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AN ANALYSIS OF THE MONEY SUPPLY DURING THE RECENT MINOR CYCLE OF BUSINESS J I THE FEDERAL RESERVE BANK OF PHILADELPHIA March 13, 1956 The years 1952-1955 might well come to be regarded some day as a classic example of monetary policy at work. Instead of presenting the usual review of Federal Reserve tions during the past year, therefore, we have decided to explore briefly some new developments which have emerged during the recent minor business cycle and which we believe +o have important implications for the future. In addition to a summary of business and banking develop ments in 1955, we also devote part of this report to a escnpt,on of one of our most important functions—fiscal agency. Alfred H. Williams President CONTENTS ge MONEY ON GOOD BEHAVIOR I Why the Money Supply Changes 4 Money in a Minor Cycle 6 Federal Reserve policy 9 Commercial bank policy 14 16 Government securities market Rewards of Good Behavior BUSINESS AND BANKING IN THE THIRD DISTRICT 19 Business 23 Banking 24 FISCAL AGENCY 29 RESERVE BANK OPERATIONS 31 34 Directors and Officers APPENDIX Additional copies of the report are available upon request to the Department of Research Federal Reserve Bank of Philadelphia Philadelphia 1, Pennsylvania MONEY ON GOOD BEHAVIOR No one really knows what causes the business cycle, but almost everyone agrees that money has something to do with it. From time to time over the years, money has misbehaved. Recently, money has been on relatively good behavior. We are devoting part of this report, therefore, to an analysis of the money supply during the recent minor cycle of business. This is a case study of money in a new role—why money has been on good behavior, and what it means. WHY THE MONEY SUPPLY CHANGES Let us begin with a basic assumption: changes in the size of the money supply—currency and bank deposits—have an important influence on economic activity. We need not assume that these changes are the only factor influencing business activity—-just that they are one of the important influences. The two top lines on page 2 don't prove anything about cause and effect, but they do show that gross national product has, in fact, moved with the money supply. The next step is to find out why the money supply changes. The next two lines in the chart reflect the most important reason: commercial banks have the unique power to create and extinguish deposit money. Most of the money supply consists of bank deposits, and bank deposits expand when banks increase their loans and investments and con tract when banks reduce their loans and investments. lip to the early 1930’s, the money supply moved up and down almost entirely because banks either increased or re duced their holdings of private debt. I he chart shows this clearly. The line for deposits and currency closely parallels the line for loans and “other” securities (corporates and municipals) . This close relationship tended to have an unstabilizing effect on the economy. During booms, businessmen, farmers, stock brokers, and others borrowed on short term from banks, obtaining new deposit money. As they used it they 1 BUSINESS ACTIVITY, MONEY, AND WHY MONEY CHANGES BILLIONS $ Over the years, business activity anrl +k„ up and down together. Chanqes in the money supply have moved thirties (shaded area), were caused mostly "by +° eaHy bank lending. Since then they have ako be holdings of Government securities 2 • flC°mmercial by cha"^ - tended to push the boom up still more. Then business turned down; and when loans fell due, borrowers paid them off, often in a desperate scramble for liquidity. As loans declined and the money supply shrank very sharply, spend ing power fell, business got worse. A British economist, R. G. Hawtrey, writing in 1928, concluded from this that credit was “inherently unstable.” But since the early 1930’s, Federal Government, debt has also had an important influence on the money supply. With the “pump priming” of the thirties and the deficit financ ing of World War II, Government debt rose to tremendous heights. Holdings of Government securities by commercial banks increased accordingly. Therefore, as the chart shows, the money supply now is influenced not only by banks in creasing and decreasing their loans or buying or selling cor porate and municipal securities, but also by banks buying and selling Federal Government securities. Three developments have tended to make the money supply more stable. In the first place, loans and ' other securities are not so large a part of earning assets as they use to be, so their expansion or contraction has relatively less effect. Second, loans now are made for longer terms than they used to be and so tend to be more stable in their own rig it. And third, bank holdings of Governments are very likely to go up when loans contract, and go down when loans expan .. This third point is the important one foi this report. It is not a new idea, of course. As Federal Government debt e came a major part of our total debt structure, some o rser ers* pointed out that it was likely to behave differently t tan private debt. When the private sector of the economy is pay ing off debts, Government may well be going deeper mt debt. Moreover, as a wider market for Government securities (particularly short-terms) developed, practical bankets ia\e found it possible—and good business to buy Governmcn when loan demand falls off, and to sell Governments when •For example. C. R. Whittlesey in a "Memorandum on, thet Stal.iHty <>' Ocmantl Deposits," The American Economic Review, December, . . ■ 3 loan demand picks up again. They did this to some extent during the minor recession and recovery around 1949, with the result that the money supply was more stable than it might have been. But the full implications of these compensating move ments of loans and Governments could not become apparent until the minor business cycle of the past four years. Before that, the Federal Reserve was supporting the Government securities market. And so long as Governments were sup ported, the tendency for movements in loans and Govern ment security holdings to counteract one another in inflation could not work out. Since the Treasury-Federal Reserve accord, the Federal Reserve has been able to take advan tage of and to reinforce these compensating movements. A oser look at the recent minor cycle in business shows how this has been so. MONEY IN A MINOR CYCLE four years5 Th ’TV’’’ d°W"’ Up durinS the Past activkv rea I H P 00 P3ge 5 ll,ustrates this- Economic for about a H ^i!" SeC°nd quarter of 1953> declined tor about a year, and then rose again ■he “•>»'* As securities ’ , “V:W3S andrecX “other” “he dXTt„7h ly partly because loans >“«4 going up Also banl<SeS Str°ng’ so real estate loans kept bonds. I argely for^e’nCreaS h°ldingS °f ^^icipal fell off cpiS LX’ tehreaS°nS’ CVen th°USh bu«ness loans only in a slow-down in^h^me ^freCeSS1°n shows UP “other” securities, not a decline happen in most recessions. probably would not * -- noticeable holding, of Government, did h ’““^j/““S’ ..me a, change, in GNP, bn, in genera,. „ J’*"™' opposue d.recon. Dnnng the ,962.53 Jm J " Government, Dnnng the 1953-54 recession. ,hey bongh, 4 MONEY IN A MINOR CYCLE billions $ 0 Li i i i i i I .............. .. i i i i I i i 1952 1953 i i i i i i i i i 1.x i i i i .i-J- 1954 1955 *all commercial banks During the past four years, business has gone through a boom, a small recession, and recovery. The money supply rose throughout the period. If bank holdings of Government securities had not behaved as they did. the money supply might have risen more during the two periods of increasing business (shaded areas) and declined during the recession. The booms might have been "boomier," and the recession deeper. Governments. As business recovered, they sold Governments once again. These movements of Government security holdings lent stability to the money supply. If holdings had not declined during the two boom periods, the money supply would have increased more than it did. If they had not gone up during the recession, the money supply would not have expanded. But all this is a pretty mechanical explanation of why money has been on relatively good behavior. Under the sur face lies a complex, tangled skein of motives, forces, and im plications. Let us try to unravel some of them, recognizing at the outset that we may run into knots we are unable to untie, or may well end up where we began. Federal Reserve policy The Federal Reserve has been partly responsible for the • ative y good behavior of money during the recent ups and downs of business. Because of the “accord” with the Treasy. t ie e eral Reserve has been free, for the first time in yea's’ gllt against the business cycle—on the up as worked ltlCi °Wn the way in which policy has when d qUlte different from the waY “ w°rked back the FederalT 'i"'" G°Vernment debt, and, later, when ities market tStrVe W3S suPPorting the Government secur ResCTv^coidd'do °f credit durinsr b explX™ GoVCTnment debt> die Federa ' f° reStrain the expansion of banl in stimu.atin, ness, banks ran short’ of le^5 *7 UPSWing °f bUSi Reserve Banks for more TlT F d‘° tH< raise the discount rate to dk 3 T"™6 C°Uld the* sion. But as loan demand f S<ourase urt ler credit expan bank, could find ‘ y mtie to put their money into Th, money supply declined even Cough the Federal R«e™ ought make plenty of reserve, cheaply available. Later, when it was supporting Government securities thFederal Reserve could do little restrict l„„ „„„ 5 6 courage the expansion of credit. Under the support policy, if hanks sold Governments to make loans and those sales forced prices of Governments below support levels, the Federal Re serve was obliged to buy the securities. In the process it pumped new reserve funds into the banking system, making possible a multiple expansion of credit. This is what tended to happen on the balance sheet for the banking system: Government securities declined when banks sold Reserves increased when the Federal Reserve bought the Governments Loans and “other” securities increased several times the amount of the new reserves Deposits increased as loans and “other” securities rose The Federal Reserve became an “engine of inflation." But when business declined and loan demand receded, banks could turn to a large volume of Government secu rities for investment. The policy of putting a floor under Gov ernment security prices was consistent with that of encourag ing expansion, so the Federal Reserve could make plenty of reserves available. If banks could not use the funds to make loans, they could buy Governments, thus cushioning any drop in the money supply. During the past few years, the Federal Reserve has had considerable success both in restraining expansion in the two boom periods and encouraging expansion in the recession. As loan demand increased, banks sold Government securities. Prices of Governments declined, but the Federal Reserve was no longer obliged to buy the securities to support their prices. With the Federal Reserve not buying, additional re serves were not supplied. If other investors bought the secu rities, deposits were drawn down. So new deposits created in making loans were offset by deposits absorbed by sales of Gov ernments. The net change was zero. In summary, this is what tended to happen on the balance sheet for the banking system: Government securities declined when banks sold Reserves stayed the same because the Governments were not bought by the Federal Reserve 7 Loans and "other” securities increased, taking the place of the reduced Governments Deposits stayed the same Banks could expand by borrowing from the Reserve Banks, but they had to pay a higher discount rate to do so. The result of Federal Reserve policy was that the money supply rose less than it might have. During the recession of 1953-54, on the other hand, loan demand slackened, the Federal Reserve made reserves freely available, and banks used the funds to buy Governments. The money supply, instead of declining, kept going up. I his description of Federal Reserve policy, of course, is nreatly over-simplified. A more detailed picture is shown on pages 10 and 11 where the major policy actions are sum marized. The table reveals an interesting use of instruments during the recent minor cycle. During the two booms the demand for 8 funds pressed against the supply of funds. Money became tight, interest rates rose. The Federal Reserve could have used all its major tools—raising reserve requirements, selling Gov ernment securities, raising the discount rate. Instead, it very largely let the money market tighten itself. Simply by refrain ing from buying the Governments that banks sold, the Fed eral Reserve permitted reserves to become scarce. Then, as interest rates rose, it increased the discount rate to keep it in line with the rest of the market. This approach had the ad vantage of being more gradual, more cautious than moving aggressively to check expansion. But as the booms grew pro gressively more intense, the tightness of money grew progres sively more severe. Federal Reserve policy was definitely at work, but in a way that minimized constant interference in the market place. On the downswing of business, however, the Federal Re serve used all its major tools actively to create easy money. It lowered reserve requirements twice, bought Government se curities from time to time, and lowered the discount rate. By taking vigorous action, the Federal Reserve has cast some doubt on the old saying that “you can pull on a string, but you can’t push on it.” Commercial bank policy Much more than Federal Reserve policy has been responsi ble for the relatively good behavior of money, however. Count less decisions by thousands of commercial bankers also have played a part. Bankers have had to make decisions on four main problems. 1) serving their communities, 2) making a profit, 3) keeping their banks safe against insolvency, and 4) keeping their banks liquid. In solving these problems bankers have shifted between loans and Governments, contributing to greater sta bility of the money supply in the process. Serving their communities and making a profit. Bankers gen erally feel that their main job is to extend credit to businesses and individuals in their communities. If the demand is there, bankers prefer to make loans. 9 FEDERAL RESERVE ACTIONS: 1952-1955 Date Reserve Requirements Open Market Operations Discount Rate (FRB Phila. 1952 May Reg. W. suspend*^ Sept. Reg. X. suspended^? 1953 Jan. Raised: 2% Feb. Margin requirom^. lowered: 75 to 50 May-June July Bought $900 million Lowered: Cent. res. city, 24 to 22% Res. city, 20 to 19 ° Country, 14 to 13 Freed est. $1.2 billion of reserves July-Dec. Bought $1.7 billion 1954 Feb. Lowered: 2 to I %% May June-Aug, 10 Selective Cred’* Regulations Lowered: l%to l'/2% Lowered: Cent. res. city, 22 to 20% Res. city, 19 to 18% Country, 13 to 12% Time dep. 6 to 5%° Freed est. $ 1.5 billion of reserves Sold or redeemed $1 billion BUSINESS AND CREDIT CONDITIONS Industrial Production 947-49= IOO) Treasury Bill Rate (Per cent) 119 1.67 65. Instalment credit fairly stable for over a year 129 1.71 95 Required by legislation 134 1.96 -640 Credit expanding, economy workinq close to capacity , 134 1.97 —672 Stock market credit and stock prices fairly stable 2.16 (May) —353 (May) Money market very tight; predictions of business decline 137 (May) Free Reserves* (Millions $) General 366 Money market still tight; business decline starting 252 (Dec.) Business declining; money easing .97 339 Business still declining .76 561 Business nearing low level of recession .64 (June) 712 (June) Business at low point; predictions of recovery 458 (Dec.) Business reviving; seasonal credit expansion 369 Stock market credit and stock prices rising 95 Business fully recovered; bull market in stocks 2.04 1.60 (Dec.] -188 —-------285 -491 Business pushinq aqainst capacity; money market tightening ditto ditto eserves less borrowings from Federal Reserve Banks. 11 This preference is in line with their desire to make profits, for loans are more profitable than Governments. During the booms, when the demand for loans increased, the profit motive induced bankers to make loans, selling Governments if necessaiy. When loan demand fell off, the search for earnings led bankers to invest in Governments rather than hold idle funds. But the relative profit advantage of loans over Governments was not always the same. When loan demand increased and banks sold Governments, the yield on Governments rose. Interest rates on most kinds of bank loans are fairly sticky, so t ie advantage of loans over Governments became smaller, us doesn't mean, of course, that bankers turned down all . ( customers. They had to think of long-run customer >ns. And the rates on some kinds of loans were still so ih i V<i l' at bankers not hesitate to make loans even though the return was less attractive, relatively. Yet, the narmig advantage of loans over Governments probably caused soni(CIS tO.tUnk twice about selling Governments to make some marginal loans. bouelnhc°ther b^’ Whe" ’°an demand fell off and banks Governmf<>V|Cr|nnientS’ yield °n Governrnents declined. X mm me re,atiVely less attracti-. and banks be1 the n/r1011510 deVe’°P neW'loa" b-i-ss. •Bunities ,m alinOtlV70t °nly led banks service their cornloans at the expense ofGo” 'b^ 3nXi°US l° CXp3nd and more anximi f ’ )veinments as the booms progressed 'h tb« respect P108^ Reserve policy and ™ k * P°llCy worked with Federal profit motive contril Stabilit y- But the 1, ,edcould d “ “’8163161 ““V °»>Y because it was When .he Federal R„F'd'ra> R'“™ P0'^ties, it le, the profit X ” ’ P'SS'nS G“vernm™ were removed, the Federal Re Unt°ntrolled' Wben ‘he pegs • n. 1 r eserve could limit the net exoan sion of bank credit during booms cwo ■ , • expanntittet. Federal Reserve poT, profitable use of their funds. 12 1 I I I Safety and liquidity. Federal Reserve policy was not the only thing limiting bankers in expanding credit and seeking profits. Bankers are keenly aware that they are responsible not only for making profits but also for safeguarding the soundness of assets. As banks increased the proportion of loans to total assets during the booms, their risks increased, and they grew more cautious about selling Governments to expand loans further. They became more anxious to hold on to their Gov ernment securities, also because selling them might have involved a loss to be charged against surplus. On the other hand, during the recession, as banks built up the proportion of assets in Governments and as the market value of their hold ings rose, they felt more venturesome about expanding loans. Bankers shifted between loans and Governments also as a way of carrying out their responsibility to depositors. Since depositors can draw out their demand deposits at any time, banks must always be prepared for this by keeping some of their assets in money or in assets close to money. This is the problem of liquidity. It is so important to bankers that it has a strong influence on their lending and investing policies. Liquidity increased and decreased during the recent cyt le ln at least three ways: L Holdings of short-term Governments changed. When loan demand increased during the booms, banks sold many short-terms to make loans, thus tending to become less liquid. When loan demands declined, banks put their money into short-term Governments, tending to become more liquid. (Because holdings of short-terms also were influenced by I reasury polit tesof debt management, however, they did not move up and down in just the way this description might suggest.) 2. Indebtedness to the Federal Reserve Banks changed. During the booms, as banks borrowed Irom the fed eral Reserve, they became less liquid. During the re cession, when reserves became more plentiful, banks paid off their debt to the Federal Reserve, becoming more liquid. 3. The marketability of Government securities changed. The liquidity of Governments depends partly on how easily the banker can find someone to buy his securi- 13 ties. Of course, there is always a buyer for every seller, but only at a price. When the Federal Reserve was sup porting the Government securities market, it really was guaranteeing the liquidity of Governments; it en abled holders to sell at any time at par or better. But during the recent booms, banks found the liquidity of their Governments declining. In the first place, the market shrank with more investors wanting to sell and fewer wanting to buy. And in the second place, prices dropped so that banks were not able to get as much cash for their Governments. During the recession, on the other hand, the liquidity of Governments rose. The market broadened as more wanted to buy, and as prices rose. In short, for several reasons, bankers found liquidity de clining during the booms and rising during the recession. With liquidity declining, they tended to hold back in expand ing credit. With liquidity rising, they were more eager to extend credit. Government securities market Federal Reserve and commercial bank policies, therefore, have contributed to greater stability of the money supply in a number of ways. But in doing so they have put a heavy burden on the Government securities market. That market has had to be strong and flexible enough to handle smoothly the neces sary s lifts of banks in and out of Government securities. For when banks have bought and sold, someone else has had to se and buy. It usually has had to be someone other than the ederal Reserve, since the market has not been pegged. And yields on Governments have had to move enough to induce that someone” to buy when banks have wanted to sell, and to sell when banks have wanted to buy. During the recent cycle, yields have swung widely. As the chart on page 15 shows, this has been particularly true of Treasury bills. During the booms, yields rose to around 2 lZ per cent. During the recession, they fell almost to \/2 per cent. Two important investor groups that have been noticeably affected by changes in the market are life insurance com panies and mutual savings banks. Those institutions had 14 bought large amounts of Government securities during World War II and then had spent most of the succeeding years liq uidating them to extend private credit. They kept on doing so throughout the cycle we are examining. During the booms they did not actually turn around and buy the Governments which banks sold. But with the market narrowing and yields rising, they did sell at a slower rate. Then, during the reces sion, with the market broadening and yields declining, they resumed their selling. Actions of certain other investors were more important in some respects than those of life insurance companies and mutual savings banks. Information is sketchy, but it is clear that certain groups, aware of the changing advantages of holdmg Governments, shifted in the opposite way from banks. It appears, for example, that corporations bought Governments with funds raised by security flotations or accumulated for taxes. Some individuals and other investors also apparently SWINGS IN GOVERNMENT SECURITY YIELDS Rate 1953 1954 Tightness and ease in the money market have been reflected in wide r^ovements in yields of Government securities, particularly Treasury bills. 15 bought Governments. As the bill rate declined during the recession, these groups were more content to hold their funds on deposit with banks. REWARDS OF GOOD BEHAVIOR In case you have lost the thread in a maze of “booms,” “recessions,” “boughts,” and “solds,” we have summarized in the table on page 17 the main reasons why money has been on good behavior. The table adds up to a fairly consistent pic ture in which a number of forces, working through a flexible Government securities market, have contributed to stability of the money supply. But the final question is still unanswered: have these forces contributing to more stable money succeeded in producing a more stable economy? No one can answer this question con clusively because no one can be sure what would have hap pened if the forces had not been at work. It is true that we still have had a minor cycle—two booms and a recession. But would the booms and recession have been worse? It is quite possible. During the booms, some potential borrowers were discour aged from getting credit. We don’t know very much about exactly how this took place or who the borrowers were. But we do know that many banks found themselves limited in ex tending loans. And because insurance companies and mutual savings banks felt they had to cut down their sales of Govern ment securities, they too probably extended less credit than they might have. The public could still spend more, however, simply by using their existing funds more intensively. And they did. As the chart shows, by two measures, the velocity of money picked up. bit it is possible that the public did not spend its money as rapidly as it might have. To the extent that some people became less liquid, they may have tended to be more cautious about spending. And to the extent that the public became convinced that the booms were under control, they were less likely to spend in fear of rising prices. During the recession, on the other hand, it is quite likely that the rising money supply helped keep the decline in busi16 SUMMARY: Why Money Has Been On Good Behavior FEDERAL RESERVE POLICY Before large Government debt Under support program During recent cycle COMMERCIAL BANK POLICY Serving communities Making profits Safety Liquidity Boom Recession Could exercise re straint on bank credit Difficult to exer cise restraint Exercised restraint; primarily by allow ing creditto tighten itself and raising discount rate Difficult to encour age expansion of bank credit Could encourage expansion Encouraqed expan sion: by using all available tools ac tively to create easy money. Expanded loans Made loans, sold Governments As boom pro gressed, relative advantage of loans over Governments decreased As proportion of loans to total as sets increased and as prices of Gov ernments fell, banks became more cau tious As banks sold short-term Govern ments, they be came less liquid As banks increased debt to Federal Reserve Banks they became less liquid As the Govern ment securities market grew thin ner and prices declined, Govern ments became less liquid Expanded loans less rapidly Invested idle funds in Governments As recession pro gressed, relative ad vantage of loans over Governments increased As proportion of Governments to to tal assets rose and as prices of Govern ments increased, banks became more venturesome As banks bought short-term Govern ments. they became more liquid As bonks poid off debt to Federal Re serve Banks they be come more liquid As the Government securities market broadened a nd prices rose, Govern ments became more liquid As the Govern ment securities market grew thin ner and prices de clined, insurance companiesand mu tual savinqs banks sold less Govern ments Corporations and miscellaneous in vestors put idle funds to work in Treasury bills As the Government securities market broadened a nd prices rose, insur ance companies and mutual savings banks sold more Governments money supply Rose less than it might have Rose instead of de clining SPENDING AND VELOCITY Rose less than they might have Declined less than they might have government securities market Corporations and miscellaneous inves tors sold bills and held idle funds in bank deposits 17 VELOCITY IN A MINOR CYCLE ANNUAL RATE Ur-J? tj6 b°°TS traded areas), people spent their money more rapidly; during the recession, less rapidly. ness to a minimum. Historically, an increase in the money supp y during a recession is very unusual. But just because la^ money does not necessarily mean that they will And th'1 ?e may be able to push on the strins on’yso far- “‘“"V >P“<< probablv , i Ct the VeTy fact tllat i*9u*tlity increased probably tended to make pe„p,e £ Y - “pX w isht h”e .............. * “ a taur SZ"1 “ ing economy. ‘"S m°n'’ ‘UPP'y 18 But it is quite possible that Pradu“d » Better bebav- BUSINESS AND BANKING IN THE THIRD DISTRICT For the district as a whole, 1955 was a good hut not a record breaking year. It was a year of increasing job opportunities, longer hours of work, and higher income for industrial work ers. Merchants did very well, and particularly the automobile dealers who sold more cars than ever. Builders and contrac tors were kept busy all year long building bouses, highways, schools, bridges, and industrial structures. Rising volume of freight required the railroads to order more rolling stock. Steel mills and electric utilities going full blast brought bitu minous coal out of the doldrums. Anthracite—long accus tomed to hard times—found times still harder; and the weather was rough on farmers. Thus while the local economy shared generously in the country’s new peak in gross national product of $387 billion, it is unlikely that we went over the top in what might be called a gross district product because of our mixed fortunes. Manufacturing employment grows Employment in manufacturing industries of the district showed a generally rising trend throughout the year. I he de clining trend of the preceding year came to a halt in Febru ary, 1955, and by the end of the year employment in all man ufacturing was about 4 per cent above the January level. As is usually the case, the greatest gains were made in industries manufacturing durable goods; employment in durables as a class rose 5 per cent in contrast with a 3 per cent gain lor non durables. Among individual lines, the sharpest gain—15 pei cent—was in primary metal industries. Sizable increases also occurred in such lines as fabricated metal products, electrical machinery, and chemicals. Despite noteworthy gains, it should be pointed out that industrial employment at year's end was still about 8 per cent short of the 1953 peak. Working time rose more sharply than employment. By the end of the year, overtime in excess of the standard 40-hour week was common practice in most industries of the district. 19 Here again, overtime was more pronounced in durables than in nondurables. The largest amount of overtime occurred in such industries as chemicals, primary metals, non-electrical machinery, lumber and furniture, paper, and rubber. 1 be combination of increased employment, longer hours, and some advances in basic wage rates brought about sub stantial increases in payrolls. During the year, total industrial payrolls in Third District manufacturing advanced about 13 per cent. I.ate in the year, industrial workers averaged $ 1.88 an hour and weekly earnings in excess of $76 were at an all time high. 1 he generally improved employment conditions through out the district were also reflected in area reclassifications of unemployment. During 1955 substantial declines in unem ployment occurred in eight of the thirteen major city areas, n . ovember, Philadelphia moved out of the substantial labor surplus category (6 to 8.9 per cent of the labor force unem ployed). Other areas where unemployment declined were Allentown-Bethlehem, Altoona, Atlantic City, Harrisburg Johnstown, Read,ng, and Wilmington. The greatest relative improvement occurred in Altoona, where unemployment de- T/ 6> to r8..)Q°per m thC PCr CCntby°TNovember. m°re cateSor y in picture May to was the cent12.bracket This brightened considerably by the recall of workers to the Pennsylvama Railroad car shops. Merchants had a good year 19M la1nrvearU.,ne StOTeS ™ ahead ' 1954 all yea, long, I he margin of increase ovgr the dh were all6": COnSiderably afler spring season. Since the I Tt. PnCC lnCTeases’the 8ains reflected sales of mo goot s. e Christmas buying season was especially good ar turned out to be a record-breaker nearly everywhere So he. was the holiday buying that merchants in some cities had re-order expensive items of gift merchandise. With that e ception, the ratio of stocks to sales was maintained in good bante over most of the year. Instalment credit accounted f a larger proportion of total sales in 1955 than in the precedi, a 20 year, which probably reflected a feeling of greater job security on the part of most shoppers. In the Third District counties of Pennsylvania, passenger automobile registrations ran far above 1954 levels in every month except December. The spread widened in both the spring and the fall. Sales were exceptionally well maintained straight through the summer when registrations normally drop from high spring levels. More goods in transport Freight-car loadings in the Allegheny district ran far ahead of 1954 levels from February on, were close to the heavy 1953 shipments after midyear, and were exceptionally well main tained throughout the fall months. Shipment of iron and steel, motor vehicle parts, building materials, and coal were very heavy. Pennsylvania soft-coal producers fared much better in 1955 than the year before, benefiting from a sharp rise in consump tion by heavy industry and electric utilities. Output would have been even higher but for a serious shortage of coal cars that first appeared about midsummer. Storage facilities at bituminous mines are quite small, so when cars could not be obtained to move above-ground stocks, production had to be temporarily cut back. Anthracite producers, unfortunately, encountered further declines in demand for their product. Estimated commercial production of all sizes was just short of 25 million tons, or about 5 per cent less than in 1954. More collieries closed down, and additional miners were unemployed for varying periods of time or lost their jobs altogether. One bright spot 'vas the increased use of anthracite in the manufacture of coke, which gives some promise of an enlarging outlet. In 1955 the port of Philadelphia had the best year in its history, handling over 85 million tons of waterborne com merce compared with 79.5 million in 1954. In recent years, volume in this port has been rising faster than in any other port along the Atlantic Seaboard. 21 The building boom continued Great activity in building and construction was apparent throughout most of the district. Dollar volume of contract awards ran about 10 per cent above 1954 which was also a good year. One of the sharpest increases in contract awards was for family houses, which bulked especially large during the spring months. I hereafter, increased activity in apartment and non residential construction more than offset the drop in smallhome construction caused in part by a tightening of terms on residential mortgages. Awards for public works and utilities and educational buildings were the major groups showing declines from 1954 levels. Manufacturing concerns in the Philadelphia eight-county area spent $307 million for plant expansion and moderniza tion of equipment in 1955. That was almost one-third more than they had planned to spend, according to our survey of their intentions made in the fall of 1954. Steadily expanding business activity in 1955 had an influence on and was influ enced by the stepped-up rate of capital expenditures. Agricultural fortune and misfortune Weather-wise, 1955 was a poor year for numerous farmers ?.1 lstr*cL Grains and other early-season crops yielded hm. egetables at midseason were damaged by drought in July and by floods in August. Tomatoes, potatoes, some sweet corn, and the tobacco crop were hard hit. Orchard fruits did we 1 and much of the field corn and late cuttings of hay turned out better than expected. Poultry men had a good year with prices over much of 1955 io c mg at more profitable levels than in 1954. Dairy farmers also made out fairly well, particularly those whose hay and forage crops were satisfactory; however, some dairy farmers had to do a lot of winter feeding during the July drought Farm cash income for Pennsylvania, New'Jersey, and Del aware was about 1 per cent short of the 1954 income, but 1954 was not a good year because prices were low. Compared with 1954, the 1955 income from crops was about 7 per cent below and income from livestock products was about 2 per cent 22 higher. For many farm products, prices were even lower in 1955, partly because of poor quality in vegetables for both the fresh market and for processing. BANKING Exceptional growth in business activity during 1955 was accompanied by relatively small growth in the volume ol bank credit and bank deposits. In the Third Federal Reserve Dis trict the total earning assets of member banks increased slightly less than 2 per cent in 1955, not quite so much as the nationwide increase of approximately 2i/£ per cent. As so often happens, however, over-all figures concealed striking internal changes. Data for this district reveal that the loans of member banks scored the greatest increase ever re ported in a twelve-month period, rising nearly $600 million, or 18 per cent, to $3.8 billion. The demand for credit was general as well as exceptional. Reports from a group ol large hanks indicate that a sharp rise in business loans reflected heavier borrowings by manufacturers, sales finance companies, mortgage dealers, construction companies and others. Bank holdings of mortgages moved up considerably and active financing of instalment purchases of consumers was reflected in the figures. To help meet the demand for loans and carry the deposits so created, banks pursued two courses of action. They sold or redeemed securities, many of which were acquired by non hank investors, tending to create a counter-balancing flee line m deposits, and they supported their reserve positions by bor rowing. The reports of Third District member banks show investments down more than $450 million in the year to S3.3 billion. Included in this decline were .$327 million of United States Government issues and $1 30 million in other securities, mostly the obligations of slates and local governments. Borrowing from the Federal Reserve Bank of Philadelphia was much more active than in 1954. In the dosing month of 19.55 discounts and advances to member banks averaged over $60 million daily as against $18 million a year earlier. Semi monthly averages for the last six months showed slit It borrow ings consistently greater than excess reserves; in other words. 23 a state of “negative” free reserves existed. Reports of banks in leading cities also reveal that borrowing from sources other than the Reserve Bank was resorted to rather freely. Prevailing conditions were reflected in the earnings reports of Third District member banks. Preliminary tabulations, adjusted for mergers and other changes, show that gross earn ings increased by 8 per cent to a record high level of $293 million, due mainly to income on greatly expanded loan port folios. More than half of this increase was absorbed by rising expenses—larger salary and wage disbursements; an increase in interest paid on deposits; and heavier outgo on other items. Current earnings, after expenses were met, still increased materially over 1954. This increase and a decline in income tax payments, however, were more than offset by a substantial shrinkage in profits on securities and a relatively large total of < harge-offs and transfers to valuation reserves on loans. Ac cordingly, early figures show a decline of nearly $8 million to $53 million in net profits, rhree-fifths of this amount were taken up by cash dividends, which were larger than in 1954. I he bank merger movement continued in 1955, with the result that the number of member banks in this district de clined from 584 on January 1 to 563 on December 31. Most of the mergers were between member banks, but five non members were brought into the Federal Reserve System via I te merger route and one existing bank was admitted to memterslnp, while only one member bank merged into a non member banlf FISCAL AGENCY I he Federal Government taxes, spends, and borrows; it collects and delivers mail; it regulates foreign and domestic commerce; il fixes rates for railroads and telegraph service- it parcels out the airways; it supports the price of some laitn products; it insures some mortgage loans; and it does a lot of other things. To the extent these actions require bankin services, it means work for us. The Federal Reserve is Fiscal Agent for the Government. 24 Now, of course, serving as bank for the United States Gov ernment is only a part of the duties of a Federal Reserve Bank. But it is a good-sized part. In terms of manpower, more than 25 per cent of the employees of this Bank are involved in serv icing the Government. This brief piece is written to give some idea of the duties we perform as Fiscal Agent for the United States. WHAT WE DO Your bank holds your checking account. The Federal Re serve Banks carry the principal checking accounts of the United States Treasury. You probably use your bank for services in addition to those directly related to your checking account—some of which you pay for outright, others come to you because you are a customer. The Treasury gets its bank ing services from the Federal Reserve in pretty much the same way. The biggest difference between your checking account at your bank and the Treasury’s account at the Federal Reserve is size. But there are other differences too. “Smoothing" the flow The sheer size of the Treasury's account means that it must be handled carefully. At tax payment periods and when the Treasury floats large security issues a lot of funds flow from the public to the Government's account. Treasury expendi tures, for defense or to meet other needs, How in large volume too. When funds are moving front the public the flow from commercial banks into the I reasury s account at the Federal Reserve drains bank reserves or lending capacity. When the Treasury disburses large amounts the lending capacity of com mercial banks is increased. This sort of thing could cause alternating shortages and excesses of funds. So the '1 reasury, with cooperation from the Federal Reserve, acts to prevent commercial bank reserves or lending capacity from being tin necessarily distorted. The Treasury designates certain banks and trust companies as Depositaries. There, funds are held in accounts known as 25 Treasury tax and loan accounts. The funds remain in the banking system while being held in this form—they do not deplete reserves or lending capacity. As these funds are needed, the Treasury through the Federal Reserve Banks makes “calls” on the banks for the recptired amounts. “Calls” or withdrawals are spaced to take smaller bites from the bank ing system than would be taken if the funds had gone into the Treasurer’s account at the Federal Reserve in one lump sum. I hey are geared, as closely as possible, to the flow of expendi tures by the Treasury. Debt and taxes Since the Government is continuously receiving and spend ing funds in all parts of the country, the Treasurer’s account is an active one. Deposits to this account come mainly from tl'ru'H y,11<intS a,nd SalCS °f Government securities. Tax funds dir, C "(C<l l° Reserve Banks—whether from employers dZ k" 7",“T,bank! Sua,ified to receive these I include withheld income taxes, social security taxes railroad retirement taxes, and certain excise taxes Withthawab-made largely in the form of Government checks80 (or national security, veterans benefits, payment of interest o„ the national del,,. and „| , "" Much of the work the Federal Reserve does fin the ireas. systc"’ •“ In addition, the Reserve Banks issue, exchange transfer and redeem marketable Government securities such as Tre J’ ury bonds, notes, certificates of indebtedness, and bills ^lese' arc, generally speaking, larger-denomination securities de signed for commercial bank, mutual savings bank insurance company, corporation, and large-investor purchase’s. ‘ ■ i K,,T,<?cry a s° taps” savings from smaller investors with United States Savings bonds. These bonds are sold in smaller denominations than the marketable securities. The Federal Reserve Banks are authorized to issue, sell, and con 26 duct subsequent transactions such as reissuing, and redeeming these securities. Much of the Savings Bond work is carried on through commercial hanks and others, who are qualified by the Reserve Banks to act as issuing and paying agents. Of course, the United States Government has set up many special Federal agencies. The Reserve Banks have somewhat similar responsibilities in connection with the securities of United States agencies. Operations, however, in most cases currently cover only redemption and payment of maturing obligations and coupons. Lending, burning, and other things Not all of the work the Federal Reserve does for the Treas ury can fit under the heading “debt and taxes.” As a matter of fact, not even all of the deposits to the Treasurer's account at Reserve Banks come under this heading. Postmasters throughout the country deposit their excess funds in the Treasurer's General Account. The Federal Reserve Banks also process postal money orders received from commercial hanks and others. Administering and servicing loans under the V-loan pro gram to expedite financing of production and deliveries for national defense is another job of the Reserve Banks. Most loan guarantees are made for the Departments of the Army, Navy, and Air Force. Finally, as Agent of the Treasury, Reserve Banks verify anti destroy unfit United States currency retired front c initiation. This Bank has an incinerator to destroy such unfit currency. HOW WE DO IT Like any other hank we accomplish our duties with people and machines. And again like other hanks the tendency in recent years has been to mechanize more and more of the opet ations. In walking through the sections of the Bank doing Fiscal Agency work, you encounter all kinds of mat bines doing things like tabulating, punching, sorting, stamping, verifying, weighing and tying up bundles. This equipment steps up output and efficiency, and requires 27 specialized workers. It enables us to keep up with the everchanging work load. One reason for changes in the work load is the growth in activities of the Federal Government. THEN AND NOW Compare for a moment some measures of Federal activities in 1914, when the Federal Reserve System began operating, with today. In 1914 Government receipts totaled $700 million. Most of the funds coming in were from customs duties. Gov ernment spending was also about $700 million. That repre sented about 2 per cent of our national income. The national debt at that time was .$1.2 billion. In 1955 the national Government received about $63 bil lon from taxes and other sources. It spent $66 billion, or about 20 per cent of our national income. Largely as a result of two World Wars and the Great Depression the national debt is now about $281 billion. Being banker for the Govern ment today is a tremendous job. Federal activities are not only much larger than formerly bey have also undergone many changes. Without going into G ’n ’ ’• 15 6357 tO SCe that the two World Wars and W«Ghri91?7h,OrbroU,!hta'wuptchanKe*inFedera,aci**ee the !««. the war Th^TT. '’'Ra" “ s“urities » erty bonds vin ’ Reserve handled the sale of libe„Vn~“' and Tr“’Ury »' ... -“hm^erdlF,?"al >senci? Were- “■> >» •>" token place. The I'e'S7" •“ “'ivi,y 'hat had agencies . Reserve provided services to these agencies. ] he second World War brought K, v 7 ................. 917.1919—1, „„ ,177,77,7' I1'," ..on some new job, came w„r|(, Wjr » add', the number of full-time employees in this Bank L 7 Fiscal Agency totaled 49« Th i • signed to b y totaled 4.8. The number in 1939 was just 54. FLEXIBILITY —A NECESSITY The .remendon, growth and the frequent change, in Fed eral achv.t.e, make ilexibilit, a prime requirement for fLc,, 28 Agency. New machines and gadgets have been of invaluable assistance in enabling this Bank to keep up with developments over the years. But machines have to be run and adapted to the job at hand. This takes people—intelligent people. Ilex tble people and, above all, people with imagination. We have been fortunate. We have them in Fiscal Agency. RESERVE BANK OPERATIONS-1955 Expansion in the world of business and a rising volume of financial transactions go hand in hand. 1955 was no exception, demands upon this Bank for credit accommodation were touch heavier than in 1954, and active use was made of other services performed by the Bank in the interests of a smoothly tunning economy. Discounts and advances to member banks increased from an aggregate of $759 million in 1954 to $6,926 million in 1955, and the daily average of such credit outstanding rose from $8 nnllion to $43 million. More than 180 banks were accommo dated, the largest number in any postwar year, as against 138 >n 1954. The growing volume of business and personal payments was reflected in the greater volume of checks passing through the Collection Department and in heavier transfers of funds. A larger amount of currency was called into use; nevertheless the number of pieces counted was a trifle smaller than in 1954. The decline in pieces counted reflected the tendency for notes to stay in circulation and the paying out of fit notes of other Reserve Banks over the entire year. This practice, permitted by legislation enacted in the middle of 1954, has effected a sub tantial economy in salary and transportation costs. The nmn Eer of depositary receipts for withheld taxes handled in creased materially, and security purchase and sale transac tions handled for the member banks ran ahead of 1951. Issues and redemptions of marketable Government securities anti re demptions of savings bonds declined, hut issues of savings bonds increased. 29 The processing of receipts from postmasters is a sizable oper ation. Approximately 447,000 remittances were received, in volving a total of $668 million. A new operation in January was the use of punch cards for the maintenance of member bank reserve accounts and the preparation of the daily reserve statements sent to the banks; this saves time and expense and has the further advantage of turning out more satisfactory statements than the methods used heretofore. Close contact with banks of the district was maintained by individual visits, group meetings, addresses, and the distribu tion of publications. Every bank in the district was visited during 1955, helping to increase the effectiveness of the Fed eral Reserve System by promoting understanding of its pur poses, responsibilities, and operations. This broad aim was furthered also by 25 field meetings covering the district, which were attended by 1,336 bank officers and directors. At these meetings Federal Reserve policy was discussed and local con ditions were reviewed by panels of businessmen. In December, a central banking seminar was held, attended by 33 teachers from colleges and universities of the district. Extending over three days, this seminar covered both the pol icy and operational features of the Federal Reserve System I o fam,1,arize commercial bank personnel and students with the Federal Reserve and what it is doing, numerous groups were taken on tours of the Bank and given talks about the p ace o i i< Federal Reserve in our economy; in this activity all departments participated. An exhibit of coins of Bible times, on display at member banks throughout the district during the year met with a very favorable public reaction. Members of the staff of the Department of Research partici pated ... all of the field meetings and made many other ad dresses before banking, business, and other groups. Carrying out its basic responsibility, the Department maintains a con tinuing check on banking and business conditions. Much of the material it collects is made available to the public through the monthly Business Review, statistical releases, and other publications. Surveys of developments in key areas such as housing and automobiles were made during the year and sta 30 tistical data on mortgage warehousing and the characteristics of business loans were assembled from special reports. Publi cations issued by the Bank were in active demand throughout the year. Directors and Officers In the fall of the year banks in Group 1 reelected Charles E. Oakes as a Class B director for a term of three years, beginning January 1, 1956. Group 3 banks elected Lindley S. Hurff, President and Trust Officer of the First National Bank of Milton, Pennsylvania, as a Class A director for a like term; he succeeds Bernard C. Wolfe. Henderson Supplee, Jr. was reappointed by the Board of Governors of the Federal Reserve System as a Class C director for a three-year term beginning with the new year. William J. Meinel was designated as Chairman of the Board of Directors and Mr. Supplee as Deputy Chairman to serve during 1956. The district was represented on the Federal Advisory Coun cil during 1955 by William R. K. Mitchell, Chairman of the Board of the Provident Trust Company of Philadelphia. By appointment of the Board of Directors of this Bank he will continue to represent the district during the coming year. There were no changes in the official staff during 1955. Effective January 1, 1956, however, David P. Eastburn, a Financial Economist, was given official status. 31 DIRECTORS as of February 1,1956 Group Class A Term expires December 31 I WILLIAM FULTON KURTZ Chairman of the Executive Committee, The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania 1956 2 W. ELBRIDGE BROWN President and Trust Officer, Clearfield Trust Company, Clearfield, Pennsylvania I957 3 LINDLEY S. HURFF President and Trust Officer, The First National Bank of Milton, Milton, Pennsylvania I958 Class B I CHARLES E. OAKES President and Director, Pennsylvania Power & Light Company, Allentown, Pennsylvania I958 2 WARREN C. NEWTON President, O. A. Newton and Son Company, Bridgeville, Delaware 1956 3 BAYARD L. ENGLAND President, Atlantic City Electric Company, Atlantic City, New Jersey I957 Class C 32 WILLIAM J. MEINEL, Chairman J Chairman of the Board, The Heintz Manufac turing Company, Philadelphia, Pennsylvania 1957 HENDERSON SUPPLEE. JR., Deputy Chairman President, The Atlantic Refining Company, Philadelphia, Pennsylvania 1958 LESTER V. CHANDLER Professor of Economics, Princeton University, Princeton, New Jersey 1956 OFFICERS as of February 1,1956 ALFRED H. WILLIAMS President W. J. DAVIS First Vice President EVAN B. ALDERFER Industrial Economist karl r. bopp Vice President CLAY J. ANDERSON Financial Economist ROBERT N. HILKERT Vice President DAVID P. EASTBURN Financial Economist ERNEST C. HILL Vice President MURDOCH K. GOODWIN Assistant General Counsel and Assistant Secretary WILLIAM G. McCREEDY Vice President and Secretary EDWARD A. AFF Assistant Cashier PHILIP M. POORMAN Vice President HUGH BARRIE Machine Methods Officer JAMES V. VERGARI Vice President and General Counsel ZELL G. FENNER Chief Examiner RICHARD G. WILGUS Cashier and Assistant Secretary JOSEPH R. CAMPBELL Assistant Vice President Wallace m. catanach Assistant Vice President Norman g. dash Assistant Vice President GEORGE J. LAVIN Assistant Vice President RALPH E. HAAS Assistant Cashier ROY HETHERINGTON Assistant Cashier FRED A. MURRAY Director of Plant HENRY J. NELSON Assistant Cashier HARRY W. ROEDER Assistant Cashier HERMAN B. HAFFNER General Auditor 33 APPENDIX - statistical tables Page FEDERAL RESERVE BANK OF PHILADELPHIA 35 Statement of Condition 36 Earnings and Expenses 37 Volume of Operations MEMBER BANKS- THIRD FEDERAL RESERVE DISTRICT 38 Combined Statement 38 Earnings, Expenses, and Profits 39 FACTORY EMPLOYMENT AND HOURS 39 INCOME AND PRICES 40 department store sales and inventories 34 STATEMENT OF CONDITION Federal Reserve Bank of Philadelphia End of year (000's omitted in dollar fig ures) 1955 1954 1953 $1,105,726 61,738 $1,220,496 58,928 $1,300,725 61.085 $1,167,464 37,672 16,770 $1,279,424 17,291 16,199 $1,361,810 17,104 26,837 Discounts and advances ........................... Industrial loans ........................................... United States Government securities . .. . 26,928 642 1,484,488 13,767 612 1,514,656 4,555 1,380 1,525,491 Total bills and securities......................... Due from foreign banks................................... Uncollected items........................................... Bank premises................................................... All other assets ............................................... $1,512,058 2 3-27.844 5,050 9,264 $1,529,035 2 235,683 5.164 7,915 $1,531,426 2 253,896 4,734 8,845 Total assets............................................... $3,076,124 $3,090,713 $3,204,654 LIABILITIES Federal Reserve notes....................................... $1,839,889 Deposits: $1,845,959 $1,896,948 868,455 22,008 28.178 15,458 884,622 39,713 35.668 14,134 959,879 30,135 30.690 8,688 Total deposits ........................................... . $ 934,099 Deferred availability items............................. . 219,651 All other liabilities........................................... . 751 $ 974,137 190,709 685 $1,029,392 201,073 875 Total liabilities ......................................... . $2,994,390 $3,01 1,490 $3,128,288 ASSETS Gold certificate reserves: Gold certificates ......................................... Redemption fund—Fed. Res. notes.......... Total gold certificate reserves............... Fed. Res. notes of other Fed. Res. Banks . . . Other cosh ................................................................... Bills and securities: Member bank reserve accounts.................. United States Government........................... Foreign .............. Other deposits............................................... CAPITAL ACCOUNTS Capital paid in ............................................... . $ Surplus—Section 7 ......................................... Surplus—Section 13b ..................................... Reserves for contingencies............................ 19,757 49,490 4.489 7,998 Total liabilities and capital accounts . . . . $3,076,124 $ 18,982 47,773 4,489 7,979 $ 18,017 45,908 4,489 7,952 $3,090,713 $3,204,654 45.4% $128 46.5% $1,724 Ratio of gold certificate reserves to deposi t and Federal Reserve note liabilities com bined ............................................................. ■ Commitments to make industrial advances . • 42.1% $41 35 EARNINGS AND EXPENSES Federal Reserve Bank of Philadelphia (000's omitted) 1955 1954 1953 U. S. Government securities.............. $24,212 $26,360 $30,649 Other sources...................................... 990 260 747 Total earnings.................................. $25,202 $26,620 $31,396 Operating expenses* ........................ $ 6.170 $ 5,923 $ 5.612 Cost of Federal Reserve currency . . . 365 634 1,041 Assessment for expenses of Board of Governors .................... ................. 306 311 310 Total net expenses.......................... $ 6,841 $ 6,868 $ 6,963 $18,361 $19,752 $24,433 Earnings from: Net expenses: Current net earnings.............................. . Additions to current net earnings: Profits on sales of U. S. Government securities (net) ............................ 30 126 ■ — — — ■ — $30 $126 18 — 27 All other . . ........................................ Total additions .............................. Deductions from current net earnings: Retirement System—adjustments for revised benefits............................ 159 Reserves for contingencies.............. . . All other........................ t................ 4 $27 $194 —$18 $3 — $68 $18,343 $19,755 $24,365 15,457 16,779 20,974 1,169 1,111 1,060 $ 1,717 $ 1,865 $ 2,331 Total deductions............................ Net additions or deductions (—) . . . .. Net earnings before payments to United States Treasury.................... • Poid to United States Treasury (inter est on Federal Reserve notes) ........ .. Dividends .............................................. • Transferred to surplus (Section 7). . . . • ■ 31 — • After deducting reimbursements received for cortain fiscal agency and other expenses. 36 VOLUME OF OPERATIONS Federal Reserve Bank of Philadelphia Number of pieces (000's omitted) Collections: Ordinary checks............................................. Government checks (paper and card) .... Postal money orders (card) ......................... Non-cash items............................................... Clearing operations in connection with direct sendings and wire and group clearings Plans#............................................................. Transfers of funds............................................. Currency counted ............................................. Coins counted ........................................... Discounts and advances to member banks . . Depositary receipts for withheld taxes.......... fiscal agency activities: Marketable securities delivered or redeemed ................................................... Savings bond transactions— (Fede ral Reserve Bank and agents) Issues (including re-issues) .................... Redemptions............................................... Coupons redeemed (Government and agencies) ....................................................... Dollar amounts (000,000's omitted) Collections: Ordinary checks............................................. Government checks (paper and card) ... Postal money orders (card) ........................ Non-cash items .... # .......................... earing operations in connection with direct sendings and wire and group clearings Plans# .............................. .... . Transfer of funds . . . . / . . ’ . ’ ’ . . . . . ' . . . ' ' . Currency counted ...................................... Coins counted .................... Discounts and advances to member banks .... Depositary receipts for withheld taxes ..... fiscal agency activities: Marketable securities delivered or redeemed ........................ Savings bond transactions— ( ederal Reserve Bank and agents) Issues (including re-issues) .................... Redemptions ............................................ °upons redeemed (Government and agencies) ........................................... j£^r0L.'ous Y®ars not comparable. Debit and credit items. 1955 1954 161,500 41,400 23,400 900 38,800 23,100 900 35,400 23,100 900 1,022 96 291.200 389,700 2 440 1,078 86 299,200 372,400 1 361 1,191 82 319,100 439,700 2 349 220 260 209 7,217 6.616 7,042 6,889 6,815 6,609 875 894 915 $55,288 6,733 337 194 $51,376 6,313 339 172 $51,747 5,025 338 159 27,926 44,346 1,903 51 6,926 1,424 25,512 43,176 1,931 47 759 1,289 26,532 33,963 2,084 57 4.028 1,245 8,531 1 1,036 8,989 497 461 495 477 406 98 89 89 1953 * 412 37 MEMBER BANKS Third Federal Reserve District Statement of Condition Dec. 30, 1955* (Dollar amounts in millions) Assets Loans and discounts.............................. . U. S. Government securities ................ Other securities...................................... Cash assets.............................................. Fixed assets ............................................ Other assets............................................ . Total assets...................................... $3,818 2,496 802 1,942 109 36 $9,203 Liabilities and Capital Accounts Deposits: Individuals, partnerships and corp.— Demand .......................................... Time ................................................ U. S. Government............................ Other ............................................... Total deposits .............................. Other liabilities .................................... Capital accounts.................................. Change in year** Amount Per cent $4,935 2,198 171 946 . . Total liabilities and cap. acc'ts. . . $8,250 139 814 $9,203 +$590 — 327 — 130 + 106 + 13 + 6 + $258 + 18% — 12 —14 + b + 14 + 19 + 3% + $260 + 15 — 31 — 67 +$177 + 56 + 25 +$258 + 8% + 1 — 15 — 7 + 2% +67 + 3 + 3% Earnings, Expenses, and Profits (Dollar amounts in millions) 1955* Earnings On U. S. Government securities.................. On other securities............ ........................... On loans ............................................... ......... Other earnings............................................... $ 54.9 19.5 173.3 45.2 Total earnings ................................ $292.9 Expenses Salaries and wages ........................................ Interest on deposits........................................ Other expenses ............................................. Total current expenses........................... Net current earnings before income taxes. . Change in year** Amount Per cent +$ . I + -I 4- 20.4 + -| $22.8 $ 86.8 25.5 67.6 $179.9 $1 13.0 +$ 4.1 + 1-2 + 6.9 + $12.2 4-$l0.6 + 5% + 5 + 11 + 7% + 10% -63% -f-44 — 12 Recoveries, profits on securities, etc.# . . . . Losses, charge-offs## .................................. Taxes on net income ................................. $ 7.6 33.9 33.7 —$12.8 4- 10.4 — 4.8 Net profits $ 53.1 32.7 —$ 7.8 4" 2.3 ................... Cash dividends declared • Preliminary. •’Adjusted for mergers and changes in membership. #lncludes transfers from valuation reserves. ##lncludes transfers to valuation reserves. 38 + 13% + 5 + 8% I —13% +8 factory employment and hours* Third Federal Reserve District All Manufacturing mployment Weekly hours worked Durable Goods Employ ment Nondurable Goods Weekly hours worked .mployment 1949 1.161.3 38.8 498.4 39.1 662.9 1950 . .. " 1.190.2 40.0 512.7 40.9 677.5 1951 .. 1,259.5 40.3 584.2 41.8 675.3 1952 . ' 40.4 1,272.0 606.9 41.7 665.1 1953 . 1,327.5 40.2 660.0 41.2 667.5 1954 1,214.2 38.9 583.4 39.5 630.8 1955 .............. 1,209.3 39.9 576.7 40.8 632.6 1955 January ........ 1,186.5 39.1 564.0 39.5 622.5 February . . . . 1,189.6 39.4 562.1 39.7 627.5 March .......... 1,194.9 39.7 564.9 40.2 630.0 April ............ 1,194.3 39.0 568.8 40.3 625.5 May .............. 1,200.8 40.1 574.8 41.2 626.0 June .............. 1,209.0 40.0 577.7 40.7 631.3 July .............. 1,198.0 39.5 576.3 40.2 621.7 August .......... 1,219.7 39.8 579.7 40.5 640.0 September . . . 1,229.6 40.3 588.3 41.4 641.3 October ........ 1,229.9 40.6 587.2 41.6 642.7 November . . . 1,226.8 40.8 585.3 41.7 641.5 December . . . 1,232.1 40.8 591.5 42.0 640.6 * Estimates of employment include production and nonproduction workers. Average hours cover only production workers. Weekly hours worked 38.6 39.4 39.2 39.4 39.3 38.4 39.3 38.7 39.1 39.3 38.0 39.3 39.6 38.9 39.3 39.4 39.8 40.0 39.8 income and prices Factory Payrolls: 1949 = 100 Farm income— Prices: 1947-1949 = 100 Factory Payrolls—Production Workers Third Federal Reserve District All Manu facturing 1949 . 100 1950 .. II I 1951 . 127 1952 . 131 1953 . 145 1954 . 129 1955 138 1955 January . . 129 February 130 March . . , 133 April ........ 131 May ........ 137 June . . . . , 137 July ........ 135 August . . , 139 September 144 October . 145 November 145 December 146 Sources: *U.S. Dept. of Agricult ure. Durable goods Nondurable goods Income from farm Consumer marketings prices in N. J.. Pa., Philo. | and Del.* 100 100 96 112 110 93 140 116 III 150 1 17 1 10 174 122 108 147 115 102 157 123 103 145 116 89 145 119 87 147 121 104 150 117 99 157 121 100 156 123 98 156 120 114 158 125 118 168 126 118 168 128 110 168 128 102 171 127 102 I U.S. Bureau of Labor Statistics. 102 102 112 114 115 116 115 115 116 116 116 116 116 116 116 115 115 115 115 39 DEPARTMENT STORE SALES 1947-49 = 100 (Adjusted for seasonal variation) Phila Lan Read Third ing District delphia caster 1949 . . 1950 ........ 1951 ........ 1952 . . 1953 . . 1954 . . 1955 ............ Scran Wilkeston Tronton Barre York 100 106 109 109 111 109 117 99 104 106 104 106 106 113 100 108 110 111 115 111 117 99 102 104 104 107 104 1 14 100 109 110 1 14 1 16 1 15 1 19 105 1 16 121 122 122 121 129 98 101 100 99 99 94 104 100 106 1 14 1 17 129 122 138 113 108 111 115 115 114 121 114 120 120 121 122 112 105 107 IOS 110 104 112 115 118 112 128 112 121 115 122 123 108 102 1 15 113 113 1 12 117 122 113 118 141 126 133 132 129 178 136 121 133 131 122 126 104 98 98 109 99 IOO 125 116 1 19 135 175 55 January . . . February . . . March ........ April .......... Moy ............ Juno .......... July ............ August . . . . September October . . November . December . 1 13 109 120 117 115 114 117 117 126 109 1 15 1 18 1 14 123 112 1 12 117 99 139 117 119 128 IO8 100 109 100 103 109 146 156 147 151 1 142 DEPARTMENT STORE INVENTORIES 1947-49 = 100 (Adjusted tor seasonal variation) 1949 . 1950 .... 1951.......... 1952 ............ 1953 .......... 1954 ... 1955 ............ 55 January .... February ... March . April .......... May............ June . . July .......... August . . . . September . October . . November December . 40 Third Phila Lan Read Scran WilkesDistrict delphia caster ing ton Trenton Barre York 99 108 127 113 119 1 16 122 97 107 125 110 114 112 119 99 108 124 114 121 125 130 100 106 131 114 122 116 120 105 1 14 134 1 16 121 129 135 105 105 127 1 13 1 16 108 121 100 110 126 113 101 115 101 1 12 128 1 19 132 126 137 118 117 118 116 119 124 125 122 126 126 128 131 117 113 111 112 115 1 17 122 117 124 123 125 130 123 124 130 124 127 133 132 136 133 132 134 139 123 120 117 117 117 1 19 117 117 118 125 123 130 135 132 131 133 134 140 137 137 136 135 135 140 125 115 118 116 123 132 127 118 126 117 117 119 110 1 14 117 114 115 117 117 117 116 1 12 115 1 14 140 128 127 126 127 139 134 144 144 140 143 150 109 third federal reserve district
@FedFRASER