than a third of the gross national product, as against
about 47 per cent in 1943. The price control mechanism created in 1942
and supplemented to some degree last year, coupled with the basically
favorable economic performance, has held prices on a remarkably even
keel during the past year. The wholesale price index averaged only
4 per cent higher in 1943 than in 1942 while the cost of living index
rose about 6 per cent.
The over-all price picture for the war to date, however, fails to
indicate how divergent have been the movements of different price
categories. All commodities except farm products and food have risen
only 22 per cent, against 96 per cent in the first war; farm products
have risen 100 per cent against 110 per cent in the last war, and food
prices 57 per cent, as against 107 per cent last time. What the compari­
sons do not reveal is that many prices today are as high or higher than
in the last war, because the starting level in 1939 was in so many cases




10

TWENTY-NINTH ANNUAL REPORT

higher than in 1914.

Except for foods, onr general commodity price rise,

at wholesale, since 1939 has been smaller than in Canada, United King­
dom, and Australia. But retail food prices in this country have risen
twice as much as in Britain or Australia and nearly 50 per cent more
than in Canada.

The higher wholesale prices in the other countries

reflect the longer and greater strain of the war. The lower retail food
prices, however, appear to be due mainly to the differences in the pricecontrol programs— in part to the greater use of subsidies abroad, but much
more, it would seem, to the operation of the parity price formulae and
other limitations in the application of price controls to our agricultural
products.
Of basic importance for the avoidance of an inflationary price spiral
is the behavior of agricultural prices and of wage rates.

Farmers and

next to them wage earners have had the fastest rise in incomes during
the war, and agricultural prices and wage rates have presented some of
the most controversial questions about the economic conduct of the war.
A rise in agricultural prices relative to others does not in itself warrant
adverse comment. Such a relative rise always occurs in wars and in
periods of rising peacetime national income— and a relative fall in
depressions.

It must be recalled too that in the present instance the

rise has been from the comparatively low base, relative to industrial
prices and wage rates, which prevailed in the thirties, and has to some
extent been necessary to bring out increased production and keep workers
on the farm in the face of the high wages available in war industries.
The danger is that the rise may be carried too far.
As regards wage incomes and wage rates, the problem is more com­
plex than appears on the surface. In discussions of the efforts to hold
to the “ Little Steel” formula, the point has been repeatedly made by
the critics that wage rates have risen much more than the cost of living.
According to the official figures, hourly earnings of factory workers have
risen about 52 per cent as against a rise of 26 per cent in cost of living.
But this high figure reflects the shift of workers from low-wage
to high-wage industries, as well as the actual raising of wage rates
and the effect of overtime penalty rates.

It has been estimated that the

actual rise in the price of factory labor between 1939 and July 1943 was
about 32 per cent. This correction somewhat weakens the argument
that the advance of wage rates threatens to produce inflation by forcing
price increases to cover costs, which in turn would lead to further wage
increases in the familiar vicious spiral.




But it should be borne in mind

FEDERAL RESERVE BANK OF NEW YORK

11

that the upgrading of labor involved in this switching of employment
implies impairment of labor efficiency, which is a hidden factor in costs,
just as deterioration of quality of products is a hidden factor in cost of
living.

Moreover, the formula apparently so generally adopted that

increases in wage rates should cover increases in living costs is itself
questionable if not accompanied by measures to absorb the rise in total
labor incomes.

An effective anti-inflationary policy must embrace always

the two-sided approach of controlling, on the one hand, the effects of
rising production costs on prices and, on the other, the effects of rising
incomes on demand for the limited supply of goods and services
available.
In concluding this broad survey of some of the main economic
features of the war, and before coming to the more detailed discussion
of monetary and fiscal developments in 1943, we may venture some
comments upon the economic outlook for 1944. There are signs that we
have reached and even passed the stage of most acute pressures on our
economy.

Both industrial production and the gross national product

are rapidly leveling off.

The raw materials situation has been easing

markedly. There seem to be definite signs that the manpower problem
as a whole will not become more serious although it obviously may remain
critical as to particular skills and industries; since November there has
been a drop in the number of places classified as acute labor shortage
areas. There have been some sizable cuts in previously authorized military
expenditures, and it seems even probable that actual expenditures will
run somewhat under the budget estimates. None of this implies any
slackening of the war effort, but is to a large extent a natural consequence
of the completion of the mobilization program, and of savings realized
through productive efficiency. One of the chief reasons for economic
strain during the expansion phase of a war production program is
that for a considerable period resources must be used to construct new,
and convert old, plant and equipment in order to produce the final
products wanted. How this kind of pressure has relaxed is shown by
the fact that in 1943 Government outlays for industrial plant construction
were 40 per cent below 1942, and in the last three months of the year
were 75 per cent below such expenditures in the last quarter of 1942.
As to output of civilian goods, it seems probable that the next change
will be upward, although the expansion may be only slight until the
European war has ended.
How much danger of inflation there will be will depend upon the




TWENTY-NINTH ANNUAL REPORT

12

policies pursued.

The need for retaining, and in some directions for

strengthening, our anti-inflationary policies will continue to be of pri­
mary importance not only for the remainder of the war period but very
probably also during the period of transition to peace.

Besides the

wartime savings and the accumulated domestic demands for goods, we
shall have to consider the effects of international demands upon us during
the transition period.

Belief and reconstruction in Europe will un­

doubtedly call for large amounts of American food products, raw mate­
rials, and equipment.

W e shall very likely also be called upon to pay

in goods for the large amounts of materials which we have been import­
ing, particularly from the Latin American countries, for war production
and civilian needs.

During the war, owing both to lack of shipping

and to our concentration on war production, this trade has been one-sided
and has resulted in a rapid accumulation here of gold and dollar balances
by these countries.

If all these demands, domestic and foreign, were

permitted to converge upon our markets without restraint before re­
conversion to peacetime production had been completed, there would be
serious danger of disorderly price increases and other dislocations in
our economy, and we might easily have, as after the last war, a boom
followed by cpllapse.

Until we can see our way safely past such dangers

it would be most unwise to remove anti-inflationary controls.

W

a

r

F

i

n

a

n

c

The effort to finance war expenditures by inflation resistant methods
fell short of our hopes in 1943 but exceeded our expectations. Total
Government expenditures (90 billion dollars), while not as large as had
been estimated at the beginning of the year, were more than 32 billion
dollars greater than in 1942.

Over half of the increase in expenditures

was covered by increased Government revenues— chiefly from individual
and corporation income taxes.

Most of the remainder was financed

through increased sales of Government securities to nonbank investors.
Consequently, although the total amount borrowed by the Treasury
during the year was 57 billion dollars as compared with 48 billion in
1942, the amount of Government securities absorbed by commercial and
Federal Reserve Banks was only slightly greater in 1943 than in 1942,
and was substantially less than had been indicated by some forecasts
early in the year on the basis of the budget estimates set forth in the
President’s message to Congress in January 1943.

Nevertheless, the

amount of Government financing through the banks, directly or indi­
rectly, was very large— 24% billion dollars— and efforts were made to




i

n

g

FEDERAL RESERVE BANK OF NEW YORK

13

U . S. Government Expenditures and Sources of the Financing of Such Expenditures

b il l io n s

OF DOLLARS

EXPENDITURES

* 50r
1

A L L OTHER
WAR
EXPENDITURES

2**

2 /w> i* 7" 2 W
HALF

HALF

HALF

1941 1942 1943

HALF

t* r 2 *
HALF

HALF

1941 1942 1943

+ NET ABSORPTION BY NONBANK IN VESTO RS OF G O V E R N M E N T S E C U R ITIE S OTHER
THAN TA X AND SA VING S N O TE S .

reduce the volume of such financing, both by further proposals for
increasing tax revenues and by further efforts to sell Government
securities to investors other than banks. It appeared probable, toward
the end of 1943, that the amount of bank financing of Government
expenditures during 1944 could be substantially reduced.
The accompanying diagram shows, by six-month periods, the amount
of war and other expenditures of the Federal Government during the
past three years and its receipts from various sources during the same
half-year periods. In reviewing the sources of Government receipts in
relation to expenditures, it will be noted that the amount of Government
receipts from security sales during the latter half of 1942 was substan­
tially greater than the amount needed to cover Government expenditures
during that period. This excess of borrowing produced an increase of
approximately 7 billion dollars in the Treasury working balance, which
has since been maintained at a relatively high level.

In the first half

of 1943, Treasury borrowings were slightly less than net Government
expenditures, and in the latter half moderately in excess of expenditures.




TWENTY-NINTH ANNUAL REPORT

14

Another aspect of the problem of war finance and inflation presents
itself in the delation of Treasury receipts to increases in the national
income. It appears that the net national income in 1943 (147 billion
dollars) was about 27% billion greater than in 1942.

Taxes paid by

individuals increased by something like 12 or 13 billion dollars during
the year, and net purchases of Government securities by nonbank in­
vestors increased by approximately 11 billion. It appears, therefore, that
the amount of income remaining for consumer expenditure was only
slightly larger in 1943 than in 1942. The amount of such income con­
tinued to be substantially greater, of course, than the amount of consumer
goods and services available valued at 1942 prices. Part of the excess
was absorbed in an increase in prices in 1943. A considerably larger
part, as in the preceding year, appears to have been added to savings
in forms other than direct or indirect investments in Government securi­
ties. These savings appear in the statistics as increases in currency cir­
culation and in bank deposits. They have no inflationary effect so long
as they remain relatively idle, but they constitute a continuing threat
to the effective maintenance of price control while the supply of civilian
goods necessarily remains restricted, even though large.
W ar expenditures continued to increase fairly rapidly during the
first quarter of 1943, but leveled off thereafter at around 7 billion dollars
a month. Some parts of the war program, including the production of
airplanes and ships, continued to expand throughout the ,year, but con­
struction of war plants and, to a smaller extent, of army camps and
other military establishments, did not need to continue at previous levels,
and there were “ cutbacks” in some parts of the munitions program.
Reduced prices for war materials, as volume output made possible more
efficient production, also played a part in holding down the cost of the
war program.

Total war expenditures during 1943 amounted to approxi­

mately 83 billion dollars, and total Government expenditures were 90
billion dollars, or about 8 billion less than the amount indicated for the
calendar year by the budgets for the fiscal years 1942-43 and 1943-44.
While Government expenditures fell short of the huge totals indi­
cated by budget estimates, Government revenues substantially exceeded
the amounts indicated by the January budget figures. The estimates for
the two fiscal years indicated that during the calendar year 1943 net rev­
enue receipts would amount to approximately 28 billion dollars. Despite
the fact that no general increase in tax rates was effected during the year,
actual net receipts of the Treasury amounted to more than 34% billion




FEDERAL RESERVE BANK OF NEW YORK

15

dollars and were more than double the net receipts of 16.3 billion in
1942.

A substantial increase in revenues was anticipated by the budget

estimates because of the rising national income and stiff increases in,
taxation under the Revenue Act of 1942, most of the provisions of which
became fully effective in 1943, but actual receipts were considerably
larger than estimated.

The difference is attributable largely to the

effects of the Current Tax Payment Act of 1943 (as a result of which
individual taxpayers were required to pay, in 1943, the estimated taxes
on their income during that year rather than on their income of the
preceding year).*

Another factor tending to increase Treasury receipts

above the amount estimated at the beginning of the year was a substan­
tial volume of cash refunds (about 1 % billion dollars) on renegotiated
war contracts completed in 1942.
Despite overestimates of expenditures and underestimates of re­
ceipts, the Treasury was a continuous and heavy borrower in 1943. The
excess of expenditures remaining to be financed by sales of Treasury
securities was a little over 55 billion dollars, compared with about 41
billion in 1942.f The success of the First War Loan drive in December
1942 set the general pattern for selling such a huge quantity of securities,
and two War Loan drives were the main reliance of the Treasury in
selling its securities during 1943.
The form of selling organization was changed during the year and
was expanded with each succeeding drive. In the First War Loan drive
there were Victory Fund Committees organized on the basis of Federal
Reserve Districts, and W ar Savings staffs organized by States. The
existence of two separate sales organizations resulted in some overlapping
and duplication of effort. For the Second War Loan drive in April a
W ar Finance Committee was set up in each Federal Reserve District,
headed by the President of the Federal Reserve Bank, with a view to
* At the beginning of 1944 it appeared likely that total Government revenues during the
year would amount to at least 40 billion dollars, without giving effect to the provisions of
the revenue act then under consideration by Congress. Collection of individual income
taxes on the basis of income during the current year, rather than on income of the pre­
ceding year, will mean that increases in income will immediately be reflected in increasing
Treasury receipts. In addition, the provision of the Current Tax Payment Act, under
which taxpayers with a tax liability for 1942 (or for 1943 if lower) of more than 50
dollars will be required to pay at least one eighth of the tax liability for that year by
March 15, 1944, will produce further funds for the Treasury. The tax bill which became
law early in 1944 is expected to bring in an additional 2 billion dollars during its first
year, not all of which will be collected in 1944, however, and not all of which will be net
additional revenue to the Treasury because of the accompanying freezing of payroll taxes.
f Actual borrowing was 57 billion in 1943 and 48 billion in 1942; consequently the
Treasury’s working balance increased from about 3 billion dollars at the end of 1941 to
^nearly 10 billion at the end of 1942, and liy 2 billion at the close of 1943.




16

TWENTY-NINTH ANNUAL REPORT

effecting greater coordination of effort between the two selling organiza­
tions.

Substantial progress was made but certain organizational difficul­

ties remained.

In preparation for the Third War Loan drive in

September and October, the Treasury decided to organize the sales staff
entirely along State lines.

A War Finance Committee was appointed

in each State and given sole responsibility for the sale of all types of
securities during drives.
While the drive method was immediately successful in producing
a huge volume of subscriptions, the amount of sales to individuals was
considered disappointing, in view of the rapid growth of wartime in­
comes, and the amount of securities taken directly and indirectly by the
commercial banks continued to be very large. The selling effort in
successive drives, therefore, was directed increasingly to sales of securi­
ties to individual investors, with secondary emphasis on sales to other
nonbank investors. In the First and Second War Loans, limited (but
large) issues of two types of securities were offered for commercial bank
subscription.

In the Third W ar Loan the offering of securities to

commercial banks was reduced, timed to follow the conclusion of the
drive, and not included in the total sales during the drive.

In the Fourth

W ar Loan, beginning on January 18, 1944, there was no offering to
commercial banks.*
The accompanying table compares the sales of Government securities
to nonbank investors in the First, Second, and Third W ar Loan drives
and shows the improvement in sales to individuals. The increase in such
sales was proportionately greater than for any other class of subscriber,
except State and local governments.
These data, however, conceal a substantial use of bank credit in the
successive drives, both in the form of loans to finance subscriptions by
nonbank purchasers, and in the form of bank buying of outstanding
securities from other investors, who were thus enabled to increase their
subscriptions, The rise in loans on securities, by weekly reporting banks
throughout the country (measured from the low point preceding each
drive to the Jiigh point during the drive) was about 700 million dollars
in the First W ar Loan, approximately 1,275 million dollars in the Second,
and more than 1,800 million dollars in the Third.

Most of the expansion

in security loans in connection with the First W ar Loan occurred at
* Except for an arrangement whereby such banks could purchase certain types of
securities in amounts up to 10 per cent of their savings deposits or $200,000, whichever
was less.




17

FEDERAL RESERVE BANK OF NEW YORK

banks in the Second Federal Eeserve District, but increasing amounts
of loans were reported by banks in other parts of the country during
the Second and Third War Loans.
Preceding and during each drive there were also substantial sales
of holdings of outstanding securities by insurance companies, savings
banks, and other investors to obtain additional funds for the purchase
of securities offered during the drives.

The greater part of the securities

sold for this purpose were purchased by the commercial banks. Subse­
quent to each drive these banks were the principal purchasers of securi­
ties sold by speculative subscribers, who financed their subscriptions with
bank loans and liquidated their holdings within relatively short periods.
It is estimated that, in addition to Government securities acquired by
commercial banks by direct subscription, during and following the War
Loan drives, the banking system (including commercial and Federal
Reserve Banks) acquired through purchases in the market a total of
approximately 2,400 million dollars of Government securities in the
four months November 1942— February 1943, more than 3 billion in the
four months March-June 1943, and nearly 4 billion in the four months
August-November 1943.
Comparison of Sales to Nonbanking Investors in the
First, Second, and Third War Loan' Drives
(In millions of dollars)

Second Federal
Reserve District

United States
Type of investor

First
Third
First
Second
Second
Third
War Loan War Loan War Loan War Loan War Loan War Loan

Individuals, partnerships, and
personal trust accounts...........
Insurance companies..................
Mutual savings banks.................
Dealers and brokers*..................
State and local governments.......
Corporations and other investors..

1.593
1,699
620
886
200
2.593

3,290
2,408
1,195
544
503
5,145

5,377
2,620
1,508
894
795
7,120

387
1,038
405
817
29
1,138

737
1,426
730
439
71
1,892

1,021
1,600
895
629
116
2,072

Total nonbanking (excluding
Federal agencies).................
Federal agencies.........................

7,591
270

13,085
391

18,313
630

3,814
1

5,295
7

6,334
9

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

7,860

13,476

18,943

3,815

5,302

6,343

*For the Second drive, dealers’ allotments earmarked for distribution to nonbanking investors were
credited to the appropriate nonbanking investor classes. In the other two drives, no such redistribution
was made.
Note: Figures are rounded and do not necessarily add to totals.




18

TWENTY-NINTH ANNUAL REPORT

By assembling data for four-month periods including each of the
first three War Loan drives, and making adjustment for all of the factors
cited above, a fair comparison of sales of Government securities to bank
and nonbank investors can be obtained.

The results are set forth in

the following table which shows the estimated increases in Government
security holdings of the two principal classes of investors for these
periods.
(In billions of dollars)
Period

Nonbank holdings

Bank holdings*

+ 9.9
+10.5
+14.2

+ 9.5
+10.3
+ 9.2

November 1942— February 1943 ......................
March — June 1943 .............................................
August — November 1943 .................................

* Including Federal Reserve Banks as well as commercial banks.

These estimates indicate that little progress was made between
the First and Second War Loan drive periods in increasing the propor­
tionate sales of Government securities to nonbank investors, but that
substantial progress was made in the Third W ar Loan drive period.
One further factor should be mentioned in assessing the non-inflationary
character of our war financing, however.

It is probable that an in­

creasing proportion of the net absorption of securities by nonbank
investors in successive W ar Loan drives has been and will be the result
of purchases paid for out of current income, and that a correspondingly
smaller proportion of purchases has been and *will be made with
previously accumulated funds. A real increase, from one War Loan to
the next, in the purchase of Government securities by individuals out
of current incomes would be a distinctly anti-inflationary development.
On the whole the record of war financing in 1943 indicates a
substantial measure of success in the efforts to finance war expenditures
more largely by taxation and sales of Government securities to nonbank
subscribers.

It still leaves much to be desired, however, and indicates the

need for continuing and intensified efforts to obtain a greater flow of
individual incomes into the financing of the war.




19

FEDERAL RESERVE BANK OF NEW YORK

Money Market Developments in 1943
The almost continuous drain on the reserves of New York City
“ money .market” banks, which developed after the first quarter of 1942,
continued during 1943. As in the earlier period, the largest factor con­
tributing to this movement was the transfer of funds on Treasury account
— Treasury receipts from security sales and tax collections in the New
York area continued to exceed by a wide margin Government disburse­
ments in the area, including Treasury checks deposited in New York
City banks to the credit of concerns operating in other parts of the
country.

The average weekly volume of Government checks deposited

in New York City banks was considerably greater in 1943 than in 1942,
reflecting the increased magnitude of the war program.

At the same

time, payments of Federal taxes out of accounts maintained in this
District were considerably greater than in 1942, and payments for
Government securities, including withdrawals from W ar Loan deposit­
aries of the proceeds of security sales, also increased greatly.

Conse­

quently, as the accompanying chart indicates, the net outflow of funds
from this District through Government transactions, while subject to
Principal Factors Accounting for Movements of Funds Into and Out of Reserve
Balances of Member Banks In Second Federal Reserve District (Cumulative since
January 1, 1 9 42; ( + ) = gain to reserve balances; (— ) = loss to reserve balances)
0IL L IO N S
OF DO LLA RS




20

TWENTY-NINTH ANNUAL REPORT

some interruptions, was on the whole at a rate fully as rapid as during
the last 9 months of 1942.
On the other hand, the flow of funds between this District and other
parts of the country through commercial and financial transfers resulted
in a net inflow in 1943, reversing the outflow in 1942. The direction of
the flow of funds through such transactions was strongly outward during
the Second War Loan drive in April, and increased in volume in Sep­
tember and 0arly October in connection with the Third W ar Loan drive,
but the general movement was inward in the periods between drives. One
factor in this inflow appears to have been the purchase of securities by
banks and other investors in other parts of the country following War
Loan drives, which no doubt reflected, at least in part, the distribution
of securities purchased by dealers and others, with borrowed funds,
during the drives. In addition there appears to have been some tendency
for funds to accumulate in the New York deposit accounts of business
organizations.

Such accounts were drawn down sharply for the purchase

of securities in the War Loan drives and for the year as a whole the
increase was probably of rather moderate proportions. The reduction
in business accounts in connection with the drives was not limited to
payments for securities purchased in the District, but included (especially
in connection with the Third W ar Loan drive) large transfers to other
parts of the country, presumably to pay for subscriptions placed in
other localities.
A second continuing factor in the drain on the reserves of banks
in this District, as well as in other districts, was the persistent demand
for currency, The net withdrawal of currency from banks in this District
during the year is estimated at approximately 1 billion dollars, or about
one fifth of the total increase for the country as a whole.

Data on the

note circulation of Federal Reserve Banks indicate, however, that large
as was the demand for currency in this area, the demand was relatively
even greater in some other parts of the country, especially those in which
there has been an unusually rapid growth of war industries and other
activities related to the war program, such as military training centers.
As in 1942, a substantial part of the demand for currency was for
bills of the smaller denominations, but there was a noticeable increase
during the past year in the demand for $50 and $100 bills, and to some
extent for even larger denominations. While precise information con­
cerning the factors that have given rise to the persistent demand for




2
1

FEDERAL RESERVE BANK OF NEW YORK

currency is not available, a number of possible factors have been sug­
gested.

In the first place there was undoubtedly some increase in the

amount of currency actually needed in connection with consumer
expenditures, owing partly to a moderate rise in prices. “ Black market”
transactions, efforts to evade taxation by concealing income, and hoarding
may also have been factors although hoarding in the sense of currency
accumulations induced by specific or indefinite fears was probably of
minor importance. It seems likely that a major factor was the accumu­
lation of savings in the form of currency by individuals whose income
has increased substantially during the war, but who do not have bank
accounts.

Whatever the causes, the continued increase in currency out­

standing was the largest factor in the drain on bank reserves for the
country as a whole, and was the second largest factor for banks in this
District.
A third factor which had its immediate impact largely on the New
York City banks, although its ultimate effects may have extended
farther, was the accumulation of funds in the accounts of foreign central
banks and governments in the Federal Reserve Bank of New York.
Deposit balances of that character showed a net increase of approxi­
mately

700

million

dollars

during

the year,

despite

the use

of

approximately the same amount by foreign owners of dollars for the
purchase and earmarking of gold in our vaults.

This accumulation of

foreign official funds in Federal Reserve Banks involves the transfer of
funds from commercial banks and thus results in a drain on their
reserves. The reasons for this accumulation of funds by foreign central
banks and governments are discussed in a subsequent section of this
report.
Despite the large increase in bank credit, which reflected mainly
bank participation directly or indirectly in the financing of the war,
and the accompanying large increase in the total volume of bank deposits,
the growth in member bank reserve requirements was a relatively minor
factor in bank needs for additional reserve funds during 1943. For all
member banks the increase in the amount of their required reserves was
only about 500 million dollars, and for the principal New York City
banks there was an actual net reduction during the year of nearly that
amount.

Increases in reserve requirements would have been a much

more important factor affecting the reserve position of member banks
had it not been for legislation enacted by Congress early in the year
which exempted War Loan (Government) deposits in the banks from




TWENTY-NINTH ANNUAL REPORT

22

reserve requirements for the war period. As War Loan deposits in all
member banks, at the end of 1943, were approximately 9 billion dollars,
the required reserves of these banks were at least 1 % billion dollars
less, at that time, than they would have been if continued maintenance
of the same percentages of reserves against War Loan accounts as against
other deposits had been required.
As a result of this legislation, a new pattern of fluctuation in member
bank reserve requirements developed during the past year. Up to the
end of 1942 each war financing operation, including the First W ar Loan,
was accompanied by a substantial increase in the reserve requirements
of the banks owing to the growth of W ar Loan deposits, and in the
periods following such operations reserve requirements tended to level
off. After the elimination of reserve requirements against W ar Loan
accounts, however, the periodic financing drives had the effect of releas­
ing substantial amounts of reserves, as deposits were shifted from private
accounts, against which the banks were required to maintain reserves,
to W ar Loan deposits.

Thus, instead of creating pressure on the reserve

positions of the banks, large war financing operations recently have had
the effect of easing the reserve positions of the banks temporarily.

Sub­

sequently, as the Treasury has made periodic withdrawals of funds from
W ar Loan accounts to meet Government expenditures, and as the dis­
bursement of the funds increased private deposits, the reserve require­
ments of the banks have again increased.
Although the New York City banks had a net reduction in their
required reserves during the past year, in contrast to the moderate
increase for the country as a whole, the release of reserves through this
decline in r0serve requirements offset only to a small extent their net
losses of reserves through other transactions, especially transfers of
Government funds.

A small part of their need for reserve funds to

offset losses of reserves was met by using up the remainder of their
excess reserves early in the year; at the end of 1942 the New York City
banks had around 400 million dollars of excess reserves, most of which
was used up by the middle of February.

Subsequently, individual banks

followed the policy of keeping fully invested and had to make almost
constant adjustments to keep their reserves at the required levels.
These adjustments took the form largely of sales of Treasury bills
to the Federal Reserve Bank, and the banks availed themselves of the
option to repurchase the bills when, individually, they gained reserves




FEDERAL RESERVE BANK OF NEW YORK

23

through transfers from other localities, deposits of Government checks,
or other transactions. For the year as a whole, however, their sales of
bills to the Reserve Banks were greatly in excess of their repurchases,
and the Treasury bill 4‘ option account’ ’ of the Federal Reserve Bank
of ,New York at one time during the year rose as high as 3.3 billion
dollars.

In the latter part of the year, a number of banks exhausted

their supply of Treasury bills (or reduced their holdings to levels which
they wished to maintain), and thereafter adjusted their reserve position
either through temporary borrowings from the Reserve Bank or through
sales of Treasury certificates of indebtedness or other short term securi­
ties in the market.
Because of the persistent outflow of funds from New York to other
parts of the country, a large part of the reserve funds provided by the
security operations of the Federal Reserve System in New York (includ­
ing purchases of Treasury bills as well as transactions in the open mar­
ket), spread out over the country to sustain the reserve position of
banks in other communities.
Despite their lack of excess reserves during most of the year, the
New York City banks continued to take their share of new Treasury
issues when the Treasury found it advisable to resort to direct offerings
to the banks, and in addition bought substantial amounts of other securi­
ties in the market, selling Treasury bills and other short term securities
when necessary to offset losses of funds.

In general, they showed a

tendency to increase their holdings of Treasury bonds. Nevertheless,
they retained a larger portion of Treasury bills and certificates of in­
debtedness in their portfolios than is customary for most banks through­
out the country.




24

TWENTY-NINTH ANNUAL REPORT

Federal Reserve Policy
The problems of our war economy in the monetary and fiscal field
were much the same in 1943 as in 1942.

Consequently, the objectives

of Federal Reserve policy remained the same and operations in execution
of System policy differed only in detail.

The amount of funds which

the Treasury was called upon to raise to finance war operations was much
greater than in the preceding year, and despite the large increase in
tax revenues previously noted, the amount to be raised by borrowing
was considerably greater. In view of the necessary limitations on sup­
plies of consumers ’ goods and the continued increase in the aggregate
amount of individual incomes, there was a continuing problem of pro­
moting savings and debt retirement and the diversion of large amounts
of current income to the financing of the war, not only as a means of
raising the needed funds, but also as a means of reducing potential
inflationary pressure.
As was pointed out in the annual report of this bank for 1942,
Federal Reserve policy during the war period has had three principal
objectives:
1. The maintenance of adequate reserves in member banks to
assure the success of war financing;
2. Maintenance of stability in the Government security market; and
3. Promotion of efforts to counteract wartime inflationary tendencies.
Purchases of Government securities, either in the market, or (in the
case of Treasury bills) directly from the banks, were relied upon to an
even greater Extent than in 1942 to achieve the first of these objectives,
and, as in that year, accomplished at the same time the purpose of
maintaining a reasonable degree of stability in the Government security
market.

On the whole, there was less need during 1943 for emphasis

on market stabilization, but the need for active intervention to maintain
an adequate supply of reserve funds was fully as great, owing to the
continued heavy demand for currency and to other factors affecting the
reserve position of the banks.
During the early part of the year, market stabilizing operations
took the form, most frequently, of sales of securities that were in demand.
A generally strong market developed after the First W ar Loan, and
prices of Treasury bonds showed an even greater tendency to rise after
the Second War Loan. Under these circumstances, substantial sales,
of both taxable and partially tax-exempt Treasury bonds, were effected,




25

FEDERAL RESERVE BANK OF NEW YORK

in contrast to the situation in the autumn of 1942 when large purchases
of bonds for the System account were required to maintain the stability
of the market.
As the year advanced, however, it became apparent that, in general,
nonbank investors would be able to fill their requirements, as fully as
they desired, during the periodic War Loan drives.

A t the same time

banks which had adopted the policy of maintaining a fully invested
position soon used up their excess funds, and there was less inclination
to pay substantial premiums for bonds between drives.

This develop­

ment was emphasized by market conditions following the Third War
Loan.

In that drive, a large volume of securities was subscribed for and

financed by bank loans in the expectation of realizing substantial profits,
such as were obtained after the Second W ar Loan.
were disappointed.

Such expectations

It became apparent after the Third War Loan that

relatively large amounts of securities were overhanging the market, while
demands were less pressing than in the earlier months of the year.

The

market settled down to relative stability at quotations only slightly above
par for the new issues, and no large operations by the Reserve System
were required, either on the buying or the selling side of the market
for most classes of Government securities.
The one exception was in the market for securities of short maturity,
in which some excess of supply appeared from time to time— certificates
of indebtedness and other securities having only a few months to run to
maturity. A principal reason for the development of some unbalance be­
tween demand and supply in that section of the market, of course, related
to the need of certain banks for additional reserves rather than to a market
situation. Some of the buyers who formerly were most active in this
section of the market, notably the New York and Chicago banks, became
net sellers at times during the latter part of 1943, in order to maintain
their reserves at the required levels. Among the strictly market factors
then was noted a tendency on the part of some investors to sell their
short maturities at small premiums, in order to obtain a slight profit, and
to reinvest some of their funds in securities of longer maturity at higher
yields.

Similar in its general effect on the market, but differing as to

purposes, was the selling of short term securities that had been acquired
by investing institutions

as temporary

investments,

pending more

permanent investments in the longer term securities offered during
War Loan drives.

Such selling was concentrated in the periods just

before W ar Loan drives and extending into the early days of the drives.




26

TWENTY-NINTH ANNUAL REPORT

Market demand for short term securities tended to be insufficient
to absorb the supply at times when there was concentrated selling for
any one of the above reasons, and as a result purchases for the System
Open Market Account were largely short term securities.

There were,

of course, substantial amounts of excess reserves available to the banking
system at all times, and it might have been expected that some of these
funds would seek investment in short term securities.

The excess bank

reserves were concentrated, however, in banks which were either not
inclined to become fully invested, or which were apparently not interested
in investing their funds at the rates obtainable on short term securities.
As a result of these developments in the market during the past
year, the maturity distribution of securities in Reserve Bank portfolios
underwent a substantial change.

While the total volume of securities

held by Reserve Banks showed an increase of more than 5 billion dollars
during the year, holdings of Treasury notes and bonds were reduced and
holdings of Treasury bills and, to a smaller extent, certificates of indebt­
edness showed large increases.
Holdings of Government Securities by All Federal Reserve Banks
(In millions of dollars)
Dec. 31,1942
Treasury bills ...............................................
Certificates of indebtedness ........................
Treasury notes .............................................
Treasury bonds .............................................
Government guaranteed issu es...................
Total

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

Dec. 31,1943

Change

1,010
1,041
1,324
2,777
37

6,768
2,467
665
1,560
83

+ 5,758
+ 1,426
—
659
— 1,217
+
46

6,189

11,543

+ 5,354

In view of the general objective of promoting the financing of war
expenditures as largely as possible outside the banks, System open
market operations were limited to the amounts needed to offset, in part,
drains on the reserves of member banks. Additions to member bank
reserves, which might have tended to induce the banks to compete with
other investors for securities offered by the Treasury, were carefully
avoided.

The actual total of member bank reserves showed a small net

reduction for the year, and as there was a moderate increase in the
required reserves of the banks, excess reserves were reduced from ap­
proximately 2 billion dollars at the end of 1942, to about 1 billion dollars
at the end of 1943.




FEDERAL RESERVE BANK OF NEW YORK

27

Major Factors Affecting the Reserve Position of Member Banks
BILLIONS
OF DOLLARS

B AN KS IN FEDERAL RESERVE BAN KS .

Most of the reserve funds supplied to the banks through System
security operations were absorbed by the increase of slightly over 5 billion
dollars in the amount of currency outstanding. Another factor tending to
draw down member bank reserves was the increase in foreign official
deposits and earmarked gold in the Reserve Banks, which was mentioned
previously in connection with the discussion of the New York City
money market situation and is discussed at greater length later in this
report.
The discount rates of this bank remained unchanged during the
year.

The buying rate for Treasury bills continued to be the most

effective rate, however, as it afforded banks an opportunity to obtain




28

TWENTY-NINTH ANNUAL REPORT

needed reserves (by selling Treasury bills to the Reserve Banks with
an option to repurchase the bills at the same rate— in effect, a borrowing
operation) at the low rate of % per cent, without showing indebtedness
on their statements.
Many banks still seemed reluctant to borrow outright from the
Reserve Bank, a practice which was common prior to the huge accumu­
lation of excess reserves during the 1930’s.

But the reluctance to borrow

appeared to be gradually weakening as the year progressed. The general
tendency was for banks sustaining persistent losses of funds to exhaust
their holdings of Treasury bills (or at least to reduce them to some
minimum amount which they wished to retain) before resorting either
to sales of longer term securities in the market or to borrowing against
such securities at the Reserve Banks.

After reaching that point, how­

ever, the banks could borrow at the Reserve Banks against securities
maturing in one year or less at %

per cent and retain the balance

of income on the securities, whereas if the securities were sold in the
market they, of course, lost any further income from them. Consequently,
member banks in increasing numbers, including several of the large
New York City banks, after disposing of all or part of their securities
yielding less than the % per cent discount rate, adopted the practice of
borrowing at the Reserve Bank to offset temporary losses of funds. The
aggregate amount of such borrowings at the Federal Reserve Bank of
New York reached, in December, the highest levels in more than ten
years, and the number of borrowing banks also was the largest in a num­
ber pf years. The following table indicates the growth in borrowing by
member banks during the year.

The figures on aggregate borrowing

Number of borrowing banks
Month
Manhattan
January ........................
February ......................

June .............................
July .............................
August ........................
September ..................
October ........................
November ....................
December ....................




1
2
3
4
3
4
4
7
8
4
7
10

Rest of
District
23
31
17
24
28
21
25
53
52
39
55
74

Borrowings
Manhattan
$

3,000,000
5,500,000
9,500,000
8,100,000
13,750,000
34,950,000
40,200,000
148,000,000
233,600,000
7,800,000
57,100,000
826,400,000

Rest of
District
$13,520,000
11,355,000
2,525,000
12,866,000
18,703,000
4,838,000
5,745,000
13,411,000
14,570,000
9,575,000
20,700,000
26,040,000

FEDERAL RESERVE BANK OF NEW YORK

29

represent the total of all loans to member banks made during each month;
the amount outstanding at any given time was, of course, much smaller.
By way of contributing to the attainment of the third objective of
Federal Reserve policy— the promotion of efforts to counteract wartime
inflationary tendencies— this bank continued its support of measures
designed to reduce dependence on bank credit in financing the war and
to encourage the diversion of substantial amounts of individual incomes
into savings and debt reductions. Until the conclusion of the Second War
Loan drive, the President of the Reserve Bank was Chairman of the
War Finance Committee in the Second Federal Reserve District, and
after the change from district to State organizations, the bank and its
staff continued working closely with the State W ar Finance Committees.
The Reserve System consistently opposed all proposals or tendencies
which might involve unnecessarily large absorption of Government se­
curities by commercial banks, or unnecessary extensions of bank credit
in other forms.

Extensions of Federal Reserve credit were limited to

amounts actually needed by the banking system to offset losses, in part, of
reserves through currency and other demands. Bank financing of specu­
lative subscriptions to Government securities was opposed, and the
President of this bank, on September 1, addressed a letter to all banks
in the District urging them to adopt lending policies designed to dis­
courage speculative subscriptions to War Loan securities.* The experi­
ences of the Third War Loan drive indicated the need for vigorous
action to restrain speculative subscriptions, financed by bank loans, and
such action was taken prior to the Fourth War Loan drive in JanuaryFebruary 1944.
Regulation W , issued by the Board of Governors of the Federal Re­
serve System, to control the terms under which consumer instalment
loans may be made by all types of lenders, continued effective, during
the past year, in reducing the volume of consumer credit outstanding.
In a small way this helped to draw off surplus purchasing power in
the hands of consumers.

As the diagram on page 30 indicates, in a

little over two years the estimated total volume of consumer credit has
been reduced from between 9 % and 10 billion dollars to a little more
than 5 billion dollars.

This reduction was due, in large part, to the

suspension or restriction of production of goods the sale of which is
commonly financed by instalment credit, but it was also due, in part,
to the tightening of credit terms.
* Circular No. 2680.




TWENTY-NINTH ANNUAL REPORT

30

Estimated Short Term Consumer Debt Outstanding at End of Each Month,
Classified by Principal Types of Debt
BILLIO NS
OF DOLLARS

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

(Data for 1934-August 1942 are those o f the Department o f Commerce; for September
1942-December 1943, those of the Board of Governors o f the Federal Reserve System.)

Consumer instalment credit extended by commercial banks was
reduced at the end of 1943 to less than one-third the volume outstanding
at the end of 1941. The greatest curtailment, as might be expected, was
in bank holdings of retail automotive paper, but there was nearly as
large a reduction in holdings of paper representing instalment financing
of other retail transactions. Loans to finance the repair and moderniza­
tion of homes also were substantially reduced (by nearly two thirds)
during 1942 and 1943, reflecting the shortage of materials and labor
available for such purposes, as well as the more limited credit terms.
The smallest reduction was in personal instalment cash loans, but even
in that case the volume of loans held by the banks at the end of 1943
was less than one half of the volume outstanding at the end of 1941. The
shrinkage in consumer credit extended by banks in this District showed
tendencies quite similar to those shown by data for the country as a
whole, although the decline here was of somewhat greater proportions,
especially in the case of automotive financing.




FEDERAL RESERVE BANK OF NEW YORK

31

Business and Employment in the Second Federal Reserve District
The volume of employment, production, trade, and income of this
District increased further during the past year. Although the increases
again appear to have been somewhat less than in the country as a whole,
they were substantial, and such unemployment as remained at the end
of 1942 appears to have been largely eliminated. A preliminary estimate
of the amount of income payments received by individuals in this District
indicates an increase from approximately $19,700,000,000 in 1942 to about
$23,400,000,000 in 1943. This increase of $3,700,000,000, or 19 per cent,
is the largest increase of any recent year and compares with an increase
of approximately $2,500,000,000, or about 15 per cent in 1942.

From

1939 to 1943 the estimated increase in income payments received in this
District was approximately $9,500,000,000, or 68 per cent.

During the

same period income payments for the country as a whole nearly doubled.
Despite the substantial increase during the past year, this District’s
share in the national total appears to have declined slightly further, to
less than 17 per cent compared with nearly 20 per cent in 1939.
Employment trends in the larger communities in the District were
widely divergent during 1943.

Some communities such as New York

City, Rochester, the central Hudson River area, and the Binghamton
area, where increases in factory employment during the earlier part of
the war period had been relatively moderate, showed further increases
during 1943.

Other communities such as Bridgeport, Connecticut, the

Albany-Schenectady-Troy area, and the Buffalo area, where the increases
in previous years had been relatively large, showed slight declines,
especially in the later months of the year. On the other hand, in the
Paterson, New Jersey area, and Syracuse, further sizable increases in
employment followed substantial gains in preceding years, while in Eliza­
beth, Jersey City, and Yonkers, net reductions in employment followed
below-average increases previously.
In New York City, where a considerable amount of unemployment
persisted well into 1942, a fairly tight labor situation developed by the
middle of 1943. The change in the situation here may be attributable in
part to inductions of men into the armed forces, in part to the efforts
to place more war contracts in areas of labor surplus, and in part to
the employment of considerable numbers of residents of New York
City in the nearby war industries of Long Island, Northern New Jersey,
and Western Connecticut.




32

T W E N T Y-N IN T H A N N U A L REPORT
Percentage Changes in Factory Employment
Aug. 1939
to
Dec. 1942
Buffalo, N. Y ............................................................
Albany-Scl}enectady-Troy, N. Y...........................
Bridgeport* Conn.* ...............................................
Paterson, ijt. J.* .....................................................
f
Syracuse, fsf. Y ........................................................
Utica, N. Y ..............................................................
Rochester, \ Y ......................................................
N.
Elizabeth, N. J.* ...................................................
Newark, N. J.* .....................................................
Kingston-Newburgh-Poughkeepsie, N. Y.............
Yonkers, N. Y.* ...................................................
New York City .....................................................
Binghamton-Endicott-Johnson City, N. Y...........
Jersey City, N. J.* ...............................................

135
132
118
94
70
60
48
48
45
35
33
29
21
16

Dec. 1942
to
Dec. 1943
—
—
—
+
+
—
+
—
—
+
—
+
+
—

1.4
3.1
2.8
14.3
22.0
7.6
2.7
3.2
1.9
5.2
14.7
3.9
4.9
3.3

* Data for these cities are from United States Bureau of Labor Statistics and represent
percentage increases over 1939 average; data for all other localities are from the Divi­
sion of Statistics and Information, New York State Department of Labor.

Estimates of the civilian population as of November 1, 1943 indi­
cated a further shrinkage in this District of approximately 3.3 per cent
compared with May 1, 1942, and about 6.1 per cent compared with
April 1, 1940. The most recent decrease appears to have been only
slightly greater than in the country as a whole, whereas in the preced­
ing two years this District had shown a shrinkage in civilian population
which was not paralleled in the rest of the country. Apparently there
was some migration from this District to other areas between 1940 and
1942, which does not appear to have been repeated between 1942 and
1943. In fact, there were indications that the transient population of
New York City increased considerably during the past year.
One development which no doubt tended to relieve the situation
in a number of communities where labor shortages were developing
a year ago was a substantial curtailment of construction work. Reports
on construction contracts awarded during 1943 showed large shrinkages
from 1942 in all of the principal areas of the District.
Agriculture in the Second Federal Reserve District participated
in the further substantial increase in farm income which was reported
for the country as a whole during 1943. Reports of the United States
Bureau of Agricultural Economics indicate that the cash income from
farm marketings in New York State, which during the earlier years
of the war period had lagged considerably behind the increase for the




FEDERAL RESERVE BANK OF NEW YORK

33

United States, showed an increase in 1943 proportionately as large as
for the whole country. The estimate for 1943 was approximately double
that for the year 1939. The increase in farm income during this period
was considerably less than the increase in aggregate wage payments to
factory workers (which reflect the combined effects of increased em­
ployment and longer working hours, as well as higher wage rates), but
undoubtedly was considerably greater than the increases in the income
of many other groups in the District.
Retail trade in this District continued to increase in most areas,
the principal exceptions being Bridgeport, where large increases had
been reported in the preceding three years, and Newark, where there had
previously been no unusual expansion of trade. For the District as a
whole, the rate of increase continued to fall considerably short of a num­
ber of other districts and again was less for the country as a whole.
The same factors that have tended to limit the growth of employ­
ment, incomes, and trade in this District relative to other areas of the
country during the war years, should tend to make the problems inci­
dent to reconversion to peacetime activities somewhat less difficult than
in those areas where more radical changes have occurred. Among these
factors are the relative importance of consumers’ goods industries, dis­
tributive trades, and other nonwar activities, and the relatively small
in-migration of workers from other areas, with a few notable exceptions,
such as the Buffalo and Bridgeport areas, and to a smaller extent Northern
New Jersey. Presumably the most difficult problems of readjustment in
the postwar period will be in the large aircraft and shipbuilding indus­
tries of the District. Aside from the problem of reconversion of war
industries, however, the postwar situation in New York City, as the
largest distributing center of the country (including foreign trade as
well as domestic distribution), will depend heavily upon the degree of
success in meeting postwar reconversion problems in other parts of the
country and upon the extent of the recovery in foreign trade.




34

TWENTY-NINTH ANNUAL REPORT

Postwar International Monetary Cooperation
The British and American Treasuries each made public on April 7,
1943, a draft project of international currency stabilization.*

The plans

contemplate concerted action by the United Nations in making available
to one another their respective currencies for the purpose of meeting
temporary deficits in the settlement of international transactions, and
international consultation prior to changes in currency values when such
changes appear to be unavoidable.

The United States Treasury, in

releasing the plan drafted by its technical experts, emphasized the
urgency of arriving at an international agreement upon the terms of
this or some similar plan before the end of the present conflict, and
stated that “ the provisions of the proposal are in every sense tentative,
intended as a basis for discussion and exchange of views. ’ ’

The proposal

was for the creation of an International Stabilization Fund of the United
and Associated Nations.
Following exploratory discussions between its experts and those
of the other United Nations, the United States Treasury released on
August 20 a revised draft of the proposed plan for an international
stabilization fund.f

The new draft, it was ppinted out, was still pre­

liminary and did not necessarily reflect the official views of any of the
United Nations. As contemplated in the revised draft, the resources of
the Stabilization Fund would be 5 billion dollars or more, to be sub­
scribed by the member countries under a system of quotas based on the
size of their gold and exchange holdings, their national income, and the
magnitude of fluctuations in their balance of payments. Of each quota
50 per cent (or less in the case of gold-poor countries) would be in
gold, the rest in local currencies and securities. The Fund would be
administered by a Board of Directors (consisting of a Director and an
alternate from each member country), an Executive Committee, and a
Managing Director. Voting power would be distributed roughly in
proportion to the quotas.
The British proposal was in many ways similar to that of the
American experts. It called for an International Clearing Union, based
on an international accounting unit called the “ bancor” , which would
be defined in terms of gold and treated as the equivalent of gold.

The

* The full text of both plans was published in the Federal Reserve Bulletin, June 1943,
pp. 501-21.
t For the text of the revised Plan, see the Federal Reserve Bulletin, September 1943,
pp. 827-40.




FEDERAL RESERVE BANK OF NEW YORK
Union would begin its functions without capital or cash.

35
Countries

which had a favorable balance resulting from their exchange of goods
and services with the rest of the world, would be credited with that
balance at the Clearing Union, while those buying more of the world’s
goods and services than they sold would have a debit balance or over­
draft in bancor at the Union.

To each member state would be assigned

a quota determining the extent of its participation in the credit facilities
of the Union.

The initial quotas would be fixed at 75 per cent of the

sum of each country’s exports and imports on the average of the years
1936-38.

The Union would be administered by a Governing Board

appointed by the member governments.
in proportion to quotas.

Voting would, in general, be

The proposals of the British and American Treasury experts have
aroused widespread discussion among bankers and economists, here and
abroad, but have awakened perhaps less interest on the part of the
general public than the importance of the problem warrants. The general
aims of the two international currency plans have met with wide accep­
tance in the limited circles in which they have been discussed.

For the

most part, there is agreement that it would be highly desirable to have
international collaboration for the purpose of stabilizing the exchanges,
and facilitating the restoration and growth of international trade, thus
helping to raise the living standards of all peoples. A t the same time,
questions have been raised as to the content and timing of the specific
proposals.
In America there has been criticism of the British proposal because
of the potentially large commitments of the United States. British
technical opinion, on the other hand, in the main considers that the
generous scope of the British plan is one of its principal merits. It is
suggested that the danger of a renewed period of contraction and
depression such as the world experienced in the thirties can be success­
fully countered only by a bold expansionist scheme of this sort which
will ensure the ability of all countries to fill their urgent postwar import
requirements and will thus maintain an adequate level of world trade and
employment.
As seen by British and perhaps other foreign observers, the problem
of postwar international financial equilibrium is primarily one of induc­
ing the United States to make more dollars available through the purchase
of more foreign goods and services. It is widely felt abroad that the




TWENTY-NINTH ANNUAL REPORT

36

United States, during the interwar period, insisted upon selling more
goods and services to the rest of the world than it was willing to
buy from the rest of the world.

It is true that there was a sizable

American merchandise export surplus during the interwar period. How­
ever, the figures of our balance of trade must be considered in connec­
tion with other items of our current balance of payments; an American
export surplus does not necessarily mean a shortage of dollars for other
countries, since the dollars which the rest of the world needs may be
provided in a number of other ways— for example, through American
expenditures abroad in the form of tourist travel, shipping costs, silver
purchases, and emigrant and other remittances, all of which constitute
direct or indirect purchases of foreign goods and services. Taking these
additional items into account, analysis of a study issued during the
latter part of the year by the United States Department of Commerce*
shows that during the 16-year period 1922-37 (the other interwar years
being omitted as abnormal), the United States' purchases of foreign
goods and services

exceeded its sales of goods and services abroad by

about 2.5 billion dollars. The residue of truth in foreign beliefs about
our international purchases and sales of goods and services is that our
foreign purchases did not exceed our sales abroad by a sufficient margin
to offset the outside world's need of dollars for interest and dividend
payments and government debt transfers. During the twenties these
latter items were offset mainly by an extensive movement of long term
capital from this country to foreign countries. During the years 1930-37,
inclusive, our foreign lending largely ceased, but our excess purchases
of foreign goods and services, calculated in the manner stated above,
amounted to nearly 80 per cent of the interest, dividend, and govern­
ment transfer items payable to us. It was the heavy flow of foreign and
American capital from foreign countries to the United States during
this period, due in large part to political conditions abroad, which
aggravated our balance of payments position and resulted in the great
movement of gold to this country.
The belief has also been widely held abroad that the United States,
during the interwar period, ‘ ‘ hoarded’ 9 too much of the world's gold,
in the sense that it did not permit gold that came here to have the
expansionary effects on the American banking and economic system which
it was claimed it should have had if the gold standard were to function
* “ The United States in the World Economy” , published by the Bureau of Foreign and
Domestic Commerce, Washington, 1943.




FEDERAL RESERVE BANK OF NEW YORK
successfully.

37

With respect to this second point (which is the reverse

side of the first), the facts also are at variance with the assumptions. Not
only was there a great expansion of credit in this country during the
twenties, but also the statistics of actual gold stocks and movements do
not support the claim of excessive hoarding here. Thus, for example,
in the ten-year period 1919-28, the average net annual gold inflow into
this country was only 77 million dollars, while during the same decade
the declared gold reserves of countries other than the United States rose
from 4.2 to over 6 billion dollars. Even after the great inflow of gold
since 1933, the published gold stocks of the world, excluding the United
States, amount to nearly 11 billion dollars, and total stocks (disclosed and
undisclosed) held outside the United States are estimated at not much
less than 13 billion dollars, or (measured in dollars) almost twice the
total gold reserves of the world (including the United States) at the
end of 1918.
Any realistic financial and economic policy after the war must take
these facts into account. It is true that an unusual demand for dollars
during the period of transition from war to peace is not unlikely, but
it should not be forgotten that many foreign countries still have, or
have acquired during the war period, substantial holdings of dollars
as well as gold with which to meet their needs. Unless a radically differ­
ent situation prevails after the transition than before the war, it would
appear unlikely that the demand for dollar credits through the pro­
posed funds would, in the long run, reach such proportions as have
been feared by some American critics of the British plan, or as are
anticipated by some foreign critics of the American plan.
This approach to the problem has led to the suggestion that the
proposed plans have not made a clear distinction between the require­
ments of the postwar transition period and the more permanent and
normal requirements of the years which will follow. It has been argued
that the needs of the two periods are different in both character and
scope. During the transition period, the war-stricken areas will be im­
poverished, suffering from the disruption of their industrial and trans­
portation systems, and unable to feed, clothe, and shelter their peoples
adequately, much less export substantial quantities of goods. Such areas
will have a large excess of imports over exports, and some countries will
be unable to pay for everything they need. These extraordinary needs,
it has been suggested, should be financed, not by a currency stabiliza­
tion fund or union, but by special machinery such as lend-lease, relief




TWENTY-NINTH ANNUAL REPORT

38

and rehabilitation agencies, or, perhaps, by direct loans.

Should the

resources of the fund or union become frozen by financing such needs,
during the transition period, it is feared the institution would be unable
to serve its primary function in the years which follow, without an
undesirable refinancing.
Objections to the early emphasis on a mechanism for achieving
exchange stability have also been raised by those who believe that
international monetary stability is dependent primarily upon mainte­
nance of a state of economic health in the leading commercial and
industrial nations; that if this could be done, there would be less diffi­
culty in maintaining exchange stability and a reasonable state of
economic well-being in the world. An international plan aiming at post­
war external stability has been held to be premature so long as little
is known about the prospect and plans for maintenance of postwar
internal stability in the principal countries at a high level of production,
income, and employment.
In similar vein, it has been suggested that any international finan­
cial mechanism of the kind proposed presupposes a specific political and
economic environment. According to this viewpoint, the first step toward
international monetary stability should be a decision on the pattern
of political organization of the postwar world, following which inter­
national agreements on trade policies, commodity price stabilization,
international investments, and the like might be reached, and finally a
financial mechanism devised which would be suitably adapted to the
economic policies already agreed upon.
On more technical grounds, some observers do not believe that it
will be possible to fix suitable exchange rates simultaneously for a great
number of countries at the end of the war. According to this thesis,
it would be better to try to fix rates at the outset only for those few
countries, the value of whose currencies, at the time, will be most impor­
tant to international trade and finance, leaving the other nations to
put their affairs in order and to ascertain the correct value of their
currencies through a more liberal application of trial and error before
they join in a plan of international currency stabilization and financial
support.
These, and other suggestions and criticisms, have no doubt received
the attention of the Treasury experts who are working on the proposed




FEDERAL RESERVE BANK OF NEW YORK
plans.

39

The plans are still under discussion and it has been reported

that further revisions are being made in the light of continued study.

Proposed Bank for Reconstruction and Development
On November 24 the United States Treasury released the text of
a proposal for a Bank for Reconstruction and Development of the United
and Associated Nations, which had been drafted by Treasury experts
and transmitted to the Finance Ministers of the United Nations for their
consideration.* In the opinion of the sponsors of the bank plan, the
flow of private long term funds to capital-poor countries after the war
is likely to be inadequate unless a bank of this nature is set up. The
Bank would assist in reconstructing and developing member countries,
raising their productivity, and promoting the growth of international
trade. It would have an authorized capital of 10 billion dollars, sub­
scribed by the governments which were members of the International
Stabilization Fund, in accordance with a formula under which the United
States would subscribe approximately one third of the total. The capital
would be 20 per cent paid up at the start, partly in gold but mostly in
local currencies.
The Bank’s powers would include guaranteeing, participating in,
and making loans to member governments and their agencies, and also,
with the guarantee of member governments, to political subdivisions
and private enterprises. Loans could be made, however, only when the
funds were unobtainable from other sources upon reasonable terms. The
Bank would also be empowered to encourage international investments
in equity securities by arranging for government guarantees of the trans­
fer of earnings from such investments, and by participating in such
investments up to 10 per cent of its paid-up capital. The provisions
of the plan as to management are similar to those of the proposed Inter­
national Stabilization Fund.
* The text is reproduced in the Federal Reserve Bulletin, January 1944, pp. 37-41.




TWENTY-NINTH ANNUAL REPORT

40

Balance of Payments of the United States;
Capital and Gold Movements
B alance

of

P aym ents

Fundamental shifts in the balance of payments between the United
States and foreign countries, evident in the early years of the war,
were virtually completed in 1943. In that year the various items making
up the balance of payments began to conform to a well defined wartime
pattern.

Our commercial and financial transactions with foreign coun­

tries may be said to be in the second and perhaps final phase of their
wartime developments.

The shifts brought about by the war can be

seen in the accompanying diagram, which shows the cumulative move­
ment since 1935 in the principal factors providing dollars or their
equivalent to foreigners, and the chief ways in which dollars or their
equivalent were used by foreigners.
Principal Items in the United States Balance of Payments with Foreign Countries*
(Cumulative movements since January 1, 1935)

B IL L IO N S
OF DOLLARS

30

25

20
a5
10

5

0
5
10

15

20
25
30
* Areas above the zero line represent three o f the principal sources o f demand for dollars
by foreign countries; areas below the zero line represent the two principal methods by
which dollars have been obtained.




FEDERAL RESERVE BANK OF NEW YORK

41

Reviewing our immediate prewar experience, the diagram shows
that, except for a period between October 1937 and July 1938, the dom­
inant factor in the balance of payments was a persistent inflow of
capital from foreign countries. This was in large part the result, first,
of monetary uncertainties abroad and, later, of the series of political
crises which culminated in the outbreak of hostilities. From the end of
1934 through August 1939, this inward transfer of capital, according
to reported data, amounted to somewhat over $4,900,000,000,

and,

when unrecorded items are considered, the total movement was con­
siderably larger.

During the same period our merchandise exports

exceeded imports by over $2,000,000,000, only about one half of which
was offset by net payments to foreigners for services and other “ current
account” items, not shown in the diagram.
the “ current account”

items

The capital inflow and

(including trade)

were offset in the

balance of payments by a net gain of gold from abroad, amounting to
about $7,500,000,000 between the end of 1934 and the start of the war
in Europe.
The first phase of the war transition began with the prompt appli­
cation in 1939 of foreign exchange regulations in most parts of the
world where such controls had not previously been adopted. This re­
sulted in the elimination of virtually all private international transfers
of capital and gold not essential to the war effort, and the concentra­
tion of foreign exchange and gold holdings in the hands of various
monetary authorities. The effect of the war on our foreign trade, in this
period, was a further expansion in the already large export surplus,
as the trade balance of belligerents became an expression of war needs
rather than of economic exchanges of goods.
Even after the beginning of the war in 1939, however, it is signifi­
cant to note that gold movements continued to perform many of their
traditional functions. Since the British Empire and France undertook
to finance their overseas purchases of war supplies through the sale to
the United States Treasury of their gold stocks, there was for a time a
continuation, at an accelerated rate, of the inflow of gold from abroad
which had been in evidence in the prewar years. Gold, therefore, as in
peacetime, was acting as a “ balancing” item in the balance of payments.
The liquidation of prewar foreign gold reserves continued through the
early part of 1941 and between the end of August 1939 and the end of
April 1941 we experienced a further net “ gain” of gold from abroad
aggregating $5,600,000,000, or at a monthly average rate of $280,000,000.




42

TWENTY-NINTH ANNUAL REPORT
Because of these heavy gold sales, which at times were in excess

of foreign dollar requirements, foreigners did not, on balance, draw
down their dollar assets until early 1941; foreign funds in this country,
in fact, showed a rather sizable increase during 1940. With the tapering
off of gold sales, however, f oreign-owned dollar assets were heavily drawn
upon and in the thirteen months ended February 1942, there was a
recorded net reduction in foreign funds in this country amounting
to $625,500,000.

The greater part of this

4 outflow ” of foreign funds
1

represented the liquidation of short term dollar assets and American
securities requisitioned from private holders by the British Government.
Counterbalancing these gold and capital movements, there was a corre­
spondingly heavy, 4‘ favorable ” balance in our trade with foreign coun­
tries; from the outbreak of war to the end of 1941 merchandise exports
(excluding lend-lease) exceeded imports by $2,859,000,000.

E ffect

of

L e n d -L e a s e

Although there is no precise division between the two phases in our
wartime balance of payments experience, the second or current phase can
be considered to have begun with the passage of the Lend-Lease Act
in March 1941. The actual shipment of goods under the lead-lease pro­
gram did not, in fact, reach sizable proportions until several months
later, but the enactment of this legislation provided the means whereby
nations whose defense was common to ours could receive war supplies
without the need of further liquidation of their depleted gold and
dollar resources. It therefore became possible for the “ favorable’ ’ trade
balance to continue and even increase, without a corresponding move­
ment of gold, capital, or both. Exports considered vital to the war
effort were limited only by the practical restrictions of production
and shipping.
The profound effect of the lend-lease program on our balance of
payments can be seen from the chart on page 40.

In the early part of

1942, our net exports began to move rapidly upward and the movement
continued at an accelerated pace through 1943.

During 1942 and 1943

United States exports reached the unprecedented amount of $20,752,000,000 and exceeded imports by $14,645,000,000.

The bulk ($14,837,000,-

000) of the total exports for the period, however, represented lendlease goods and therefore required no immediate settlement in balance
of payment terms.




As a result, the inflow of gold from abroad,

FEDERAL RESERVE BANK OF NEW YORK

43

which previously had been the principal factor supplying the dollars
needed to pay for foreign purchases of our goods, ceased.
From the beginning of the lend-lease program through December
1943 we extended aid totaling $19,986,100,000, including services ren­
dered as well as goods transferred.

Of this amount, more than half, or

$11,733,000,000, was furnished during 1943.

At the same time we have

been receiving considerable amounts of “ reverse lend-lease” from those
countries to which we have been supplying goods and services.

Although

no comprehensive figures have been published, it has been reported that
the British Commonwealth of Nations alone had made expenditures of
about $2,094,900,000 for “ reverse lend-lease” aid up to December 31,
1943.

About $1,526,200,000 of this total was expended by the United

Kingdom and $568,700,000 by Australia, New Zealand, and India. By
the beginning of the year 1944, outlays by the British Commonwealth
for “ reverse lend-lease” to the United States were at an annual rate
approaching $2,000,000,000.
The lend-lease program has not been the only factor bringing to a
halt the drain on foreign holdings of dollar exchange and gold. The
Government’s buying program of vital raw materials in Latin American
and neutral European countries, either for shipment to the United States
or for storage abroad, has placed relatively large amounts of dollar funds
in the hands of foreigners. Not only has there been a substantial in­
crease in our imports, but, as a result of the restrictions on the production
of civilian goods here and limited shipping capacity for such goods,
there has also been an enforced reduction in our exports to those coun­
tries now benefiting from our buying abroad. The movement of American
troops to foreign countries and the outlays of these forces for goods
and services not received under “ reverse lend-lease” also have been an
important source of dollar exchange to the monetary authorities of the
United and Associated Nations.
R e c e n t C a p it a l M o v e m e n t s

The combined effect of all these factors, making up the second
stage of transition from peace to war, was, first, a curtailment in the
depletion of foreign-owned gold and dollars as the lend-lease program
got under way and, then, a gradual building up of foreign funds as
our foreign spending began to reach sizable proportions.

The net

acquisition of dollar exchange by foreigners began in February 1942
and has since continued at an increasing rate. According to recorded




44

TWENTY-NINTH ANNUAL REPORT

data, the net amount of foreign funds held in this country rose by
$2,037,900,000 between the middle of February 1942 and the end of
November 1943, the last date for which figures are published.

Of this

“ inflow/ ’ $1,238,600,000 occurred during the first eleven months of 1943.
Most of the “ inflow” during 1943, and in fact since February 1942,
has represented a building up of short term dollar assets by foreign
central banks and governments.

Since February 1942 foreign official

dollar assets in this country, despite large purchases of gold here, have
increased $1,583,900,000; of this increase $1,038,000,000 took place during
1943. As a result, official holdings of short term dollar funds as of
November 1943 amounted to $3,087,600,000 — a level greatly exceeding
that which prevailed at the outbreak of the war.
Under existing conditions and regulations, international transfers
of short term capital for private foreign account have, in general, been
negligible in recent years.

In the first eleven months of 1943, the net

amount of banking funds held in this country for such account rose by
$71,200,000. The small amount of these transactions, of course, has little
or no long-run significance, inasmuch as, under the systems of exchange
control in force throughout most of the world, dollar exchange held for
private account is kept at the minimum considered necessary for the
normal conduct of business, and new acquisitions of dollars are usually
turned over to the control authorities of the countries concerned.
Reported Net Movement of Capital between the United States
and Foreign Countries
(In millions of dollars; net capital inflow -f- or outflow —)
In banking funds
“ Official”
(a)

Total

Total

+1,413
+1,196
+ 802
+ 434
+1,177
+ 706
497
+ 604
+1,239

+ 965
+ 397
+ 256
+ 318
+1,146
+ 853
287
+ 561
+ 1,109

+
+
+
-

1935—Nov. 1943, in­
clusive................ + 7,074

+ 5,318

1935.......................
1936.......................
1937.......................
1938.......................
1939.......................
1940.......................
1941.......................
1942.......................
1943 through Nov...

Through security transactions

Private
+
+
+
+
+
+

+
+

10
71
163
5
304
658
147
358
1,038

+

2,450

+ 2,868

+
+
—

—

+
+

955
326
93
323
842
195
140
203
71

Total
+
+
+
+
+
—

+
+

Domes­
Broker­
tic
Foreign age bal­
securities securities ances

448 + 317
799 + 601
546 + 245
116 + 58
86
31 147 - 245
210 - 262
43 + 47
130 + 37

+1,756

+ 712

+ 125 +
+ 191 +
+ 267 +
+ 58
+ 84 +
+ 78 +
+ 52
7 +
+ 82 +
+ 930

6
7
34
—
33
20
—
3
11

+ 114

(a) Since July 1942, includes funds held for account of foreign central banks, governments, and their
agencies; prior to that date included only certain foreign funds held with the Federal Reserve
Bank of New York and commercial banks in New York City.




FEDERAL RESERVE BANK OF NEW YORK

45

Foreign transactions in long term securities likewise were on a
small scale during 1943. In the elapsed portion of the year, through
November, a net amount of $36,800,000 of domestic securities was pur­
chased for foreign account. This represented largely purchases of long
term United States Treasury securities for official foreign account. As
has been the case in most previous years, foreigners continued to retire,
either through redemption or repurchase prior to redemption, their
securities outstanding in this market. From the end of 1942 through
the end of November 1943, recorded net purchases of foreign securities
by foreigners amounted to $81,600,000, most of which appeared to have
reflected the repatriation of the dollar bonds of the Western Hemi­
sphere countries.

These net purchases extended to $929,800,000 the

repatriation of foreign securities since the beginning of 1935, when the
present reporting system began.

G old M o v e m e n t s

The magnitude of recent accumulations of dollar exchange by for­
eign monetary authorities cannot be fully appreciated without taking
into account recent gold movements. During the period from February
1942 to November 1943, when banking assets held in this country for
foreign official account rose by $1,583,900,000, foreign central banks
and governments also increased the total amount of gold earmarked
for their account at this bank by $1,027,264,000. There has been a further
increase in gold earmarkings since the end of last November and the
amount held at the end of 1943 — $3,477,400,000 — was the largest on
record and about $1,560,600,000 above the level of June 1941, when the
current program of gold earmarking began. As the gold earmarkings,
together with relatively small exports of gold, were only partly offset by
domestic production and imports, the United States monetary gold stock,
which reached a peak of $22,800,000,000 in November 1941, had been
reduced to $21,900,000,000 by the end of 1943.

A t that level, however,

it was still more than $5,000,000,000 greater than at the beginning of
the war in Europe.
Without identifying the principal buyers of gold, the general state­
ment may be made that they had one characteristic in common: namely,
they have acquired substantial amounts of dollar exchange in recent
years following a period of severe strain on their gold and dollar reserves
in the years leading up to, or immediately after, the start of the war.




46

TWENTY-NINTH ANNUAL REPORT
As related to our international balance of payments, this foreign

accumulation of gold is significant in two respects. In the first place,
the gold purchases indicate a recouping of foreign gold reserves which
had been depleted in the prewar years. The redistribution of the world’s
gold supply now under way — although still on a relatively small scale —
should aid in establishing and maintaining postwar exchange stability.
Secondly, the foreign acquisitions of gold demonstrate that, despite the
many changes the war has made in this country’s financial and com­
mercial relations with other nations, gold continues to play a role as a
means of settling international balances. Whereas, before the inaugura­
tion of the lend-lease program gold flowed to this country, we are now
losing gold as a result, in part, of the excess of our imports over cash
exports.
The esteem in which gold is still held in many countries has been
evidenced not only by the monetary demand for gold in recent years,
but also by a public demand in those countries where a more or less un­
restricted bullion market still exists. This has been particularly true in
Gold Held Under Earmark for Foreign Accounts and Foreign Deposits In
Federal Reserve Banks
BILLIO NS
OF D O L L A R S




47

FEDERAL RESERVE BANK OF NEW YORK

India and in the Middle Eastern countries, where large allied expenditures
and a limited supply of commodities have made possible a considerable
hoarding demand for gold. Indicative of this demand, the price of gold
in the Bombay bullion market, which rose steadily during 1942, turned
sharply upward in April 1943 and by the early part of May had
reached a record high, equivalent to about $78 per ounce. A similar
movement has occurred in Egypt and prices in the Alexandria market
have been roughly comparable with those quoted in Bombay. At these
high levels, gold was selling at well over twice the $35 an ounce price
quoted by the United States Treasury. Such wide discrepancies in price
between markets can, of course, exist only because of the present re­
strictions throughout the world on dealings in, and the international
movement of, gold.
The introduction by the Indian Government of anti-inflationary
measures, including restrictions on forward dealings in gold and a
prohibition against loans on gold, has been instrumental in depress­
ing the Bombay gold price.

But by the end of last November, gold

bullion was still being traded in the Bombay market at the equivalent
of about $62.50 per ounce.

As a further means of combating inflation,

official sales of gold reportedly have been made on a large scale in the
Indian market and in markets of the Middle East.

These sales

undoubtedly have also tended to reduce the price of gold in Bombay.

Foreign Exchanges
The foreign exchange markets continued inactive during 1943 and
any resumption of dealings on a more or less unrestricted basis must
await at least the partial removal of the wartime controls on inter­
national finance and commerce. These restrictions at present include
not only the direct foreign exchange controls in effect here and abroad,
but also the various other governmental regulations covering trade and
finance, which have indirectly restricted exchange transactions for private
account. Governmental controls over trade and shipping, together with
the curtailment of the production of civilian goods, have been instru­
mental in placing a large share of foreign trade on a government-togovemment basis.
With but few exceptions, foreign exchange rates remained stable
during 1943, although under the present conditions this stability may
reflect simply the efficiency of the controls. Few changes were made in




48

TWENTY-NINTH ANNUAL REPORT

the official rates quoted by the various monetary authorities. The official
sterling rates continued at $4.03% for the purchase of dollars and
$4.02% for the sale of dollars. As a means of simplifying the manage­
ment of sterling accounts held by residents of the United States, on
February 2, 1943, all such sterling area and “ free” (old) accounts were
converted into United States registered accounts, first established in
July 1940. This amalgamation had the effect of extending to the sterling
area and “ free” accounts the guarantee of convertibility into dollars
at the official rate. Official dollar rates for other sterling area currencies
also remained at previously prevailing levels. No large changes were
made in the official dollar rates of the Latin American exchanges.
In the New York market, quotations for those currencies still traded
reflected closely the various official rates.

In the “ unofficial” market

for the Canadian dollar, the rates moved within a fairly narrow range
around the official level.

Among the Latin American exchanges, the

free rate for the Argentine peso which had held somewhat below $0.2400
since the early part of 1941 presumably through official intervention
in the Buenos Aires free market, was allowed by the Argentine authori­
ties to appreciate at the beginning of 1943 and by mid-April had risen to
slightly above $0.2500, the highest level since before the start of the
war in 1939. On April 19 the rate at which the Argentine central bank
buys dollar exchange derived from “ nonregular” Argentine exports to
the United States was changed to 397.02 pesos per $100, equivalent to
about $0.2519 per peso (compared with about $0.2370 previously).
The widest fluctuations in New York foreign exchange rates during
1943 occurred in the so-called “ free” rate for Swiss francs. This rate
is to be distinguished from the so-called official rate of $0.2331, at
which Swiss banks supply Swiss francs against dollars for certain
specified purposes. In view of the extremely limited supply of Swiss
francs available for other purposes, the “ free” rate is unduly sensitive
to relatively small changes in demand and supply, and the resultant,
erratic movements in the rate have little or no economic significance.
During 1943 the “ free” rate fluctuated between $0.2450 on February 1
and a high of $0.4435 in mid-December. This appreciation in the rate
in the latter part of the year appears to have been due largely to a
tightening of the Swiss National Bank’s policy with respect to the absorp­
tion of the dollar proceeds of the exports of Swiss watches.




FEDERAL RESERVE BANK OF NEW YORK

Foreign Relations
Deposits held by the Federal Reserve Banks for foreign central
banks and governments rose to successive, high levels during most of
1943, and as of the end of the year totaled $1,360,000,000, an increase of
$568,000,000 over the level of a year earlier. This increase occurred
despite the continuation of the sizable conversion of dollar balances into
earmarked gold which has been under way for several years. The total
amount of gold held under earmark for foreign account rose $803,000,000
during the year to a new high of $3,477,000,000. Furthermore, foreign
monetary authorities continued to show considerable interest in investing
some of their holdings of dollars in United States Government securities,
as evidenced by an increase of $352,000,000 in such holdings at this
bank, which at the end of the year amounted to $833,000,000.

All

funds, including gold, held by the Reserve Banks for foreign account at
the close of 1943 aggregated $5,693,000,000, compared with $3,969,000,000
at the end of 1942 and $1,515,000,000 immediately prior to the outbreak
of the war.
Six new foreign accounts were opened on the books of the Federal
Reserve Bank of New York during the year. Two of these accounts were
opened in this bank's capacity as fiscal agent of the United States, while
the other four were opened by this bank on its own behalf and that of
the other Reserve Banks. This bank also established three new foreign
currency accounts with central banks abroad — two in its capacity
as fiscal agent of the United States and the other for its own account
and that of other Reserve Banks.
As a result of United , States
Government operations abroad in connection with the war, there was
a considerable increase in the volume of foreign transactions effected by
this bank, acting on behalf of the Treasury Department and several
Government agencies.
Two short term loans, aggregating $2,500,000 and secured by gold
earmarked at this bank, were made to a Latin American central bank
in January 1943 and were repaid the following April.

Two similar

loans made to the same central bank in the latter part of 1942 were also
repaid during the year under review, so that no loans to foreign central
banks were outstanding as of the end of 1943.

Developments in Operations of the Bank
There was a further substantial increase in the volume of operations
of the bank during 1943, especially in its work related to war expendi­




50

TWENTY-NINTH ANNUAL REPORT

tures and the financing of such expenditures. In order to handle this
greatly increased volume of work, it has been necessary to increase the
size of the bank’s staff to nearly double that of three years ago. A t the
end of 1943, the total number of employees, including the Buffalo Branch,
was 4,632, compared with 2,482 at the end of 1940. Between 40 and 45
per cent of all employees of the bank are now engaged directly in opera­
tions which are carried on as fiscal agent of the Federal Government
and its agencies.
The Government Bond Department and its affiliated Savings Bond
Redemption Department continued to be among those showing the great­
est expansion. A t the end of 1943, these departments had more than
1,000 regular employees and, in addition, were forced to borrow con­
siderable numbers of employees from other departments from time to
time to handle the load at peak periods. The large increase in the work
of these departments is reflected in the table at the end of this section,
in which it is shown that the total number of Government securities
issued, redeemed, and exchanged during the past year was in excess of
42.000.000, compared with slightly less than 20,000,000 in 1942. The
dollar amount represented by these securities totaled more than
$112,000,000,000 in 1943, compared with approximately $47,000,000,000 in
1942. The greater part of the increase in the number of securities handled
was in Savings bonds; the number of Savings bonds issued by this bank
and supplied to other issuing agents in the District increased from about
17.000.000 in 1942 to 32,000,000 in 1943, and there was also a substantial
increase in the number of redemptions of Savings bonds accompanying
the rapid increase in the number outstanding. On the other hand, most of
the increase in dollar volume was in other types of securities, including
Treasury bills, certificates of indebtedness, notes and bonds, and Savings
notes.
In the handling of Government checks, there was a growth of such
proportions that it became advisable to set up, in June 1943, a separate
department for the payment, recording, and forwarding of such checks.
As the table indicates, the number of Government checks handled rose
from somewhat more than 22,000,000 in 1942 to about 61,500,000 in 1943.
A large part of the increase was due to the fact that, beginning in May,
army dependency benefit allowance checks* for the whole country were
made payable at this bank. The number of such checks handled by the end
of 1943 was close to 30,000,000.

Army allotment checks** also were

* These checks represent payments by the Government to dependents of men in the
Army, to supplement allotments made by the men themselves.
* * Allotments of part of their pay, made by men in the Army to their dependents.




FEDERAL RESERVE BANK OF NEW YORK

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TW ENTY-NINTH A N N U AL REPORT

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Number of Pieces Handled*
Bills discounted:
Applications ..........................................................
Notes discounted ...................................................
Industrial advances:
Notes discounted ...................................................
Commitments to make industrial advances___
Currency received and counted .................................
Coin received and counted .........................................
Checks handled:
United States Government ch e c k s......................
All other ................................................................
Collection items handled:
United States Government coupons paid'"*___
All other ................................................................
Issues, redemptions, and exchanges by fiscal agency
departments:
United States Government direct obligations ..
All other .................................................................
Wire transfers of funds ...............................................
Amounts Handled
Bills discounted .............................................................
Industrial advances:
Notes discounted ...................................................
Commitments to make industrial advances___
Currency received and counted .................................
Coin received and counted .........................................
Checks handled:
United States Government ch e ck s......................
All other ................................................................
Collection items handled:
United States Government coupons paid** . . .
All other ................................................................
Issues, redemptions, and exchanges by fiscal agency
departments:
United States Government direct obligations ..
All other ................................................................
Wire transfers of funds ...............................................

1942

940
940

585
585

3
0
759,332,000
1,441,589,000

1
2
735,507,000
1,325,127,000

61,568,000
224,249,000

22,292,000
214,308,000

5,466,000
1,310,000

4,799,000
1,730,000

42,090,000
182,000
158,000

19,776,000
242,000
165,000

$642,816,000

$106,361,000

101,000
0
4,439,525,000
138,784,000

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145,000
3,804,765,000
129,409,000

32,483,158,000
139,355,654,000

19,193,691,000
105,717,029,000

932,461,000
2,407,785,000

703,483,000
1,711,466,000

112,431,087,000
1,753,839,000
62,527,138,000

46,726,911,000
2,567,823,000
42,120,814,000

* Two or more checks, coupons, etc., handled as a single item are counted as one
“ piece.”
* * Includes coupons from obligations guaranteed by the United States.




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1943

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53

FEDERAL RESERVE BANK OF NEW YORK

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e
m
v
e
n
i n
g

u

b

s
f

o
d

e
e

t
t

e

s

g
h

s

a
f

i
e
e

i

d

w
e

e

r
t

r

,
a

w
m
t

National b a n k s................
State banks and trust com­
panies ........................

565

0

100

574

0

100

241

161

60

225

179

56

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

806

161

83

799

179

82

Changes in Federal Reserve Membership in Second District During 1943
Total membership beginning of year ................................................................

799

Increases:!
State banks and trust companies adm itted.................................................

17

Decreases:
Member banks combined with other members ...........................................
Voluntary liquidation ....................................................................................

9
1

Total membership end of y e a r ............................................................................

h
a

c

December 31,1942

Net increase .............................................................................................................

h
w

Non­
Non­
Per cent
Per cent
Members members members Members members members

Total decreases ......................................................................................

a

d

r
o

s

p
h

n

f

e

—
e

d

n

l
h

s

e

o

a

s

s

a
f

t
t

e

h

,

r

d

u

s
o

n
n

r

e

h
t

e

a

u
t

h

c
n
r

s

c
n

t

e

,

n
i

v

n

k

i

—

e

December 31,1943

10
7
806

* This represents only banks in actual operation.
t In addition to figures shown in this table, two nonmembers were absorbed by members
during the year.




e

s

s

m
n

o
t

l
k
e

a

p
a

a

d

m

o
e

r
n

e

m

p

o

b

h

a

p
l

i
n
s

e

d
e

t
a

o

y

v
s

i

n
b

r
r
n

a

Number of Member and Nonmember Banks in
Second Federal Reserve District at End of Year*
(Exclusive of Mutual Savings banks and Industrial banks)

Type of bank

r

.

y
e
h

m
a

t

55

FEDERAL RESERVE BANK OF NEW YORK

F

i

n

a

Statem ent

o
t
o
t
t
$

T
f

h

h

a
f

o

t

a

e

v

7

, 9

e

n

3

r
$

n
1

i

o

e

r
h

r

k
a

v

8
m
, 7

a

l

S

e

s

o

a

t

n

t
, 0

0

A ssets

Gold certificates on hand and due from U. S.
Treasury .........................................................
Redemption Fund—Federal Reserve notes . . . .
Other cash .............................................................
Total reserves .......................................
Bills discounted:
Secured by U. S. Government obligations,
direct and guaranteed .........................
Other bills discounted.................................

Dec.

w
f

i
, 0
t

e
c
u
, 0
0

0

Dec.

$ 6,855,451
1 ,364

74,244

73,223

$ 6,001,376

$ 6,930,038

$

$

$

2,185

Industrial advances .............................................

$

126

$

179,243

$

Total U. S. Government securities,
direct and guaranteed ..................
Total bills and securities ....................
Due from foreign b a n k s.....................................
Federal Reserve notes of other b a n k s..............
Uncollected items ...............................................
Bank premises .....................................................
Other assets ...........................................................
Total assets.............................................
* After deducting participation of other Federal
Reserve Banks .............................................

235
1,062

Total bills discounted .........................

U. S. Government securities, direct and
guaranteed:
Bonds .............................................................
Notes ........................................................
Certificates ...................................................
Bills ..............................................................

3 1 ,1 9 4 2

22,844

2,185

$

$

1,297
611

713,273

74,569

343,553

271,407

265,889

2,474,891

372,606

$ 3,000,110

$ 1,695,321

$ 3,002,421

$ 1,697,229

$

$

56*

u

n

d
h

2

s

$ 5,904,288

o
i

g
l

o

c

h
0

0

h

,

e

.
0

3 1 ,1 9 4 3

t
r

n

o
0

e

(In thousands of dollars)




t

u

$

0

e

n
d

n

, 0
0

e
d
y
,
l l i
,

r

m
t

s

i

u
t

0
Y

e

n
n

e

r
3

o

0

r

l

i

u

w
o

t

o

c

C ondition

of

n

c
9

, 5
a

o

e

N
m

9
h

c

h
n

o

G
t

e
t

n

18*

12,394

7,019

502,634

3 82,789

9,121

9,823

9,936

21,947

$ 9,537,938

$ 9,048,863

80

29

r
0

i

t
a

56

TW ENTY-NINTH AN N U AL REPORT

1
9
4
3
.
H
o
l d
i n
g
r e
f l e
c
t i n
g
h
e
a
v
o
p
t i o
n
s )
t o
a
d
i n
c
r e
a
s e
i n
t h
i
i t s
p
a
r t i c
i p
a
t i o
d
u
c
e
d
.
C
o
n
s e
h
o
l d
i n
g
s
o
f
T
d
e
b
t e
d
n
e
s s
s h
o
h
o
l d
i n
g
s
b
e
i n
g
W
“
e
n
m
l a
D
a
n

h
t

i

o

t

l

a

d

o

e
r

n

t

g

e

c

e
e

d

e

l

m
o

t

e
y
l s
f
1
9
4
2
,
o
f
m
e
m
b
a
n
k
s
b
e
r
2
9
n
D
e
c
e
m
b

h

i

l

s

o

y
j u

t
a

n
u
r

a
e

w
a
a

r
i
e

o

c

e

L iabilities

Dec. 31,1943
$ 3,766,861

$ 2,799,735

$

4,263,922
210,279
600,236*
246,308

$ 5,320,745

* After deducting participation of other Federal
Reserve B a n k s................................... ."...........




$

271,518
342

$

8,917,259

$

Total liabilities .....................................

Ratio of total reserves to deposit and Federal
Reserve note liabilities com bined..............
Commitments to make industrial advances . . .

301,754
1,154

57,440
70,012
7,092
12,880

$

53,653
58,001
7,070
12,880

$

147,424

$

131,604

$

Capital accounts:
Capital paid i n .............................................
Surplus (Section 7) ...................................
Surplus (Section 13b) ...............................
Other capital accounts ...............................

Total liabilities and capital accounts..

$ 5,845,664

$ 9,390,514

Deferred availability ite m s.................................

Total capital accoun ts.........................

$ 5,029,391
144,933
367,578*
303,762

'

$ 9,537,938

$

66.0%
9
759,843

$ 9,048,863

$

80.2%
261
424,034

i

t

a

t

d
n

t

c

r

a

e

n

h

Dec. 31,1942

Federal Reserve notes in actual circulation . . .
Deposits:
Member bank— reserve account ................
U. S. Treasurer— General Account ..........
Foreign ........................................................

c

k

e

l

(In thousands of dollars)

y
l

o

b
a
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r

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t

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s

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i
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e

r

l e

b

q

T

a
s

s

e
d
t
b

f

s

d
8

i

s
t

h

57

FEDERAL RESERVE BANK OF NEW YORK

$
$
t
w
t
p

M
7
6

e

m

5
0

h

r

e

e
r

T

l o
h

c

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O
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p

s

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a

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1
c




4
u

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n
$
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0

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r

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b
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0
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d
u
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58

TW ENTY-NINTH AN N U AL REPORT
Profit and Loss Account
For the Calendar Years 1943 and 1942
(In thousands of dollars)
1943

1942

$

17,998
10,034

$

14,078
8,880

$

7,964

$

5,198

$

10,217
28

$

967
7

$

10,245

$

974

$

2,389
482
7

$

1,122
482

Total deductions .................................

$

2,878

$

1,604

Net earnings .........................................................

$

15,331

$

4,568

Paid United States Treasury (Section 13b) ..
Dividends paid .....................................................
Transferred to surplus (Section 13b) ..............
Transferred to surplus (Section 7) ..................

$

18
3,280
22
12,011

$

34
3,184

Surplus (Section 7) beginning of year ..........
Addition as above ...............................................

$

58,001
12,011

$

56,651
1,350

Surplus (Section 7) end of y e a r ......................

$

70,012

$

58,001

Additions to current net earnings:
Profits on sales of U.S. Government securities
All other .......................................................
Total additions .....................................
Deductions from current net earnings:
Retirement system .......................................
Special reserve on bank prem ises..............
All other .......................................................

R
n
o

e

t

e
v
o
h

r

v
k

r

p




e

r
$

e
u

m

a

r
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t
t
s

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n
4

n
n

i
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1,350

t

o

n
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c
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k

h
q
n

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t

i

59

FEDERAL RESERVE BANK OF NEW YORK

I
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b
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A
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TW ENTY-NINTH A N N U AL REPORT

60

C h an g es

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FEDERAL RESERVE BANK OF NEW YORK

Directors and Officers
DIRECTORS
Class
A

Group
I S .

Slo an

C o lt

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

61

Term
Expires
Dec, 31
1946

President, Bankers Trust Company, New York, N. Y.
A

2

W

il l ia m

J. F ield ......................................................................................................
President, Commercial Trust Company of New Jersey,
Jersey City, N. J.

A

3

W

arren

W . C l u t e , Jr ..............................................................................................

1944

1945

President, Glen National Bank of Watkins Glen, Watkins
Glen, N. Y.
B

1

D o n a l d so n

Brow n

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

1946

Vice Chairman of the Board, General Motors Corporation,
New York, N. Y.
2

B

F rederick E. W

il l ia m s o n

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

1944

President, The New York Central Railroad Company, New
York, N. Y.
3

B

C arle C. C o

n w ay

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

1945

Chairman of the Board and President, Continental Can Com­
pany, Inc., New York, N. Y.
C

B eardsley R u m l ,

Chairman ..............................................................
Treasurer, R. H. Macy & Co., Inc., New York, N. Y.

1944

C

W

I. M ye r s , Deputy Chairman.................................................
Dean, New York State College of Agriculture, Cornell
University, Ithaca, N. Y.

1945

C

R obert D. C a l k in s

il l ia m

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

1946

Dean, School of Business, Columbia University, New York,
N. Y.
DIRECTORS—BUFFALO BRANCH
B . F o l s o m , Chairman ........................................................................
Treasurer, Eastman Kodak Company, Rochester, N. Y.

M a r io n

Term
Expires
Dec. 31
1944

G il b e r t

A. P r o l e ...................................................................................................................................
Genesee Farm Supply Company, Batavia, N. Y.

1945

T h o m a s R o b i n s , Jr ..................................................................................................................................

1946

President, Hewitt Rubber Corporation, Buffalo, N. Y.
R obert R . D e w

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

1944

President, Dunkirk Trust Company, Dunkirk, N. Y.
L e w is

G . H a r r im a n

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

1945

President, Manufacturers and Traders Trust Company, Buffalo, N. Y.
B. M i l l i m a n .............................................................................................................................
President, Central Trust Company Rochester, N. Y., Rochester, N. Y.

E lm er

R e g in a l d

B.

W il t s e ,




Managing D irecto r.........................................................

MEMBER OF FEDERAL ADVISORY COUNCIL
J o h n C. T r a p h a g e n ,
President, Bank of New York,
New York, N. Y.

1946
1944

62

TW ENTY-NINTH A N N U AL REPORT
OFFICERS
A l l an Sproul,

First Vice President
R a y M. G id n e y , Vice President
J. W il so n J o n e s , Vice President
L. W erner K n o k e , Vice President
W alt er S. L o g a n , Vice President, and
General Counsel
L eslie R . R o u n d s ,

J a m e s M . R ice ,
R obert

Vice President

il l is ,

Vice President
Vice President

Assistant Vice President
H arold V . R oelse ,

Assistant Vice President

Assistant Vice President

H erbert H . K im b a l l ,

H orace L. S a n f o r d ,

Assistant Vice President

Assistant Vice President

T odd G . T ie b o u t ,
R u fu s J. T r im b l e ,

Assistant General Counsel
Assistant General Counsel
N orris O . J o h n s o n ,

L oren B. A l l e n ,

Manager, Research Department

Manager, Credit Department
D udley H . B a r r o w s ,

W

Manager, Cash Department

il l ia m

M . K e tt ne r ,

Manager, Security Custody
Department

H arold A . B i l b y ,

Manager, Check Department

D a n ie l J. L iddy ,

H arry M . B o yd,

Manager, Savings Bond Redemption
Department
R obert H . B r o m e ,

Assistant Counsel, and Assistant
Secretary

Manager, Foreign Department
M ic h a e l J. M cL a u g h l in ,

Manager, Accounting Department
F r a n k l in E. P e te r so n ,

Manager, Bank Relations Department
W

W . B ur t ,

F e l ix T . D a v is ,

Manager, R.F.C. Custody Department

Manager, Government Check
Department
F rederick S to c k e r ,

Manager, Cash Custody Department
W

E d w in C. F r e n c h ,

Manager, Collection Department

F. S h e e h a n ,

I n s l e y B. S m i t h ,

N o r m a n P. D a v is ,

Manager, Foreign Funds Control
Department, and Manager, Security
Loans Department

il l ia m

Manager, Bank Examinations Depart­
ment, and Chief Examiner

Manager, Government Bond Department

il l ia m

F. T reiber ,

Assistant Counsel, and Secretary
C h ar les N . V a n H o u t e n ,

M arcus A . H arris ,

Manager, Securities Department
il l ia m

R o u se ,

S ila s A . M iller ,

G eorge W . F er g u so n ,

W

Vice President

Vice President

il l ia m s ,

V a l e n t in e W

Assistant Vice President

esley

G.

Jo h n H . W

E dw ard 0 . D o u g la s ,

W

President

A rt hu r P h e l a n ,

Manager, Safekeeping Department
Jo h n H . W

A . H e in l ,

Manager, Personnel Department

urts ,

Manager, Government Bond Department

W il l ia m H . D il l is t in , General Auditor
D o n a l d J. C a m e r o n , Assistant General Auditor

OFFICERS—BUFFALO BRANCH
B. W il t s e ,
H alsey W . S n o w ,
Managing Director
Cashier

R eginald




G eorge J. D o l l ,

Assistant Cashier