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FEDERAL RESERVE BANK
OF NEW YORK

f Circular No. 3 9 5 7 1
I
March 20, 1953
]

Results of Election of Directors

To Member Banks in the Second Federal Reserve D istrict:

The election o f directors o f this Bank to fill three vacancies in its board of
directors has been duly held in accordance with the requirements o f section 4 o f the
Federal Reserve A ct, as amended, and the provisions o f Circular No. 3943, dated
F ebru ary 2,1953.
The results o f the election are as fo llo w s :
1. N.

B

J

axter

ack so n ,

Chairman o f the B oard, Chemical Bank & Trust

Com pany, New Y ork, N. Y., was elected by member banks in G roup 1 as a class A
director o f this Bank to hold office fo r the unexpired portion o f the term ending
Decem ber 31,1955.
2.

L

a n s in g

P.

S h ie l d ,

President, The Grand U nion Company, East Paterson,

New Jersey, was elected bv member banks in G roup 2 as a class B director to
hold office fo r the unexpired portion o f the term ending Decem ber 31, 1953.
3.

J

ohn

E.

B

ie r w ir t h

,

President, National D istillers P roducts Corporation,

New Y ork, N. Y., was elected by member banks in G roup 3 as a class

B

director to

hold office fo r the unexpired portion o f the term ending Decem ber 31, 1954.




J

ay

E.

Crane,

Chairman o f the Board.




President’s Report
to
Directors
for 1952

F ed eral R eserve
of

N ew

Y ork

B ank




F ed er al

R eserve

B a n k

o f

N ew

President’s Report
to
Directors
for 1952

CONFIDENTIAL

Y ork

FEDERAL RESERVE BANK
OF NEW YORK

M arch 12, 1953

To the Directors o f the
Federal Reserve Banlc o f New Yorlc:

I submit herewith a confidential report on the operations and policies o f the Bank
fo r 1952. A s usual, it covers those m atters that are not appropriate to the published stock­
h old ers’ report, and provides a m ore detailed sum mary o f operations than is possible in
that publication. It also becom es a part o f the continuing record o f the operations o f
the Bank.
F o r the first fu ll year in tw o decades, the F ederal R eserve System, in 1952, was free
to em ploy the tools o f m onetary and credit p olicy in an econom y susceptible to significant
influence b y them. In the later thirties a huge inflow o f gold created large excess reserves
in the banking system, and left little scope fo r an affirmative credit policy. In the forties
the exigencies o f w ar financing and postw ar conversion problem s allow ed credit policy
little freedom . In these twenty years, much has changed— the System has gained from
study and experience, the national debt has grow n enorm ously and constitutes an im por­
tant part o f the assets o f m ost financing institutions and the principal means o f m oney
market adjustment, and the econom ic statistics available to the System have im proved in
both quality and quantity. The record o f the year under review provides encouragement
fo r the b elief that these developm ents have increased the ability o f the central banking
system to play an im portant role in helping to m oderate fluctuations in our econom y.
P erh aps the m ost notew orthy developm ent in this field, in 1952, was the use o f open
market operations to fo rce mem ber banks to com e to the discount w indow to satisfy some
o f their reserve needs, which resulted in the reestablishm ent o f the discount privilege and
the discount rate as im portant w eapons o f credit control. D uring the latter half o f the
year, m em ber banks were kept fa irly constantly in debt, so that they were restrained from
expanding credit beyond the actual seasonal needs arising out o f bum per crops, rising
defense and civilian production, and T reasury deficit financing. The provision o f needed
reserves through the discount window, and the sim ilar extension o f tem porary reserve
credits through repurchase agreem ents with nonbank dealers in Governm ent securities
(together aggregating m ore than $3 billion at one time near the year-en d), gave the
F ederal R eserve Banks a flexible control o f the reserve positions o f individual banks,
and o f the m oney market.
Once again, in 1952, the volum e o f our ordinary operations reached record levels,
although the number o f people em ployed declined during the last three quarters o f the
year. This achievement furnishes some evidence o f the ability and willingness o f the staff
to handle new and recurring problem s with efficiency, evidence which I believe is sup­
ported by the attitude o f m ember banks and the public tow ard the F ederal R eserve Bank
o f N ew Y ork as a public service institution.
Y ou rs sincerely,




P resident.

CO N TE N TS
O pen M a r k et O p e r a t i o n s ....................................................................................................................................
Transactions in Government securities ...................................................................................................
D irect security purchases from the Treasury b y System Open M arket A c c o u n t .......................
Repurchase agreements ...................................................................................................................................
Statistical summary .........................................................................................................................................
F is c a l A gency O p e r a t i o n s ...................................................................................................................................
P u b lic debt .........................................................................................................................................................
Volum e o f w o r k ..................................................................................................................................................
T elegraphic transfers o f marketable securities ....................................................................................
Reserve stock ......................................................................................................................................................
International Bank f o r Reconstruction and D e v e lo p m e n t.................................................................
Treasury T ax and Loan A ccou nt ..............................................................................................................
Foreign Assets C o n t r o l.....................................................................................................................................
S ecurity F iles P rogram .......................................................................................................................................
L o ans and Credits ................................................................................................................................................
Loan Guarantees fo r Defense Production (R egulation V ) ...............................................................
Consumer Credit (R egulation W ) ...............................................................................................................
Real Estate Credit (R egulation X ) ..........................................................................................................
V oluntary Credit R estraint P rogram ..........................................................................................................
C heck Collection .....................................................................................................................................................
V isual perception training ............................................................................................................................
Nassau County clearing arrangement ........................................................................................................
Consolidated check shipments .....................................................................................................................
Check Routing Sym bol program ................................................................................................................
Nonmem ber clearing account .....................................................................................................................
Postal money orders .........................................................................................................................................
Government checks ...........................................................................................................................................
C a s h O perations .......................................................................................................................................................
Counterfeits ........................................................................................................................................................
Arm ored carrier service .................................................................................................................................
Coin shortage ......................................................................................................................................................
W ire T ransfers of F unds ...................................................................................................................................
T elefa x ..................................................................................................................................................................
F oreign Operations ................................................................................................................................................
Assets held fo r foreign and international account ...............................................................................
Changes in status o f foreign a c c o u n t s ......................................................................................................
Loans to central banks ...................................................................................................................................
G old m o v e m e n ts..................................................................................................................................................
TJ. S. currency and c o i n ..................................................................................................................................
V isits to foreign central banks ...................................................................................................................
M eetings o f Experts o f the Central Banks o f the Am erican C o n tin e n t.......................................
F oreign visitors ..................................................................................................................................................
S taff Group on F oreign I n te r e s ts .................................................................................................................
B a n k S upervision ....................................................................................................................................................
Bank c h a n g e s ......................................................................................................................................................
Bank mergers and branch banking ............................................................................................................
Capital a d e q u a c y ................................................................................................................................................
R. F . C. investment in member b a n k s ........................................................................................................
B a n k R elations .......................................................................................................................................................
P ublic I nformation ................................................................................................................................................
Publications .........................................................................................................................................................
Film s ......................................................................................................................................................................
Guided t o u r s .........................................................................................................................................................
Speeches ...............................................................................................................................................................
Relations with schools and c o lle g e s ............................................................................................................
R esearch ......................................................................................................................................................................
D om estic studies and publications ..............................................................................................................
F oreign and international studies and p u b lic a tio n s .............................................................................
F oreign missions and a ssign m en ts...............................................................................................................
L ib ra ry ..................................................................................................................................................................
P ersonnel ....................................................................................................................................................................
Salary a d m in istra tio n ......................................................................................................................................
N um ber o f e m p lo y e e s .......................................................................................................................................
H ead Office salary l i a b i l i t y ............................................................................................................................
Em ployee benefits ..............................................................................................................................................
Personnel improvement program s ..............................................................................................................
Federal Reserve C l u b .......................................................................................................................................
C afeteria ...............................................................................................................................................................
L igh tin g P r o g r a m .....................................................................................................................................................
B uffalo B ranch O p e r a t io n s ..............................................................................................................................
Cash operations ..................................................................................................................................................
W ire transfers o f f u n d s ..................................................................................................................................
Check collection ................................................................................................................................................
Operating methods ...........................................................................................................................................
Loans to member b a n k s ..................................................................................................................................
Regulations W and X .....................................................................................................................................
Bank r e la t io n s ....................................................................................................................................................
Bank supervision ................................................................................................................................................
Personnel ..............................................................................................................................................................




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PRESIDENT’ S REPORT TO DIRECTORS FOR 1 9 5 2

rriHE revival o f traditional m onetary and credit
J- p o licy that had taken place in the preceding year
was fu rth er extended during 1952 in an econom ic
setting characterized by general stability at high
levels o f activity. D espite somewhat greater G ov­
ernment expenditures fo r m ilitary items and a
long shutdown in the steel industry, inflationary
pressures w ere held in check as production was
maintained at levels adequate to sa tisfy business
and consum er requirem ents at generally stable
prices while at the same time providin g fo r de­
fense needs. H ow ever, stability in an econom y
pressing at the lim its o f its productive capacity
is at best p recariou s; the possibility o f shifts in
consum er spending habits or in business invest­
ment program s poses a continuing threat. Indica­
tions that such shifts m ight be developing, accom ­
panied b y generally m ore buoyant business senti­
ment, were discernible in the closing months o f the
year ju st ended.
F ederal R eserve credit p olicy in 1952 was
designed to prom ote and to m aintain an econom y
en joyin g p rosp erity without inflation. The absence
o f serious inflationary pressures made a positive
restrictive credit p olicy unnecessary, but aware­
ness o f a continuing threat o f inflation suggested
that a p olicy o f m onetary ease could w ell provide
fu el fo r any upsurge o f spending that might
develop. The F ederal R eserve System , therefore,
directed its efforts in the first h a lf o f the year
tow ard prom oting econom ic stability b y assigning
a neutral role to m oney and cred it; later, as sea­
sonal credit needs expanded and rising public
demand fo r currency drained reserves fro m banks,
the neutral p olicy gradually becam e one o f re­
straint. The earlier neutral p olicy involved, at
times, preventing the accum ulation o f excess re­
serves which m ight encourage easier credit tend­
encies, and as seasonal credit expansion pressed on
reserve availability, the m ore restrictive policy
that em erged p rovided fo r creation o f the neces­
sary reserves only at a rate, and in such form s,
as to m aintain restraint on the banks and the
m oney market. Open market operations and dis­
count p olicy were geared, in sofa r as possible, to
provide only the banking reserves necessary to
meet the norm al credit needs o f the econom y.




M oreover, this program bore virtually fu ll re­
sponsibility fo r attaining F ederal R eserve objec­
tives, since Regulation W (Consum er C redit) and
the V olu n tary Credit R estraint P rogra m were
suspended in the spring, and Regulation X (R eal
E state C redit) in the fall.
The seasonal pattern o f demand fo r bank credit
during 1952, a pattern that has been m issing in
several o f the postw ar years, was m ore or less
typical o f a stable econom y that is undergoin g
neither inflation n or deflation. In turn, the sea­
sonal pattern o f credit requirem ents was reflected
in the changes that occurred in the System Open
M arket A ccou n t during the year. In the first half
o f 1952, short term securities were sold from the
System A ccount to m op up reserves accruing to
the banking system fro m gold inflows, fro m a
reduced currency circulation, and fro m other
sources. Com m ercial bank loans and investments
rose slightly during the first six months, but bank
credit was under no particular pressure to expand
at this tim e ; i f free reserves had been allow ed to
accumulate, it w ould have been possible fo r the
banks to meet credit requests w ith greater ease
later in the year. Short period investment o f
these funds b y banks, i f not absorbed b y the S ys­
tem, w ould have created only tem porary price
firmness in the security m arkets and w ould have
tended to freeze the reserves into the deposit
base. A s the year progressed, seasonally expanded
credit needs o f private b orrow ers and new money
financing b y the Treasury, accom panied b y a sea­
sonal loss o f reserves through currency outflow
and other factors, increased the pressure on avail­
able reserves. System p olicy then shifted to one
o f a controlled provision o f funds to the m oney
market through the acquisition o f Government
securities fo r the System Open M arket A ccount
and fo r account o f the F ederal R eserve Bank o f
New Y ork on repurchase agreements with dealers.
In the last half o f 1952, discounting became
increasingly prom inent as a source o f reserve bal­
ances f o r the banking system. The restoration o f
greater latitude fo r application o f traditional
m onetary p olicy had envisaged, fro m the outset,
a much expanded role fo r the discounting mecha­
l

PRESIDENT’ S REPORT TO DIRECTORS FOR 1952

2

nism. Open m arket action to regulate the supply
o f reserves available to the banking system im ­
poses lim its on the aggregate volum e o f bank
re serv e s; but under a sustained p olicy o f restraint
on bank reserves, open market operations are not
the m ost effective means o f adjusting fo r changes
in the availability o f reserves within a given week
or month, n or is there assurance that open market
action w ill result in a prop er distribution o f avail­
able reserves. The discount privilege available to
all m em ber banks provides the banking system
w ith the flexibility required to make adjustm ent
fo r these conditions. A considerable p ortion o f
the discounting activity in 1952 grew out o f the
fa ct that the F ederal R eserve open market p olicy
m aintained a relatively tight rein on aggregate
excess reserves, and, since reserve funds w ere not
readily available elsewhere, it was necessary fo r
individual banks to have recourse to the discount
w indow fo r the purpose o f m aking short period
reserve adjustm ents.
A fte r the low point in credit needs was passed
in midsummer, and as the new credit requirements
o f private business and o f the T reasury increased,
F ederal R eserve p olicy tended to shade from neu­
trality to, at first, m ild restraint. T he change in
the emphasis o f credit p olicy resulted fro m the
fa ct that the F ederal R eserve System did not p ro­
vide fu lly through open m arket purchases the
reserves required to replace seasonal reserve
losses and also to support credit expansion, with
the result that m ember banks secured these re­
serves through discounts. Since reserves acquired
through discounting create a contractual obliga­
tion fo r the bank to repay, they are, in effect, ‘ ‘ on
a strin g ,” whereas reserves furnished through
securities purchased outright b y the System be­
com e w holly owned assets o f the m em ber banks.
N ot only is F ederal R eserve credit extended
through the discount m echanism easier to recover
a fter the need fo r its existence has passed, it is
also possible that the distinction between free
reserve funds and reserves subject to repaym ent
m ay w ell be im portant in influencing the w illing­
ness o f banks to advance new credit. The increased
use o f the borrow in g privilege b y member banks,
how ever, im plies a responsibility o f the F ederal
R eserve Bank to see that the privilege is not
abused.
F u ll freedom fo r open market operations to




achieve the S ystem ’s credit control objectives fo l­
low ing the accord in 1951 had been obstructed by
the frequency o f T reasury financing operations.
A lthough the System abandoned responsibility fo r
the maintenance o f any particular structure o f
market prices and yields on Governm ent issues at
the time o f the accord, it considered that it re­
tained a responsibility to extend to the T reasury
the market support deemed necessary to insure
“ successful” debt operations. In practice, the
System usually acquired a large part o f the ma­
turing securities that w ould otherw ise have been
redeem ed fo r cash, and the effect was to hold
the T rea su ry ’s cash redem ptions to a minimum.
(A lthough som e offsetting sales were generally
made, this support involved net purchases o f
securities fo r System A ccou n t and the consequent
creation o f reserve balances.) A s 1952 p ro ­
gressed, the System m odified its view o f its re­
sponsibilities during T rea su ry financing opera­
tions. Support o f all T reasury offerings was gra d ­
ually replaced b y a p olicy o f aid to the T reasury
limited by, and conditioned upon, the extent to
which such aid could be extended consistently with
m onetary p olicy goals.
This change, and, o f course, the fundam ental
change in the position o f the System in the G ov­
ernment security m arket arising out o f the 1951
accord resulted not only in partially freein g m one­
tary p olicy fro m the shackles o f the T re a su ry ’ s
financing schedule, but it served as w ell furth er to
educate investors and dealers in the m eaning o f
a free security market. A fte r operating fo r nearly
a decade in the hothouse atm osphere created by
F ederal R eserve support o f security prices and
yields, a process o f education in the w ays o f a free
market was necessary. One o f the m ore im portant
developm ents o f 1952 from the view point o f m one­
tary p olicy was the grow th in the m ark et’ s recog­
nition o f its independence.
D uring the last seven months o f 1952 the
T reasury borrow ed $4.25 billion through the sale
o f a bond issue o f interm ediate m aturity, b or­
row ed $4.5 billion through the sale o f T ax A n tici­
pation bill issues m aturing at the M arch and June
1953 tax dates, and refunded $19.5 billion o f ma­
turing certificates o f indebtedness. This program
was carried through with a minimum o f m arket
disturbance and with System support fo r three o f
the operations and only nominal support fo r an­

FEDERAL RESERVE BANK OF NEW YORK

other. Further, prices and yields on Government
securities o f all m aturities fluctuated during 1952
over a wide range, and at times sharply, without
adverse effect on m arket viability. In general, it
w ould appear that the market com m unity now has
come a long w ay tow ard accepting freely m oving
prices as a natural concom itant o f an unregulated
market reflecting the basic m onetary and econom ic
circum stances underlying the supply o f and de­
mand fo r investment funds. P reviou sly such price
m ovem ents occasioned uneasiness and unlimited
speculation as to what the System was doing or
planning to do.

OPEN M A R K E T O PER A TIO N S
Transactions in G overnm ent securities

A ctiv ity in the Governm ent security market
during Jan uary and F ebru ary 1952 was largely
centered in the short term issu es; prices o f inter­
mediate and long term securities w ere substan­
tially unchanged over the period in a generally
inactive market. A com bination o f m oney market
stringency and m arket uncertainty in the closing
days o f 1951 had driven short term security yields
to the highest levels since the early 1930’ s, but
easier m oney market conditions and a supply o f
funds to the m arket from the investment o f the
proceeds o f new corporate financing and other
sources had fo rced yields sharply low er by the
end o f January 1952. In order to absorb the
reserve gains that accrued to m em ber banks in
January, and to w ithdraw funds put into the m ar­
ket on System security transactions in the latter
part o f Decem ber, the System took the initiative
during January in selling to the market large
amounts o f T reasury bills and certificates o f in­
debtedness. A ll securities held by the F ederal
R eserve Bank o f New Y ork under repurchase
agreem ents were bought back by the dealers.
These transactions, together with sales and re­
dem ptions o f securities fo r System A ccount, m ore
than offset the increase in the holdings o f the
A ccou nt that had taken place during Decem ber
1951. B y January 24, 1952 sales and redem ptions
to absorb the seasonal reserve accruals to com ­
m ercial banks had exhausted System A ccount
T reasury bill holdings. In total, System holdings
o f Governm ent securities, including repurchases,
were reduced b y $1.1 billion during January 1952.




3

It was the first time since early 1942 that the S ys­
tem A ccount had held no bills. A t the peak, in
F ebru ary 1947, a total o f $15.8 billion in bills was
held in System and option accounts.
T reasury debt operations were a m a jor stimu­
lant to m arket trading during F ebru ary 1952.
These operations included an offering o f interm e­
diate bonds in exchange fo r the $1.0 billion o f 2 ^
per cent bonds called fo r M arch 15 and an offer­
ing o f 1 % per cent certificates fo r the $9.5 billion
o f certificates o f indebtedness scheduled to mature
on A p r il 1. Both the new issues were dated M arch
1,1952. Rather aggressive selling o f the M arch 15
and A p r il 1 “ rig h ts” follow ed the T rea su ry an­
nouncement o f the refunding terms and continued
until the subscription books closed on F ebru ary
21. A lthough the term s o f both offerings were
view ed fa vora b ly b y the market, the fa ct that a
large amount o f m oney scheduled fo r M arch 15
tax paym ent was invested in the m aturing certifi­
cates and the fa ct that m arket opinion expected a
money squeeze around the im pending tax date,
resulted in a belief in market circles that an op­
portunity w ould arise later to acquire the new
bonds and other issues at m ore favorable p ric e s ;
this belief created difficulties fo r the F ebruary
refundings. S hortly b efore and during the fourday period that the subscription books were open,
the F ederal R eserve System purchased $950 m il­
lion o f the m aturing issues. H ow ever, the active
demand b y corporations and others fo r short term
investments during the month enabled the System
to supply shorter certificates to the market in an
amount in excess o f the amount o f the “ rig h ts”
purchased fo r System Account. F o r the month as
a whole the total o f System A ccount security hold­
ings was reduced b y m ore than $200 m illion, ab­
sorbing a like amount o f reserves accruing to the
banking system fro m other sources.
The tight m oney conditions, and the related
pressure on the Governm ent security market, that
had been w idely expected to develop as corp ora ­
tions borrow ed and liquidated investm ents to
make their M arch 15 tax payments proved to have
been overestim ated. P rio r to the middle o f March,
in preparation fo r such market stringency as
m ight develop, the F ederal R eserve Bank o f New
Y ork made repurchase agreements liberally avail­
able to dealers when w arranted b y m oney market
conditions. H ow ever, substantial T reasury cash
outlays, including tem porary funds made avail­

4

PRESIDENT’ S REPORT TO DIRECTORS FOR 1952

able through System purchases o f special T reas­
u ry certificates o f indebtedness, created marked
m oney m arket ease over the m iddle o f the month
and the securities taken under repurchase agree­
ment earlier w ere bought back b y the dealers.
The ease in the m oney market persisted over the
balance o f M arch and was reflected in steadily
low er yields on short term securities.
The failu re o f the m id-M arch m oney market
stringency to develop as expected touched o ff a
price recov ery in the interm ediate and lon g term
T reasury issues that lasted fo r tw o months and
carried prices o f the longest m aturity issues as
much as three fu ll points above their early M arch
levels. Com m ercial banks and other investors had
tended to defer their investment program s hoping
fo r generally low er prices p rior to the tax date,
so that the initial impetus fo r the upw ard price
adjustm ent cam e fro m the backlog o f demand that
entered the market when this anticipation was dis­
appointed. A com bination o f influences helped
m aintain the price advance through the balance
o f M arch and A p ril. These included active com ­
m ercial bank attempts to lengthen p o rtfolio m a­
turities to com pensate fo r incom e lost through a
declining loan volume, and, during A p ril, indica­
tions that the boom conditions grow in g out o f the
rearm am ent program had abated considerably
and that the outlook was m ore one o f econom ic
stability than o f continued inflationary pressure.
B ond prices continued to advance during the first
h a lf o f M ay, but la rgely on profession al activity
as investors displayed grow in g resistance to the
higher price level. N ear the m iddle o f M ay, m ar­
ket opinion was diverted b y the possibility that
low er security prices m ight follow the closing o f
the books on the T rea su ry ’ s M ay financing. This
was an optional offerin g o f nonm arketable 2%
p er cent bonds fo r cash and exchange o f the fou r
longest restricted issues outstanding, and was
co o ly received. B ond prices began an irregular
decline, which was fostered b y the alm ost con­
stantly tight conditions in the short term market
and which, save fo r a period o f stability in late
June and July, continued through the end o f
Septem ber.
In early A p r il 1952 yields on short term G overn­
ment securities m oved upw ard fro m the M arch
low, and continued to advance, w ith but occasional
interruptions, through the spring and summer
m onths against a background o f persistent money




market tightness. A fa ctor influencing the short
term m arket during this period was the T reasury
b orrow in g o f $1.6 billion through $200 m illion
w eekly additions to T rea su ry bill offerings dur­
ing A p r il and M ay. Concurrently, the F ederal
R eserve System continued to sell short term Gov­
ernment securities in the m arket during these two
months in pursuance o f its p olicy o f absorbing
accretions to bank reserves not im m ediately
needed b y the banks to m eet norm al credit de­
mands. A total o f $240 m illion o f short term
issues was sold fro m System holdings in this
period, bringing to m ore than $1.5 billion the net
reduction in System security holdings over the
first five months o f 1952.
The position o f the System in the market was
reversed in early June 1952 as the proxim ity o f
the June 15 tax date caused corporation s to con­
serve cash against their tax liabilities, weakening
what had been the m a jor source o f demand fo r
short issues. In order to provide some assistance
to the market, this Bank acquired short term
securities from dealers under repurchase agree­
ments. The m oney market eased briefly during the
last half o f June in response to these purchases,
the net outlay o f T rea su ry cash (including funds
from the System purchase o f special T reasury
Yields on U . S. Government Securities

FEDERAL RESERVE BANK OF NEW YORK

certificates), and System purchases o f “ rig h ts”
to the T re a s u ry ’ s June refunding offering.
T reasury financing in June 1952 included an
offerin g o f 1 % per cent certificates fo r the $5.2
billion o f certificates m aturing on J u ly 1, and the
sale fo r new m oney o f $4.2 billion o f 2 % per cent
six-year bonds. System support o f the custom ary
type w as extended to the certificate refunding,
resulting in a net addition to System holdings o f
about $630 m illion during the month. The new
interm ediate bond had been made eligible fo r com ­
m ercial bank ow nership (but fo r lim ited subscrip­
tion o n ly ), and proceeds w ere eligible fo r credit
to T ax and L oan Accounts. These features en­
couraged a heavy oversubscription, apparently in­
cluding a substantial volum e o f speculative “ free
r id in g ” financed with bank credit. The existence
o f these tem porary and uncertain holders in the
origin al distribution was o f im portance to the
market over the follow in g three months as trad­
ing centered in the new b on d ; the weakly held
securities hanging over the market exerted a de­
pressing effect on prices already subject to some
selling pressure.
H eavy bank buying o f the new bond featured
the trading in J u ly 1952 and helped maintain
fa irly steady prices, but as the month progressed
the bond m arket displayed an increasingly heavy
tone largely because o f bank reluctance to p ro­
ceed w ith investm ent in the fa ce o f a persistently
tight m oney market. The pressure on the money
m arket at this time was the outgrow th o f the in­
crease in required reserves resulting fro m the
additional deposits created to finance the T reas­
u r y ’ s cash b o rro w in g ; additional new F ederal
Reserve credit was not made available through
open m arket operations to help the banks meet
their larger reserve requirem ents. U nder this
pressure, and in view o f large scale nonbank buy­
ing o f short term Government securities, there
was some selling b y banks to offset deposit losses
which in turn reduced required reserves. In
August, and again in Septem ber, Government
bond prices continued to sag in response to in­
creasing uncertainty as to the effect the fa ll and
w inter bank loan expansion w ould have on the
security market and in sym pathy w ith the evolv­
in g higher sh ort term rate pattern, which was
being confirm ed by the successively higher rates
on the T re a su ry ’ s A ugust and Septem ber refund­
ing offerings.




5

The tight m oney market conditions which pre­
vailed in A ugust and Septem ber 1952 were diffi­
cult ones in which to effect the refunding o f the
certificates o f indebtedness m aturing A ugust 15,
Septem ber 1, and October 1. H olders o f the first
two m aturities were offered exchange into a 2 per
cent, one-year certificate— terms which w ere in
line w ith m arket yields at the time o f the T reas­
u ry announcement’—but there was a tendency fo r
yields to advance while the books were open. A lso,
in seeking to provide assistance to the T reasu ry
with a minimum o f F ederal R eserve credit, the
System departed fro m the procedures follow ed in
most refundings in recent years and supported the
“ rig h ts” at a level equivalent to a par price
rather than at a premium. This procedural change
contributed somewhat to a b elief that short term
rates m ight rise further follow in g the refunding,
and in the absence o f demand fo r the ‘ ‘ rights ’ ’ or
the “ when issu ed” securities, the b id fo r the new
issue fell below par shortly after the books closed.
The market turned somewhat easier b efore midSeptem ber, when the T reasury offered a 14-month,
2Vs per cent note in exchange fo r the certificates
m aturing on O ctober 1, but the fa ct that a large
part o f the m aturing issue was held b y corp ora ­
tions, which frequently restrict their investments
to securities m aturing within one year, made S ys­
tem support necessary to facilitate trading and to
encourage redistribution o f the “ rig h ts.” Because
o f the circum stances surrounding the refunding,
and in view o f the fa ct that provid in g some F e d ­
eral R eserve credit (although not by choice, at
that time and in the amount involved) was essen­
tially consistent with the S ystem ’ s p olicy o f cre­
ating a lim ited volum e o f reserves to meet a part
o f the banks’ seasonal needs, the System estab­
lished a small prem ium on the ‘ ‘ rights ’ ’ and made
large purchases o f the m aturing issue. In total,
System holdings o f Governm ent securities in­
creased by about $840 m illion during A ugust and
Septem ber 1952.
A s the year progressed, the System made
greater efforts to hold to a minimum its interven­
tion in the market in aid o f T reasury refunding
operations. W hereas in 1951 and early 1952 the
System had follow ed a practice o f offering a p re­
mium on “ rig h ts” sufficient to encourage selling
b y investors who planned to redeem f o r cash, in
the later refundings either no prem ium or a less
generous prem ium was offered. In the Decem ber

6

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

certificate refunding, ‘ ‘ rights ’ ’ were not purchased
at all fo r System A ccount. W h ile the basic prin­
ciple o f p rim ary T rea su ry responsibility fo r debt
managem ent decisions and fo r the outcom e o f
these decisions m ay now be considered an accepted
doctrine, the experience o f 1952 indicates that sit­
uations p robably w ill again arise w herein some aid
to the T rea su ry m ay be expedient. T he circum ­
stances surrounding any given refunding w ill thus
determine the S ystem ’s role.
F unds supplied b y System purchases o f the
Septem ber 1952 “ rig h ts” w ere reflected in a
strong reinvestm ent demand fo r other short term
issues, and yields m oved low er through the end
o f Septem ber. H ow ever, the steady tightening in
the m oney market over the rem ainder o f the year,
occasioned b y the inadequacy o f available reserves
to enable banks readily to satisfy seasonal busi­
ness credit needs, an expansion in public demand
fo r currency, and T reasury cash borrow in g in T ax
A n ticipation bills, maintained almost constant
pressure on the short term security market. H eavy
nonbank investment in these instrum ents in
O ctober and early N ovem ber served to absorb bank
selling and, fo r a time, to prevent rates from ris­
in g significantly. But corporate buying tapered
o ff as the year-end approached, and since bank
reserve positions becam e progressively tighter
during N ovem ber and Decem ber, short term rates
rose steadily until, b y late Decem ber, they were
at the highest level in nearly tw enty years.
The interm ediate to lon g term m arket over
much o f this period responded to a different set
o f fo rce s and displayed considerable strength. On
the theory that bond prices in the late fa ll were
low er than they w ould be a fter the m oney m arket
eased ea rly in the new year, a generally bullish
atm osphere developed and m any investors entered
the m arket fo r the purpose o f lengthening p ort­
fo lio m aturities at prevailing prices. B on d prices
advanced in O ctober and early Novem ber, but buy­
in g interest soon evaporated in the prevailing
tight m oney environm ent and price declines in the
latter h a lf o f D ecem ber w iped out the earlier ad­
vances and brought some bond prices to the low est
levels since issuance.
In summary, the System made funds available
to the m arket during the last quarter o f 1952 in
ord er to p rovid e at least pa rt o f the reserves
needed to support the seasonal expansion o f bank
credit and to com pensate fo r reserves lost through
a flow o f curren cy into circulation and other year-




end factors. Short term securities were purchased
outright fo r System Open M arket A ccount and on
repurchase agreem ents with dealers fo r account
o f this Bank. A total o f approxim ately $1 billion
in short term securities was added to System hold­
ings in the O ctober to D ecem ber period, nearly all
o f it in December, a sum which actually fell short
o f replacing the reserves that mem ber banks lost
during the last quarter through the increase in
m oney in circulation alone. The largest part o f
the increm ent to System security holdings at this
time represented repurchase agreem ents. In the
last week o f the year, this account reached nearly
$900 million, while discounts at the R eserve Banks
clim bed to almost $2.4 billion. The close rein held
on the supply o f F ederal R eserve credit at this
period reflected the p olicy the System was follow ­
ing o f increasing restrictiveness as the demands
fo r credit built up. A t the same time, although
banks ’ reserve positions w ere under much greater
pressure in Decem ber 1952 than in Decem ber 1951,
and although short term yields increased b y at
least as much, there was in 1952 a striking absence
o f the sort o f uncertainty that had threatened
the m arket w ith disorderliness in the previous
December.
D irect secu rity purchases from th e Treasury
b y System O pen M arket A ccoun t

On several occasions during the last year, pu r­
chases o f special certificates o f indebtedness w ere
made fo r the System Open M arket A ccou n t di­
rectly fro m the T reasury in order to avoid over­
drafts at the F ederal R eserve Banks. (T hese
transactions are effected under statutory perm is­
sion fo r the System to purchase directly fro m the
T reasury up to $5 billion o f direct or guaranteed
obligations o f the U nited States.) P urchases were
made in amounts o f $55 m illion in January, $947
m illion in March, $536 m illion in June, and $278
m illion in Septem ber. In each instance their pur­
pose was to anticipate tax receipts b y the T reas­
ury, and on the last three occasions to avoid a
strain on the m oney m a rk et; in each instance they
were soon retired by the T rea su ry as the antici­
pated tax revenues became available. In order
to sim plify the mechanics o f direct T reasury b or­
row ing fro m the F ederal R eserve Banks, the p ro ­
cedure o f handling special certificates o f indebted­
ness was changed in Septem ber 1952. H enceforth,
special certificates w ill be sold to the F ederal

7

FEDERAL RESERVE BANK OF NEW YORK

R eserve B ank o f N ew Y ork, rather than to the
System Open M arket Account, with any a p p or­
tionm ent to other R eserve Banks that m ight ap­
pear desirable left to the discretion o f the Federal
R eserve Bank o f New York.

ments b y this Bank amounted to $500 m illion, giv­
ing a total increase in System holdings o f $900
million. The follow in g table shows the effect that
System security purchases and other relevant fa c­
tors had upon the availability o f bank reserves in
1952.

R epurchase agreem ents

T his Bank made active use during the year o f
the repurchase agreem ent authority granted by
the F ed eral Open M arket Committee to all F ed ­
eral R eserve Banks. This authority perm its the
individual R eserve Bank to buy short term G ov­
ernment securities from qualified nonbank dealers
under an arrangem ent requiring the dealers to
repurchase the securities within fifteen days. The
repurchase fa cility assisted dealers in carrying
positions in short term T reasury obligations at
a rate equal to the discount rate at times o f m oney
market stringency when dealers were obliged to
pay as much as 2^4 to 2 % per cent fo r com m ercial
bank accom m odation. It also lessened the need fo r
outright System A ccount purchases and proved to
be an im portant adjunct to the flexible rate policy.
The follow in g table points up the significantly
greater use o f this facility in the past year b y com ­
parison with the other years since its use was
reauthorized in 1948.

(In m illions o f dollars)
Sales

1948

-0 -

-0 -

1949

279.7
598.0
2,341.8
5,491.2

279.7
544.9
2,198.2
5,024.2

1 950
1951
1952

Peak
balance

Year-end
balance

-0 -

-0 -

1 0 2 .8

- 053.1
196.7
663.7

1 2 0 .0

306.0
873.5

Statistical summary

U nder the direction o f the F ederal Open Market
Committee, this Bank made open m arket pur­
chases o f Governm ent securities fo r the System
Open Market A ccount during 1952 having a total
face value o f $4.0 billion, and sold, or presented
fo r redem ption, securities having a fa ce value o f
$3.6 billion. Thus, m arket transactions during the
year resulted in a net increase o f $400 m illion in
System Open Market A ccount holdings o f U nited
States Governm ent securities, while the net in­
crease in securities held under repurchase agree­




(In billions of dollars)

Factors o f Increase
Increase in Federal Reserve holdings o f
United States Government se cu ritie s .............
Increase in the gold s t o c k .....................................
Increase in Treasury c u r r e n c y ............................
Increase in member banks’ discounts and
a d v a n c e s ................................................................
Total ..............................................................

0.9
0.5
0.1
0 .1

1.6

Factors o f Decrease
Increase in Treasury cash and d e p o s its .............
Increase in other Federal Reserve deposits and
accounts ................................................................
Decrease in Federal Reserve f l o a t ......................
Increase in money in c ir c u la tio n ........................

0 .2

Total ..............................................................
Decrease in member banks’ re se rv e s.................
Increase in required re s e r v e s ..............................

1.7
0.1
0.8

Decrease in member banks ’ excess reserves . . . .

Transactions in Short Term Securities
Under Repurchase Agreements

Purchases

Factors A ffecting M em ber Bank Reserves— 1952

0.1

0.9

0.2
1.2

T otal F ederal R eserve System holdings o f G ov­
ernment securities at the end o f 1952 amounted to
$24.7 billion, o f which $24.0 billion was in the S y s­
tem Open M arket A ccount and $664 m illion was
held by this Bank under repurchase agreements.
The exchange o f the rem aining $1.2 billion o f 2 %
per cent nonmarketable Investm ent Series bonds
fo r a like amount o f IV 2 per cent five-year notes
eliminated the S ystem ’s nonm arketable bond hold­
ings. A pproxim ate changes in m arketable security
holdings grow in g out o f the purchases, sales, re­
dem ptions, and exchanges o f these instruments
during 1952 included an increase o f $300 m illion in
T reasury bills, a decrease o f $7.7 billion in certifi­
cates o f indebtedness, an increase o f $8.7 billion
in T reasury notes, and an increase o f $400 m illion
in m arketable T reasury bonds. This B a n k ’ s share
in the total Governm ent securities held b y the
System Open M arket A ccount amounted at the
year-end to $5.6 billion, com pared with $5.3 billion
at the end o f 1951.

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

8

FISC A L A G E N C Y O P E R A TIO N S
P u b lic d eb t

Governm ent financing operations during 1952
included the refunding o f six m aturing issues o f
certificates o f indebtedness aggregating $29,078
m illion and one issue o f bonds am ounting to $1,023
m illion. Cash offerings o f marketable securities
com prised an issue o f 2 % per cent T reasury
B onds o f 1958 in the amount o f $4,245 m illion, the
largest T reasu ry issue fo r new m oney since 1945,
and two issues o f T ax A nticipation bills aggregat­
in g $4,504 million. The regular w eekly offerings
o f T reasu ry bills issued during 1952 w ere in­
creased, with the result that the aggregate yearly
total o f $67,247 m illion exceeded the total issued
in 1951 b y $8,767 million.
The net result o f all the financing operations
was an increase o f slightly less than $8 billion in
the public debt during 1952. B ills rose $3.6 billion,
notes m ore than $11.8 billion, bonds $2.8 billion,
and special issues $3.2 b illion ; partial offsets re­
sulted from declines in certificates o f indebtedness
o f m ore than $12.3 billion and in various nonmarketable obligations o f $920 million.
A n innovation in Governm ent financing opera­
tions was introduced with the offerin g fo r cash, or
fo r cash and outstanding long term restricted
bonds, o f nonm arketable 2 % per cent T reasury
Bonds, Investm ent Series B-1975-80, which in turn
w ere exchangeable at the ow n er’s option fo r IV 2
p er cent five-year m arketable T reasury notes,
Gross Debt of the United States Government
Bi ll io ns
o f dollars




Bill ions
o f dollars

dated A p r il 1 and O ctober 1 o f each year during
the life o f the bonds. Com m ercial banks were
severely restricted in subscription rights, and the
T reasury D epartm ent hoped the deferred pay­
ment privilege w ould be attractive to insurance
com panies and other nonbank investors. Only
$1,757 m illion o f bonds were taken, how ever ($523
m illion o f the total b y G overnm ent investment
accounts).
Cash issues o f nonmarketable securities during
the year w ere confined to the Investm ent Series
bonds just described, U nited States Savings
bonds, and T rea su ry Savings notes. T here was a
substantial decline in the sale o f T reasury Savings
notes during 1952, as com pared with 1951, as well
as a decline in the aggregate redem ption o f such
notes, as reflected in the follow in g schedu le:
Treasury Savings Notes
(In millions of dollars)
1952

Issued .................................................
Redeemed ...........................................
Total outstanding at y e a r -e n d ___

1951

3,726
5,510
5,797

5,822
6,922
7,581

On M ay 1,1952, the eleventh anniversary o f the
original offerings o f U nited States Savings Bonds
o f Series E, F and G, the intermediate redem ption
schedule o f Series E bonds was changed to give a
higher return in earlier years. The over-all inter­
est rate was also raised fro m 2.9 per cent, com ­
pounded semiannually, to the legal maximum o f
3 per cent, com pounded semiannually, b y shorten­
ing the term o f the bond fro m 10 years to 9 years
and 8 months. The lim itation on holdings was
raised from $10,000 m aturity value to $20,000
m aturity value. A t the same time, the issuance o f
Savings bonds o f Series F and G was discon ­
tinued, and they w ere replaced by new series
designated J and K , respectively, w ith higher
yields (2.76 per cent i f held 12 years to m aturity,
com pared with about 2.53 and 2.50 per cent, re­
spectively, on the Series F and G b on d s). The
com bined annual purchase lim it fo r Series J and
K has been fixed at $200,000, as com pared with the
form er com bined lim it o f $100,000 fo r the Series F
and G bonds.
A new current incom e Savings bond, designated
Series H, was offered to individuals on June 1,
1952 as a com panion to the new Series E bond.
Interest on the new Series H bond, which is issued
at par fo r a term o f 9 years and 8 m onths and is

FEDERAL RESERVE BANK OF NEW YORK

redeemable at par, is paid b y check semiannually
on a graduated rate scale conform ing closely to
that paid on the new Series E bond.
The follow in g table summarizes the financing
operations o f the T reasury Departm ent, and our
part in them, during 1952, together w ith com par­
able figures fo r 1951:

T o t a l........... 172,562

35,137*
-0 2,238

19,337
2,586
872

753
41,150
39,697

2,718
35,277
33,683

150,082

104,395

92,478

Nonmarketable Issues
Issued on exchange . .
Issued for c a s h ........
R edeem ed...................

1,309
10,584
11,685

13,579
10,991
12,725

471
3,860
4,982

6,826
3,127
5,178

T o t a l..........

23,578

37,295

9,313

11,052,463
12,092,961
936,684

9,791,295
12,020,550
903,487

A rm ed Forces Leave b on d s:
Redeemed ..........................

36,654

154,667

59,052

79,871

121

15

7,446

24,580

24,185,381

22,974,465

15,131

Total

(In m illions o f dollars)

V olu m e o f w ork

D u ring the year as fiscal agent o f the United
States fo r the issue, exchange, transfer and
redem ption o f marketable securities, we han­
dled 2,851,288 pieces having a par value o f
$269,992,070,000, com pared with 2,872,814 pieces
in 1951 having a par value o f $258,187,575,000.
The number o f pieces o f nonmarketable securi­
ties handled during 1952 amounted to 24,185,381
w orth $9,964 million, as com pared w ith the pre­
vious y e a r ’s total o f 22,974,465 pieces valued at
$15,509 m illion.1
A s can be seen fro m the table below, the number
o f pieces o f nonmarketable issues handled in 1952
showed an increase in Savings bonds, and a
decrease in A rm ed F orces Leave bonds and S av­
ings notes, as com pared with the 1951 volum e. The
decrease in dollar volum e o f U nited States Sav­




......................

D ollar V olu m e H andled

* In clu des $1,514 m illion in 1951, and $1,316 m illion in 1952, o f
m ark etab le n otes ob tained in exch a n g e f o r n on m arketable bond s,
t In clu des bills o f T a x A n ticipa tion Series.

l
Figures for 1951 were revised and differ slightly from
given in the P r e s i d e n t ’ s R e p o r t t o D i r e c t o r s for 1951.

1951

Investment Series B b on d s:
Issued, redeemed and re­
issued ..............................

19,871
-0 929

4,748
56,214
51,745

1952

U. S. Savings b o n d s:
Issued ................................
Redeemed ..........................
Reissued ............................

Special notes, International
Monetary Fund S eries:
Issued, redeemed and re­
issued ..............................

Handled by
Federal Reserve Bank
of N ew York
1952
1951

Marketable Issues
Certificates, notes and bonds:
29,498*
E x ch a n g ed ............
4,245
Issued for cash . . .
2,048
R edeem ed...............
Treasury b ills: t
Issued (and re­
deemed) on
3,113
exchange ..........
Issued for cash . . .
68,639
Redeemed for cash. 65,019

Pieces Handled

Savings n otes:
Issued, redeemed and re­
issued ..............................

(In m illions o f dollars)

Entire country
1951
1952

ings bond transactions reflects, prim arily, an
increase in processing bonds o f smaller denomina­
tions together w ith a decrease in the number o f
larger denom inations handled.

1952

1951

U. S. Savings bon d s:
Issued ...............................................
Redeemed .........................................
Reissued ...........................................

757
839
237

774
963
257

A rm ed Forces Leave b on d s:
Redeemed .........................................

8

34

Savings n otes:
Issued, redeemed and reissued . . .

3,563

5,057

Special notes, International Monetary
F u n d S eries:
Issued, redeemed and reissued . . .

2,410

23

Investment Series B b on d s:
Issued, redeemed and reissued . . .

2,150

8,401

9,964

15,509

Total

...........................................

Telegraphic transfers o f m arketable securities

The volume o f w ork in handling telegraphic
transfers o f securities rose to new peaks in 1952.
Fees fo r the service, which are collected by the
sending F ederal R eserve Bank, amounted to
$113,685 and were credited to the account o f the
those
Treasurer o f the U nited States. Significant fig-

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

10

ures on volum e o f transfers, together with com ­
parable figures fo r 1951, fo llo w :

as com pared with 1951, both in number o f trans­
actions and in dollar volum e as shown b elo w :

T elegraphic Transfers

Treasury Tax and Loan Accounts
1952

Transfers (outgoin g) ..........................
Transfers (incom ing) ..........................
Pieces handled (outgoing) .................
Pieces handled (in co m in g ).................
P ar amount, in millions (o u tg o in g ).
Par amount, in m illions (in co m in g ).

46,985
36,096
350,658
257,658
$23,225
$23,882

1951

39,606
34,050
316,813
206,214
$19,824
$20,393

R eserve stock

A s a precaution against a possible emergency,
the T reasury D epartm ent has established a re­
serve stock o f certain Governm ent securities.
U nder the program , our general stock has been
increased b y 275,800 pieces with par value o f
$28,620 million, constituting an estim ated three
m on th s’ supply. P lans have not yet been com ­
pleted fo r creating a reserve stock o f Savings
bonds. H ow ever, w ith the introduction on M ay 1,
1952 o f the new form o f Series E Savings bond,
w e replaced the unissued stock o f the old form
o f Series E bond then held b y qualified issuing
agents. A s a part o f the replacem ent opera­
tion, 815,801 old -form Series E bonds have been
received, processed, and retained as unissued
stock. The adoption o f the new form o f Series E
Savings bond also enabled the Bank to obtain
fro m all issuing agents a final accounting fo r the
old-style bonds.
International Bank fo r R econstruction
and D evelop m en t

The Bank, as fiscal agent o f the International
Bank fo r R econstruction and Developm ent, issued
$50 m illion o f 3 % per cent bonds o f 1975, dated
M ay 15, 1952, and $60 m illion o f 3 % per cent
bonds o f 1971, dated O ctober 15, 1952. B eginning
June 1952, tem porary bonds o f the $50 m illion
issue o f 3 per cent bonds m aturing in 1976 were
exchanged fo r perm anent bonds. A com parison
o f the volum e o f transactions handled during 1952
and 1951 fo llo w s:

Is su e d ..................................
Redeemed and exchanged.

Pieces handled
1952
1951
62,969
92,108
54,427
167,147

D ollar volume
(In millions)
1952
1951
$110
$150
$130
$216

Treasury T ax and Loan A ccount

The volum e o f w ork in m aintaining T reasury
T ax and L oan A ccounts increased during 1952,




Trans­
actions
Deposits ........ 199,963
52,371
Withdrawals . .

1952
Volum e
(In millions)

1951
Tran s­
Volum e
actions (In millions)

$14,879
14,437

191,329
53,231

$10,415
9,974

Total .. 252,334

$29,316

244,560

$20,389

Collateral security:
Deposits ........
6,040
Withdrawals . .
4,198

$ 6,826
6,119

5,189
2,884

$ 4,402
3,923

Total . .

$12,945

8,073

$ 8,325

10,238

D uring 1952 a total o f 18,875 m onthly state­
ments were forw a rded to depositaries, com pared
with a total o f 17,652 statements in 1951. The
increase in volum e was caused prim arily by pay­
ment through these accounts fo r the 2 % per cent
T reasury B onds o f 1958 offered in June, and fo r
the T reasury T ax A n ticipation bills offered in
Septem ber and Novem ber, as well as by the quar­
terly tax paym ents b y individuals and co rp ora ­
tions in amounts o f $10,000 or over which were
paid through the accounts.
Foreign Assets Control

T his Bank acts as agent o f the T reasury
D epartm ent in adm inistering the regulations
blocking transactions affecting assets o f Com ­
munist China and N orth K orea, and their na­
tionals, in the U nited States. The regulations have
been a m ajor fa ctor in stopping trade between
China and the U nited States.
Our F oreign A ssets C ontrol D epartm ent an­
swers inquiries fro m the public, furnishes neces­
sary form s and instructions, and acts under
authorization from the T reasury D epartm ent on
applications fo r licenses. D uring the year, 6,800
applications fo r licenses w ere filed w ith the
F oreign A ssets C ontrol Departm ent, bringing the
total to 14,600 filed since D ecem ber 17, 1950, the
effective date o f the regulations.
SE C U R IT Y FILES PR O G R A M

W e continued to send duplicate records to our
S ecurity F iles unit in Ossining, making daily
deliveries and generally seeking to im prove our
methods. These records should enable us to recon ­
struct serial numbers and other identifying data o f
securities which m ight be destroyed at our offices
here in the city.

FEDERAL RESERVE BANK OF NEW YORK

The F ederal R eserve Banks o f B oston, P hila­
delphia, and St. L ouis were appointed to act as
agents o f this Bank, in the event o f an emergency,
and the President, F irst V ice President, and V ice
Presidents o f this Bank were individually author­
ized, in the event o f necessity, to appoint any other
R eserve Bank as the agent o f this Bank. A rra n ge­
ments fo r the handling o f our fiscal agency activi­
ties b y other R eserve Banks, in the event o f an
em ergency, were cleared with the S ecretary o f the
Treasury.
LOANS A N D CREDITS

A s was noted earlier, the shift o f F ederal
R eserve credit p olicy fro m neutrality to gradually
increasing restraint caused a m arked rise in our
loans and advances to member banks seeking to
obtain required reserves. Just b efore the year-end
their borrow ings reached the highest point in the
past 32 years. W e continued to supervise these
borrow ings closely to make sure that F ederal
R eserve credit was not being used im properly.
L oans to central reserve New Y ork City banks
accounted fo r the greater part o f the increase in
volume. H ow ever, borrow ing activity o f banks
located outside o f New Y ork C ity also increased,
both b y number o f banks and total advances. The
follow in g table shows the dollar volum e (in mil­
lion s) and the number o f accom m odations to mem­
ber banks in 1952 and 1951:
1952

1951

Volum e o f a ccom m oda tion s...........$23,500
$13,500
D aily average v o lu m e ......................
$181.8
$99.3
Range o f outstandings:
H igh ...........................................$ 1,025.5*
$589.5
$2.61
$2.6
L ow .............................................
Highest volume o f outstanding ad­
vances to members outside New
Y ork C i t y .......................................
$85.1
$87.4
Number o f accom m odations...........
3,925$
3,118
350
333
Number o f b a n k s ..............................
* R eached on D ecem b er 26 and lasted th ro u g h w eekend.
t R eached on Jan uary 1, 1952.
t In clu des on e red iscou n t o f com m ercia l p a p er f o r a cen tral reserv e
N ew Y o r k C ity b a n k ; all o th ers w ere a d va n ces secu red b y U . S. G overn ­
m en t ob lig a tion s.

W e received no applications last year fo r w ork­
ing capital loans under Section 13b o f the F ederal
R eserve A ct and have 110 loan o f this type on our
books at the present time. On M arch 14, 1952, we
received final paym ent in fu ll o f the 13b direct
loan in the original amount o f $30,000 made in
June 1950 to R oya l Crown B everage Com pany o f
Poughkeepsie, Inc., Poughkeepsie, New Y ork.




11

Loan Guarantees fo r D efen se Production
( R egulation V )

D uring 1952 the statutory authority fo r the
guaranteed loan program was further extended to
June 30, 1953, b y amendment to the D efense P r o ­
duction A ct o f 1950. The program continued
active in this D istrict during the year, although
there were few er new applications fo r V -L oan
Guarantee A greem ents than in 1951. T his decline
was occasioned, at least in part, by the slowdown
in certain phases o f m ilitary procurem ent in 1952.
H ow ever, the volum e o f servicing w ork we per­
form ed on behalf o f the guaranteeing agencies in­
creased. T his w ork included checking on the cur­
rent condition and progress tow ard liquidation o f
outstanding V-loans, w orking out, in cooperation
with the lenders and borrow ers, several loans
that had becom e “ distress cases,” studies o f and
recom m endations on requested extensions o f
maturity, increased loan amounts, and other p ro ­
posed m odifications o f agreements.
A ctin g as fiscal agent o f the U nited States, we
received during the year 58 applications— exclud­
ing those subsequently withdrawn— fo r V-loans
aggregating $331.5 million, com pared with 175
applications totaling $312.9 m illion in 1951. W e
also handled 36 requests to amend certain out­
standing Guarantee Agreem ents to cover an ag­
gregate o f $50.8 m illion in excess o f the original
loan amounts, com pared with 22 requests fo r an
additional $34.2 m illion received the previous
year. A num ber o f the applications and requests
fo r increased loan amounts were received late in
the year and were still under consideration b y the
Guarantors at the year-end.
D uring the year, the guaranteeing agencies
issued 58 new V -L oa n Guarantee Agreem ents to
cover $370.9 m illion V-loans, and authorized 36
increases aggregating $54.6 m illion in loan
amounts. F ourteen applications fo r V -loans total­
ing $4.8 m illion and one request fo r a loan increase
o f $5 m illion were declined. A s a partial offset to
this rise in guaranteed credits outstanding, 35
V -L oan Guarantee Agreem ents coverin g an au­
thorized amount o f $13.0 m illion were terminated,
while 26 authorized loan amounts w ere reduced at
the request o f the b orrow ers b y $21.5 m illion be­
cause o f a decrease in requirem ents fo r w orking
capital to finance defense contracts.
A t the year-end, 130 Guarantee Agreem ents
authorizing loans aggregating $657.4 m illion were
outstanding, and $397.3 m illion o f this was in use

12

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

by the borrow ers. The guaranteeing agencies con­
tinued reluctant, except in unusual circumstances,
to issue Guarantee Agreem ents coverin g m ore
than 90 per cent o f any V -loa n ; the guaranteed
percentage o f m ost frequent incidence was 90 per
cent, w ith the average guaranteed percentage,
80 per cent.

The regulation was difficult to adm inister and
enforce, because o f the varied lines o f businesses
affected, the large number o f registrants, the
tem porary character o f the authority, and general
lack o f understanding o f its purpose and necessity.

In the fa ll o f 1952, after m ore than a year o f
negotiation between the financing institutions, this
Bank, and the General S ervices Adm inistration,
the latter authorized a V -loan in the amount o f
$76,750,000 to be made b y a group o f banks and
insurance com panies to a subsidiary o f one o f the
large aluminum com panies fo r the construction o f
facilities. The loan, as it finally evolved, included
a number o f unique features departing fro m prac­
tices usually follow ed in the V -loan program , and
is to date the largest fa cility loan that has been
authorized in this D istrict under Regulation V.

U nder the authority o f the D efense P roduction
A ct o f 1950 and the P resid en t’s E xecutive Order
No. 10161, dated Septem ber 9, 1950, the B oa rd o f
G overnors o f the F ederal R eserve System issued
Regulation X effective October 12,1950. Statutory
authority fo r the regulation ran to June 30, 1951,
but was extended to June 30,1952 b y legislation in
1951. The statutory authority fo r the regulation
was extended fo r another year b y further amend­
ment in 1952 that also provided fo r relaxation o f
residential credit restrictions i f the estimated
residential construction “ sta rts” fo r three con­
secutive m onths should be below a seasonally ad­
justed annual rate o f 1,200,000 units. This period
o f relaxation could be term inated at any time after
the annual rate o f residential construction
“ sta rts” fo r any three consecutive months ex­
ceeded the designated rate. Since residential con­
struction “ sta rts” fo r June, July, and A ugust
1952 were below the rate named, a period o f resi­
dential credit con trol relaxation was announced
by the B oa rd o f G overnors with the concurrence
o f the H ousing and H om e Finance Adm inistrator,
and Regulation X was suspended b y the B oa rd o f
G overnors on Septem ber 16, 1952.

C onsum er C redit ( Regulation W )

R eal Estate Credit ( R egulation X )

The con trol o f consum er instalm ent credit,
w hich had been reinstated b y the B oa rd o f G ov­
ernors in Septem ber 1950, was suspended on
M ay 7, 1952; statutory authority fo r the regula­
tion expired June 30, 1952. D uring the p ortion o f
the y ea r that the regulation was in effect, we rein­
vestigated 406 form er violators, and we conducted
initial investigations o f 1,583 registrants, finding
326 violators in all. D isciplinary conferences were
held at the Bank w ith 53 registrants whose viola ­
tions w ere considered serious. In addition, one
registrant was referred by us to the B oa rd o f
G overnors and we understand this m atter is now
pending w ith the U. S. A ttorn ey fo r the Southern
D istrict o f N ew Y ork fo r the institution o f crim i­
nal proceedings.

F rom January 1 to Septem ber 16, 1952, we con­
ducted initial investigations o f 1,201 registrants
and fou n d 45 inadvertent violators. W e also made
reinvestigations o f 112 registrants, 13 o f them
previous violators.

A t the time o f the suspension o f the regulation,
approxim ately 17,200 concerns and individuals
subject to the regulation were registered ; o f this
number, about 14,600 w ere not supervised b y F ed ­
eral or State regu latory agencies. D uring the 21
months the regulation was in effect, 7,252 initial
investigations w ere conducted. O f this number,
1,554 were fou n d to have violated the regu la tion ;
in all instances we took disciplinary action either
through correspondence with the violator or
through conferences held at this Bank. W e also
made 582 reinvestigations o f previous violators.
Ten cases, including the one previously men­
tioned, w ere refe rred to the B oa rd o f G overnors
w ith recom m endations fo r further action.

A t the time o f the suspension o f the regulation,
5,053 concerns and individuals w ere registered, o f
whom 3,078 were not supervised b y F ederal or
State regulatory agencies. D uring the 20 months
the regulation was in effect, 2,504 initial investiga­
tions were conducted, and 201 registrants were
found to have violated the regulation, la rgely be­
cause o f their failure to maintain adequate rec­
ords and to obtain required statements from b or­
row ers seeking real estate construction credit.
D uring the period o f the regulation, we made
approxim ately 400 visits to various registrants
subject to exam ination by other supervisory agen­
cies, in order to explain the regulation and its




FEDERAL RESERVE BANK OF NEW YORK

requirem ents. W e also participated in 36 panel
discussions and group meetings fo r bankers, trade
associations and other groups interested in the
regulation.
F o u r sections o f the regulation required special
attention and considerable adm inistrative w ork on
our part. One section provided an exem ption from
the regu latory restrictions fo r credit extended on
residential constructions under oral commitments
made p rio r to the effective date o f the regulation,
i f the fa cts relative to the commitments were sub­
m itted to us. W e received and processed under this
section a total o f 201 statements regarding com ­
m itments aggregating approxim ately $99,900,000,
involvin g approxim ately 8,300 dw elling units.
Three sections o f the regulation authorized the
issuance o f certificates o f exem ption under specific
conditions. U nder these three sections a total o f
119 applications were received and 50 certificates
o f exem ption were issued fo r $20,889,950 o f real
estate construction credit.
F ederal and State agencies supervising com ­
m ercial lenders cooperated fully, and, in general,
the spirit and letter o f the regulation w ere care­
fu lly observed.
V O L U N T A R Y C R E D IT R E S T R A IN T P R O G R A M

The P rog ra m fo r V oluntary Credit R estraint
was suspended on M ay 5, 1952 b y the B oa rd o f
G overnors o f the F ederal R eserve System in
accord with the recom m endation o f the national
V olu ntary Credit R estraint Committee and in the
light o f current econom ic conditions. T his action
follow ed a m odification o f the P rogra m at P resi­
dential request in March. The V oluntary Credit
Restraint organization continued on a stand-by
basis until term ination on June 30, 1952 o f the
statutory authority fo r the P rog ra m under the
D efense P roduction A ct o f 1950.
The P rogram , which had been in effect since
M arch 9, 1951, had as its principal objective the
encouragem ent o f financing institutions to curtail
nonessential extensions o f credit as a means o f
com bating inflationary forces and to assure the
financing o f p rojects contributing to the national
defense effort and to the productive strength o f
the econom y.
Since the P rog ra m was voluntary, and since
many o f the inquiries were oral, com plete statis­
tics o f its operations are not available. The fo l­
low ing tabulation, how ever, discloses the volume




13

o f written inquiries received by the regional Com ­
mittees in this D istrict fro m A p ril 1951 through
A p ril 1952:

R egional Committee

Eastern Insurance V C R C .. .
Eastern Investment Banking
V C R C .....................................
New York-New Jersey Mutual
Savings Bank V C R C ...........
Second D istrict Commercial
Banking V C R C ....................
Second D istrict Savings and
Loan V C R C ..........................

W ritten
Inquiries
Received

Am ount
Involved

61

$ 144,668,200

843

$3,045,957,602

12

$

588,000

83

$

44,354,950

None

None

The effectiveness o f the P rogram cannot be
expressed in statistics, but the P rogram as a
whole m ay have served a useful purpose and
achieved its general objectives under the circum ­
stances which existed.
CHECK COLLECTION

The volume o f com m ercial checks collected by
the H ead Office in 1952 established an all-time
record at 409 m illion items. This represents an
increase o f 6 per cent over the 385 million checks
collected in 1951, the form er record year, and is
almost double the number handled ten years ago.
Despite this record-breaking check volume,
there were few er days than in the previous year
on which we were not able to process all checks on
the day o f receipt. This better perform ance re­
sulted, in large part, from a substantial im prove­
ment in our personnel situation, which had posed
m any problem s in 1951. W e were m ore successful
in hiring persons to train fo r operator positions,
except fo r the early m orning shift. These trainees,
with whom we enlarged the staff, were drawn
largely from groups o f high school seniors who
were trained during evening hours on a part-time
basis. This training program was first adopted in
1951. Since graduation, m ost members o f these
groups have continued with us on a full-tim e basis
on our day force. In addition, we have been able
to increase our night force to some extent b y hir­
ing m arried women who wish to supplement their
fam ily incomes.
The rate o f turnover o f operators during the
year remained high on the night force, but de­
creased am ong day force personnel. Over-all, the

14

PRESIDENTS REPORT TO DIRECTORS FOR 1952

rate o f turnover was 48 per cent in 1952, as com ­
pared w ith 57 p er cent in 1951. A s a result o f this
m ore favorable record, the ratio o f trained opera­
tors to all operating personnel on Decem ber 31,
1952, was 64 p er cent, as against 44 per cent at the
close o f the previous year.
D uring the last two m onths o f 1951, we had in­
creased the num ber o f p r o o f machines in the
Check D epartm ent from 203 to 233; during 1952
virtu ally the entire installation was replaced with
new m odels equipped w ith electrically actuated
keyboards. The new machines reduced the fatigue
fa ctor, and perm itted experienced operators to
show about a 6 per cent im provem ent in their
hourly production rate.
These various fa ctors have resulted in m ore
productive capacity and stability in the check
processin g force. In spite o f the expanded check
volum e, hours o f overtim e decreased 57 per cent
fro m the 1951 level.
Checks Handled and Personnel Assigned
at H ead Office— 1942-52*

* The sharp drop in requirements fo r personnel from 1948 to
1950 reflected a changeover to p r o o f machine equipment. F or two
years b egin nin g about mid-1950, a very high rate o f personnel
turnover increased requirements disproportionately.

Visual p ercep tion training

D urin g the fall, under the leadership o f an in­
structor fro m the R eadin g Institute o f New Y ork
U niversity, an experim ental course in perceptual
im provem ent training was given to 13 p ro o f
machine operators. A lthough the analysis o f the
results had n ot been com pleted at the year-end,




there w ere indications that the course had resulted
in an increase o f speed and an im provem ent in
accuracy, even fo r those operators who appeared
to have attained their m aximum standards o f per­
form ance. The training also seemed to reduce the
fatigue factor, for, a fter com pleting the course,
participants volunteered the inform ation that
with the application o f their newly im proved skill
they fe lt less tired at the end o f the day. E xten­
sion o f this training program to all operators and
trainees, and to office machine operators in other
departm ents o f the Bank, is under consideration.
Nassau C ounty clearing arrangement

In June 1952, we w ere approached b y a com m it­
tee o f bankers representing the Nassau County
Clearing H ouse A ssociation and asked to consider
ways and means o f expediting the collection o f
checks deposited with them that w ere drawn on
other banks in N assau County. Several sugges­
tions were considered and a plan was devised to
encompass, in addition to banks in N assau County,
certain banks in Suffolk and Queens Counties. In
substance, the plan contem plates the establish­
ment o f a clearing house within the banking area
to which such checks w ould be transported b y the
participating banks at the close o f each business
day. The checks w ould be sorted to the individual
drawee banks at the clearing house and would
then be transported b y autom obile from the clear­
ing house to the drawee banks b y their agents in
the early hours o f the follow in g day. The final net
debit and credit balances o f the respective par­
ticipating banks resulting from the clearings
w ould be settled on our books.
W e offered our services and cooperation in the
organization and initial operation o f the clearing
center, and agreed to furnish the necessary equip­
ment, supplies, supervisory personnel, and twothirds o f the clerical personnel fo r an organization
period o f three months. W e stipulated that during
this period the clearing house should obtain its
own equipm ent and personnel to replace ours and
that, when the new personnel had been sufficiently
trained, we w ould withdraw our em ployees. T here­
after, our contribution to the clearing house w ould
be in the fo rm o f a lim ited mem bership fee.
A s the year ended, m embers o f the committee
were engaged in acquainting other bankers in the
three counties with the plan we had proposed, with
the aim o f determ ining how m any banks desired
to participate.

FEDERAL RESERVE BANK OF NEW YORK

Consolidated ch eck shipments

The number o f checks forw arded by air trans­
portation in our consolidated shipment program
increased about 9 per cent in 1952 over the previ­
ous year. Shipm ents to other F ederal Reserve
Banks and Branches o f our own cash letters and
those o f 33 participating direct-sending banks
located in the m etropolitan area averaged ap­
proxim ately 730,000 checks daily. On O ctober 15,
1952, an all-time peak was reached when we fo r ­
w arded by consolidated air shipments 1,300,000
checks, a total w eight o f m ore than two tons.
C heck R outing Sym bol program

The Check R ou ting Sym bol program , which was
developed join tly b y the Am erican Bankers A sso ­
ciation and the F ederal R eserve Banks, continued
to progress during the past year. In Decem ber
1952, a nationwide survey o f checks in circulation,
draw n on par rem itting banks, indicated that 90
per cent bore the sym bol in the approved location,
an increase o f 5 p er cent fo r the year. The p ro ­
gram registered gains in all F ederal R eserve D is­
tricts, and it is gra tifyin g to note that this D istrict,
with an average o f 96 per cent, again led the
country.
N onm em ber clearing account

W e opened a nonmember clearing account in
October 1952 fo r the Governm ent Developm ent
Bank fo r P uerto R ico, San Juan, P u erto R ico (a
governm ent-owned institution), to be used exclu­
sively fo r the purpose o f settling balances in the
check exchanges am ong certain Island banks. This
account was opened after representatives o f our
Bank met with officials o f the Governm ent D evel­
opm ent Bank fo r P uerto R ico and officers o f each
o f the large P uerto R ican banks to furnish tech­
nical assistance fo r the establishment o f such a
check clearing system.
Postal m on ey orders

The processing o f the new form o f postal m oney
order, which was inaugurated on J u ly 1, 1951,
progressed sm oothly during 1952, with 54 m illion
money orders handled aggregating $798 million.
A t the start o f 1952, there were 94 em ployees
assigned to this operation, but a reorganiza­
tion o f the M oney O rder D ivision, together with
im provem ents in machine production and in op ­
erating procedure, made possible a reduction o f
staff requirem ents to 61 em ployees by the yearend.




15

G overnm ent checks

W e handled 52 m illion Government checks a g ­
gregating $22 billion during the year, an increase
o f 5 per cent over the number handled in 1951.
CASH O PER A TIO N S
C ounterfeits

D uring the year 1952, our currency counters de­
tected 920 counterfeits am ounting to $15,057, a
sharp decrease fro m the previous year when 2,263
counterfeits am ounting to $34,311 had been de­
tected. L arge scale counterfeiting, first observed
in 1948, reached its peak in 1950 when 3,157 coun­
terfeits am ounting to $41,174 were detected.
E xperience in p rior years had indicated a norm al
annual expectancy b y our counters o f about 400
counterfeits. A bout tw o-thirds o f the counterfeits
detected during 1952 were in the $10 denom ina­
tion, and m ost o f them purported to be issues o f
the F ederal R eserve Bank o f Chicago. A circular
letter describing new counterfeits was sent to all
banks in this D istrict in January 1952, w ith the
approval and cooperation o f the U nited States
Secret Service. Special representatives o f the
Bank Relations Departm ent continued to show
typical counterfeits to banks and oth ers; and cer­
tain members o f the Cash Departm ent, through
arrangem ents made b y the P ublic Inform ation
Department, gave talks on counterfeits fro m time
to time to groups o f interested persons, including
newly com m issioned finance and disbursing offi­
cers o f the U nited States Navy.
A rm ored carrier service

E a rly in 1952, 18 banks on the New Jersey
“ Shore R o u te ” in M onm outh County were given
a w eekly delivery service o f currency and coin.
P reviously, banks on this route had been lim ited
to pickup service only. B y the year-end, we had
expanded this service to meet the coin and cur­
rency needs o f 417 banking offices.
A rm ored carrier service was interrupted fo r
three months, fro m early June to Septem ber, b y a
strike o f drivers and guards em ployed b y the
arm ored carrier corporations. D uring this period
m ost shipments to and from member banks n or­
m ally serviced b y us b y arm ored car were made b y
registered m a il; banks in the area affected b y the
strike cooperated in exchanging currency and coin
with each other, thus reducing the need fo r ship­
ments to or from us.

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

16

Coin shortage

Shortages o f coin, which had been persistent
during m uch o f the year 1951, w ere all but elimi­
nated during 1952. A lthough our stocks were low
at times, particularly during the p eriod o f the
arm ored car strike, w e were able to fill all orders
fo r coin fro m early January until mid-Decem ber.
The heavy seasonal demand in the latter part o f
Decem ber m ade it necessary to ration briefly sup­
plies to the larger banks in the m etropolitan area
o f pennies, nickels, and qu arters; b y the close o f
the year, how ever, supplies o f pennies and quar­
ters were again sufficient to fill all orders in full,
and supplies o f nickels were sufficient to fill 75 per
cent o f the orders fro m the larger banks. A ll other
banks were supplied w ith the fu ll amount re­
quested in all denominations, provid ed the re­
quests did not exceed their estim ated norm al
requirements.
W IR E TR A N SFE R S OF FUNDS

T he volum e o f w ire transfers handled during
1952 continued the upw ard trend o f recent years,
although the rate o f increase m oderated som e­
what. D uring the year, 297,157 transfers a ggre­
gating $276 billion w ere made, representing an in­
crease over 1951 o f 5^2 per cent in volum e and
19 per cent in dollar amount.
T elefa x

O f the transfers that we handle, at least 80 per
cent originate with, o r go to, the larger New Y ork
C ity b a n k s; until recently, advices and authoriza­
tions relating to these transfers w ere delivered by
m essenger. A s m entioned in the rep ort fo r 1951,
we had concluded that facsim ile transm ission o f­
fered the best means o f expediting transfers o f
funds to or fro m the larger banks. A n experi­
mental installation b y the W estern U nion Tele­
graph Com pany o f T elefax equipment linking four
local institutions to this Bank operated fo r a three
months ’ trial period early in 1952, and proved that
facsim ile transm ission was feasible and w orth­
while. Subsequently, participation in the new sys­
tem was offered to all local banks that fe lt that
their volum e o f transfers w arranted installation
o f the equipment.
A fte r some delay due to a strike at W estern
Union, T elefa x equipment was installed here and
at 15 m em ber banks, and operations began on
O ctober 14, 1952. D uring the rem ainder o f the
year, a daily average o f 922 transfer advices and




authorizations were handled by T elefax. There
have been some m echanical difficulties and a few
peak periods during which we and some o f the
banks have had to use supplem entary m essenger
service, but on the whole the new system is living
up to expectations. The participating banks bear
50 per cent o f the c o s t ; they are enthusiastic about
the results o f the new service. A lthough the cost
to us is somewhat higher than m essenger service,
a substantial im provem ent in service to member
banks and their d epositors has resulted from the
use o f T elefax.
F O R E IG N O PER A TIO N S
Assets held fo r foreign and international account

The volum e o f foreign -ow ned earm arked gold
and dollar assets at this Bank, which had declined
during the second half o f 1951, began to rise early
in 1952. The trend continued generally upw ard
throughout the year and la rgely offset the 1951
drop. The increase, am ounting to slightly over
$1 billion fo r 1952, brought foreig n assets at the
year-end to nearly $7.1 billion, as com pared with
the all-time high o f $7.5 billion reached in M arch
1951. A ssets held fo r the International Bank and
International M onetary F und were little changed
during the year, total holdings o f $3.3 billion at
year-end being only $38 m illion above those o f a
year earlier.
Total G old and D ollar A ssets H eld at the Federal Reserve
Bank o f N ew Y o rk fo r Foreign A ccou n t and for
International M onetary Fund and Bank
Bi lli ons
of dollars

Billions
of dollars

FEDERAL RESERVE BANK OF NEW YORK

17

Total Assets H eld at
Federal Reserve Bank o f New Y ork
fo r Foreign and International Accounts
(In m illions o f dollars)
N et Change
End of 1951 to
End of 195;

End of
1952

End of
1951

E arm arked g o l d ..........................................................
D e p o s it s ........................................................................

4,285 (a )
550

U. S. Government s e c u r itie s ..................................

2,156

4,072(b)
526
1,383

+
+
+

213
24
773

80

+

3

F o reig n A ccou n ts

M iscellaneous securities, com m ercial paper, and
bankers’ a c c e p ta n c e s ...........................................
T otal— F oreign A c c o u n t s ..............................

8 3 (c)
7,074

6,061

+1,013

E arm arked g o l d ..........................................................
D e p o s it s ........................................................................

1,028
40

+

92

U. S. Government s e c u r itie s ..................................
M iscellaneous se cu ritie s ...........................................

1,733 (d )
525(e)

936
35
1,793(d)
5 2 4 (f)

+
—

5
60

+

1

3,326

3,288

+

38

10,400

9,349

+ 1,051

International A ccounts
(International Fund & Bank)

T otal— International Accounts ...................
G rand T

o t a l

................................................................

(a ) Includes $141.6 million as collateral to loans made by domestic commercial banks to Bolivia, Spain, Turkey, and
Venezuela, and $30.6 million held as collateral to loans to Turkey by Federal Reserve Banks.
(b ) Includes $133.3 million held as collateral to loans made by domestic commercial banks to Bolivia, Spain, and Vene­
zuela, and $10.2 million held as collateral to a loan to Turkey by Federal Reserve Banks.
(c ) Does not include bonds having face value o f 12.6 million Swiss francs (or a U. S. dollar equivalent o f $3 million).
(d ) Includes noninterest-bearing nonnegotiable demand notes as follows:
1952— $1.3 billion

1951— $1.3 billion

(e) Does not include bonds having face value o f 2.1 million Swiss francs (or a U. S. dollar equivalent o f $.5 million),
65 million Belgian francs ($1.3 million), .6 million Canadian dollars ($.6 million), and .3 million pounds sterling ($.8 million).
( f ) Does not include bonds having face value o f 17 million Swiss francs (or a U. S. dollar equivalent o f $3.9 million),
86.8 million Belgian francs ($1.7 million), .4 million Canadian dollars ($.4 million), and .3 million pounds sterling ($.8
m illion).

A s is evident from the accom panying table, all
the principal types o f assets contributed to the
rise in foreign account holdings. O f the greatest
significance, however, was the increase o f $773
m illion in investments in United States Govern­
ment securities, prim arily T reasury bills. E a r­
marked gold rose by $213 million, and dollar de­
posits b y $24 million.
The U nited K ingdom increased its gold and dol­
lar assets at this Bank by $418 million, net, dur­
ing the year.2 The Netherlands added $313 million
2
For the same period, however, U. K. holdings o f gold in
Canada were reduced by the shipment o f $535 million o f gold to
the United States, which approximately offset sales o f gold in the
United States.




to its assets here, while holdings fo r Germany
(Bank deutscher L aender) increased by $81 m il­
lion. The other m a jor increases in gold and dollar
assets were as fo llo w s: Thailand, $87 m illion;
Iran, $72 m illion (representing gold sent here
from South A fr ica and C a n a d a ); the Belgian
Congo, $58 m illion; and the Bank fo r Interna­
tional Settlements, $111 million, $52 m illion o f
which represented assets held by the Bank fo r
International Settlements as agent fo r the Organ­
ization fo r E uropean E conom ic Cooperation
(E uropean Paym ents U nion).
Although most o f the accounts showed increases,
a number had rather m aterial decreases. Indo­

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

18

nesia, fo r exam ple, reduced its gold and dollar
assets here by $108 million, a substantial part o f
which was tran sferred to the Netherlands. M exico
reduced its holdings b y $62 m illion ; Argentina, by
$54 m illio n ; and E g y p t and Cuba, by $41 m illion
each.

been transferred in our vaults by the central
banks o r foreign exchange authorities o f Bolivia,
Venezuela, and Spain to secure loans running fo r
periods longer than our ow n lending p olicy
provides.
G old m ovem ents

Changes in status o f foreign accounts

T w o new ly established central banks opened
accounts w ith us during the year. T hey are Banque
Centrale du Congo B eige et du Ruanda-Urundi,
which took over the central banking functions f o r ­
m erly p erform ed b y Banque du Congo Beige, and
Banco Central del Paraguay, which succeeded in
sim ilar fashion B anco del Paraguay. Banque du
Congo B eige has closed its account with us, and we
anticipate that B anco del Paraguay, which con­
tinues to ca rry a nom inal balance, w ill close its
account shortly. W e also established a dollar
account fo r the Governm ent o f Japan, with a sub­
account fo r the M inister o f Finance. T his sub­
account, which is la rgely invested in U nited States
G overnm ent and W o rld Bank securities, has been
established as an evidence o f g ood faith in con­
nection with settlement o f outstanding Japanese
dollar bonds.
The account o f the Central C orporation o f
B anking Com panies o f H ungary was closed.
Loans to central banks

L endin g on gold to central banks continued com ­
paratively inactive during 1952, the central bank
o f T urkey being, as in the previous year, the only
b orrow er. The m aximum outstanding at any one
time w as $45 m illion ; at the year-end, $29.5 m illion
was outstanding. E a rly in January, the outstand­
in g amount rose to $30 m illion— the maximum that
T urkey could then borrow from us.
A s the year closed, negotiations were being
carried on in volvin g possible loans (a ) on gold to
the central bank o f B olivia in the amount o f $9.5
m illion fo r 3 months, and (b ) on U nited States
T rea su ry bills to the Bank fo r International Set­
tlements, fo r v e ry short periods, in connection
w ith the m onthly settlements o f the E uropean
Paym ents Union.
D u ring 1952, we transferred gold to the account
o f a N ew Y o rk com m ercial bank to secure a long
term loan to the central bank o f Turkey, running
concurrently w ith our lo a n s ; we also continued to
hold in custody fo r the account o f five U nited
States com m ercial banks gold that had previously




The substantial flow o f gold into the United
States that developed in the second half o f 1951
continued during the first quarter o f 1952, when
the T reasury was a net buyer o f over $560 m illion
o f gold. This reflected la rgely the sale b y the
U nited K in gdom o f $520 m illion. T here was little
activity in the second and third quarters, except
fo r M ex ico’ s sales o f $100 m illion, in addition to
$12 m illion sold previously. D uring the last quar­
ter, however, there was an outflow, which became
w ell defined in Decem ber, accom panying renewed
discussions abroad o f a possible change in the
U nited States gold price. In Decem ber, foreign
accounts bought $257 m illion o f gold fro m the
Treasury, o f which the Netherlands purchased
$100 m illion ; the U nited K ingdom , $80 m illion;
M exico, $25 m illion ; and A rgentina and Belgium,
each about $20 m illion. Over the entire year, how­
ever, the T reasury was a net purchaser o f about
$400 m illion o f foreign -ow ned gold.
The w ork o f this Bank in handling gold is mea­
sured not only b y the purchases o f gold from the
Treasury, and sales o f gold to the Treasury, fo r
foreign account; it also includes sizable transfers
o f gold held in our vaults between foreig n
accounts. T ransfers o f this kind are arranged in
part directly between the central banks concerned,
and in part by the Bank fo r International Settle­
ments and b y the International M onetary Fund,
which recently established a service that under­
takes to “ match o f f ” sales orders by central banks
with sim ilar purchase orders. T otal tran sfers o f
gold in our vaults during the past year totaled
$585 m illion, o f which $193 m illion was arranged
through the International M onetary Fund. The
F u n d ’s service costs the buyer and seller each
Vs2 per cent, as com pared with the *4 per cent
charge o f the U nited States T rea su ry on a sale o f
gold b y a central bank to the T reasury, and the
3 per cent charge o f the T reasury on a purchase
,4
o f gold by a central bank fro m the Treasury.
U. S. cu rren cy and coin

The F oreign and the Cash and Collection F u n c­
tions handled im ports fo r our foreig n corres­
pondents o f $16.6 m illion o f U nited States cu r­

FEDERAL RESERVE BANK OF NEW YORK

rency and $2.8 million o f coins, as well as exports
o f $52.5 million of United States currency and a
small amount of coins.
Visits to foreign central banks

In March and April, N orman P. D avis, Assist­
ant Vice President, visited the Bank of England
and Banque de France. In May and June,
L. W erner K noke, Vice President, accompanied by
T homas J. R oche of the Foreign Department staff,
also visited the Bank o f England. Mr. Knoke also
attended the annual meeting of the Bank fo r Interternational Settlements in Basle. In October and
early November, A llan S proul, President, visited
the central banks o f France, Switzerland, Italy,
Germany, Belgium, Netherlands, and England and
the Bank fo r International Settlements. H orace L.
S anford, Assistant Vice President, and F rank W .
S chiff , o f the Foreign Research Division, visited
the central banks of Peru, Brazil, Uruguay,
Argentina, and Chile in October and November.
In a continuation o f the program provid in g fo r
exchange visits o f staff m embers o f this Bank and
o f the Bank o f Canada, one member o f the F oreign
D epartm ent and one member o f the Planning
Departm ent spent two weeks o f observation and
study in Canada during November.
M eetings o f E xperts o f th e Central Banks
o f th e A m erican Continent

From February 25 to March 8, 1952, the Third
Meeting o f Experts of the Central Banks of the
American Continent was held in Havana, under
the sponsorship of Banco Nacional de Cuba. P re­
vious conferences had been held in Mexico City in
August 1946 and in Santiago, Chile, in December
1949. The third meeting was attended by represen­
tatives from most o f the central banks and similar
institutions of the Western Hemisphere. The
Federal Reserve Bank o f New Y ork was repre­
sented by W alter H. R ozell, Jr., Manager of the
Foreign Department, and by E. R. S chlesinger,
form erly of the Research Department. The United
States delegation was headed by R alph A. Y oung,
Director o f the Division of Research and Statis­
tics, and included another member of the staff of
the Board of Governors o f the Federal Reserve
System, and a member o f the staff o f the Federal
Reserve Bank of Atlanta.
The fourth m eeting is scheduled to be held in
M ay 1954 in W ashington and New Y ork, with the
B oa rd o f G overnors o f the F ederal R eserve S ys­
tem and this Bank acting as joint hosts.



19

Foreign visitors

V isits by representatives o f foreign central
banks and governm ents in 1952 numbered well
over 100, exceeding the record number in 1951.
Besides the Bank fo r International Settlements
and the International Bank and M onetary Fund,
37 countries were represented, 25 o f them b y the
senior executive officers o f their central banks.
F rom the U nited K in gdom alone, we had at differ­
ent times visits b y 15 persons, either senior officers
or directors o f the Bank o f E ngland or o f the B rit­
ish G overnm ent; A ustralia sent 9 visitors, A ustria
8, Thailand 7, Japan 5, and Belgium and Canada 4
each. W e provided some with offices fo r stays o f
va ryin g duration and arranged fo r them to
observe operations o f this Bank and o f com m ercial
banks. In addition, other officers and staff mem­
bers o f the central banks o f Burm a, Ceylon,
Colombia, Denmark, E l Salvador, France, M exico,
Philippines, and Thailand stayed with us fo r
somewhat longer periods, review ing our systems
and operations.
Staff G roup on Foreign Interests

The S taff G roup on F oreign Interests, consist­
ing o f representatives o f the foreign , legal, and
research staffs o f this Bank and o f the B oa rd o f
G overnors, held two meetings during the year
to discuss foreig n and international problem s in
the operating and research fields. T w o problem s
that had received some attention in 1951 were the
subject o f further consideration during the past
year, nam ely the gold p olicy o f the U nited States
and o f the International M onetary Fund, and fo r ­
eign treaty provisions affecting U nited States
banks. The tax status o f interest on time deposits
held by foreign ers in U nited States banks was
analyzed, and letters were w ritten to the T reasury
on the subject. A m on g other topics that the group
studied and discussed were possible stabilization
credits b y the System, the purposes and terms o f
Federal R eserve loans on gold, the adequacy o f
im port financing facilities, planning fo r the pre­
viously mentioned 1954 meeting o f central bank
technicians, and the scope and method o f F ederal
R eserve participation in the new Center fo r Study
o f L atin A m erican M onetary Problem s in M exico
City. A s in the past, the group gave continuous
consideration to the efficient staffing o f missions
requested by foreig n governm ents or official
U nited States and international agencies.

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

20

B A N K SU PE R VISIO N
Bank changes

D u ring 1952 the total number o f national banks
and State banks and trust com panies in this D is­
trict declined fro m 848 to 826, while the number o f
m em ber banks declined from 737 to 720. The
declines resulted fro m the follow in g ch a n ges:
National Banks
A bsorbed by
A bsorbed by
A bsorbed by
Converted to

other
State
State
State

national banks.............................. ... 8
member banks.............................. ... 1
nonmember banks........................... 1
nonmember banks........................... 2

State M em ber Banks
A bsorbed b y national banks............................................ 5
Absorbed by other State member banks....................... 2
W ithdrew from m em b ersh ip .......................................... 1

requirem ent on State member banks that they
obtain the approva l o f the B oa rd o f G overnors
o f the F ederal R eserve System b efore establish­
ing any in-tow n branch. Since that date, we have
been m aking a field investigation and a recom ­
mendation to the B oa rd o f G overnors, in connec­
tion w ith each application o f a State member bank
fo r the establishment o f an in-tow n branch, in
addition to investigations and recom m endations
concerning out-of-tow n branch applications. In
1952 we made 13 investigations o f out-of-tow n
branch applications and 10 investigations o f
in-town branch applications.
N otw ithstanding the continued decline during
the year in the number o f com m ercial banks, the
establishment o f new branches has brought about
an increase in the number o f banking offices from
1,814 to 1,832.

N onm em ber State Banks
A bsorbed
Absorbed
Absorbed
Adm itted

by
by
by
to

national banks............................................ 1
State member banks.............................. ... 2
other State nonmember banks............. ... 2
m em b e rs h ip ............................................. ... 3

The return o f three State banks to m em ber­
ship was a direct result o f amendments adopted
Ju ly 15, 1952, to the provisions o f F ederal law
requiring certain m inimum capital fo r the estab­
lishment o f out-of-tow n branches. These three
banks had previou sly w ithdraw n fo r m embership
because they w anted to establish out-of-tow n
branches, but could not meet the capital require­
ments under F ederal law. Since they w ere per­
m itted to do so under State law, they w ithdrew
fr o m m em bership to avoid the F ederal restriction.
The amendments to the F ederal law eased this
requirem ent and they returned to m embership.
W e are hopefu l that several other State banks
that w ithdrew fr o m m em bership in recent years
fo r the same reason w ill again seek membership.
In the ten-year p eriod fro m 1943 through 1952,
the total num ber o f com m ercial banks in this
D istrict declined fro m 978 to 826. D uring this
period, there w ere 155 m ergers and absorptions.
D uring the same period, the number o f member
banks declined fro m 799 to 720.
Bank mergers and branch banking

B ank m ergers and absorptions and the estab­
lishment o f branches continued at about the same
rate in 1952 as in the past several years. The A ct
o f J u ly 15,1952, referred to above, im posed a new




Capital adequacy

D uring 1952, our Bank E xam inations D epart­
ment has been experim enting w ith a new approach
to the problem o f attem pting to measure m ore
accurately the adequacy, o r inadequacy, o f a
bank’ s capital position.
One o f the two standard conditions o f m em ber­
ship in the F ederal R eserve System requires that
a member bank maintain capital “ adequate in
relation to the character and condition o f its
assets and to its deposit liabilities and other
capital responsibilities.” In the past, we have
attempted to obtain a rough m easure o f capital
adequacy on the basis o f various ratios, such as
the ratio o f capital to deposits or to total assets,
o r the ratio o f capital to so-called risk assets.
These, at best, were v ery rough benchmarks and
w ere used prim arily as screening devices to find
those banks that required fu rth er detailed study
in order to examine m ore closely the adequacy o f
their capital.
W e have now developed a form ula that helps to
establish ob jectively the minimum amount o f capi­
tal in dollars we w ould expect a bank to have, by
reference to the quality and volum e o f its own
assets, rather than to general ratios and percent­
ages. M ost banks, o f course, should as a practical
m atter have m ore capital than the indicated minimums. The minimum amount under our form ula
is arrived at b y assigning various percentages, as
required capital protection, against a ban k ’ s as­
sets, which have been segregated into six rough
groupings. These range in degrees o f risk and

21

FEDERAL RESERVE BANK OF NEW YORK

liquidity fro m cash assets against which no capital
is needed, to banking house and equipment against
which a fu ll 100 per cent capital requirem ent is
suggested.
Our new approach is still not an accurate sta­
tistical gauge o f capital adequacy. W e do not
believe that such a gauge is feasible since the ques­
tion o f capital adequacy involves a number o f
intangible factors, such as the character o f a
ban k’ s management, the econom y o f the com ­
m unity in which it is located, and the quality o f
its assets in any particular category. W e do think,
how ever, that we have evolved a m ore selective
screening device, which reduces the further anal­
ysis o f intangibles to a minimum and provides a
m ore equitable basis o f com paring one bank with
another.
T his approach has engendered a considerable
amount o f interest in banking circles all over the
country. W hile no form ula can supply the com ­
plete answer, it seems to be the consensus o f the
bankers who have studied our new approach that
it is a realistic and practical one. W e have also
fou n d it an effective argum ent in discussing the
need fo r additional capital w ith our member bank
directors and officers.
R.F.C. investm ent in m em ber banks

R econstruction Finance C orporation investment
in m em ber banks in this D istrict was further
reduced in 1952. T ow ard the latter part o f 1951,
the R .F .C . announced that after F ebru ary 1,1952,
it w ould no longer feel obligated to give 90 d a y s ’
w ritten notice before selling its investm ent to
anyone m aking a satisfactory offer. A s a result
o f this announcement, 30 m em ber banks com ­
pletely eliminated the R .F .C . investm ent during
1952, and one other is in process o f eliminating
its preferred capital. A bout 95 per cent o f the
rem aining R .F .C . investment is in three State
m em ber banks.
The follow in g table shows the original R.F.C .
investment in banks in this D istrict and the invest­
ment at the end o f 1952, with com parable figures
fo r 1951 (retirem ent and par values are in
m illio n s ):
Original investment
N o. of
Retirement
Banks
Value

State m e m b e r s .........
N ational b a n k s .........

156
293

$181.5
147.4

T o t a l ...........

449

$328.9

N o. of
Banks

4

B A N K R E LA TIO N S

D uring 1952, the Bank Relations Departm ent
continued its efforts to develop a better under­
standing o f the functions and operations o f the
F ederal R eserve System , and to m aintain frien dly
and cooperative relations w ith bankers in this
D istrict.
Our Special Representatives made over 2,000
visits to banks; in addition, 25 officers spent a
week each with representatives making these calls.
The program o f holding bankers’ m eetings in our
Bank was also continued in 1952. G roups o f from
8 to 15 bank officers, usually fro m the same or
adjacent counties, w ere invited to come in and see
our operations. A fte r luncheon, F ederal R eserve
policies and their relation to the current business
situation were discussed under the leadership o f
our officers and staff econom ists. T en o f these
meetings w ere held during the y e a r; b y June o f
1953, all banks in the H ead Office territory w ill
have had an opportu nity to participate in these
meetings.
Our representatives also attended nearly all of
the various meetings held by banking organizations
in the D istrict, fro m the county level up. W e were
represented at one national convention, six State
conventions, and 112 other meetings. Officers and
staff m embers took an active part in the program s
at 20 bankers ’ meetings, and in addition made 66
appearances as speakers b efore service clubs and
other nonbanking organizations. Bank Relations
representatives also exhibited films on the F ederal
Reserve System b efore 20 service groups and
other organizations.
Our program o f offerin g technical assistance to
mem ber banks on some o f their operating p rob ­
lems was continued and somewhat expanded dur­
ing the year. P rio r to 1952, our efforts were con­
fined la rgely to check handling operations and
credit file installations. S hortly after the first o f
the year, however, w e added a third technical
assistance service to mem ber b an k s: a survey o f
internal control and audit procedures. Since then,
389 banks in the D istrict have requested this serv­
ice. The survey is made by qualified representaDecember 31,1952
Par
Retirement
Value
Value

$8.3
.4

$33.8*
1.4

19
19

$13.3

2.1

$43.3
4.2

~$8/7

$35.2

38

$15.4

$47.5

* R etirem en t o f an add ition a l $120,000 at p a r value ap p roved b y this B ank and S tate au th orities.




December 31,1951
N o. of
Par
Retirement
Banks
Value
Value

22

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

tives who v isit a mem ber bank at its request
and analyze operational procedures to determine
whether o r not they provide adequate internal
safeguards and controls. In addition, where an
auditing p rogram exists, its scope is analyzed to
ascertain whether o r not it meets generally recog­
nized auditing standards. A written report, evalu­
ating its internal controls and auditing proce­
dures, is given to the bank at the conclusion o f
the survey. Suggestions and recom m endations fo r
im proving the audit program , or tightening the
m ethods in use, are also submitted to the member
banks fo r their consideration. I f a bank does not
have any form al audit program , we recomm end
that one be form ulated and submitted to the
ban k’s directors fo r approval.
W e have also expanded our technical assistance
service to include a survey o f loan departm ent
operations. T his service is in addition to the
assistance we render through the credit file
program .
The p op u larity o f the technical assistance p ro ­
gram is shown in the follow in g ta b le :

Field o f survey

Date
started
September 1949

Transit and bookkeeping..
Credit (including loan
operations) ....................... September 1949
Audit and control............... January 1952

V isits
made
450

Pending
requests
for visits
140

220
102

65
287

D u ring 1953, we hope to add substantially to the
staff doing this w ork in order to reduce the back­
lo g o f unsatisfied requests fo r these im portant
services.
V a riou s officers o f the Bank have attended the
w eekly staff m eetings o f the Bank Relations
D epartm ent to discuss problem s o f particular
interest to their functions. T his practice was con­
tinued and expanded during the year to provide
f o r regular attendance, in rotation, o f chiefs o f
operating divisions o f the Bank. The program
should produce a closer understanding and liaison
between our field representatives and the operat­
ing staff.
In M arch 1952, we announced b y letter that a
collection o f U nited States currency and coin was
available on loan to m em ber banks fo r lobby dis­
play purposes. The response was immediate, and
n early tw o hundred requests fo r the exhibit have
been received. T w o exhibits are now in circula­
tion, w ith the b orrow in g bank getting the collec­
tion fo r display fo r a period o f one week. D uring




the year, 82 banks displayed the exhibits, and
requests now on hand w ill keep the collections in
circulation throughout 1953, or longer. The Bank
Relations D epartm ent arranges the schedule o f
showings and is responsible fo r the care, trans­
portation, and exhibition o f the collections.
PU BLIC IN FO R M A T IO N

The P ublic In form ation Departm ent, with a
prim ary responsibility fo r trying to increase pub­
lic understanding o f the purposes and functions
o f the F ederal R eserve System and o f this Bank,
handled a daily average o f m ore than 85 tele­
phoned and personal requests, and m ore than 40
letter inquiries, fo r inform ation, publications,
films, and guided tours during 1952. The D epart­
ment is also a service organization fo r other func­
tions in the Bank, advising them on request in the
dra ftin g and printing o f circulars, bulletins, and
other publications; d ra ftin g and distributing
press releases on their a ctivities; and participat­
ing in “ educational” staff meetings.
The position o f Chief, P ublic Inform ation D ivi­
sion, was created and filled in A p r il to im prove
the organization and operations o f the D epart­
ment.
Publications

A second volum e (in a projected series) o f
articles reprinted fro m the M onthly R ev iew was
published in March. B y the end o f the year, m ore
than 13,000 copies o f this 33-page booklet, M on ey
M arket E ssa ys, had been distributed, la rgely to
college teachers o f m oney and banking fo r redis­
tribution to their students. The earlier volume,
Bank R eserv es, continued in demand, and nearly
10,000 copies w ere needed to sa tisfy requests.
M ore than 36,000 copies o f a m ore elem entary
booklet, A D a y ’s W o rk at the F ed era l R eserv e
Bank o f N ew Y ork, were distributed during the
year, m ainly to A IB , high school, and college
teachers fo r use in their classes. Circulation o f
the W ee k ly N ew s R ev iew continued to grow , with
about 17,000 copies goin g to m ember banks at the
year-end.
Through the use o f Bank circulars, we continued
to in form mem ber and nonmember banks and
other financing institutions in the D istrict o f all
m atters affecting our dealings with them, such as
changes in the term s and conditions o f our serv­
ices, amendments to regulations o f the B oa rd o f
G overnors, and offerings o f Governm ent securi­

FEDERAL RESERVE BANK OF NEW YORK

ties. M ore than 90 different m ailing lists com pris­
ing approxim ately 50,000 names were used to
direct these publications. The number o f circulars
issued in 1952 declined from the 1951 total because
o f the suspension o f R egulations W and X and the
term ination o f the V oluntary Credit R estraint
P rogram . The number o f circulars issued as fiscal
agent o f the U nited States was reduced b y one,
but the total copies printed rose alm ost 5 per cent
above the level o f the previous year.
A tabulation o f circulars and periodicals dis­
tributed to m em ber banks and to interested mem­
bers o f the public during the last fo u r years
fo llo w s :
A ll
circulars

Issued

Pieces

148
131
215
147

1,110,395
1,189,000
2,112,625
1,242,800

1949
1950
1951
1952

Fiscal agency
circulars

Issued Pieces
85
76
102
101

795,100
580,200
804,200
841,700

Annual
Report Monthly Review

Pieces

Pieces

Monthly
Average

19,000
20,000
22,500
24,000

246,300
239,400
260,300
281,700

20,525
19,950
21,691
23,475

D u ring 1952,197 internal bulletins, aggregating
over 65,000 pieces, w ere distributed to our officers
and other staff m embers to make announcements
and to give them inform ation concerning internal
procedures o f the Bank. T o effect this distribution
efficiently, thirteen different distribution lists com ­
p risin g about 500 names were used.
W o rk in progress at the end o f 1952 included an
em p loyees’ manual being produced fo r the P er­
sonnel D epartm ent and a booklet on coins and
currency fo r the Bank Relations Department,
which w ill furnish it to member banks fo r distribu­
tion to their custom ers.

23

program in January 1952, and placed emphasis
on m aking the tour program appealing to high
school and college groups especially. In achieving
this end, discussion sessions on F ederal R eserve
operations and p olicy w ere arranged fo r these
groups, whenever possible. A n analysis o f visitors
fo r 1951 and 1952 is given below :
1952

1951

H igh s c h o o l ......... . . . .
C o lle g e ................. .. . .

2,223
1,682

....

1,035

1,784
1,036
1,069
473

T o t a l .................

5,608

4,362

668

A new E xh ibit R oom (room 145) was opened in
M ay, to provide an appropriate starting place fo r
tours and fo r discussion sessions, and fo r use by
groups w ithin the Bank fo r inform al m eetings and
conferences. T o provide adequate and effective
guide service fo r our increasing number o f v isi­
tors, a second full-tim e guide was added to the
staff, and the num ber o f “ occasion a l” guides
draw n from other departm ents o f the Bank was
about doubled. A 22-page, illustrated “ H andbook
fo r G uides” was prepared fo r use in training the
new “ occasion a l” gu ides; this also served as a
basis fo r a refresher course given to all the experi­
enced “ occasion a l” guides on our staff. R egular
w eekly tours fo r new em ployees were begun and,
in cooperation with the P ersonnel Departm ent,
plans w ere made tow ard the end o f the year to
provide tours and discussion sessions fo r all
“ o ld ” em ployees o f the Bank desiring them.
S peech es

F ilm s

In addition to lending 14 prints o f three films on
the F ederal R eserve System fo r 286 show ings to
bank, school, civic, and other interested groups,
we continued w ork on plans fo r producing a film
o f our own. A producer was selected, a w riter
assigned, and b y the end o f the year a script had
been developed and recorded on tape in order to
better ju d g e the quality o f the explanatory mate­
rial and dialogue. This recording was tested on a
grou p o f new em ployees and played fo r the offi­
cers, so that we could take the fullest advantage
o f criticism s and suggestions fo r improvement.
Guided tours

T he P u blic In form ation D ivision assumed re­
sponsibility fo r adm inistering the guided tour




P rovid in g speakers fo r appropriate occasions
continued to be an im portant aspect o f our p ro ­
gram o f public inform ation. In cooperation with
the Bank Relations D epartm ent and R esearch De­
partm ent, we provided speakers fo r a series o f
meetings w ith Second D istrict bankers held at the
Bank in 1952. Speakers w ere also provided fo r a
number o f other bank occasions, such as meetings
o f county bankers associations and clearing house
groups, and fo r a variety o f nonbank groups, such
as service clubs, profession al societies, schools
and colleges, and teachers’ conferences. In all,
officers and staff m em bers o f the Bank made 134
public addresses during the year, to audiences
totaling over 10,000. In an effort to make the
position o f the F ederal R eserve System in the
econom y, and its role in attem pting to prom ote

PRESIDENT’ S REPORT TO DIRECTORS FOR 1952

24

high-level econom ic stability, easier to under­
stand, we developed an illustrated “ flannel
b o a r d ” lecture and dem onstration on the general
subject o f “ The E conom y, T he M oney Supply,
and Bank R e se rv es,” which was presented with
considerable success during the year to a large
num ber o f bank, civic, school, and teacher groups.
R e l a t i o n s w ith s c h o o ls a n d c o lle g e s

"We increased our efforts to develop a strong
p rogram o f relations with schools and colleges,
especially with high school teachers o f social
studies and college teachers o f econom ics and
m oney and banking, as an integral part o f our
public inform ation activities. In addition to sup­
plying publications fo r use b y teachers and fo r
distribution to students, furnishing speakers, a r­
ranging film bookings, and encouraging teacher
and student grou p s to visit the Bank fo r tours and
discussion sessions, we made plans fo r the threeday sem inar fo r college teachers that was held at
the B ank in F ebru ary 1953; and we did m ore w ork
w ith and fo r the J oin t Council on E conom ic E du ­
cation. The latter included an increased participa­
tion in regional w orkshops b y officers and staff
members, join in g w ith the S ystem ’ s Committee on
Education and P ublications in m aking educational
m aterials m ore readily available, and accepting an
assignm ent fro m the Committee and the Joint
Council to produce early in 1953 a simple explana­
tion o f the role o f m oney and banking in our
econom y fo r use b y secondary school teachers.
R E SE A R C H

D u rin g the year, the R esearch D epartm ent was
p rim arily concerned w ith studies bearing upon
the policy, procedures, and day-to-day implemen­
tation o f m onetary and credit controls. W hile
em phasis necessarily was given to U nited States
problem s in this area, substantial w ork was also
done on the m onetary systems o f other countries,
and on problem s relating to the desirability o f
attaining fre e r convertibility between other cur­
rencies and the dollar. In addition, the D epart­
m ent continued to p erform its regular research
and statistical activities, including numerous
studies analyzing developm ents here and abroad,
the preparation and release o f data on financial
and econom ic developm ents, and preparation o f
the sem im onthly R usiness and Financial Sum­
m ary, the M onthly R eview o f C redit and R usiness
Conditions, and the B a n k ’ s Annual R ep ort.




D o m e s t ic s tu d ie s a n d p u b lic a t io n s

A s a service to m ember banks, the Departm ent
initiated, and subsequently turned over to the
Publications D ivision, distribution o f the article
prepared m onthly on current business develop­
ments fo r the R usin ess and Financial Sum m ary;
b y the year-end, 2,300 copies w ere being distrib­
uted each month. A nother innovation has been to
include in this Sum m ary at the end o f each month
a m ore com prehensive discussion o f the interre­
lations between System p olicy and m oney market
developm ents than could practicably be included
in the published article on the m oney market that
appears regularly in the B a n k ’ s M onthly R eview .
The D epartm ent continued to provide speakers on
financial and econom ic topics fo r bankers’ and
civic groups throughout the D istrict, and to pre­
sent a discussion o f the current business situation
at each o f the luncheons fo r visitin g bankers’
groups arranged b y the Bank Relations D epart­
ment. The second o f a p rojected series o f pam ph­
lets describing the organization and functioning
o f the m oney and securities markets was published
during 1952, entitled M on ey M arket E s s a y s ; by
the end o f the year approxim ately 13,000 copies
had been distributed b y the P ublications Division.
A t the request o f the B oa rd o f G overnors, we
participated in three System wide surveys. One
concerned the availability and cost o f credit to
small business in the Second D istrict; a second,
in which we assisted the Credit Departm ent, was
a survey o f real estate activity in this D istrict;
and the third was a revival o f the R etail Credit
S urvey that was made regularly until a year ago.
In addition, an analysis o f the im pact o f excess
profits taxes upon bank earnings in this D istrict,
begun in 1951, w as com pleted and transm itted to
the B oa rd o f G overnors. Other surveys were con­
ducted to determine the am ount o f nonconsumer
debt included in the single-paym ent loans to indi­
viduals that are reported b y mem ber banks, to en­
large the consum er credit sample fo r household
appliance stores, and to test the practicability o f
obtaining additional inform ation through the
S ystem ’ s annual S urvey o f D eposit Ownership. A
p roject was under w ay at the close o f the year
to test the adequacy o f the coverage provid ed b y
our quarterly reports o f the interest rates charged
b y member banks on com m ercial loans.
In cooperation w ith the P lanning Departm ent,
the R esearch D epartm ent com pleted studies, ini­
tiated in 1951, on the long-run space and real

FEDERAL RESERVE BANK OF NEW YORK

25

estate requirem ents o f the H ead Office and B uffalo
Branch. These studies involved projections o f the
volum e o f w ork likely to be done by the Bank in
1975.

Y ork area. The D epartm ent also analyzed recent
proposals fo r the establishment o f an Interna­
tional Finance C orporation and an International
D evelopm ent A uthority.

M em bers o f the staff engaged in a number of
conferences in the Bank, at the B oa rd o f G over­
nors, and at outside agencies and academ ic insti­
tutions, relating to current econom ic and credit
developm ents, and to broader problem s o f eco­
nom ic analysis and policy. A number o f memo­
randa and articles were prepared, and many were
subsequently published in academ ic journals or by
various university presses. Some o f the outstand­
ing studies prepared during 1952 w e r e :

The D epartm ent maintained the usual flow o f
inform ation to the F oreign D epartm ent regarding
developm ents in foreign exchange controls and
rates, changes in the legal status or financial con­
dition o f fo re ig n central banks, and econom ic and
financial conditions and developm ents abroad.
A nsw ers w ere given to many outside inquiries on
foreig n and international financial and econom ic
topics.

Savings and Inflation
L ife Insurance Companies and the Securities Markets
Changes in the Federal Debt Structure between 1945
and 1952
Recent Changes in Savings B ond Terms in Canada
and the United States
Measuring the Neutrality o f Federal Open Market
Operations
A Note on Recent M onetary P olicy in the United States
The Integration o f Debt Management and Open
Market Operations
F o r e ig n a n d in te r n a tio n a l stu d ie s a n d p u b lic a tio n s

Research studies in the fo re ig n and interna­
tional field during 1952 had an unusually broad
range. A m on g the m a jor topics to which attention
was devoted were the prerequisites and conditions
o f a return to currency convertibility in im portant
fore ig n countries, the scope and significance o f
postw ar private short term international capital
movements, the progress and problem s o f E u ro­
pean econom ic integration, and the international
raw m aterial situation. Continuous study was
made o f international trade and exchange p rob ­
lems, o f developm ents affecting the international
transactions o f the U nited States, and o f changes,
and p rop osed changes, in this cou n try ’ s foreign
econom ic policies, including the foreig n aid p ro­
gram . The future behavior o f the U nited States
balance o f paym ents was assessed in the light o f
fore ig n and dom estic policies and developments.
The rep ort published by a group o f U nited Nations
experts (the “ A n gell Com m ittee” ) on m ethods o f
attaining international econom ic stability was sub­
jected to analysis, as was the com prehensive
survey o f form er P resident T ru m an ’s M aterials
P olicy Com m ission (the “ P aley C om m ission” ).
A survey was made o f the availability o f nonbank
financing facilities fo r small im porters in the New




The follow in g is illustrative o f the numerous
papers on foreig n and international m atters that
were circulated to certain officers and directors
during 1952:
Some Observations on Balanee-of-Payments Instability
during 1950-52
Recent Developments in Foreign D ollar B on ds: New
Issues and Debt Settlement
United States Private Foreign Investment and Dollar
Shortage
The Position and Prospects fo r Sterling
New Trends in Swedish M onetary P olicy
Reorganization o f W estern Europe
The French Inflation
B ra zil’s Current Foreign Exchange Position
The E uropean Payments Union after Tw o Years
Prospects fo r the German Balance o f Payments
M onetary and Debt Management in Australia
The Econom ic Situation in Argentina
F o r e i g n m i s s i o n s a n d a s s ig n m e n t s

The Department continued to be subject to
heavy demands fo r the services of its economists
and technicians fo r temporary foreign assign­
ments. The one-year leave of absence of 0 . E rn est
Moore, Manager, who had gone to Haiti under
United Nations auspices in A pril 1951 as financial
adviser, was extended at the request o f the Haitian
Government to October 1952. A r th u r I. Bloom ­
fie ld , Senior Economist, was on leave o f absence
from December 1, 1951, to A pril 1, 1952, serving
as financial adviser to the United Nations agencies
in Korea. Under the auspices of the International
Bank, George Garvy, Senior Economist, spent two
weeks in Panama in September to advise on fiscal
problems, and a further two weeks at the end o f
the year to survey the monetary and banking sys­
tem o f Panama. H orst Mendershausen spent
more than two months during the summer in
Colombia, where he was the economist on a mis­

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

26

sion requested by the Department of Caldas
(Colombia) fo r the purpose o f surveying the
economic, fiscal, and administrative problems o f
regional government in that area. P h ilip J.
Glaessner, who since August 1951 had been serv­
ing as economic officer with the Joint BrazilianUnited States Commission for Economic Develop­
ment in R io de Janeiro, was granted extensions
o f his leave o f absence through early June 1953.
F ran k W . S ch e ff made a two-month trip to
visit certain central banks in South America. In
February and March, Eugene R. S ch lesin ger was
one o f this Bank’s delegates to a two-week con­
ference in Havana o f central bank technicians o f
the Western Hemisphere. Upon the return of Joh n
S. Morgan in September from a y ea r’s service
with the economic staff of the United Nations
Relief and W orks Agency for Palestine at Beirut,
Lebanon, a yea r’s leave o f absence was granted
Frederick Loud to serve in the same capacity.
Library

The use o f the R esearch L ib ra ry b y members
o f the R esearch Departm ent, and by the officers
and staff o f the Bank, continued to increase. A t
the end o f 1952, book circulation had reached a
m onthly rate o f 1,000, and magazine circulation
6,900, representing increases o f about one-fifth
over the peak rates o f use reached in 1951. The
average number o f requests fo r inform ation was
m ore than 1,300 a m onth during 1952, also an
increase o f about one-fifth. Circulation o f the
D aily N ew sp ap er R evieiv, the m ost w idely known
service o f the L ibrary, continued to increase, with
year-end daily distribution at approxim ately 2,000.
The L ib ra ry N ew s, which lists new accessions, was
also in increased demand because o f its usefulness
as a check list o f im portant current econom ic and
financial literature.
PERSON N EL

Reductions in the need fo r personnel, stemming
fro m term ination o f consum er and real estate
credit controls and o f the V olu n tary Credit
R estraint P rogram , together w ith im provem ents
in operating m ethods, la rgely offset increased
requirem ents resulting from the rise in the volume
o f w ork o f m ost functions during 1952. T here was,
therefore, a halt in the grow th o f staff that
had characterized the preceding year. A verage
m onthly em ploym ent rose during the first quarter
o f 1952 (the peak day fo r the year was A p ril 2,
when 3,900 were on the p a y roll), and then declined




rather steadily through the rest o f the year. The
year-to-year decline on D ecem ber 31 was almost
1 per cent, although salary liability was nearly
4 per cent higher. T his disparity reflects salary
revisions fo r certain jo b s review ed after a survey
o f com m unity p a y scales, the increases awarded
in the year-end salary review , and a m ore rapid
salary progression fo r successful trainees com ing
out o f our intensified training program .
The labor market was characterized by a con­
tinuing and even increasing stringency during the
year. W e fou n d the available supply o f high
school graduates p rogressively smaller than in
previous years, reflecting both the com paratively
low birth-rate years o f the 1930’s and the fa ct that
m ore high school graduates g o on to college than
heretofore. W e therefore placed greater emphasis
on recruiting high school students and drawing
them into our em ploy on a part-tim e basis p rior to
graduation. In general, developm ents during the
year continued to give evidence o f the im portance
o f careful initial selection o f new em ployees and
m aintaining a high level o f jo b satisfaction am ong
those we wish to keep in our em ploy.
S a la r y a d m i n i s t r a t i o n

In the adm inistration o f m erit and prom otional
salary increase policies, we recognized that special
conditions influencing salary rates paid fo r par­
ticular job s in the New Y ork m etropolitan area
should be considered. A s a result, a thorough
study was made o f how salaries paid in the Bank
fo r certain job s com pared with salaries paid by
other em ployers fo r sim ilar job s. W ithin the
lim its im posed b y w age and salary stabilization
regulations, corrective adjustm ents were made
from time to time during the course o f the year
in the salaries that appeared to be substantially
below the market.
In view o f the continuing upw ard m ovem ent
o f salaries in the N ew Y ork m etropolitan area
and the consequent need to keep currently in­
form ed o f changes in w ages and salaries being
paid b y others, a program was developed early
in 1952 calling fo r the exchange o f salary rate
inform ation between this Bank and certain p ro ­
gressive em ployers m ore frequently than once a
year, as had been our practice. W e were there­
fo re aware as early as m id-year that average wage
and salary rates paid by other em ployers partici­
pating in the program had m oved ahead o f our
rates, and that b y Septem ber the deviations had
widened somewhat further. A nalysis o f the salary

FEDERAL RESERVE BANK OF NEW YORK

data fo r jo b s at particular levels o f responsibility
and difficulty indicated that our la g behind the
m arket was generally greatest in job s at the
higher levels. On N ovem ber 20, 1952, the B oard
o f D irectors approved increases in the salary
ranges o f the fo u r highest jo b grades (X I I I -X V I )
ranging fro m $150 in the minimum o f Salary
G rade X I I I to $600 in the m aximum o f Salary
G rade X V I . These adjustm ents w ere approved
by the S alary Stabilization B oard on D ecem ber 12,
1952.
On D ecem ber 18, 1952, the B oa rd o f D irectors
ap p roved individual m erit salary increases, deter­
mined in the regular year-end review o f salaries
o f all em ployees, am ounting to 4.63 per cent o f
total salary liability at the H ead Office, and 4.48
per cent o f total salary liability at the B uffalo
Branch. The salary grade adjustm ents and the
individual m erit increases served to bring our
salary scale m ore nearly in line with those o f
em ployers in this area whose salaries and w orking
conditions we consider progressive.
U nder our J o b E valuation P rogram , we still try
to m aintain a p rop er internal alignm ent o f jobs
and salary ranges through a regular review and
re-evaluation o f jo b duties and responsibilities.
This p olicy entailed the review o f 238 job s and
the revision o f 134 jo b descriptions in order to
reflect p rop erly the duties p erform ed and the
knowledge and skills required. R evision o f job
descriptions resulted in changes o f so-called point
values fo r 102 job s— 14 per cent o f the total— at
the H ead Office and fo r 10 job s— 11 per cent o f the
total— at the B uffalo Branch.

A t the year-end we had a total o f 3,744 persons
in our em ploy, or 31 few er than at the close o f
business on D ecem ber 31,1951.
The follow in g table and chart present some
basic statistics on H ead Office em ploym ent:
1948
Employees, close o f busi­
ness December 3 1 ............ 3,771
Employees, average num­
ber, engaged in work re­
imbursable by U. S. Govt.
and its a g e n c ie s............... 690
Employees, average num­
ber, all o t h e r ....................3,141
Applicants .............................8,050
H i r e d ......................................... 767
Separations! ............ ........... 750
Dismissals (included in
S e p a ra tio n s )...................... 158

Fluctuations in Average Yearly Head Office
Employment— 1948-1952
Tho usa nds
o f employees

1949

1950

1951

1952
3,744*

3,441

3,385

3,775

590

541

530

540

3,050
4.531
282
612

2,839
4,648
553
602

3,084
9,092
1,245
852

3,263
6,229
835
866

210

109

87

30

Thousands
of employees

S ---------------------------------------------------------------------------------------------------- 5

IN
REIMBURSABLE
W ORK

IN
ALL OTHER
WORK

- 2

The follow in g table shows the distribution o f
H ead Office em ployees according to length o f serv­
ice ; it is g ra tify in g to note that 467 o f these
em ployees, or approxim ately an eighth o f our
total staff, have been with the Bank fo r 25 years
or m o r e :
Length of service
35 years or m o r e ......................
30 years to 34 years inclusive
25 years to 29 years inclusive
20 years to 24 years inclusive
15 years to 19 years inclusive
10 years to 14 years inclusive
5 years to 9 years inclusive
Less than 5 y e a r s ......................
Total (December 3 1 ,1 9 5 2 ) . .

N u m b er o f em p lo y ees

27

Number of
employees
66
213
188
294
149
596
710
1,528
3,744

Percentage of
total number
o f employees
1.8
5.7
5.0
7.8
4.0
15.9
19.0
40.8
100.0

H e a d O ffic e s a la r y lia b ilit y

On Decem ber 31, 1952, salary liability (includ­
ing reim bursable salary) at the H ead Office was
$14,099,842 ;3 the com parable figure in even thou­
sand dollar amounts fo r previous year-ends was
$13,576,000 (1951), $11,779,000 (1950), $10,929,000
(1949) and $11,496,000 (1948).
E m p lo y e e b e n e fits

1.
N on con tribu tory active service death bene­
fit.— D uring the year, 10 H ead Office staff mem­
bers died and their beneficiaries received a total
o f $42,149 in death benefits under insurance cover­
age provided b y the Bank w ithout cost to
employees.

*
In clu d es 45 s h o rt-h o u r stu d en t em p loy ees an d 25 coo p e ra tiv e
3
Includes salary increases am ounting to $620,710 effective as o f
p rog ra m em p loyees.
December 25, 1952.
t In clu des th o s e w h o resign ed , retired , died, o r w ere d ism issed .




28

PRESIDENT’S REPORT TO DIRECTORS FOR 1952

2. B lu e C ross H ospital and B lu e Shield S u rgi­
cal-M edical Plans.— A total o f 3,231 em ployees, or
86.7 p er cent o f ou r total staff, w ere enrolled at
the end o f 1952, com pared with 3,208, o r 83.8 per
cent, enrolled at the end o f 1951. The expense to
the Bank, which pays tw o-thirds o f the total cost,
w as $127,838, com pared with $105,877 the preced­
in g year. A substantial portion o f the increase in
cost was due to an increase in rates that became
effective in M ay 1952. W e conducted a detailed
study o f m edical and surgical benefits offered
under alternative plans b efore agreeing to go
along with the increase in rates, but the study
failed to reveal a plan that w ould provide equal
p rotection at lesser cost. D uring 1952, members
o f our H ead Office staff filed 618 claims fo r hospi­
tal care, in volvin g a cost o f $70,670, and 733
claim s fo r surgical and m edical care, am ounting
to $41,200.
3. M edical D ivision.— D uring the year we
added an oral hygienist to our m edical staff to
p rovid e a consultative service on dental problems,
and to exam ine all applicants and em ployees who
requested exam ination. A m oderate amount o f
oral prophylaxis as education in preventive den­
tistry and o f treatm ent to relieve acute conditions
is also provided, although neither prophylaxis nor
treatment, as such, are part o f the dental program .
Cornell U n iversity M edical College requested us
to allow small groups o f their senior m edical stu­
dents to v isit our M edical D ivision as a part o f
their course in industrial medicine. W e were
pleased to com ply w ith the request, and reports
fro m Cornell indicate that those groups that have
visited us are m ost enthusiastic about our p ro­
gram . W e have been inform ed that the college
authorities consider our program to be outstand­
in g am ong the various business firms that are
visited as part o f the teaching program in indus­
trial medicine. V isits b y em ployees and jo b appli­
cants to the M edical D ivision during 1952 totaled
som e 37,000, approxim ately the same as fo r the
previous year.
4. R ed C ross blood bank.— W e have continued
to cooperate w ith the blood bank o f the Am erican
R ed C r o s s ; the staff, through the F ederal R eserve
Club, gave a total o f 395 units o f blood in 1952.
D u ring the year 241 units w ere w ithdraw n to meet
the needs o f em ployees and their fam ilies.
5. M ilitary service.— W e now have a total o f 55
em ployees in the A rm ed F orces, including 29 who
entered the service during 1952. T hirty-five o f




these em ployees have elected to leave their contri­
butions in the R etirem ent System and, as a result,
the Bank is continuing to p a y contributions in
their behalf at a rate that insures them they w ill
not lose Retirem ent System credit if they elect to
return to our em ploy at the conclusion o f their
m ilitary service. The 20 em ployees in the arm ed
services who w ithdrew their contributions when
they le ft our em ploy w ill be given the opportunity
upon reem ploym ent to repa y the contributions
that they w ithdrew ; in that case the Bank w ill
p a y the cost o f p rovid in g Retirem ent System
credit fo r the period o f their m ilitary service. W e
have continued our p olicy o f provid in g Blue Cross
H ospital and Blue Shield Surgical-M edical insur­
ance benefits to the fam ilies o f em ployees in serv­
ice at no cost to them. W e have also continued
the custom o f sending Christm as g ifts to staff
members in the A rm ed F orces.
P e rs o n n e l im p r o v e m e n t p rogra m s

D uring 1952 w e reactivated the J ob Instruc­
tion T raining program b y conducting eight panels
fo r 74 o f our supervisory personnel. W e also
sponsored the developm ent o f and assisted in
the organization o f departm ental grou p m eetings,
and arranged fo r 31 o f our secretary-stenographers to participate! in a three-hour training
course in “ voice p erson a lity” conducted b y the
New Y ork Telephone Com pany. W e also made
some use o f clerical aptitude and proficiency tests
and introduced, on an experim ental basis, a course
to im prove visual perception b y check w orkers.
W e continued our efforts to orient new em ployees
fu lly and carefu lly a rd in that connection we
devoted approxim ately three and one-half hours
to each new em ployee during his first week or two
on the job . In all, we conducted orientation meet­
ings fo r 805 new em ployees and, in addition,
arranged tours o f the IBank fo r 454 o f these new
staff members.
F e d e r a l R e s e r v e C lu b

The F ederal R eserve Club, a voluntary and
cooperative enterprise fo r the benefit o f em­
ployees o f the Bank, celebrated its thirty-fourth
anniversary in 1952, with a m em bership com pris­
ing 90 per cent o f the staff o f the Bank. In keep­
ing w ith its established tradition, the Club con­
tinued to provide special services, and social,
recreational and educational opportunities fo r the
staff. Through its seven-man Conference Com m it­

FEDERAL RESERVE BANK OF NEW YORK

tee, it also serves as a means o f tw o-w ay com ­
m unication between the staff and the management
o f the Bank.
One o f the m ost popular o f the Club services
continued to be the operation o f the Club Store,
which enabled em ployees to purchase a w ide va ri­
ety o f m erchandise at prices substantially below
established retail prices. F o r the fiscal year ended
M ay 31, 1952, total Club Store sales amounted to
$156,566. A m on g its other notew orthy services,
the Club issued m ore than 18,000 checks fo r the
convenience o f members who do not have checking
accounts at b a n k s; m aintained a reading and cir­
culating library that lent 2,236 books, purchased
200 new books and placed 229 subscriptions to
various periodicals fo r Club members.
The Club sponsored a variety o f recreational
activities, including a broad athletic program ,
stage presentations, a series o f dances, hobby
groups, a boat ride, and a party fo r children
related to em ployees o f the Bank.
In view o f the fa ct that one o f the prim ary
objectives o f the founders o f the Club was to
encourage the continuing education o f members
o f the staff, the Club plays a prom inent role in
this field. In 1952, under the Club educational p ro­
gram , 155 m embers o f the staff com pleted 426
study courses at various schools and colleges in
and around New Y ork. The Club counselled m any
o f these individuals with respect to the school or
college to be chosen and the course o f study to be
follow ed. D epending upon their scholastic rec­
ords, and upon com pletion o f the y e a r ’ s work,
students w ere reim bursed b y the Bank fo r the
entire cost o f tuition, books and fees or fo r 50 per
cent o f these costs.
A t the suggestion o f the Club, a new sun-deck
rest area was constructed on the r o o f o f the Annex
building, 95 M aiden Lane. In the m ain building
a battery o f 16 spotlights with a total output o f
11,000 watts was installed to m odernize the light­
ing equipment o f the auditorium stage fo r the use
o f the Club amateur theatrical grou p and fo r
other Club stage presentations.
Through the Benjam in S trong M em orial Fund,
established b y the Club in 1928 and supported by
contributions solicited b y the Club fro m time to
time, em ployees in financial distress through their
own illness were granted assistance. A Club drive
fo r contributions to the F und in 1952 raised ap­
proxim ately $2,700, and the corpus o f the Fund
now totals $11,850.




29

The F ed, an eight-page staff magazine, contin­
ued to be published every other W edn esday by
and in the interests o f the m embers o f the Club.
D uring the course o f the year it carried numerous
items concerning Club activities, as well as stories
about day-to-day life in various units o f the Bank
and other m atters o f interest to the staff as a
whole.
C a fe t e r ia

The F ood S u pply D ivision served 828,614 meals
during the year, a daily average o f 3,301, as com ­
pared with 821,541, a daily average o f 3,286, in the
previous year. T o provide this service, the Bank
spent $254,865 in 1952 or 46.4 per cent o f total
cost, com pared with $231,415 in 1951 or 45.7 per
cent o f total cost.
L IG H T IN G PR O G R A M

D uring the year the installation o f a fluorescent
lighting system in m ost o f the w orking areas o f
the main Bank building was com pleted. A s a
result the illum ination in those areas has been
increased fro m an average o f 8M> foot-candles to
30 foot-candles. The installation required 39,000
feet o f large copp er feeders, approxim ately 356,500
feet o f circuit w iring, 3,642 fixtures averaging
about 8 feet in length, and 7,708 fluorescent tubes.
Since the new system uses alternating current
purchased from the Consolidated E dison Com ­
pany, the installation also served to reduce the
load on our own pow er plant and electrical dis­
tribution system which, under peak conditions,
were loaded beyond their rated capacities. Our
pow er plant w ill continue to generate direct cur­
rent fo r the operation o f office machines, building
m otors, and fo r all lighting in corridors, service
space, and other areas.
B U FFA LO B R A N C H O PER A TIO N S

Business activity throughout the B uffalo B ranch
territory clim bed to a new high level in 1952,
despite setbacks in em ploym ent and production
caused by a protracted steel strike. The largest
gains were made in the B uffalo area, where the
business index reached a new all-time high o f 234.8
(1936-39 = 100) in December, com pared with
214.0 a year earlier. Increased production and
em ploym ent in a number o f autom otive and avia­
tion plants w ere im portant fa ctors in this rise,
and an expansion o f steel capacity in the area has

PRESIDENT’ S REPORT TO DIRECTORS FOR 1952

30

also contributed to the high activity. Residential,
com m ercial, and industrial construction continued
at about the peak levels o f the previous two years.
The p a y o f fa cto r y w orkers in the B u ffalo indus­
trial area averaged $82.24 per week in N ovem ber
1952, as com pared w ith $75.32 in the same month
o f 1951. A verage hourly pay during the same
periods was $1.93 and $1.81, respectively; and the
workweeks averaged 42.6 and 41.7 hours.
Business activity in Rochester rose fa irly stead­
ily in 1952. The business index fo r that city
reached 219.2 (1935-39 = 100) in Novem ber, as
com pared with 202.5 in N ovem ber 1951. In N iagara
F alls, however, N ovem ber em ploym ent figures
w ere about 7 per cent below the figures fo r the
same p eriod the year before.
The volum e o f m ost operations at the Branch
increased over last year, follow in g the trend o f
the general business situation in the territory.
Reflecting these increased activities, B ranch ex­
penditures fo r the year were $1,097,246, somewhat
over the previous y e a r ’s figure o f $1,000,962, but
$50,950 less than the amount budgeted fo r the
year.
D urin g the year, renewed and intensive con­
sideration was given to the needs o f the Branch
fo r im p roved banking quarters.

C a s h o p e r a t io n s

The follow in g table summarizes the B ran ch ’ s
cash operations fo r the year, as com pared with
1951:
1952

Currency and coin:
Paid out ......................
Received ......................
Net outflow..................
Currency counted (pieces)
Coin counted (pieces)----Coin wrapped (pieces) . . .

1951

$334,894,000 $318,836,000
$290,574,000 $278,728,000
$ 44,320,000 $ 40,108,000
52,206,000
51,109,000
58,212,000
54,867,000
19,026,000
14,924,000

In contrast to the situation in the latter part o f
1951, it was possible to supply all orders fo r coin
during 1952 without resort to rationing. T w o new
curren cy counting machines w ere received during
the year to replace old equipment.
C ounterfeit currency detected at the B ranch
continued to decline in 1952. A total o f 130 notes
am ounting to $1,870 was detected b y our currency
sorters, as com pared with 159 notes aggregating
$2,326 in 1951.




W i r e tr a n s fe r s o f fu n d s

W e made 11,838 transfers o f funds am ounting
to $4,169,968,000 in 1952, as com pared with 12,439
transfers totaling $3,905,524,000 in 1951. The sub­
stantial increase in the amount transferred was
due prim arily to the daily lending and repaying
o f F ederal funds in largB am ounts am ong Buffalo,
Rochester, New Y o rk C.’.ty and Chicago banks.
C h e c k c o l le c t i o n

W e handled the collecti on o f 35,515,000 checks and
postal m oney orders aggregating $9,518,500,000 in
1952, as com pared with 31,037,000 items amount­
ing to $9,298,800,000 in the previous year. The
average number o f items handled daily rose from
124,149 in 1951 to 141,494 in 1952. A lthough much
o f this expansion reflects the first fu ll year o f
handling postal m oney orders, there w ere also in­
creases in volum e in practically every category o f
checks. The increased volume has been handled
during 1952 through the use o f new 32-pocket elec­
tric keyboard IB M p r o s f m achines and w ith the
addition o f only three m ore em ployees in the
Check D ivision. D espite a heavy turnover o f help
in the D ivision, which provides a training ground
fo r prom otion to other positions in the Branch,
the increased volum e o f checks and postal m oney
orders was handled with a minimum o f holdover
and with a substantial reduction in overtim e cost.
A survey com pleted a? o f D ecem ber 1,1952 indi­
cated that 96.2 per cent o f the checks draw n upon
banks located in the B u ffalo Branch territo ry bore
the check routing sym bol and transit number in
the approved location, as com pared w ith 94.7 per
cent as o f Decem ber 1, 1951.
D uring 1952 we obtained an additional postal
m oney order machine to provide us with the neces­
sary equipment to handle a peak d a y ’ s volum e o f
m oney orders.
O p e r a t in g m e th o d s

W e continued to mechanize m ore o f our opera­
tions during the year. In addition to the G overn­
ment card checks and credit advices, which we
were processing b y machine in 1951, we have con ­
verted some other operations to punch card rec­
ords. These include payroll and personnel records,
deferred debits, inventory o f furniture and equip­
ment, safekeeping records, and the analysis o f
w ork volum e in the Check D ivision. W e are mak­
ing preparations to handle stock room record s and
current expenses during the early pa rt o f 1953

FEDERAL RESERVE BANK OF NEW YORK

through the use o f punch cards and mechanical
equipment, and we are considering the handling
o f variou s other operations in a sim ilar manner.
W e also obtained in 1952 a collator and a rep ro­
ducing sum m ary punch to be used in conjunction
with the IB M tabulating machine and the sorting
machine. W e installed plastic windows on two
IB M p r o o f machines and on one IB M postal
m oney ord er p r o o f machine to provide a means o f
dem onstrating the operations o f this type o f
machine to visitors as well as to our ow n em­
ployees. Sketches and instructions coverin g this
installation have been furnished to several other
R eserve Banks and Branches which have become
interested in making sim ilar use o f it.
L oa n s to m e m b er banks

A total o f 499 loans, aggregating $1,036,165,000,
was granted to 35 member banks in 1952, as com ­
pared with 444 loans totaling $641,045,000
granted to 35 member banks in 1951. T his is the
first year since 1929 that the total amount dis­
counted has exceeded one billion dollars. D iscount
earned am ounted to $99,782, as com pared with
$83,901 in 1951. The maximum amount o f loans
outstanding at any one time during 1952 was
$26,480,000 on J u ly 15, and the longest period o f
continuous borrow in g b y any one bank was 171
days. T w o loans totaling $95,000 w ere outstand­
ing on our books at the close o f business December
31, 1952. D uring the year, fo u r banks borrow ed
tem porarily in amounts exceeding their com bined
capital and surplus.
R e g u la tio n s W a n d X

F ro m January 1 until M ay 7, 1952, when R egu­
lation W was suspended, we made 256 investiga­
tions o f registrants located in the B uffalo Branch
territory, with a total o f 14,586 transactions ex­
amined. These investigations disclosed 485 v iola ­
tions o f the regulation b y 65 registrants. T w o dis­
ciplinary conferences w ere held at the B ranch to
discuss violations which appeared to be deliberate
and willful.
In June and July, criminal actions were insti­
tuted fo r violations o f the regulation which oc­
curred in the B ranch territory, resulting in fines,
one fo r $5,000, three fo r $2,000 each, one fo r
$1,000, and another fo r $500.
F ro m January 1 until Septem ber 16,1952, when
R egulation X was suspended, we made 127 investi­
gations and 65 calls on banks, financial institu­




31

tions, and various real estate concerns located in
the B ranch territory. The 1,539 transactions ex­
am ined disclosed only 12 inconsequential viola­
tions, all o f which w ere due to failure to register.
B a n k r e la tio n s

Our bank relations w ork during 1952 included
311 visits to banks and branches, 90 meetings
attended, and 25 addresses b y Branch officers be­
fo re banking, civic, and educational groups. F e d ­
eral R eserve System films were shown on 11 occa­
sions. D uring the year, 689 visitors were conducted
through the Branch building to observe our opera­
tions, as com pared w ith 399 visitors received in
1951. W e installed credit files at two member
banks, and the currency and coin exhibit was made
available to nine member banks during A ugust
and September.
B a n k s u p e r v is io n

A t the end o f 1952, there were 63 member banks,
25 nonm em ber com m ercial banks, eight mutual
savings banks, and one industrial bank operating
in the Branch territory. In addition, there were
90 com m ercial bank branches, 12 mutual savings
offices and two industrial bank branches operating
in the same cities in which their head offices are
located, and 62 com m ercial bank branches located
outside o f the parent committees. Three Rochester
com m ercial banks operate a total o f 11 branches
in H ead Office territory in counties adjacent to the
B uffalo Branch territory.
D uring the year, fo u r banks were m erged into
mem ber banks and one into a nonmember bank.
The m erged institutions were continued as branch
offices; the number o f branches was also increased
by the establishment o f three new offices by three
mem ber banks and o f one new savings bank
branch.
P erson n el

The num ber o f em ployees at the Branch at the
year-end was 206, the same as at the beginning o f
the year. A high point o f 213 was reached during
June and July. T here were 72 separations from
service, and 72 new em ployees were engaged after
interview ing 313 applicants. The rate o f turnover
was 35 per cent, as com pared with 36 per cent in
1951. A ll but seven em ployees have signed au­
thorizations fo r deductions from payroll fo r the
purchase o f Series E bonds, the total deductions

32

PRESIDENTS REPORT TO DIRECTORS FOR 1952

am ounting to 3.78 per cent o f the p a yroll at the
end o f the year. In addition, 51 em ployees are
participating in a special payroll savings plan p ro­
viding fo r deposit in a local savings bank. A ll
but 27 em ployees are enrolled in the Blue Cross
H osp ital and B lue Shield Surgical-M edical plans.
A ll o f the 27 exceptions are covered under a simi­
lar plan through other members o f their fam ilies
o r through the V eterans A dm inistration. On July
1,1952, we assum ed the operation o f the cafeteria,
which had been operated previously as a Club
function, and, since that time, we have expanded
the scope o f its services. Our training program
fo r senior high school girls was continued in 1952.
U nder the program , the girls are hired to w ork on




Saturdays to receive instruction, practice, and
training in the handling o f checks. U pon gradua­
tion in June, these girls w ere added to the staff as
perm anent em p loyees; we expect to continue this
program fo r obtaining new em ployees in 1953.
D uring 1952 a survey was conducted o f person­
nel practices and o f w age and salary rates paid to
clerical, supervisory, building maintenance, and
service em ployees in six banks, tw o insurance com ­
panies, and 16 com petitive industrial concerns.
This survey was conducted by personal interviews
with representatives o f the participating organi­
zations ; it has enabled us to com pile desired sta­
tistical data and at the same time to reduce the
clerical w ork load incident to past similar surveys.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102