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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.

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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.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102