The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1951:A OFFENSE-CIV ECONOMY IN OPERATIO Thirt3-seventh The Federal Annual Reserve Report Bank of Philutlel ph.i.a SOME PROBLEMS OFA DEFENSE-CIVILIAN ECONOMY AND A REVIEW OF1951 THE FEDERAL RESERVE BANK OF PHILADELPHIA April 30,1952 A year ago, in its Annual Report for 1950, this Bank pointed out that "a constantly mobilized economy will present grave new problems. " Even if the Korean con- flict should end, the threat of new crises in other parts of the world makes it increasingly lems will clear that these prob- be with us for some time. We shall need to understand and to develop a facility in dealing with the problems of partial mobilization. A further these problems is the subject of this Annual analysis of Report for the year 19 51. (itJiL44A4 President. CONTENTS PAGE 1 Introduction: Some Problems Defense-Civilian 4 Review Economy of 1951 4 Choices in 1951 10 Inflation Control 13 16 20 Reserve Bank Directors Appendix Operations and Officers in a Additional copies of this report are available upon request to the Department of Research, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pa. SOME PROBLEMS IN A DEFENSE-CIVILIAN ECONOMY The decision to take military action in Korea introduced problems different from any this country has ever faced. In the past, we have had relatively short, intense periods of war and rather long periods of peace.The present state of concurrent peace and war, of civilian and defense activity is a new experience. Foreign aggressionhas forced us to prepare for a number of possible moves by the Communists; and, becauseour resources are limited, we cannot prepare to the extent we should like for every possible eventuality. The key problem in the current defense economy is how fast to rearm. By concentrating on present models of military weapons, production could be expanded rapidly. In many cases,however, these models are practically obsolete. New, improved designs are nearing completion but all of the "bugs" have not been removed; it takes time to test and perfect the more complex, advanced designs. The therefore, has been between a rapid build-up in major choice, the production of old model weapons or a slower build-up with more modern weapons. The first course would give us greater strength in caseof immediate attack; the second would give us a stronger defense in the long-run. The present leans strongly program represents a compromise. It toward the more forces in Korea The build-up. military gradual have been be put which could equipped with standard weapons into production immediately. At the same time the hulk of the program is being concentrated in weapons of more advanced design. Concurrently, has been put forth to increase greater effort basic industrial capacity, so that the output of these new weapons could be stepped up rapidly in case of all-out war. As a result of the compromise decision, there has been some sacrifice in the volume of defense output. I Any program for defense which calls for a large volume of production over a long period of time must take into account the likelihood of periodic speed-ups and cut-backs in production as international tensions mount and subside; likewise, rapid obsolescenceof military equipment is likely to mean that the volume of defenseproduction will fluctuate rather than remain stable. Such an environment would place a premium on flexibility. It would require frequent shifting of both productive resources and purchasing power between the civilian and defense sectors. Stepping up or slowing down the tempo of defense activity would sector require opposite and compensating changes in the civilian of the economy if full use of productive resources were to be maintained. The volume of civilian spending power also would have to be adjusted to a fluctuating volume of civilian goods, inasbut, much as the production of defense goods generates incomes does the unlike civilian production, supply of civilian not add to goods and services for these incomes to buy. Unless sufficient purchasing power is diverted to the Government to pay for defense, excessive demand for civilian goods would tend to force prices up. Another problem in a defense-civilian economy is the extent to which market forces can be relied on for the necessary allocation of resources between civilian and defense uses and for restraining inflation. In total war, direct controls are necessary, but the need for them is for a limited period of time. In a prolonged period of partial mobilization, on the other hand, we may be faced with an uncomfortable choice: to impose controls over a long period with the threat that they might become permanent, or to devise ways of turning them on and off as needed. Taxation and a restrictive monetary policy are the first lines of defense against inflation. They go to the source of inflation by curbing spending power in excess of the supply of goods available for purchase. One of the most difficult problems in a period like this, however, is to make tax and monetary policies sufficiently restrictive to curb inflation and yet not interfere with the expan2 demand slon of production. The objective is to restrain excess Tax which would bid resources. serve only to up prices of scarce and monetary policies may have to be supplemented at times, however, by measures-such as selective credit regulations, accelerated amortization of defense plants for tax purposes and materials controls-designed to allocate resources to the most essential uses. One of the disadvantages its inflexibility. of fiscal policy is Tax changes, because of the legislative process, require time. It would be difficult to time tax increases and decreases to match neatly the requirements imposed by in the substantial swings volume of defense furthermore, people are not as production; willing to bear a heavy burden of taxation under partial mobilization as in all-out war. Monetary and debt management policies are more flexible. They line with the can help keep spending in for an effecsupply of civilian but goods they are not a substitute tive tax program. Direct controls over prices and wages, while undesirable except for temporary periods, may also be helpful under certain condit'ons. Ceilings are likely to be however, more difficult to maintain, when wages and prices are tied closely together by escalator and Productivity clauses, and when labor has not given up the right to strike. The administration of direct controls is more difficult, moreover, and public support is more apathetic than in all-out war. Over a prolonged period there would also be severe administrative problems involved in alternate control and de-control to meet changing conditions. These are some of the disadvantages of direct controls. Their basic shortcoming, however, is that they attack the symptoms of inflation, not the cause. Some of the problems of a large defense program for a prolonged period can be solved by more production. If we can produce more, we shall be able to satisfy more of the defense needs and ordinary civilian demands. But to get this increased production takes time; it requires an expansion of capacity and an increase in Productivity. More production, however, does not remove the inflationary effects long as part of a large defense program. As 3 become availof our current output goesfor defense and does not able for civilians to buy, civilian spending power tends to outrun the available supply of civilian goods-unless the Government defense pursiphons off enough spending power to pay for its chases.Credit restraints are also needed to prevent the money supbe ply from expanding more rapidly than physical output can increased. REVIEW OF 1951 The year 1951 can be put down as a good case illustration of the problems of partial mobilization. It was characterized by unto a new certainties, conflicting trends, and gradual adjustment kind of environment. Choices in 1951 The major types of choices just discussed were reflected in one way or another in the distribution of the total output of goods and services - the gross national product. As the chart shows, although Government purchases of goods and services for national security rose during the year, by the fourth quarter they were still absorbing only 13 per cent of the gross national product. The share going for national security was held down by shortages, perhaps the most serious of which was in machine tools, by the decision not to freeze designs of new types of fighting equipment, and by the many delays which are inevitable in the development of complex new weapons. Only $16 billion worth of end products was delivered to the armed forces during 1951, but industry at the end of the year was working on outstanding orders of more than $40 billion. Nineteen fifty-one was essentially a year of gearing up. In the three states-Pennsylvania, New Jersey, and Delaware Third Federal contain the Reserve District, almost $4V2 -which 4 GOVERNMENT PURCHASES OF GOODS AND SERVICES FOR NATIONAL SECURITY BILLIONS $ ANNUAL 1 75 QUARTERLY (ANNUAL RATES) 25 ý1 0 PER CENT OF GROSS NATIONAL 1rt PRODUCT 40 20 0 44 1950 49 1951 billion of prime defense contracts were awarded from the Korean outbreak to the end of 1951. This constituted 10 per cent of all contracts awarded in the United States; but becauseof the many small manufacturing establishments working on subcontracts, this figure probably understates the contribution of this area to the defense effort. As in the early stages of World War II, this region was for a time receiving a growing share of defense contracts. Already highly industrialized area and producing items like a E clothing which are needed for an expanding armed force, the Third District has contributed materially to the defense effort in this period of gearing up. As plants are built for new types of defense production in other parts of the country, however, this 5 area is likely to receive a smaller share of the defense contracts. This is what happened in World War II, and there are evidences that a repetition of this experience is now beginning. Five areas in the district-Altoona, Pottsville, Wilkes-Barre, Scranton, and Atlantic City-have been designated areas of "substantial labor surplus," however, and are to receive preferential treatment in the placement of defense contracts. The gearing-up process involved a tremendous expansion of basic productive capacity, much of which will enlarge defense production in the future. Businessspending for plant and equipDOMESTIC INVESTMENT* QUARTERLY (ANNUAL RATES) RESIDENTIAL CONSTRUCTI OI ýQV60 roo'oý ý a OTHER NEW CONSTRUCTION - PRODUCERS EQUIPMENT % 11 PER CENT OF GROSS NATIONAL PRODUCT DURABLE ment broke all previous records in 1951, reaching $23 billion for the country as a whole. Certificates permitting acceleration of amortization for tax purposes were issued covering a total of $12 billion worth of facilities deemed necessary for defense. The total increased but there was a volume of investment substantial shift in the importance of the various components, a growing proportion consisting of investment by defense industries. Investment in producers' durable equipment not only was the most important item but (with the exception of inventories) increased more rapidly than the others. Total non-residential construction changed little during the year, defense construction offsetting a substantial cut-back in non-essential building. The most place in home building, which dropped from striking change took$13 billion in the fourth quarter an annual rate of 1950 of to $10 billion in the fourth quarter of 1951. Although substantial this decline was not as great as was intended. When real estate credit controls were imposed in the fall of 1950, an official target of 800,000 to 850,000 housing starts was established for the year 1951. The number of houses started during the year actually turned out to be 1,100,000, largely because of a high level of building activity in the first part of the year on the basis of commitments made before the imposition of real estate credit controls. With a few exceptions, materials for home construction were adequate. It is have possible that home construction would dropped from but boom level in even so the any event, of 1950 stiffer credit terms and a shrinking supply of mortgage money hastened the decline. These same general movements were apparent in the Third FederalReserve District during the year. Total construction activity, as measured by contract awards, was higher than in 1950; but industrial construction rose by 168 per cent, residential building stayed at about the level, and all other types of construction declined. Businesssame concerns in this district through October 7 of 1951 had received certificates permitting acceleration of amortization for tax purposes covering roughly $800 million of facilities. Five areasin the district were designated critical housing areas: Fort Dix-McGuire Air Force Base, New Jersey; Indiantown Gap, Pennsylvania; Allentown-Bethlehem, Pennsylvania; Dover, Delaware; and Bucks County, Pennsylvania. The beginning of construction of the Fairless Steel Works in deBucks County promised to stimulate substantial industrial largest plant This is Delaware River. the velopment along the of this plant erected anywhere since World War II. Construction integrated steelmaking caunit with an annual -a completely begun March in in 19 S1 1,800,000 tons-was response pacity of to urgent national defense demands for more steel. Rolled steel products are scheduled to emerge by mid-1952. The project is accompanied by a huge housing development and the influx of auxiliary industries, some to produce the required raw materials and supplies for the new steel mill and others to turn the basic steel output into fabricated products for both national defense and civilian needs. A construction crew of 6,000 workers is rushing completion of the plant, which will employ 6,000 workers when fully operating. Consumers became adjusted to partial mobilization during the year, although it took some time for them to unlearn the lessons of World War II. When fighting broke out in Korea, consumers and business men rushed into the markets to stock up on goods which they thought would become scarce. Consumers went on another buying spree after the Chinese entered the Korean conflict. During the first quarter of the year, department store sales in the Third Federal Reserve District were 17 per cent greater than in the same period of 1950. Business firms also accumulated inventories during this period. During the last three-quarters at a rapid rate however, consumers behaved quite conservatively. They of 1951, found had that goods of almost all kinds were plentiful and that prices were more stable. As the chart shows, consumer spending dropped off in the second quarter and then proceeded to rise grad8 70 60 50 l, f ,, ý39 44 49 1950 IIII 1951 I__J ually, about as fast as the total gross national product. Spending did not rise as fast as incomes however, which meant that consumers were saving more. Part of this saving went into liquid assets,part to pay off debts. It was this change in the attitude of consumers, perhaps more than anything else, that kept inflation from breaking out in 1951. The rise in total business inventories alsoslowed up considerably after mid-1951. Consumer prices ended the year at a level 6 per cent higher than they began the year, and only 2 per cent above the March 1951 level. At the end of the year, wholesale prices had almost cancelled out the upsurge experienced in January and February but were still 13 per cent above the level prevailing when fighting started in Korea. There was no over-all inflation in 1951, but the basic economic forces still carried a threat of inflation. 9 Inflation Control Becausethese pressureswere still with us, there was a need for keeping up our guard against more inflation. Prices were frozen in January. Numerous adjustments were then made throughout the year to correct inequities and to conform to liberalizing amendmentspassedby Congressin the middle of the year. Limitations on wage increaseswere imposed and scarce materials were directed to essential usesfirst by priorities and later by a Controlled Materials Plan. Efforts were also made to remove the source of inflationary pressures. The tax increases voted by Congress were sufficient to billion during the provide the Treasury with a cash surplus of $1.3 year. As Government expenditures were stepped up, however, it became increasingly apparent that higher taxes would be necessary to put us on a pay-as-we-go basis. The Federal Reserve authorities took two types of actions to hold down the expansion of credit and the money supply. One type was designed to restrict the total amount of credit and new deposits made available to borrowers by limiting the supply and availability of bank reserves. The discount rate had already been increased shortly after the outbreak in Korea, making it more expensive for member banks to get more reserves by borrowing from the Reserve Banks. In January 1951, reserve requirements were raised to immobilize reserves which otherwise would have been available for new loans and investments. Most important of all, in the spring of the year a fundamental change was made in open market policy. Throughout the war and post-war periods, the Federal Reserve had followed the policy of supporting the prices of Government securities. This policy, however, made it more difficult to combat inflation. As banks, insurance companies, and other lenders sold Government securities to get funds for loans and other investments, Federal Reserve purchases in supporting the prices of Governments gave banks 10 more reserves and tended to increase the money supply. In an effort to eliminate this source of inflation, the Federal Reserve and the Treasury reached an accord in March 1951 which permitted Government security prices to seek their own level, the Federal Reservemerely standing by to maintain orderly conditions in the market. By limiting its purchases of Government securities, the Federal Reserve System reduced the supply of additional reserves made available to the banks. Smaller purchases by the System also resulted in a decline in the price of Government securities, in many casesbelow par. Lending institutions became lesswilling to use this source of funds as the prices declined. The tendency was for lending agencies to limit the amount of credit extended to private borrowers to the amount of new funds becoming available from savings and from repayments on old loans. This change in in the field of policy was particularly effective real estate credit. Insurance companies and other lenders had become heavily committed to make mortgage loans, expecting to meet many of these commitments by selling Government securities. When prices dropped below par, these of Governments lenders became The in more cautious making new commitments. result was that the supply of funds in the real estate market became considerably tighter, particularly in the field of loans guarfixed at anteed by the Veterans Administration where the rate is 4 per cent. A second type of action taken by the Federal Reserve authorities was designed to limit the use of credit in particular areas-the stock market, selected consumer durable goods, and new construction. In January the Board of Governors tightened stock market credit by raising margin requirements from 50 to 75 per cent. The System's authority to regulate consumer credit had been restored in the Defense Production Act of 1950, and the System was also given new responsibility for regulating credit (not guaranteed or insured by the Government) for most types of new 11 construction. There is a special need for consumer and real estate credit regulations during a period of war or partial mobilization, for they not only limit credit in particular strategic areasand thus help to curb spending in those sectors of the economy, but they defense purposes. also tend to free labor and materials needed for dampen Regulations on consumer credit helped to the demand for consumers'durable goods in 1951. Outstanding consumer instalment credit showed practically no net change during the year, in contrast with an average annual increase of more than $2 billion in the preceding four years. In renewing the Defense Production Act during the summer, however, Congress provided that the regulations could not be more restrictive than certain specified down payment and maturity provisions provided in the Act. This, of course,necessitatedsomerelaxation of the regulation, the terms becoming effective at the end of July. Perhaps partly for this reason,the volume of instalment credit rose slightly between July and the end of the year. A similar development occurred in the field of real estate credit. Regulation X had been issued in October of 1950, applying to credit in connection with new homes and additions and improvements to existing homes. At the same time, the Housing and Home Finance Agency had issued regulations restricting credit on houses financed with Government guarantee or insurance. In January of 1951, the regulations were extended to multi-family dwellings, and in February to In non-residential construction. each month of 1951 from February until August, the number of private housing starts fell below the corresponding month of the preceding year by progressively larger percentages. The volume of mortgage lending remained high, but in some cases not as high as in 1950. Although the large volume of outstanding commitments made the regulation necessarily slow in taking effect, Regulation X and its companion restrictions undoubtedly confor nontributed to a lower volume of construction activity defense purposes and a lower volume of mortgage lending. Conin f decided act, that the gress, regulations had been too restrictive, for in the Defense Housing Act it, in effect, relaxed the regula12 tions by providing that terms could not be more restrictive than certain specified down-payment and maturity provisions. After the relaxation of real estate credit restrictions, housing starts still remained below the previous year but by a smaller percentage than was the casepreviously. A new weapon in the fight against inflation was created during 1951 in the form of the Voluntary Credit Restraint Committee, authorized by the Defense Production Act of 1950. During the year, the national Committee issuedsix bulletins dealing with various phasesof the program, including loans on real estate, loans secured by stocks and bonds, international financing, and postponement of state and local government borrowing. It is impossible to measure accurately the effect of any one of these measures to restrain the expansion of money and credit because we never know what would have happened otherwise. The facts are that the privately held money supply increased during the year by $9 billion. Bank loans increased substantially, but less than in 1950. Loans of all member banks in the Third Federal Reserve District mounted rapidly in the first quarter of the year, but the upward trend was much slower in succeeding quarters. During the year as a whole, the increase was $276 million as against a record-breaking rise of $414 million in 1950. Business loans accounted for over 70 per cent of the increase but a large part of this, of course, was either directly or indirectly for defense Reserve work. At the weekly reporting banks in the Third Federal District, loans finance defense defense-supporting to activities or roserather steadily from May to the end of the year. Lending for non-defense on the other hand, remained low during May, June, activity, July and and subsequently rose more rapidly than defenseloans. RESERVE BANK OPERATIONS In the fall of 191 many bank officers and bank directors in the Third Federal Reserve District had their first look at the Fed13 banks in eral Reserve in action. Invitations were extended to all held here in home" "at district meetings the to attend a seriesof bank building. Our to make the guests were given the opportunity to Bank, the staff, and to meet members of a tour through the in the extension observe the tremendous volume of work entailed of servicesto banks, the Government, and the public. Nineteen fifty-one was a busy year at the "Fed. " Expansion in the general level of business was reflected in a substantial rise in checks handled to a record-breaking 187 million units-an average of about three-quarters of a million every working day. A factor was a heavier volume of checks of the Vetcontributing following the transfer of some of its offices erans Administration Philadelphia. Beginning in July, card-form postal money orders to last were added to the work; 10 million were handled over the half of the year. Active public demand for currency was reflected in the receipt and counting of 291 million pieces-another new high rec- ord. A decline in coin handled was due in part to shortages of supply, which necessitated informal rationing at times in the latter part of the year, and to the direct interchange of coin between commercial banks. Increasing use is being made of armored cars for shipments of cash; more than half of all money received from or shipped to country banks in the district is now being so handled. The number of United States savings bonds issued by qualified agents and by this Bank increased in 1951, but dollar volume declined, chiefly because of a sharp drop in sales of Series F and G bonds. Redemptions were somewhat less than in 1950, despite maturing of some of the Series E bonds; many holders of these matured securities obviously are availing themselves of the privilege of holding them for another term of years. There was a decline in the moderate number of marketable Government securities handled in connection with subscriptions, exchanges and transfers, but redemptions increased. A decline in the number of Government coupons redeemed was due partly to refunding of 14 coupon-bearing securities into paid at maturity. certificates on which interest is Pressure on bank reserves from time to time and the smaller incentive to adjust reserve positions through sales of Governments when prices of numerous issues are below par contributed to an increased use of the discount privilege. The number of banks accommodated increased from 103 to 148 and the volume of advances during the year from $195 million to a total of $1.5 billion. Inquiries fewer capital were with respect to working loans under Section 13b of the Federal Reserve Act; 20 loans were approved, all but two to facilitate defense production. The Bank received many more applications than in 1950 for the guarantee of loans under Regulation V, as was to be expected in view of the stepping up of defense activities. The administration of Regulations W and X, relating to consumer and real estate credit, was consolidated in a new department - Selective Credit Regulation The - as the year opened. recordsshow 10,700 registrants in this district under W and 4,100 under X. Much time has been devoted to explanation of the provisions of these regulations, but the major effort now is concerned with investigation and compliance. High-level activity prevailed in many other departments of the Bank. Purchases and sales of securities for the account of member banks and their customers increased in number in 1951, and the volume of securities held for various purposes rose 2 per cent to more than $2V2 billion. The number of receipts handled in connection with Federal taxes held close to 300,000 and the dollar amount increased by $233 million, or 35 per cent. Transfers of funds were heavier than in 1950, showing gains of onethird in number of transactions and in dollar amount. Handling a tremendous volume of items and transactions, with substantial shifts in activity from day to day, every effort is put forth to achieve a maximum of efficiency and flexibility. Machineshave been introduced wherever possible-in currency and coin counting, in the collection department where there has been 15 in fiscal agency a shift from 24- to 32-pocket proof machines, divisions of the work. operations, in accounting, and in other Punch-card equipment has been adapted to an increasing number in the numof operations, necessitating an increase from 20 to 29 is department ber of machines in the where this type of work with concentrated. Maintenance of a well-balanced organization has been adequate training for the supervisory staff and employees part of the work of promoting efficiency. As a result of expanding operations and new activities, however, the number of full-time employees increased from 997 to 1,08 5. Increasing pressure on available space necessitated the renting of a floor in a nearby building, to which the Redemption and Consignment Divisions of the Savings Bond Department were transferred in June. To safeguard records in the event of bombing, a security file program was instituted with provision for the storage of records outside of the city. It is the policy of the Bank that the member banks should be informed of the services available and the procedures to be followed in utilizing them, that banks and the public should be informed as far as possibleof the reasonsactuating Federal Reserve policy decisions,and that information on basic banking and businessconditions should receive wide distribution. To this end, conferenceswith bankers are held "at home" or in the field; meetings of the Federal Reserve Relations Committee are held semiannually and printed minutes are prepared; hundreds of visits are made to individual banks by field representatives; members of the staff participate in many meetings, often as the speakers; and a wealth of statistical and other material bearing on the economic situation and district activities is distributed. Directors and officers George W. Reily, completing 24 years as a Class A director representing Group 2 banks, and Albert G. Frost, a Class B director ending his second term as a representative of Group 3 banks, 16 decided not to stand for re-election. Wadsworth Cresse was elected to succeedMr. Reily and Andrew Kaul, III, to succeed Mr. Frost, for terms of three years beginning January 1,1952. In a special election, Charles E. Oakes was selected as a Class B director by Group 1 banks to complete the unexpired term of William J. Memel, who was appointed by the Board of Governors of the FedReserve ereal System to fill a vacancy among the Class C directors. Subsequently, the Board of Governors reappointed Mr. Memel asa ClassC director for a term of three years. Warren F. Whittier served as Chairman and C. Canby Balderston as Deputy Chairman of the Board of Directors during 1951, and they were reappointed by the Board of Governors for service during 1952. Frederic A. Potts, President of the Philadelphia National Bank, completed his third year as the District's representative on the Federal Advisory Council. The Board of Directors of the Bank selected Geoffrey S. Smith, President of the Girard Trust Corn Exchange Bank, Philadelphia, to serve during 1952. L. E. Donaldson, a Vice President who had been associated with this Bank since 1919, died in April. Effective May 1, Philip M. Poorman was made Vice President in charge of fiscal agency operations, relinquishing his former additional title of Cashier. Richard G. Wilgus, an Assistant Vice President, was named Cashier and given charge of the cash and collection departments in addition to other duties. Norman G. Dash, formerly General Auditor, was made an Assistant Vice President, and Herman B. Haffner succeeded him as General Auditor. As the year drew to a close, the following were announced, effective appointments January 1,19 52: George J. Lavin, an Assistant Cashier, became an Assistant Vice President; Harry W. Roeder was named an Assistant Cashier. The following individuals were promoted to official positions with Industrial professional titles: Evan B. Alderfer, Economist; Clay J. Anderson, Financial Economist; Hugh Barrie, Machine Methods Officer; and Fred A. Murray, Director of Plant. 17 DIRECTORS as of April Group 1,1952 Term Expires December31 A CLASS D. SWIFT ARCHIE Chairman of the Board, Central-Penn National Philadelphia, Pennsylvania 1 1953 Bank, WADSWORTH CRESSE 2 Cashier and Director, The First National Bank and Trust Company, Woodbury, New Jersey 3 J. NYCE PATTERSON President, The Watsontown National Bank, Watsontown, Pennsylvania cuss B CHARLES E. OAKES 1952 President and Director, Pennsylvania Power and Light Company, Allentown, Pennsylvania 2 WARREN C. NEWTON 1953 President, 0. A. Newton and Son Company, Bridgeville, Delaware 3 ANDREW KAUL, III President and Director, St. Marys, Pennsylvania 1954 Speer Carbon Company, cussc WARREN F. WHITTIER, Agricultural Consultant, Chairman 1952 Chester Springs, Pennsylvania C. CANBY BALDERSTON, Deputy Chairman Dean, Wharton School of Finance and Commerce, 1953 WILLIAM 1954 University of Pennsylvania, Philadelphia, Pennsylvania J. MEINEL President and Chairman of the Board, Heintz Manufacturing Company, Philadelphia, Pennsylvania 18 OFFICERS us of April 1,1952 ALFRED H. WILLIAMS President W. J. DAVIS First Vice President GEORGE J. LAVIN Assistant Vice President KARL Vice EDWARD Assistant R. BOPP President A. AFF Cashier ROBERT N. HILKERT Vice President RALPH E. HAAS Assistant Cashier ERNEST C. HILL Vice President ROY HETHERINGTON Assistant Cashier WILLIAM G. McCREEDY Vice President and Secretary HENRY J. NELSON Assistant Cashier PHILIP M. POORMAN Vice President HARRY W. ROEDER Assistant Cashier RICHARD Cashier EVAN B. ALUERFER Industrial Economist G. WILGUS and Assistant Secretary JAMES V. VERGARI Counsel and Assistant Secretary CLAY J. ANDERSON Financial Economist WALLACE M. CATANACH Assistant Vice President HUGH BARRIE Machine Methods Officer NORMAN G. DASH Assistant Vice President PREI) A. MURRAY Director of Plant HERMAN R. HAFFNER General Auditor 19 PAGE 21 Statement 22 Earnings 23 Volume of Condition and Expenses of Operations MEMBER BANKSTHIRD FEDERAL RESERVE DISTRICT 24 Combined Statement 24 Earnings, Expenses, and Profits 25 EMPLOYMENT AND EARNINGS 25 INCOME AND PRICES 26 DEPARTMENT STORE SALES AND INVENTORIES 20 Statement of Condition Federal Reserve Bank of Philadelphia End of Year (000's omitted in dollar figures) ASSETS Gold certificates ............................... Redemption fund-Fed. Res. notes............... Total gold certificate reserves................ Other cash .................................... Discounts and advances......................... Industrial loans ................ United States Government 1951 1950 1949 $1,145,047 56,306 $1,130,280 50,563 $1,208,508 48,915 $1,201,353 17,513 $1,180,843 19,125 $1,257,423 14,489 1,485,205 securities ............. Total loans and securities ................... Due from foreign banks ...... 'R'e's. ' ............... Fed. Res. notes of other Fed. Banks......... Uncollected items .............................. Bank premises ................................. All other assets ................................ ) $1,492,408 1,378,198 $1,384,042 267,200 2,854 8,298 $2,759,740 $1,769,888 $1,665,849 $1,632,188 912,100 4,285 822,286 58,227 71,016 5,142 788,335 63,750 60,848 5,131 $ 956,671 183,799 239 $ 918,064 143,300 557 $2,806,558 $2,694,109 660 21 172,456 2,986 6,493 $2,874,305 $ 964,915 195,198 CAPITAL ACCOUNTS Capital paid in........ Surplus-Section 7 Surplus-Section ............................. 13b Reservesfor ........................... contingencies ....................... Total liabilities and capital accounts........ . Ratio of gold certificate reservesto deposit and Federal Reserve note liabilities combined...... Commitments . to make industrial advances........ 3 10,369 268,232 2,920 7,759 41,119 7,411 . 1,286,381 $1,295,521 $3,001,310 Member bank reserve accounts ................ United States Government .................... Foreign ..................................... Other deposits .............. . ................ . 7,255 1,885 2 11,382 2 11,682 Total assets ............................... LIABILITIES Federal Reserve notes Deposits: ........................... Total deposits........ Deferred availability items ............ All other liabilities Total liabilities ........................... ........................... 3,640 2,204 3,440 3,763 $2,930,661 $ 16,765 41,493 4,489 7,902 $ 15,675 39,710 4,489 7,873 S 15,084 38,205 4,489 7,852 $3,001,310 $2,874,305 $2,759,740 43.9% $1,319 45.0% $593 49.3% $689 Earnings and Expenses Federal Reserve Bank of Philadelphia 1950 1949 $24,444 $18,142 $21,270 373 184 241 $24,817 $18,326 $21,511 1951 (000's omitted) 1 Earnings from: United StatesGovernment securities........... Other sources ................................ Total earnings ............................. Expenses: Operating expenses' .......................... Cost of Federal Reserve currency ............... Assessments for expenses of Board of Governors ................................. Total net expenses ......................... Current net earnings ............................ Additions to current net earnings: 4,252 695 439 4,159 322 272 458 260 $ 4,877 $ 5,875 $ 4,963 18,942 13,363 16,634 0 1,630 2,272 Profit on salesof U. S. Government securities (net) ............................. All other ................................. Total additions ............................ 4,858 312 $ 2,274 $3$2,631 Deductions from current net earnings ............. Net additions to current net earnings ............. Transferred to reserves for contingencies.......... 114 179 $ 2,631 $ 2,095 29 23 2,821 Interest on Federal Reserve notes .............. 16,042 13,539 13,511 Net earnings after reserves and payments to U. S. Treasury ............................... $ 2,760 $ 2,432 $ 2,397 -$ lilt Paid to U. S. Treasury: Dividends paid ................................ Transferred to surplus (Section 7) ................ 978 927 896 $ 1,782 $ 1,505 $ 1,501 'Aftcr dcducting rcimburscmcntsrcceivcd for certain fiscal agcncy and other expenses. tNrt deduction. 22 ý. _- Volume of Operations Federal Reserve Bank of Philadelphia 1949 1951 1950 161,500 26,100 10,100' 800 157,300 23,300 160,600 22,500 700 290,800 479,700 1 70 277,900 541,000 1 700 270,300 431,600 Number of pieces (000's omitted) Collections: Ordinary checks ............................. Government checks (paper and card)........... Post Office money orders card Non-cash items .............................. Currency counted .............................. Coins counted ................................. Discounts and advances to member banks......... T...... ýýaýý>aCl> [___ - [ I-U1 . ...... .. c....... ... .... ... Fiscal agencyactivities: 229 Marketable securities delivered or redeemed Savings bond transactions (Federal Reserve Bank and agents) Issucs(including rc-issucs Rcdcmpt'Ions ......... .. Couponsrcdcemed(Govcrnment and agcncics).. 53 I 46 200 148 5,766 5,902 1,032 5,428 5,964 1,106 $46,718 3,640 145' 167 1,859 49 1,537 28,371 $42,416 2,950 5,336 6,050 1,250 Dollar amounts (000,000's omittcd) Collections: Ordinary checks.......... ............. Government checks (paper and card)........... Post Office money orders (card) ................ Non-cash items .............................. Currency counted .............................. Coinscounted Discounts and ................................. banks......... advancesto member Transfers of funds .............................. Fiscal agency activities: Marketable securities delivered or redeemed..... Savings bond transactions (Federal Reserve Bank and agents) Issues (including re-issues) ................ Redemptions ............................ Coupons redeemed (Government and agencies). *New activity, beginning July 1952. tear values. 23 8,968 3871 3891 90 $37,186 2,771 52 195 21,157 140 1,671 42 254 17,706 9,613 7,215 163 1,708 sz2t 396t 113 483t 366t 122 Member Banks Third Federal Reserve District Statement of Condition I Percent distribution Change during (000,000'somitted in dollar figures) Dec. 31, 1951t Assets Loans and discounts.. . .......... U. S. Government securities......... Other securities .................... Cash assets ........................ Fixed assets ....................... Other assets Total Total +$ 414 131 + 72 + 163 31.1% 34.5 9.9 23.3 28.2% 38.7 9.6 22.22 . 518 .3 100.0% 418 18 11 53 54.3% 23.3 1.9 6.2 +$ 276 265 + 39 + 127 +3... 25 $8,000 -2.. +$ 178 +$ +$ + +$ + $4,337 1,866 151 499 395 $7,248 53 699 1 $8,000 ....................... Dcc. 30, 1950 1950 $2,484 2,762 791 1,867 71 ....................... ....................... Liabilities and capital accounts Deposits: Individuals, partnerships, and corporationsDcmand ..................... Time ....................... U. S. Government ................ Bank Other ........................... ........................... Total deposits ............... Other liabilities Capital accounts .................... ................... Dcc. 31, 1951 1 1951 .9 109 31 13 + 22 -5+74.9 +$ 144 +2+8 + 32 + +$ 485 + .4 100.0% 90.6%0 .7 8.7 25 .7 8.5 +$ 518 1 100.0% +$ 178 54.0% 23.5 2.1 6.1 5.1 90.8% 1 100.0% Earnings, Expenses, and Profits (Millions of dollars) 1 1951t Earnings On U. S. Government securities ................ On other securities ............................ On loans ..................................... Other earnings ............................... Total earnings .......................... Current expenses Salaries and wages Intcrest on dcposits ............................ .......................... Othcr cxpcnses ............................... Total current expenses .................. 50.1 16.3 106.3 35.6 208.3 62.6 17.1 48.7 128.4 Net current earnings before income taxes I-i9-. 9 Net recoveriesand profits on sales(-}-) or charge-offs (- ) ............................ Taxes on net income .......................... Net profits ................................. Cash dividends declared ....................... 1950 -10.4* 23.4 46.1 23.6 1 1949 56.5 1 16.6 I 46.43.6 1 119.2 72.6 - 6.6* 17.5 48.5 23.0 51.7 16.4 include substantial 54.3 14.6 68.5 29.8 167.2 1 111.7 I 64.8 - 7.4* 15.5 41.9 21.5 tPrcliminary. 'Charge-offs 1948 54.1 15.0 76.3 31.1 176.5 53.7 16.3 88.0 33.8 191 .8 1 1 transfers to reserves for bad debt losses on loans. 49.0 16.2 41.4 106.6 60.6 I - 9.1* 13.9 37.6 20.3 Employment and Earnings-Pennsylvania All Manufacturing Emplo Weekly ment, earnings Average: Factory Workers Durable Goods Emplo'Weekly mcnt earnings 1939.......... 100 1940.......... 1941.......... 110 134 24.27 29.25 119 158 28.19 34.31 101 111 19.77 22.23 147 35.45 184 41.57 111 25.58 156 153 138 133 143 143 127 131 139 140 141 41.48 44.57 43.29 42.21 48.04 52.84 52.94 57.01 63.74 62.77 62.28 203 198 171 151 166 166 143 150 168 165 166 47.82 51.14 48.89 45.63 52.18 57.59 57.63 62.15 70.22 68.94 68.10 110 108 106 115 120 120 112 113 111 115 116 30.03 32.80 34.47 37.86 42.47 46.42 47.12 50.29 54.10 54.10 54.12 142 63.52 169 69.65 116 54.78 142 140 140 137 138 63.40 63.36 63.74 63.47 63.28 170 170 170 167 168 69.67 70.01 70.28 69.75 69.88 115 111 110 108 109 54.29 53.43 53.85 53.86 53.25 138 64.65 168 71.59 109 54.24 138 137 137 64.13 64.49 165.79 168 168 169 70.93 71.16 72.62 108 106 107 53.55 54.44 55.25 1942.......... 1943.......... 1944.......... 1945.......... 1946.......... 1947.......... 1948.......... 1949.......... 1950.......... 1951.......... 1951: January.,,, February...... March......... April.......... ay.......... June........... July ........... August........ September..... October....... November..... December 100. Factory payrolls: 1939 100 Farm Income- Prices: 1935-1939 - 100 $22.42 1940................... 1941................... ................... 1942... 1943 ................ 1944 ................... 1945 ................... ................... 1946 1947................... 1948................... 1949 ................... 1950................... 1951................... ................... 1951: January February ................ March ............... ................. April .................. y June ................ ................... 100 100 $19.16 Income and Prices Income from farm marketings Consumer N.. 1. Pa., goods and Dcl. ' Factory Payrolls Pennsylvania Total Average: 1939 $25.76 Nondurable Goods Emplo%Weekly ment earnings Durable goods Consumer prices in Phila. t 100 100 100 99 99 119 175 232 2B8 131 210 297 377 104 129 148 172 104 122 155 197 99 104 115 123 303 266 394 324 185 191 199 231 124 127 250 306 336 267 336 372 228 267 290 268 299 321 138 158 171 300 320 275 292 169 334 395 391 362 459 441 298 313 325 290 345 303 170 186 181 392 440 328 277 186 402 457 331 322 185 402 460 326 314 310 308 303 302 309 302 301 307 Statistics. 341 361 406 412 382 377 334 327 396 462 397 465 July 388 453 ................... Au gust 389 455 ................. September 466 398 .............. October.:.............. 463 393 November 465 394 December ....... :...... 47b 403 Ste,. .............. ----- Dept. -U. S. Agriculture, tU. S. Bureau of Labor of 25 185 186 186 185 185 186 187 190 190 Department Store Sales 1947-1949° 100 (Ad)usted for seasonalvariation) 1939.......... 1940.......... 1941.......... 1942.......... 1943.......... 1944.......... 1945.......... 1946.......... 1947.......... 1946.......... 1949.......... 1950.......... 1951.......... 1951: January....... February...... March........ April ......... May.......... June.......... July.......... August........ September..... October....... November..... December..... Third District Lancaster Ph ila. 38 41 48 53 56 62 68 87 96 104 100 106 109 126 120 109 105 104 103 105 111 107 109 110 105 41 44 51 57 60 65 70 88 98 104 99 104 106 124 114 104 103 100 102 104 108 104 105 107 101 Reading 36 37 45 52 57 62 67 87 97 103 100 108 110 128 120 119 98 106 109 100 110 104 99 121 109 36 39 47 53 58 62 65 86 97 104 99 102 104 121 112 97 104 98 103 98 100 104 103 95 112 Trenton I WilkesBarre 32 35 40 44 50 55 63 83 91 104 105 116 121 135 124 123 120 125 117 114 117 124 114 122 123 32 32 38 41 46 56 65 88 97 105 98 101 100 118 113 101 97 95 93 94 98 95 97 102 102 York 36 39 45 53 60 68 74 94 95 105 100 106 114 129 120 118 100 118 110 105 119 113 107 113 114 Department Store Inventories 1939.......... 1940.......... 1941.......... 1942.......... 1943.......... 1944.......... 1945.......... 1946.......... 1947 1948 .......... .......... 1949.......... 1950.......... 1951 .......... 1951: January....... February ...... March........ April......... May.......... June July .......... .......... August....... . September ..... October....... November.... . December.... 41 42 51 70 60 62 64 81 93 107 99 108 127 124 127 132 133 133 132 132 129 125 117 115 120 43 44 52 78 65 66 69 87 98 105 97 107 125 123 129 136 133 129 134 132 129 121 113 113 116 44 46 52 64 55 58 56 78 96 105 99 108 124 119 121 127 134 127 127 129 126 124 116 113 123 26 38 41 51 69 57 66 69 83 92 108 100 106 131 120 126 134 140 138 135 145 144 133 122 120 122 32 33 47 61 54 56 56 69 84 112 105 105 127 125 127 126 131 137 129 129 128 132 116 118 125 32 32 39 50 46 50 52 70 83 116 100 110 126 133 132 144 140 133 135 135 125 117 108 104 112 43 45 55 71 65 66 64 85 91 108 101 112 128 122 131 134 138 137 131 135 131 128 118 117 122
@FedFRASER