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FEDERAL RESERVE BANK OF RICHMOND FORTY- FIRST ANNUAL REFORT BALTIMORE BRANCHES IN AND CHARLOTTE FIFTH FEDERAL RESERVE DISTRICT & I(M TO THE M EM BE R It is a pleasure to present the forty-first annual report o f the Federal Reserve Bank o f Richm ond review ing the year 1955. This report, like others o f recent years, has been written and illustrated to present in rather informal style a few notes and comments on the econom y of the Fifth Federal Reserve District and to discuss in non-technical terms some o f the bank’s operations and activities. I also take this opportunity to introduce our direc tors to those o f you who may not know them. They are pictured in these pages against the backdrops o f their businesses. On behalf o f our directors and staff, I wish to express appreciation fo r the cooperation received throughout the year from bankers and from leaders o f agriculture, com m erce, and industry in the Fifth Federal Reserve District. V ery truly yours, President Like the proverbial circus, 1955 was “ bigger and better than ever.” It was a year when new records o f econom ic activ ity becam e com m onplace. The total dollar output o f goods and services produced by near-capacity operations reached heights never before ascended— as did also industrial production, national in come, per capita incom e after taxes, and profits, to men tion some other m a jor econom ic indicators that pointed to all-time record highs. In fact, in almost any direction one looked the situa tion was better than it had ever been before. Em ploy ment exceeded by five m illion the once-im probable total o f 60 million w orkers; the construction industry put the largest dollar volum e o f construction in place in its history; average w eekly earnings filled the pockets of m anufacturing w orkers to a record extent; and an un precedented volume o f consumer spending kept cash registers full and inventories relatively low . It is gilding the lily to add that all this was accom plished with but a slight jigglin g o f prices. It almost seems necessary to give this picture an air o f reality by pointing out that there were some weak spots in the 1955 econom y. The farm ing community, fo r instance, was not a party to the boom ing prosperity of the rest of the nation; new housing starts, seasonally adjusted, were in a dow nw ard trend over the course of the year (although, it should be noted, at record levels) ; and many analysts felt that the rapid rate o f increase of residential m ortgage indebtedness and consumer credit 1952 1 Revenue 1953 195 BUSINESS -AJNTD B-AJNTKUHNrGSoft Coal Production Fifth District had exceeded sustainable levels. W hile serious, these weaknesses were not pervasive, and by year-end the economy was operating at near-capacity, with demands fo r funds at high and rising levels. In fact, by late Fall the surging econom y was flexing its muscles to such an extent that the Secretary o f Commerce was led to declare, “ The econom y is in the pink of con dition. . . .Business never was better. W orkers never had it so good. Old Man Prosperity ‘just keeps rolling a lo n g / ” By Its Own Bootstraps Perhaps the most significant feature o f the economic expansion in 1955 was the fa ct that it represented private initiative and activity. Expenditures by the Federal Government fo r goods and services show ed little change during the year at a level well below year-earlier figures. State and local government outlays increased moderately, but not enough to change the sidewise trend o f total public spending. All m ajor types o f private expenditures, however, contributed to the 7 % grow th in the total outlays for goods and services. Spurred by unexpectedly large purchases o f automobiles, consumer spending rose at a clip that surpassed the 1954 rate. F ollow ing a rise of more than 40% from early 1954, the seasonally adjusted value o f residential building declined from the peak reached in the Spring of 1955, but fo r the year as a whole added to the advance in the gross national product. Private business investment outlays also rose sharply from the 1954 level. W hereas business in general lived off its shelves in 1954, by January 1955 a shift to inventory accum ulation had been effected. This expansionary force continued throughout the year. New business construction was another important fa ctor in the 1955 growth, with gains in industrial and com m ercial building leading the way. A fter lagging behind other form s o f private business investment during the first quarter o f the year, expenditures fo r new durable equipment picked up sharply in the Spring and continued to rise smartly the rest o f the year. Another significant feature of the 1955 econom y was the fa ct that most o f the approxim ately $26 billion in crease in total product represented grow th in physical volume. Since average consumer prices rose relatively little, the bulk o f the rise in consumer outlays fo r goods and services represented increased real consumption. In fact, the increase in per capita real incom e in 1955 was one of the largest o f the past decade. Credit Demand High Banking activity in the Fifth District, as in the nation as a whole, responded to the strong upw ard momentum of the econom y in 1955, and at the same time gave stimulus to the surging growth. Throughout the year the demand fo r bank credit was unusually strong as the recovery from the mild recession of 1953-54 stood on its own legs as a boom to be reckoned with. By February the District’s member banks had be gun to convert governm ent security holdings into funds to meet loan demands and these conversions continued , BUSINESS ^ N J D B^ISTKHSTG through mid-Summer. In recognition o f potential infla tionary forces being concealed beneath the strong economic growth, Federal Reserve policy early in the year shifted away from its previous “ ease” to one o f m oderate restraint. In the second half o f the year demands fo r credit con tinued strong and Federal Reserve monetary actions con tinued to encourage conditions of money tightness without permitting serious strains to develop. A m ong these m one tary actions were increases in the discount rate to a final level o f 21/2 %, the highest the discount rate has been since 1933. Short-term interest rates rose sharply during the period, the 90-day Treasury Bill rate also reaching its highest level since 1933. The pressures on the banks con tinued to intensify during the Fall and their borrow ings from Federal Reserve grew to meet them. In spite o f all these pressures generated by the advancing econom ic activity and the m onetary policy actions o f Federal Re serve, the banks were able to supply an ample volume of credit to continue the high through the end o f the year. levels of business activity Mortgage Money Plentiful Loan demand at Fifth District member banks paralleled that fo r the nation as a whole, remaining strong throughout 1955— strong enough to iron out the usual seasonal patterns that generally appear. T o tal loans outstanding dropped m oderately during January, but by considerably less than is customary at that time o f year. During the remainder o f the year, seasonality was smoothed over by the presence o f heavy de mands fo r bank credit from individuals for consumption expenditures and fo r home pur chases. Such demands as these do not have as clearcut or strongly felt seasonal characteristics as do credit demands from business firms and farmers, and their volume in 1955 was sufficient to take up the usual seasonal slack o f other types o f borrowers. M ember banks’ loans secured by real estate advanced during 1955 at a slightly faster pace than the recent record set in 1954. Not only did individual home buyers find bank funds more readily available, but also other m ortgage lenders (insurance companies, savings and loan associa tions, m ortgage com panies) were able to secure a much larger volum e o f short-term bank funds to support their own record level of real estate lending activities. On a nationwide basis, this high availability o f m ortgage funds experienced some tightening in the final quarter o f the year, but was sufficient fo r the year as a whole to support the largest number o f new housing starts since 1950. Consumer Loans Active Perhaps the outstanding characteristic o f bank lending in 1955, both nationally and in the District, was the un usually high proportion of such lending going to individuals fo r consumer purposes. Sparked by high and rising levels o f personal income, by bright expectations fo r the im mediate future, and by the sales pressures generated in a highly com petitive econom y, consumer borrow ing expanded at a more rapid pace than in any o f the post W orld W ar II years. In the District, member banks increased their loans to consumers by a larger percentage than to any other single class o f borrow er. BUSINESS AND BANKING- C r o p Y ie ld s Per A c re Fifth District TOBACCO COTTON CORN (Pounds) (P o u n d s ) ( Bus he Is) Agricultural Debt Up Fifth District farm ers found the 1955 crop one o f the most expensive ever produced. The prices o f things they had to buy in many cases were at or near 1943-52 '53 '54 ‘55 1943-52 *53 record levels, and many bought »: U S. Department of Agriculture. larger quantities of some of the items used in farm produc tion. Diminished incomes, associated in part with the drought, led many farm ers to carry forw ard into 1955 debts that would otherwise have been repaid. Continued high operating expenses and the frequent need to make additional capital investment to im prove or enlarge their farms, or to buy additional m achinery to increase produc tive efficiency, forced many farm ers to increase indebted ness in 1955. The grow ing trend am ong those with relatively large short-term indebtedness to refinance part or all o f their debt in the form o f a farm -m ortgage loan, thus spreading repayments over a longer period, also continued. W hile the cost-price squeeze continued to weaken the financial position o f many farmers, the over all financial position o f Fifth District agriculture still would com pare favorably with that in most past periods. Fortunately, most District areas which suffered drought in 1954 and other recent years had good grow ing weather in 1955. For example, while flue-cured tobacco acreage was reduced 5 % in 1955, production jum ped 14% ; and while cotton acreage was cut 1 4 % , production gained 7% . The Federal Reserve System is generally thought of, when it is thought o f at all, as something pretty remote from the people. A nd yet there’s hardly anyone living in the United States, apart from younger per sons still whiling away their hours in cribs and play-pens, who doesn’t com e into di rect contact with the Federal Reserve every day. The Federal Reserve puts the na tion’s m oney into circulation. The Federal Reserve Bank of Richm ond and its Baltimore and Charlotte branches put almost two and a half billion dollars o f paper money and coins into circulation in 1955, $2,338,676,820 in paper currency and $52,027,926 in coins. If that all had been in one dollar bills, and if the one dollar M a i n v a u lt at R ic h m o n d h o ld s m illio ns of d o lla rs in currency a n d bo n d s. D o o r w e i g h s 6 3 l/ 2 tons. N e w d o lla r bills g o i n g into s t o r a g e in v a u lt co m p a rtm e n t. Each p a c k a g e on truck c o ntain s $4 ,0 0 0 in S ilver Certificates. bills had been placed end to end . . . well, the ribbon o f bills would have extended 226,392 miles. The huge total o f dollars didn’t repre sent a net increase in the nation’s supply of money. “ Circulation” is the key word. Money flows out o f and into the Federal Reserve Bank each business day, flowing out to take care o f the demand o f com m er cial banks and returning as the commercial banks’ day to day amount of cash on hand exceeds their needs. The return flow al most equalled the outflow. The Richmond Head Office and the two branches ac tually handled a total of $4,673,995,470 in paper money and $103,758,770 in coins during 1955. That was 800,017,338 pieces o f paper currency and 1,310,829,911 indi need or want and to pay others fo r doing vidual coins. things fo r us. On a daily average, the Head Office handled $9,524,947 in currency and $132,446 in coins; Baltimore, $5,051,572 in cur rency and $209,023 in coins; and Char lotte, $3,189,651 in currency and $55,390 in coins. By denominations, the three offices to gether over the w hole year handled more m oney in $20 bills, $1,726,824,880, than any other size, and less in $5,000 bills, a mere $235,000. The biggest handle in coins was in quarters, $39,159,730, and the smallest in silver dollars, $1,801,295. The Richm ond Reserve bank and its branches serve the Fifth Federal Reserve District— Maryland, Virginia, North Caro lina, South Carolina, W est Virginia, and the District of Columbia. Some o f the (In the present day most payments are made by check. In contrast to the total o f $4,777,754,240 in currency and coins that the bank handled in 1955, it handled $79,879,673,000 in check clear ing operations fo r com m ercial banks. But that is another story.) M oney in the form o f currency and coin goes into circulation according to the demand o f individual per sons and business firms fo r it. Money on the Move W hen a person who has m oney on de posit in a bank needs some cash fo r pocket money, he may go to the bank and draw out what he wants from his account, or he may cash a check at a grocery store on his bank account. Banks always keep an ample supply o f cash on hand fo r day to day operations. Banks that are members other eleven Reserve banks in more popu lous and more highly industrialized areas o f the Federal Reserve System obtain their cash from the Federal Reserve Bank or handle much larger amounts o f money. The New Y ork Reserve bank, fo r instance, rency and $600,000,000 in coins annually. branch in their area, som ewhat in the same way that individuals draw cash from com m ercial banks. That is, m ember banks have accounts at the Reserve banks, called Where Does the Money Go? they handles more than $23,000,000,000 in cur reserve accounts, and when they need cash Peering into one’s own pocketbook or wallet and trying at the same time to visualize billions o f dollars, one might w onder where all o f the money goes, and why. There really isn’t any simple an swer to either question, but an attempt at simplification might go something like this: To begin with, m oney is exchange. W e get paid fo r do, the things we make, and grow . W e spend money to a medium the things the things get things of we we we draw on these reserve accounts. Banks that are not members o f the System generally get their m oney from member banks, with which they have accounts. W hen a member bank, say in a Carolina textile town, needs a bigger amount of cash at a given time than it might norm ally have in its vault, it asks the Federal Re serve Bank to ship the needed amount, which is deducted from the m em ber bank’s reserve account. Suppose it needs this cash to supply a customer, the local tex- H e a v i ly a r m o r e d trucks deliver m o n e y to Federal Rese rve B a n k daily. A r m e d g u a r d s , all expert m a r k s m e n , w a t c h eve ry m ove. N e r v e center of b a n k 's m o d e rn protection system. Control post is in c onstan t touch w ith g u a r d s in all parts of R ic h m o n d H e a d Office, C o in s b y the m illio ns are ca refu lly co un ted a n d w e i g h e d , a l w a y s u n d e r close scrutiny. Skillfully o perated, m a c h i n e s count coins at a rate of a b o u t 2,0 00 a minute, 120 ,0 0 0 a n hour. ■Ji J tile plant, which has a payroll to meet. The textile plant gets the money, which is deducted from its account at the bank, and pays its em ployees. The em ployees soon put the money into circulation. They pay the grocer, the doctor, the clothing s to re ; they spend some o f their money at the m ovies; they put some o f it into their bank accounts. Sooner or later, and usual ly it doesn’t take long, much o f the money that the bank has paid out to the textile plant has found its way back to the bank. And with more money on hand than it needs fo r normal operation, the bank ships the excess back to the Federal Reserve Bank or branch. Federal Reserve’s Role This flow o f money goes on all o f the time. Millions o f dollars are constantly on the move. N obody, probably, ever has enough money, or thinks he has, but be cause o f the Federal Reserve System there is always enough money to carry on the nation’s business. One o f the objectives o f the Federal R e serve System, as specified by Congress when it enacted the Federal Reserve Act in 1913, is “ to furnish an elastic currency.” An elastic currency is the kind that will expand in amount to meet the needs of business and the people and contract when the needs are reduced. Before the F ed eral Reserve System came into being the amount o f money that could be issued was limited by the value o f certain governm ent bonds held by com m ercial banks or by the amount o f silver and gold in the country. W hen the need fo r m oney in business chan nels increased sharply over the country, at Fall harvest time, fo r instance, there som e times wasn’t enough money to go around, and there were, now and then, “ money panics” that raised hob with the econom y. S t o w i n g coins in b a n k 's v a u lt is like a s t e v e d o r in g o peration. Each b a g of nickels on electric lift c o n tain s $ 1 0 0 a n d w e i g h s 22 po u n d s. W ith the passage of the Federal Reserve lateral behind the notes over the year Act, Federal Reserve Banks were author ized to issue money. At present about 85 was $712,000,000 in gold certificates and per cent o f the total o f currency and coin in circulation is in the form o f Federal Re serve Notes. These notes are “ b a ck ed ” by the Reserve banks’ holdings o f gold certificates, governm ent securities, and eligible com m ercial paper. At least 25 per cent o f the Reserve banks’ assets back ing the money they issue must be in gold certificates, but actually the backing of gold certificates is generally much more than the required 25 per cent. On D ecem ber 21, 1955 there were $2,049,106,655 in Federal Reserve Bank of Richm ond notes in circulation. the high point of the year. That was A verage col $1,300,000,000 in government securities. The total o f Federal Reserve Notes of all Federal Reserve Banks outstanding at latest count was $25,936,000,000. Two other kinds of paper money also are issued at the present time, United States Notes and Silver Certificates, both issued by the Treasury and put into circulation through the Federal Reserve Banks (except fo r a relatively small amount that W ashington, D. C. banks obtain directly from the Treas u ry). The total of United States Notes outstanding is set by law at $347,000,000; these notes are backed by gold bullion owned by the Treasury. Silver Certificates are based on silver bought by the Treasury, G u a r d w a tc h e s m o n e y s o r tin g from u pp e r-le ve l " p i l l b o x . " W it h in his reach a r e g u n s a n d te ar-gas. T ra in e d o p e r a t o rs count a n d sort p a p e r m o n e y at these m a c h i n e s a t a rate o f a b o u t 2 5 ,0 0 0 bills a day. Stacks of m o n e y m e a n just stacks of p a p e r to those w h o h a n d l e m illio n s of d o lla r s da ily. which by law must pay not less than 90.5 cents an ounce fo r the m eta l; the Certifi cates are issued on the basis of a monetary value o f $1.29 an ounce. The average dollar amount o f Silver Certificates in cir culation runs around $2,000,000,000. Money in Storage Federal Reserve Notes are issued in de nominations o f $5, $10, $20, $50, $100, $500, $1,000, $5,000, and $10,000, United States Notes in only $2 and $5, and Silver Certificates in only $1, $5, and $10. All paper money is printed by the Bureau o f Engraving and Printing o f the United States Treasury, at Washington. Coins are made by the Treasury in its mints at Philadelphia and Denver. The mint at San Francisco is not operating at present. The currency and coins are sent to the Federal Reserve Banks fo r current use and fo r “ cold storage.” In addition to the paper money and coins kept by the Reserve banks to carry on their business with com m ercial banks, millions o f dollars o f their own as-yet-unissued Federal Re serve Notes are stored at the Reserve banks under the authority of each bank’ s Federal Reserve Agent. W hen it becom es necessary to issue new money, the Reserve bank pledges the required amount o f col lateral and the money is issued fo r use. The Federal Reserve Bank of Richmond Head Office keeps a daily average o f about $70,000,000 in ready cash in its vaults. The Baltimore and Charlotte branches each keep about $35,000,000 on hand. The amount o f unissued currency in the Head Office vaults runs to more than $ 1,000,00 0 ,0 0 0 . Before w o r n - o u t m o n e y is b u rn e d it is split le n g t h w is e into s e p a r a t e halves. A s h e s a re all that r e m a i n of a b o u t $ 7 0 0 ,0 0 0 in p a p e r m o n e y b u r n e d in b a n k 's inc ine ra to r Visitors to the Richmond Reserve bank and branches often ask whether any rob bery attempts have ever been made. The answer is no. Any such attempts would be likely to fail, for the bank’s protection systems are strong. The Head Office and branches have big and tough corps of is withdrawn from circulation by the F ed eral Reserve Banks and is destroyed. F ed eral Reserve Banks, in specially built in cinerators generating nearly 3,000 degrees of heat, burn w ithdrawn United States guards, many o f them form er Marines and Notes and Silver Certificates. They send Federal Reserve Notes to the Treasury fo r burning. Money so destroyed is replaced Navy and Arm y men and all o f them by new money. marksmen (with medals to prove it) with the pistols, riot guns, tommy guns, tear-gas guns and grenades, and other weapons in the banks’ several w ell-equipped arsenals. The buildings are honeycom bed with elec tronic protective devices. The vaults are strong enough to shut out anyone not equipped with atomic weapons. As happens to everything made by man, m oney wears out. W hen paper money wears out or becom es too dirty fo r use, it In 1955 the bank and branches w ithdrew $658,393,750 in paper m oney fo r destruc tion, $496,752,350 in F ederal Reserve Notes, $14,591,150 in United States Notes, and $147,050,250 in Silver Certificates. A total of $179,804,000, an average of $711,000 each w orking day, went up in smoke at the Federal Reserve Bank o f Richmond in 1955. They made a m erry blaze. “ Do you have $163.15 in cash? You w ould, if all o f the currency and coin in circulation in the United States today were divided am ong all o f the people.” So read lege teachers, provided speakers fo r 143 meetings, and, among other things, w el com ed some 3,000 visitors who toured the Head Office and branches. the provocative introduction to a chapter O f particular interest in 1955 was the in “ Readings on M oney,” a booklet pub lished in 1955 by the Federal Reserve Bank o f Richm ond. production o f a 16-mm educational motion picture, “ You and Y our M oney.” This short feature, showing in cartoon story style what makes the wheels go around The question and assertion, used in ageneral announcement that the booklet was available to anyone interested in the role o f m oney in the Am erican economy, set a lot o f people to counting their money, and caused thousands o f them to ask fo r copies o f the booklet. The bank was pleased to distribute thousands of copies— to students, teachers, bankers, business men, and others— because it believes that such contributions to the understanding o f the functions o f money and o f the Federal Reserve System are o f worth to a public that seeks to be better informed o f the econom ic facts o f life. F or the same reason the bank in 1955 published other booklets, produced a m o tion picture, conducted a seminar fo r col in the nation’s business, joined the bank’s earlier film, “ Y our M oney’s W orth ,” among the outstanding films on econom ics avail able in the country. That, at least, is the opinion o f hundreds o f college and high school teachers, bankers, and business executives who have so ju dged them. A m ong other publications released in 1955 were “ You and Y our M oney” and “ Y our M oney’s W orth ,” each an adapta tion o f the script o f the films; the “ Month ly Review ,” which goes to a reading list of more than 7,000; and “ O perating Ratios of Fifth District M ember Banks,” an annual com parative com pilation valued highly by bankers. All o f the bank’s publications are free to interested persons. Requests fo r bank officers and staff mem bers to speak at meetings in 1955 were, as always, fa r beyond the bank’s ability to fulfill. But in so fa r as was possible re Pu b lish e d monthly, this Re view offers reports and Representatives o f the c o m m e n ts on busin ess c o n Head Office and branches addressed 143 meetings and lectured at the Graduate ditions in the Fifth District quests were met. School o f Banking at Rutgers University, at schools and conferences o f bankers as sociations o f Virginia, Maryland, W est Vir ginia, North Carolina, and South Carolina, and at many colleges. For the third year the bank held a cen tral banking seminar for Fifth District college and university professors o f money and banking, giving the teachers an oppor tunity to see the operations o f the bank, to hear discussions o f m onetary policy from Causes and changes the in d o lla r in " Y o u r effects o f the the a re v a lu e of discu ssed M o n e y's W orth" authorities in the field, and to ask ques tions and contribute their own thoughts. In the past three years nearly 100 teachers have attended the seminars. T h o u s a n d s of copies o f this new bookle t have been g iv e n to b an kers, b u s i n e s s m en and college students Illustration fr o m n e w m o v i e s h o w s in outline the t r a v e ls of m o n e y a s it do es its w o r k a s m e d i u m of e x c h a n g e in the n atio n 's busin ess. and lo an Your M o n e y " are fr o m the bank, Prints of " Y o u a v a ila b le its on bra n che s, a n d all other F edera l Reserve Banks. As the Volum e o f Operations table on another page indicates, 1955 was a busy year fo r the Federal Reserve Bank o f Richm ond and its Baltimore and Charlotte branches. It was indeed one of the busiest years on record, with the bank and its branches keeping pace with a boom ing econom y. Figures in the table, of course, are con solidated tabulations for the entire bank. It may be o f interest, however, to glance at a breakdow n o f a few o f the figures as an indication o f the scope of the branch operations. For instance: O f the total o f 232,132,000 checks in the amount o f $79,879,673,000 handled during 1955, Richm ond’s share was 122,373,000 amounting to $42,742,626,000, Baltim ore’s 62,318,000 and $17,474,445,000, and Char lotte’s 47,441,000 and $19,662,602,000. Of currency received and paid out, R ich m ond’s share was 401,876,406 pieces amounting to $2,409,811,629, Baltim ore’s 218,518,395 and $1,288,150,754, and Char lotte’s 179,622,537 and $976,033,087. Of coins received and paid out, R ichm ond’s share was 400,263,574 pieces amounting to $33,508,743, Baltim ore’s 716,951,641 and $53,300,766, and Charlotte’s 193,714,696 and $16,949,261. Richm ond handled 191,000 noncash co l lection items adding up to $68,789,000, Baltimore 596,000 amounting to $259,332,000, and Charlotte 35,000 amounting to $57,065,000. Richm ond made 63,189 trans fers o f funds fo r member banks totaling $23,718,555,000, Baltimore 26,069 totaling $8,894,029,000, and Charlotte 40,224 total ing $20,925,997,000. Except in a book of telephone directory proportions not all o f the persons whose In Decem ber, the Head Office board lost a valued m ember when John A. Syden- work contributed to the activities o f the bank could be listed. Am ong those whose stricker, executive vice president o f the names made news in 1955, some might be mentioned here. Virginia, First National Bank in Marlinton, W est died. Mr. Sydenstricker served on the board since 1942. had A special election will be called early in 1956 to fill Changes in Directorates D irectors: John B. W oodw ard, Jr., re appointed by the Board o f Governors to a new three-year term as Class C director and re-designated chairman and Federal Reserve A gent fo r 1956 . . . A lonzo G. Decker, Jr., re-designated by the Board of Governors deputy chairman for 1956 . . . Joseph E. Healy, elected by m ember banks to a three-year term as Class A director, succeeding W arren S. Johnson, who left the board after nine years . . . L. Vinton Hershey, elected by member banks to a three-year term as Class B director, suc ceeding H. L. Rust, Jr., who had served Baltimore Branch directors: W m. Pur nell Hall, re-appointed by the Board of Governors to a three-year term . . . John W . Stout, appointed by the Head Office board to a three-year term, succeeding Lacy I. Rice . . . Stanley B. Trott, re-appointed by the Head Office board to a sec ond three-year term. Charlotte Branch directors: T. Henry Wilson, re-appointed by the Board of G ov ernors to a new three-year term . . . Ivey W . Stewart, appointed by the Head Office board to a three-year term, succeeding George S. Crouch . . . G. G. Watts, ap pointed by the Head Office board to a W oody. term, succeeding Also in D ecem ber death took J. G. H oltzclaw, chairman o f the bank’s Indus trial Advisory Committee since 1934. Mr. H oltzclaw was president o f the Virginia Electric and Pow er Company. The bank’s board o f directors re-ap pointed Robert V. Fleming, chairman o f the board o f Riggs National Bank, Washington, to his fourteenth term as the Fifth District m em ber of Advisory Council fo r 1956. the Federal New Officers Elected on the board since 1944. three-year Mr. Sydenstricker’s unexpired term, which ends D ecem ber 31, 1956. Jonathan Three members o f the Head Office staff became officers o f the bank in 1955. Fiscal A gency Department M anager John G. Deitrick, Transit Departm ent M anager Clifford B. Beavers, and Planning D epart ment Manager J. G ordon Dickerson, Jr. were elected to the position o f assistant cashier. The end of 1955 brought the retirement of Assistant Cashier Edw ard W aller, Jr., who had been a m em ber o f the Head Office staff since 1915. Two banks o f the Fifth District entered the Federal Reserve System in 1955. They were the new ly organized First National Bank, Greer, South Carolina, and the Cambria Bank, Inc., o f Cambria, Virginia. VO LU M E OF PRINCIPAL OPERATIONS 1955 1954 232,132,000 $79,879,673,000 223,784,000 $73,752,728,000 C h ecks H andled : N um ber _______________________________________________ A m o u n t_________________________________________________ N o n c a s h C o l l e c t io n I t e m s R e c e iv e d : N um ber _______________________________________________ Am ount _______________________________________________ $ 822,000 385,186,000 $ 747,000 219,807,000 T r a n s f e r s o f F u n d s for M e m b e r B a n k s : Number _________ _____________________________________ Am ount _______________________________________________ 129,482 $53,538,581,000 116,403 $47,002,429,000 $51,794,241,000 $51,844,814,000 $46,768,291,000 $46,727,150,000 399,344,743 $ 2,335,318,650 415,894,215 $ 2,545,480,530 400,672,595 $ 2,338,676,820 416,795,922 $ 2,566,072,196 I n t e r d is t r ic t S e t t l e m e n t F u n d D a il y T r a n s C l e a r in g s : it Total received from F . R. Banks and B ran ch es____ Total paid to F . R. Banks and B ran ch es___________ C u r r e n c y a n d C o in H a n d l e d : Currency received (including new notes) : Num ber o f n o t e s ______________________________________ Am ount _______________________________________________ Currency paid out (including notes returned for redemption) : Number o f n o t e s ______________________________________ Am ount _______________________________________________ Coin received (including new coin) : Num ber o f c o in s ______________________________________ Am ount _______________________________________________ $ 651,132,388 51,730,844 $ 623,707,044 49,440,621 $ 659,797,523 52,027,926 $ 594,074,874 48,895,610 Coin paid out (including coin returned for redemption) : Number o f c o in s ______________________________________ Am ount _______________________________________________ U. S. A rmed S a v in g s deem ed G overnm ent S e c u r it ie s F orces B onds B onds) L eave I n c l u d in g ( E x c l u s iv e I ssued, E x c h a n g e d and of R e : Number _______________________________________________ Am ount _______________________________________________ 121,000 $ 3,772,847,000 156,000 $ 4,900,377,000 U . S . S a v in g s B o n d s— I s s u e d : Number _______________________________________________ Issue p r ic e _____________________________________________ $ 5,767,000 336,141,000 $ 5,607,000 323,417,000 $ 7,338,000 471,520,000 $ 7,790,000 480,997,000 U . S . S a v in g s B o n d s— R e d e e m e d : Num ber _______________________________________________ Redemption v a lu e -------------------------------------------------------- W e generally appraise financial state nearly the entire m onetary gold stock of ments o f business firms in terms o f the the nation. A ny increases in it w ork to increase member bank reserve accounts by profitableness o f the year’s operation. Not so with a Federal Reserve Bank’s state a similar amount. ments. Profit making is not a determining consideration in the operations o f a Federal whole, however, the G old Certificate Re serve declined just slightly over 1955. The increase at the Richm ond bank was caused Reserve Bank. W hat, then, is the basis fo r ju dgin g the changes in the financial statements o f a Federal Reserve Bank? The principal purpose o f the Federal Reserve System is influencing the conditions o f credit in the econom y tow ard the end of prom oting For the System as a by a net inflow o f paym ents from other Federal Reserve districts, and this increase tended to increase m em ber bank reserve accounts at this bank proportionately. During 1955, increased m em ber bank borrow ing from the Federal Reserve Bank orderly econom ic grow th while maintain ing stability in the purchasing pow er o f the dollar. Most o f the actions taken to of Richmond, and from the other Reserve banks, was indicative o f the grow ing m one tary tightness which developed over the achieve this purpose are reflected directly or indirectly in the financial statements of the Reserve banks. Any appraisal o f these statements should be in the light o f credit year. A lthough the balance sheet shows a smaller amount o f discounts outstanding at the end o f 1955 than at the end o f 1954, average borrow ing during the year was policy over a period. substantially greater than during the earlier year. This is reflected in the earn ings statement. Total earnings from dis counts in 1955 were over tw o and a half M onetary policy throughout 1955 was one o f increasing restraint. The decline in the Federal Reserve Bank o f Richm ond’s holdings o f government securities over the year reflects the execution o f this policy. The Richmond Reserve bank does not buy and sell government securities on its own account, but participates in the System’s times the amount earned in 1954. Increases in the discount rate from 1 per cent to 21/2 per cent accounted fo r some portion of the increased earnings, but the higher level of borrow ings was the principal source of the increase. total holdings which are administered un der directives o f the Federal Open Market Committee. The change in the Richm ond bank’s holdings, therefore, reflects System operations designed to influence national credit conditions. The second largest asset item in the bal Another fa ctor which affected m em ber bank reserve accounts during 1955 was the increase in the liability item F ederal Re serve Notes. This item represents Federal Reserve currency issued to m em ber banks in response to the demands made upon them by their customers. Increasing busi ance sheet o f the Richmond Reserve bank ness activity calls fo r more “ pocketbook is the Gold Certificate Reserve. m oney” in the hands o f the public, and This ac count fo r the System as a w hole represents this was the pattern in 1955. C O M P A R A T I V E S T A T E M E N T OF C O N D I T I O N ASSETS: — —— •* _______ : ------ $1,275,459,867.17 $1,156,033,013.39 72,427,230.78 74,913,000.78 1,347,887,097.95 1,230,946,014.17 38,249,760.00 23,787,968.28 4,175,000.00 22,851,810.00 24,156,354.76 7,550,000.00 88,530,000.00 348,812,000.00 834,571,000.00 165,062,000.00 127,632,000.00 817,643,000.00 355,583,000.00 165,017,000.00 1,436,975,000.00 1,465,875,000.00 T o t a l l o a n s a n d s e c u r i t i e s ___________ 1,441,150,000.00 1,473,425,000.00 Due from foreign banks---------------------------------------Uncollected cash item s-----------------------------------------Bank premises-------------------------------------------------------Other assets------------------------------------------------------------ 1,113.13 437,744,631.04 5,218,406.37 9,160,589.14 1,140.09 333,589,980.75 4,495,308.58 7,853,762.64 T O T A L A S S E T S _____________ $3,303,199,565.91 $3,097,319,370.99 $2,024,916,515.00 $1,864,244,945.00 833,907,250.82 17,776,533.41 19,300,000.00 21,225,299.95 829,940,097.83 44,619,021.03 24,582,000.00 5,626,323.09 892,209,084.18 904,767,441.95 325,780,232.00 611,860.02 270,806,430.95 555,780.20 3,243,517,691.20 3,040,374,598.10 13,771,500.00 35,011,852.68 3,349,144.81 7,549,377.22 12,618,200.00 33,480,005.72 3,349,144.81 7,497,422.36 $3,303,199,565.91 $3,097,319,370.99 $ $ Gold certificates___________________________________ Redemption Fund for Federal Reserve notes___ T o t a l G o ld C e r t i f i c a t e R e s e r v e s ____ Federal Reserve notes o f other banks___________ Other cash__________________________________________ Discounts and advances---------------------------------------- ------------- U . S. G O V E R N M E N T S E C U R IT I E S : B i l l s ______________________________________________ C ertificates______________________________________ Notes ____________________________________________ Bonds -----------------------------------------------------------------T o t a l U . S. G o v e r n m e n t s e c u r it i e s ------------- -------- LIABILITIES: Federal Reserve notes—. D E P O S IT S : Member banlc- -reserve accounts U . S. Treasurer— general account F o r e ig n ______________________________ Other _______________________________ T otal D e p o s it s Deferred availability cash items Other liabilities---------------------------T O T A L L IA B I L IT IE S CAPITAL ACCOUNTS: Capital paid in _________ Surplus (Section 7) — Surplus (Section 1 3 b )___ Other capital accounts T O T A L L I A B I L I T I E S A N D C A P IT A L A C C O U N T S Contingent liability on Acceptances Purchased for Foreign Correspondents ... Commitments to make industrial loans ------------- -------- ----------- --------- ------- ----------- 1,675,000.00 11,250.00 979,200.00 39,000.00 C O M P A R A T I V E S T A T E M E N T OF EARNI NGS AND E X P E NS E S 1955 E a r n in g s : Discounts and advances _____ ___ _____ _______________________ _______ ...... ......... $ 567,773.21 Interest earned on industrial loans under Section 13b_________________ Fees received on commitments to make industrial loans ___ ________ _________________ 210.11 Interest on U. S. Government securities ________________________ . .___ _____ ________ 23,436,368.44 Other earnings________________________ ______________________ ... __ _____ ____ _ 8,490.13 Total Current Earnins’s_______________________________ E _______________ 1954 $ 220,539.06 304.52 447.76 25,627,427.68 6,532.64 24.012.841.89 25.855.251 .fifi 7,183,650.33 213,100.00 445.423.66 6,945,073.95 212,900.00 649.fi9fi.R1 7,842,173.99 7,807,670.76 16,170,667.90 18,047,580.90 _______ 482.68 31,734.87 9,213.26 ....... _________________ 482.68 40,948.13 ____ ____________ Losses on sales o f U. S. Government securities (net) ________________ Reserves for Contingencies ________________________ ___ ____ _____ _ A ll other. .. ------------------- ---------------------- --------- ----- ---------------------------- ________ ________ 55.37 51,954.86 995.23 52,508.82 637.20 ........ ___________ ____ 53,005.46 53,146.02 __________ ______ - 5 2 ,5 2 2 .7 8 - 1 2 ,1 9 7 .8 9 _________________ $16,118,145.12 $18,035,383.01 Paid U . S. Treasury (Interest on Federal Reserve n otes)________ ... . _ ______ ________ $13,786,647.54 799,650.62 Dividends paid — ____ __________ ____ — ____ _________________ 1,531,846.96 Transferred to surplus (Section 7) — _______ ............................... $15,573,732.87 731,160.00 1,730,490.14 _________________ _________________ $16,118,145.12 $18,035,383.01 xtenses: Operating expenses (including depreciation on bank premises) after deducting reimbursements received for certain Fiscal Agency and other expenses_______ ____ _ Assessments for expenses o f Board o f Governors_____ . . . ___________________ ________ Cost o f Federal Reserve r.urrenev ___ N et Expenses . Current N et Earnings . . . .... . . . ............... . ... _______ ____ _____ . .. ... _____ ____ __________ A d d it io n s to C u r r e n t N e t E a r n i n g s : Profits on sales of U . S. Government securities (net) _______________ All other _______ __ __________ ___ _____________ ________ ____ ____-_________ Total Additions ............. ............................................ .. D e d u c t io n s f r o m C u r r e n t N et E a r n in g s : Total Deductions ... .............. ........... ....... ..................... . Net Additions ( + ) or Deductions ( — ) ____________ _........ ...... N et E a r n in g s B efore P a y m e n t s T o ta l to U . S. T reasur y . SURPLUS ACCOUNT (Section 7) Ruliinnp jit rlnsp nf nvevious vear ArLlitinn n /o nrnfik fnr vpar ____________________________ $33,480,005.72 _________________ 1.531.846.96 B a l a n c e a t C l o s e o f C u r r e n t Y e a r ........................... ............. ...... ................. ........ $35,011,852.68 $31,749,515.58 1.730.490.14 $33,480,005.72 CAPITAL STOCK ACCOUNT (Representing amount paid in, which is 5 0 % o f amount subscribed) Rnlsinfp sit clnsp n f nrevimis vpar Issued during the year _______________ ____________ . .... ....... _................... Cancelled during the year B a l a n c e a t C l o s e o f C u r r e n t Y e a r ............................................ ............................ . $12,618,200.00 1,160,800.00 $11,655,200.00 1,014,600.00 13,779,000.00 7,500.00 12,669,800.00 51,600.00 $13,771,500.00 $12,618,200.00 JOHN B. W O O D W A R D , JR., C h a i r m a n of the B o a r d a n d Federal Re serve Agent, is c h a irm a n b o a r d o f the N e w p o r t b u i ld i n g and Dry New port N ew s, of News Dock V i r g i n ia . the S h ip Com pany, He has been a C la s s C m e m b e r o f the b a n k 's board since 1949 and C h a irm a n since J a n u a r y 1954. A L O N Z O G. D E CK ER , JR., is vice pre siden t o f the Black a n d Com pany, T o w so n , Decker M a n u f a c t u r i n g M arylan d . He w as a p p o in t e d a C la s s C director in 195 4 a n d D e p u ty C h a i r m a n in J a n u a r y 1955. D E A N W . C O L V A R D is D e a n of A g r ic u lt u r e at N o rth C a r o l i n a State C o lle g e of A g r ic u ltu r e a n d E n g in e e r in g , Raleigh. He w as a pp o in te d a C la s s C director o f the b a n k in J a n u a r y 1955. D A N I E L W . BELL is p re siden t a n d b o a r d c h a i r m a n o f the A m e r i c a n Security a n d Trust C o m p a n y , W a s h i n g t o n , D. C. He is a fo rm e r U n d e r S e c re ta ry o f the T reasury. His term a s a C la s s A director b e g a n in J a n u a r y 1955. ROBERT O. HUFFMAN is pre siden t of the Drexel Furniture C o m p a n y , Drexel, N o rt h C a r o lin a a n d of t w o textile concerns in th at state. He b e c a m e a C la s s B director in J a n u a r y 1955. W M . A. L. S IB LEY is vice p re siden t a n d tr e a s urer of M o n a r c h M ills, Unio n, So uth C a r o lin a . His term o f office a s a C l a s s B director b e g a n in J a n u a r y 1954. L. V I N T O N H E R S H E Y is p re sid e n t o f the H a g e r s t o w n S h o e C o m p a n y , H agerstow n, M a r y la n d . F orm e rly a m e m b e r a n d c h a ir m a n of the B a ltim o r e B r a n c h b o a r d , he b e c a m e a C la s s B director o f the b a n k in J a n u a r y 1956. J O S E P H E. H E A L Y is pre siden t of the Citizens N a t i o n a l B a n k of H a m p t o n a n d the F arm e rs B a n k of M a t h e w s , both in V i r g i n ia . He took office a s a C l a s s A director in J a n u a r y 1956. OFFICERS H u g h Leach President E d w a r d A. W a y n e First Vice President N. L. A r m i s t e a d Vice President Robert G. H o w a r d A ssistan t Vice President Robert L. C h e r r y Vice President Jo h n L. N o s k e r A ssista n t Vice President D o n a l d F. H a g n e r Vice President T h o m a s I. Storrs A ssista n t Vice President A u b r e y N. Heflin Vice President and G eneral Counsel G. H a r o l d S n e a d C hief Exam iner U p to n S. M a r t i n Vice President Victor E. Pre g e an t, III A ssistan t G eneral Counsel Jam es M. Sla y Vice President C liffo rd B. B e a v e rs C. B. S tr a t h y A ssistan t Cashier Vice President and Secretary C h a r le s W . W i l l i a m s E. B. C o l e m a n A ssistan t Cashier Vice President Joseph M . N o w la n Cashier J o hn G. Deitrick A ssistan t Cashier R. S. Brock, Jr. General Auditor J. G o r d o n Dickerson, Jr. A ssistan t Cashier H. Ernest Ford A ssistan t Cashier W y t h e B. W a k e h a m A ssista n t C ashier J. D e w e y D a a n e Assistan t Vice President J a m e s W . D o d d , Jr. Assistan t Vice President USTIDTJSTI^XAL ADVISORY COMMITTEE O v e r t o n D. D e n n is W a l k e r D. S tu art Dom inion Oil C om p an y Ross Puette President, Richmond H a rd w a re C o m p a n y Richmond, V irgin ia Richmond, V irgin ia President, C aro lin a Paper Board Corporation J o h n L. W hit e h u r st President and Treasurer, Burt M achin e C o m p a n y, Inc. Baltim ore, M a ry la n d Charlotte, North C aro lin a IMIElvflBEIFl FEDERAL A D V IS O R Y Robert V. Fle m ing C h airm a n o f the Board, R iggs N a tio n a l Bank W a sh in g to n , D. C. COXJISrOIH, DIRECTORS T h e o d o re E. Fletcher Agriculturist Easton, M a ry la n d W m . Purnell Hall Executive Vice President, M a ry la n d Ship b u ild in g & D ryd ock C o m p a n y, Inc. Baltimore, M a ry la n d C h a r le s W . H off President, Union Trust C o m p an y of M a ry la n d Baltimore, M a ry la n d C h a r le s A. Piper President, The Liberty Trust C o m p an y Cu m b erlan d, M a r y la n d J o hn W . Stout President, The Parkersburg N a tio n a l Bank Parkersburg, W e st V irgin ia S t a n le y B. Trott President, M a r y la n d Trust C o m p an y Baltimore, M a ry la n d C la r e n c e R. Z a r fo s s Vice President, W estern M a ry la n d R a ilw a y C o m p a n y Baltimore, M a ry la n d OFFICERS D o n a l d F. H a g n e r vice President A. C. W ie n e rt A ssista n t Cashie r A. A. Stew art, jr. Cashier B. F. A r m s t r o n g A ssista n t Cashie r E. R i g g s Jones, jr. A ssistant Cashier DIRECTORS A r c h ie K. D a v i s C hairm an of the Board, W a c h o v ia Bank & Trust C o m p a n y W inston-Salem , N orth C a ro lin a W i l l i a m H. G rier Executive Vice President, Rock Hill Printing and Finishing C o m p a n y Rock Hill, South C a ro lin a Ernest Patton Ch airm an of the Board, Peoples N a tio n a l Bank Greenville, South C a ro lin a Iv e y W . S te w a rt President, The Com m ercial N a tio n a l Bank Charlotte, N orth C a ro lin a Pa u l T. T a y lo r President, Taylor W a re h o u se C o m p a n y W inston-Salem , N orth C a ro lin a G. G . W a t t s President, M erchants and Planters N a tio n a l Bank G affn ey, South C a ro lin a T. H e n r y W il s o n President an d Treasurer, Henredon Furniture Industries, Inc. M o rgan ton , N orth C a ro lin a OFFICERS R obert L. C h e r r y Vice President R. L. H oneycutt A ssistan t Cashie r S. A. Ligon Cashier E. C. M o n d y A ssistan t Cashier