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1957: end o f an a f t e r m a t h ? o p e r a t i o n s o f the b a n k : 1957 vs. 1941 ANNUAL REPORT issue of the business review F E D E R A L R E S E R V E B A N K O F P H I L A D E L P H Because some feel that the forces driving the economy during the postwar period have weakened, the main article in this Annual Report analyzes the question whether, in fact, 1957 can be considered “ the last postwar year.” The second article describes changes in operations of this Bank since the beginning of World War II, a period that happens to coincide with my tenure as President of the Federal Reserve Bank of Philadelphia. d^uv/niiuuuM P R E S ID E N T I A CO NTENTS Page 1 1957: END OF AN AFTERMATH? 11 OPERATIONS OF THE BANK: 1957 VS. 1941 15 DIRECTORS AND OFFICERS 18 STATEMENT OF CONDITION 19 EARNINGS AND EXPENSES 20 VOLUME OF OPERATIONS 1957: END OF AN AFTERMATH? Facts and figures underlie every sound analysis. creeps up on historians of the moment. For ex But as any analyst will tell you, facts and figures ample even now it’s difficult to say when the In are fugitive. In a sense you get out of them what dustrial Revolution began. you put into them. You see what you want to see, permit yourself to see, or are able to see. It might be, therefore, that in 1957 one era ended and a new one began. It is possible that the At present, some are taking a look at the facts forces, moods, and aspirations which shaped the and figures and concluding that an old era— the postwar years have burned out or modified them postwar era— is dying, and the next era is taking selves to be replaced by new or remolded ones. shape. If it is difficult to agree that an era ended in Of course, not everyone agrees that the postwar 1957 or thereabout, it is virtually impossible to era is over. And they could Very well be right. say what the next era will be like. Two analysts Certainly, it was easier to determine that the “ jazz looking at the same facts and figures can come to age” ended in 1929, and the “ war years” in 1946. widely divergent opinions. These turning points are easily distinguishable. There is a growing body of opinion, however, They were punctuated by history-making events— that says the next few years will form an “ inter- the stock market crash, and the end of World boom era” of slower growth and higher unemploy War II. ment. This thesis rests on a careful examination Not always, however, do eras begin and end and analysis of the postwar era and the forces with such a crash and bang. Sometimes the change that made it. It is based, too, on an analysis of 1 the forces to be operating in the years ahead. 1919. Prices fell 21 per cent two years after the How accurate a forecast might the interboom end of the fighting between the states. The war of thesis form? To answer this, even partially, it is 1812 was followed by a price plop of 33 per cent necessary to discuss many related questions. Such within a two-year period. Usually, following the as: what are the forces, moods, and aspirations nose dive, prices stabilized and then for the next that have shaped the years since 1946? How have decade or so, fluctuated over a fairly narrow they influenced the postwar period? Which have range. burned out— been modified? What new and modi fied forces will influence the next era? Prices in this postwar period bear little resem blance to the past. They did not break sharply shortly after fighting stopped. In fact, prices THE POSTWAR ERA didn’t break at all and still haven’t. The chart Like all eras, the postwar years have had certain showing wholesale prices illustrates dramatically definite characteristics. But unlike other postwar the differences in the periods. Unlike any other eras, inflation has been a dominant characteristic postwar era in our history, rising prices have been of the years since World War II. characteristic of recent years. Inflation Growth and mild cyclical swings Each war in our history has brought about a tre Many are properly concerned about the inflation mendous rise in prices. World War II was no that has taken place over the past decade. A few exception. are so overcome by these rising prices that they Within two or three years after the end of each forget that the years have also been marked by war, except World War II, prices broke sharply. business growth and the absence of serious reces In 1921, prices were 30 per cent below the level in sions or depressions. In 1946, gross national product was $209 bil lion. By 1957 the total was $434 billion. True, a W H O LE S A LE PRICES good part of this growth was fictitious because INDEX ( 1 9 4 7 - 4 9 = 100) prices are so much higher today. But even after correcting for the change in buying power, GNP is 44 per cent higher today than it was in 1946. Since dollar measures are distorted by price changes, turn to physical output. Our steel makers had the capacity to produce 92 million tons of steel in 1946. By 1952, capacity operations could have brought forth 109 million tons, and this past year 133 million tons. It would be easy to tick off totals on the number of houses, automobiles, television sets, washing machines, dryers, air-conditioning units, etc. that we have produced and sold since the war. Suffice it to say that our standard of living is estimated 2 to be 32 per cent higher today than in our most This was one side of it. On the other side, money prosperous prewar year. and jobs were superabundant. American industry The growth of our economy since the war has was called on to supply itself and its allies with been really remarkable. Perhaps even more re war goods and food. What a job this was, espe markable is the fact that this growth has been rel cially with our labor force thinned by the 11 mil atively uninterrupted. lion or so in the armed forces. High wages, over True, the business cycle is not obsolete. Reces time, and patriotism were used to lure the over sionary tendencies have dominated the business aged and the too young into the employment scene from time to time as in 1949 and 1954. But picture. always the tremendous growth momentum has The situation was loaded with inflationary po been sufficient to override these mild contractions. tential, especially since the war was not paid for from current taxes and it was decided to check THE BASIC FORCES inflation with price controls and rationing. These So far, all that we have done has been to discuss measures could not cure the inflation virus. They briefly and broadly the general characteristics of were “ stop gaps.” the postwar years. Characteristics are important. If the situation was loaded with inflationary They are what we remember eras by. But how potential, it was also loaded with potential for much more interesting it is to speculate about the growth. The war effort, because it scooped out basic forces and the derived forces that made the huge voids in civilian output and simultaneously era what it was. filled pocketbooks, created a tremendous desire It is obvious to everyone that a most basic force propelling the postwar era was the war itself. Not for capital assets and consumer goods plus pro so obvious but probably another important basic force was the Great Depression. viding buying power. Imagine the “ set up” facing producers and sellers in 1946. Each spending sector in the econ omy, except the Federal Government, had huge World W ar II needs left over from the war period. Each spend It’s difficult to know where to begin. World War II ing sector except the Federal Government had im had such a gigantic effect on everyone who lived proved considerably its liquid asset position. And through it or even those born after it. Perhaps it is possible to say broadly that World War II scooped out huge voids— almost vacuums finally each sector except the Federal Government began the postwar period with a relatively small volume of debt. — and conversely filled to overflowing other pock But this wasn’t all. ets. Producing weapons for war was a tremendous The war created other voids, or near voids. One job. It was not possible to add this on to normal was in household formation. During the years civilian goods production. Something had to give 1941 through 1945, new household formation — production of civilian goods. Only a very few averaged only 400,000 per year. One big reason non-essential factories, civilian autom obiles, was that when the “ boys” went overseas, the num houses, refrigerators, radios, washing machines, ber of marriages dropped off. A slow-down in shoes, nylons, and spare ribs, among other things, marriages caused a decline in new family forma could be produced for sale. tions. In addition, many families “ doubled up” 3 because husbands were away and materials for comes don’t promote early marriages, larger fam new housing weren’t available. ilies, and house buying. Doubling up— moving in The birth rate was lower than might have been expected during the war years. Fewer marriages and husbands overseas spelled the reason. with the in-laws— also was common during the depression years. Even some of the war’s overfilled pockets were As a consequence, by the time the war ended complemented by the depression. Sacrifices made we had a tremendous “ backlog” of unfilled orders. for patriotic reasons during the war had to be Preachers and obstetricians were swamped with made for lack of funds during the thirties. And if calls for their services. Rapid family formation and a high birth rate, of course, heightened living during the war years was drab, many had found the depression years even “ drabber.” That growth potential and intensified inflationary pres “ we-deserve-a-fling” sures in the postwar period. moderated by memories of the era preceding The war filled to overflowing other pockets, too. feeling was certainly not World War II. We were filled up with saving, controls, scarcities, and the drabness of wartime living. We were tired of hearing about the sacrifices that had to be made. People were in the mood for bursting their A G E O F A U T O M O B IL E S PER CENT bounds and cashing their bonds. “ We deserve a fling,” was the pervasive feeling. That feeling didn’t hinder inflation. The Great Depression Psychosis Naturally the war years had most immediate and dramatic impact on the postwar era. Their stamp was vivid and indelible. Not so vivid, but perhaps just as indelible an impression came from the de pression of the 1930’s. To some extent the depression years augmented 1946 1957 (E) Source: Autom obile Manufacturers Association — maybe aggravated would be more accurate— forces coming out of the war years. This is espe But the most indelible stamp from the Great cially true of the “ voids.” Cars and other con Depression was left on the mind, the conscience, sumer goods not produced in great volume during the memory of all who lived through it. Rising the war years could not be bought in great volume prices had been a goal of public policy in the during the 1930’s, because incomes were so low; 1930’s. How was it possible to recognize inflation so that the tremendous desire and need for these as a challenging problem in the early post-war products coming from the war years were rein years? “ Prices will stop rising soon enough with forced by the depression. Household formation and birth rates, kept low out trying to hold them down,” was a feeling many couldn’t shake. by the disruptions of war, were likewise low dur In fact, the imprint of the depression was ing the depression. Unemployment and small in stamped on our minds so ineradicably that in the 4 face of sharply rising prices in the early postwar C O M B IN E D HO USEHO LDS years, many of our actions were antideflationary. The “ Full Employment Act of 1946” to some ex tent reflected this perhaps paradoxical behavior. And certainly postwar support policy for Govern ment bonds, a policy of the Treasury and Federal Reserve System, revealed fear of disturbances carrying the economy into the abyss of another depression. AN ERA ENDS The postwar era didn’t end suddenly in 1957. It has ended slowly and gradually. Some felt as early as 1948-49 that forces growing out of World War II were no longer dominant. Business spending dropped off sharply at that time. Consumer de mand, however, pushed on to higher ground. Even before fighting broke out in Korea it was apparent springs of that momentum were the voids and that momentum had been regained. The well over-filled pockets of the depression and war ELECTRIC periods. Undoubtedly the Korean fighting prolonged the REFRIGERATORS ( Per cent of wired homes) postwar period. Higher totals for defense spending and the attendant reimposition of some wartime controls “ redug” some voids and replenished some PER CENT ioor over-filled pockets. As a result, the boom in con sumer spending in 1955 and business spending in 1956 assumed the same general characteristics as earlier postwar spending surges. By now, however, some fundamental changes seem to have taken place. To be sure, some post war characteristics are still with us. Prices rose for many months in 1957. But even inflation seems different— it was labeled the “ new inflation” by many. Certainly the basic forces “ driving” the econ omy seemed to be changing. The charts tell this story. In general these three charts indicate that the 1946 Source: Electrical Merchandising 1957 voids have been filled. The near dearth in produc tion of all but war goods before 1946 has been 5 replaced by a near plethora in the years since. As a result, strong demand pressures for these products stemming from actual needs have been replaced by still strong but somewhat more tenuous de C O M M E R C IA L B A N K L IQ U ID IT Y ( Cash and Governments as a percentage of assets) mand pressures stemming from desire. The three charts on this page tell us that in the process of filling the voids, some over-filled pock ets have been drawn down. Despite very high in comes, probably all the major spending groups have used up liquidity since the war. In addition, 1946 liquidity ratios of the commercial banking system 1957 and other lending institutions are considerably Source: Board o f Governors lower than in 1946. Higher debt totals, as revealed in the final charts, are additional reminders that “ a whole lot of spending has been going on.” The debt bur den of all the major spending groups except the Federal Government has increased considerably. C O R P O R A TE L IQ U ID IT Y ( Cash and Governments as a percentage of total current liabilities) The fact is that the very passing of a number of years with new characteristics and experiences makes change inevitable. Now our most vivid memories are of the postwar years themselves. The postwar era may not be over yet, but it is probably dead enough to talk about in the past tense. 1946 1957 THE NEXT ERA Source: Securities and Exchange Commission What will the next era be like? Of course, no one knows. There are some things we do know however. We know what the postwar period itself has been like and we know that these years are now our most vivid memory. We know too that forces having their origin in the war and depression periods shaped the characteristics of S A V IN G S ( Per person in 1956 dollars) the postwar era. It’s likely that the postwar years will provide forces helping to shape the next era. “ What will the next era be like?” is probably too big a question to pose in one piece. Perhaps in groping toward an answer, it might be helpful to 1946 1957(E) Source: Board o f Governors subdivide it a bit. “ Will the next economic era have the same general characteristics as the post war era— will it be as inflationary, will it show PER CAPITA STATE A N D LOCAL DEBT (in 1956 dollars) growth without serious and protracted setbacks?” Inflation? In the years from 1946 through 1957, consumer prices rose 44 per cent, or an average of 3 % per cent a year. Many say that this creeping inflation is a permanent part of our modern economic sys tem. For example, recently it was reported that a large number of economists said that inflation would be the number one economic problem for PER CAPITA CONSUMER DEBT (in 1956 dollars) the next 20 years. Very probably, inflation would have been named by only a very small minority in 1946 if a similar poll had been taken. This turnabout in thinking is dramatic evidence that not the least of the forces operating in the next era will be the fact that many expect inflation. Some say this will assure and aggravate rising prices, because businessmen, consumers, and gov PER CAPITA CORPORATE DEBT ernments will rush to buy— to wait means to pay (in 1956 dollars) a higher price. Others point out that the expecta tion of deflation in 1946 didn’t prevent inflation. In fact, anticipation of deflation was probably one big reason why practically everyone was slow to recognize inflation as a challenging problem. Now our guard is up. We are much more likely to deal with the problem of inflation realistically and ef fectively. PER CAPITA FEDERAL DEBT Some would say that whatever inflation we may (in 1956 dollars) have in the next era will be like the price rises in early 1957, when demands for many products seemed to be levelling or even declining, but prices kept rising. It is conceded that demand pressures may not be so strong as in the recent past. On the other hand, it is remembered that we have built some inflationary biases into our econ omy since the war. The argument rests on the idea that persistently rising prices follow inevit- 1946 1957 (E) Source: Department o f Commerce 7 ably from our present combination of corporate Admitted that homes, cars, television sets, and concentration, union labor power, an elastic some other business “ bellwethers” are no longer money system, and the fullness of employment in short supply. that society demands. growth is to be stunted? Does this mean that business Isn’t it possible that new household formation, plus replacement busi Growth? ness, will cause the demand for these products to Our economy needs growth. Each year our pop do no worse than hold at high levels? Then how ulation grows. Each year productive efficiency tends to rise. To absorb the new workers and to about products for which desire is growing buy the additional goods, total business activity living rises? Dishwashers, air conditioners, hi-fi sets, outboard motors, and swimming pools, all has to rise. Since 1946, gross national product has in creased by 133 billion real 1957 dollars, or 44 per cent. That’s an average of 3 % per cent a and will continue to grow as our standard of seem on the threshold of breaking into the mass market. Think of the voids we’ve filled. In the filling year. This rate of growth is good, yet not so we’ve created new yawning cavities. spectacular as sometimes said. For the period biles, there are now 56 million of them— so many from 1909 to 1945 it is estimated that the econ that just about every large metropolitan area in omy grew at an average rate of nearly 3.2 per the nation has hardening of its traffic arteries. cent a year. In historical perspective, therefore, Housing, we’ve built 13 million units since 1946. equalling the growth rate of the postwar period New developments are all around us. But what Automo in the era ahead doesn’t loom as such a stupen about water and sewage facilities? dous task as sometimes assumed. they haven’t kept pace. Appliances— they’re all In general, Still, we know that many ingredients of expan over the house. And they are complicated. Who sion are missing: (1) War-created shortages of fixes them when they falter? Try and find out. homes, cars, appliances, etc., have been filled. (2) Whoever it is, we need a lot more of him. The age composition of our population is such that Admitted, too, that the age composition of our family formation is taking place at a much slower population is such that family formation won’t rate than in the earlier postwar years. (3) Our be as high as in earlier postwar years. But the capacity to produce is more adequate in terms of age composition also suggests tremendous needs. current and foreseeable requirements. The number of school-age children is increasing Because of these factors the concept of an much more rapidly than facilities for teaching “ interim” or “ interboom” period has taken hold. them. We need more schools and more teachers. It says that 1957 was the first year of a series of The age composition— more youngsters and interboom years that will extend at least into the oldsters— puts pressure early 1960’s. These “ interboom” years will be Hospitals and sanitariums are over crowded. on medical facilities. characterized by noticeably slower growth in Doctors’ offices hang out the “ standing room business activity. only” sign early. But if you examine the And finally, what about the point that our factors upon which this concept stands, you can’t It sounds plausible. capacity to produce seems much more adequate help but wonder. in terms of current and foreseeable requirements? 8 True, capacity in many industries seems more flation continues, distortions will worsen and a adequate than heretofore in the postwar period. serious recession is a distinct probability. But this seems particularly so because we instinc There is much to be said for both arguments. tively think of houses, cars, television sets, and Certainly, Government spending is huge and other postwar “ boomers.” The changing nature must be counted as a powerful prop under the of demand assures us that capacity is inadequate economy. Still, the three sectors of our economy in other lines. For example, do we have adequate which have displayed the most instability his capacity in universities, water facilities, and torically— private construction activity, produc peopled satellites? ers’ durable equipment, and consumer durable What this all seems to mean is that the concept of the interboom era is built upon static assump tions. It says “ war-created voids have been goods— comprise about the same proportion of the gross national product as in 1929. Perhaps a position somewhere in between the filled,” but it never notices voids created during “ recession proofers” the postwar period. appropriate. Cyclical disturbances? and the “ haircurlers” is A CONCLUSION OF SORTS One of the real blessings of the postwar period Postwar years have been good years for most was the absence of serious and protracted busi Americans. ness downturns. Will the era ahead be similarly high, new products have made living easier, Jobs have been plentiful, income In recent years, two dramatically dif pleasanter. There have been some problems, too, ferent schools of thought have butted heads on this question. Some say our modern economic system is so recession proof that we can never such as creeping inflation and high taxes. But blessed? have more of a setback than the 1954 variety. on the whole, most of us don’t like to think of the postwar era in the past tense. Yet it seems that the basic forces driving our But just as adamant— though possibly not so economy are changing. numerous— are those who say a “ haircurling” created shortages have disappeared. Ugly mem Depression and war- depression is a very real possibility. ories have been crowded out by more pleasant “ Recession proofers” talk mostly about the large swath that Government cuts in our business ones. At the moment, however, many are looking at system. “ How can we have a really serious re the current situation and forecasting an “ inter cession so long as Government spending stays boom” period ahead— a period characterized by high and remains ready to go even higher in the much slower growth in output and income, and event of severe business distress?” they wonder. persistent inflation, not because demand is ex Flexible credit policy, built-in stabilizers, and the cessive but because costs will push prices higher. increased size and diversity of our economy are There will be no really severe depression but un also talking points for this school of thought. employment will be higher, on the average, than “ Haircurlers,” on the other hand, say that creeping inflation creates and has created serious in the postwar period. This all could be an accurate forecast. But it distortions within our economic system. These seems to be based on static assumptions. distortions will plague us until removed. If in seems to say houses, cars, and television sets, are It 9 no longer “ needed” ; so what are people going to What this all seems to mean is that voids were buy? New family formation is to proceed at a created during the postwar years, just as during slower pace; so why should our industrial base the war years. True, they are different voids, the grow? filling of which may not come about so naturally. In other words, the “ interboom thesis” seems to forecast in terms of the past— but only part of the past. It is clear that houses, cars, and tele vision sets are no longer “ needed” in the same sense as in early postwar years. But schools, But they exist, and needs beget spending and production. It is altogether probable that the next era will be different from the postwar era. Certainly a lot highways, water and sewage facilities, and mis of changes have taken place. However, it is ques siles are “ needed.” It is equally true that the tionable whether the next several years will form age structure of our population suggests a lower an era of stunted growth. The bases for growth level of family formation. But the birth rate is have changed, but they could prove to be just as high and promises to stay there. strong. 10 OPERATIONS OF THE BANK: 1957 VS. 1941 Over the sweep of years from prewar 1941 to render the best possible service to the banking postwar 1957 many things have happened to system and to the Treasury and, through them, shape the operations of the Reserve Bank and to the public. In achieving these objectives, the the banking and business world it serves. Two means through which they may be accomplished wars, one world-wide; expanding population; — methods, equipment, and people— must con new products and new desires; new skills and tinually be reviewed. new plants— all of these have been at work. Measured in units or in dollars, operations of Looking back over this era of amazing develop the Bank far exceed those in the period before ments, it becomes pertinent to review the ways in World War II, but the number of people on its which this Bank has fitted itself into the scheme staff has risen by only one-fourth, from about of things, apart from its activities in the major 800 at the opening of 1941 to approximately sphere of monetary and credit policy. 1,000 at the close of 1957. Uppermost in our minds at all times must be the need for continuing improvement in operat EXPEDITING CHECK COLLECTION ing efficiency and the maintenance of over-all A sharp contrast between expansion in volume flexibility to meet changing and unusual de handled and personnel is shown in the collection mands. of checks. In 1957 approximately 2,700 checks per Uppermost, too, must be the urge to 11 employe were handled on each working day, as FACILITATING HANDLING OF CURRENCY against 1,900 a decade earlier and 1,600 two dec Improved equipment for handling currency and ades ago, when daily working hours were longer. coin has been installed from time to time, but Improvement in equipment was one of the prin the principal gains in this field have been of a cipal means of achieving this gain in efficiency. different kind. The direct exchange of coin be The adding machine and sorting bin gave way to tween commercial banks has been encouraged proof machines which add and sort at the same and tends to cut down the work here. Another time; in turn, the “ 24-pocket” proof machine gave way to machines with 32 pockets or sorts. A shift development, more far-reaching in its effect, was the enactment of legislation in 1954 permitting from alphabetic to numeric sorting was an addi a Reserve Bank to pay out the notes of other tional factor contributing to productivity. Over the years from 1940 to 1957 improvements also Reserve Banks. This made possible substantial savings in transportation costs and a material re were made in services to banks. A motor carrier duction in the sorting operations of the Cash pick-up service, initiated in 1951 and now reach Department. And yet another has been rapid ex ing over 400 banks in this District, saves one day pansion over the past decade in armored-car in collection time; the use of air transport, de pick-up and delivery of currency and coin, now veloped in 1950, speeds the interdistrict collec tion of checks; and the increasing volume of checks sent directly by member banks to Reserve Banks in other districts has a like effect. MOVING FUNDS BY WIRE Transfers of funds over leased wires have shown extraordinary growth, as banks engaged more actively in Federal funds transactions for the adjustment of reserve positions and business men became increasingly aware of the advan tages in nearly instantaneous shifting of funds. The increasing burden of this operation was met reaching 329 banking offices in the District. It is estimated that 70 per cent of the cash shipments to banks outside Philadelphia are handled in this way. This service has a strong appeal to banks, providing door-to-door service and minimizing the difficulties arising from curtailment of train service and postal restrictions on shipments. WIDER USE OF PUNCH CARDS Many of the internal improvements in this Bank’s operations are tied in with the increased use of punch-card equipment. In 1940 no “ machine tabulating” department was to be found in the list of departments, although a few small in late in 1955 on a System-wide basis by switching stallations of such equipment were in use. Today from coded messages to clear-language trans we have, in one centralized department, 34 pieces mission on a closed circuit, tele-typewriter sys of this equipment and others elsewhere, and tem that prints all required forms. Similar ar thought is being given to the later acquisition of rangements between large city banks and this even more flexible electronic equipment with Bank were initiated in 1957. A like method also “ memories,” etc. is now being followed in connection with certain “ Machine Tab” now serves, as a matter of purchases and sales of United States Govern daily, monthly, or occasional practice, most of ment the departments of the Bank concerned with securities, transactions. 12 which involve interdistrict records or reports. Step by step, certain opera tions have been placed on punch cards— notices penditures continues to give rise to transactions of checks on which credit is deferred and ac on a scale far exceeding those in the prewar counting entries arising out of wire and group period. Over the years many improvements have clearings, to mention Climaxing the been instituted in the handling of Savings bonds, planning and experimentation, the entire main a few. including the use of punch cards for the process tenance of member bank reserve accounts and ing of stubs; machines for addressing and for preparation of the daily reports that go out to inserting and sealing; as well as microfilming. the banks was transferred to punch cards at the Not all of the new activities now carried on beginning of 1955. This effected savings here for the Federal Government have their roots in and provided the banks with better, more in war and its after-effects. formative reports of the many transactions that work in connection with withheld taxes was affect their balances every day. taken on and in 1951 the processing of postal In 1950 accounting Many other operations are now being handled money orders; in 1953 the local verification and by the Machine Tabulating Department, replac destruction of unfit United States notes and silver ing in many cases manual or partially mechan certificates were turned over to the Reserve ized methods followed previously. Among these Banks; and, in 1954, proving and accounting for are payroll accounting, which had become quite receipts from postmasters. The “ cold war” has complex because of the numerous deductions in its problems, resulting in the establishment of volved; accounting work pertaining to Federal security files at an interior point and careful taxes; records and advices in connection with Treasury tax and loan accounts at commercial planning for emergency. action to be taken in case of banks; and the maintenance of records, the ac counting, and the preparation of advices and lists THE HUMAN SIDE in connection with securities held in safekeeping In an organization so diverse in its operations as a Federal Reserve Bank, machines alone can and maturing coupons on such securities. not do the job and the “ push button” technique FLEXIBILITY IN OPERATIONS has only limited Flexibility is essential in a central banking application. A well-trained staff, suitably housed, must accompany the latest organization. No greater test of this can be made in equipment. The Bank is fortunate in having than the ability to respond to the extraordinary an experienced staff; at the close of the year, 216 demands imposed by a conflict of the magnitude of its 1,000 people had served 25 years or more. of World War II. These demands were met, Training programs and increasing attention to although they involved the handling of many mil the orientation of new employes contribute to lions of pieces in connection with the issue, ex proficiency and employe understanding. change and redemption of securities; participa Several steps have been taken over the past and the decade or more which affect personnel very di exercise of assigned powers such as the regula rectly. In 1947 a carefully worked out job evalu tion of consumer credit and control of foreign ation system was put into effect, to assure the funds. equitable determination of salaries; tion in frequent war loan drives; Volume contracted with the passing of war, but the heritage of debt and defense ex improve ments in the retirement system have been insti 13 tuted; recreational facilities have been expanded this District; the distribution of economic infor and opportunities given for individual creative mation and pamphlets relating to Reserve Bank ness through after-hours participation in such operations and policies; and in other ways. In activities as a camera club, an art class, and a 1946 steps were taken to broaden these contacts. chorus. And, too, a more extensive plan for the Beginning in that year, sectional meetings have encouragement of higher education was devel been held covering the entire District in the oped, with reimbursement for college tuition. course of a year, where members of the staff dis By incorporating basic information on employes on punch cards, we have a ready source to which Working conditions were im cuss business and banking conditions, Federal Reserve policy, and related matters. Representa tives of all banks in each area are invited to these meetings, with increasing emphasis in later years proved through modernization of the building, on attendance by bank directors. In two years— the installation of air conditioning and electron 1951 and 1954— the arrangement was reversed ically controlled elevators, and better lighting. by inviting the bankers to come to this Bank, Looking toward the provision of well-equipped meet together, and get a first-hand view of opera to turn for the study of individuals for transfer, promotion, etc. personnel for the banking world, a trainee pro tions here. gram was instituted in 1947. Outstanding grad A Reserve Bank by its very nature cannot uates of colleges in this area are selected each avoid living in the spotlight. More and more, the year and given two years of training. They work public wants to know what it is and what it does. in all major departments of the Bank and take Many requests come to us from educational insti graduate courses during their stay here, but in tutions and responsible organizations for speak cur no obligation to enter our employ after their ers, films or exhibits, and tours of the Bank, and work has been completed. demand continues heavy for published informa tion about the System. RELATIONS WITH THE PUBLIC We are convinced that understanding of Fed * * * eral Reserve operations and policy decisions by In a recent publication the postwar years were bankers and the general public can do much to described as an age of miracles. There have been promote the successful functioning of the System. miracles in many lines— in the fields of medi For years this Bank had sought to achieve this cine, electronics, aviation, machinery, among understanding through a program of visits to in others. This Bank has striven to keep in step, dividual banks; semi-annual meetings of the adapting new ideas and new developments to its Federal Reserve Relations Committee, composed operations and striving to make them really effec of representatives of banking organizations in tive through a well-rounded, efficient organization. 14 D IR E C T O R S A N D O F F IC E R S Elections held in the fall of the year resulted in the election of W illiam B. Brosius, President of the National Bank of Chester County and Trust Company, W est Chester, Pennsylvania, as a Class A director to represent the banks in Group 2. He succeeds W . Elbridge Brown and will serve for a term of three years from January I, 1958. The banks in Group 3 re-elected Bayard L. England as a Class B director fo r a like term. By action of the Board of Governors of the Federal Reserve System, Henderson Supplee, Jr., will serve as Chairman of the Board and Federal Reserve A gent fo r the year 1958, and Lester V. Chandler as Deputy Chairman. W illiam J. Meinel, the outgoing Chairman, had been on the Board o f this Bank for I I years, initially as a Class B director and then as Class C. W alter E. Hoadley, Jr., Treasurer of the Armstrong Cork Company, Lancaster, Penn sylvania, was appointed a Class C director to serve for a three-year term beginning January 1958. The Board of Directors of the Bank appointed Casimir A . Sienkiewicz, President of the Central-Penn National Bank of Philadelphia, to represent the Third Federal Reserve District on the Federal Advisory Council during 1958. He succeeds W illiam R. K. Mitchell. As of the beginning of 1958, R. G. W il gus, previously Cashier and Assistant Secretary, was made Vice President and Secretary and George J. Lavin, an Assistant Vice President, adds to his duties by appointment as an Assistant Secretary. John R. Bunting, Jr., an Associate Economist, was made an officer of the Bank with the title of Business Economist. 15 D IR E C TO R S A S OF J A N U A R Y 1958 Term expires December 31 Group CLASS A 1 GEOFFREY S. SMITH President, Girard Trust Corn Exchange Bank, Philadelphia, Pennsylvania 1959 2 WILLIAM B. BROSIUS President, National Bank of Chester County & Trust Company, West Chester, Pennsylvania 1960 3 LINDLEY S. HURFF President and Trust Officer, The First National Bank of Milton, Milton, Pennsylvania 1958 CLASS B 1 CHARLES E. OAKES Chairman of the Board, Pennsylvania Power & Light Company, Allentown, Pennsylvania 1958 2 R. RUSSELL PIPPIN Treasurer, E. I. du Pont de Nemours & Company, Wilmington, Delaware 1959 3 BAYARD L. ENGLAND President, Atlantic City Electric Company Atlantic City, New Jersey 1960 CLASS C HENDERSON SUPPLEE, JR.,Chairman President, The Atlantic Refining Company, Philadelphia, Pennsylvania 1958 LESTER V. CHANDLER,Deputy Chairman Professor of Economics, Princeton University, Princeton, New Jersey 1959 WALTER E. HOADLEY, JR. Treasurer, Armstrong Cork Company, Lancaster, Pennsylvania 1960 16 O F F IC E R S A S O F J A N U A R Y 1958 ALFRED H. WILLIAMS President W. J. DAVIS First Vice President CLAY J. ANDERSON Financial Economist KARL R. BOPP Vice President JOHN R. BUNTING, JR. Business Economist ROBERT N. HILKERT Vice President DAVID P. EASTBURN Financial Economist ERNEST C. HILL Vice President WILLIAM G. McCREEDY Vice President PHILIP M. POORMAN Vice President JAMES V. VERGARI Vice President and General Counsel RICHARD G. WILGUS Vice President and Secretary MURDOCH K. GOODWIN Assistant General Counsel and Assistant Secretary EDWARD A. AFF Assistant Cashier HUGH BARRIE Machine Methods Officer ZELL G. FENNER Chief Examiner JOSEPH R. CAMPBELL Assistant Vice President RALPH E. HAAS Assistant Cashier WALLACE M. CATANACH Assistant Vice President ROY HETHERINGTON Assistant Cashier NORMAN G. DASH Assistant Vice President FRED A. MURRAY Director of Plant GEORGE J. LAVIN Assistant Vice President and Assistant Secretary HENRY J. NELSON Assistant Cashier HARRY W. ROEDER Assistant Vice President RUSSELL P. SUDDERS Assistant Cashier EVAN B. ALDERFER Industrial Economist HERMAN B. HAFFNER General Auditor 17 S T A T E M E N T OF CON DITIO N FEDERAL RESERVE BANK OF PHILADELPHIA End o f Y e a r (0 0 0 ’s o m itte d in d o lla r figures) 1957 1956 G o ld c e rtific a te reserves: G o ld c e r t if ic a t e s ............................................. Redem ption fu n d — Fed. Res. n o te s ........... $ 1 ,1 8 2 ,7 3 0 60,901 $ 1 ,0 5 1 ,2 7 4 6 3 ,0 5 3 $ 1 ,1 0 5 ,7 2 6 6 1 ,7 3 8 T ota l g o ld c e rtific a te r e s e r v e s ............. Fed. Res. notes o f o th e r Fed. Res. Banks. . O th e r cash ............................................................ $ 1 ,2 4 3 ,6 3 1 3 8 ,5 5 6 1 5 ,0 5 7 $ 1 ,1 1 4 ,3 2 7 3 5 ,1 3 2 1 3 ,1 1 6 $ 1 ,1 6 7 ,4 6 4 3 7 ,6 7 2 1 6 ,7 7 0 Loans a nd securities: Discounts a nd advances ............................. In d u s tria l l o a n s ............................................... U nited States G o ve rn m e nt securities. . . . 5 ,4 9 0 173 1 ,3 8 4 ,5 4 5 7 ,9 7 5 439 1 ,4 7 8 ,8 1 7 2 6 ,9 2 8 642 1 ,4 8 4 ,4 8 8 T ota l loans a nd s e c u r itie s ..................... $ 1 ,3 9 0 ,2 0 8 $ 1 ,4 8 7 ,2 3 1 $ 1 ,5 1 2 ,0 5 8 1955 ASSETS 2 4 0 5 ,8 1 2 4,781 1 4 ,8 8 5 2 3 2 7 ,8 4 4 5 ,0 5 0 9 ,2 6 4 $ 3 ,0 5 0 ,1 3 1 $ 3 ,0 7 5 ,2 8 6 $ 3 ,0 7 6 ,1 2 4 Federal Reserve notes ....................................... $ 1 ,7 3 8 ,7 5 6 $ 1 ,7 5 6 ,4 9 0 $ 1 ,8 3 9 ,8 8 9 Deposits: M em ber b a n k reserve a c c o u n ts ................ U nited States G o v e r n m e n t.......................... Foreign ............................................................... O th e r deposits ............................................... 8 7 4 ,7 4 0 30,221 2 3 ,8 7 0 1 2 ,9 5 5 8 5 9 ,6 7 7 27,841 2 1 ,3 1 2 1 6 ,8 6 5 8 6 8 ,4 5 5 2 2 ,0 0 8 2 8 ,1 7 8 1 5 ,4 5 8 1 3 4 5 ,4 2 5 4 ,5 1 3 1 2 ,7 4 0 Due from fo re ig n b a n k s .................................. U ncollected items ............................................... Bank p re m is e s ....................................................... A ll o th e r a s s e ts .................................................... T ota l a s s e ts .................................................. L IA B IL IT IE S T otal d e p o s it s ............................................. D eferred a v a ila b ility i t e m s ............................. A ll o th e r l i a b i l i t i e s ............................................. T ota l lia b ilitie s C A P IT A L .......................................... $ 9 4 1 ,7 8 6 2 7 9 ,3 3 4 623 $ 9 2 5 ,6 9 5 3 0 6 ,8 6 8 800 $ 9 3 4 ,0 9 9 2 1 9 ,6 5 1 751 $ 2 ,9 6 0 ,4 9 9 $ 2 ,9 8 9 ,8 5 3 $ 2 ,9 9 4 ,3 9 0 $ $ $ ACCOUNTS C a p ita l p a id i n .................................................... Surplus— Section 7 ............................................. Surplus— Section 1 3 b ....................................... Reserves fo r c o n tin g e n c ie s ................................ 2 1 ,1 9 2 5 5 ,9 2 3 4 ,4 8 9 8 ,0 2 8 2 0 ,6 2 9 52,301 4 ,4 8 9 8 ,0 1 4 1 9 ,7 5 7 4 9 ,4 9 0 4 ,4 8 9 7 ,9 9 8 T otal lia b ilitie s and c a p ita l a cco u nts. . $ 3 ,0 5 0 ,1 3 1 $ 3 ,0 7 5 ,2 8 6 $ 3 ,0 7 6 ,1 2 4 Ratio o f g o ld ce rtifica te reserves to de p osit a nd Federal Reserve note lia b ilitie s com bined .......................................................... Com m itm ents to m ake in d u s tria l adva nce s. 4 6 .4 % $ 26 4 1 .5 % $ 15 42.1 % $41 E A R N IN G S A N D E X P E N S E S FEDERAL RESERVE BANK OF PHILADELPHIA (0 0 0 ’ s om itted) 1957 1956 19 5 5 $ 3 4 ,3 5 1 $ 2 4 ,2 1 2 E arnings fro m : U. S. G o ve rn m e nt s e c u r itie s ....................... $ 4 3 ,0 3 6 O th e r s o u rc e s .................................................... 2 ,1 7 2 1 ,9 4 0 990 T ota l e a rn in g s ............................................ $ 4 5 ,2 0 8 $ 3 6 ,2 9 1 $ 2 5 ,2 0 2 O p e ra tin g e x p e n s e s * ..................................... $ 6 ,4 9 4 $ 6 ,2 9 4 $ 6 ,1 7 0 Cost o f Federal Reserve c u rre n c y ................ 211 293 365 N e t expenses: Assessment fo r expenses o f Board o f 528 383 306 .................................. $ 7 ,2 3 3 $ 6 ,9 7 0 $ 6,841 C u rre n t net e a r n in g s .......................................... $ 3 7 ,9 7 5 $ 2 9 ,3 2 1 $1 8,361 $ $ $ G o ve rn o rs .................................................... T otal net expenses A d d itio n s to cu rre n t net e a rn in g s: Profits on sales o f U. S. G overnm ent securities (net) ............................................ 10 16 — Reim bursem ent fo r Fiscal A g e n cy expense in curred in p rio r y e a rs .......... A ll o t h e r ............................................................... T ota l a d d it io n s ............................................ 113 — — — — — $ 123 $ 17 $ — $ 14 $ 16 $ 18 Deductions from cu rre n t net e a rn in g s: Reserves fo r c o n tin g e n c ie s ............................. R etirem ent System (adjustm ent fo r revised b e n e f it s ) .......................................... 604 — — A ll o t h e r ............................................................... 1 — — T ota l ded uctio n s ....................................... N e t a d d itio n s o r deductions (— ) .................. $ 619 $ 17 $ 18 $ — 496 $ — $ — 18 $ 3 7 ,4 7 9 $ 2 9 ,3 2 1 $ 1 8 ,3 4 3 N e t e a rn in g s b e fo re paym ents to U. S. T re a su ry ............................................................ Paid to U. S. T re a su ry (interest on Federal Reserve n o t e s ) .................................. 3 2 ,5 9 4 2 5 ,2 9 6 1 5 ,4 5 7 D ividends ................................................................. 1 ,263 1 ,2 15 1 ,1 6 9 T ra n sfe rre d to Surplus (Section 7 ) ..................... $ 3 ,6 2 2 $ 2,811 $ 1 ,7 1 7 * After deducting reimbursements received for certain fiscal agency and other expenses. 19 V O L U M E OF O PE R A TIO N S FEDERAL RESERVE BANK OF PHILADELPHIA 1957 1956 19 5 5 1 6 2 ,8 0 0 4 6 ,6 0 0 2 1 ,9 0 0 1 ,0 00 1 6 3 ,1 0 0 4 4 ,2 0 0 2 3 ,6 0 0 1 ,0 0 0 1 6 1 ,5 0 0 4 1 .4 0 0 2 3 .4 0 0 900 864 115 3 1 4 ,6 0 0 4 2 5 ,0 0 0 2 496 423 940 106 3 0 4 ,9 0 0 3 9 5 ,9 0 0 3 463 462 1,022 345 213 220 8 ,9 4 4 7,461 7 ,9 0 9 6 ,5 4 8 7 ,2 1 7 6 ,6 1 6 906 789 875 $ 6 3 ,2 0 6 5 ,8 7 6 337 156 $ 6 0 ,9 2 7 6 ,9 7 0 346 190 $ 5 5 ,2 8 8 6 ,7 3 3 337 194 3 1 ,1 9 4 4 9 ,3 1 5 2 ,1 2 0 45 1 1 ,90 3 1 ,7 99 3 0 ,7 9 3 4 9 ,5 2 4 2 ,0 4 9 44 2 7 ,9 2 6 4 4 ,3 4 6 1 ,903 51 6 ,9 2 6 1 ,4 2 4 N u m b e r o f pieces (0 0 0 's om itted) C olle ctio n s: O rd in a ry c h e c k s ............................................. G o ve rn m e nt checks (p a p e r and ca rd s). . Postal m oney o rd e rs ( c a r d ) ........................ N on-cash items ............................................. C le a rin g o p e ra tio n s in connection w ith d ire c t sendings a nd w ire a nd g ro u p c le a rin g s p l a n s * ............................................. T ransfers o f f u n d s ............................................... C u rrency c o u n t e d ............................................... Coins counted .................................................... Discounts a nd advances to m em ber b a n ks. D e p o sita ry receipts fo r w ith h e ld taxes . . . Postal deposits (re m itta n c e s ).......................... Fiscal a g e n cy a ctivitie s: M a rk e ta b le securities d e live re d or r e d e e m e d .................................................... Savings bond tran sa ctio n s— (Federal Reserve Bank and agents) Issues (in clu d in g r e - is s u e s ) .................. R e d e m p tio n s ............................................... C oupons redeem ed (G overnm ent a nd a g e n c ie s )........................ 96 2 9 1 ,2 0 0 3 8 9 ,7 0 0 2 440 447 D o lla r am ounts (0 0 0 ,0 0 0 ’ s om itted) C o llections: O rd in a ry c h e c k s ............................................. G o ve rn m e nt checks (p a p e r and c a rd ). . Postal m oney orders ( c a r d ) ........................ N on-cash items ............................................. C le a rin g o p e ra tio n s in connection w ith d ire c t sendings a nd w ire and g ro u p c le a rin g s p l a n s * ............................................ Transfers o f fu n d s ............................................... C u rrency c o u n t e d ............................................... Coins counted .................................................... Discounts a nd advances to m em ber b a n ks. D e p o sitary receipts fo r w ith h e ld ta xe s. . . . Postal d eposits (re m itta n c e s ).......................... Fiscal a g e ncy a ctivitie s: M a rk e ta b le securities d e live re d or r e d e e m e d .................................................... Savings bond tran sa ctio n s— (Federal Reserve Bank and agents) Issues (inclu d in g r e - is s u e s ) .................. R e d e m p tio n s ............................................... Coupons redeem ed (G overnm ent a nd a g e n c ie s ) ..................... 20 Debit and credit items. 870 11,731 1 ,6 1 9 819 1 0 ,79 8 8 ,0 3 5 8,531 444 620 467 521 497 461 101 93 98 668 Additional copies of this issue are available upon request to the Department of Research, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pa.