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THIRTY-NINTH ANNUAL REPORT \ FEDERAL RESERVE BANK OF RICHMOND THIRTY-NINTH ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF R I C H M O N D WITH BRANCHES B A L T I MO R E SERVING IN CHARLOTTE THE FIFTH FEDERAL RESERVE DISTRICT B u s in e s s a n d B a n k i n g in 1 9 5 3 _______ I E c o n o m i c R e s e a r c h _____________________ A 6 Y o u r M o n e y ’ s W o r t h __________________ 18 C e n t e r ______________________ 9 G e n e r a l S e r v i c e s ________________________ 19 T r a n s i t ____________________________________ 10 V o l u m e o f O p e r a t io n s 14 T h e B a l a n c e S h e e t -------------- Y e a r ’ s A c t i v i t y ______________________ S w it c h in g M o n e y ______________________________________ M o n e y t o B u r n ___________________________ F is c a l A g e n c y _____________________________ 17 16 20 21 C o m p a r a t i v e S t a t e m e n t s _____________ 15 _ ____ ------------ 2 2 -2 3 D i r e c t o r s a n d O f f i c e r s ______________ 2 4 - 2 5 -2 6 ./'BALTIM ORE RICHMOND charlotte r TO THE MEMBER BANKS O nce a g a in w e a re p leased to p re se n t to y o u , o u r s to c k h o ld e rs , a re p o rt on th e m a jo r a c tiv itie s o f th is b a n k d u rin g th e p re c e d in g y e a r. As in th e p a st tw o ye a rs , w e h a v e a tte m p te d to m a k e th is in fo rm a l re p o rt m o re th a n th e m e re re c ita tio n o f fig u re s w h ic h m a n y o f y o u h a ve a lre a d y seen in o u r A n n u a l S ta te m e n t. It is h o p e d th a t th is ty p e o f re p o rt—w ith its b rie f c o m m e n ta rie s on business a n d b a n k in g d u rin g 1 953, d e s c rip tiv e notes on th e m a jo r d e v e lo p m e n ts in th e b a n k its e lf a n d a fe w s id e lig h ts on th e s ig n ific a n c e o f th e o p e ra tin g fig u re s —w ill p ro v id e a c le a re r p ic tu re o f w h a t goes on w ith in th e F e d e ra l R eserve B ank o f R ichm ond a n d , a t the sam e tim e , p o in t up th e p a rt p la y e d b y this b a n k in th e e co n o m y o f th e F ifth Fed e ra l Reserve D istrict. O n b e h a lf o f th e d ire cto rs, o ffice rs, a n d s ta ff o f th e b a n k I a g a in e x te n d a p p re c ia tio n f o r th e c o o p e ra tio n a cco rd e d us b y th e m e m b e r b a n k s o f th is D istrict. S in c e re ly yo u rs, President In the future when we speak of “ the good old days,” we are not likely to exaggerate so far as 1953 was concerned. The plus signs far out weighed the minuses. Economic activity, like the climbers of Mt. Everest in 1953, scaled new heights while, in the opposite direction, unem ployment plumbed new depths. Based on an upsurge that began in the Fall of 1952 and hit a peak the following Summer, the output of goods and services during 1953 set another rec ord in both dollar amount and physical volume. BUSINESS AND BANKING IN 1953 1 The 1953 records long a rea an success stead o f the of the unusual story above episode chart in the of cigarettes. In- usual m oderate CIGARETTE PRODUCTION FIFTH DISTRICT rise in 1953. Despite the boom ; 300 300 250 250 200 consumption, a slight decline occurred during 200 per form ance o f production in ge n e ral last year, cigarette production in the Fifth District w a s off about 5% . (Seasonally Adjusted) (1935-1939=100) 150 150 1946 1947 1948 1949 1950 1951 1952 1953 B U S I N E S S AND B A N K I N G IN 1953 The m ajor streams o f spending all rose to contribute to a rise o f approxim ately $19 billion in the value o f all goods and serv ices produced, sw elling the latter to the highest point in our history. Individual consumers spent almost $11 billion more than they did in 1952; business enterprise boosted its aggregate outlays by almost $2 billion; and total governm ent expenditures reached a record peacetim e high about $7.4 billion over the preceding year. 1953 was the boom year o f the long boom period. An important difference in the expansion o f the econom y last year as com pared with the preceding two years was that grow th in 1953 rested prim arily on increased private spending. In 1951 and 1952, on the other hand, outlays fo r defense purposes ac counted fo r about half the increase in all goods and services. That was an im por tant difference, fo r it meant that m ore o f the nation’s production was fo r personal and business uses and thus raised our standard o f living that much higher. 2 In Our Stride F or the past few years there has been a “ mourners’ bench” o f diehards who kept croaking, “ It can’t last forev er.” They were referring to the high level o f business activity and were im plying that it would soon be follow ed by severely depressed conditions. Their forebodings were based mainly on such reasoning as, “ W hat goes up must come dow n.” There has been, of course, general agreem ent that the boom w ouldn’t go on forever, but its cessation wasn’t anticipated w illy-nilly, and most bankers and businessmen did not look fo r it to be replaced by a knock-dow n, dragout depression. As one Fifth District busi ness leader expressed it a year ago this time, “ I think we shall have some downturn in 1953, but I don’t expect anything so seri ous that we shall not be able to take it in our stride.” The record o f 1953 proved that to be a “ smart” forecast. A banker in this District recently wrote to us about downtrends in business activity evident at year-end. He said, “ The main It is often a rgu e d that total business activity is not likely to decline sharp ly w hile construction w ork is still strong. If true, it's a g o o d sign for the District since construction contract a w a rd s here in the fourth quarter of 1953 ran close to the peak for the year. Total con struction contracts a w a rd e d in this District w ere -4 8 % a h e a d of 1952, as com pared to a 37-state g a in of 3.9%. Residential a w a rd s, however, declined 10% in the District and 2 .6 % nationally. CONSTRUCTION CONTRACT AWARDS F IF T H D IS T R IC T M . illion MANUFACTURING EMPLOYMENT FIFTH D ISTR IC T (N o t S e a s o n a lly A d ju s te d I9 3 5 -I9 3 9 -IO 0 ) 1946 1947 1948 1949 1950 1951 1952 1953 M a n u fa c tu rin g em ploym ent in 1953 reached the highest point in the history of this five-state area. A t 163 last Septem ber the District index o f m an u factu rin g em p lo y ment exceeded the previous record of 161 set a decade earlier w hen the w ar-tim e econom y w a s at the zenith of its economic achievement. However, 1953 m arked also the first time since the recession-year 1949 that factory em ploym ent w ou n d up the year at a low er level than existed at the opening of the year. thing about a recession or readjustm ent, or w hatever you economists call it, is that it w ould reflect a movement aw ay from ex tremes in business sentiment as well as in business activity. I think that would be a healthy change.” Extremes in business at titudes involve im moderate and unreason able expectations— a boom or bust philos ophy. As 1953 closed shop, business sentiment and expectations were not m arked by ex tremes. In general, m oderate attitudes prevailed despite the sharp contrast be tw een the volume and trend o f business during the last few months o f the year and the record fo r the full year. One o f the interesting developments tow ard the close o f 1953 was the rising optimism on the part o f businessmen— concurrently with reports o f production cutbacks, em ploym ent lay offs, declining order backlogs, and inven tory difficulties in this or that line. Such optimism in the midst o f less opti mistic trends seemed to have considerable support. That the bloom was off the boom was generally recognized, but it wasn’t in terpreted as evidence o f a forthcom ing de pression. In general, it was regarded as an interim o f adjustments from peak activ ity that w ould mark the com pletion o f the transition from a sellers’ market to a buyers’ m arket and the return o f com peti tion from its limbo o f the past decade and more. The prevalent view o f the situation was that we were in a short-run adjustment to more “ norm al” conditions, but that in the long-run we seemed to be still on the w ay up. Banking— At Record Levels F or Fifth District m ember banks, the year 1953 was one o f sustained operations at record levels. It was, how ever, a year o f slackening rate o f growth. Total assets o f the m em ber banks increased during 1953, but at a rate less than one-sixth that in 1952. The prim ary cause of the failure to ex pand as rapidly as in 1952 lay in the deci sions o f bank borrow ers. A lthough bor row ers’ demands fo r credit were at the highest level ever reached, their demands did not expand to as great an extent as in the year before. The banks’ loan expan sion was only about 6 per cent as com pared with an 11 per cent grow th in 1952. The sharpest difference between the two years is found in the usually expanded demand fo r bank credit in the Fall and early W inter months. In 1952, this demand from both business firms and consumers was sharply above expectations. In 1953, demands were much w eaker than expected— al though still at a very high level. The increase in consumer loans over the last three months o f 1953 was only about one-third the increase in the com parable period o f 1952. The change in the grow th o f com m ercial and industrial loans was even more striking. From Septem ber 30 through D ecem ber 31, 1953, repayments on outstanding business loans were greater in total amount than the sum o f all new loans made so that the amount on the books of the banks declined. In the same period of 1952, this group o f loans expanded by 11 per cent. Bankers started the year with fairly tight credit conditions which continued to tight en over the first fou r months. Free re serves were relatively scarce and to gain additional reserve funds the banks resorted to borrow ing from the Federal Reserve. During this period, demand fo r credit was strong and interest rates all along the line w ere pushed upward. Beginning in early M ay the Federal Reserve began purchasing Treasury Bills as a measure to ease the m oney tightness and, in the first half o f July, the Board o f Governors low ered re serve requirements in anticipation o f sea sonal and Treasury credit needs. During the relatively tight m oney situation over the first half o f the year the District’s mem ber banks sold almost one-tenth o f their Government securities as a means o f easing their reserve needs. By July, how ever, re serve conditions had changed to such an extent that it was possible fo r these banks to purchase Government securities in an amount equal to 60 per cent o f those they had sold over the first six months. The banks ended 1953 with holdings o f G overn ments just two per cent under the amount held at the beginning o f the year. Total deposits at the District’s m ember banks experienced an unusually sharp de cline over the first five months o f 1953. By the end o f May they had dropped 7 per cent below their level at the beginning of the year. By year’s end, how ever, total FIFTH B an kin g in the Fifth District in 1953 w a s characterized by sustained operations at record levels. The rate of grow th during the year w a s under that o f 1952, but member b an ks closed the year with total loans on their books ab o u t 5 % greater in am ou n t than they h ad at the b egin n in g o f the year. In spite of the m oderate loan expan sion , however, total deposits at District m em ber ban ks declined over the year. D IST R ICT M E M B E R BANKS OPERATIONS AT RECORD LEVELS IN 1953 TOTAL DEPOSITS \ 6500 p :' V \ LOANS AND DISCOUNTS deposits had climbed back to just slightly above the amount on the banks’ books a year earlier. Demand deposits, considered alone, actually declined over the year— the first annual decline since 1949. Because o f a slightly higher dollar level o f earning assets during 1953 and higher interest rates effective over much o f the year, gross bank earnings in 1953 set an all-time record. Increased operating costs and a higher tax bill, however, kept net profits from rising in the same proportion. The District’s m em ber banks earned the largest gross income in 1953 that has ever been recorded. They also paid the largest expense bill in their experience. O perat ing expenses o f the average bank took 63.7 cents o f every dollar o f current earnings— leaving a net o f 36.3 cents per earnings dollar. Provision fo r bad debt losses and payment o f Federal income taxes absorbed an additional 15.3 cents out of the gross earnings dollar— leaving a net profit to the stockholders o f 21.0 cents from each dollar their bank earned from the year’s opera tions. This represents the smallest share o f total earnings accruing to the benefit of the stockholders in any o f the postwar years. It is well under the peak o f 28.9 cents per earnings dollar the stockholders of the average bank realized in 1947. The net profits figure fo r 1953, fo r the average bank in this District, represented a net capital return of 8.3 per cent. The banks declared 38.8 per cent o f their net profits as cash dividends in 1953, giving the stockholders a cash return on their capital equity o f 2.9 per cent, slightly under the 3 per cent rate which had been main tained in the preceding three years. In 1953, one-third o f all the assets of the average mem ber bank consisted o f loans to customers. This one-third of total assets provided almost tw o-thirds o f total earn ings— 60.7 cents o f every earnings dollar. Over one-third o f all assets was in the form of U. S. Government securities, but this onethird contributed less than twenty-five cents to each earnings dollar. On the expense side, the amount o f in terest paid on time deposits took a real spurt in 1953. Thirteen and a half cents o f each earnings dollar went to meet this mounting cost; in 1952 interest payments took 12.5 cents per dollar o f earnings. A portion of the increased cost resulted from larger amounts held on deposit in savings accounts at the District’s m ember banks A greater portion, however, probably came from a higher rate o f interest paid by many o f the banks in keeping with other interest rate developments. Farmers’ Income Declined Fifth District farm ers had a further drop in farm income in 1953 fo r the second con secutive year. The level o f farm product prices has been falling most of the time since the post-Korean peak was reached in early 1951, while prices paid by farmers have dropped to a much smaller extent. Farm income has been low er despite the generally high over-all level o f farm mar ketings. Fifth District farm income from livestock and livestock products w a s fa irly evenly distributed throughout the A year. Income from crops w a s unevenly distributed, with ] nearly three-fourths com ing w ithin the four month period of A u gu st-N o v e m b e r. Since about three dollars out of five come from crops, the se ason al pattern for total farm income rather closely resembles the pattern for crops. 5 Taking one consideration with another, the year 1953 was a m em orable one fo r the Federal Reserve Bank o f Richm ond and its Baltimore and Charlotte branches. As it was a year o f record or near-record busi ness in the Fifth District, so was it a year o f record or near-record busy-ness at the Federal Reserve Bank and branches that serve the District. The figures on the volum e o f principal operations on Page 20 show an increase in activity in almost every item. The com parative statements on Pages 22 and 23 also reflect a busy year. But these figures represent only the routine things— fo r al most tw o score years the bank has handled checks, shipped money, reported earnings, and paid dividends— and the only rem ark able thing about them is the evidence o f satisfying and, it could be said, astonishing growth. Other things, operational and otherwise, took place during the year. For instan ce: In July the Federal Reserve Bank o f Richm ond becam e the nerve-center o f the Federal Reserve System’s Leased W ire net w ork. This operation is described on Pages 8 and 9 o f this report. In the same month the bank, as a service to the Treasury, took over the destruction o f unfit United States Notes and Silver Cer tificates fo r the Fifth District. This pro cedure is outlined on Page 15. 6 Tow ard the close o f the year the bank was setting up a new office to accept and hold deposits o f the thousands o f post offices o f the Fifth District. Outside the operational field there were other new departures. F or instance: Early in the year the bank produced an educational motion picture— a treatise on the ups and downs o f the dollar called “ Y our M oney’s W orth .” (See Page 18.) In June, fo r the first time in history, the Conference o f Presidents of the Federal Re serve Banks met here. The president of this bank is the chairman o f that organi zation which is instrumental in the develop ment o f Federal Reserve policy. In D ecem ber the bank conducted a Cen tral Banking Seminar fo r teachers o f m on ey and banking in Fifth District colleges. The end o f 1953 brought to an end seven teen years o f service to the bank by Charles P. M cCorm ick, who retired as a director and chairman o f the board. He was succeeded as chairman and F ed eral Reserve A gent by John B. W oodw ard, Jr., chairman o f the board o f the N ew port News Shipbuilding and Dry D ock Com pany, a Class C director and deputy chair man since 1949. W . G. W ysor, m anage ment counsel o f Southern States C oopera tive, Inc., Richm ond, a Class C director since 1937, was named deputy chairman. A lon zo G. Decker, Jr., vice president o f the Black and D ecker M anufacturing Com pany, was appointed a Class C director. In N ovem ber the m em ber banks elected W m . A. L. Sibley, vice president and treas urer o f M onarch Mills, Union, South Caro lina, a Class B director to succeed Cary L. Page, president and treasurer o f Jackson Mills, W ellford, South Carolina, who re tired from the board after six years o f serv ice on D ecem ber 31. John A. Sydenstricker, executive vice president o f the First National Bank in Marlinton, W est Virginia, was re-elected to his fifth term as Class A director. New directors named at the branches were, at Baltimore, Clarence R. Zarfoss, vice president o f the W estern M aryland Railway Company, appointed to succeed Mr. D ecker on January 1, 1954, and, at Charlotte, T. Henry W ilson, president and treasurer o f H enredon Furniture Industries, Inc., M organton, North Carolina. [On January 8, 1954, W illiam H. Grier, execu tive vice president o f the R ock Hill Print ing and Finishing Company, R ock Hill, South Carolina, was appointed to the Char lotte branch board.] The year also brought the retirement o f First V ice President John S. W alden, Jr. Mr. W alden had been with the bank fo r more than thirty-four years and had been first vice president since 1936. He was succeeded in office by Edw ard A. W ayne. PACIFIC STANDARD MOUNTAIN STANDARD CENTRAL S T A N D A R D EASTERN STANDARD The a b o v e System m ap sho w s the Federal netw ork w hich Reserve Leased sp a n s the continent. Wire P h oto grap hs are view s o f the Sw itch in g Center in operation. Control p an el keeps the o p e ra tor in constant touch w ith all o f the points on the network. One o f the Federal Reserve Banks’ ma jo r contributions to the efficiency o f the Am erican banking system, and une little known to the public generally, is the opera tion o f the Federal Reserve Leased W ire network fo r the quick transfer o f funds. Millions o f dollars in bank credit are shifted about the country daily— in a mat ter o f minutes— over this network. In 1953, with the installation o f a new electronic Switching Center here, the F ed eral Reserve Bank of Richm ond becam e the headquarters o f this vast com plex, which links together forty-six stations in thirtyseven cities throughout the nation, bring ing the twelve Federal Reserve Banks and their tw enty-four branches— and through them the nearly 7,000 com m ercial member banks— within seconds o f each other. In addition, the Leased W ire system serves the Federal Reserve System’s Board of Governors, the W ashington and Chicago offices o f the United States Treasury, and the Reconstruction Finance Corporation and the Commodity Credit Corporation. Astronom ical figures are com m onplace to the people concerned with the Leased W ire operation. Over this netw ork in 1953 a total o f $788,211,526,290.57 was trans ferred. Seven hundred and eighty-eight billion dollars is almost three times the size o f the national debt. It is almost $5,000 fo r every person in the United States. As a service to its m ember banks o f the Fifth District, the Federal Reserve Bank of Richm ond in 1953 handled 86,675 o f their messages, transferring $33,048,412,526.69 in funds via the Leased Wire. That was an average o f some $130,000,000 daily. This, in outline, is the transfer pro cedure : A customer of a m ember bank in North Carolina needs to get $5,000 to Min neapolis quickly to com plete a business deal. His bank asks the Federal Reserve Bank to transfer the funds. The Federal Reserve Bank, deducting the $5,000 from the member bank’s reserve account here, wires the Minneapolis Reserve Bank to credit the sum to the account o f the desig nated bank there, with notice that it is fo r the concern with which the North Caro linian is transacting his business. The en tire operation might be handled in less than half an hour. The Leased W ire service is not new, but the system inaugurated in 1953 is new and unique. D eveloped by the Bell Telephone Laboratories and provided to the Federal Reserve under contract by the American Telephone and Telegraph Company, it is a teletypew riter communications system al most entirely automatic in operation. A coded message typed at the Jacksonville branch o f the Atlanta Federal Reserve Bank, fo r example, is fed into a machine on punched tape and is transmitted instant ly at a rate o f 75 words a minute to any one, several, or all of the stations on the network, passing through the Switching Center at Richmond to its destination “ un touched by human hand.” TRANSIT During the course o f a year hundreds of visitors are taken on guided tours of the Federal Reserve Bank o f Richm ond and its Baltimore and Charlotte branches, the visi tors including bankers, business people, w om en’s groups, college classes, high school students, and occasionally some younger fry, like the lively pack of Cub Scouts that came into the Head Office re cently. These lads were particularly in terested in the shooting irons of the Protec tion Force and the fascinating gadgets in the furnace room and repair shops, but to avoid short-circuiting their educational tour the guides took them also through some o f the banking areas, among these the Transit, or check collection, Department. Here the guide rem arked casually that figures indicating the total dollar amount o f the checks that w ould be handled by the bank and its branches in 1953 would prob ably add up to more than $70 billion. Said one o f the young tourists, incred ulously: “ There ain’t that much m on ey !” W ell, there ain’t. A t least not in fo ld ing money and jingling coin. The total volume o f currency and coin in circulation late in 1953 was some $30,807,000,000 for the United States as a whole. The important thing is, though, that that $70 billion— in credit— does exist, does flow, and that the business o f handling money in the form o f checks is one o f the most significant features o f the Am erican banking system and, fo r that matter, the fam iliar Am erican w ay o f life. As it turned out the bank and its branches in 1953 collected the huge total o f $73,205,707,000 in checks, almost $5 bil lion more than in 1952, the previous record year. That was a daily average (299 days) o f $244,835,140. The average amount per item was $333. Acres of Checks The total represented 219,709,000 indi vidual pieces of paper, an increase o f ten million over 1952. Laid end to end these pieces o f paper would make a continuous ribbon some 21,000 miles lon g ; spread out as a single sheet they w ould cover an area o f some 420 acres, almost five times the size o f the average Fifth District farm . A breakdow n o f the figures by office shows that the Richmond Head Office han dled 112,985,000 checks amounting to $39,011,318,000; Baltimore 60,859,000 amount ing to $16,342,211,000; and Charlotte 45,865,000 amounting to $17,852,178,000. M Ml Ml M L The vast changes in the dollar am ount o f checks handled by the Federal Reserve Bank of Richmond a n d its Baltim ore and Charlotte branches is illustrated in this chart, which show s the month by month totals for the boom year 1929, the deep depression year 1933, an d the most robust boom year of all time, 1953. Total am ount in 1929 w a s $14,118,820,000; in 1933 it w a s $7,659,951,000, an d in 1953 it w a s $73,205,707,000. A significant clutch o f figures, these point up a number o f things that are taken as com m onplace in the Am erican econom y — fo r instance, the w hopping amount o f m oney that flows about the country con stantly in the form o f checks and the part played by the Federal Reserve Banks in sim plifying and expediting this steadily increasing flow. A hundred years ago actual currency and coin were in much more general use in the transaction o f business. Since then the use o f bank deposits has increased to such an extent that some 90 per cent o f the na tion’s business today is carried on by check payments— the estimated dollar volume o f checks written in the United States in a year is upward o f $1,750,000,000,000 (one and three-quarters trillion dollars). The Travels o f a Check The use o f bank deposits is facilitated by the services o f the Federal Reserve Banks in clearing and collecting checks through the reserve accounts o f m em ber banks. This is the w ay that system op era tes: Suppose a shoe m anufacturer in Lynch burg, Virginia, sells $1,000 worth o f shoes to a dealer in Dry Gulch, Texas, and re ceives in payment a check on a bank in Dry Gulch. The check is an order on the Dry Gulch bank to pay the Lynchburg concern $1,000. The Lynchburg m anufacturer does (mm ii to the Federal Reserve Bank o f Dallas, which in turn sends it along to the bank in Dry Gulch. The Dry Gulch bank charges the check to the account o f the depositor who wrote it, and either remits the amount to the Dallas Reserve Bank or authorizes the Reserve Bank to charge the amount to the reserve account o f the Dry Gulch bank. The Federal Reserve Bank o f Dallas there upon credits the Federal Reserve Bank of Richm ond, and the Richmond Reserve Bank credits the account of the Lynchburg bank. not want to travel to Texas to get his mon ey, nor does he want to pay postage and in surance on a shipment o f currency. He does not ordinarily want currency at all. W hat he wants is to have the $1,000 cred ited to his bank account. So he deposits the check in his bank. The Lynchburg bank does not want currency fo r the c h e c k ; it wants credit in its reserve account at the Federal Reserve Bank o f Richm ond. So it sends the check to the Richm ond Reserve Bank. There the check is proved and recorded and forw arded, along with others drawn on banks dow n Texas way, So, without the exchange o f any fold in g money at all, the $1,000 from the bank ac count o f the Dry Gulch merchant is trans ferred to the bank account o f the Lynch burg m anufacturer. And it doesn’t take very long. The check itself gets prom pt handling all along the way. From the time the Lynchburg firm deposits the check until it gets back home to be deducted from the Dry Gulch retailer’s account is only three or fou r days, m aybe a little longer if w eath er slows the air mail from Richm ond to Dallas. But the Lynchburg bank and the shoe m anufacturer get credit fo r the $1,000 within tw o days after the check reaches the Richm ond Reserve Bank, since a system de signed to expedite check collection enables the Reserve Bank to credit the account of the Lynchburg bank with the amount of the checks received according to a pre arranged time schedule. A Lot o f Paper W ork Since promptness is so important in col lecting checks, member banks with a con siderable volume o f checks payable in Ml Ml M_ < 12 other Federal Reserve districts may send those checks directly to the Federal Re serve Banks o f those districts, in a sense by passing the local Reserve Bank. The Lynchburg bank, therefore, might have sent the $1,000 check directly to the F ed eral Reserve Bank o f Dallas, at the same time notifying the Richm ond Reserve Bank o f the action. The Richm ond Reserve Bank w ould have credited the Lynchburg bank’s reserve account, just as if the check had cleared through Richmond. This same procedure is follow ed at the Baltimore and Charlotte branches, which handle the checks and hold the reserve ac counts o f the m ember banks in their re spective territories. W ith the hundreds o f millions o f dollars in checks constantly flowing, the collection procedure naturally involves a great deal o f bookkeeping, o f debiting here and cred iting there. The Lynchburg bank got cred it in its account in the Richm ond Reserve Bank fo r the Dry Gulch m erchant’s $1,000 and fo r hundreds o f other checks on the same day. But also on the same day its reserve account was charged fo r the many checks its customers had written. Con stantly adjusting figures, the Federal Re serve Bank keeps tab to the penny each day on the amount in the reserve accounts o f hundreds o f member banks. The Federal Reserve Banks themselves settle their accounts with each other daily, m aking telegraphic transfers o f funds through the Interdistrict Settlement Fund in W ashington. The Leased W ire network, mentioned on Pages 8 and 9 o f this report, is kept humming by this daily adjustment. Collection Steadily Improving The Federal Reserve Banks, w orking with the Am erican Bankers Association and the com m ercial banks o f the nation, have made great progress in sim plifying and otherwise im proving the process o f clearing and collecting checks, in transfer ring money about the country. In days gone by it was necessary to ship currency and gold between financial centers— at great cost, great risk, and great loss o f time. Now, with the Federal Reserve’s constantly im proving system, the means by which payments are made fo r goods and services and by which m onetary obligations are settled is cheaper, faster, and safer. Included in the w ork o f the Transit D e partment is the handling o f large numbers o f Government checks, the dollar amount o f which also runs into high figures. Last year the Federal Reserve Bank o f Rich mond and its tw o branches handled 30,781,000 o f Uncle Sam’s checks (arm ed forces, social security, etc.) in an amount totalling $5,634,901,000. Both totals ex ceeded the 1952 figures o f 29,699,000 items amounting to $5,235,191,000. Under a new procedure instituted in 1952 Transit also handles United States Postal Money Orders. Last year the bank and its branches processed 28,847,000 of these, $505,849,000 in dollar amount. The previous year’s figures had been 29,427,000 items and $498,519,000. M Ml Ml L Further evidence o f prosperity, or at least w ell-being, in the Fifth District in 1953 may be found in figures of the Money Departments o f the Federal Reserve Bank and its Baltim ore and Charlotte branches. In response to the demands of people for currency and coin these departments han dled more than ever before. The total of $5,672,118,202 in currency and coin re ceived and paid out exceeded 1952’s rec ord total by $105,369,776. Interestingly, the gain was all at the Baltim ore and Charlotte offices; the Head Office handled few er dollars and cents than in 1952. In amount o f currency received and paid out R ichm ond’s total in 1953 was $2,837,655,487 against $2,861,933,184 in 1952; Baltim ore’s $1,571,117,783 against $1,503,242,647; Charlotte’s $1,160,551,444 against $1,097,718,177. In coins received and paid out Rich m ond’s total amounted to $23,334,653 against $34,808,342 in 1952; Baltim ore’s $64,073,440 against $54,615,290 in 1952; Charlotte’s $15,385,395 against a total of $14,430,786 in 1952. Thus Richm ond’s total “ handle” o f cur rency and coin received and paid out was down $35,751,386 from 1952; while Balti m ore’s was up $77,333,286 and Charlotte’s up $63,787,876. Reasons fo r the decline in the Head Office territory and the increases in the Baltimore and Charlotte areas are hard com e by. They depend upon so many vari able factors, not excluding even weather conditions, that pin-pointing them accurate ly is not possible. It is possible, however, to relate the in crease in the use of spending money to such things as the generally robust state o f busi ness and virtually full employment. 1929 w a s the peak year of the boom of the 1920s. 1933 w a s the darkest year of the grea t depression. 1953 w a s the b igge st boom year the nation h ad ever known. The chart show s the m arked contrast in the public's d em an ds for currency an d coin in those significant years, a s represented in the do llar am ount of currency and coin shipped to a n d received from member banks month by month by the Federal Reserve Bank o f Richmond a n d its Baltim ore a n d Charlotte branches. CUR R EN CY 14 “ They have money to burn at the Federal Reserve Bank o f Richm ond. And that’s what they’re doing— burning $700,000 worth o f money every w orking day.” So read the lead on a Page One story in a Richm ond new spaper one day in 1953. The story caused quite a stir. It was the first public mention made in this area of the new currency destruction procedure w orked out between the Treasury and the Federal Reserve Banks. U nder the new system, unfit United States Notes and Silver Certificates are destroyed by burning at the Federal Reserve Banks instead o f being sent back to W ashington to be burned. That doesn’t mean, as the new spaper ac count went on to say, that the money is fo r ever lost. Unfit currency w ould be with drawn anyway— and replaced with crisp new bills. So no m oney is being lost; in fact, money is being saved. The Treasury figures that a billion and a quarter pieces o f worn out currency, making, if laid flat, a stack as high as 900 W ashington Monu ments, will be verified and destroyed an nually by the tw elve Federal Reserve Banks at substantial savings to the G ov ernment. Reduced shipping costs alone are expected to save some $200,000. In an incinerator especially installed for the job , the Richm ond Reserve Bank de stroys an average o f $700,000 a day. Unfit United States Notes and Silver Certificates ($1 to $10 denom inations) returned to the Reserve Bank from com m ercial banks are sorted, counted, and canceled, their face value verified and recorded, and then tossed into the 2800 degree gas furnace, where they go up in smoke. The ashes are inspected to make sure o f total destruction. The Federal Reserve Bank does not de stroy its own Federal Reserve Notes. In accordance with law, when these becom e unfit they are destroyed at the Treasury. 15 As long as the Federal Government is in debt, as long as it has to service its debt regularly, and as long as it has to borrow new funds from time to time, Fiscal A gency is going to be a busy shop. As “ Fiscal Agent fo r the United States Government,” Federal Reserve Banks issue, service, and redeem Governm ent securities o f all kinds. The task o f handling the multitudinous public debt operations involved is the spe cial province o f the Fiscal A gency Depart ments. Last year, to give an idea o f the size o f the job , Fiscal A gency— at Rich mond, Baltim ore, and Charlotte— handled around 13.8 million individual Savings SAVINGS BONDS ISSUED FIFTH DISTRICT M illions of Pieces Millions of Dollars Bond transactions in connection with the issuance, redem ption, and safekeeping of these popular investments. Regardless o f where sales or redem p tions o f Savings Bonds are made (m ost o f the transactions occur at com m ercial banks or other qualified issuing agents), a m ajor portion o f the bookkeeping is done in the Fiscal A gen cy Departments of the Federal Reserve Banks. This is a responsibility that required each o f the 13.8 million items handled to be treated as carefully as though it were the only one o f the year. Although belittled by com parison with the preceding figure, other Fiscal A gen cy operations arising from servicing the pub lic debt add up to an impressive amount o f work. A ll told, the three Fiscal A gency Departments handled some 630,000 indi vidual items in processing Governm ent se curities other than Savings Bonds and in perform ing such other services as paying Governm ent coupons. Another principal service perform ed by Federal Reserve Banks as fiscal agent fo r the Government is the receipt o f such funds as withheld income taxes and payments by buyers o f Government securities which are recorded to the credit o f the Treasury in the Treasury Tax and Loan Account. Dur ing 1953 operations in connection with Treasury Tax and Loan Accounts required Fiscal A gen cy to handle about 141,000 transactions with a total value o f over $4 billion. The $271 million of U. S. S a v in g s Bonds issued in this District in 1953 w a s 10.7% greater than in 1952— the largest a n n u al g a in o f the post W o rld W a r li period. AGENCY The Research Departm ent o f the Federal Reserve Bank is a fact-finding— and inter preting— agency, charged with the respon sibility o f keeping the bank’s officers and directors and the Board o f Governors o f the Federal Reserve System supplied with cur rent, accurate inform ation on business and credit conditions. The by-product o f this w ork is a steady stream o f information o f interest and value to bankers, businessmen, farmers, and others, made a v a i la b 1 e through the bank’s publications, through the press and radio, through individual re ports, lectures and personal visits. Econom ic research fo r Federal Reserve policy form ation consists mainly o f the col lection and interpretation o f inform ation to answer such questions as: W hat is the current condition o f the econom y? W hat role is credit playing? W hat changes are in prospect? W hat changes in Federal Reserve policy are indicated or what would be the effects o f some policy if adopted? Much o f this inform ation comes from Government agencies, trade associations, and private reporting services. It comes in quan tity; in 1953 the bank received (and economists and statisticians studied) more than 10,000 reports from such sources. In addition, the bank collects credit and trade statistics directly from banks and other concerns all over the Fifth District. Dur ing 1953 its economists and statisticians pored over some 23,000 reports from banks, department, f u r n i t u r e , and appliance stores, building inspectors, consum er loan companies, and credit unions. Some o f these reports contained as fe w as tw o items, some as many as 440 separate entries. From this avalanche o f m aterial the R e search Department supplied m ore than 1,000 reports to banks and business firms and some 500 detailed reports to the Board o f Governors, in addition to providing facts and figures fo r upw ard o f 500 news re leases and data fo r bank publications. O f particular interest to Fifth District member bankers in 1953, as in other years, was the involved com pilation o f mem ber bank operating ratios, individual studies made for each o f the nearly 500 m ember banks o f the District. In addition, members o f the departm ent’s staff participated in the preparation and presentation o f such bank-sponsored p r o j ects as the Central Banking Seminar and the illustrated lecture program , “ Y our M oney’s W'orth,” and in a series o f agri cultural credit meetings sponsored by the North Carolina Bankers Association. Several basic research projects were be gun in 1953: A study o f the seasonal factors in individual m em ber bank loans and deposits; a study o f the im pact o f real estate finance on financial institutions; the first of a series o f studies o f the industrial structure o f areas o f the Fifth D istrict; and a further study in the analysis o f inter regional flows o f funds. if n ii d If it is true that one picture is worth a thousand w ords (anyone who ever wrote a thousand w ords w ould dispute it), then a picture produced by the Federal Reserve Bank o f Richm ond in 1953 is probably w orth a fe w in an annual report on the bank’s activities. Your Money’s W orth, a 38-minute, 16-mm. film in sound and color, has proved a genuine contribution to eco nom ic education. It was written, acted, and prod uced by this bank. Based on an illustrated lecture program designed to explain the factors making fo r changes in the value o f money and the role o f the Federal Reserve System in contribu ting to econom ic stability— a program de scribed by a professor o f money and bank ing as a “ full course in economics and m onetary p olicy in one easy lesson” — the m otion picture Your Money’s Worth was released in A pril. Since that time it has been seen by m ore than 50,000 persons— bankers, business men and women, indus trial m anagers and employees, trade union members, college and high school teachers and students, Federal Government person nel, farm ers, and others. It has been booked fo r showing at “ Ex plaining Y our Business” Seminars o f the 18 Y ’ S WORTH Chamber o f Commerce o f the United States, and that organization is publishing a promotional brochure to recom m end the film to local cham bers o f com m erce in all sections o f the country. The Industrial College o f the Arm ed Forces used the film fo r a period o f several months in courses in econom ics. The Asso ciation o f Am erican Law Schools is includ ing Your Money’s W orth in a list o f selected films recom m ended fo r classroom work. Typical o f the comments that have been made are th e se : From a Texas banker— “ It is one o f the most splendidly presented films on the background of inflation that I have ever been privileged to view ” ; from a W ilm ington, Delaw are industrialist— “ W e are glad to add Your Money’s W orth to the films we will be able to recom m end” ; from a W isconsin industrial concern— “ . . . a very excellent explanation o f the function o f m oney and the various causes o f the changes in value o f m oney” ; from a Fifth District college dean— “ A very fine film” ; from a North Carolina banker— “ A telling story of the effects every action has upon our m onetary system. I wish it could be seen by every thinking person in our com m unity.” tenance. Most o f this w ork is done, fo r econom ical reasons, by staff personnel. The bank has its ow n m echanics, steamfitters, plumbers, electricians, carpenters, painters, m e t a l- w o r k e r s , j a n i t o r s and maids, and others to do the job s that seem ever in need o f doing. The Head Office, fo r instance, has 314 typewriters that must be kept in writing condition. It has 229 calculating machines of various kinds. It has 640 desks and 2,881 chairs. It has seventeen elevators. It has a heating system o f fou r boilers and an air-conditioning system with tw o main units and eight sub-units. It has 432 win dows to be kept clean. Every item o f physical property acquired by the bank comes through the purchasing office, from an $11,000 incinerator to 100for-a-nickel paper clips. In 1953, fo r ex ample, the purchasing office bought 27,480 pencils (and, in case o f error, 1,823 erasers), 907 typew riter ribbons, tw o auto mobiles, 424 bottles o f ink (only 26 o f them red ink), 5,498 light bulbs, 445 mops, 8,500 pounds of soap, 71,000 pounds o f paper. It also bought 12,000 aspirin tablets, anoth er necessity o f bank operation. As may be deduced from the foregoin g and follow in g pages, it takes a sizeable organization to do the amount o f w ork that is done in the Federal Reserve Bank. Be hind the fron t office and the operating de partments are the people whose w ork is essential to keeping the wheels turning. These are the people o f the General Serv ice, the Building and Equipment, and the Printing and Supplies departments. Buildings o f the size of the Head Office and the Baltimore and Charlotte branches require a considerable amount o f main O f particular im portance is the Head Office’s printing shop, which does most o f the printing o f the m i l l i o n s o f form s, notices, announcements, pamphlets, and publications o f the H ead Office and the branches. The shop, equipped with a Lino type machine, 1,000 fonts o f hand type, seven printing presses (flatbed, vertical, and jo b ), and other paraphernalia o f the trade, is capable o f turning out almost any kind of printing jo b . (M any visitors ask whether it prints cu rren cy; it doesn’t.) Am ong the printing shop’s productions in 1953 w ere: 84,625 copies o f the bank’s Monthly Review, 60,000 o f the news letter Agricultural Items, 395,150 operating cir culars, announcements o f various kinds to banking institutions, and 13,314,481 form s for internal use. This annual report was printed in the bank’s shop. 19 V O L U M E OF P R I N C I P A L O P E R A T I O N S 1952 1953 C h ec k s H andled : __________________________________________________________________________ 2 1 9 ,7 0 9 ,0 0 0 2 0 9 ,7 1 1 ,0 0 0 A m o u n t ___________________________________________________________________________ $ 7 3 ,2 0 5 ,7 0 7 ,0 0 0 $ 6 8 ,4 0 1 ,7 7 2 ,0 0 0 N um ber 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 __________________________________________________________________________ 5 77 ,0 00 6 4 7 ,0 0 0 $ 1 7 8 ,9 1 2 ,0 0 0 $ 1 7 7 ,4 0 2 ,0 0 0 T r a n s f e r s o f F u n d s fo r M e m b e r B a n k s : (In clu d e s tr a n s fe r s b y w ire and oth er m eans) N um ber __________________________________________________________________________ 1 16 ,5 87 108,015 Am ount __________________________________________________________________________ $ 4 6 ,3 0 8 ,3 5 8 ,0 0 0 $ 4 2 ,8 8 8 ,6 0 7 ,0 0 0 T o ta l received fr o m F . R . B a n k s and B r a n c h e s __________________________ $ 4 7 ,1 3 0 ,6 9 0 ,0 0 0 $ 4 5 ,9 9 7 ,5 6 3 ,0 0 0 T o ta l p aid to F . R . B a n k s and B r a n c h e s __________________________________ $ 4 7 ,0 7 7 ,1 4 6 ,0 0 0 $ 4 5 ,9 5 9 ,8 3 6 ,0 0 0 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 it C l e a r i n g s : C u r r e n c y a n d C o in H a n d l e d : C u rren cy received (in clu d in g new notes) : 4 4 6 ,9 2 2 ,2 1 3 4 4 0 ,9 7 5 ,7 8 9 $ 2 ,7 9 9 ,9 8 6 ,5 6 1 $ 2 ,7 3 0 ,7 6 4 ,8 1 0 N u m b e r o f n o t e s ________________________________________________________________ Am ount __________________________________________________________________________ C u rren cy p aid out (in clu d in g notes retu rn ed fo r redem ption) : 4 4 3 ,7 8 1 ,9 8 4 4 4 0 ,6 5 7 ,8 1 8 $ 2 ,7 6 9 ,3 3 8 ,1 5 3 $ 2 ,7 3 2 ,1 2 9 ,1 9 8 N u m b e r o f n o t e s ________________________________________________________________ Am ount __________________________________________________________________________ Coin received (in clu d in g new coin) : N u m b e r o f c o i n s ________________________________________________________________ Am ount __________________________________________________________________________ 6 9 2 ,7 5 5 ,2 9 8 6 6 5 ,1 5 3 ,7 7 7 $ 5 1,7 9 3 ,0 9 9 $ 5 1,9 6 9,4 0 4 Coin p aid out (in clu d in g coin retu rn ed fo r redem ption ) : N u m b e r o f c o i n s ________________________________________________________________ Am ount __________________________________________________________________________ 6 95 ,0 8 9 ,5 2 1 6 5 5 ,7 3 9 ,9 8 6 $ 5 1 ,0 0 0 ,3 8 9 $ 5 1,8 8 5,0 1 4 U . S . G o v e r n m e n t S e c u r it ie s I n c l u d in g A r m e d F o rces L ea v e B o n d s ( E x c l u s iv e of S a v in g s B o n d s ) I ssued , E x c h a n g e d a n d R edeem ed : N um ber __________________________________________________________________________ 1 4 1 ,0 0 0 120,000 A m ount __________________________________________________________________________ $ 4 ,6 1 7 ,0 3 5 ,0 0 0 $ 4 ,5 3 8 ,0 5 9 ,0 0 0 U . S . S a v in g s B o n d s— I s s u e d : N um ber __________________________________________________________________________ Issu e p r i c e _______________________________________________________________________ 5 ,2 1 1 ,00 0 5 ,6 2 0 ,0 0 0 $ 2 7 0 ,6 1 6 ,0 0 0 $ 4 0 8 ,6 0 4 ,0 0 0 $ 2 4 4 ,4 9 4 ,0 0 0 $ 3 5 6 ,2 4 8 ,0 0 0 U . S . S a v in g s B o n d s— R e d e e m e d : N um ber __________________________________________________________________________ R edem p tion v a l u e ______________________________________________________________ 20 6 ,7 9 1 ,0 0 0 7 ,3 9 7 ,0 0 0 There are balance sheets, and then there are balance sheets. To make head or tail o f many o f them, regrettably, takes a prac ticed eye, but balance sheets o f Federal Re serve Banks may be even more puzzling to decipher. Take a look at the Compara tive Statement o f Condition on the next page, fo r exam ple. Under “ Assets” you will see an item called “ Gold Certificates.” Outside the Federal Reserve Banks no other banking institution lists these in its balance sheet. W h y ? Briefly, this is the answer: In 1933 the Government ordered all privately held gold turned over to the Treasury. Then in 1934 Congress passed an act that prohibited the ownership and circulation o f gold and in effect “ nationalized” it as the base fo r our circulating money. Only Federal Reserve Banks can get close to the nation’s mone tary gold now, and even they are held at arm ’s length— their holdings are in gold certificates and entries on the Treasury’ s books representing claims to gold certifi cates. Very little actual gold is ever seen. Each Reserve Bank must have gold certifi cates equal to 25 per cent o f its deposit and note liabilities. On D ecem ber 31, 1953, this bank had gold certificates equal to 42.1 per cent o f its deposits and note liabilities — sufficient to permit considerable expan sion in the nation’s basic money, should the need arise. Also, you will note that this bank’ s hold ings o f U. S. Government securities declined from the total o f the year before. A ctual ly, the Federal Reserve System as a whole made net purchases during 1953. Pur chases by the System increase member bank reserves— the high-pow ered dollars behind our deposit money. (R ichm ond’s decline m erely reflects a reallocation o f System holdings am ong the tw elve Reserve Banks and does not affect these reserves.) Under “ Liabilities” appears the item Federal Reserve Notes, something else that never appears as such in com m ercial bank statements. Federal Reserve Notes are paper money issued by the Federal Reserve Banks fo r the spending m oney o f the na tion; about 85 per cent o f the country’s paper money is in Federal Reserve Notes. This money is backed by gold certificates and Government securities. It gets into circulation as calls fo r currency are made upon the com m ercial banks that are mem bers o f the Federal Reserve System. These banks, to supply the dem and fo r currency in their areas, get the m oney from the Reserve Bank, w hich charges the w ith drawals to their reserve accounts. These reserve accounts are probably the most important single item on a Reserve Bank’s balance sheet, fo r they are the medium through which the Federal Re serve can influence the nation’s credit and money supply. W hen com m ercial banks make loans or investments they add to the money supply. The extent to which they can make new loans and investments is g ov erned by the amount o f m oney they have in their reserve accounts; the amount, that is, over and above the legally required re serve of dollars that is based on a stated percentage o f deposits. The Federal Re serve, therefore, by regulating the supply, availability, and cost o f reserve funds exer cises a monetary influence with effects felt throughout the entire econom y. One thing worth rem em bering is this: The Reserve Banks are em pow ered by law f ^ A T O Q iin n n u r n . o vv v n A M n ir iv* in 4-1% ^ tu t; jl O i i i i ^ -P u i e lt n t jr Federal Reserve Notes (cu rren cy) or de posit balances at the Reserve Banks (com monly called reserve fu n d s). W hen the Reserve Banks purchase securities or make loans to member banks they use such new ly created money to make payment. That is, whenever the Reserve Banks acquire earning assets they make additional reserve funds available to m em ber banks— they do not, and cannot, use fo r this purpose re serve funds already to the credit o f the member banks. 21 OMPARATIVE STATEMENT OF C O N D I T I O N ASSETS: D Gold certificates ecember 31, 1953 $ 1 ,0 6 4 ,8 9 1 ,9 4 9 .8 5 R edem p tion F u n d fo r F e d e ra l R eserve notes- D ecember $ 31, 1952 9 8 6 ,3 4 7 ,7 1 0 .8 6 7 6 ,9 7 4 ,0 5 0 .7 8 7 6 ,7 3 2 ,2 5 8 .2 6 1 ,1 4 1 ,8 6 6 ,0 0 0 .6 3 1 ,0 6 3 ,0 7 9 ,9 6 9 .1 2 O th er ca sh _________________ 2 2 ,5 7 9 ,7 7 7 .9 3 2 7 ,6 1 6 ,0 7 1 .8 2 D iscou n ts and advances- 1 ,95 0 ,0 0 0 .0 0 5 ,7 0 4 ,5 0 0 .0 0 6 0 ,0 0 0 .0 0 5 5 ,9 7 2 .8 9 T In d u stria l otal G ol d Certificate R es erves . lo a n s__________ U . S. G O V E R N M E N T S E C U R I T I E S : B i l l s ________________________________________ 1 5 3 ,9 6 2 ,0 0 0 .0 0 5 0 ,1 4 8 ,0 0 0 .0 0 C e r t ific a t e s _______________________________ 3 4 4 ,9 2 1 ,0 0 0 .0 0 3 3 7 ,6 5 0 ,0 0 0 .0 0 N o t e s ______________________________________ 7 8 6 ,5 3 6 ,0 0 0 .0 0 9 3 0 ,9 3 5 ,0 0 0 .0 0 B onds 2 1 5 ,9 1 9 ,0 0 0 .0 0 3 0 5 ,6 3 1 ,0 0 0 .0 0 1 ,5 0 1 ,3 3 8 ,0 0 0 .0 0 1 ,6 2 4 ,3 6 4 ,0 0 0 .0 0 1 ,5 0 3 ,3 4 8 ,0 0 0 .0 0 1 ,6 3 0 ,1 2 4 ,4 7 2 .8 9 _____________________________________ T o t a l U . S. G T otal loans overnment and securities s e c u r i t i e s ____________ D u e fr o m fo re ig n b a n k s _________________ 1 ,13 4 .38 1 ,1 5 7 .0 7 F ed era l R e serv e n otes o f oth er banks 3 0 ,1 4 7 ,3 2 0 .0 0 5 0 ,7 1 0 ,3 2 0 .0 0 U ncollected cash ite m s__________________ 3 3 5 ,5 2 9 ,3 3 2 .9 9 3 4 4 ,4 4 9 ,2 7 5 .4 8 Bank p re m is e s____________________________ 4 ,7 1 9 ,4 0 2 .5 6 4 ,8 3 9 ,1 0 5 .4 9 O ther a s s e ts_______________________________ 8 ,8 5 2 ,4 3 6 .0 9 1 0 ,8 8 7 ,1 0 4 .0 0 $ 3 ,0 4 7 ,0 4 3 ,4 0 4 .5 8 $ 3 ,1 3 1 ,7 0 7 ,4 7 5 .8 7 $ 1 ,8 4 9 ,0 9 3 ,2 7 0 .0 0 $ 1 ,8 8 7 ,0 6 2 ,6 1 0 .0 0 TO TAL ASSETS LIABILITIES: F ed era l R e serve n o tes__________________ D E P O S IT S : M em b er ban k — reserv e accoun ts___ 8 2 7 ,2 5 5 ,3 8 9 .3 7 8 4 9 ,0 2 4 ,5 5 8 .8 6 U . S . T re a s u r e r — g e n e ra l account 1 1 ,1 2 6 ,5 7 1 .4 8 2 8 ,7 4 3 ,4 1 3 .1 7 F o r e ig n _________________________________ 2 0 ,4 6 0 ,0 0 0 .0 0 2 6 ,6 9 8 ,5 0 0 .0 0 O th er ____________________________________ 6 ,76 2 ,4 1 4 .2 4 7 ,7 0 7 ,0 6 8 .8 3 8 6 5 ,6 0 4 ,3 7 5 .0 9 9 1 2 ,1 7 3 ,5 4 0 .8 6 D e fe rre d a v a ila b ility cash item s. 2 7 7 ,3 8 4 ,5 3 7 .5 7 2 8 0 ,7 9 1 ,1 8 0 .3 4 Other lia b ilitie s_____________________ 7 6 2 ,4 4 7 .9 9 6 8 9 ,2 4 0 .9 3 2 ,9 9 2 ,8 4 4 ,6 3 0 .6 5 3 ,0 8 0 ,7 1 6 ,5 7 2 .1 3 T otal D e p o s i t s _________ T O T A L L IA B IL IT IE S - CAPITAL ACCOUNTS: C a p ital p aid in __________ 1 1 ,6 5 5 ,2 0 0 .0 0 1 1 ,0 1 3 ,7 5 0 .0 0 S u rp lu s (S e ctio n 7 ) ___ 3 1 ,7 4 9 ,5 1 5 .5 8 2 9 ,2 4 7 ,9 3 7 .1 2 S u rp lu s (S e ctio n 1 3 b ) . 3 ,3 4 9 ,1 4 4 .8 1 3 ,3 4 9 ,1 4 4 .8 1 O ther ca p ita l accou n ts. 7 ,4 4 4 .9 1 3 .5 4 7 ,3 8 0 ,0 7 1 .8 1 $ 3 ,0 4 7 ,0 4 3 ,4 0 4 .5 8 $ 3 ,1 3 1 ,7 0 7 ,4 7 5 .8 7 1 ,1 9 6 ,6 0 5 .2 4 1 ,0 0 9 ,3 9 8 .5 6 5 1,1 9 0 .5 5 7 0 ,4 2 2 .3 7 T O T A L L IA B IL IT IE S A N D C A P IT A L A C C O U N T S C o n tin g en t lia b ility on A ccep tan ces P u rch ased fo r F o reig n C orrespondents In d u stria l L o a n 22 C o m m itm en ts_____________________________________________________ _ C O M P A R A T I V E S T A T E M E N T OF E A R N I N G S A N D E X P E N S E S E a r n in g s : 195 2 1953 D iscou n ts an d a d v a n ce s________________________________________________ In te re st earned on in d u strial loa n s under Section 1 3b ____________ $ 7 1 0 ,2 9 7 .1 1 ____ $ F e es received on com m itm en ts to m ake in d u strial lo a n s ____ 7 0 5 ,5 1 5 .1 5 4 ,2 5 5 .0 5 2 ,2 7 4 .2 0 5 6 0 .3 8 In te re st on U . S . G o vern m en t secu rities___________________________ 5 9 5 .8 8 3 3 ,3 4 3 ,1 0 5 .5 5 --------------------------- 2 9 ,6 3 6 ,3 4 9 .0 3 In te re st on oth er U . S. G o vern m en t secu rities___________________________ 4 .4 1 7 .8 1 O th er e a r n in g s ________________________________________________________ 1 1 ,1 2 7 .9 6 7 .0 5 6 .8 2 3 4 ,0 6 7 ,3 6 5 .2 0 3 0 ,3 5 8 ,1 8 9 .7 4 O p e ra tin g exp en ses (in clu d in g d epreciation on bank p rem ises) a fte r ded ucting reim b u rsem en ts received f o r certain F is c a l A ffen cv and other expenses 6 ,9 3 2 ,1 2 4 .3 8 6 ,3 8 6 ,6 3 0 .0 7 A sse ssm e n ts fo r exp en ses o f B o a rd o f G o v e rn o rs_______________________ --------------------------- 2 0 6 ,4 0 0 .0 0 2 0 9 ,1 0 0 .0 0 C o st o f F e d e ra l R eserve C u rre n cy__________________________________________ 1 ,1 3 4 ,6 9 5 .7 4 9 6 4 ,7 8 3 .7 2 T o ta l N e t E x p e n s e s ____________________________________________________ 8 ,2 7 3 ,2 2 0 .1 2 7 ,5 6 0 ,5 1 3 .7 9 2 5 ,7 9 4 ,1 4 5 .0 8 2 2 ,7 9 7 ,6 7 5 .9 5 1 29 ,5 7 4 .0 4 1 3 0 ,4 9 7 .4 4 T o ta l C u rre n t E a r n in g s __________________________________ E xpenses : C u rren t N e t E a r n in g s ___________________________________ A d d it io n s to a n d D e d u c t io n s f r o m C u r r e n t N e t E a r n i n g s : P rofits on sales o f U . S. G overn m ent s e c u r itie s _____________ ... ... S u n d ry ad d ition s_______________________________________________________________ T o ta l 3 3.0 2 R etirem en t S y ste m (a d ju stm e n t fo r revised benefits) .. - 1 ,6 9 3 .1 0 1 29 ,6 0 7 .0 6 A d d itio n s______________________________________________________ 1 3 2 ,1 9 0 .5 4 1 6 7 ,5 7 6 .4 3 S u n d ry deductions______________________________________________________________ --------------------------- 2 ,1 2 4 .1 8 2 .2 2 5 .0 8 1 69 ,7 0 0 .6 1 T otal D ed u ction s____________________________________________________ 2 .2 2 5 .0 8 N e t A d d itio n s________________________________________________________ N e t D ed u ctio n s________________________ ____________________ 1 2 9 ,9 6 5 .4 6 _____ 4 0 ,0 9 3 .5 5 T r a n s f e r r e d t o R e s e r v e s f o r C o n t in g e n c ie s 6 4 ,5 7 8 .8 0 A v a il a b l e for D iv id e n d s , P a y m e n t to T r e a s u r e r of U . S. a n d S u r p l u s A c c o u n t D ividen ds paid m em b er b a n k s______________________________________________________ ____________ 5 5 ,1 8 0 .9 3 $ 2 5 ,6 8 9 ,4 7 2 .7 3 $ 2 2 ,8 7 2 ,4 6 0 .4 8 $ $ 6 7 6 ,5 0 2 .0 0 6 4 3 ,1 4 0 .7 4 P a y m en t to T re a s u r e r o f U . S .— In te re st on o u tsta n d in g F ed era l R eserve n o te s______ 2 2 ,5 1 1 ,3 9 2 .2 7 2 0 ,0 0 6 ,0 7 0 .3 8 A d d itio n to S u rp lu s A cco u n t (S ection 7 ) ______________ ______________________ ______ _________ 2 ,5 0 1 ,5 7 8 .4 6 2 ,2 2 3 ,2 4 9 .3 6 $ 2 5 ,6 8 9 ,4 7 2 .7 3 $ 2 2 ,8 7 2 ,4 6 0 .4 8 $ 2 9 ,2 4 7 ,9 3 7 .1 2 $ 2 7 ,0 2 4 ,6 8 7 .7 6 T ota l _____ ____________ SURPLUS ACCOU NT (Section 7) B a la n ce a t close o f p revio u s y e a r A d d ition a / c p rofits f o r y e a r R ii.A N f iE at _____ .... * ... ... _______ 2 ,2 2 3 ,2 4 9 .3 6 $ 3 1 ,7 4 9 ,5 1 5 .5 8 C lose of C u rr en t Y ear 2 ,5 0 1 ,5 7 8 .4 6 $ 2 9 ,2 4 7 ,9 3 7 .1 2 CA P ITA L STOCK ACCOUNT (R e p re se n tin g am ou nt p aid in, w hich is 5 0 % o f am ou n t su bscribed ) - Issu ed d u rin g the y e a r . „ ___ $ 1 1 ,0 1 3 ,7 5 0 .0 0 . . _____ 6 6 8 ,4 5 0 .0 0 6 3 8 ,3 5 0 .0 0 1 1 ,6 8 2 ,2 0 0 .0 0 B alan ce a t close o f p reviou s y e a r 1 1 ,0 2 1 ,2 5 0 .0 0 $ 1 0 ,3 8 2 ,9 0 0 .0 0 . _ ___ 2 7 ,0 0 0 .0 0 7 ,5 0 0 .0 0 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 ______________________________________ $ 1 1 ,6 5 5 ,2 0 0 .0 0 $ 1 1 ,0 1 3 ,7 5 0 .0 0 Cancelled d u rin g the y e a r ____ .. .. ~ FEDERAL RESERVE BANK OF RICHMOND John B. W o o d w a rd , Jr. Ch airm an o f the Board an d W. G. W ysor Deputy C h airm an James D. Harrison DIRECTORS President First N a tio n a l Bank Baltimore, M a r y la n d Federal Reserve Agent of the Board of Baltimore W arren S. Johnson John A. Sydenstricker Executive Vice President First N a tio n a l Bank in M arlin ton M arlinton, W est V irgin ia Edwin Hyde President Miller & Rhoads, Inc. Richmond, V irg in ia H. L. Rust, Jr. President H. L. Rust C o m p a n y W ash ingto n , D. C. W m . A. L. Sibley Vice President an d Treasurer M onarch M ills Union, South Carolin a Alonzo G. Decker, Jr. Vice President The Black an d Decker M a n u fa ctu rin g C o m p an y Towson, M a r y la n d John B. W o o d w a rd , Jr. C h airm an of the Board N e w p o rt N e w s Sh ip b u ild ing and Dry Dock C o m p an y N e w p o rt N ew s, V irgin ia W. G. W yso r [2 -5 1 Investment Counselor Peoples S a v in g s Bank and Trust C o m p an y W ilm ington, North C a ro lin a M a n a g e m e n t Counsel Southern States Cooperative, Richmond, V irgin ia - .......—-j' felJ Inc. MEMBER FEDERAL ADVISORY COUNCIL Robert V. Fleming Ch airm an of the Board R iggs N a tio n a l Bank W a sh in g to n , AND D. C. and President I *1111' *1*1 * 1 1 -II, H u gh Leach President Ed w a rd A. W a yn e First Vice President R. W . Mercer Vice President a n d Cashie r C. B. Strathy Vice President a n d Secretary Robert L. Cherry Vice President Ch arle s W . W illiam s OFFICERS Vice President K. Brantley W atso n Vice President N. L. A rm iste ad Vice D o n a ld Vice President F. H agn e r President A u b re y N. Heflin Vice President a n d Counsel Upton S. M artin G e ne ral Vice President R. S. Brock, Jr. G eneral A u d ito r Thom as 1. Storrs A ssistan t V ice President J. De w e y D a a n e A ssistan t V ice President Joseph M . N o w la n A ssistan t Vice President John L. N osker A ssistan t Vice President Jam es W . Dodd, Jr. A ssistan t Vice President G. H aro ld Snead Chief Exam iner E d w a rd A ssistan t C ash ie r W aller, Jr. W ythe B. W a k e h a m INDUSTRIAL ADVISORY COMMITTEE J. G. Holtzclaw, C h airm an A ssistan t C a sh ie r H. Ernest Ford A ssistan t C ashie r Robert G. H o w ard A ssistan t C a sh ie r President V irg in ia Electric an d Richmond, V irgin ia Pow er C o m p a n y O verton D. Dennis Dom inion O il C o m p an y Richmond, V irgin ia Ross Puette President C a ro lin a Paper Board Corporation Charlotte, North Carolin a W a lk e r D. Stuart President Richm ond H a rd w a re C o m p a n y Richmond, V irgin ia John L. Whitehurst President a n d Treasurer Burt M a c h in e C om pan y, Inc. Baltimore, M a ry la n d 25 BALTIMORE BRANCH DIRECTORS Charles W . Hoff President Union Trust C o m p a n y of M a r y la n d Baltimore, M a r y la n d Charles A . Piper President The Liberty Trust C o m p a n y C um berland, M a r y la n d Lacy I. Rice President The O ld N a tio n a l Bank M a rtin sb u rg, W est V irg in ia H o w ard M . Taylor, Jr., Ch airm an President an d Treasurer International B edding C o m p a n y Baltimore, M a ry la n d Stanley B. Trott President M a r y la n d Trust C o m p a n y Baltimore, M a ry la n d Clarence R. Z a rfo ss Vice President W estern M a r y la n d R a ilw a y Baltimore, M a r y la n d OFFICERS Com pany D on ald F. H a gn e r Vice A. A. Stew art, Jr. C ashier President A. C. W ienert A ssista n t C ashier B. F. A rm stro n g A ssista n t Cashier E. R iggs Jones, Jr. A ssista n t Cashier CHARLOTTE BRANCH DIRECTORS G e orge S. Crouch C h airm a n of the Board Union N a tio n a l Bank Charlotte, North C a ro lin a Archie K. D a vis Senior Vice President W a c h o v ia Bank a n d Trust C o m p a n y W in ston -Salem , N orth C a ro lin a W illiam Executive Vice President Rock Hill Printing a n d Finishing C o m p a n y Rock Hill, South C a ro lin a H. Grier Thom as J. Robertson President First N a tio n a l Bank o f South C a ro lin a Colu m b ia, South C a ro lin a Paul T. Taylor President T aylor W are ho u se C o m p a n y W in ston -Salem , North C a ro lin a T. Henry W ilson, C h airm an President a n d Treasurer Henredon Furniture Industries, Inc. M o rga n to n , North C a ro lin a Jonathan President First N a tio n a l Bank W ayn esville, North C a ro lin a W oody OFFICERS Robert L. Cherry Vice President S. A. Ligon C ashier E. C. M o n d y A ssista n t Cashier R. L. Honeycutt A ssista n t Cashie r