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Federal Reserve
Bank of
San Francisco
Annual Report
1974
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Contents
From the Boardroom
First Year of Recession
Another Year of Pressure
Sixtieth Year of Service
Directors and Officers
2
4
12
18
24
From the Boardroom
The Federal Reserve's sixtieth year was
one of the most difficult in its entire his
tory . Like other institutions, the nation's
central bank was forced to deal with an
accelerating inflation in early 1974 and a
decelerating level of business activity in
the later months of the year, along with a
continuing crisis in energy usage. The
pressures on the financial community at
times became intense. Despite a develop
ing recession, commercial banks faced
record money rates which were caused,
at least in part, by severe inflation and
heavy business-credit demands.
The banking system nonetheless per
formed very creditably in the face of these
difficulties . For example, banks in the San
Francisco (Twelfth) Federal Reserve Dis
trict recorded a 10-percent increase in
loans and investments in 1974, to a year
end total of $104 billion . Many major na
2
tional firms turned increasingly to District
banks, after encountering difficulties in
the capital and commercial-paper mar
kets , and after exhausting their lines of
credit at money-center banks elsewhere.
Serious problems developed at a few
banks, but that cannot dim the banking
system's ov rall accomplishment in meet
ing the essential credit needs of the busi
ness community.
The range of maneuver for policymakers
remained quite limited throughout 1974.
The Federal Reserve System attempted to
fight inflation and to moderate excessive
loan demand without worsening an
economy that was sinking into recession.
In our participation in this policymaking
process, we remained keenly aware of
the central bank's need to reconcile some
times conflicting economic objectives,
and of its need to act as the lender f last
resort in the event of severe problems in
the banking industry.
I~' -:;. 4
Inflation, recession and credit stringency
were worldwide phe no mena in 1974,
strongly affecting the activi ties of the
international-banking community. Pres
ident Balles made an extended tour of Far
Eastern capitals last spring, to confer with
foreign monetary authorities and com
mercial bankers on matters of mutual in
terest, particularly the regu lation of
foreign bank s in both those countries and
the U.S. The information gathered on
that tour helped contribute to the formu
lation of legislation designed to extend
Federal regu lation , on a nondiscrimina
tory basis, to all foreign banks operating
inside this country.
Our Bank completed a major im prove
ment in the money p aym en ts system last
year, with the establishment of regional
ch eck-processing centers at all offices to
provide overnight processing and se ttle
ment of checks in their individual service
areas . But realizing that the trend of the
future ma y lie wit h an electronic pay
ments system, we encouraged the staff to
follow up on such initiatives as the elec
tronic processing of Air Force payroll
checks, which became operational at our
California offices last fall. We also su p
ported the smooth daily performance of
the expanding Western economy,
through the continued provision of fiscal,
coin , currency and other services. With
the assis tance of a ma jor consulting firm,
we introd uced a Productivity Improve
ment Program - a fundamen tal overhaul
of internal Bank operations - in an at
tempt to improve cost effectiveness and
to develop more clearly defined jobs and
improved working conditions. Through
this program, we plan to handle signifi
cant increases in workload without unac
ceptable cost increases.
Our appreciation goes to the financial,
industrial and community leaders who
served as directors in 1974, helping to
guide the Bank through that very difficult
year. In particular, we wish to th ank
those who completed terms as directors
during the period: Mas Oji (Presiden t, Oji
Brothers Farm, Inc.) at Head Office;
a .M. Wilson
Leland D. Pratt (President , Kelco Com
pany) at Los Angeles; Roderi ck H .
Browning (Presid en t, Bank of Utah) at
Salt Lake City; and Robert C. Whitwam
(President, American National Bank of
Edmonds) and C. H enry Bacon, Jr. (Vice
Chairman, Sim pson Lum ber Company)
at Seattle. Finally , we wish to express our
appreciation to our officers and staff,
whose dedication to the improved effec
tiveness of Bank operat ion s has enabled
us to better serve th e financial community
and the general public.
O . Meredith Wilson
Chairman
John J. Balles
President
].]. Balles
FirstYear
of Recession
Nineteen seventy-four was a year of re
cession, with a 2-percent decline in real
(price -adjusted) GNP, but the evidence
was mixed on this score until fairly late in
the year. The year began with the crunch
of the oil embargo, as autos, petrochemi
cals and travel-related industries felt the
effects of the sudden cutoff in imported
crude oil. However, many observers
blamed the resulting adjustment solely
upon supply constraints, in a national
economy that wa s operating right up
against the limits of physical capacity. In
this view, business activity would recover
quickly-would snap back like a
"plucked fiddle string"- once the oil
spigot was tumed on again.
The economy appeared to follow this
scenario until after midyear, except in
such obvious problem areas as autos and
housing. Industrial production staged a
modes t recovery from its winter low, un
employment remained relatively stable,
and the earlier job expansion continued
unabated. But then, in late summer, the
classical signs of recession became qui te
evident, and semantic arguments about
the application of the term to the 1974
economy were quickly forgotten . In the
fourth quarter alone, real GNP dropped
at a 9-percen t annual rate, while more
than 1 million jobs disappeared and th e
jobless rat e soared from 5.8 to 7.1 percent
of the civilian labor force.
To make things worse, the nation was
beset during 1974 with the worst inflation
of the past quarter-century, measured by
a 10-p ercent jump in the general price
level. Energy costs shot up during the
embargo period, and a pervasive run-up
in prices developed after the d ismantling
of Phase IV controls in early spring. Food
prices slowed down for a while , but then
began climbing again in late summer as
bad weather cut into crop prod uction.
The one bright spot was in raw industrial
commodities, where prices started easing
as capacity utilization rates declined.
Western jobs and jobless
The same pattern of activity prevailed in
the San Francisco Federal Reserve Dis
trict, which encompasses the one-sixth of
the national economv west of the Conti
nental Divide. (District states include
Alaska , Arizona, California, Hawaii,
Idaho, Nevada, Oregon, Utah and
Washington.) The number of Western
workers expanded during the year, but
so did the number of jobseekers, and the
jobless lines eventually stretched as long
as they did at the peak of the last rece s
sion . Total personal income increased
substan tially, but consumer prices rose
even faster , so that family income and
consump tion actually declined in real
terms. Factory output held up fairly well
until late in the year, while farm produc
tion soared on the strength of heavy
worldwide demand for Western food
products.
Total employment increased about 2 per
cent for the year, to 13.0 million, or
somewh at faster than the national pace.
However, employment was relatively
stagnan t in many ma jor in d ustries, and
one-half of th e total increase was due to
only two industries, services and state
local government. Besides, th ese gains
were not sufficient to absorb all entrants
into the labor force, so that the average
unemployment rate rose from 7.2 percent
to 8.5 percent over the course of the year.
(On th e ot her hand, the 1974average was
in line with the 1973 figure .) At year-end ,
24 of the 34 metropolitan areas in the
West were classified as areas of substan
tial or p ersist en t unemployment, and al
most all signs pointed to a further deterio
ration of th e job market.
The regional unemployment rate has ex
ceeded the national rate throughout the
pa st decade, and the gap has actually
widened to almost two full percentage
points in the past several years. A
number of structural factors have helped
account for this problem-the relatively
large number of persons who migrate
westward in search of work, the relatively
youn g age composition of the labor force,
and an industrial composition ba sed on
activities that are either highly seasonal
(food processing and lumber) or highly
cyclical (defense- aerospace and lumber) .
The situation ha s been aggravated in the
past several years by the slow recovery of
the key aerospace industry from the se
vere slump it went through at the begin
n ing of this decade.
Regional employment rises modestly in '74 . . .
most of gain in seroices and local government
Million s
12
III
Manufa ct1uring ~ O ther
8
I I
I I
Ser vices
Government
6
2
Disributil"
o
Strong and weak points
Manufacturing output in 1974 held close
to the 1973 level, although the trend was
decidedly downward during the final
months of the year. Food processing
and ot her nond urab le-good s industries
raised their output abo ut 3 percen t for the
year, bu t durable-goods production fell
about 2 percent despite isolated sources
of strength such as primary metals. In
most Western industries, production
gains were somewhat smaller than in the
previous year.
' 67
' 68
' 69
'70
71
'72
7J
7t
The foreign-trade sector was a very bright
spot in an otherwise undistinguished
business scene. Western ports boomed
for the second straight year with a sharp
gain in the export trade to almost $18
billion-more than double the level of
two years ago-on the basis of a very
strong performance by farm exports and
commercial-aircraft shipments. But im
ports rose even more rapidly than exports
to $20 billion, bolstered by the surging
prices of oil and other raw materials.
Unemployment remains far worse
in West than in rest of nation
Rate (Percent)
10
6
...
I
8
~t l
I
....
I
I
"""
U.s.
I
I
I
o
i I
'70
' 71
I
I
I
' 72.
'73
'74
Consumers and governments
Personal income expanded to about $188
billion-a rise of about 10 percent, or
close to th e year-earlier performance
but as in the nation generally, the gain
was outpaced by an 11-percent rise in
consumer prices. Consumer buying (and
consumer borrowing) increased at only
about half the 1973 pace . This perform
ance reflected the severe slump in
durable-goods purchases; total retail
sales rose about 61/2 percent, but durable
sales dropped 2 percent in response to
plummeting new-car sales.
Western state and local governments, like
their taxpaying constituents, were forced
to cut their cloak to fit the reduced
amount of available cloth. Despite
double-digit inflation, California's state
government budgeted a 7l/2-percent in
crease in spending for fiscal 1975, and
under new management, only a 6
percent increase (to $11.3 billion) for fiscal
1976. The same type of hold-down on
construction programs and government
services was evident in the budget plan
ning of other jurisdictions.
Governmental planners in this region, as
elsewhere in the nation, had achieved
substantial surpluses in the early 1970's
because of tax-rate increases, the availa
bility of Federal revenue-sharing funds,
and the easing demand for certain serv
ices, especially education. Within the
past year, however, this surplus situation
disappeared. The turnaround developed
because of an inflationary upsurge in
government costs and a recession lag in
tax receipts, as well as an unexpected lag
in revenue-sharing funds due to pay-out
schedules which failed to take account of
inflation.
In this tightening fiscal situation, gov
ernmental agencies turned increasingly
to the capital market to finance their
growing needs. Bond sales of Western
state and local governments rose 10 per
cent to a record $3.5 billion during the
year , despite all the problems of finding
funds in 1974's crowded credit markets .
But the cost of financing was not cheap;
the average yield on rated general
obligation issues rose from 5.13 percent in
1973 to 5.89 percent in 1974, and the aver
age reached 6.56 percent at the midsum
mer peak.
Bountiful agriculture
The farm year was bountiful-a year of
bumper crop production and rising live
stock output-but it was also a year of
strain under the pressures of rising costs ,
supply shortages and tumbling livestock
prices. Net farm income was close to the
year-before level of $3.9 billion, in con
trast to the sharp decline recorded na
tionally. Western farmers could thank the
elements for much of this bounty, since
they enjoyed very favorable growing
weather while their counterparts else
where were hampered by the worst
growing conditions in decades.
The farm sector generated over$14 billion
in cash receipts, up 14 percent from the
previous record of 1973. Most of this
came from a sharp advance in crop re
ceipts, due partly to record prices, but
also to heavy output as crop records were
smashed for the second straight year.
Production of wheat, cotton, rice and
other field crops rose very sharply, and
the dollar value of exports of each of those
three major commodities increased more
than 70 percent in fiscal 1974. Indeed, the
expansion of export sales was crucial to
the regional farm prosperity; farm ex
ports accounted for almost 18 percent of
gross receipts, compared with 12 percent
just two years earlier.
Crop receipts again advance strongly,
but livestock hurt by falling prices
Ranchers, after a buoyant performance in
1973, posted only a modest gain in re
ceipts in 1974. Meat production ex
panded rapidly, partly because of a re
cord accumulation of animals on the
farm , but also because of a fast -devel
oping cost -price squeeze that forced ran
chers to liquidate herds and reduce feed
ing operations. Livestock prices fell shar
ply after early spring, and cattle prices in
particular were 22 percent below 1973
levels as the year ended. Feeding opera
tions declined under the impact of
weakening prices and soaring costs; in
deed, by late fall placement of cattle and
calves on feed fell one -third below year
earlier levels.
Change (Percent)
~~
Change (Percent)
CROPS
70
60 I--- - - __I - - - - - -t-- - ----I
50
1--- - -
__1 - - - - - -+ - - - ----1
40 I---
-
-
-
30 r--
-
-
- r --
20
I---'-----
-
-
t --
-
-
---I
i -+-t --
-
-
---I
I--- - - - I--.-- t-f-t-- - r--H
10 1---- - f--l---1---- - t-f-t-- ..;--r--H
o L -_ _' - - L -L -_ _.L-L-L -_ _-'---'--J
LIVESTOCK
30 r - - - - - r --:----== - , - - - - ----,
us
10
I---- - -I -.---- +-+-t-- - - ---I
0 1---
-
'72
'--L-1---
-..L......!-t--
' 73
-
-'---'---1
'74
~it~ti j f•
....
ag
7
Aerospace sector benefits from military
orders, but commercial business lags
Billions of Do llar s
10 r - - . - - - - - ----:-:c--:-:c--,-----,---,-- - . ,
'- Commerc ial Back lo gs
4 t---
t --
+---
-t--
-+--
Spa ce Procure me nt Awa rds
2 t--'--.----
,---
-,--
---r-
-t--
- t-
-----1
-t--
- t-
-----1
O'--_ "'----_ ..L-_ -L-_ -'-_ -'-_ --'-_ --'
'6 7
' 68
Fiscal Year
'69
' 70
'71
'72
'73
'74
Under the spur of the crop-production
boom, Western farm land values rose 18
percent above the year-earlier level-the
largest increase of the past two dec
ades-and this gain was reflected in a
21-p ercent jump in real-estate loans at
Federal Land Banks. The expansion of
farm output, coupled with sharply h igher
costs of purchased inputs, meanwhile
contributed to a 41-p ercent gain-double
the national pace-in outstanding loans
at Production Credit Associations.
Slu~sh aerospace
The crucial aerospace-and-electronics
manufacturing ind ustry expanded mod
estly during the yea r. (Even so, afte r three
year s of stead y gains, aerospace em
ployment remained almost 21 percent
below its 1968 peak. ) Military prime
contract awards rose almost 8 percent
during fiscal 1974 to $8.8 billion, as the
continuation of several majo r missile and
aircraft programs again gave the regional
industry a 27-percen t share of the Penta
gon's procurement budget. Space-agen
cy awards to Western firms also rose sig
nificantly, primarily for the space-sh uttle
program, but1974 awards (at $0.9 billion)
amounted to less than one-half of the
decade-ago peak.
Domestic orders for commercial aircraft
declined, as rising fuel costs and falling
passenger traffic caused the nation's air
lines to hold down the size of their fleets
of Lockheed L-1011's and Douglas DC
TO's. On the other hand, some of this
weakness was offset by the booming
foreign market for older-generation Boe
ing 727's and 737's. After midyear, the re
cession began to cut into ind ustrial and
consumer markets for electronic equip
ment, while a fairly tight defense budget
threatened to curtail a number of im por
tant military projects.
Falling building
The construction industry held up rela
tively well de spite the con tinued slump
in homebuilding, as total construction
awards fell about 1 percen t, to $16.4 bil
lion, in con tras t to a 6-percen t decline na
tionally. Much of the strength came from
the heavy-construction sector-water
and electric-power facilities and the
like-and from the construct ion of office
buildings and other com mercial facilities.
In the residential sector, 1974 was a repeat
of 1973. Indeed, Western housing starts
dropped even fas ter in 1974-35 per
cent-to 280,000 units, but still the
number of houses under construction
and the inven tory of unsold housing re
mained quite high at year-end. Sales of
nobile hon es-the low -priced end of the
market-declined 20 percent to about
70,000 units .
The continued uptrend in both the cost of
new homes and the cost of home owner
ship, along with the shortage and high
cost of mortgage credit, helped account
for the depression in the regional housing
industry. The average rate on conven
tiona l new-home loans reached a peak of
10.40 percen t in early fall-up from 8.75
percent in a single year-reflecting the
enormous demands placed on the credit
markets as well as the reduced flow of
fun ds in to thri ft institutions. Banks and
saving s-and-loan associations managed
to increase their mortgage-loan port
folios, but at a much-reduced pace from
the previous year. The lending situation
improved in the late fall months as sav
ings flows expanded and mortgage rates
declined, but consumers' recession fears
and the overhang of u ncompleted and
unsold units precluded any substantial
near-term recovery in home -building.
The na tionwide housing slump took a
heavy toll of the Western lumber indus
try, forcing an ll-percent cut in produc
tion and heavy layoffs . The decline un
doubtedly would have been even sharper
but for the strength of the nonresi
dential-contruction market. This factor,
along with a speculative buying flurry,
helped push lumber prices to peak levels
during the spring months . Total orders
and prices then declined, slowly at first
and later with increasing momentum,
until at year-end softwood lumber prices
were 19 percent below year-ago levels.
The pulp-and-paper segment of the in
dustry in contrast remained under heavy
demand pressure throughout most of
1974, so tha t prices shot up 24 percent for
the yea r. But as the recession deepened,
paper mills as well as lumber mills were
forced to curtail production and payrolls .
Strong metals
The regional steel industry had trouble
keeping up with the inflow of orders last
year, and its supply problems worsened
as furnace breakdowns resulted from the
all-out production pace. Output thus fell
3 percent below the 1973 pace to 7.1 mil
lion tons. To satisfy their heavy require
ments, steel consumers then began to
tum to foreign suppliers-increasingly so
as these foreign firms began to quote
lower prices in reaction to a slow -down in
overseas markets. The profitability of the
regional industry improved during 1974,
reflecting a 25-percent rise in steel prices,
and this led producers to launch several
major plant-expansion programs to help
meet future demand .
The Western aluminum industry main
tained full-capacity operations through
out 1974, as demand strengthened in the
early part of the year, and as hydropower
for industry potlines again became as
sured after the end of the severe North
west drought. Regional producers con
tinued to produce heavily even when a
late-year inventory buildup forced the
shutdown of potlines in other areas of the
country, and they were not affected by
the recession until early 1975. Other non
Lagging demand, plus supply problems,
force production cuts in basic industries
Change (Perc ent)
20
IS
10
....
1972
.5
1 ~3
I
o
0
- 5
-10
1974
-I S
- 20
Lumber
10
Steel
Cop pe r
Refined
Petroleum
ferrous industries went through a similar
(bu t stronger) cycle of shortages and
speculative buying followed by producer
inventory buildups and price declines. In
copper, th e early-year crunch was aggra
vated by fuel shortages, equipment
breakdowns, strikes and other produc
tion problems. Prices of nonferrous me t
als soared to record levels during th e
spring period as the worldwide economic
boom combined with widespread cur
rency gyrations to spur industrial and
specula tive demand. But when the turn
came, it came quickly and dramatically.
Silver , the historic Western me tal,
typ ified these up-and-down m ovements .
Silver's pri ce more than doubled to $6.70
an ounce in the first two mo nths of the
year, partly because of the strength of in
dustrial demand, but m ostly because of
speculators ' atte mp ts to find protection
against worldwide inflation and weak
ened currencies in the wake of the Arab
oil embargo . The bubble bu rst after the
embargo en ded an d the wo rld eco nomy
turned sluggish, and pri ces benefitted lit
tle from the absence of silver byprod uct
supplies during the copper strike. By
year-end the price was down to $4.27 as
speculators turned away from silver in
anticipation of the legalization of priva te
gold ownership by U.S . citizens. Yet
even at that reduced level, the price trend
was very profitable for Western silver
producers.
Reduced energy
Oil-refinery output lagged abou t 7 per
cent behind the year-ago pace, as a result
of sluggish demand, a cut in foreign im
ports, and a contin ue d de cline in d omes
tic crude production. Imports fell at an
even faster pace than domestic output of
crude, so th at domestic sources increased
th eir sh are of the total market to 55 per
cent. The im port decline reflected the
Arab oil em ba rgo as well as red uced
availa bility of Canadian and other crude,
but it also reflected the cutback in regional
consumption induced by soaring prices
an d conservation efforts. Prices of refined
products at year-end were 57 percent
higher than a year ago, mostly because of
the quadrupling of prices of imported
crude oil.
vironmental issues, such as water avail
ability and feasibility of strip-mining
techniques, remain to be settled before
full-scale development can begin.
The world oil crisis highlighted the poten
tialities of the Western storehouse of
energy-and also highlighted the dif
ficulties of exploiting that treasure trove.
Attention centered on the 789-mile
Trans-Alaska Pipeline, the principal
means of reducing U .S. dependency on
high-cost foreign imports in the latter
part of this decade. As the Alaska
pipeline boom finally got underway, six
years after the discovery of the Prudhoe
Bay bonanza, it touched off a frenzied
pace of construction in Alaska and in
creased activity in supply cen ters such as
Seattle, along with a petroleum-explor
ation program unrivalled in Western his
tory. Th e upsurge in fuel prices also in
tensified interest in the exploitation of
Rocky Mountain coal and shale-oil re
sources, but important tech nical and en
Because of the late -1974 downtrend in
most regional industries , the new year
opened on a gloomy recession note. Al
ready suffering from an abortive recovery
from the post-Vietnam aerospace slump!
the Western economy now faces an in
creasingly weak demand for both its
crude materials and finished products,
and the results may be seen in jobless
rates that are far higher than the national
figure-that may reach, indeed, the
highest levels in a generation. Still, the
regional economy should benefit from
the continued strong worldwide demand
for food , and Western basic-materials
producers may be th e first to feel the
favorable effects when housing, autos
and other key national industries begin to
tum around .
AnotherYear
of Pressure
Although operating in a recession at
mosphere, the na tion's com mercial
banks in 1974 faced record money rates
fanned by rampant inflation and heavy
business-credit demands. The more suc
cess ful banks adjusted well to this unor
thodox mix, racking up record profits
from a massive expansion in loans at re
cord rates of return. Some other banks
did no t fare so well, however, because of
sizable loan losses, large write-downs on
securities, and majo r foreign-exchange
difficulties. The strains which developed
as the year progressed brought about a
fundamental reassessment of bank goals ,
as managements shifted away from their
earlier emphasis on asset growth and
market expansion, and instead concen
tra ted on the basic adequacy of bank cap i
tal structure.
After several months of relative stability
in early 1974, the financial calm was shat
tered by sharply rising money rates
which reached all-time highs in mid
summer. Heavy business-credit de
mands converged on the nation's finan
cial markets, and most importantly on the
banks. Record demands for capital
financing pushed up long-term rates to
levels which diverted borrowing into in
terim bank loans, and severe strains in
the commercial-paper market led to very
high paper rate s which further diverted
business requests to the hard-pressed
banks . Moreover, investor emphasis on
the quality of securities made it difficult
for many firms to raise funds through of
ferings of either short-term or long-term
securities.
The worst strains developed around
midyear, in the wake of the Con Edison,
Franklin National Bank and Herstatt
Bank crises . In that situation, wary in
vestors avoided placing their funds with
any bu t the largest and strongest banks,
so that a tiered rate structure developed
for the major sources of bank funds, such
as large corporate deposits (CD's) and
short-term interbank loans (Fed funds) .
Then, pressures began to ease in the fall
months, as the recession deepened and
as monetary policy became more accom
modative. Money-market rates dropped
rapidly, and this was followed by a de
cline in the prime bu sin ess-loan rate.
Shifting policy
The Federal Reserve attempted to fight
inflation and to moderate the excessive
business-loan demand without worsen
ing an economy that was sinking into re
cession. The narrowly defined money
supply (M!) grew at annual rates of 5.5
and 6.5 percent, respectively, in the firs t
two quarters of the year, bu t at only a
1.6-percent rate in the July -September
period , reflecting the impact of high in
teres t rates and restrictive monetary pol
icy earlier in the year. Then, as signs of a
d eep ening recession became evident,
Fed eral Reserve policy eased somewhat;
at its October meeting, the Federal Open
Market Committee sought " to achieve
bank reserve and money-market condi
tions con sist en t with resumption of m od
erate grow th in monetary aggregates
over the months ahead," specifically with
a growt h rate of 4% -to 7% percent in M I'
However, th e money su p ply responded
disa ppoin tingly with only a 4.3 -percent
rate of growth in the final quarter.
The Fed adjusted reserve requirements
on time deposits in September and
November, partly to lengthen the matur
ity structure of bank liabilities. But the
November action and a later one in
January included overt moves toward
ease-reductions in reserve requirements
on demand deposits ranging up to 1 112
percentage points (to 16112 percent) on
deposits of over $400 million. Also, the
System reduced its dis count rate on
member-bank loans, in two steps, from
the summer-fall peak of 8 percent to 7%
percent just after year-end.
Bank credit expands, because of regional
and national business-loan boom
Change (Percent)
2
On.
0
West
Despite 1974's exceedingly difficult eco
nomic environment, total bank credit
nationwide increased to a record $686 bil
lion -a $51-billion (8 percent) gain, al
most all of which was recorded in the first
half of the year. Loans accounted for the
vast bulk of the increase; for the second
year in a ro w, ban ks added only modes tly
to their secu rity portfolios, largely be
cause of a net reduction in holdings of
U.S. Treasuries.
Business loans dominated the overall
loan expansion with a $25-billion (16 per
cen t) inc rease-almost equal to the mas
sive 1973 expansion, despite an obviously
weakening trend in the latter part of the
year . This strong demand stemmed from
n
.I
O ther
U.S.
-1 0
-2 0
Tota l
Bank
Cre dit
Loa ns
Bus iness
Loan s
Ll.S.
Ot her
Cov't. Secu rit ies
Securit ies
Western banks put funds into business
loans, at expense of other categories
Billions of Dollars
5 . --
..---
...,....--
Billions of Dollars
LOA '5
-,--
---,--
---,--
---,-
-,
SECURITIES
- 1 ~-+_--->.--++--+---l--_+-_>.__1~__I
' 68
'6 9
' 70
'7 1
' 72
'7 3
'74
inflation-ind uced increases in operating
costs, especially for carrying inventories
and for meeting raw material shortages,
and from delayed completion dates on
business-investment projects . At times
the pre ssure became severe as banks tried
to accommodate the demand diverted
from the cap ital and commercial-paper
markets, but their task was eased to some
degree by the sluggish ness of mortgage
and con sumer-credit demand . The major
source of funds for this nationwide loan
expansion was a huge $29-billion (43 per
cen t) increase in CD money, and tempor
ary funds came from Federal Reserve
Banks through the discount window and
from other commercial banks through the
Fed -funds market.
Financing the West
Western banks, amidst the turbulent busi
ness and financial scene, expanded total
credit to $104 billion, This $9-billion (10
percent) gain fell short only of the record
1973 increase, Regionally as nationally,
business loans dominated the statistics
with a $3-billion gain, and at year-end
they constituted 35 percent of total loan
portfolios, close to the national ratio for
the first time. Many national firm s drew
heavily on their loan commitments at Dis
trict banks, after en countering difficulties
in the capital and commercial-paper mar
kets and/or exhausting their lines of credit
at money-market banks elsewhere . Fol
lowing a very sharp seco nd -quarter rise
in business loans, District banks tight
ened their lending practices in an effort to
slow the expansion and thus reduce their
loan-deposit and capi tal ratios. As these
tightened policies took hold and as th e re
cessio n deepened, the business lending
pa ce slackened, at first modestly and then
quite steeply.
With the slu mp in the regional housing
market, the mortgage -loan gain fell more
than one -third below the business-loan
gain, after years of do minating reg iona l
lend ing activity. Suffering from a rela
tively small savings inflow, Western
banks in midsummer raised mortgage
rates to record levels and adopted other
restrictive lending term s- in some cases
going to a "no growth " policy on home
loans. Consumer lending also weakened
considerably, in part because of th e
squeeze on consumer real incomes,
Demand deposits rose modestly, about
$1/2 billion, but time -and-savings de
posits jumped more than $9 billion .
Lenders boost mortgage loans modestly
as savings inflows lag in tight-money year
8
In this as in other periods of rapidly rising
in terest rates, banks generally avoided
selling securities as a source of funds be
cau se of the large capital losses they
would have incurred. For the year as a
whole, total security portfolios changed
very little, despite some sales during the
very tight spring and summer quarters.
Altogether, banks recorded only a nomi
nal increase in holdings of Treasuries and
a reduction in municipals, but added to
their holdings of Federal Agency issues.
They failed to make any major shifts in
the maturity composition of their hold
ings, except for some replenishing of
Treasury bills in the final quarter.
Consumer savings deposits increased
about $21/2 billion, mainly in certificate
accounts. But surprisingly, even pass
book savings increased, despite the sig
nificant disintermediation of consumer
savings into money-market instruments,
brought about by banks' inability to pay
more than the 5-percent Regulation Q
ceiling on passbook savings-and in
some cases , by their unwillingness to pay
more than 41/2 percent on such deposits.
More than $61/2 billion of the time -deposit
increase came from large negotiable
CD's, primarily during the massive
second-quarter loan expansion. After
doubling in size within two years time,
CD's accounted for 20 percent of total
District-bank deposits at the end of 1974.
Finding funds
Because of the need for very substantial
funds to accommodate the heavy loan
demand, Western banks relied more on
"liability management" than on the more
traditional " asset management" to obtain
funds . Total deposits rose more than 101/
2
percent, in line with the national pace .
Still, heavy reliance on these high-cost
and highly volatile funds caused substan
tial problems, expecially during the mid
summer crunch. As investors shifted
their funds to the largest and strongest
institutions, banks outside the top tier re-
which drastically reduced sales of autos
and other big-ticke t items that normally
account for the bulk of consumer
instalment credi t.
Change (Billions of Dollars)
I I
-: ~
I
Sa vings Acco u nts (S&Ls)
6
,j/ . \
., I.
<,
-,
2
o
I
r
1\
\.\
\
~ ," ><
/
Sa ving s &
Oth er Co nsum er
Account s (ba n ks)
f
/
\1
- 2
Change (Billions of Dollars)
8
6
o
<,
Mo rtgage Loa ns (S&Ls)- /
4
2
"
/'
1
/
!-
v ....
'67
f-.........
'68
' 69
,.
/
I
"
"
/'"
//
'70
,.
\ Mo rtgag e Loa ns
(banks)
I
I
'71
"72
'73
.
"
'74
portedly had trouble rolling over matur
ing CD's, even at premium rates. Also ,
banks generally ran into difficulty match
ing their relatively short-maturity CD's
with their longer-maturity loan assets.
Growing concern by the regulatory au
thorities and by the banks themselves led
many banks to slow down their lending
pace, in an effort to reduce risk exposure
and stave off further weakening of their
capital structure.
Paying for funds
The cost of bank funds soared to all-time
high s in July, then declined gradually
du ring the remainder of the year. CD
fund s were very expensive; offering rates
reache d 12 percent in July and August,
before declinin g to 8 3/ 4 percent by year
end. The effective ra te on Fed funds
rang ed from a midyear peak of more tha n
131/ percent to a late -December low of
2
about 81/2 percent. And from April to De
cember, member banks had to pay 8 per
cen t for borrowing from the Federal Re
serve Bank of San Fra n cisco-a record, al
though far below the cost of other sources
of fund s.
16
Required reserves of District member
banks increased by $300 million last year
(daily average basis) , mainly because of
the large increase in their outstanding
time deposits-and despite the several
late -year reductions in reserve require
ments. Member banks borrowed a record
$204 million (daily average) from the Fed
eral Reserve Bank of San Francisco, an in
crease of nearly $50 million over the 1973
level. Borrowing at the discount window
peaked in the third quarter, when many
banks came under pressure because of a
restrictive monetary policy as well as their
inability in a tiered Fed-funds market to
borrow reserves from other member
banks. Still, net Fed -funds purchases
(borrowings) almost tripled during the
year to $1.8 billion, and borrowings
under repurchase agreements with cor
porations and public age ncies exceeded
eve n tha t hig h figure . District banks also
obtained significan tly more funds from
the Eurodollar market and fro m hold
ing -company sales of commercial paper,
especially during the su mmer period .
Throughout mos t of the year, Western
banks had trouble covering the rapidly
rising cost of the funds which they
needed to accommodate their strong loan
demand. They had lowered the prime
business-loan rate from 9% to 83/4 per
cent during the relatively calm winter
months, but as money rates began to soar
they raised the prime, in a series of steps,
to a record 12 percent in July. They held at
that level until early fall, somewhat after
market rates had turned downward, and
thereafter they kept the prime from fall
ing as rapidly as the rates on the funds
they borrowed. At year-end the prevail
ing prime of 101/2 percent was more than
3 percentage points above the Fed -funds
rate. This high and widening spread-a
normal phenomenon for the recession
phase of the business cycle-naturally
helped to boost profit margins, and it also
played a role in moderating loan demand
and in building up bank reserves as a
cushion to absorb extraordinarily large
(actual and potential) loan losses.
Facing 1975
In a pressure-filled atmosphere, many
banks deliberately slowed their rate of
loan expansion in late 1974 to bring their
assets and liabilities into better balance.
Banks also reexamined the quality of their
assets, increased their loan-loss provi
sions for risk assets, and initiated steps to
improve their capital ratios. Many of
these corrective actions are still being
pursued-necessarily so, because banks
entered 1975 in a less liquid position and
with reduced capital ratios. Moreover,
banks may have trouble obtaining funds
in the capital markets because of the
heavy volume of corporate offerings, not
to mention the huge Treasury demands
caused by soaring Federal deficits.
Bank-loan demand in the West has de
clined more than seasonally in recent
months, and it is not likely to explode
again as it did in 1973 and 1974. Nonethe
less, the financing of involuntary ac
cumulations of inventories and rising re
ceivables , at still high prices, should help
sustain business-loan demand in coming
months. Banks also may have to carry
some borrowers who are still not able to
obtain accommodation in the capital
market. Meanwhile, the deteriorating
economy could aggravate the problem of
loan losses as increasing numbers of firms
encounter liquidity problems. Rising un
employment and furthe r declines in real
income also could create repayment prob
lems on mortgage and consumer loans.
With consumers boosting their savings,
as they normally do during recession
periods, and with bank deposit rates
again becoming competitive, banks
should benefit from an improved inflow
of relatively inexpensive savings deposits
this year. Moreover, with business capital
expenditures probably lagging, a larger
pool of corporate funds could become a
vailable for investment in CD's. In the
near-term, some of the proceeds from the
current heavy volume of corporate issues
also may be invested in CD's, since the
expenditure of such funds normally is
spaced over time. The recent sharp de
cline in the cost of funds, along with a
lagged adjustment in the prime rate,
could generate wider profit margins in
coming months, although some banks
could find their profits limited by a slow
down in loan expansion and by actual
loan losses.
Sixtieth Year
of Service
The Federal Reserve Bank of San Fran
cisco celebra ted its sixtieth birthday in
1974. The Bank opened its doors on
November 16, 1914 with a sta ff of jus t 21
people to provide central-banking ser
vices for the nine Western states . Today,
with nearly a hundred times more em
ployees located in five offices throughout
the West - San Francisco, Los Angeles,
Portland, Salt Lake City and Seattle
the Bank continues to serve the region's
growing financial needs and to assist in
maintaining the sound operation of the
nation's banking system. Its work is con
stantly expanding, for commercial-bank
deposits in this District have risen from
less than $11/2 billion in 1914 to more than
$100 billion today.
In 1974, the community served by the San
Francisco Reserve Bank numbered 450
banks with almost 6,200 branches. Dur
ing the year, 3 na tiona l ban ks, 25 state
banks and 1 trust company were or
ganized in the District. The number of
Federal Reserve member banks dropped
slightly to 140, but member-bank offices
increased moderately to 4,661. Th e non
me mber -bank category meanwh ile ex
panded to 307 banks and 1,504 offices .
In a related category, the Bank expanded
its supervision over bank holding com
panies, from 65 in 1973 to 72 in 1974. Its
staff investigated 128 applications to in
itiate or expand bank holding company
activities, compared with 111 the previ
ous yea r. Incidentally, holding com
panies were permitted to add two new
nonbank activities-real property leasing
and management-consultant service s to
non -affiliated banks-to the list of ac
tivities they already engage in .
In the international field , the Reserve
Bank supervised 24 Edge Act corp ora
tions last year, up from 20 in 1973. (These
corporations are bank-owned subsid
iaries which engage in international-fi
nancing activities .) The Bank's staff proc
essed 52 applications involving new or
expanded overseas operations by Edge
Act corporations and District member
banks. To highlight the Bank's growing
international role , President Balles em
barked last spring on a 25,O O
O -mile tour of
nine Far Eastern coun tries as a represen
tative of the System's Steering Commit
tee on International Banking Regulation.
He made the trip to establish personal
working rela tions with Pacific area cen tral
bankers, to gather first -hand information
on the foreign operations of American
banks, and to explain the System's views
on foreign-bank regulation . His work
contributed to the formulation of pro
posed legislation which would extend
Federal regulation, on a nondiscrimina
tory basis , to all foreign banks operating
inside this country.
Discount window activity
In its credit activity, the San Francisco Re
serve Bank helped alleviate the strains of
a very tight financial situation last year.
As noted above, member-bank borrow
ing jumped 31 percent to $204 million
(daily average), as 61 member banks-up
from 54 in 1973-obtained accommoda
tion at the discount window. To facilitate
discount op erations, the Fed eral Reserve
System twice amended its credit regu
lations- first, in Sep tem ber, to allow a
special discount rate for member banks
requmng exceptionally large assistance
over a prolonged period of time , and sec
on dly, in October, to bring rates on ad
vances secured by one-to-four family
mortgages down to the same leve l as the
basic dis count rate .
Early in the year, the Reserve Bank be
came inv olved in emergency lend ing to
the former Beverly Hills National Bank ,
whose financial condition had been ad
versely affected by publicity concerning
the difficulties of its parent company,
Beverly Hills Bancorp. Working closely
with th e Comptroller of the Currency and
the Federal Deposit Insurance Corpora
tion , the Fed staff spent several weeks
helping to devise a solution to the prob
lem . The solution ultimately involved the
sale of the bank, with substantially all of
its assets and liabilities being assumed by
Wells Fargo Bank.
Paper flood of checks continues to rise
at San Francisco Federal Reserve Bank
Million s o f Piec es
1200
1000
800
-
.-
.....-
60 0
400
200
o
Billion s of Do lla rs
400
300
Electronic processing
Computerized, round-the-clock check
processing became a realit y throughout
the District as the San Francisco office
opened its Regional Check Proc essing
Center (RCPC) in April. All Reserve Bank
200
100
-
-
-
' 70
'71
' 72
.
o
' 73
'74
Reserve Bank's wire-transfer volume
keeps growing, to more than $4 trillion
Trillions of Dollars
5
.....
.....
....
-
I
.....
o
'70
20
'7 1
' 72
' 73
' 74
offices now house RCPC facilities. Even
tually, 95 percent of all checks processed
in the District should flow through the
RCPC system, which generally makes
possible one-day check clearing as well as
lower check-handling costs for banks.
The need for such a system becomes
more evident as the volume of check
handling continues to increase. In 1974
the San Francisco Fed processed more
than 1.1 billion checks - an increase of
almost 150 million, or 15 percent.
Electronic processing of payroll checks
for the U.S. Air Force became operational
at the San Francisco and Los Angeles of
fices at the end of November. This sys tem
- offered on a voluntary basis to all air
men- automatically deposits Air Force
paychecks at the California Reserve Bank
offices by the use of magnetic tapes. Then
each payee's checking or savings account
at a designated depository institution is
simply in creased by the amount of the
paycheck. When fully implemented,
nearly 300,000 personnel may be taking
advantage of this electronic-payments
program. Among the benefits of the sys
tem are speed, safety, and lower costs,
through the elimination of check clearing
and processing for individual checks.
The Reserve Bank continued to partici
pate in a computerized communications
switch, which makes it possible to trans
fer funds almost instantaneously from
one commercial bank to another any
where in the country. This Federal Re
serve service allows member banks to
earn interest on otherwise idle excess re
serves, and it is especially useful to bank
customers who find it necessary to trans
fer funds immediately. District member
banks bought and sold more than $4.3
trillion using this network in 1974, an in
crease of more than 28 percent from the
year before . Altogether, more than 1.4
million messages were involved in these
funds transfers.
Cash and securities
Even with the increased usage of checks
and electronic transfers, coin and cur
rency remain a large and vital responsibil
ity of the San Francisco Reserve Bank.
The amount of currency received and
counted by the five Bank offices increased
last year to $10.1 billion in value and al
most 1.1 billion pieces-gains of 14 and 8
percent, respectively, over the year be
fore. Coin handling declined slightly,
however, with processing of 1.8 billion
coins valued at $243 million-largely re
flecting a severe penny shortage which
developed early in the year because of
hoarding brought about by soaring cop
per prices. The shortage later eased,
however, as copper prices declined in the
recession atmosphere, and as the Bank
achieved success in its cooperative cam
paign (with banks, schools and other in
stitutions) to recirculate coins held by the
general public.
In its role as fiscal agent for the U. S, Gov
ernment, the Bank was kept busy issuing
and redeeming U.S . Treasury securities
and savings bonds in a time of record
high interest rates . (Rates on Treasury
bills reached a peak of 9.91 percen t in late
August.) Due to these high rates, partici
pation by individual inves tors in the
Treasury-bill market more than doubled
in number at the San Francisco office
alone, from 16,374 in 1973 to 39,347 in
1974. Marketable securities issued, ex
changed and redeemed at the Bank's five
offices rose in value to $297 billion - a
gain of 35 percent over the year before .
The heavy traffic in Treasury securities
prompted the Bank to implement new
streamlined methods for better service to
com m ercial banks and th e public.
The late -1973 increase in the interest rate
on Series E Savings Bonds, from 51/ to 6
2
percent, contributed to a 3-percent in
crease in value of bonds sold during 1974.
Redemptions once again exceeded sales,
by $130 million, but this was a substantial
Currency volume again expands, but penny
shortage causes reduction in coin volume
Mil lions of Piec es
CO li\:
2000
..
-
- -
-
1000
500
o
Milli on s o f Pieces
CURR Ei\CCY
1200
......
1000
800
......
~
......
'7 1
'72
~
600
400
200
o
'7 0
'73
~
:.
'.t.." .. .
'
.
.
..'"
"
/
r
21
improvement over the 1973 performance .
Indeed, savings-bond rates looked in
creasingly attractive to investors as rates
on other instruments plummeted during
the fall months.
The Bank recorded increases in both the
number and value of food stamps han
dled . Some 375 million pieces were proc
essed, a gain of 15 percent over the pre vi
ous year, while dollar value rose nearly 30
percent to $806 million . This gain was
partly attributable to th e risi ng number of
eligible people resultin g from the in
creased sluggishness of the regional
economy. Some reduction in proc
essing-perhaps a one-third reduc
tion-may occur this year because of
the Agricu lture Department's plan to
substitu te larger denominations for 50
cent and $2 coupons.
Internal operations
The past year was an important one in
terms of the Bank's internal operations.
Conservation and increased productivity
were the by -words as the Bank re
sponded 0 the pressures developing in
the national economy. During the oil
embargo period, all offices of the Bank
implemented energy-conservation pro
grams affecting ligh ting, heating, au
tomobiles, travel and office-equipment
use. A new employee-suggestio n pro
gram wa s put into effect as a means of en
couraging employees to develop addi
tional conservation measures.
In the fall the Bank was assisted by an
outside con sulting firm in conducting a
dia gn ostic review of all intern al Bank op
eratio ns. The initial rev iew identified a
large number of p roductivity -improve
ment op portunities at the San Francisco
office, involving virtually every depart
ment. Subsequent analyses at the
branches iden tified additional oppor
tunities. This study led to the initiation of
a Productivity Improvement Program
which will result in a fundamental over
haul of operations, in an attempt to im
prove cost effectiveness and to develop
more clearly defined jobs and im proved
working conditions. For the Bank as a
whole, the program should make it pos
sible to handle expected sharp increases
in work loads without unacceptable cost
increases .
Federal Reserve Bank of San Francisco
Summary of Operations
N umbe r (thous ands)
Value ($ millions)
1974
1973
1974
1973
Coin and Currency
Coin received and counted
Currency received and co un ted
243
10,145
246
8,921
1, 797,254
1,062,975
1,937,330
986,335
248,488
55,317
2,286
6,352
192,035
48,095
1,883
4,4 76
967,574
139,486
10,055
649
833,642
127,736
8,422
727
42,481
204
NA
28,802
158
NA
1,720 ±
NA
61±
1,435 ±
NA
54 ±
10,253
274,973
11,673
8,841
203,552
8,087
. 231
298
316
116
314
161
660
90
790
640
82
798
13,508
14,192
13,527
461
14,545
2,148
30, 932
806
2,175
25,481
622
395,378
6,754
375/ 71
356,178
5,935
326,175
4,345,801
3,381,379
1,4 08
1,116
Collections
Check Collections
Commercial ba nk chec ks .
Gov ern m en t chec ks'
Return item s .
Noncash Collections
Discounts and Advances
Total discounts and advances
Daily average borr owings
Nu mber banks accom modated
Fiscal Agency
Marketable Securities
Issu an ce
Exch an ges and transfe rs .
Red emptions .
Savings Bon d s
Issu ance
Rei ssu es and repl acem ents
Retireme n ts
Other Fiscal
Curren cy verified a nd destroye d
Feder al tax deposits proces sed
Food stam ps received and process ed.
j08
Tra nsfer of Funds
Wire transfe rs
' including po stal mo ney orders
tac tua l num ber
About the pictures
A regional Federal Reserve Bank requires the serv
ices of a number of different types of people: ac
countants, programmers, guards and eco nomists;
pla nners, clerks, typists and personnel experts;
au ditors, secr
etaries, building staff and messen
gers. Some of the activi ties of th ese Bank
employees are pictured in these pages.
Handling monl?1 is a central activity of the Bank's
J
staff. Shown herearepeople sorting and handling
checks, transferring funds by wire, counting and
sorting currencf . handling coins in various ways
(receiving, shipping, sacking and countingi-as
well as people standing guard over all these ac
tivities. But many other workers are involved in
policy support for the Federal Reserve System and
in service activities for the Bank staff and the
general public. Illustrating these activities arc
pictures of economic resea rchers, graphic artists,
bank relations personnal, secretaries, painters,
switchboard operators-and annual-report writers .
23
Directors and Officers
Federal Reserv functions are carried out
through 12 Federal Reserve Banks and
their 24 branches, coordinated by the
Board of Governors in Washington, D.C.
The Board of Governors consists of seven
members appointed by the President of
the United States and confirmed by the
Senate. Board members devote their full
time to the business of the Board . They
are appointed for 14-year terms arranged
so that one term expires every two years.
Decentralization is one of the important
characteristics of the System's operation .
Each of the 12 Federal Reserve Banks is a
corporation organized and operated for
public service, with its shareholders
being its member banks.
Each Federal Reserve Bank has nine di
rectors, divided into three classes. Class
A directors are bankers and Clas s B direc
tors are actively engaged in the District in
commerce, agriculture, or some other in
dustrial pursuit, but must not be officers,
directors, or em ployees of any bank.
These Class A and B directors are elected
by member banks. Class C directors must
m eet the sam e qualifications as Class B di
rectors, bu t they are appointed by the
Board of Governors of th e Federal Re
serve System in Wash ington, D.C. The
Bank's Board of Directors is charged with
respons ibility for overseeing and direct
ing the managemen t of the Reserve Bank
in order to accomplish the broad public
purposes of the Federal Reserve Act . One
of the primary responsibilities of the
Board of Directors is to es tab lish the dis
count ra te, subject to review by the Board
of Governors.
24
In addition, each of the Reserve Bank's
branches has a Board of Directors. In the
Twelfth District, the Los Angeles Branch
has a seven-member board, four ap
pointed by the San Francisco Reserve
Bank's Board of Directors and three by
the Board of Governors. Each of the other
Branch offices - Portland, Salt Lake City,
and Seattle - has five-member boards,
three appointed by the San Francisco
Bank 's board and two by the Board of
Governors.
Changes in Boards of Directors
Boards of Directors, Branch Offices
Changes in Official Staff
Because of the public nature of the direc
torships of the Bank and the demands
upon the time of those who serv~,
changes occur each year In the c.omposI
tion of the various boards. Dunng 1974
the following changes and reappoint
ments were announced:
Los Angeles Branch:
Appointment by San Francisco Reserve
Bank's Board:
Robert A. Barley
President, United California Bank,
Los Angeles
Newly appointed to a three-year term
beginning January 1, 1974
Appointments by the Board of Couernors :
Dr. Armando M. Rodriguez,
President, East Los Angeles College,
Appointed to fill a three-year term
that will expire at year-end 1976.
Harvey A. Proctor,
Chairman of the Board, Southern
California Gas Company, Los Angeles
Appointed to fill a three-year term that
will expire at year-end 1975
Promotions
Kent O. Sims ,
Vice President to Senior Vice President
January 1, 1974
Joseph Bisignano,
.
.
Economist to Assistant VICe President
and Economist
January 1, 1975
Appointmcn ts
Richard L. Rasmussen
Planning Officer (Los Angeles)
February 1, 1974
Walter Woodbury,
Personnel Officer (Los Angeles)
May 1,1974
James F. Leyman
Assistan t General Auditor
June 1, 1974
Gordon Hammond ,
Vice President, Data Processing
and Management Science
July 1, 1974
Bruce Thompson,
Audit Officer (Los Angeles)
August I , 1974
Retirements
J. Norman Aamod t
Chief Examiner
Apri l 30, 1974
Deceased
Amadeo G. Conte,
Assistant General Auditor
April 5, 1974
Board of Directors, Federal Reserve Bank
of San Francisco
Elected by Member Banks in the Twelfth
District:
Class A Director
Carl E. Schroeder
President, First National Bank of
Orange Coun ty
Re-elected to a three-year term
beginning January 1, 1975
Class B Director
Charles Raymond Dahl
President and Chief Executive Officer,
Crown Zellerbach Corporation
Re-elected to a three-year term
beginning January 1, 1975
Appointments by the Board of Governors,
Federal Reserve System:
Class C Directors
O. Meredith Wilson
President and Director, Center for
Advanced Study in the Behavioral
Sciences, Sta nford, California
Redesignated Chairman of the Board
for 1975
Joseph F. Alibrandi.
.
.
President and Chief Executive Officer,
Whittaker Corpora tion , Los Angeles
Redesignated Deputy Chairman for 1975
Salt Lake City Branch:
Appoiniment btJ Sail Francisco Reserve Bank's
Board:
David P. Gardner
President, University of Utah,
Salt Lake Citv , Utah
Appointed to' fill a three-year term
that will exp ire at year-end 1976
Seattle Branch:
Appointment by the Board of Governors:
Malcolm T. Stamper
President, The Boeing Company,
Seattle, Washington
Appointed to fill a three-year term that
will expire at year-end 1976. (Also
designated as Chairman of the Branch
Board for 1975.)
25
Comparative Statement of Condition
December 31, 1974
December 31, 1973
$ 1,500,750
49,000
279,344
35,556
$ 1,3 27,367
-0
21,950
29,595
53,000
72,500
67,700
684,392
263,139
5,351,037
5,8 23,307
$11,652 )38
$12,388,175
5,011 ,138
5,216,920
~ 427,667
g(1655, 725
$11,11 2,064
987,173
7,540
1,212,689
7,685
220
232,930
515,480,687
556
155,814
$14,064 ,149
Federal Reserve not es .
s 8, 562,318
s 7,659,768
Deposits :
Member ban k -s-reser ve account s
United States Treasurer -s-ge ne ral account
Foreign.
Ot her deposits .
Total deposits
5,330,167
357,810
37,120
94,237
5 5,819,334
4,840 ,137
349,692
32,500
69,450
5 5,291,779
Deferred availability cas h item s .
Other liab ilities .
694,680
~50 7
751,491
144,497
$13,847,535
!thousands of dolla rs)
Assets
Gold cer tificate account
Sp ecial Drawing Rights certificate account .
Federal Reserve notes o f other Federal Reserve banks
Other cash
. . . . .
Loans to Member Banks:
Secured by United States Government and Agency ob liga tions .
O ther eligible paper .
Other paper .
Federal Agency obligations
United States Government securi ties:
Bills .
Notes .
Bonds .
Total U nited Sta te s Government securities .
Tota l loa ns and securities
~894
Cas h items in proce ss of collection
Bank premises
Other assets:
Denominated in foreig n currencies
All other .
Total assets .
Liabilities
Totalliabilities
$15,256,839
49,000
170,935
28,039
----
Capital Acco unts
Capi tal paid in
Surpl us
Total Liabilitie s an d Capital Accoun ts .
Contingent liability on accep ta nces purchased for foreign correspondents
26
S
111,924
S
108,307
~,J 24
~dQZ
J~,jil~, 687
14,064,149
---~-
5
125,798
5
72,638
Earnings and Expenses
1974
1973
$ 16,10 7
837,274
873
1
$854,255
$ 10,304
666,062
57
113
_._ -
$676,536
$ 52,418
_,!, 788
47,630
$ 46,820
__
3,21_Q
$ 43,610
5806,625
$632,926
0
0
152
152
0
0
123
123
(thousands of dolla rs)
Current earnings
Discounts and adva nces .
United States Government securities .
Foreign currencies .
All other .
Total current earnings .
~~
Current expenses
Total current expenses
Less reimbursement for certain fiscal agency and other expenses.
Net expenses .
s
Profit and loss
Current ne t earnings
Additions to curren t net earnings:
Profit on sales of Un ited States Government securities (net) .
Profits on foreig n exchange transactio ns .
All other
Tota l additions .
Deductions from current net earnings:
Loss on foreign exchange transactions (net)
Loss on sales of United States Government securities (net )
All other .
Tota l deduc tions .
Net addi tions ( + )/deductio ns (- ) .
let earnings before payments to United States Treasury .
Dividends paid .
Payments to United States Treasury (interest o n Federal Reserve no tes) _
Trans ferred to S ur p lus
Surplus Ja n uary 1 .
Surplus December 31 .
$
s
4,34 7
5, 794
574
10, 7l2
5
1
2:.- Q,562
796,063
6,645
_5 785J 8Q
.1
s
3,616
1O§, 307
_ 1 1,924
§ )
$
s
_~
5,927
4,825
7
10, 752
~10~36
622,290
6,221
$607,13]
8,938
99,3/'0
SlQ§,307
$
27
James E. Phillips
A. W. Clau sen
Cha rles Ra ymond Dah l
P rt"~ ldl'nl
Presid <,>nl an d C h ;l1' Exe u ti ve 0 ["((,,/
f
c
Prcsidcn t .lod Chl<.. [ "l'<:tlliw U f!l,·...r
'{ '
firs t Ndtio nal Bank in P,'U Angd,'s
Pori .\ ng('!,'S. Wa" hing 'o n
Ban k (If Am{'l'iu Na tio nal Tr u~ l
a nd S,n i ngs Assooarion
$d o Franci sco . C..lifo rn iil
Ca rl E. Sch roede r
Head Office
Janua ry 1975
1 1'1 \,
Prl-S tJ~'nl
Fl r~ l N a tio na l
8.l.ni..
••, Oraoge Cou nrv
Ura ng... Call/orn'.l
.
.
Crs~·~ ~I~~~~~~~(\l~c;;,~:
in
Jos eph Rose nbla tt
Hon orar v Ch alrm a n " f Ilw B.••
Th IL' b m('l ' Cu rp' .,..th",n
Sdlt t.... keCuv. L:tdh
Directors
Wesle y
Ie
.
Devries
Se nior v tce Pres id t' n l
John
J. Carson
J. S umner
Vice Presrdent
An~~!~p;c.$l~:n~e l la
PCTs..m,., e1
EEOOf6cc r
General Audilor
M,lnag e-Jm'nI5 ci<l' nre s, Prorecnon
William
Richard C. Dunn
Robert C. Dietz
Vice Pre stdene
C h eck s, PaymcnlS Mt:<han,i.
<m
ush, Fis.:dl,
Vice Pt~ ~idenl
Bank Rtlab ons
G ordo n Hammar
Henry B. Jamison
vtcc Pre-sident
Data S ys te ms
VI((- PlX' ident
s
Examin a tion s
I
ames F. Leyman
~i$ tan t
William E. O'Donnell
Ct"ncr al Audi tor
A s~istll.nt
Ge org e P.. Ga lloway
As.s ~ l an l
Vice I'~sld l"nt
vice President
Martin S. Depper
Robe rt C. Joh nsen
A ~ ist.a nl
Ass istant Vice Presld enr
&. ChId F..J n1in N , Trus ts
.
Vice President
Jane W. Langh orne
Cla ude Woessner
Euge ne A. Thomas
A ss15ranl Vice Pres idl"11
1
Ass istan t vt ee Pre siden!
Assisl.Jnl Vice rr~ldcn l
&: (hi'" Ex.tmi nt'l'
Robe rt H . Colfelt
C h""k Olf!« f
28
Richard
e.:
AsS ~ Ll n l V ice
O. Mered ith Wilso n
Clair L. Peck
Chen-na n " f tlll' B.lI1 u
fd
Cb. n
rrnan of tnt' B o
ard
C L. Pl"(" k Cl ,n h" ef('r
J
L\J'oA ngd t's . Cahlornia
F( '~' rql R, ':'«'n ~ ' Ag"1I
1
Presidcn t t.e Direc tor
C( n t ~ r to r Ad va nced S tud v In me
~ha\-i ord l Soencc.... Std nfo rd: Cah lo rlllil
.
One Director ' s
Seat Vacant
Joseph F. Alibra nd i
D,p" l v (/i I1!...I.J1l
.
rr"~ llh· n l
an d ( lu d l' , <", u li \'~' U (n"'r
\ \ hifl.lk,'r C.,rF"'r ah, ' n
L,,:j.An):< ·s . l .ll.l .,m j.l
·s..
f
Ha rold A . Rogers
F",j,'ral l'ld pl;," j L,'IOk ll
.
r"'~ ld . ·I' I . r'· " ~:~ I C~ ~~~;;~ i~~~.~. ' f \\.l:,h inl;lo,n
John J. BaUes
Preside nt
john B. Williams
First Vi C(' PH' $idc'n l
Do na ld V . Mas le n
Kent O. Sims
Se moe Via> Pres tde nr
James M . Brundy
Th omas E. Ju dg e
vsce Prcsid eru
Data Proce ss big
vr ce Presiden t-c-Con trofle r
SClUO Vi C\' Pre siden t
r
Rix Maurer, j r.
vrce Prcsrde nt
Bank Se rvices &. Buildi ng s
Louis E. Reilly
Warren H. Hutchins
?re s ld t'nt a nd
Gen eral Co unsel
Vice Preald ent
VI C'l'
Wilhelmine Stefansky
Michael W , Keran
William M , BUlk
Direct or of
Dircctc r c !
Researc h Statis tics
Ombu dsma n
Res earch
Direct or of
Economic Publicatiol\.
I
William L. Coo pe r
Assod are Gene ra! Co unsel
EIwood E. Bern stein
A<:>sis ran l Vice Pr('Sid e n t
Vera
J. Ta yloe
A s ~t~t a nl
Secr etary
Ernes t E. Livi ngst on
~su ta n t Vi ~
Pres ide nt
Joseph R. Bis ignano
Assis t,}" t v tce Pres -d eo e and
Econo m.i ~ t
Robe rt A. Johnston
As s,st" nl Vl(t' Presi d ~ nl
a ed l- o,",'m iSl
.
Ernes t C. 0 1
Public InJOTm.:J II\) "
Harve y A. Proctor
Lin us E. Southwick
Prestd em
Vall",y N,,(ionM B" n k
Glendale, Ca li(o rn i"
P, ('slde nl
N a rio nolJ B.u\k o f \V hitt i~' r
Whltt ll'r , Ca liil'ml '
J.R.
W. Gord on Ferguson
Ch.litm.: n of the 80 M J
1
Sout lwrn Californ ia Ca s Co m p" n y
Los Ang eles . Cabtomi a
Directors
Ar man do M , Rodrigu ez
RaZh~~n ~~dDp~;~etd":~e r
Robert A. Barley
Vaugha n
Pr("';id,'nl
U ruted Call1,,m l,) Ban k
Lo Ang d los, Calif orn ia
s
CI: ':I m::lIl ''f tlr,'&'ard
l
Pr,'"i,t.. nt Knu J )<,n c "'l " 'fJli" n
Loc A n ~ .. Io.·!> C ,llJI,' mJd
Pre sid ent
US ! Los An gll'lc s Cortege
Los Angeles , Cilliform "
Ame nca n Narto nal Bdnk
Bakers field . C.llifom la
Ge rald R. Kelly
Se n ior v ice Prt'"id enl end
s
M anA): ~r
James M. Davis
Vi C\: Pre side n t
Walt er G , Woodb ury
Adrian A. Horva y
Assis ta m
V ic",
Pred e nt
Bruce Tho m pson
AssislAnt Vice Prc!>
iden t
Kenneth L. Pete rson
Rich ard L. Rasmussen
AuditOffi cer
Har old A. Erne
AssiSLln l Vic", President
John F. Luce y, Jr.
Personn..l O ltk er
Ple nnin g Offi ce r
Chec k O utc e r
Los Angeles
The od ore C. Jacobs en
C hairma n of th e Board
jaco bsen s~?tL~:~j~~u~a ny . Inc.
Sam H , Bennion
Josep h Bian co
Chaiman and Pre sid e n t
r
Roy W , Sim mo n s
(},a ;"" 1I n ,,{ Ii ,1.' Board
1
David P , Gardn e r
Pr~'Sld ",nt
s..·crl'ta ry .Treasure- r
Bank o f ldahc
Boiw .ld"h o
2101\5 Firs t Na tio nal Bank
Sall LJke u ry, U ta h
V. :d~~QCF~"f. ~~h~n(
President
Untvcrsnvot Ul,l h
Lake O ry. Ulah
ssu
Directors
A. Gran t Holman
v tce Pf('sid('n l and MdnJg('f
H . Peter Fra nzel
A~!>i~ l d nl
vice President
and A!> sl.m f M.ll\agl·f
!>i
Don W . Sheets
Ass ts ta m vice Presid ent
2.L.---_
I
Vern R. Lester,
C hl!'<: kO fb ce r
Salt Lake City
Jr.
_
Th oma s Hirai
Joseph Cebe rt Baillargeon
Harry S. Goodfellow
Cl1ai.cm.In l.c Chit" Eeecunve Orncer
t
O ne Director's
Grow t> Packer , Shipper or Po tatoes
r,
Qu in cy. wash ingt on
C hair1l"L1l n of the Board &I President
Old Nation al Bank 01 washin gton
S po ka ne, washjn gton
Sea t Vacant
Sea ttle Tt u ~1 & SaV1n g ~ Bank
S t> l r)t> W as hi n gt on
a
,
Directors
Paul W. C av an
Senio r
V u: ~'
PresidHlI .: d M" nageT
m
James
J. Curra n
Vice Preside nt
_ _-------"'t .~_
E. Ronald Liggett
Pa rker R. S m ith
AssiSldn l Viet' Prcs o ent
Assis t,lnl ViC'( Presrde nt
'
Seattle
John R. Ho ward
Lego y 6. Sta ver
I'r t'sid en l, Le... is and C I, t k Co IlI.' <'
t
S
Po rt land. Oregon
Loran L Stewart
James H . Stan ard
Frank L. Serv oss
Ch aim'l,Jn o f the Boord 6:
( hl( f E;>;('(ul'i w O fhl' er
,
Untied Sta les N:lfio nal Bank of Or ego n
Portland . 0 10: :; n
)o
Ch, imlllrlc/ th,, 8<;Q,d
a
Presi dent, BOhe mia. Inc.
Euge ne, Ore gon
Executiv e V iC\.'Presrden r
FIr.,;1 Natio nal Ban k of I'.-kMinn viUe
Mcr-.1i nnw le. O rego n
Presi d ent . Cra te r Na rtonal Bank
Med ford, O regon
Directors
Willia m M. Brown
Vice rr es idcnt and ManagH
:--------_ _@i
~_ _
WiUiam K, Ginter
Ass tstant vice Preside nt
lind .\ssis lan l ~b n a ger
Maynard C. Petersen
Assls ta n t Vice Pre sid ent
l------R----i-------
I
H. William Penn ingto n
A('\Ountl 1\g and Fiscal Otfic
er
~ortland
Federal Reserve Bank of San Francisco
PO . Box 7702
San Francisco, California 94120
Alaska' Arizona' California' Hawaii
Nevada' Oregon' Utah, Washington
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