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{The article on the last page describes the operations of Federal Reserve Banks as Banking Agents for the Government)

M ONTHLY
O f C r e d it a n d
I n
B y
pll 1 .III

th e
.....

F e d e r a l

t h e

S e c o n d

R e s e r v e

.......... ......... I.I1I I.M
.

R E V IE W

B u s in e s s
F e d e r a l

A g e n t ,

R e s e r v e

F e d e r a l

Mllll... .1— 1■■■■ ■■!■—HIM .1! .1

C o n d itio n s
D is t r ic t

R e s e r v e

B a n k ,

III II.. Ill...................... .....— I■■I. — II.T - I Ml II

I I

N e w
.......

■

Y o r k
■.1■ ■ ■I ■■ ■■—11.^

New York, September 1, 1922

C r e d it C o n d itio n s

T

HE

coal and railroad strikes have

ap paren tly

been without effect upon the credit situation,
which seems to have been influenced b y more
fundam ental conditions.

F o r m an y months past increas­

ing commodity prices and a general increase in trade
a n d industrial a ctiv ity have facilitated the liquidation
of m an y commercial bank loans of long standing.

commercial loans and investments, above referred to, fo r
reporting member banks in N ew Y o rk C ity and in the
U nited States.
A cco m pan yin g the pause in the decline in the com­
m ercial loans of the banks there has recently been a
slight increase in the note circulation o f the Fed eral
Reserve banks, as shown in the diagram below.

In

At

the same time the investments of the banks in Govern­
m ent and other bonds have steadily increased. These
tendencies were disQussed at some length in the last
number of the R eview .
D u rin g the past month, however, the dow nw ard move­
m ent in the volume o f commercial loans has ceased; but
the volume of bond investments in banks outside of
N e w Y o rk C ity has continued to increase, presum ably
as a cum ulative effect o f the liquidation of the past y e a r
an d o f the continuing im ports of gold.

The volume of

bills discounted b y the F e d e ra l Reserve banks is at
alm ost the lowest point of the year.
Th e follow ing diagram illustrates the tendencies in

Federal Reserve Notes in Circulation

almost every y e a r since the F e d e ra l Reserve system
began there w as a more or less m arked increase in circu ­
lation in the late summer and autum n when funds were
needed fo r m oving the crops.

B efo re the establishment

of the F e d e ral R eserve system this demand fo r funds
was often the cause of strained credit or cu rren cy con­
ditions and an increase in interest rates in this season
o f the year.

Sin ce the establishment of the Reserve

system, however, the pow er of the R eserve banks to
su p p ly additional funds when required has eliminated
the autum n cu rren cy scarcity and g reatly lessened the
'Changes in Commercial Loans and Total Investments of Reporting
Member Banks m the United States and in New York City




autum n credit strain.

D u rin g 1 9 2 1 the decline in prices

and the liquidation o f loans offset the seasonal require­

2

MONTHLY REVIEW

ments fo r currency and there w as no increase in the
autumn.

Thus fa r in 19 2 2 note issues have been in

much closer correspondence w ith the experience of the
years p rio r to 1 9 2 1 .
The volume of funds made available fo r investment
purposes in the past few months has doubtless been a
facto r in the continued rise of prices in the security
m arkets at a time when the coal and railroad strikes
m ight have been expected to be influences in the other
direction.

C o m m e r c ia l P a p e r

A fu rth er result has been the grad ual low er­

ing of interest rates.

D u rin g the past month, however,

the only indications of lower rates were a slight reduc­
tion in the yield of certain groups of bonds and a slight
lowering of rates charged b y banks on their customers ’
commercial paper.

The open m arket rate fo r commer­

cial p aper has rem ained at 4 per cent, and the rate on
bankers acceptances at 3 p er cent.

S a v in g s

m arket fo r their own account, but there w as a f a ir
demand from banks in the interior, and total sales b y
dealers were about the same as in the month previous.
O f the m onth's offerings of new bills, those d raw n to
finance the im portation of raw su gar and the exporta­
tion o f cotton were the most numerous.
D e a le rs7
purchases were m ainly to meet day-to-day requirem ents
and the total amount of bills in their portfolios
remained p ra ctica lly unchanged.

B ank

D e p o s its

R ep ortin g savings banks in the Second F ed eral
R eserve D istrict showed a slight decline in aggregate
deposits between J u l y 10 and A u g u s t 10 . Su ch a de­
cline u su ally occurs follow ing the crediting of interest
at the m id-year. The trend of deposits in recent months
is shown in the accom panying diagram .
PER CENT.

The p revailin g rate fo r prim e commercial paper re­
mained unchanged d u rin g A u g u st at 4 p er cent. The
market, however, w as sligh tly firmer, p a rtic u la rly in
N ew Y o rk C ity , in that the proportion of sales at 4 *4
per cent, increased somewhat and 3 % per cent, paper
w as scarcely in evidence.
The m arket among the larger banks of N ew Y o rk C ity
was dull, and confined to only a few institutions, due
a p pare n tly in p a rt to seasonal causes, p a rtly to a some­
what less satisfacto ry su p p ly of paper, and p a rtly to
the continued competition of other form s of investment,
p a rticu la rly ta x exem pt securities. The demand from
cou ntry banks and institutions in a num ber of the larger
interior cities continued in good volume, and dealers
reported substantial b u yin g in and about Richm ond,
S t. Louis, and Chicago, and on the P acific coast. B an ks
are b u yin g fre e ly of the longer m aturities at current
rates, which in the opinion of dealers seems to indicate
a belief in the continuance of low money rates.
The follow ing diagram carries fo rw a rd through J u l y
this b an k 's tabulation of the reported outstanding p aper
of 2 7 leading commercial p aper dealers.
A fu rth er
increase in outstanding paper is shown.
MILLIONS CF
DOLLARS

Deposits of 15 Savings Banks in New York City and 15 Savings
Banks in the Second District Outside New York City. (Average
Deposits in 1918=100 per cent.)

B ill M a r k e t

Offering rates fo r bankers acceptances were m ain­
tained du ring A u g u st at the 3 per cent, level which
has ruled since Ju n e , although some dealers raised bid
rates tem porarily on several occasions from 3 % per
cent, to 3 3 4 per cent, because o f firm er m oney con­
ditions.
N ew Y o rk C ity banks were p ra ctica lly out of the




Commercial Paper Outstanding— Twenty-Seven Dealers
S to ck

M ark et

M oney

R a te s

D u rin g A u g u st, call loan rates fluctuated between
3 and 5 p er cent., a sligh tly narrow er range than in
J u l y and Ju n e , when 2% and 5y 2 p er cent, were
touched occasionally. The usual period o f relative firm ­
ness around the first of the month was prolonged some­

F E D E R A L R E SER VE AGENT A T NEW YORK

what, accompanying loss by this district in the
inter-district financial settlements, but in the third week
money again was offered plentifully around 3 per cent.,
or slightly higher. Demand from the stock market
appeared to be largely for replacement purposes.
Fluctuations in call money during the first part of
the month were accompanied by slower trading in time
money and a rate of about % of one per cent,
higher for most maturities. At the end of the second
week rates again declined to those previously prevail­
ing, which were 3% to 4 y2 per cent, for maturities from
60 days to six months. Some loans were made for
maturities before the first of September at 3y2 per cent.
S to ck

The following diagram shows average monthly bond
prices for a period of ten years, as computed by the
Annalist.

M arket

Stock trading was in small volume in late July and
most of August, but prices continued upward to new
high levels for the year despite domestic labor troubles
and uncertain foreign political conditions. The advance
in railroad stocks was larger than in industrials, and
in both groups became more marked during the third
week following a partial settlement of the coal strike.
The month marks the completion of precisely one year
of almost continuously rising prices, during which the
advance in railroad stocks has averaged about eighteen
points and in industrial stocks about thirty-six points.
At present levels, industrials show a recovery of ap­
proximately half the decline that took place between
November 1919, and August 1921, while railroad stocks
have approached or exceeded the highest 1919 prices.
Total stock transactions during July were 15,000,000
shares, or about 600,000 shares daily. Trading con­
tinued at approximately this rate during early August,
but about August 21, increased somewhat in response
to encouraging reports concerning the railroad and coal
strikes.
Bond

3

Prices of corporation bonds continued upward during
the first three weeks of August to levels about one point
above the previous high point touched in July and the
highest since 1918. High-grade railroad bonds, which
led the advance during the preceding month, were hesi­
tant, and gains in combined price averages were due to
an evening up of prices in other groups. Demand
broadened to include even semi-speculative issues, some
of which reached new high prices. Prime municipal
bonds were slightly firmer in company with corporation
bonds.
The changes in several different bond groups, as
shown by Wall Street Journal averages, were as follows:




Foreign issues continued heavy, due to uncertain­
ties abroad and the heavy volume of new offerings in
recent months. Several issues broke sharply when sup­
port was removed through the dissolution of distributing
syndicates.
July transactions in bonds other than United States
Government securities on the New York Stock Exchange
totaled $192,000,000, somewhat under the June total
and 33 per cent, less than the high level of $287,000,000 established in April. Compared with transac­
tions in July last year, however, there was an increase
of 81 per cent.
U n i t e d S t a t e s G o v e r n m e n t S e c u r i t ie s

M arket

10 Highest grade rails.......................
10 Second grade rails........................
10 Public utilities................................
10 Industrials.......................................
Combined average.........................

1912, 1913 1914 1915 1916 -1917 1918 1919 1920 1921 1911
Average Monthly Price of 40 Bonds

Price
July 20

Price
Aug. 21

Change

91.24
87.06
88.12
95.40
90.45

91.24
89.22
89.05
96.66
91.54

0
+ 2 .1 6
+ 0 .9 3
+ 1 .2 6
+ 1 .0 9

In the latter part of July continued demand for Lib­
erty bonds carried all active issues to new high prices
for the year at or above 101. Thereafter, prices
reacted and by August 22, active issues declined from
one-half to three-fourths of a point from July high
levels. Factors of some influence in this decline appeared
to be the renewed discussion of a soldiers’ bonus, as
well as a tendency for funds to flow into higher yielding
issues. The volume of trading reflected mid-summer
dulness, and July transactions on the New York Stock
Exchange totaled only $111,000,000, the smallest amount
since August 1921.
Offering rates for Treasury certificates and notes
averaged slightly lower during the first three weeks of
August. The call of approximately half the outstanding
Victory 4% per cent, notes for redemption December
15, this year, resulted in an active demand and higher
prices for uncalled notes.
The new issue of 4% per cent, four-year Treasury
notes, offered concurrently with the call for Victory
notes, was more than four times oversubscribed. Of
total allotments of $345,000,000, allotments to this dis­
trict were $117,000,000. The issue is now quoted in the

4

MONTHLY R E V IE W

open m arket to yield 4 .14 . In addition to cash sales,
$14 2,0 0 0 ,0 0 0 new notes w ere issued in exchange for
.Victories, of which $80,000,000 w ere issued in the Se c­
ond D istrict.
N ew

A u g u st new financing reflected the usual seasonal
slackening, and w eekly totals of new issues decreased
to the smallest fo r the year. O f securities offered, refu n d ­
in g of issues previously placed at higher rates con­
tinued in evidence, but there has been also an increas­
in g amount o f borrow ing fo r financing business
expansion.
A notew orthy development of the m onth's corpora­
tion financing w as the sale of stock issues b y large
retail and mail order m erchandising establishments, in
some cases at least fo r financing expansion. The prom pt
subscription afforded these issues gave testim ony of the
change that has occurred both in m erchandising and
investment m arket conditions du ring the past year.
O ffering of domestic State, county, and m unicipal
securities w as slow in A u g u st, but a substantial vol­
ume of issues is reported in prospect fo r early fall.
There was p ra ctica lly an entire absence of new foreign
issues in this m arket up to A u g u st 24.
F o r e ig n E x c h a n g e

The foreign exchange m arket reflected the usual m id­
summer in a ctivity d u rin g A u g u st. Trad in g, which was
confined largely to ord in ary commercial transactions,
w as featured b y firmness in the sterling rate in the
face of considerable weakness in the p rin cipal conti­
nental exchanges. M arks continued the sharp decline
of recent months, reaching a value of 1 / 2 0 of a cent on
A u g u st 24, at a depreciation from gold p a rity of 99.8
p er cent.
C an ad ian exchange reached p a r on A u g u st 1 5 , selling
at this point for the first time since 1 9 1 5 . F a r E a ste rn
and South A m erican exchanges in general held firm
du ring the month.
The follow ing table shows the changes of the month
in the p rin cipal exchanges.

Country

Aug. 19
Last

Change
from
July 20

England.............................
France...............................
Italy...................................
Germany...........................
Belgium.............................
Holland.............................
Switzerland.......................
Spain.................................
Sweden (Stockholm). . . .
Argentina.........................
Brazil.................................
Japan (Yokohama)........
China (Hong Kong). . . .
China (Shanghai)............
India..................................
Canada..............................
Bar Silver in New York.

$4.4775
.0796
.0453
.0008
.0756
.3890
.1907
.1562
.2647
.3619
.1326
.4780
.5813
.7763
.2925
.9988
.6950

+ .0256
- .0 0 4 3
- .0 0 0 6
- .0 0 1 2
-.0 0 3 8
+ .0008
-.0 0 1 1
+ .0007
+ .0052
+ .0024
-.0 0 2 2
+ .0002
0
+ .0025
+ .0019
+ .0085
-.0 0 5 0




\

\
ENGLAND

*~\
\
\
- Z 5 %&---- A-------........

F in a n c in g

' Silver Exchange Basis.

.'-'A?,

Per Cent.
Depreciation
from Par
8.0
58.8
76.5
99.7
60.8
3.2
1.2
19.1
1.2
14.7
59.1
4.1
*
*
39.9
0.1

-50%t

.

^ *.
\ v

i

'

\
\

FRA N C E

•

\
\
\

\

/•-..J

\

-75%&

—

■

*"\ /

V

v -5 8
.......

ITALY

\

76

-/

\
\\

\

•-

GERMANY

»

-100%
1919

19 2 .0

19 2 .1

19 2 ,2 .

Depreciation of Foreign Exchange Rates from Par Value

F o r e ig n T r a d e

E x p o rts from the U nited States d u rin g J u l y w ere
$30,000,000 less than in Ju n e and im ports were
$9,000,000 less. The surplus of outgoing m erchandise
declined to $54,000,000, the smallest export surplus fo r
an y month since F e b ru a ry .
The follow ng table compares totals of exports and
imports, and surplus of exports, fo r the first seven
months of this y ear w ith corresponding totals fo r p re­
vious years.
Since 1 9 1 9 there has been a steady
tendency tow ard the reestablishment of a closer cor­
respondence between exports and imports.
(000,000 Omitted)

Year

Exports

Imports

Excess
Exports

1914
1915
1916
1917
1918
1919
1920
1921
1922

$1,200
1,970
2,925
3,661
3,483
4,626
4,897
2,860
2,126

$1,141
1,009
1,468
1,779
1,787
1,954
3,482
1,499
1,670

$ 60
962
1,458
1,882
1,695
2,671
1,416
1,361
455

The decrease in the J u l y export total m ay be ac­
counted fo r in p a rt b y a decrease in cotton shipments
from 4 9 1,0 79 bales to 3 7 3 ,7 4 2 bales. Th is total w as the
smallest since F e b ru a ry and 29 p er cent, less than
shipments in J u l y last year. F o r the crop y e a r ju st
completed, however, exports w ere considerably larger
than for the preceding crop y e a r both in amount and in
relation to the total crop. F ig u re s fo r the past eleven
years are shown in the follow ing table.

FE D E R A L R E SE R V E AG EN T A T N E W YO R K
(Millions of Dollars)
E

P r o d u c t io n

Year Ending
July 31
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923

(Including Linters)
No. of Bales
16,250,000
14,313,000
14,795,000
16,992,000
12,123,000
12,781,000
12,428,000
12,970,000
12,029,000
13,880,000
8,352,000
11,449,000#

xports

(Including Linters)
No. of Bales
10,719,000
8,746,000
9,151,000
8,545,000
6,191,000
5,739,000
4,476,000
5,664,000
6,598,000
5,725,000
6,404,000

Production figures cover crop grown during preceding calendar
year.
x — Estimated, exclusive of linters.

A fu rth er possible facto r in lower J u l y export totals
w as a continued ligh t dem and fo r iron and steel and
copper.

Ju n e iron and steel shipments were 8 p er cent,

less than those of M ay, though th ey w ere otherwise the
largest since early last year. Copper demand is rela­

Foreign
Net
Financing
Imports
in
of Gold
United
and Silver
States

1921

Total of
Foreign
Financing
and Net
Imports
of Gold
and Silver

United
States
Export
Balance
(Merchan­
dise)

April....................
M ay.....................
June.....................
July.....................
August................
September..........
October...............
November..........
December...........

62
47
30
6
139*
8
42
51
121
53
63
741

29
41
88
81
62
45
60
88
63
42
52
28

91
88
117
87
200
53
102
139
185
95
115
102

445
272
135
86
125
151
147
172
146
155
83
59

1922
January...............
February.............
March.................
April....................
May.....................
June.....................
July.....................

93
58
163
207
39
119
55

28
25
35
10
5
12
43

121
82
198
217
44
131
98

62
35
74
101
55
74
54

January...............
February.............

tively dull from all countries, including Germ any, which
w as the largest bu yer o f A m erican production du rin g
the past year.
Contrasting with quietness in these lines there
developed around the first o f A u g u st h eavy export
business in wheat and a steady demand fo r corn and
rye.

The up w ard trend of the past seven months in

cotton cloth exports continued through Ju n e , and, while
a period of quietness accom panied un certainty over
cotton prices ea rly in A u g u st, the renewed strength in
cotton prices in the th ird week of the month again
brought additional inquiries fo r goods.
F a cto rs in the low er im port total fo r J u l y were
decreases in im ports of silk and sugar. Coffee imports,
on the other hand, increased, and rubber im ports rose
n early 10,000 long tons to 2 5 ,2 4 5 tons, the largest total
since F e b ru a ry .

C u r r e n t B a la n c e

of T rade

The accom panying table, brin gin g up through J u l y
a tabulation printed in the R ev iew of M a y 1 , shows that

* Refunding May $50,000,000.
f Hawaiian Issue sold during year, included.

G o ld

M ovem ent

Gold im ports d u rin g J u l y amounted to about $43,000,000, the largest receipts since Novem ber 1 9 2 1 .
The
large total w as due entirely to B ritish shipments of
$38,000,000.
(000 omitted)
(Monthly Average)
1921

Jan .-Mar. Apr.-June
1922
1922

July
1922

Total
1922

$16,841
5,530
3,071

$6,266
9,345
1,765

$1,954
1,174
816

$38,000
245
580

$62,663
31,804
8,321

C h in a and
Hong Kong
France..........
Denmark.. ..
Norway........
All Other. . . .

1,964
15,891
453
128
13,728

170
3,317
3,437
1,601
3,686

1,040
791
2,115
1,026
2,486

342
1,688
2,131

3,972
14,011
16,655
7,880
20,647

Total.........

$57,606

$29,587

$11,402

$42,986

$165,953

Sweden.........

in recent months credits created in this country through
sales of foreign securities and net im ports of gold and
silver have continued to offset this c o u n try ’s m onthly

W o r ld ’s S e a -G o in g

export balance in merchandise.

The amounts of sea-going steel and iron steam vessels
owned b y prin cip al countries in Ju n e 1 9 2 2 have recently
been announced b y L lo y d ’s R egister of Sh ipping. F i g ­
ures are shown in the follow ing table in thousands of
gross tons, together w ith the change since 1 9 2 1 and since
1 9 1 4 in the amounts owned b y different countries. The
total increase in the y ea r amounts to about 2,600,000
gross tons. The country showing the largest increase is

The figures fo r J u l y ,

however, indicate an im portant alteration in the pro­
portion of credits established here b y these two means.
A m arked reduction in the volume of foreign issues
sold here w as accompanied b y a rise in im ports of gold
and silver to the highest levels since the close of last
year.




S h ip p i n g

MONTHLY R E V IE W

Germ any, which increased her m erchant m arine b y more
than one m illion tons, la rg e ly through purchases from
G reat B rita in and other countries. H olland shows the
second largest increase, w ith 400,000 tons. I n spite o f
h eavy shipbuilding operations the U nited K ingdom
shows a sm all net loss fo r the y e a r due to the sale of
ships.

o f G erm any, where a continued h eavy volume of new
cu rren cy issues w as accom panied b y an increase o f more
than 50 p er cent, in wholesale commodity prices. I n
the first three weeks of A u g u st prices of basic com­
modities in E n g la n d reacted dow nw ard follow ing a
sim ilar movement which began a few weeks earlier in
the U nited States.

(In thousands of gross tons)
D o m e s t i c P r ic e s

Country

June
1914

United Kingdom. . . . 18,877
British Dominions...
1,407
United States.............
1,837
Austria-Hungary. . . .
1,052
Denmark.....................
768
France.........................
1,918
Germany.....................
5,098
Greece.........................
820
Holland.......................
1,471
Italy.............................
1,428
Japan...........................
1,642
Norway.......................
1,923
Spain...........................
883
Sweden........................
992
Other countries.........
2,398
World’s total......... 42,514

W o r ld

Differ­
Differ­
ence
ence
between between
1921 and 1914 and
1922
1922

June
1921

June
1922

19,288
1,950
12,314

19,053
2,201
12,506

+
+

235
251
192

+
176
+
794
+10,669

866
3,046
654
576
2,207
2,378
3,063
2,285
1,094
1,037
3,459
54,217

944
3,303
1,783
653
2,613
2,600
3,325
2,337
1,187
996
3,301
56,802

+
78
-I- 257
+1,129
+
77
+ 406
+ 222
+ 262
+
52
+
93
41
158
+2,585

+
176
+ 1,385
- 3,315
167
+ 1,142
+ 1,172
+ 1,683
+
414
+
304
4
+
+
903
+14,288

P r ic e s

Th e movement o f w orld commodity prices a t wholesale
w as in general sligh tly n p w a rd d u rin g J u l y , although
this movement was not pronounced except in the case

A large increase in the p rice o f fu el resulting from
the coal strike, together w ith some increase in prices
o f farm products ea rly in the month, brought the
D epartm ent of L a b o r index of wholesale prices fo r J u l y
to 1 5 5 , a figure more than 3 p er cent, higher than the
Ju n e level. T h e changes in the index b y com m odity
groups are shown in the follow ing table.

(1913 average = 100 per cent.)

Value of Index
Commodity Group
Farm products......................................
Foods......................................................
Cloths and clothing.............................
Fuel and lighting..................................
Metals....................................................
Building materials...............................
Chemicals and drugs...........................
House furnishing goods......................
Miscellaneous........................................
All groups......................................

Per Cent.
Change

June
1922

July
1922

June to July

131
140
179
225
120
167
122
176
114
150

135
142
180
254
121
170
121
173
114
155

+ 3 .1
+ 1.4
+ 0 .6
+ 1 2 .9
+ 0 .8
+ 1.8
- 0 .8
- 1.7
0.0
+ 3 .3

(1913 average=100 per cent, unless otherwise noted)

Country

Latest
Quotation

United States:
20 basic commodities*.
Dept, of Labor..............
Dun’s ...............................
Bradstreet’s ..................
Great Britain:
Econom ist......................
Statist.....................
20 basic commoditiesi.
France.................................
Ita ly .....................................
Japan...................................
Canada...............................
Australia*...........................
Norway3.............................
Germany*.........................
Denmark*..........................

138 (Aug. 19)
155 (July 15)
144 (Aug. 1)
131 (Aug. 1)
163 (Aug. 1)
157 (Aug. 1)
138 (Aug. 19)
325 (Aug. 1)
537 (July 1)
201 (July av.)
166 (July 15)
156 (June 15)
232 (Aug. 1)
13935 (Aug. 1)
180 (Aug. 1)

P er C ent . C hange
D uring
M ay

June

+
+
+
+
+
+
+
+
+
+
+
+

+ 1 .8
+ 1.4
+ 2 .2
+ 1.7
+ 0 .4
+ 0.1
+ 1.4
+ 2 .6
+ 2 .6
+ 1.5
- 0 .8
+ 0 .6
- 0 .4
+ 1 6 .6r
+ 0 .6

5 .4
3 .5
1.1
1.7
1.9
0 .5
3 .3
1 .0
0 .6
1.6
0 .5
4 .7
2 .1
6 .3 i
1.1

July
+
+
+
+

0 .1
3 .3
0 .1
0 .3
0 .1
1.7
2 .8
0 .0
+ 1.9
+ 0 .5
+ 0 .9
+ 5 2 .5
0 .0

iComputed by this bank. *July 1914 = 100. sDecember 3 1 , 1913June 30, 1914*100.
‘Middle of 1914*100.
‘July 1912-June
1914® 100. r=Revised.




To w ard the latter p a rt of J u l y and e a rly in A u g u st,
the price of w heat broke sh a rp ly and there w ere losses
in a num ber of other basic commodities; so that this
b a n k ’s index o f 20 basic commodities w as 3.8 p er
cent, lower on A u g u st 2 1 than on J u l y 10 . The recent
dow nw ard movement corresponds closely w ith a sim ilar
movement w hich took place in the sp rin g of the year.
The follow ing diagram makes a com parison between
the course of the D epartm ent o f L a b o r index and the
index o f 20 basic commodities m aintained b y this
bank.
The D epartm ent o f L a b o r index is computed
each month and is an average of prices fo r the entire
month, while the index of 20 basic commodities is
computed on M onday of each week and both b y reason
of the commodities included and the method of compu­
tation, reacts more ra p id ly to changed p rice conditions
than does the D epartm ent of L a b o r index.
The Cost of L iv in g index num ber m aintained b y the
N ational In d u strial Conference B o ard shows substan­
tia lly no change fo r J u l y . Th e index now stands at
15 5 .6 ( J u l y 1 9 1 4 , equals 10 0 per cent.).

F E D E R A L R E SE R V E AGENT A T NEW YORK
PER CENT.

a demand for the highest grade o f stenographers at $25
a week, while applicants fo r that type o f position ask
$ 30 and $35 a week.
I n a num ber of occupations the average wage pay­
ment has been reduced gradually through lowering the
hiring rate fo r new employees and without any salary
cuts.

E m p lo y m e n t

Wholesale Prices in the United States According to Two Indices
(1913 Average=100 per cent.)

W ages
The U nited States Steel Corporation announced on
A u gu st 22 an increase of 20 per cent., from 30 to 36
cents an hour, in the wages o f common or unskilled
laborers, to become effective on September 1, and a cor­
responding adjustm ent in wages o f other workers. A
m ajority o f the independent steel companies granted
sim ilar increases in wage rates at about the same time.
The new rate is 80 per cent, above that o f 1915 and
undoubtedly reflects the greater competition fo r un ­
skilled labor, which has been evident in the steel and
other industries during the summer months. This ten­
dency was indicated last m onth by an increase in the
index o f common labor wage rates computed b y this
bank, and reported in the A u gu st 1 Review.
A n increase averaging 47 per cent, and affecting be­
tween 30,000 and 40,000 non-union coal miners in

The New Y o rk State Departm ent o f Labor reported
fo r J u ly a decline o f 60 per cent, in the number em­
ployed in railroad repair shops in New Y o rk State
on account o f the strike. The effect o f this decline upon
the total number o f persons em ployed in industries of
the State was offset by increased em ploym ent in the
miscellaneous metal and machinery industries, in iron
and steel mills, automobile plants, clothing factories,
and in the m anufacture o f building materials and food
products.
The follow ing diagram shows the increase in recent
months in the num ber o f factory workers both in N ew
Y o rk C ity and throughout the State as reported by the
New Y o rk State D epartm ent o f Labor. The New Y o rk
C ity index is much influenced by conditions in the
apparel trades. That industry did not share largely in
the general industrial expansion o f 1918 and 1920, and
in 1921 and 1922, has been ham pered by labor disputes.
In neither the city nor the State is the em ploym ent
index yet back to the 1914 level.
E m ploym ent agencies in the State report a steadily
increasing dem and fo r workers o f all types w ith a cor­
responding decline in the number o f applicants fo r
positions. The number o f applicants, however, continues
to exceed the num ber o f positions except in the cases
o f common labor, the building trades, and a few spe­
cialized occupations.

pec cent

Pennsylvania was announced A u g u st 22 by several coal
companies owned by steel companies which use the en­
tire production of these mines.
The tendency to increase wages has not been u niform
among all types o f workers.
The continuation o f a
gradual downward wage readjustm ent particularly
among clerical workers is reported by a number o f em­
ploym ent agencies in the district. E m ployers frequently
are attem pting to replace at somewhat lower salaries
employees who resign.
This is especially true among
clerical workers. The result is a greater difference than
usual between the salaries offered b y employers and
those which the applicants expect. There is, fo r example,




Number of Workers Employed in Industrial Establishments in
New York State and New York City. (Figures for July, 1914=
100 per cent.)

M ONTHLY R E V IE W

8

Production in Basic Industries

Volume of Building

L a r g e ly b y reason of a shortage in the car supply, in
which the railro ad strike w as a factor, the production
of bitum inous coal in J u l y was about 2 5 per cent, less
than in Ju n e . The weekly figures fo r J u l y and the e arly
weeks of A u g u st showed a gradual increase. The sus­
pension o f anthracite m ining w as p ra ctica lly complete
in the period fo r which reports are available.
The
m an ufactu re of coke has gone fo rw a rd w ith little
interruption.
Other indices of production fo r J u l y show in general,
some interruption of the u p w a rd movement which had
been p ra ctica lly continuous fo r about a year.
Steel
output w as sligh tly sm aller in the face of some dim inu­
tion in the demand, p a rticu la rly the export demand, and
current reports fo r A u g u st indicated a still fu rth er
reduction o f output in that month. To tal p ig iron pro­
duction in J u l y was la rg e r than in Ju n e , but the furnaces
in blast diminished du ring the month from 1 9 2 to 1 7 1 ,
and production in A u g u st w as at a low er rate.
A continued increase in cement production together
w ith a decrease in the output of lum ber m ay be p a rtly
explained b y a recent decrease in contracts let fo r resi­
dential construction and an increase in contracts let fo r
public works and industrial construction.
Representatives of the textile in d u stry report that the
decreased consumption of cotton in J u l y w as due m ainly
to a lighter demand rather than to the coal strike, except
to the extent that the strike exercised an influence on
the general business outlook.
The follow ing table shows fo r successive months the
production of a number of basic commodities expressed
as percentages of estimated normal production. In the
calculation o f normal, allowance has been made fo r both
y e a r to ye a r grow th and seasonal variation.

B u ild in g contract aw ards reported b y the F . W .
Dodge C om pany for the tw enty-seven northeastern
States in J u l y were about 2 per cent, larger than in
Ju n e , but were still sligh tly under the exceptionally
large totals of A p r il and M ay . Residential construc­
tion w as considerably under the Ju n e figure, but this
loss w as more than offset b y large expenditures fo r
public works and educational buildings. The J u l y in­
crease w as m ainly in the C entral W estern States, and
most eastern States showed slight declines. A w a rd s in
N ew Y o rk and N orthern N ew Je r s e y declined about
4 per cent., due to a fu rth er reduction in aw ards in N ew
Y o rk C ity .

Feb.

Anthracite coal mined.............
Bituminous coal mined...........
Pig iron production.................
Steel ingot production.............
Copper production, mine. . . .
Tin deliveries............................
Crude petroleum production..
Portland cement production..
Wheat flour production..........
Meat slaughtered.....................
Sugar meltings..........................
Wool consumption*.................
Cotton consumption...............
Lumber production.................
Wood pulp production.............
Tobacco consumption.............
Paper (total) production*.. ..
Gasoline production................

99
82
57
58
33
58
111
82
105
98
129
115
92
83
90
77
85
89

Mar. Apr. May June July
105
89
65
71
46
103
111
104
114
112
142
128
91
93
100
83
100
97

p — Preliminary,
r— Revised.
* Seasonal variation not^allowed for.




0. 3p

34p
67
74
59
100
109
111
95
96
124
95
80
75
92
79
89
95

0.4p
41p
73
81
68
92
111
119
100
108
146

l.Op l A p
43p 32p
82
79
82
79
74
68
90
75
HOp . . •
120 128
104 142
112
135 i3 i

’ 88
96
108
91
100
96

92
82 r
110
ioo
101

*84
76

T r a ffic

F re ig h t car loadings on the railroads of the U nited
States in recent weeks have been from 8 to 1 0 p er
cent, heavier than in the corresponding weeks o f 1 9 2 1 ,
but have been about the same amount behind 19 2 0 . The
increase over last y e a r w as due chiefly to a steady gain
in the movement of m erchandise and miscellaneous
freight, and w as in spite of low er coal loadings since
A p ril.
Coal traffic increased sligh tly du rin g the latter p a rt
o f J u l y and e a rly in A u g u st but w as still sligh tly un der
the weekly totals before the railroad strike. T h e dia­
gram below on the le ft shows coal loadings b y weeks
from Ja n u a r y to A u g u st of 1 9 2 1 and 19 2 2 , while that
to the righ t shows fo r each week cum ulative loadings,
that is, total loadings since the first o f the year.
THOUSANDS
OF CARS

MILLIONS
OF CARS

£50

£00

(Normal Production=:100 Per Cent.)
Commodity

R a ilw a y

A i
r y

rA1 9 2 1

150

N*
\

%
\ /
192/

100

y

7
/
V■

50

EKS
a JAN FE&MAR.APR. MAYJUNEE> JULYA
UG.

Coal Loadings Each Week

Total Coal Loadings from
the First of the Year
Through Each Week

Loadings of coal were much heavier in the first three
months of 19 2 2 than in the same period of 1 9 2 1 , la rg e ly
in anticipation of the coal strike, and the total move­
ment up to A p r il had exceeded loadings in the same
period of 1 9 2 1 b y two or three w eeks' operations. U p
to the second week of A u g u st loadings w ere about five
weeks behind 1 9 2 1 figures.

FED E R A L RE SE R V E AGENT A T NEW YORK

The movement o f the new crops began in J u l y 19 2 2 ,
at a somewhat slower rate than last year, but total grain
traffic up to the end of the second week in A u g u st has
been larger than in 1 9 2 1 because of a heavier movement
o f grain ea rly in the year. Th e diagram below to the le ft
compares w eekly totals while that to the righ t shows
cum ulative loadings since the first of the year.
THOUSANDS
OF CARS

MILLIONS
OF CARS

N et ra ilw a y operating income (a fte r adjustm ent fo r
joint fa c ility and equipment rentals) of the Class 1
roads fo r the first h a lf of 1 9 2 2 w as reported b y the
B u reau of R a ilw a y Econom ics at an annual rate of
about 4.4 p er cent, on the tentative p ro p erty valuation
of these roads as determined b y the Interstate Commerce
Commission. In M arch, the last month before the coal
strike, earnings reached the 5 % p er cent, rate fixed as
a fa ir return b y the Interstate Commerce Commission,
but in A p ril, M ay, and Ju n e , they ranged from a rate
of about 3 y 2 per cent, to about 4 % per cent.

C rop

Grain Loadings Each Week

R a ilw a y

Total Grain Loadings
from the First of the Year
Through Each Week

E a r n in g s

N et earnings of 2 0 1 Class 1 railroads in the U nited
States were higher fo r the first six months of 1 9 2 2 than
fo r the same period of a n y other y e a r since 1 9 1 7 . D e­
tailed figures on earnings and expenses, indicate that
there has been little increase in gross income, and higher
net earnings have been due la rg e ly to reduction in w ork­
in g forces and to sm aller repair, renewal, and m ain­
tenance outlays.
Th e follow ing diagram compares net earnings fo r the
first h a lf o f each y e a r since 1 9 1 3 as tabulated b y the
Com m ercial and F in a n cia l Chronicle.
553

552

Net Earnings of Class 1 Railroads in the United States in the
First 6 Months of Different Years (in Millions of Dollars)




9

C o n d itio n s

Su bstan tial im provem ent du rin g J u l y in the condit ic r o f most im portant crops w as reported b y the
Departm ent o f A g ricu ltu re .
The crop estimate fo r
A u g u st 1 , placed the average condition of all crops in
the U nited States at 1 per cent, above the ten-year
average fo r that date, as com pared with 2 per cent, below
the average on J u l y 1 . C rops in N ew Y o rk and N ew
Je r s e y w ere in relatively better condition than those
of other States except N orth Dakota and M ontana.
Probable yields o f corn and wheat in view o f A u g u st
1 crop conditions were estimated fo r 19 2 2 , at p ra c ­
tica lly the same as in 1 9 2 1 . The cotton crop w as esti­
m ated at 11,4 4 9 ,0 0 0 bales, 40 per cent, more than in
1 9 2 1 . The indicated cotton and corn crops are above
the average of the past five years while that of wheat
is about equal to the average.

W h o le s a le T r a d e

The weighted index of wholesale trade in this district,
computed b y this bank from reports received from 1 2 2
dealers in ten im portant commodities, shows that the
J u l y sales w ere 2 .3 p er cent, greater than the sales of
J u l y a y e a r ago. T h is is the largest gain over the same
month in the preceding y e a r that has been made since
Ju n e 19 20 . The gain reflects greater confidence of
retail m erchants in p lacing fa ll orders and the some­
w hat higher prices w hich some o f the commodities now
command.
The diagram s at the top of page 10 compare the
J u l y sales o f each of these ten commodities fo r the past
fou r years.
The columns represent only the dollar
value of sales and no allowance has been made fo r
fluctuations in prices.
Sales in J u l y w ere large r than in J u l y a y e a r ago
in eight of the ten commodities. Shoes and d r y goods
showed losses. O ur index of shoe sales has been g reatly
reduced b y the closing of a num ber o f factories in
Rochester fo r several months on account of labor trou­
bles. The erratic fluctuations in the price of ra w cotton
have retarded sales o f d r y goods, as buyers are reluc­
tant to order un til prices become more stable.

10

M ONTHLY R E V IE W

DRY GOODS

CLOTHING

GROCERIES

flu rin fin [in
19

*20

'ZO

*19

'ZZ

*21

ZZ

‘21

*19

‘2 0

*19

20

‘21

‘22

‘19

‘2 0

*21

ZZ

19

'19

20

A 4 3 p er cent, increase in sales o f diamonds since a
yea r ago w as due to the fa c t that sales in J u l y of last
Sales of diamonds are still
19 19 .

The

increase in machine tool sales reflects greater a ctivity
in industrial plants.
Th e figures in detail are shown in the follow ing table.

D

Firms
Reporting July
1919
Diamonds...........
Machine Tools..
Jewelry................
Hardware............
Drugs...................
Clothing (Total).
(a) Men’s........
( b ) Women’s ..
Groceries.............
Stationery...........
Dry Goods..........
Shoes....................
Total (weighted)

7
4
6
11
6
22
(8 )

(14)
42
6
8

10
122

July
1920

July
1921

Per
Cent.
Change
July 1921
July
to
1922 July 1922

27
132
93
123
101
93
126
66
112
135
107
65
100

16
27
30
72
98
75
104
51
62
80
67
57
64

22
34
36
82
104
79
111
53
65
81
65
45
66

ollar

100
100
100
100
100
100
100
100
100
100
100
100
100

V alue

of

‘22

I I I I Ti■■ I l i i

*22

only about one-fifth as large as in J u l y

‘21

JEWELRY

21

22

19

20

*21

ZZ

‘19

Sales of Representative Wholesale Houses in July 1922, Compared with Sales in July of Previous Years.
1919=100 per cent.) No Allowance is Made for Price Changes

y e a r were g re atly reduced.

‘20

DIAMONDS

STATIONERY

MACHINE TOOLS

HARDWARE

‘21

DRUGS

SHOES

Sa l e s

+ 4 2 .7
+ 2 6 .5
+ 2 2 .7
+ 1 3 .7
+ 6.3
+ 5.4
+ 6.6
+ 3.3
+ 4.5
+ 0 .9
- 2 .7
-2 1 .3
+ 2 .3

‘20

* it

‘2,2,

(Sales in July

C ity the departm ent stores reported an increase o f 2 .3
p er cent., due m ainly to la rg e r sales of house fu rn ish ­
ings, reflecting the completion of large num bers o f new
residential buildings.
Sales in B uffalo, N ew ark , and
Syracu se were about 4 p er cent, below those o f last J u l y .
Sales in B rid gep o rt increased 5 p e r cent, follow ing
greater a ctiv ity in m an ufactu rin g plants in th at city.
M id-sum m er is norm ally the dullest period of the
ye a r in the business o f departm ent stores, as m an y peo­
ple are a w a y on vacations, and in N e w Y o r k C ity the
stores are closed on S a tu rd a y s. J u l y sales w ere about
one-third below those of Ju n e , and in norm al years
A u g u st sales are sligh tly below those o f J u l y .
They
increase in Septem ber and the height of the fa ll bu yin g
PER CENT.

D e p a rtm e n t S to re T ra d e

J u l y sales of departm ent stores in this district were
about the same as those of last J u l y , according to
reports received b y this bank from 50 firms operating
64 stores.
The largest decline, which amounted to 6 per cent.,
w as reported b y those stores that sell ap parel exclu­
sively and w as due to somewhat low er prices, p articu ­
la r ly in connection w ith special sales. In N ew Y o rk




Sales of 64 Department Stores in the Second District
Average=100 per cent.)

(1919

FED E R A L R E SER VE AGENT A T NEW YORK

11

season occurs in October. The foregoing diagram of
the sales b y departm ent stores in this district indicates

to low er prices. The num ber o f pairs o f shoes sold b y
these stores w as 5 .5 p er cent, greater in J u l y of this

how closely the sales o f different years follow the same
J u l y sales b y m ail order houses were n early 20 per

ye a r than last. The average p rice p er p a ir declined 7 .2
per cent, from $ 3 .6 3 last J u l y , to $ 3 .3 7 in J u l y of this
year.

cent, greater than those of last y e a r and reflect the

D etailed figures are shown in the table that follows.

seasonal variations.

im provem ent in the financial position o f agricu ltu ral
districts where the bulk of m ail order business origi­
nates.

M ail order sales continued to be much below the

levels reached in 1 9 1 9 and 19 20 .
Detailed figures are shown in the table that follows.

Stock on H and
Retail Price
(in percentages)

N et Sales
(in percentages)

Type
of Store

July
1919

July
1920

July
1921

% Change
in Sales
per Store,
July July 1921
1922 to July 1922

93
81
89
76
60
85
84

138
104
108
107
95
119
117

100
100
100
100
100
100
100

120
117
101
99
98
98
113

Number
of Stores
July
1921

July
1922

Grocery.. 6,001 8,006
Ten Cent. 1,602 1,665
255
251
Drug. . . .
Cigar. . . .
2,246 2,549
373
Apparel. .
369
186
Shoe........
210
Total. . 10,659 13,054

T otal N et Sales
(in percentages)

- 9 .7
+ 1 2 .6
+ 2.9
-1 2 .7
- 2 .8
- 1 3 .1
- 7.8

July July July July Aug.l Aug.l Aug.l Aug.l
1919 1920 1921 1922 1919 1920 1921 1922
All Dept. Stores.. 95
New York. . ..
99
Buffalo.............
91
Newark...........
92
74
Rochester........
90
Syracuse.. . . . .
84
Bridgeport.. ..
Elsewhere in
2nd District 79
Apparel Stores...
98
Mail Ord. Houses 153

113
115
110
116
106
117
137

100
100
100
100
100
100
100

100
102
96
96
100
95
105

87
86
93
90
87
92
99

125
124
122
133
143
135
119

100
100
100
100
100
100
100

99
101
101
99
93
83
99

109
105
160

100
100
100

102
94
119

78
93
*

104
129
*

100
100
*

89
107
*

B u s i n e s s F a il u r e s

The ,num ber and aggregate liabilities o f commercial
failures in the U nited States reported b y D u n ’s fo r
J u l y were p ra ctica lly the same as in Ju n e , though nor­
m ally the J u l y total shows an increase.

F a ilu re s were

reported fo r the first three weeks of A u g u st at about
the same rate as in J u l y .
This b an k ’s index, which is based upon the number
of failures each month in proportion to the num ber o f

Stocks held b y department stores declined about 6
p e r cent, between J u l y 1 and A u g u st 1, a norm al decline
d u rin g the summer months.

The value of the stocks

firms in business and which makes allowance fo r sea­
sonal change, was lower fo r J u l y than fo r a n y month
since October 1 9 2 1 . The follow ing diagram shows the
decline in recent months.

held is about the same as one y ea r ago.
Some m erchants have placed large orders fo r fa ll
goods while others have delayed m aking extensive p u r­
chases. In general, those stores which are situated a
long distance from N ew Y o rk and other m arkets have
bought freely to avoid delays which m ight result from
ra ilw a y labor troubles. B u t the stores which are sit­
uated in the v icin ity of p rim a ry markets have delayed
placin g the bulk of their fall orders.

C h a in

S to re

S a le s

J u l y sales b y the chain store system s that report to
this bank were 12 .9 per cent, greater than those o f J u l y
last year.

W ith the exception of the five and ten cent

stores, this increase has been due la rg e ly to the opening
o f new stores b y the reporting systems.
Sales b y shoe stores show a loss of 2 per cent., due




Percentage of Firms Failing to the Number in Business, in Terms
of Annual Rate. Seasonal Variation Allowed For

Federal Reserve Banks as Banking Agents for the Government
H E largest business organization in this country
is the U nited States Governm ent. To meet its
annual expenditures it collects in revenue, or bor­
rows through sale of securities, sums v a stly greater than
an y ever approached b y a p rivate corporation. U ntil
recently, however, there has been no country-w ide or­
ganization to handle these operations.

T

T h e I n d e p e n d e n t T r e a su r y

Th e first and second U nited States B an ks, which re p ­
resented an attem pt to handle Governm ent funds
through one central F e d e ra l bank, succumbed to
opposition of the State banks and a belief that th ey
were undem ocratic.
So insecure, however, were G ov­
ernment deposits in the then b ad ly m anaged State
banks that the Governm ent in 18 4 6 created the S u b ­
trea su ry System , or the so-called Independent T rea s­
u ry , which w as designed to c a rry on all Governm ent
financial operations com pletely independent of the
banks o f the country.
D u rin g the C ivil W a r, and afterw ard s, the G overn­
m ent found increasing need fo r closer cooperation w ith
the banks fo r distributin g its securities and other p u r­
poses. M oreover the custom of locking up funds in the
T re a su ry vau lts fo r indefinite periods often resulted in
a serious shortage o f fund s fo r the conduct o f the coun­
t r y ’s business. C ertain funds were allowed to accum u­
late in depository banks but there w as no satisfacto ry
system of distributin g the fund s among the banks.

B ankers

fo r t h e

Governm ent

One of the objects of the F e d e ral R eserve A c t w as to
provide the Governm ent w ith a suitable banking agent.
U nder the term s o f the A c t, on Novem ber 2 3 , 1 9 1 5 , the
F ed eral R eserve B an ks were officially appointed fiscal
agents of the Governm ent b y the Se cre tary of the
T re a su ry , and were empowered to accept Governm ent
receipts, c a r ry Governm ent deposits, and p a y checks
a n d w arran ts draw n b y the Treasu rer of the U nited
States, as w ell as coupons on the Governm ent debt.
To these typ es of service the Reserve banks are b y
the nature of their organization p ecu liarly adapted.
A n y Governm ent check, no m atter where draw n, w ill
be paid at a n y o f the 1 2 Reserve banks or their 2 3
branches, thus p rovidin g a convenient and prom pt
means of paym ent. The breadth of the Reserve bank
facilities are sim ilarly convenient fo r the handling of
T re a su ry notes and certificates of indebtedness, which
m ay be redeemed at a n y Reserve bank regardless of
where they were sold.
The p rivate telegraph system
m aintained b y the Reserve banks b y which funds can
be tran sferred instan tly to and from different sections
o f the country has also proved absolutely essential to the
Governm ent’s immense operations during and since the
W o rld W a r.

M ee t in g G o v e r n m e n t W ar N eeds
The outbreak of the w a r resulted not only in a vast
expansion in the operations o f the Reserve banks as
bankers to the Government, but in the assumption of
responsibilities, unprecedented in both character and
volume, in effecting the flotation and distribution of
Governm ent w a r securities. A s adm inistrative centers
o f the L ib e rty Lo an committees, th ey were the heart of
the greatest bond selling organizations ever created.
T h e y advertised the bonds, handled the subscriptions




and paym ents, distributed the bonds, and kept the ac­
counts of five bond issues aggregatin g $21,000,000,000
w ith more than 63,000,000 subscriptions. J u s t as cu r­
ren cy requires changing from one denomination to an­
other, so these issues o f L ib e rty bonds and V ic to ry
notes require changing not only from one denomination
to another, but also from one issue to another, from
registered to unregistered or vice versa, from tem porary
to permanent.
These operations were undertaken b y
the Reserve banks and are still being carried forw ard.
Interest paym ents are made through the Reserve banks
and V ic to ry notes as th ey m ature are being redeemed.
The Reserve banks have also assumed charge of the
sale and redem ption in th eir respective districts of the
successive issues of T re a su ry certificates o f indebtedness
b y means o f which the Governm ent supplied its current
needs in intervals between the flotation o f L ib e rty Loans
and now m aintains its floating indebtedness.
In all,
from the first certificate issue in 1 9 1 7 to the most recent
certificate and short note issues in the refun din g pro­
gram of the T rea su ry, the Reserve banks acted as agents
fo r the distribution of $36,000,000,000 short term Gov­
ernment issues, and fo r the redemption of $32,00 0,000,000. To avoid disturbance to the m oney market,
funds obtained b y the Governm ent from sales of all
such issues are perm itted to rem ain in the banks as G ov­
ernment deposits until required, secured b y collateral
pledged w ith the R eserve banks.

S ize

of

O p e r a t io n s

Some idea o f the size of these operations m ay be
gathered from the follow ing figures fo r the y e a r 1 9 2 1
fo r the F e d e ra l Reserve B an k of N ew Y o rk alone:
Government cheeks handled......................................... $1,638,000,000
Government funds transferred by telegraph.............$1,220,000,000
Government bonds and notes handled for conver­
sion or exchange...................................................... $5,639,000,000
Certificates of indebtedness and short term notes
sold............................................................................. $1,481,000,000
Number of employees in fiscal agency departments
264

The cost of fiscal agency operations o f the Reserve
banks up to J u l y 1 , 1 9 2 1 , w as reim bursed b y the G ov­
ernment, but since that date, all expenses, except a
few incidentals, have been borne b y the Reserve banks.
F ro m J u l y 1 to Decem ber 3 1 , 1 9 2 1 , the services p er­
form ed fo r the Governm ent b y the F e d e ra l Reserve
B an k of N ew Y o rk , solely in connection w ith the
handling of Governm ent loans cost $ 5 7 2 ,7 4 8 .
W ith the continuous enlargem ent of the fiscal agency
operations of the R eserve banks, the necessity fo r m ain­
tainin g the Subtreasuries w as reduced correspondingly.
B y A c t of Congress, approved M a y 29, 19 2 0 , their dis­
continuance w as authorized, and e a rly in the ensuing
y e a r the Reserve banks fo rm ally took over all their
functions except the keeping of the m etallic reserve be­
hind gold and silver certificates and U nited States notes,
which was transferred to the T re a su ry at W ashington.
Th e closing of the Subtreasuries m arks the final pass­
ing of the Independent T re a su ry and its replacem ent
b y the Reserve banks. In place o f an expensive, cum­
bersome, inelastic system fo r handling public fund s al­
most entirely unrelated to the business life of the coun­
try , the Reserve banks provide p ra ctica lly w ithout cost
to the Government, a flexible organization im m ediately
related to the banking and business life of the entire
country.