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P OO RP E S P E B R9 1 2




The first location o f the Federal Reserve Bank o f Richmond (far right)

F e d e r a l
1 9 8 9

R e s e r v e

A n n u a l

B a n k

o f R ic h m o n d

R e p o rt

C o n te n ts
Message from the Chairman
and the President


The Federal Reserve Bank of Richmond:
Governor Seay and the Issues of the Early Years




Advisory Councils


Operating and Financial Statistics




ISSN 0164-0798


Fdra Rse e Bn of R m d P b tio Nme P
e e l e rv a k ich on u lica n u b r: -l

Additional copies o f this Annual Report may be obtained without charge from:
P ub lic Services D e partm ent

Federal Reserve Bank o f R ic h m o n d

R O . Box 27622

R ich m o n d , V irginia


Federal Reserve Bank of Richmond

M e s s a g e fr o m ,
C h a ir m a n

a n d

th e
th e

Robert P. Black


e are pleased to present the 1989
Annual Report of the Federal Reserve
Bank of Richmond.

This Annual Report commemorates the Bank’s
75th anniversary. In the anniversary spirit, we turn
attention from the issues that we encounter daily to
those that confronted our counterparts during the
Bank’s early years. In the feature article, author James
Parthemos relates how George Seay, the Bank’s first
chief executive officer, led the District’s bond
drives to finance W orld War I, helped define the
roles o f the Reserve Banks, and directed District
efforts to improve the nation’s payments system. The
article serves to remind us that the Reserve Banks
have always contributed importantly to the many
functions o f the Federal Reserve System.

P r e s id e n t

Hanne Merriman
Chairman o f the Board

The Bank’s highlight o f 1989 was the completion
o f the new building in Charlotte. New buildings have
now replaced the three original buildings constructed
for Fifth District offices in Richmond, Baltimore, and
Charlotte. The old buildings are featured on page 18,
and the new ones on page 28.
On behalf o f the directors and staff, we thank you
and your predecessors for the support and coopera­
tion that you have given the Bank over these past
75 years.

C h a ir m a n o f th e B o a r d

P r e s id e n t


1989 Annual Report

.Illin iu m '



---C Mr O RO T EC R K 'Y ---O PK ij.F F H V K W

T h e

F e d e r a l


e s e r v e

G o v ern o r S eay


a n k

a n d

o f th e E a r ly





i c h m

o n d :

th e I s s u e s

Y ea rs

James Parthemos

he choice o f Richm ond as a Federal Reserve city was greeted with jubilation by the civic leaders
o f the old capital o f the Confederacy. For three m onths they had w aged a carefully orchestrated
campaign to convince the Reserve Bank Organization Committee, established to select the sites
for the new Reserve Banks, o f the superiority o f R ichm ond’s claims over those o f such c o m ­
peting cities as Washington, Baltimore, Charlotte, and Columbia. The chief architect o f that campaign was
George J. Seay.
For Seay, the choice o f Richmond, announced on April 2, 1914, was a great personal triumph. He
had w orked tirelessly in the campaign to bring the Reserve Bank to Richm ond. The city’s petition to
the organization com m ittee and its supporting brief were largely his w ork. He had made the principal
oral presentation before the com m ittee in January 1914 and had prepared the revised written brief
presented to the com m ittee in the follow ing m onth. W ith other Richm ond leaders, he had toured the
Carolinas in an effort to m obilize support am ong bankers and business leaders in those states. He had
prepared an extensive brief countering efforts by Baltimore leaders to reverse the choice o f Richmond.
Seay’s contributions were recognized and lauded, even am ong the leaders o f rival campaigns. The c o m ­
pelling arguments presented in his brief to the organization committee were widely credited as the crucial
factor in the decision to locate the Reserve Bank in Richm ond.



Federal Reserve Bank of Richmond

eorge J. Seay was born in Petersburg,
Virginia, in March 1862. He was educated
in the public schools o f Petersburg, win­
ning first honors on graduation from high
school. Seay had no college training. At 17, he
accepted employment as a runner at the Petersburg
Savings and Insurance Company. His talents were
quickly recognized, and he rose rapidly in the organi­
zation. He served that institution for 24 years, the
last nine as cashier. In 1902 he was elected president
o f the Virginia Bankers Association. He resigned from
the Petersburg institution in 1903 to becom e a part­
ner in the Richmond banking house o f Scott and
Stringfellow. He remained in that post until 1909,
leaving in that year to devote himself to independent
study o f banking reform and railroad finance, sub­
jects that had commanded his interest for most o f
his adult life,
Seay was especially interested in the movement
for banking reform at the turn o f the century and
had follow ed closely the various reform proposals.
He published a pamphlet on the Fowler and Aldrich
bills and was said to have “ devoted many months’
study to the Federal Reserve Act during its progress
in Congress.” While the record indicates that he
retired in 1909, at the age o f 47, it is likely that he
maintained some connection with one or more local
businesses between 1 9 0 9 and 1 9 1 3 , perhaps in a con­
sultative capacity. O n December 28, 1913, he was
retained by the Committee on Locating a Federal
Reserve Bank in Richmond to put together a case for
the city’s petition to the organization committee.
Following the choice of Richmond as a site for one
o f the Reserve Banks, Seay, amid plaudits for his con­

tributions, was widely regarded as a likely candidate
for a high post in the new institution. He was recom­
mended by a former employer as a man
. . of
absolute integrity and high character, perfect habits
and o f great industry and energy, with an effi­
ciency, capacity and ability in banking matters which
I have never seen surpassed, and rarely equalled in
many men o f his age.” This employer deemed him
“ eminently qualified” for the position o f manager
o f the Reserve Bank.
The Richmond Reserve Bank was incorporated on
May 18, 1914. On the same day, representatives o f
some 2 10 banks from the Fifth District met in Rich­
m ond to discuss procedures for electing three Class
A directors, representing the banking community,
and three Class B directors, representing industry,
commerce, and agriculture. This gathering was
without authority to elect directors, but it never­
theless proceeded to offer a preferred slate o f can­
didates which included Seay’s name as a Class B
director. This slate was later elected through the
elaborate election procedure prescribed in the
Federal Reserve Act. While in January Seay had in­
dicated to the organization committee that he had
“ no business or financial connection,” in executing
the oath o f office as director in August he described
himself as “ Vice Pres’t U.S. Tobacco Co. and RR and
Financial Statistician and Expert.”
Selected with Seay in the Class B category were
David R. Coker, o f Hartsville, South Carolina, and
James F. Oyster, o f Washington, D .C. The Class A
directors were W aldo Newcomer, o f Baltimore; J. F.
Bruton, o f Wilson, North Carolina; and Edwin Mann,
o f Bluefield, W est Virginia. Three Class C directors,
representing the general interest, were appointed
later by the Federal Reserve Board. They were
William Ingle, o f Baltimore, designated Chairman and
Federal Reserve Agent; James A. Moncure, o f Rich­
m ond, designated Deputy Chairman and Deputy
Federal Reserve Agent; and M.F.H. Gouveneur, o f
Wilmington, North Carolina. At its first meeting, on
October 5, the board o f directors elected Seay to be
the Bank’s first governor, as the chief executive
officer was then called. It also named him the Fifth
District’s representative to the Federal Advisory
Seay served as governor o f the Richmond Bank
until 1936. His tenure covers the Federal Reserve
System’s formative years. This formative period
embraces two distinct chapters, the first dominated
by W orld War I and the second by the vicissitudes
o f the world econom y in the decade following. The
second chapter ended unhappily, with the great stock
market crash o f 1 9 2 9 followed by a collapse o f the
banking system that led to a restructuring o f the
Federal Reserve.


1989 Annual Report

The early years— the period from 1914 to the end o f 1929— posed a number o f key issues the resolution
of which was important in the development o f effective monetary policy mechanisms as well as an efficient
payments system. First, there was the basic issue o f the distribution o f authority between the Reserve
Banks and the Reserve Board. This issue remained in abeyance during the war years when the Banks were
preoccupied with war financing and were largely under Treasury domination. Second, there were issues
of credit policy involving the forging o f effective policy tools and their application to the problems o f the
time. Third, there were issues and problems involved in a broad effort to improve the nation’s payments
arrangements, especially in the area o f check collection. The Richmond Bank, under Seay, played an impor­
tant role in the System’s efforts to confront these issues constructively.

F in a n c in g

he entry o f the United States into the First
W orld War in April 1917 presented a
special challenge to the Reserve Banks.
As fiscal agents o f the federal govern­
ment, they were called on to serve the Treasury in
planning and implementing a program to finance
the war effort with minimal disturbance to the
nation’s financial markets. Seay and the other Re­
serve Bank governors participated in the planning
The Banks’ services to the Treasury in this regard
began in March, just before the country’s entry into
the war. At that time the Banks distributed for the
Treasury $50 million o f certificates o f indebtedness
issued in anticipation o f income tax receipts due in
June. The Richmond Bank was allotted $2 million
o f this issue, which it placed promptly.
Then followed the first o f five multi-billion-dollar
bond issues aggregating more than $24 billion, an
unprecedented magnitude o f borrowing. The socalled First Liberty Loan, announced on May 14, was
a $2-billion, 30-year issue dated June 15, with interest
at 3% percent. An elaborate effort was mounted to
market this issue. Secretary M cAdoo led the effort,
touring the country in what he later described as a
“ . . . great movement that vibrated with energy
and patriotism and swept the country from coast to
coast in the greatest bond-selling campaign ever
launched by any nation.”
The marketing effort centered heavily on the
Reserve Banks. In accordance with detailed plans
provided by the Treasury, each Bank established a
closely structured, Districtwide network for pro­
moting sales. The Reserve Bank governors were
designated chairmen o f District committees made
up, in turn, o f the chairmen o f state committees,
who, in their turn, appointed county and local
committees. In the Richmond District a Liberty Loan



W o r ld

W a r


bureau was set up in every bank, and each was
advised o f its “ proportionate amount o f the loan,
based on its total resources.” An executive staff,
reporting directly to Governor Seay and including
teams o f field directors, coordinated the effort. Seay




W IL S O N .


BU Y A B O N D ° ™





Federal Reserve Bank of Richmond

considered the Liberty Loan drives to be his most
important duty and threw himself wholeheartedly
into each campaign.
The premise of the financing program was that the
war should be financed to the extent possible by the
real savings o f the public. Bank credit, and in par­
ticular, Reserve Bank credit, was to be relied on
only residually with every effort made to hold the
residual to a minimum, in keeping with the prevail­
ing view in banking circles that bank credit should
be directed primarily at financing production and
accommodating trade, not at accommodating
government. Hence a large promotional effort was
directed at placing the bonds with the nonbank
Seay approached the financing task with a fervor
bordering on the religious and worked untiringly to
match or excel the best efforts o f the other Reserve
Banks. Writing in 1923, he noted the District’s
“ remarkable record” in 1917, 1918, and 1 9 1 9 , when
the actual purchases o f all types o f war securities by
the people o f the Fifth District reached “ the stupen­
dous aggregate of $ 1.1 billion!” It was his “ deliberate
and mature judgement that but for the existence of
the Federal Reserve System . . . Germany would have
w o n .” He also believed that “ the bringing o f the
Federal Reserve System into being and enabling it
to perform such a signal service for civilization was
nothing less than an act o f Providence.”
As the apparatus o f wartime controls expanded,
the Reserve Banks were given a variety o f additional

duties in the areas o f foreign exchange trading, gold
export controls, and surveillance over the capital
issues o f corporations and municipalities. Much of
the added work fell directly on Seay, who was
already heavily preoccupied with perfecting the
District’s organization for handling the Liberty Loans.
The work burden contributed to a breakdown in his
health in the autumn o f 1918. At the height of the
influenza outbreak o f that year, he fell dangerously
ill and was bedridden for more than a month. Subse­
quently, at the insistence o f the Bank’s directors, he
underwent a convalescence o f several months before
returning to work.
For the five drives, subscriptions nationwide
totaled just over $24 billion. The slightly more than
$1 billion handled by the Richmond Bank thus
accounted for roughly 4 percent o f the total. At that
time the nation’s financial wealth was heavily con­
centrated in the large centers o f the Northeast.
The New York, Boston, and Philadelphia Districts
accounted for nearly half the total subscriptions,
with Chicago and Cleveland accounting for an addi­
tional 25 percent. The Richmond District stood
seventh in subscriptions, behind San Francisco.
Seay and the Richmond Bank won plaudits
throughout the District for their efforts. The work
o f all the Banks was widely appreciated and the
System emerged from the war with great prestige.
It had won its spurs, so to speak, and was widely
accepted as the institution at the heart o f the nation’s
financial system.


1989 Annual Report

T h e


R e se rv e

B a n k s

a n d

th e

R e se rv e

B o a rd

T he Is su e o f A u th o r ity

A major issue in the early years o f the System was
the question o f the division o f authority between the
Reserve Banks and the Federal Reserve Board. The
question was particularly contentious until the bank­
ing acts o f the middle 1 9 3 0 s buttressed the author­
ity o f the Reserve Board in several areas. For most
o f the decade o f the 1920s, however, the Banks
offered a distinct resistance to the Board’s dictates
and relations were marked by a continuing tension.
By com m on agreement the new System, when
launched, was a regional arrangement envisaging
substantial autonomy for the individual Reserve
Banks. But the lines were not sharply drawn. Broad
supervisory and coordinating authority was vested
in the Reserve Board by the Federal Reserve Act. The
view was widely held, however, that the Board’s role
should be constraining and coordinating, not coer­
cive, leaving the Banks latitude for independent
action to cope with credit and payments-system
problems peculiar to their respective Districts. There
was a general reluctance to describe the System as
a “ central bank,” as though the term might under­
mine the emphasis on regionalism.
The Richmond Bank’s directors sought from the
beginning to reach an understanding on the scope
of their authority. They sent a delegation to the Board
early in 1 9 1 5 to discuss the matter but received
little satisfaction. Immediately afterward, a sharp
dispute with the Reserve Board erupted over the
issue o f Governor Seay’s salary. The Richmond direc­
tors had set his annual salary at $ 15,000 only to have
the Reserve Board reduce it to S I0,00 0 . There
followed a sharp exchange o f letters in which the
Board rebuked the Bank’s directors and peremptorily
asserted its right to approve salaries at all levels. The
directors acquiesced, but the episode left scars.
The entry o f the United States into the W orld War
had an important effect on the distribution of author­
ity in the System. Until the end o f 1919, the exigen­
cies o f Treasury borrowing for the war effort subor­
dinated both the Reserve Board and the Reserve
Banks to the Treasury’s mandate. But the practical
knowledge and experience that the Treasury re­
quired in its debt management and financing opera­
tions were heavily concentrated in the Reserve
Banks, especially the New York Bank. As a result,
Treasury officials tended increasingly to work
directly through the Reserve Bank governors and to


Federal Reserve Board, 1924: Adolph C. Miller, Flenry M. Dawes,
Daniel R. Crissinger, Andrew W. Mellon, Edmund Platt,
George R. James, Edward H. Cunningham, Charles S. Hamlin

bypass the Reserve Board. Governor Harding o f the
Boston Bank, who had served earlier as a member
o f the Reserve Board, once remarked that for this
reason members o f the Reserve Board frequently felt
left out o f important deliberations.
As matters developed in the 1920s, the governors
of the Reserve Banks, acting through conferences that
met semiannually, were able to establish themselves
as a major factor in shaping System policies and
practices. At these conferences, the governors
discussed and analyzed in detail the full range o f
problems confronting the System. The discussions
were comprehensive, frequently lasting four days or
more and including sessions with the Reserve Board
and with Treasury officials. Standing committees kept
major issues, including credit policy and paymentssystem problems, under continuing study.
Compared with the members o f the Reserve Board,
the Reserve Bank governors were much closer to the
day-to-day problems in the banking system and in
credit markets. For the most part, they were sea­
soned bankers with hands-on experience o f the
technical details o f both the payments system and
credit operations o f commercial banks. This gave the
Conference o f Governors an important advantage in

Federal Reserve Bank of Richmond

the give-and-take that determined the degree o f
autonomy o f the Reserve Banks. Under the leader­
ship o f Benjamin Strong, governor o f the New York
Reserve Bank, the Conference of Governors became
the dominant forum in the System in the 1920s, with
Strong emerging as the leading figure in the System.


S e a y ’s V i e w s

Seay was a major contributor to the deliberations
o f the Conference. He was chairman o f the commit­
tee on discount rate policy and also chaired a special
advisory committee to the Federal Reserve Board on
Like most o f his colleagues, Seay had an aversion
to the term “ central bank.” He was a vigorous
defender o f regionalism and favored a high degree
o f autonomy for the Reserve Banks. He argued, in
particular, that the Banks, as the best judges o f credit
conditions in their respective Districts, deserved
broad latitude in setting discount rates. Because o f
what he perceived as wide disparities o f basic credit
conditions among Districts, he opposed requiring
uniformity o f discount rates. He also insisted on the
right o f individual Reserve Banks to buy and sell
government securities.
Yet Seay was a team player. To him, autonomy
defined a relationship between the Reserve Board
and the Banks and did not preclude close coopera­
tion among the Banks. He thought that the gover­
nors of the Banks should discuss discount rate policy
every 6 0 days and that such discussions should
becom e an important factor in discount rate deci­
sions. He thought that transactions in government

C r e d it


P o lic y

Issu e s

G en era l B a ck g rou n d

The decade o f the 1920s presented a variety o f
challenges to the System. It was, in general, a period
o f rapid economic growth, fueled by the intensive
development o f new industries— the automobile,
radio, major appliances— and by innovations in the
organization of production. Public confidence in the
econom y’s capacity to generate high levels o f pros­
perity ran high and translated soon into a strong
speculative m ood that constituted an important ele­
ment in the backdrop against which the Reserve
Banks operated. Prosperity was by no means com ­

securities should be managed with similar coopera­
tion among the Reserve Bank governors and was
prepared to limit, though not to deny altogether,
independent operations by the Banks.
In other areas o f the Reserve Banks’ activities, Seay
was inclined to favor Systemwide uniformity of prac­
tice. This was especially the case for such paymentssystem functions as check collection and clearing and
noncash collections. He sought uniformity o f prac­
tice in such technical details as the timing o f debits
and credits to reserve accounts in the course o f
check-collection operations, the treatment in reserve
accounting o f coin and currency en route to the
Reserve Banks from members, and penalties for
reserve deficiencies. Questions involving these and
other important details were not definitively settled
in the 1 9 2 0 s, and for much o f the decade practices
differed among the several Districts.
Yet close cooperation among the governors was
the general rule. The Conference o f Governors,
under the leadership o f Governor Strong, was pro­
tective of the rights o f the individual Banks and resis­
tant to broad interpretations o f the Reserve Board’s
authority. Strong’s death in October 1928 marked
the beginning o f a shift o f power away from the
Banks and toward the Reserve Board, away from
regionalism and toward centralization. The stock
market crash o f 1 9 2 9 and the banking collapse o f the
1930-33 period accelerated that shift. The Banking
Acts o f 1933 and 1935 ratified it in many respects.
For virtually all of the decade o f the 1920s, however,
the Reserve Banks were able to hold centralization
at bay and to realize a high degree o f autonomy.

o f

th e

1 9 2 0 s

prehensive, however. The agricultural sector re­
mained depressed for the entire decade. Large
numbers of bank failures occurred almost every year.
Serious problems existed, too, in the international
area. A large fraction o f the w orld’s monetary gold
had lodged in this country and its orderly redistri­
bution became a key condition for the restoration
o f the international gold standard, a prime objective
of U.S. policy. The vexatious issue o f war reparations
and resurgent economic nationalism in the world at
large were also complicating factors.
Early in the decade the econom y slipped into a
severe recession for which the System was widely


1989 Annual Report

blamed. Milder recessions occurred in 1923-24 and
1927. Combined with the continuing bank failures
and widespread farm sector discontent with credit
conditions, these interruptions seriously eroded the
System’s prestige, which reached a low point in the
financial disturbances at the end o f the decade and
in the early 1 9 3 0 s.


S e a y 's A p p r o a c h to C r e d it P o l i c y

During the war years, credit policy was dominated
by the U.S. Treasury. The discount rate was deter­
mined by the interest rate the Treasury placed on
its offerings o f securities. Moreover, to facilitate the
Treasury’s financings, the Reserve Banks offered
preferential rates on their loans when government
securities were offered as collateral. Such loans were
made at rates slightly below the nominal rate on
the Liberty bonds, with the result that they rose
sharply and, while the Reserve Banks bought only
small amounts o f government securities, they held
large amounts as collateral.
Seay shared a widespread conviction that exten­
sive use o f bank credit to finance the war would pose
a problem in the war’s aftermath. At this stage, he
adhered strictly to the commercial loan, or real
bills, theory, holding that bank credit should be ex­
tended to finance only self-liquidating loans arising
out o f the production or distribution of goods. Credit
extended for any other purpose, including even the
holding o f government securities, represented un­
sound banking practice and multiplied the risk o f
destabilizing price movements. Seay would purchase
only those government bonds that were eligible for
use as collateral for national bank notes and this
only for the purpose o f retiring all such notes in
order to leave the issue function exclusively with the
Reserve Banks.
Like most o f his contemporaries, Seay had no idea
of using Federal Reserve credit policies in any
countercyclical way. He attributed the burst o f
rising prices in 1 9 1 9 and 1 9 2 0 to the large amounts
o f government securities in the banking system. Like
most o f his colleagues, he failed to envisage using
open market operations in government securities as
a policy instrument. Rather, he felt that the inflation
problem had to be met with discount rate action that
would force banks to disgorge their government
securities. Following the lead o f Strong, he recom ­
mended and the Richmond directors voted suc­
cessive increases in the discount rate from 4 percent
in late 1 9 1 9 to 6 percent in m id- 1 9 2 0 .


George J. Seay (foreground) in the early days o f his tenure as
governor o f the Federal Reserve Bank o f Richmond

The discount rate increases in this period created
some friction in relations with the Treasury, which
operated in the market for government securities on
a virtually continuing basis at the time. Since discount
rate increases tended to hamper its operations, the
Treasury favored a program o f direct controls on
credit expansion administered by the Reserve Banks
instead o f rate increases. This view also found some
support at the Reserve Board. The Reserve Bank
governors for the most part felt, as did Strong and
Seay, that credit expansion could not be controlled
effectively without discount rate action.
W hen the econom y slipped into a sharp recession
in the spring o f 1920, Seay and the Richmond direc­
tors saw little reason to reduce the discount rate
promptly. Indeed, the Reserve Banks generally were
slow to take any easing action. In the face o f a sharp
break in commodities prices, rising unemployment,
and a severe depression in the farm sector, the
System came under criticism by a number o f groups,
especially by governors and legislators from farm
states. Under pressure from the Treasury, the Boston
and New York Banks began reducing their discount

Federal Reserve Bank of Richmond

rates in the spring o f 1921. But the Richmond Bank
continued to hold out, waiting until November to
reduce its rate from 6 percent to 5 x percent and until
December to reduce it to 5 percent.
In public addresses, Seay staunchly defended the
action o f the System in the recession o f 1920-21. He
argued that the basic problem was the earlier credit
inflation caused by sizable holdings o f government
securities in the banking system. The solution lay in
moving these securities out of the banking system
and into the hands o f the nonbank public. He con­
sidered the resulting reduction in bank credit, with
its accompanying setback to business, a necessary
and inevitable part o f the nation’s adjustment from
a wartime to a peacetime econom y.
Seay also argued that an overriding objective of
discount rate policy had to be the protection o f the
gold reserves o f the Reserve Banks. At the depth o f
the 1 9 2 0 - 2 1 recession the gold reserve ratio o f the
Richmond Bank had fallen to 34 percent and the
ratios o f five other Reserve Banks were substanti­
ally lower, far below the legal limit o f 40 percent.
These low reserve ratios were clearly a factor in the
tardiness o f the Richmond and other Reserve Banks
in reducing the discount rate. Seay’s view, widely
held at the time, was that the System’s main concerns
had to be the soundness o f bank credit, the preven­
tion o f financial panics, and the preservation o f gold
payments. Systematic control o f the m oney supply
and positive action to moderate cyclical swings in
business were not part o f his agenda.


C h a n g i n g V i e w s o n O p e r a t i o n s in
th e G o v e r n m e n t S e c u r itie s M a r k e t

The decade was an extended learning experience
for the entire System. Seay’s views on credit policy
underwent significant changes, as did those o f most
other System personnel involved with policy. Credit
policy was discussed at length in the semiannual
meetings o f the Conference of Governors and in the
sessions with the Reserve Board. These discussions,
and especially the trenchant observations o f Gover­
nor Strong, had a major influence on Seay’s think­
ing. There were other influences as well. One was
an increasing appreciation of the potential usefulness
o f systematic operations in the market for govern­
ment securities. Another was the large contem po­
raneous swings in gold exports and imports, which
tended to upset conventional notions regarding the
relationship between the gold reserve ratio and the
discount rate.

In any case, in the early 1920s, Seay modified his
views on the holding o f government securities by
the Reserve Banks. At a conference o f the governors
in March 1923 he observed that a stock o f govern­
ments held by Reserve Banks would give the System
“ a better hold upon the market.” He joined several
colleagues in noting that sales from such holdings
could prove useful in offsetting excessive easing in
markets resulting from large gold imports. This
adjustment in Seay’s attitude was probably influ­
enced in part by the indifferent success o f the
System’s efforts to establish an acceptance market
o f significant dimensions. Seay had been a strong
supporter o f such efforts and of arrangements for
coordinating operations in acceptance markets.
Among the Banks, attitudes toward investing in
government securities were affected by a sharp
reduction in their earning assets in the recession o f
1920-21. As rediscounts declined and the supply o f
acceptances diminished, most o f the Banks turned
to the government securities markets for investments
in order to be able to cover costs and pay the divi­
dend provided for by the Federal Reserve Act. Pur­
chases and sales were o f sufficient magnitude to in­
terfere with Treasury operations in the market and
hence aroused the opposition o f the Treasury. The
matter was discussed in detail by the Conference in
May 1922. At that time all the Banks except Atlanta
and Richmond were buying and holding govern­
ments. The governors of all, including Richmond and
Atlanta, vigorously defended their right to do so at
their discretion.
The Conference was confronted with the problem
o f reconciling the Treasury’s apprehensions and the

Reprinted from the W all Street Jo u rna l, April 28, 1925


1989 Annual Report

Reserve Banks’ need for earning assets. The Banks
were reluctant to accept any restrictions on their
right to invest as they deemed necessary. The
Treasury for its part insisted that the Banks refrain
from purchases and sales whenever it was engaged
in market operations.
Under Strong’s leadership and after extended dis­
cussion, a compromise was reached. Each governor
agreed to recommend to his directors that invest­
ments in government securities be limited to “ . . .
such amount as is required, over a period o f time,
to meet . . . expenses and dividends and necessary
reserves.” It was also agreed that purchases and
sales would be coordinated to avoid interference
with the Treasury’s activities in the market. To pro­
vide this coordination a Committee on Centralized
Execution o f Purchases and Sales o f Government
Securities by Federal Reserve Banks was estab­
lished, composed o f the governors o f the New York,
Boston, Philadelphia, and Chicago Banks. Later the
governor o f the Cleveland Bank was added.
This committee, under the chairmanship o f Gover­
nor Strong, operated until March 1923 when, on
orders o f the Federal Reserve Board, it was dis­
banded and replaced by an Open Market Investment
Committee. The change, however, made little dif­
ference in practice, amounting to little more than a
formal response to the Reserve Board’s assertion o f
authority over open market operations. The new
committee was com posed o f the same governors as
the old and included no member o f the Reserve
Board. Like its predecessor, it allowed the Banks a
wide latitude o f discretion with respect to their par­
ticipation in the new committee’s purchases and
sales. Moreover, no limits were placed on the Reserve
Banks’ transactions in government securities with
member banks o f their respective Districts.
The arrangements for dealing in government
securities were satisfactory to Seay and the Richmond
directors. The Richmond Bank had no earnings
problem in that period and consequently no need
to rely on government securities as a source o f earn­
ings. Accordingly, Seay was not as exercised over
the issue as some o f his counterparts and could take
a longer term view o f the implications o f the new
arrangement. While he was fiercely defensive o f the
Banks’ rights to buy and sell securities, he agreed
with Strong that coordination of purchases and sales
was highly desirable. He argued that open market
operations should not be geared to the earning needs
o f the Reserve Banks but rather to the “ overall
credit requirements” o f the econom y.


Along with many o f the other governors, Seay
recognized limitations on the practical usefulness o f
open market operations. Through much o f the
decade, large operations had to be undertaken to off­
set gold movements and these often had a major im­
pact on the Committee’s portfolio without a cor­
responding effect on bank credit. Moreover, doubts
soon developed that the government securities
market was sufficiently large to accommodate the
magnitude o f operations that domestic and inter­
national considerations might require. The Treasury
was actively retiring debt over much o f the period
and, while the Committee operated in acceptances
as well, that market contracted in periods o f slack
business. Recognition o f this limiting factor
strengthened Seay’s conviction that the discount rate
had to be the System’s chief policy instrument.


C o o r d in a tin g O p en M a r k e t a n d
D is c o u n t R a te P o lic ie s

The System’s m ove toward systematic open
market operations had implications for the manner
in which discount rate policy was implemented.
These implications were quickly recognized by Seay
and others o f the governors. In 1924 Governor
Strong noted that the “ . . . belief o f the Governors
has been uniformly for some years past that the
operations o f the Open Market Committee are
designed . . . to exert some influence on matters
preliminary to the possible need for changes in dis­
count rates.” In the same year, Seay observed that
the Committee’s purchases led member banks to
reduce their borrowings at the discount window and,
with diminished dependence on the Reserve Banks,
to step up their efforts to make loans. This put
downward pressure on loan rates, setting the stage
for discount rate reductions.
Seay appreciated the relationship between dis­
count rate policy and gold movements but seemed
reluctant to use the discount rate to help restore
the international gold standard. W hen in the late
summer o f 1927 the Reserve Board, largely at the
initiative o f Governor Strong, undertook to or­
chestrate a general reduction in discount rates in
order to help Great Britain solidify its return to the
gold standard, the Richmond Bank followed, cutting
the discount rate from 4 percent to 3 V percent. But
Seay expressed sympathy for the position o f the
Chicago Bank, which refused to reduce its rate, with
the result that the Reserve Board fixed it at 3 V per­
cent at that Bank. This action by the Board ran
counter to Seay’s conviction that the initiative for

Federal Reserve Bank of Richmond

rate changes should come from the Banks. But Seay
appears also to have entertained doubts about
giving international considerations precedence over
domestic conditions. W hen this controversial rate
action was discussed at the meeting o f the Con­
ference o f Governors in November, he argued that
the rate should be higher to reflect “ true market
forces instead of international conditions.”
The stock market speculation o f the later years of
the decade troubled Seay. He met with groups of
District bankers on several occasions and urged them
to limit stock market loans. But to him the problem
went beyond stock market loans and was not likely
to be solved by moral suasion. The basic problem
was excessively easy credit and had to be ad­
dressed by effective tightening action on both the
open market and discount rate fronts. The excessive
ease, he argued, resulted largely from the arbitrary

P a y m e n ts

S y ste m

eay held strong convictions regarding the
role o f the Reserve Banks in the nation’s
payments system. In his view, the Reserve
Banks should have the exclusive issue
privilege and also be the principal managers o f the
nation’s facilities for check-collection and checkclearing operations.


reclassification o f demand deposits as time deposits
by member banks, which created large amounts of
excess reserves.
In March 1928 and again in April, the Richmond
directors conveyed to the Open Market Committee
their conviction that the Committee should be sell­
ing securities. In an April 1929 communication to
the Reserve Board they argued that, from the national
standpoint, a strong reason existed for raising the dis­
count rate to 6 percent, noting, however, that Fifth
District conditions could not justify such an action.
Rather they believed that the rate should be raised
first in the New York District since the stock ex­
change loan problem was centered there, with the
other Banks following later. Actually, the rate at the
Richmond Bank, which had been raised in successive
steps from 3 x to 5 percent in 1 9 2 8 , was not raised
further in 1 9 2 9 .


Issu e s

The C u rren cy

Regarding the currency, Seay considered the
Federal Reserve note, anchored to gold to ensure
its soundness and to eligible commercial paper to
ensure its “ elasticity,” the ideal currency. He urged
that it be allowed to displace all other forms of
currency, including legal tender notes and silver

Series 1918 Federal Reserve Bank note issued by the Federal Reserve Bank o f Richmond and signed
by Governor Seay


1989 Annual Report

certificates. These last two forms he believed to have
taken on the character o f “ reserve m o n ey,” and,
along with gold and gold certificates, should be im­
pounded in the Reserve Banks to support Federal
Reserve credit as represented in Federal Reserve
notes and member bank reserves. He was unalterably
opposed to the issue o f national bank notes and
urged that they be completely eliminated from the
circulation, by legislation if necessary. This stance
reflected his continuing aversion to linking the cur­
rency to government securities. On the same
grounds, he opposed the issue o f Federal Reserve
Bank notes, which, unlike Federal Reserve notes,
were backed only by government securities.
With such views, Seay often found himself at odds
with both the Reserve Board and the Treasury. He
was critical o f a Reserve Board ruling requiring the
Reserve Banks to pay out currency in a priority order­
ing with national bank notes first, followed in order
by Federal Reserve Bank notes, silver certificates,
legal tender notes, Federal Reserve notes, gold cer­
tificates, and gold. He argued that, pending the retire­
ment o f national bank notes and Federal Reserve
Bank notes, Federal Reserve notes should be third
in the priority ordering.
Seay also opposed proposals by the Treasury and
the New York Reserve Bank to encourage the cir­
culation o f gold certificates in periods o f heavy gold
imports. He was also cool to a Treasury request for
Reserve Bank cooperation in an effort to encourage
temporary use by the public o f silver dollars to allow
the buildup o f an inventory o f one-dollar bills in
the months before the introduction o f a newly de­
signed, smaller sized currency in the summer of 1 9 2 9 .


T h e C o lle c tio n F u n c tio n

Seay’s concern over the quality o f the currency
was part o f a more general interest in improving the
efficiency o f the country’s payments system, which
he considered to be a major objective o f the Federal
Reserve Act. The introduction o f the Federal
Reserve’s leased wire system in 1918 was a welcome
innovation to Seay, and he favored Reserve Bank
absorption o f the cost o f wire transfers o f funds
by member banks.
The major effort to improve the payments system
in the 1920s centered on check-collection operations.
Few System activities in the 1920s commanded
as much attention. One o f the first standing com ­
mittees o f the Conference of Governors was the
Standing Committee on Collections and Clearings.


John S. Walden, Jr., an assistant to Seay and a senior
operating officer o f the Richmond Bank, served on
this committee during the entire decade. Through
Walden, Seay contributed to the standing commit­
tee’s work. He was especially interested in promoting
uniformity o f procedures and practices among the
Banks and in pressing for effective measures to
ensure collection at par, that is, with no levy of
exchange charges by drawee banks.
The committee devised in this period the system
o f symbols, printed in the upper right-hand corner
o f checks, identifying the drawee bank and the
Federal Reserve office through which the check
would be collected. This system quickly became o f
inestimable value to banks in sorting and routing
checks. The committee also faced the daunting
task o f working out a satisfactory arrangement for
timing debits and credits to the reserve accounts of
drawee banks and depositing banks and dealing with
the effect on member bank reserves o f arrangements
that involved other than simultaneous debits and
credits. Only after long experimentation was a
satisfactory time schedule with a system o f deferred
credits put in place.
In the war period, as part o f the Board’s general
promotion o f membership, the Banks began col­
lecting for member banks such noncash items as
notes, drafts, and acceptances. Member banks were
quick to avail themselves o f this noncash-collection
service, which soon became a major activity at all
the Reserve Banks. When many o f the Reserve Banks
were experiencing earnings problems in the early
1 9 2 0 s, sentiment for eliminating the service began
to develop. Such sentiment was especially strong in
the geographically large Districts o f the South and
the W est— Atlanta, Dallas, Minneapolis, Kansas
City, and San Francisco— where distances were great
and transportation and communications costs
relatively high.
Seay, however, insisted on uniformity. He had had
misgivings about offering the service, but once it was
instituted he favored continuing it. The System had
much to lose, he thought, if it were perceived as
arbitrarily turning its services off and on in response
to earnings changes. Moreover, noncash-collection
services were consistent with Seay’s expansive views
o f the services the Reserve Banks should offer to
members. Citing the nonpayment o f interest on
reserve balances, he argued that Reserve Banks
should offer to member banks all the services they
could expect from city correspondents.

Federal Reserve Bank of Richmond


P r o b le m A r e a s : P a r C o lle c tio n ,
B a n k F a ilu r e s , a n d M e m b e r s h ip

Efforts to improve the collection process were
hampered in the period by a continuing wave of bank
failures and by a running and often acrimonious
disagreement with state-chartered banks over ex­
change charges. In the ensuing controversy, the
System found itself confronting the hostility o f state
legislatures and banking commissions as well as o f
many state-chartered banks. The Reserve Banks
sometimes found to their consternation that member
banks, especially the large-city correspondents, gave
them little or no support in this impasse. In any case,
the large number o f bank failures, among members
as well as nonmembers, in combination with the parcollection controversy, tended to diminish public
confidence in the System and to contribute to a
steady erosion o f membership in the period.
From the outset, exchange charges on checks were
recognized as a major obstacle to membership in the
System by small, state-chartered institutions. The
Reserve Board took advantage o f the patriotism
generated during the war period to mount a cam­
paign to encourage universal par remittance on a
voluntary basis. So-called par lists were established,
and the Reserve Banks succeeded in placing on these
lists the great majority o f the nation’s banks. Yet
substantial groups o f state banks in rural areas o f the
South, West, and Midwest stubbornly resisted. Many
soon found that they could take advantage o f the
System’s collection facilities through city cor­
respondents without becoming members and giving
up exchange charges.
Acting on a Reserve Board interpretation that the
Federal Reserve Act gave the System authority to
collect all checks at par, the Reserve Banks met this
resistance with a concerted effort to present the
checks o f nonpar banks at the counter for cash pay­
ment. This action by the Reserve Banks brought
the issue to a head. It touched off extended liti­
gation that seriously embittered relations with small,
state-chartered banks over much o f the nation.
The Reserve Banks most immediately involved in
the litigation were Richmond, Atlanta, Cleveland,
Minneapolis, and San Francisco.
In its annual report for 1920 the Richmond Bank
noted “ . . . marked progress toward the establish­
ment o f universal par collection.” All District states
except South Carolina were reported on a par basis.
O f 2,210 banks in the District, only 334, all in South
Carolina, refused to remit at par. In view of

developments in the following year, this report prob­
ably gave an inaccurate evaluation o f progress toward
universal voluntary par remittance. Data for subse­
quent years suggest strongly that the par list for 1 9 2 0
included many involuntary par remitters at whose
counters the Richmond Bank was presenting checks
for cash payment.
On February 5, 1921, the North Carolina legislature
passed “ An Act to Promote the Solvency o f State
Banks,” in which it affirmed the right o f state banks
to charge exchange when remitting for checks sent
to them by mail. It provided, moreover, that state
banks were not required to pay in cash for checks
presented at their counters by the Reserve Bank or
any o f its agencies but could pay with a draft drawn
on a correspondent unless the drawer o f the check
had made a notation to the contrary. Finally, it
forbade notaries public to protest checks when pay­
ment had been refused solely because it had been
demanded in cash.
The Richmond Bank deemed the act to be un­
constitutional and continued to present checks on
nonpar banks at the counter for cash payment. On
February 9, 13 nonmember banks brought suit
against the Richmond Bank in the Superior Court o f
Union County, North Carolina, and obtained a
restraining order forbidding the return as dishonored
o f checks that the plaintiff banks had refused to pay
in cash. More North Carolina banks joined the suit,
and 230 were on the injunction list by December.
The Richmond Bank refused to handle the checks
of these banks and from time to time published their
names along with the names o f other banks the
checks o f which, for various reasons, it would not
handle. At the end o f 1921, o f 2 ,195 banks in the
District, 580 refused to remit at par. All these were
in North Carolina (254) and South Carolina (326).
At trial, the Superior Court ruled the North
Carolina act constitutional. The Richmond Bank ap­
pealed the decision to the North Carolina Supreme
Court, which reversed the Superior Court. The plain­
tiff banks, however, took the case to the U.S.
Supreme Court, which in June 1923 reversed the
North Carolina Supreme Court and ruled the act con­
stitutional. The banks o f the state thus retained the
right to charge exchange and to refuse cash payment
for checks presented by the Reserve Bank at the
Paralleling this case against the Richmond Bank
were significant cases against the San Francisco,
Atlanta, Cleveland, and Minneapolis Banks. As a result
o f the decisions in the several cases, the System


1989 Annual Report

Suprem Court of the State of North Carolina

F R E S &M R H N S B N , E A S
E C A T A K T L .,
E E A E R E A K F IC M N .

E T F S E.
T is c se is ac il a tio bo g t, b th te nb n s
h a
iv c n r u h y ir e a k
a d tru c m a ie o g n e u d r th la s o th
st o p n s r a iz d n e e w f e
S te o N rth C ro a wic a e n t mme s o th
ta f o
a lin , h h r o e b r f e
F d ra R se e S ste , a a st th F d ra R se v
e e l e rv y m g in e e e l e r e
B n o R h o d T e o je t o th a tio ws to o ­
a k f ic mn . h b c f e c n a
ta a in n tio to p v n th F d ra R se v B n
in n ju c n re e t e e e l e r e a k
of R h o d fro r fu g to a c p e c a g d fts
ic mn
m e sin
c e t x h n e ra
d w b th p in o th ir r se v d p sits inp y
ra n y e la tiffs n e e r e e o
mn of c e k p e n d a dfro r tu n ga d o ­
e t h c s r se te , n m e r in s ish n
o e c e k d a nb v r u d p sito s u o th p in
r d h c s r w y a io s e o r p n e la ­
tiffs w ic h d b e p e n d a th ir c u te s b th
h h a e n r se te t e o n r y e
F d ra R se e B n o R h o d b t fo wic th
e e l e rv a k f ic mn , u r h h e
p in h d te d r dd fts d a nb th mu o th ir
la tiffs a n e e ra r w y e p n e
r sp c e r se v d p sita s. T e a tio ws in
e e tiv e r e e o rie h c n a sti­
tu d b th p in in th S p r r C u t o U io
te y e la tiffs
e u e io o r f n n
C u ty N rth C ro a o th Oh d y of F b ­
on , o
a lin , n e t a
e ru
a , 1 2 , a date p ra re a in o d r ws a a d
ry 9 1 n
m o ry str in g r e a wr -

Reprinted from brief filed May 4, 1922

ended up well short o f its desired goal o f universal
par collection. At the direction of the Reserve Board,
the practice o f presenting checks for cash payment
at the counters o f nonpar banks was discontinued.
The System adopted a policy of refusing to handle
checks on nonpar banks. In the years that fol­
lowed, the number o f banks on the par list fell
In the Richmond District, the U.S. Supreme Court
decision in 1 9 2 3 was quickly followed by a large
reduction in the number o f banks on the par list.
Three banks in W est Virginia and 57 in Virginia

C o n c lu d in g
n their first five years, the Federal Reserve
Banks were immersed in problems associated
with financing the First World War. Not until
1 9 2 0 were they able to come to grips with issues
they were designed to resolve. To a significant extent



promptly removed themselves from the list. The list
fell rapidly over the remaining years o f the decade,
from 1,494 in 1923 to 1,091 in 1929. The decline
was slightly more rapid than the drop in the total
number o f banks. At the end o f 1929, nearly a third
o f the banks in the District were not remitting at par.
These were concentrated heavily in the Carolinas and
Virginia. In North Carolina some 70 percent (294 o f
419) o f all banks were nonpar; in South Carolina,
almost half (67 o f 139); and in Virginia, nearly a
quarter (104 o f 468). There were nine nonpar banks
in West Virginia but none in Maryland and the
District o f Columbia.
While the nonpar banks were mostly small banks
in rural areas, the volume o f check operations for
the group was significant. Their refusal to remit at
par left an important gap in the Federal-Reserve-based
payments arrangement that the System was so eager
to establish. The outcome was especially disappoint­
ing to Seay.
The par-collection issue affected membership. In
the Fifth District membership reached a peak o f 634
in 1922 and then declined in each remaining year
o f the decade. At the end o f 1929 it totaled 525. The
number o f state members fell from 6 8 to 45. Over
the same span, the number o f national banks de­
clined from 5 6 6 to 480.
The total number o f banks in the District fell from
2 ,210 in 1920 to 1,637 at the end o f 1929, a reduc­
tion o f 573. Much o f this decline was accounted for
by failures, which totaled 431 for the period. The
failures were heavily concentrated in the farming
areas o f the District, with South Carolina accounting
for 225, North Carolina for 119, Virginia for 45, and
West Virginia for 34. There were only eight failures
in Maryland and none in the District o f Columbia.
Among the failures were many national banks and
state member banks, which accounted for much o f
the decline in membership. A handful o f state m em ­
bers merged with national banks during the period,
but the decline in state membership was due almost
entirely to liquidations and voluntary withdrawals.

O b s e r v a tio n s
the experience o f the 1 9 2 0 s represented efforts
by the Banks and the Reserve Board to fill gaps and
resolve ambiguities in the Federal Reserve Act, which
was amended ten times in the 1920s. The original
act described only a skeletal outline o f a system o f

Federal Reserve Bank of Richmond

banking control. Many crucial questions o f detail
were left unaddressed. It remained for the Reserve
Board and the Banks, in the course o f practice and
experience, to put flesh on the skeleton.
For the entire decade the division o f authority be­
tween the Reserve Board and the Banks remained
at issue. While the act clearly gave the Board broad
authority, certain sections implied substantial
autonomy for the Banks. The new system had been
treated all along as a regional system, not a central
bank, and it was widely assumed that the Board’s
authority over the Banks would be limited to a
monitoring and coordinating function. This was
clearly the view o f Seay. It was frequently ex­
pressed by the governors o f the other Banks and
seems to have been acquiesced in by some Reserve
Board members as well. In any case, it is clear from
the history o f the period that the governors o f the
Banks, as a group under the leadership o f Benjamin
Strong, were able to maintain a high degree o f
autonomy and to play a major role in shaping the
System’s early development.
As noted, Seay and the Richmond Bank were
vigorous defenders o f the autonomy o f the Reserve
Banks. They were also major contributors to the
efforts o f the governors to develop an effective
mechanism o f credit control and an efficient
payments system. In the credit-policy area, Seay
favored cooperative action by the Banks’ governors,
coordinated through the Conference o f Governors,

over Reserve Board leadership. He was a firm sup­
porter o f Governor Strong’s efforts to forge an
effective policy tool out o f the Banks’ purchases and
sales in the market for government securities. In ad­
dition, he chaired the Conference o f Governors’
committee to establish basic principles that should
be followed in setting discount rates.
In the payments-system area, the Richmond Bank
was in the forefront o f the effort to universalize
collection o f checks at par. Seay and Walden were
major contributors to the work o f the Conference
o f Governors’ Standing Committee on Collections
and Clearings. The Richmond Bank was also in­
volved in one o f the key court cases that ques­
tioned the authority o f the System to require par
remittance for checks.
The stock market crash at the end o f the decade
o f the 1 9 2 0 s signaled the end o f an important
chapter in the history o f the Federal Reserve Banks.
It ushered in a new set o f problems for the entire
System, problems that dwarfed in both magnitude
and complexity any that had been confronted up to
that time. The banking collapse in the three years
that followed and the onset o f the Great Depression
led to a drastic restructuring o f the System. The result
was a less ambiguous centralization o f authority in
a newly constituted Reserve Board, renamed the
Board o f Governors o f the Federal Reserve System,
and a substantial reduction in the autonomy o f the
Reserve Banks.

The major reforms o f the m id-1930s, along with important amendments enacted since that time, have
produced a system fundamentally different, both in structure and in approaches to m oney and credit con­
trol, from the original. In every respect, the Federal Reserve System has becom e undeniably a central bank
or, more precisely, a central banking system.
The System today retains, however, sufficient vestiges o f its pristine form to continue to be described
as unique among the w orld’s central banks. In particular, in the face o f increased centralization o f power
in the hands o f the Board o f Governors, the regional Reserve Banks continue to play an important role. Their
operations are crucial to the maintenance o f an efficient payments system. Their information services con­
stitute useful inputs into decisions o f businesses, large and small, and o f governments. Their role in m one­
tary policymaking has been restructured to bring it into closer conformity with radically revised views regarding
techniques o f monetary and credit control, but it is no less significant. The boards o f directors o f the Reserve
Banks continue to take the initiative in setting the discount rate. More important, the executive heads o f
the Reserve Banks, now styled presidents instead o f governors, serve actively on the Federal Open Market
Committee, the System’s chief policymaking body.


Richmond, completed 1921

■ C o n s tr u c te d


Baltimore, completed 1927

R e s e r v e

Charlotte, completed 1942

to H o u s e

O p e r a tio n s


B a n k D ig e s t
Directors/Richmond Office


Directors/Branch Offices


Advisory Councils


Comparative Financial Statements


Summary of Operations





1989 Annual R

D ir e c to r s

(Decem ber 31, 1989)

Seated: Jack C. Smith; Thomas B. Cookerly; Edward H. Covell; Anne Marie Whittemore
Standing: Chester A. Duke; John F. McNair III; Hanne Merriman; Leroy T. Canoles, Jr.; C. R. Hill, Jr.

Richmond Office

C . R. H ill, Jr.

H a n n e M e r r im a n

Chairman o f the Board and President

Retail Business Consultant
W a s h in g to n , D .C .

M e rchants & M in e rs N a tio n a l B a n k
O a k H ill, W e st V irg in ia


J o h n F. M c N a ir II I

L e ro y T. C a n o le s , Jr.

President and Chief Executive Officer


M em ber, F ed era l
A d v is o r y C o u n c il

W a c h o v ia B a n k & T rust C o m p a n y , N.A.
a n d T he W a c h o v ia C o r p o r a tio n
W in sto n- S ale m , N o r th C a ro lin a

K a u fm a n & C a n o le s
N o rfo lk , V irg in ia
T h o m a s B. C o o k e r ly

C o o k e r ly C o m m u n ic a t io n s
B e the sd a, M a ry la n d
E d w a r d H . C o v e ll

T he C o v e ll C o m p a n y
E asto n, M a r y la n d
C h e ste r A. D u k e

President and ChieJ Executive Officer
M a rio n N a tio n a l B a n k
M a rio n , S o u th C a r o lin a


Ja c k C. S m ith

Chairman o f the Board and
Chief Executive Officer
K-VA-T F o o d Stores, In c .
G r u n d y , V irg in ia
A n n e M arie W h it t e m o r e

M c G u ire , W o o d s , Battle & B o o th e
R ic h m o n d , V irg in ia

F re d e ric k D e a n e , Jr.

Chairman o f the Board
S ig ne t B a n k in g C o r p o r a tio n
R ic h m o n d , V irg in ia

Federal Reserve Bank of Richmond

B a lt im o r e O ffic e
T hom as R. Shelton

Case Foods, Inc.
Salisbury, M aryland
J o h n R. Hardesty, Jr.

Preston Energy, Inc.
K in g w o o d , W est Virginia
H. G ra n t H athaw ay

Chairman o f the Board
E quitable Bank, N.A.
Baltim ore, M aryland
R a y m o n d V. Haysbert, Sr.

President and Chief Executive Officer
Parks Sausage C o m pa ny
Baltim ore, M aryland
Charles W . H o ff III

President and Chief Executive Officer
Farmers an d M echanics N ational Bank
Frederick, M aryland
G lo ria L. Jo h n s o n

Deputy Director o f Administration
The B altim ore M useum o f Art
Baltim ore, M aryland
Jo seph W . M osm iller

Chairman o f the Board
Loyola Federal Savings an d
Loan A ssociation
Baltim ore, M aryland

Seated: fohn R. Hardesty, fr.; Thomas R. Shelton; H. Grant Hathaway;

Charles W. H off III
Standing: Raymond V. Haysbert, Sr.; Gloria L. fohnson; Joseph W. Mosmiller

Charlotte Office
W illia m E. Masters

Perception, Inc.
Easley, South Carolina
A nne M. A llen

Allen-Austin, Inc.
G reensboro, N orth Carolina
C rand all C. Bowles

The Springs C o m p a n y
Lancaster, South Carolina
Jam es M. C ulberson, Jr.

Chairman and President
The First N ational Bank o f
R a n d o lp h C o un ty
A sheboro, N orth Carolina
H aro ld D . K ingsm ore

President and Chief Operating Officer
Graniteville C o m p a n y
Graniteville, South C arolina
Jam es G . Lindley

Chairman and Chief Executive Officer
So uth Carolina National C o rp oratio n

Chairman, President, and
Chief Executive Officer
The So uth C arolina N ational Bank
C o lu m b ia, South Carolina


, „
. „ _ „
Sealed-. Crandall C. Bowles; William E. Masters; Anne M. Allen
Standing: Harold D. Kingsmore; James G. Lindley; fames M. Culberson, fr.,
William McKay

W illia m M cK ay

First Federal Savings Bank
H endersonville, N orth Carolina


1989 Annual Report

A d v i s o r y

C o u n c i l s

(Decem ber 31, 1989)

O p e r a tio n s A d v is o r y C o m m itte e

Ronald W . Davies

Senior Executive Vice President
Maryland National Bank
Baltimore, Maryland
W illiam E. Albert

Vice President and Cashier
The First National Bank o f Bluefield
Bluefield, West Virginia
Robert Baldw in

Senior Vice President
Crestar Bank, N.A.
W ashington, D.C.
Robert A. Barton, Jr.

Senior Vice President
Perpetual Savings Bank, F.S.B.
Vienna, Virginia
George E. Beckham

Senior Vice President
South Carolina Federal Savings Bank
Colum bia, South Carolina
Charles S. Brum m itt

Senior Vice President
NCNB National Bank o f South Carolina
Colum bia, South Carolina
W illiam V. Bunting

Executive Vice President
Crestar Bank, N.A.
Richm ond, Virginia

Ashpy P. Lowrimore

Edward J. Spirko

Senior Vice President— City Executive

Senior Vice President

Southern National Bank o f South Carolina
Florence, South Carolina

Mercantile-Safe Deposit & Trust Com pany
Baltimore, Maryland

Clement E. Medley, Jr.

Jo h n J. Sponski

President and Chief Executive Officer
Marshall N. Colebank, Jr.

Executive Vice President and Cashier
The Charleston National Bank
Charleston, West Virginia

Group Executive Officer

First Federal Savings and
Loan Association o f D unn
D unn, North Carolina

Sovran Bank, N.A.
Norfolk, Virginia
Thomas J. Strange

Ricky B. Nicks

Vice President

David A. D enton

Senior Vice President

Vice President

W achovia Bank and Trust Company, N.A.
Winston-Salem, North Carolina

South Carolina Credit U nion League, Inc.
Columbia, South Carolina

Investors Savings Bank
Richm ond, Virginia

Charles E. Thomas
Richard D. Pillow

Vice President

Raym ond L. Gazelle

Vice President

Senior Vice President

Virginia Credit U nion League
Lynchburg, Virginia

West Virginia Credit U nion League, Inc.
Parkersburg, West Virginia

Citizens Bank o f Maryland
Laurel, Maryland

Rick A. Wieczorek
James W . Ricci


Harrison Giles


Executive Vice President

Educational Systems Employees
Federal Credit Union
Bladensburg, Maryland

District o f Colum bia Credit U nion League
Washington, D.C.

NCNB National Bank o f North Carolina
Charlotte, North Carolina

C. L. W ilson III

Senior Vice President
Kenneth L. Greear

Charles C. Schmitt

Vice President

Executive Vice President

Branch Banking and Trust Com pany
W ilson, North Carolina

United National Bank
Charleston, West Virginia

Loyola Federal Savings and Loan Association
Glen Burnie, Maryland

James R. W ilson

D. C. Hastings

H. Jerry Shearer

President and Chief Executive Officer

Executive Vice President and Cashier

Virginia Bank and Trust Com pany
Danville, Virginia

Vice President
Commercial Bank o f the South, N.A.
Colum bia, South Carolina

David L. Kot

Rita A. Smith

Vice President

Executive Vice President

American Security Bank, N.A.
W ashington, D.C.

West Virginia Savings League
Charleston, West Virginia


First Carolina Corporate Credit U nion
Greensboro, North Carolina

Federal Reserve Bank of Richmond

Small Business and Agriculture Advisory Council


W illiam M. Dickson

G eorge B. Reeves

Charles O. Strickler




Spring Valley Farm
Ronceverte, West Virginia

Reeves Agricultural Enterprises, Inc.
Chaptico, Maryland

Michele V. Hagans

Robert W. Stewart, Jr.

Rocco Enterprises, Inc.
Harrisonburg, Virginia



Chairman and Chief Executive Officer

Michael Clark


Fort Lincoln New Town Corporation
Washington, D.C.

Engineered Custom Plastics Corporation
Easley, South Carolina

Clark Insurance Services Com pany, Inc.
Richm ond, Virginia

Jo h n W . Hane

Joe M. Williams




Blackwoods Farm
Fort Motte, South Carolina

W illiams Dairy
O lin, North Carolina

Associated Enterprises, Inc.
Annapolis, Maryland

Charles H. James II

Joan H. Zim m erm an

Chairman of the Board and Treasurer


C. H. James & Co.
Charleston, West Virginia

Southern Shows, Inc.
Charlotte, North Carolina

Leonard A. Blackshear

D ickie S. Carter

President and Chief Executive Officer
Urban Service Systems Corporation
W ashington, D.C.


1989 Annual Report

C o m p a r a tiv e

F in a n c ia l

S ta te m e n ts


D ecem ber 30, 1988

D ecem ber 2 9 , 19 89

A ssets
Gold certificate account
Special Drawing Rights certificate account
Loans to depository institutions
Federal agency obligations
U.S. government securities
Total U.S. government securities
Cash items in process of collection
Bank premises
Furniture and equipment (net)
Other assets
Interdistrict settlement account
Accrued service income


9 4 3 ,0 0 0 ,0 0 0 .0 0
74 5 ,0 0 0 ,0 0 0 .0 0
7 8,2 7 7 ,7 7 2 .6 4
2 ,50 0 ,0 0 0 .0 0
5 4 0 ,7 38 ,8 15 .0 8



8 ,66 7 ,3 0 3 ,5 8 5 .8 4
7 ,5 7 3 ,3 7 2 ,0 6 0 .4 7
2,55 3 ,7 31 ,8 39 .1 1


1 8,7 9 4,407,485.42


533 ,9 33 ,8 42 .1 2
1 2 6 ,9 9 6 , 5 5 2 . 5 2


2 5,4 0 4,87 1.19
2,19 4 ,2 41 ,8 92 .7 1
3,70 1 ,8 51 ,8 15 .9 4
5 ,18 8 ,0 4 7 .6 6


$ 2 7 ,6 9 1 ,5 41 ,0 95 .2 8


$ 23 ,1 80 ,1 17 ,1 24 .0 0


3 ,4 5 5 ,8 40 ,3 34 .3 5
8 ,7 0 0 ,0 0 0 .0 0
8 7 ,9 8 6 ,7 1 7 .9 6

3,835,573,288.7 6

3,55 2 ,5 27 ,0 52 .3 1


4 4 6 ,6 3 8 ,2 37 .8 5
2 3 3 ,3 97 ,2 81 .1 2


$ 2 7 ,4 1 2 ,6 79 ,6 95 .2 8


139 .430.700.00
139 .430.700.00


$ 2 7 ,6 9 1 ,5 41 ,0 95 .2 8


L ia b ilitie s
Federal Reserve notes
Depository institutions
Total deposits
Deferred availability cash items
Other liabilities

C a p ita l A c c o u n ts
Capital paid in


Federal Reserve Bank of Richmond




E a r n in g s
Loans to depository institutions
Interest on U.S. government securities
Foreign currencies
Income from services
Other earnings
Total current earnings


1 ,6 1 2 , 2 5 2 . 1 8
1,62 4 ,0 11 ,5 24 .1 2
6 0 ,0 7 9 ,5 6 7 .7 7
6 2 ,0 9 9 ,0 8 7 .8 2
7 48 ,7 7 9 .8 8



$ 1 ,7 4 8,55 1,21 1.77


Operating expenses
Cost of earnings credits

9 5 ,0 6 6 ,3 9 8 .6 0

Net expenses



$ 1 ,6 4 1,43 1,55 6.25


1 ,208,662.07
7 4 ,3 2 9 ,4 1 8 .3 8
6 ,53 8 ,9 8 3 .1 3
8 2 ,0 7 7 ,0 6 3 .5 8


E xp en ses

Additions to current net earnings
Profit on sales of U.S. government securities (n t)
Profit on foreign exchange transactions
All other
Total additions
Deductions from current net earnings
Losses on foreign exchange transactions
All other


2 8 ,6 0 9 ,0 2 2 . 3 6


5 3,115.52


5 3,115.52


+ 8 2 ,0 2 3 ,9 4 8 .0 6

-2 6 ,6 9 0 ,7 1 9 .9 7

2 ,9 1 9 , 9 3 8 . 2 2
5 ,2 5 8 , 2 0 0 . 0 0

1 5,2 5 3,97 1.00


$ 1,7 0 0,02 3,39 5.09


Dividends paid
Payments to U.S. Treasury (in
terest on F era R
ed l eserve n
Transferred to surplus




$1,7 0 0 ,0 2 3 ,3 9 5 .0 9


Balance at close of previous year
Addition of profits for year


123 ,4 55 ,8 50 .0 0
15,9 7 4,85 0.00





139 ,4 30 ,7 00 .0 0





Total deductions
Net additions or deductions
Cost of unreimbursed Treasury services
Assessment for expenses of Board of Governors
Federal Reserve currency costs

D is tr ib u tio n o f N e t E a r n in g s
7 ,9 0 2 ,9 1 1 .6 2
1,67 6 ,1 45 ,6 33 .4 7
1 5,9 7 4,85 0.00


S u r p lu s A c c o u n t

C a p i t a l StOCk A c c o u n t (R resenting am nt p in w ich is 50% of am nt subscribed)
ou aid , h
Balance at close of previous year
Issued during the year


142 ,2 18 ,9 50 .0 0
2 ,7 8 8 ,2 5 0 .0 0

Cancelled during the year

123 ,4 55 ,8 50 .0 0
18,7 6 3,10 0.00


139 ,4 30 ,7 00 .0 0




1989 Annual Report

S u m m a r y

o f

O p e r a tio n s
N um b e r

O p e ra tio n

A m o u n t (^thousands)




Currency and coin processed
Currency received and verified
Currency verified and destroyed
Coin received and verified

6 1 3 ,3 5 3 ,0 0 0

6 2 0 ,6 9 9 , 0 0 0


Checks handled
Commercial— processed *
Commercial— packaged items
U.S. government

2 9 5 , 1 0 2 ,0 0 0
6 6,3 7 2,00 0


963 ,0 5 1 ,6 8 8

1 0 2 , 1 3 6 ,0 0 0

Collections items handled
U.S. government coupons paid
Noncash items


8 6 ,0 0 0




Commercial book-entry
transfers originated







8 ,8 8 8 ,0 5 3 ,0 0 0


1 6 9 , 1 2 1 ,0 0 0






4 ,04 3 ,0 00


Funds transfers sent and received
Food stamps redeemed
Loans advanced

*Excluding checks on this Bank.


2 48,019

2 6 6 ,9 0 8

Federal Reserve Bank of Richmond

O ffic e r s

(Decem ber 31, 1989)

Robert P. Black, President
Jim m ie R. M o n h o llo n , First Vice President
W e lfo rd S. Farmer, Executive Vice President
J. Alfred Broaddus, Jr., Senior Vice President and

Director o f Research
Roy L. Fauber, Senior Vice President
Jam es D . Reese, Senior Vice President
Bruce J. Sum m ers, Senior Vice President*
Jam es F. Tucker, Senior Vice President
Fred L. Bagwell, Vice President
D a n M. Bechter, Vice President
L loyd W . Bostian, Jr., Vice President
T im o th y Q . C o o k , Vice President
W illia m E. C ullison, Vice President
D o n n a G. D ancy, Vice President
W yatt F. Davis, Vice President
M ichael Dotsey, Vice President
George B. Evans, Vice President
W illia m C. Fitzgerald, Associate General Counsel
M arvin S. G o o d frie n d , Vice President
Robert L. Hetzel, Vice President
D avid B. H um p hrey , Vice President and

Payments System Adviser
T hom as M. H um p hrey , Vice President
Jam es McAfee, Vice President and General Counsel
M ichael W . N ew ton, Vice President
Jo seph C. Ramage, Vice President
J o h n W . Scott, Vice President
A nd re w L. T ilton, Vice President
W alter A. Varvel, Vice President
R oy H. W e b b , Vice President

K em per W . Baker, Jr., Assistant Vice President
W illiam H. Benner, Jr., Assistant Vice President
Jackson L. Blanton, Assistant Vice President
W illiam A. Bridenstine, Jr., Assistant General Counsel
Bradford N. Carden, Assistant Vice President
Betty M. Fahed, Assistant Vice President
Sharon M. Haley, Assistant Vice President and Secretary
Eugene W . Jo h n so n , Jr., Assistant Vice President
Thom as P. Kellam, Assistant Vice President
Anatoli K u prianov, Research Officer
H arold T. Lipscom b, Assistant Vice President
Edgar A. M artindale III, Assistant Vice President
Yash P. Mehra, Research Officer
D avid L. M engle, Research Officer
Jo seph F. Morrissette, Assistant Vice President
Virginius H. Rosson, Jr., Assistant Vice President
G. R onald Scharr, Assistant Vice President
Gary W . Schem m el, Assistant Vice President
Marsha S. Shuler, Assistant Vice President
James R. Slate, Assistant General Counsel
W illiam F. W hite, Assistant Vice President
H ow ard S. W h ite he ad , Assistant Vice President
B obby D. W y n n , Assistant Vice President
A rthur J. Zo h ab , Jr., Assistant Vice President
M alcolm C. Alfriend, Examining Officer
W h itle y K. Crane, Information Systems Officer
Floyd M. D ickin so n, Jr., Examining Officer
Jeffrey S. Kane, Examining Officer
Susan Q . Moore, Personnel Officer
Lawrence P. N uckols, Examining Officer
Virginia W . Shelor, Information Systems Officer
Charlotte L. W ald ro p , Examining Officer

Lewis Garrett, General Auditor
R obert E. W etzel, Jr., Assistant General Auditor



Robert D. McTeer, Jr., Senior Vice President

Jo h n G. Stoides, Senior Vice President

R o na ld B. D u n c an , Vice President
W illia m E. Pascoe III, Vice President

James J. Florin III, Assistant Vice President
Thom as C. Ju d d , Assistant Vice President

J o h n S. Frain, Assistant Vice President
W illia m J. Tignanelli, Assistant Vice President

Julius M alinow ski, Jr., Operations Officer

J o h n I. T urn b u ll II, Financial Services Officer

Albert D. T inkelenberg, Senior Vice President
Sam uel W . Pow ell, Jr., Vice President
Robert F. Stratton, Vice President
Jefferson A. W alker, Vice President

Richard L. H opkins, Vice President

W o o d y Y. Cain, Vice President

Marsha H. Malarz, Assistant Vice President
Lyle C. DeVane, Operations Officer
R o na ld D. Steele, Check Operations Officer

* O leave of ab ce


T h e
th e

n e w

C h a r lo tte

B a n k ’s


b u ild in g

lo n g -r a n g e

co m p letes

b u ild in g p r o g r a m