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Authorized for public release by the FOMC Secretariat on 8/21/2020 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551 January 15, 1974 CONFIDENTIAL (FR) TO: Federal Open Market Committee FROM: Arthur L. Broida Enclosed are copies of the reports of examination of the System Open Market Account and of foreign currency operations, made by the Board's Division of Federal Reserve Bank Operations as at the close of business July 27, 1973, and submitted by Mr. McWhirter, Associate Director. An audit of the Account is made in connection with examination of the Federal Reserve Bank of New York, in accordance with long-standing procedures most recently reaffirmed by the Committee at its meeting on March 10, 1970. Also enclosed are (1) a memorandum from Mr. Holmes, dated January 3, 1974, which discusses the criticisms of the System Open Market Account contained in the examination report and the steps that have been and are being taken to eliminate the unsatisfactory conditions noted in the report; and (2) a letter from Mr. McWhirter, dated January 14, 1974, which states in part: "Based on the information provided .. . it appears that management has completed or set in motion all the steps required to correct the conditions outlined in our Report of Examination." It is contemplated that the enclosed reports will be discussed at the meeting of the Committee to be held on January 22, 1974. Arthur L. Broida Secretary Federal Open Market Committee Enclosures Authorized for public release by the FOMC Secretariat on 8/21/2020 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 DIVISION OF FEDERAL RESERVE BANK OPERATIONS January 14, 1974 Mr. Arthur L. Broida Secretary Federal Open Market Committee Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Broida: In the 1973 Report of Examination of the System Open Market Account, we included statements which presented fairly the financial position of the Account. The Balance Sheet carried two footnotes resulting from an accumulation of errors in records which were identified and reconciled prior to the conclusion of the examination. Some of the errors were corrected during the examination but others were not corrected because of problems or inadequacies in data processing programs. From our analysis, we concluded that the established procedures were adequate, if followed, to detect such errors. However, we observed that the prescribed procedures were not always being followed. We noted that the problems were primarily attributable to an increased volume of work, a shortage of clerical personnel, and difficulties relating to computer services and obsolescent programs. We were also critical of supervision in the Department. Supervision had deteriorated as supervisors were pressed to perform more and more routine duties because of volume increases and the shortage of clerical personnel. Management recognized the seriousness and sensitivity of the situation and began taking action to correct the unsatisfactory conditions prior to the end of the examination. At that time, there was no way to predict the timing for implementing improvements which were needed in computer services and data processing programs. Authorized for public release by the FOMC Secretariat on 8/21/2020 Mr. Broida Management responded to the examination findings on December 21 and stated that additional staff members had been employed, that delivery of data processing equipment was expected before the end of the year to replace outmoded equipment, and that the System Open Market Account books were in the final steps of conversion to a new computer program. The actions related to data processing are designed to eliminate much of the accounting work which has been done manually, to decrease the chance for error, and to permit prompt adjustments when errors are discovered. On January 3, 1974, Mr. Holmes transmitted a memorandum to the Federal Open Market Committee providing additional information about the unsatisfactory conditions and the corrective action that management has taken. His memorandum indicates that new data processing equipment in the department is being tested, that new computer programs are now being used, that employees are being kept aware of the necessity to perform standard checking procedures, and that supervisory employees are being relieved of routine operations so that they can effectively discharge their supervisory responsibilities. Mr. Holmes also states that provisions to implement all of the changes have been incorporated into the Bank's plans and budgets. On January 8, 1974, General Auditor Smith of the New York Reserve Bank advised me that he had read Mr. Holmes' memorandum to the Committee. He stated that he was satisfied with the corrective measures that have been taken or that were contemplated to upgrade the quality of recordkeeping connected with transactions of the System Open Market Account. He also stated that none of their recent audits had disclosed out-ofbalance conditions. Based on the information provided in management's response to the examination findings, on the information provided in Mr. Holmes' memorandum, and on Mr. Smith's letter, it appears that management has completed or set in motion all the steps required to correct the conditions outlined in our Report of Examination. The General Auditor at the New York B to monitor the operations and the changes being inue ove Authorized for public release by the FOMC Secretariat on 8/21/2020 Mr. Broida -3- the conditions. The Board's examiners will again review the System Open Market Account operations in 1974 and will report the findings to the Committee at the conclusion of the examination. Very truly yours, E. Maurice McWhirter Associate Director Authorized for public release by the FOMC Secretariat on 8/21/2020 January 3, 1974 CONFIDENTIAL (FR) TO: Federal Open Market Committee FROM: Alan R. Holmes SUBJECT: Examination of System Open Market Account The report, dated August 28, 1973, of examination of the System Open Market Account as at the close of business July 27, 1973, by examiners of the Board of Governors contained several criticisms on the record-keeping for the Account during the year. This memorandum discusses the criticisms and the steps that have been and are being taken to eliminate the unsatisiactory conditions noted in the report. The criticisms are summarized in the report as follows: "Our review of operations disclosed that departmental records, in several instances, did not agree with balances in the general ledger. Exhibit A appended to this report includes an item for $211 thousand (Issues Ledger increases) and another item for $71 thousand (Nonparticipated balances-net), both of which resulted from an accumulation of errors in records. This situation was primarily attributable to clerical errors and was also aggravated by difficulties in getting work to and from the Computer Services Department. It is evident that there has been a lapse in complying with established procedures designed to prevent such errors. Adjusting entries have been, or will be, functioned to correct the account records." Authorized for public release by the FOMC Secretariat on 8/21/2020 -2- The situation noted in the report resulted partly from clerical errors made under tremendous pressure by employees of the Securities Department who were responsible for processing the record volume of transactions executed by the Trading Desk. The volume of these transactions increased by an estimated 80 per cent over the 1972 volume, mainly repurchase agreements, securities loans, and transactions undertaken for foreign accounts. During the first half of 1973, the Securities Department sought to handle the increasing volume without any increase in staff, in an attempt to comply with System-wide budgetary restraints. The result was a sharp rise in overtime payments, increas- ing delivery problems with dealers and their clearing banks, and other work pressures that culminated in the clerical errors noted in the report. While there are established checking procedures that should have revealed these errors without delay, the supervisory personnel who regularly make sure these checks are made were temporarily diverted to other tasks because of the heavy workload. Another source of difficulty arose in the area of computer operations. Machines that had been used for long periods in the Securities Department--and retained partly because of cost considerations--were subject to frequent breakdown, causing undue delays and errors that had to be detected and corrected by the overburdened staff. Meanwhile, there was a long delay in the completion of a new program to handle accounting for the System Open Market Account on machines Authorized for public release by the FOMC Secretariat on 8/21/2020 that would cover transactions in Government agency securities and remedy some of the defects of the old program. Accounting for transactions in agency issues has had to be done manually ever since the Committee authorized such operations in September 1971, even though it planned for the work to be processed on the computer by the had been end of that year. Even before the receipt of the examination report last summer, steps were being taken to correct these unsatisfactory conditions--of which the Account Management was already aware. An increase of three in the staff of the Securities Department, initiated while the examiners were at the Bank, was approved and additional employees were obtained. In addition, Top priority steps were taken to improve the automation of the Division. was given by the Computer Support Department and the Computer Operations Department to System Account needs, and biweekly meetings of representatives of those departments and of the Securities and Auditing Departments were instituted. In addition, as part of the Federal Reserve Bank of New York's "Statement of the Bank's Primary Missions and Related Objectives for 1974", the following mission and objective have been adopted: Mission: To interpret, execute and implement domestic policy directives of the FOMC. Objective: To ensure that the operational needs of the Open Market Operations and Treasury Authorized for public release by the FOMC Secretariat on 8/21/2020 Issues function receive needed support from within the Bank--including the provision of the necessary staffing, computer services, and research facilities--and also to seek procedural improvements within the System as a whole in order to facilitate the operations of the Trading Desk and minimize operating problems. Efforts to complete the reprogramming of the System Open Market Account to a new, comprehensive 360 program were intensified. the end of the year Toward the new and old programs were being run in parallel, and the old program is now being phased out. After further experience the new program should permit routine performance of daily accounting operations, including the accounting for Government agency issues, and overburdened employees will be able to concentrate on the preparation of accurate, fully checked accounting records. In the meantime, per- sonnel responsible for performing standard checking procedures have been made to understand that there must be no delays in making these checks. These steps are expected to relieve supervisory employees from routine operations and permit them to exercise their supervisory functions in an effective manner. Finally, arrangements have been made to replace the obsolete data processing equipment used in the Securities Department with new Authorized for public release by the FOMC Secretariat on 8/21/2020 -5- equipment of larger capacity. The first of the new machines has been produced and delivered, and is undergoing on-site tests. The new machines will be under the supervision of the Government Bond and Safekeeping Department, which has responsibility for the maintenance of records of book-entry and other holdings of securities and for the delivery and receipt of securities by or to the Federal Reserve Bank of New York. After the changeover has been completed early in 1974, the Securities Department will then be in a better position to concentrate on its primary responsibility for the accuracy of the System Account records and for furnishing other Reserve Banks with the data necessary to keep their participation in the Account up to date. Provisions to implement all these changes have been incorporated into the Bank's plans and budgets. I therefore believe that we have completed or set in motion all the steps required to meet the criticisms contained in the examiners' report. Authorized for public release by the FOMC Secretariat on 8/21/2020 CONFIDENTIAL REPORTS OF EXAMINATION OF THE SYSTEM OPEN MARKET ACCOUNT AND FOREIGN CURRENCY OPERATIONS AT THE CLOSE OF BUSINESS JULY 27, 1973 Board of Governors of the Federal Reserve System Washington, D. C. Authorized for public release by the FOMC Secretariat on 8/21/2020 REPORT OF EXAMINATION OF THE SYSTEM OPEN MARKET ACCOUNT AT THE CLOSE OF BUSINESS JULY 27, 1973 Board of Governors of the Federal Reserve System Washington, D. C. Authorized for public release by the FOMC Secretariat on 8/21/2020 SYSTEM OPEN MARKET ACCOUNT CONTENTS Text Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . Exhibits Balance Sheet . . . . . . . . . . . Net Earnings . . . . . . . . . . . . . . . . . . . . Net Profit or Loss on Sales and Exchanges . . . . . . . . . . . . @jee ee e @ Schedules Inventory and Appraisal of Holdings . . . . Participations of the Federal Reserve Banks in U.S. Treasury and Government Agency Securities by Class of Security . .. Participations of the Federal Reserve Banks ........... . . . . .. . . . . . . . . . in the Account . . . Attachment Procedures With Respect to Allocations of the Account I . ... . III Authorized for public release by the FOMC Secretariat on 8/21/2020 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 August 28, 1973 CONFIDENTIAL (FR) Mr. Arthur L. Broida Secretary Federal Open Market Committee Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Broida: An examination of the System Open Market Account was made at the close of business July 27, 1973, in conjunction with our annual examination of the Federal Reserve Bank of New York. This report is submitted for the information of the Federal Open Market Committee in compliance with the Committee's standing request. SCOPE OF EXAMINATION The examination, conducted in accordance with generally accepted auditing standards, included verification of the holdings in the Account, review of transactions for propriety as to authorization and processing, tests of the accounting records, evaluation of internal controls, review of the scope and frequency of audits Authorized for public release by the FOMC Secretariat on 8/21/2020 - 2SCOPE OF EXAMINATION (continued) made by the resident auditing staff, and other examination procedures as we considered necessary or appropriate. SUMMARY OF FINDINGS In our opinion, the accompanying statements (Exhibits A, B, and C) present fairly the financial position of the Account at July 27, 1973, and the results of operations for the periods indicated therein. During the interval between examinations, allocations of the Account among the twelve Federal Reserve Banks were made in accordance with procedures approved by the Federal Open Market Committee (refer to Attachment). We determined that transactions in the Account since our previous examination were within the limits prescribed in the pertinent authorizations issued by the Federal Open Market Committee. Our review of operations disclosed that departmental records, in several instances, did not agree with balances in the general ledger. Exhibit A appended to this report includes an item for $211 thousand (Issues Ledger increases) and another item for $71 thousand (Nonparticipated balances- net), both of which resulted from an accumulation of errors in records. This situation was primarily attribut- able to clerical errors and was also aggravated by difficulties in getting work to and from the Computer Services Department. It is Authorized for public release by the FOMC Secretariat on 8/21/2020 - 3- SUMMARY OF FINDINGS (continued) evident that there has been a lapse in complying with established procedures designed to prevent such errors. Adjusting entries have been, or will be, functioned to correct the accounting records. The volume of transactions processed in the first six months of 1973 has, on an annualized basis, increased by 80 per cent over 1972 volume while the size of the staff has remained stable. The increased workload has placed a burden on the clerical staff and particularly on the nonofficial supervisors. The examination staff observed a deterioration of employee morale which is probably due to the fact that overtime has become commonplace and because employees feel that they are working under undue pressures. In our discussions with management, we were informed that the current unsatisfactory conditions would be partially alleviated by (1) additions to the staff which were requested during the examination, (2) the installation of larger capacity equipment now being planned in cooperation with the Computer Services Department, and (3) the implementation of new computer programs which have been in the developmental process for four years. In the current year to date of examination, operations resulted in net earnings of $2,553.6 million (Exhibit B) and a net loss of $12.1 million (Exhibit C) on securities sold. Authorized for public release by the FOMC Secretariat on 8/21/2020 -4The following figures reflect a comparison of net earnings and the net profit from sale and exchange transactions for the year 1972 with corresponding totals for the preceding year. Net profit for 1972 and 1971 includes $105 thousand and $91.8 million, respectively, which resulted from advance refunding adjustments by the Treasury on securities exchanged. 1972 1971 Increase (Decrease) (In thousands) Net earnings Net profit on sale and exchange of securities $3,763,910 $3,682,614 $ 81,296 2,986 $ 101,992 $(99,006) Detailed statements covering the inventory and appraisal of holdings in the Account and related participations of the respective Reserve Banks are presented in the appended schedules. Respectfully submitted, E. Maurice McWhirter Associate Director Division of Federal Reserve Bank Operations Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit A BALANCE SHEET (In thousands) At the close of business July 27, 1973 ASSETS U.S. Government securities at par value (Note A) (Schedule I)Treasury Bills $34,857,300 Treasury Notes 37,138,248 Treasury Bonds 3,663,655 Agency Issues 1,616,858 $77,276,061 Accrued interestTreasury Notes $ 798,068 Treasury Bonds 59,075 Agency Issues 29,811 211 1/ Issues Ledger Increases 887,165 Premium (Schedule I)Treasury Notes $ 42,261 675 Treasury Bonds Agency Issues 14,682 Total assets 1/ totaling $6 thousand. Consists of an underaccrual of $205 thousand on one issue and three other adjustments Correcting entries are to be functioned on or before the next coupon maturity date. 57,618 $78,220,844 Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit A (continued) BALANCE SHEET (In thousands) LIABILITIES Discount (Schedule I)$ Treasury Bills 600,519 Treasury Notes 59,133 Treasury Bonds 142,786 11,869 Agency Issues $ 814,307 PARTICIPATIONS Net account (Schedule III)Federal Reserve Bank- $ 3,531,438 Boston 20,816,922 New York 4,030,709 Philadelphia Cleveland 5,594,552 Richmond 5,526,124 Atlanta 4,142,949 Chicago 12,352,910 St. Louis 2,858,776 Minneapolis 1,604,482 Kansas City 2,981,000 3,404,569 Dallas 10,562,035 San Francisco 77,406,466 Participated balances Non-participated balances- net Total liabilities and participations Note A - Of the total holdings, $63.4 billion was pledged as collateral securities for outstanding Federal Reserve notes 1/ (Schedule III). Consists of various accrual errors in the Interest Participation Ledger and amortization errors Correcting entries were functioned on August 8, 1973. in the Discount Participation Ledger. 71 1/ $78,220,844 Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit B NET EARNINGS (In thousands) January 1 to July 27, 1973 Year 1972 Interest $1,471,511 $2,466,237 Discount 1,099,464 1,328,879 $2,570,975 $3,795,116 17,373 31,206 $2,553,602 $3,763,910 Earnings U.S. Government securities- Less- Premium amortization Net earnings Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit B (continued) NET EARNINGS (In thousands) January 1 to July 27, 1973 Amount Per cent Year 1972 Amount Per cent Participations Federal Reserve Bank- $ 116,785 4.6 New York 668,562 26.2 Philadelphia 134,298 Cleveland Boston $ 174,721 952,964 25.3 5.3 199,460 5.3 189,374 7.4 289,933 7.7 Richmond 186,030 7.3 279,471 7.4 Atlanta 139,124 5.4 201,495 5.4 Chicago 408,682 16.0 609,927 16.2 St. Louis 94,602 3.7 141,190 3.8 Minneapolis 53,009 2.1 73,638 2.0 Kansas City 102,385 4.0 153,516 4.1 Dallas 113,358 4.4 171,213 4.5 San Francisco 347,393 13.6 516,382 13.7 Total $2,553,602 100. $3,763,910 100. Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit C NET PROFIT OR LOSS ON SALES AND EXCHANGES (In thousands) January 1 to July 27, 1973 Amount Per cent Year 1972 Per cent Amount U.S. Government securities- $ Profits Losses Net profit (loss) 201 $7,103 12,346 4,117 $2,986 1/ $12,145) Participations Federal Reserve Bank- $ Boston New York 553 3,209 4.6 26.4 $ 143 4.8 770 25.8 Philadelphia 638 5.3 158 5.3 Cleveland 899 7.4 230 7.7 Richmond 879 7.3 214 7.2 Atlanta 660 5.4 153 5.1 Chicago 1,935 485 16.2 15.9 St. Louis 450 3.7 114 Minneapolis 256 2.1 57 1.9 484 4.0 124 4.2 538 4.4 137 4.6 1,644 13.5 401 13.4 Kansas City Dallas San Francisco Total profit (loss) 1/ 12,145) Includes $105 thousand advance refunding adjustments by Treasury on securities exchanged August 15. 100. $2,986 3.8 100. Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government securities Treasury Bills Forward Maturity 7-31-73 Par value $ 721,620 Premium $ - Book value Discount $ 543 $ 721,077 Appreciation Market value 1/ (Depreciation) $ 720,929 $ (148) 8- 2-73 1,600,080 1,837 1,598,243 1,597,811 (432) 8- 9-73 1,682,065 3,694 1,678,371 1,676,932 (1,439) 8-16-73 1,773,385 6,005 1,767,380 1,765,356 (2,024) 8-23-73 1,633,195 7,697 1,625,498 1,623,163 (2,335) 8-28-73 426,000 2,167 423,833 422,933 (900) 8-30-73 1,484,245 9,237 1,475,008 1,472,891 (2,117) - 9- 6-73 1,541,755 12,093 1,529,662 1,527,567 (2,095) 9-13-73 1,505,395 13,822 1,491,573 1,489,157 (2,416) 9-20-73 1,555,580 16,956 1,538,624 1,536,306 (2,318) 9-25-73 635,785 5,873 629,912 627,234 (2,678) 9-27-73 1,435,930 17,560 1,418,370 1,415,800 (2,570) 10- 4-73 1,606,810 23,508 1,583,302 1,581,864 (1,438) 10-11-73 1,589,990 25,213 1,564,777 1,562,969 (1,808) 10-18-73 1,605,135 27,728 1,577,407 1,575,270 (2,137) 10-23-73 562,635 7,371 555,264 551,426 (3,838) 10-25-73 1,688,240 1,655,818 1,653,631 (2,187) $22,834,119 $22,801,239 $ (32,880) $23,047,845 $ $ - $213,7422 $213,726 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government securities Appreciation (Depreciation) Premium Discount Book value $23,047,845 $ - $213,726 $22,834,119 $22,801,239 11- 1-73 536,400 - 9,548 526,852 524,650 (2,202) 11- 8-73 532,400 - 10,108 522,292 519,788 (2,504) 10,089 488,211 485,701 (2,510) Forwarded Treasury Bills (continued) Market value 1/ Par value Maturity 11-15-73 $ (32,880) 498,300 - 11-20-73 543,700 - 9,163 534,537 529,317 (5,220) 11-23-73 465,950 - 10,540 455,410 453,305 (2,105) 11-29-73 506,180 - 12,483 493,697 491,750 (1,947) 12- 6-73 412,005 - 10,991 401,014 399,602 (1,412) 12-13-73 521,450 - 14,506 506,944 504,940 (2,004) 12-18-73 748,180 - 15,960 732,220 723,490 (8,730) 12-20-73 476,165 - 14,060 462,105 460,291 (1,814) 12-27-73 447,410 - 13,979 433,431 431,723 (1,708) 1- 3-74 574,980 - 20,721 554,259 553,923 (336) 1-10-74 511,900 - 19,042 492,858 492,737 (121) 1-15-74 771,990 - 22,015 749,975 741,966 (8,009) 1-17-74 440,000 - 17,079 422,921 422,412 (509) 1-24-74 519,700 - 21,664 498,036 497,725 (311) 2-12-74 748,685 - 25,317 723,368 714,245 (9,123) 3-12-74 766,750 - 32,124 734,626 726,493 (8,133) 4- 9-74 670,180 - 31,450 638,730 630,720 (8,010) 5- 7-74 508,400 - 27,701 480,699 475,111 (5,588) 6- 4-74 608,730 38253 570,477 564,837 $600 519 $34 256,781 $34,145,965 $34,857,300 S ;,= (5,640) $(110,816) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government securities Treasury Notes Rate Maturity Par value Premium $ 35 8-15-73 8 1/8% $ 232,000 2-15-74 7 3/4 324,750 1,709 998,750 1,689 5-15-74 7 1/4 8-15-74 5 5/8 9-30-74 6 Book value Discount $ - $ - 232,035 326,459 Appreciation Market value 1/ (Depreciation) $ 231,928 322,720 $ (107) (3,739) - 1,000,439 985,641 (14,798) 5,279,532 5,053 5,274,479 5,119,496 (154,983) 23,200 144 23,056 22,504 (552) (63,734) 1,885,850 1,681 1,884,169 1,820,435 33,750 459 33,291 32,558 (733) 1,094,697 1,054,285 (40,412) 11-15-74 5 3/4 12-31-74 5 7/8 2-15-75 5 3/4 2-15-75 5-15-75 5-15-75 6 3,741,597 299 8-15-75 5 7/8 1,094,650 47 - 5 7/8 95,200 312 - 95,512 91,838 (3,674) 5 7/8 89,763 481 89,282 86,453 (2,829) - 3,741,896 3,610,641 (131,255) 2,387,797 1,820 - 2,389,617 2,288,554 (101,063) 7 463,815 2,063 - 465,878 455,119 (10,759) 2-15-76 5 7/8 934,001 2,476 931,525 888,468 (43,057) 2-15-76 6 1/4 2,506,500 2,277 2,504,223 2,410,940 (93,283) 5-15-76 5 3/4 461,540 235 461,305 436,732 (24,573) 5-15-76 6 1/2 344,850 - 345,381 332,780 (12,601) 8-15-76 6 1/2 1,437,926 1,387,378 (50,548) 8-15-76 7 1/2 720,300 6,711 - 727,011 711,746 (15,265) 11-15-76 6 1/4 49,300 569 - 49,869 46,974 (2,895) 2,450,700 11,638 - 2,462,338 2,460,656 (1,682) 11-15-75 531 1,441,900 3,974 2-15-77 8 8-15-77 7 3/4 337,500 8,736 - 346,236 335,602 (10,634) 2-15-78 6 1/4 2,573,250 6,102 - 2,579,352 2,429,309 (150,043) 6 (178,223) 11-15-78 2,440,200 4,029 2,436,171 2,257,948 8-15-79 6 1/4 512,000 15 511,985 481,600 (30,385) 11-15-79 6 5/8 590,500 2,967 587,533 562,820 (24,713) 5.125,053 35,342 5,089,711 4,892,824 (196,887) $59,133 $37,121,376 $35,7571949 $(1,363,427) 5-15-80 6 7/8 $37,138,248 ..i2261 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government securities Treasury Bonds Rate Maturity Par value Premium 335,950 $ - 11-15-73 4 1/8 437,950 - 2-15-74 4 1/8 202,950 8-15-73 4 7. $ Discount $ 144 Book value $ 335,806 Appreciation Market value 1/ (Depreciation) $ 335,215 $ (591) 898 437,052 432,065 (4,987) - 860 202,090 198,320 (3,770) 325,991 316,807 (9,184) 5-15-74 4 1/4 327,555 - 1,564 11-15-74 3 7/8 67,500 - 508 66,992 63,872 (3,120) 144,800 - 10,396 134,404 118,917 (15,487) 74,450 - 7,235 67,215 58,118 (9,097) 2-15-80 11-15-80 4 3 1/2 8-15-81 7 121,425 268 121,693 120,590 (1,103) 2-15-82 6 3/8 270,700 407 271,107 254,458 (16,649) 6-15-83 3 1/4 78,450 - 15,422 63,028 55,994 (7,034) 8-15-84 6 3/8 299,000 - 2,434 296,566 277,323 (19,243) 5-15-85 3 1/4 46,800 - 5,955 40,845 33,374 (7,471) 5-15-85 4 1/4 135,140 - 9,479 125,661 103,298 (22,363) 11-15-86 6 1/8 301,160 - 1,479 299,681 274,432 (25,249) 2-15-90 3 1/2 84,250 - 6,410 77,840 59,396 (18,444) 8-15-92 4 1/4 503,600 - 62,650 440,950 363,221 (77,729) 2-15-93 4 24,300 - 1,114 23,186 17,405 (5,781) 2-15-93 6 3/4 23,200 - 334 22,866 21,387 (1,479) 5-15-94 4 1/8 76,625 - 10,347 66,278 54,212 (12,066) 2-15-95 3 2,100 - 419 1,681 1,479 (202) 5-15-98 7 75,000 - 1,007 73,993 70,219 (3,774) 3 1/2 30,750 4.131 26.619 21. 660 (4,959) .663.655 6 $142 786 $3,521,544 3.251.762 S(269,782) 11-15-98 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Export-Import Bank of the United States Debentures Appreciation Maturity Rate Par value Premium 2- 3-75 5.30 % $ 23,565 $ - 5.70 22,000 - 12- 1-76 Discount $ Book value Market value 1/ (Depreciation) 110 $ 23,455 $22,593 325 21,675 20,433 107 1,893 1,880 (13) $ (862) (1,242) 8- 2-77 6 1/4 2,000 2- 1-78 6.45 21,700 35 - 21,735 20,506 (1,229) 5- 3-79 6.60 30,000 179 - 30,179 28,350 (1,829) 2-20-82 5.10 5,400 719 4,681 4,509 (172) $1,261 $103,618 $98,271 $(5 347) $104,665 $214 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Federal Home Loan Bank Notes Maturity 8-27-73 11-27-73 Rate 7.20 % 5.55 Par value $ 17,325 Premium $ 28 Discount $ 2 3,000 Book value Market value 1/ Appreciation (Depreciation) $ 17,353 $ 17,287 2,998 2,963 (35) $ (66) 1-25-74 8.40 9,820 90 - 9,910 9,783 (127) 2-25-74 7.10 8,000 72 - 8,072 7,905 (167) 5-27-74 6.35 14,340 1 14,339 14,035 (304) 5-28-74 6.45 1,000 8 992 979 (13) 8-26-74 5 3/8 9,500 228 9,272 9,156 (116) 36,400 245 36,155 35,558 (597) 1,500 3 1,497 1,444 (53) 179 20,821 20,593 (228) - 20,114 19,465 (649) 7,702 7,320 (382) 999 977 (22) 7,156 6,828 (328) 11-25-74 7.05 2-25-75 5 7/8 5-27-75 7.15 21,000 8-25-75 7.95 19,600 514 102 11-25-75 6 1/2 7,600 11-25-75 7.05 1,000 2-25-76 7 3/8 6,950 1 206 - 5-25-76 7.20 3,500 63 3,437 3,417 (20) 8-25-76 7.05 16,500 208 16,292 16,005 (287) (336) 2-25-77 6.15 8,200 115 8,085 7,749 5-25-77 6.95 2,000 27 - 2,027 1,929 2-25-80 7 3/4 35,415 1,772 - 37,187 35,326 7.80 11,300 558 - 11,858 11,286 (572) 1 - 1,701 7,123 (578) 13 3,587 3,492 (95) $1,066 $247,554 $240,620 (6, 934) 10-15-80 11-27-81 6.60 7,700 5-25-83 7.30 3,600 $245,250 $3,370 (98) (1,861) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Federal Intermediate Credit Bank Debentures Maturity Rate Par value 8- 1-73 5.65 % $ 2,400 9- 4-73 5.45 4,800 Premium Discount 1 Book value Appreciation Market value 1/ (Depreciation) $ 2,401 $ 2,399 4,799 4,782 $ (2) (17) 1- 2-74 7.00 17,995 17,910 17,826 (84) 2- 4-74 6.90 38,400 139 38,261 37,956 (305) 3- 4-74 7.00 4,500 24 4,476 4,448 (28) 7- 1-75 5.70 10,000 9,550 (462) $76.961 $(898) $78,095 85 $249 $77,859 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Maturity Rate Federal Land Bank Bonds 10-22-73 7.80 % 10-23-73 5.80 2,000 1-21-74 5.55 10,590 1 4-22-74 5.85 15,150 4-22-74 7.30 7-22-74 Par value $ Premium Discount $ - 2,003 Book value $ 2,010 Market value 1/ $ 1,993 Appreciation (Depreciation) $ (17) 2,001 1,984 (17) 10,589 10,411 (178) 128 15,022 14,809 (213) 32,872 - 33,117 32,461 (656) 5.85 27,275 - 27,322 26,491 (831) 10-21-74 5.30 16,900 70 16,830 16,182 (648) 10-20-75 7.20 7,100 - 7,280 6,958 (322) 6 1/4 3,975 - 4,007 3,799 (208) 174 9,826 9,725 (101) 66 1-20-76 10-20-76 7.15 10,000 10-20-77 6.35 19,500 7-20-78 6.40 2,000 1-22-79 5.00 3,900 4-23-79 6.85 10,000 10-23-79 6.80 4-20-81 19,434 18,354 (1,080) - 2,005 1,875 (130) 335 3,565 3,412 (153) 155 - 10,155 9,562 (593) 8,500 11.0 - 8,610 8,086 (524) 6.70 1,000 8 - 1,008 935 (73) 4-20-82 6.90 3,000 - 3,056 2,850 (206) 10-20-82 7.30 56 1 014 1,944 (70) 177,851 $171 831 (6 .020) 2 000 8177 762 5 4 S2 $774 Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Federal National Mortgage Association Debentures Maturity Par value Premium Discount Book value Appreciation Market value 1/ (Depreciation) $ (87) 9-10-73 6 1/8% 18 $ 20,143 $ 20,056 9-10-73 8.10 5,400 18 5,418 5,386 10- 1-73 6.00 500 1 501 497 12-10-73 5 3/4 40,800 109 40,909 40,265 (644) 12-10-73 7.15 43,645 313 43,958 43,290 (668) 3-11-74 5.45 13,485 13,480 13,181 (299) 3-11-74 7 3/4 29,910 30,311 29,648 (663) 6-10-74 5.70 38,940 38,858 37,480 (1,378) 23,107 22,538 (569) 6,869 6,639 (230) $ 20,125 6-10-74 7.90 22,780 9-10-74 5.65 6,880 12-10-74 6.45 50,150 3-10-75 6.35 3-10-75 7.55 6- 2-75 8 3/8 750 6-10-75 5 1/4 13,000 9-10-75 6.80 2,000 9-10-75 7 1/2 $ - 5 82 11 (32) (4) 415 - 50,565 48,646 (1,919) 33,390 302 - 33,692 32,346 (1,346) 43,700 1,038 - 44,738 43,154 (1,584) - 763 749 (14) 106 12,894 12,301 (593) 43 1,957 1,939 (18) 29,185 27,879 (1,306) 28,340 - 845 12-10-75 5.70 7,750 15 7,735 7,343 (392) 3-10-76 5.65 15,345 65 15,280 14,443 (837) 3-10-76 7 1/8 3,700 72 3,628 3,610 (18) 6-10-76 5.85 6,300 135 6,165 5,926 (239) 9-10-76 5.85 11,220 275 10,945 10,519 (426) 9-10-76 6 1/8 25,750 19 25,731 24,382 (1,349) 23 739 22,523 (1,216) 828 $490,571 $474,740 $(15,831) 12-10-76 Forward Rate 7.45 23,100 639 $486,960 $4,439 - $ Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Maturity Rate Forwarded Federal National Mortgage Association Debentures (continued) 3-10-77 6.30 % 6-10-77 6 3/8 Par value Premium $486,960 $4,439 5,300 6 7/8 35,590 6-12-78 7.15 8,000 6 3/4 $ 44,500 Book value Market value 1/ Appreciation (Depreciation) 828 $490,571 $474,740 $(15,831) 62 3,093 2,974 (119) 21 5,279 4,982 (297) 36,366 34,077 (2,289) 7,812 7,700 (112) 45,033 42,275 (2,758) 3,155 9-12-77 12-11-78 Discount 776 - - 188 533 - 9-10-79 6.40 2,000 - 123 1,877 1,855 (22) 12-10-79 6.55 10,500 - 23 10,477 9,765 (712) 8,077 7,552 (525) 6 7/8 7,970 107 12-10-80 6.60 1,000 - 65 935 930 (5) 3-10-81 7.05 1,000 - 36 964 957 (7) 6-10-81 7 1/4 17,120 460 - 17,580 16,478 (1,102) 9-10-81 7 1/4 28,880 761 - 29,641 27,797 (1,844) 6-10-82 6.65 9,414 8,765 (649) 9-10-82 6.80 6-10-83 6 3/4 6-10-83 3-10-80 - 9,450 - 36 8,500 - 140 8,360 7,969 (391) 14,400 - 101 14,299 13,392 (907) 7.30 7,000 - 167 6,833 6,790 (43) 9-12-83 6 3/4 40,325 - 315 40,010 37,502 (2,508) 6-11-84 6 1/4 13,430 - 593 12,837 11,986 (851) 12-10-84 6.90 39,080 - 47 39,033 36,735 (2,298) 10- 1-90 - 18,687 17,922 (765) 175 17,925 16,788 (1,137) 8 5/8 17,150 1,,537 3-10-92 7.00 18,100 - 6-10-92 7.05 6,500 - 77 6,423 6,045 (378) 10- 1-97 7.40 15,215 - 226 14,989 14,226 (763) 12-10-97 7.10 2 000 - 137 1,863 1 845 18) $3,360 $848,378 $812,047 $(36,331) $843 125 613. Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) Appreciation U.S. Government agency securities Government National Mortgage Association Participation Certificates Maturity Rate Par value Premium Discount $ Book value Market value 1/ (Depreciation) 1-19-77 5.20 % $ 2,300 $ - 61 $ 2,239 $ 2,105 8-14-78 6 1/8 1,400 - 6 1,394 1,299 (95) 1-19-82 5.20 7,500 - 800 6,700 6,300 (400) 4-16-87 5.10 2,950 427 2,523 2,330 (193) 12-11-87 6.40 4,200 163 4,037 3,780 (257) 2- 1-88 6.05 7,500 569 6,931 6,506 (425) 4- 8-88 6.45 5,500 192 5,308 4,964 (344) 8-12-88 6.20 6,250 397 5,853 5,484 (369) $2,615 $34,985 $32,768 (2 217) $37,600 - .L. $ (134) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) U.S. Government agency securities Farmers Home Administration Notes Premium Discount Book value Market value 1/ Appreciation (Depreciation) Rate Par value 3-31-77 6.35 % $10,509 63 $10,446 $ 9,852 6-30-77 6.45 6,997 119 6,878 6,568 (310) 8-31-77 6 7/8 8,493 211 8,282 8,090 (192) 12-29-77 6.55 3,520 29 3,491 3,300 (191) 3-21-78 7.20 603 3 600 579 (21) 5-12-78 7 1/4 1,703 47 1,656 1,637 (19) 11-30-80 7.00 5,001 50 4,951 4,688 (263) 3-31-81 6.40 8,016 216 7,800 7,214 (586) 6-30-81 7 7/8 6,998 7,178 6,911 (267) 1- 4-82 7.10 4,998 4,985 4,698 (287) 7-31-85 8 5/8 21,007 22,436 21,742 (694) 12-29-87 7 1/8 1,506 83 1,423 1,382 (41) 3-21-88 7.50 1,004 33 971 954 (17) 5-12-88 7.50 9 006 251 8,755 8,556 (199) $1,118 $89,852 $86,171 (3 681) Maturity $89,361 $ - $ 180 13 1,429 $1,609 $ (594) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) INVENTORY AND APPRAISAL OF HOLDINGS thousands) (In U.S. Government agency securities U.S. Postal Service Bonds Washington Metropolitan Area Transit Authority Bonds Maturity Rate Par value Premium Discount 6 7/8% $24250 $1,136 7- 1-2012 7.30 $ 9,750 $ 7- 1-2012 7.35 7,000 177 1$6,750 $ 290 2- 1-97 113 Book value Appreciation Market value 1/ (Depreciation) 23114 21,158 $ 9,637 $ 8,933 (l 956) $ (704) (374) $16,460 $15,382 $(l,078) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) RECAPITUATION INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) Appreciation U.S. Government securities Par value Per cent Market value 1/ (Depreciation) $ (110,816) $34,145,965 42,261 59,133 37,121,376 35,757,949 (1,363,427) 3,663,655 675 142,786 3,521,544 3.251,762 (269,782) $75,659,203 $42 936 $802,438 $74,899,701 $73,155,676 $ $ $ $ $ Treasury Notes 48.1 37,138,248 Treasury Bonds 4.7 97.9 Federal Intermediate Credit Bank Debentures Book value $34,256,781 45.1 Federal Home Loan Bank Notes Discount $600,519 $34,857,300 Treasury Bills Export-Import Bank of the United States Debentures Premium 104,665 - $ 214 1,261 103,618 98,271 $(1,744,025) $ (5,347) 245,250 3,370 1,066 247,554 240,620 (6,934) 78,095 13 249 77,859 76,961 (898) Federal Land Bank Bonds 177,762 863 774 177,851 171,831 (6,020) Federal National Mortgage Association Debentures 843,125 8,613 3,360 848,378 812,047 (36,331) Government National Mortgage Association Participation Certificates 37,600 - 2,615 34,985 32,768 (2,217) Farmers Home Administration Notes 89,361 1,609 1,118 89,852 86,171 (3,681) U.S. Postal Service Bonds 24,250 - 1,136 23,114 21,158 (1,956) Washington Metropolitan Area Transit Authority Bonds 16,750 290 16,460 15.382 (1,078) 2.1 100. 9e $ 1,616.858 $14,682 $11,869 $ 1,619,671 $ 1,555.209 $ $77,276,061 $57,618 $814,307 $76,519,372 $74,710,885 $(1,808,487) (64,462) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule I (continued) RECAPITULATION INVENTORY AND APPRAISAL OF HOLDINGS (In thousands) MATURITIES U.S. Government securities Per cent Par value Appreciation Market value 1/ (Depreciation) Premium Discount Book value $ 534 $446,805 $32,284,764 $32,202,906 Less than 6 months 42.3 $32,731,035 6 months to 1 year 7.1 5,480,722 4,580 158,164 5,327,138 5,250,480 (76,658) $ (81,858) 1 to 2 years 16.2 12,510,277 2,438 8,770 12,503,945 12,097,121 (406,824) 2 to 5 years 19.5 15,034,753 41,531 11,449 15,064,835 14,531,906 (532,929) 5 to 10 years 12.5 9,665,626 5,569 78,249 9,592,946 9,095,779 (497,167) Over 10 years 2.4 1,853,648 2,966 110 870 1,745,744 1,532,693 (213,051) 100. $77,276,061 $57,618 S814 307 $76,519,372 $74,710,885 1/ Market value computed at the midpoint between dealers' bid and asked prices at closing July 27, 1973. $(1,808,487) Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule II PARTICIPATIONS OF THE FEDERAL RESERVE BANKS IN U.S. TREASURY AND GOVERNMENT AGENCY SECURITIES BY CLASS OF SECURITY (In thousands) At the close of business July 27, 1973 Bills Notes Bonds Agencies Total Per cent Federal Reserve Bank$ 1,590,231 $ 1,694,321 New York 9,374,184 9,987,589 Philadelphia 1,815,108 Cleveland $ 73,765 $ 3,525,489 4.6 985,257 434,822 20,781,852 26.9 1,933,863 190,754 84,194 4,023,919 5.2 2,519,305 2,684,167 264,797 116,858 5,585,127 7.2 Richmond 2,488,492 2,651,337 261,557 115,429 5,516,815 7.1 Atlanta 1,865,623 1,987,713 196,096 86,537 4,135,969 5.4 Chicago 5,562,721 5,926,707 584,646 258,026 12,332,100 16.0 St. Louis 1,287,381 1,371,590 135,275 59,714 2,853,960 3.7 Minneapolis 722,523 769,801 75,940 33,514 1,601,778 2.1 Kansas City 1,342,352 1,430,231 141,128 62,267 2,975,978 3.8 Dallas 1,533,145 1,633,452 161,122 71,114 3,398,833 4.4 San Francisco 4,756,235 5,067,477 499,911 220,618 10,544,241 $34,857,300 $37,138,248 $3,663,655 $1,616,858 $77,276,061 Boston $ 167,172 13.6 100. Authorized for public release by the FOMC Secretariat on 8/21/2020 Schedule III PARTICIPATIONS OF THE FEDERAL RESERVE BANKS IN THE ACCOUNT (In thousands) At the close of business July 27. 1973 Assets U.S. Government securitiesat par value Total Unpledged Pledged Liabilities Accrued interest Premium Total Discount Participationsnet account Amount Per cent Federal Reserve Bank$ 3,160,000 365,489 $ 3,525,489 $ 40,475 $ 2,628 $ 43,103 $ 37,154 $ 3,531,438 16,250,000 4,531,852 20,781,852 238,587 15,495 254,082 219,012 20,816,922 Philadelphia 3,700,000 323,919 4,023,919 46,197 3,000 49,197 42,407 4,030,709 5.2 Cleveland 4,850,000 735,127 5,585,127 64,120 4,165 68,285 58,860 5,594,552 7.2 Richmond 5,155,000 361,815 5,516,815 63,336 4,113 67,449 58,140 5,526,124 7.1 3,084 50,567 43,587 4,142,949 5.4 BostonNew York 4.6 26.9 3,600,000 535,969 4,135,969 47,483 Chicago 9,900,000 2,432,100 12,332,100 141,579 9,195 150,774 129,964 12,352,910 16.0 St. Louis 2,480,000 373,960 2,853,960 32,765 2,128 34,893 30,077 2,858,776 3.7 Minneapolis 1,200,000 401,778 1,601,778 18,389 1,195 19,584 16,880 1,604,482 2.1 Kansas City 2,600,000 375,978 2,975,978 34,166 2,219 36,385 31,363 2,981,000 3.8 Dallas 2,580,000 818,833 3,398,833 39,021 2,534 41,555 35,819 3,404,569 4.4 7,900,000 2,644,241 10,544,241 121 054 128 916 111, 122 10,562,035 $63,375,000 $13,901,061 $77,276,061 $887 172 $944 790 $814,385 $77,406,466 Atlanta San Francisco $57,618 13.6 100. Authorized for public release by the FOMC Secretariat on 8/21/2020 Attachment PROCEDURES WITH RESPECT TO ALLOCATIONS OF THE SYSTEM OPEN MARKET ACCOUNT July 18, 1972 1. Securities in the System Open Market Account shall be reallocated on the last business day of each month by means of adjustments proportionate to the adjustments that would have been required to equalize approximately the average ratios of gold holdings to note liabilities of the twelve Federal Reserve Banks based on the ratios of gold to notes for the most recent five business days. 2. Until the next reallocation the Account shall be appor- tioned on the basis of the ratios determined in paragraph 1, except that temporary interim adjustments may be made in the apportionments for two or more Banks when desirable in the judgment of the Director of the Board's Division of Federal Reserve Bank Operations and the Manager of the System Open Market Account. 3. Profits and losses on the sale of securities from the Account shall be allocated on the day of delivery of the securities sold on the basis of each Bank's current holdings at the opening of business on that day. Authorized for public release by the FOMC Secretariat on 8/21/2020 REPORT OF EXAMINATION OF THE FOREIGN CURRENCY OPERATIONS AT THE CLOSE OF BUSINESS JULY 27, 1973 Board of Governors of the Federal Reserve System Washington, D. C. Authorized for public release by the FOMC Secretariat on 8/21/2020 FOREIGN CURRENCY OPERATIONS CONTENTS Text Summary of Findings ....................... Exhibits System Foreign Currency Balances . . . . . . . . . . . . . . . . Participation of the Federal Reserve Banks . . . . . . . . . . . Distribution of Interest Earnings and Losses on Foreign Exchange ...................... Authorized for public release by the FOMC Secretariat on 8/21/2020 BOARD OF GOVERNORS OF THE FEDERAL RESERVE F WASHINGTON, D C. SYSTEM 20551 August 28, 1973 CONFIDENTIAL (FR) Mr. Arthur L. Broida Secretary Federal Open Market Committee Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Broida: An examination of the foreign currency operations was made at the close of business July 27, 1973, in conjunction with our annual examination of the Federal Reserve Bank of New York. This report is submitted for the information of the Federal Open Market Committee. SCOPE OF EXAMINATION The examination, conducted in accordance with generally accepted auditing standards, included: verification of the asset and liability accounts; tests of the accounting records, the earnings accounts, and the profits and losses resulting from completed transactions; determination that the transactions were properly authorized and processed; evaluation of internal controls; review of the scope Authorized for public release by the FOMC Secretariat on 8/21/2020 - 2- SCOPE OF EXAMINATION (continued) and frequency of audits made by the resident auditing staff; and other examination procedures as we considered necessary or appropriate. SUMMARY OF FINDINGS In our opinion, the accompanying statement (Exhibit A) presents fairly the foreign currency deposit balances at July 27, 1973. The participation of each of the Federal Reserve Banks in these account balances is shown in Exhibit B. During the interval between examinations, distribution of interest earnings on foreign currency balances and net loss on foreign exchange operations among the Federal Reserve Banks (Exhibit C) was made on the basis of participation percentages. These percentages are determined at the beginning of each year by a computation of the ratio of each Bank's capital and surplus to the total capital and surplus for all Banks combined. We reviewed the transactions in effect on the date of our examination and determined that the pertinent authorizations issued by the Federal Open Market Committee were being followed. In our opinion, the accounting records and the internal controls in effect are adequate. Respectfully submitted, E. Maurice McWhirter Associate Director Division of Federal Reserve Bank Operations Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit A FOREIGN DEPARTMENT SYSTEM FOREIGN CURRENCY BALANCES (In thousands) At the close of business July 27, 1973 Balance Belgian francs Banque Nationale de Belgique Bank for International Settlements 4,315 2,670 Dollar value $ 97 61 Canadian dollars Bank of Canada British pounds Bank of England 96 90 64 163 Deutsche Bundesbank 36 12 Bank for International Settlements 18 6 329,846 1,047 11,125 2,951 German marks Japanese yen The Bank of Japan Swiss francs Bank for International Settlements $4,427 Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit B PARTICIPATION OF THE FEDERAL RESERVE BANKS (In thousands) At the close of business July 27, 1973 Per cent Dollar carrying value Federal Reserve BankBoston 4.2 Philadelphia 4.9 196 Cleveland 9.1 364 Richmond 5.2 208 Atlanta 7.0 280 Chicago 15.7 628 St. Louis 3.4 136 Minneapolis 2.3 92 Kansas City 4.2 168 Dallas 5.4 216 San Francisco 12.5 500 New York 73.9 26.1 $2,956 1,471 100. $ 168 $4,427 Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit C DISTRIBUTION OF INTEREST EARNINGS AND LOSSES ON FOREIGN EXCHANGE (In thousands) January 1 to July 27, 1973 Interest Losses on Per cent Earnings Foreign Exchange Boston 4.2 $ 44 Philadelphia 4.9 51 438 Cleveland 9.1 89 814 Richmond 5.2 51 465 Atlanta 7.0 67 626 Chicago 15.7 148 1,404 St. Louis 3.4 33 304 Minneapolis 2.3 23 206 Kansas City 4.2 41 376 Dallas 5.4 54 483 San Francisco 12.5 126 1,118 New York 73.9 26.1 $727 255 $6,610 2,335 982 $8,945 Federal Reserve Bank- 100. $ 376 Authorized for public release by the FOMC Secretariat on 8/21/2020 Exhibit C (continued) DISTRIBUTION OF INTEREST EARNINGS AND LOSSES ON FOREIGN EXCHANGE (In thousands) Year 1972 Per cent Interest Earnings Losses on Foreign Exchange Boston 4.5 $ 23 $ 2,333 Philadelphia 5.2 26 2,696 Cleveland 9.1 46 4,717 Richmond 5.2 26 2,695 Atlanta 6.8 34 3,525 Chicago 14.9 76 7,723 St. Louis 3.4 17 1,762 Minneapolis 2.3 12 1,192 Kansas City 4.2 21 2,177 Dallas 5.5 28 2,851 12.9 65 6,687 74.0 $374 $38,358 26.0 132 13,477 $506 $51,835 Federal Reserve Bank- San Francisco New York 100.
@FedFRASER