Full text of Federal Reserve Bank of New York Circulars : 4218. Offering of $1,500,000,000 of 91-Day Treasury Bills

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FED ERAL RE SE R V E BANK O F N EW YO RK
£ CirApril i4 i95518 }
°

Fiscal Agent of the United States

Offering of $1,500,000,000 of 91-Day Treasury Bills
Dated April 21, 1955

Maturing July 21, 1955

To all Incorporated, Banks and Trust Companies, and Others
Concerned, in the Second Federal Reserve D istrict:

Following is the text of a notice published today:
F O R R E L E A S E , M O R N IN G N E W S P A P E R S ,
Thursday, April 14, 1955.

TREASU RY DEPARTM ENT
Washington

The Treasury Department, by this public notice, invites tenders for $1,500,000,000, or thereabouts, o f 91-day Treasury
bills, for cash and in exchange for Treasury bills maturing April 21, 1955, in the amount o f $1,500,562,000, to be be issued on
a discount basis under competitive and noncompetitive bidding as hereinafter provided. The bills o f this series w ill be dated
April 21, 1955, and w ill mature July 21, 1955, when the face amount w ill be payable without interest. They w ill
be issued in bearer form only, and in denominations o f $1,000, $5,000, $10,000, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders w ill be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p.m., Eastern
Standard time, Monday, April 18, 1955. Tenders w ill not be received at the Treasury Department, Washington. Each
tender must be for an even multiple o f $1,000, and in the case o f competitive tenders the price offered must be expressed on
the basis o f 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be
made on the printed forms and forwarded in the special envelopes which w ill be supplied by Federal Reserve Banks or
Branches on application therefor.
Others1than banking institutions w ill not be permitted to submit tenders except for their own account. Tenders w ill be
received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in in
vestment securities. Tenders from others must be accompanied by payment o f 2 percent o f the face amount o f Treasury bills
applied for, unless the tenders are accompanied by an express guaranty o f payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders w ill be opened at the Federal Reserve Banks and Branches, follow ing which
public announcement w ill be made by the Treasury Department o f the amount and price range of accepted bids. Those
submitting tenders will be advised o f the acceptance or rejection thereof. The Secretary o f the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Subject
to these reservations, noncompetitive tenders for $200,000 or less without stated price from any one bidder w ill be accepted
in full at the average price (in three decimals) o f accepted competitive bids. Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve Bank on April 21, 1955, in cash or other immediately
available funds or in a like face amount o f Treasury bills maturing April 21, 1955. Cash and exchange tenders w ill re
ceive equal treatment. Cash adjustments w ill be made for differences between the par value o f maturing bills accepted in
exchange and the issue price o f the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or other disposition o f the bills, does not
have any exemption, as such, and loss from the sale or other disposition o f Treasury bills does not have any special treat
ment, as such, under the Internal Revenue Code o f 1954. The bills are subject to estate, inheritance, gift or other excise taxes,
whether Federal or State, but are exempt from all taxation now or hereafter imposed on the principal or interest thereof by
any State, or any o f the possessions o f the United States, or by any local taxing authority. For purposes o f taxation the
amount o f discount at which Treasury bills are originally sold by the United States is considered to be interest. Under
Sections 454(b) and 1221(5) o f the Internal Revenue Code o f 1954 the amount o f discount at which bills issued hereunder
are sold is not considered to accrue until such bills are sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original
issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the
taxable year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, Revised, and this notice, prescribe the terms o f the Treasury bills and govern
the conditions o f their issue. Copies o f the circular may be obtained from any Federal Reserve Bank or Branch.

This Bank will receive tenders up to 2 p.m., Eastern Standard time, Monday, April 18, 1955, at the Securi
ties Department of its Head Office and at its Buffalo Branch. Please use the form on the reverse side of this circular
to submit a tender, and return it in an envelope marked “ Tender for Treasury Bills.” Tenders may be submitted
by telegraph, subject to written confirmation; they may not be submitted by telephone. Payment for the Treasury bills
cannot be made by credit through the Treasury Tax and Loan Account. Settlement must be made in cash or other
immediately available funds or in maturing Treasury bills.
A l l a n S p r o u l , President.
Results o f last offering of Treasury bills (91-day bills dated April 14, 1955, maturing July 14, 1955)
Total applied f o r ........ $2,125,641,000
Total a ccep ted ............ $1,500,441,000 (includes $223,738,000
entered on a noncompetitive basis
and accepted in full at the aver
age price shown below)
Average p rice .......... 99.582+Equivalent rate o f discount
approx. 1.652% per annum
Range o f accepted competitive b id s:
H i g h .........................
L o w ...........................

99.662

Equivalent rate
approx. 1.337%
99.575 Equivalent rate
approx. 1.681%

o f discount
per annum
o f discount
per annum

(The entire amount bid for at the low
price was accepted)

Federal Reserve
District

Total
Applied for

Boston ..................... . . .
New Y ork ..............
Philadelphia ..........
Cleveland ................
Richmond ...............
Atlanta ....................
Chicago .................
St. Louis ................
Minneapolis ..........
Kansas City ..........
San Francisco ----T

o ta l

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

...

29,321,000
1,474,421,000
27,782,000
45,964,000
15,201,000
26,854,000
247,795,000
33,380,000
22,232,000
48,999,000
37,652,000
116,040,000

$2,125,641,000

Total
Accepted
$

28,821,000
914,421,000
16,782,000
43,964,000
15,201,000
26,854,000
196,095,000
33,380,000
22,232,000
48,999,000
37,652,000
116,040,000

$1,500,441,000
( over)

33 E
IM PORTANT— If you desire to bid on a com petitive basis, fill in rate per 100 and maturity
value in paragraph headed “ Competitive Bid.” If you desire to bid on a noncompetitive
basis, fill in only the maturity value in paragraph headed “ Noncompetitive Bid.” DO
NOT fill in both paragraphs on one form. A separate tender must be used for each bid,
except that banks submitting bids on a competitive basis for their own and their customers’
accounts may submit one tender for the total amount bid at each price, provided a list is
attached showing the name o f each bidder, the amount bid for his account, and method
o f payment. Forms for this purpose will be furnished upon request.
N o...........................

T E N D E R FOR 91-D AY T R E A SU R Y BILLS
Dated April 21, 1955
To

F ed era l

R eserve

B an k

o f

N ew

Maturing July 21, 1955
Dated at

Y ork ,

Fiscal Agent o f the United States.

1955
NONCOMPETITIVE BID

COMPETITIVE BID
Pursuant to the provisions of Treas
ury Department Circular No. 418, Revised,
and to the provisions of the public no
tice on April 14, 1955, as issued by the
Treasury Department, the undersigned offers

Pursuant to the provisions of Treasury De
partment Circular No. 418, Revised, and to the
provisions of the public notice on April 14,
1955, as issued by the Treasury Department,
the undersigned offers a noncompetitive tender

..........................................* for a total amount of

for a total amount of $.

(R ate per 100)

(N ot to exceed $200,000)

$ ....................................................(maturity value)
of the Treasury bills therein described, or for
any less amount that may be awarded, settlement
therefor to be made at your Bank, on the date
stated in the public notice, as indicated below :

(maturity value) of the Treasury bills therein
described, at the average price (in three deci
mals) of accepted competitive bids, settlement
therefor to be made at your Bank, on the date
stated in the public notice, as indicated below :

□

By surrender of maturing Treasury bills

amounting t o .................. $______________________
□

By cash or other immediately available funds

By surrender of maturing Treasury bills

amounting t o ..................$___________:__________
□

By cash or other immediately available funds

P rice must be expressed on the basis of 100, with not
more than three decimal places, for example, 99.925.
*

The Treasury bills for which tender is hereby made are to be dated April 21, 1955, and are to
mature on July 21, 1955.
This tender will be inserted in special envelope marked “ Tender for Treasury Bills.”
Name o f Bidder .................................................................................................................................
(P le a se print)

(O fficial signature required)

(T itle )

Street Address ....................................... .
(C ity , T o w n or V illa g e , P. O. N o., and State)

I f this tender is submitted by a bank for the account of a customer, indicate the customer’s name on line below:
(N am e o f Custom er)

(C ity , T ow n o r V illa g e , P. O. N o., and State)

IM PORTANT INSTRUCTIONS:
1. N o tender for less than $1,000 w ill be considered, and each tender must be for an even multiple of
$1,000 (maturity value).
2. If the person making the tender is a corporation, the tender should be signed by an officer o f the corporation
authorized to make the tender, and the signing o f the tender by an officer o f the corporation w ill be construed as a rep
resentation by him that he has been so authorized. If the tender is made by a partnership, it should be signed by a mem
ber o f the firm, who should sign in the form “ ....................................................................................................... . a copartnership, by
............................................................................................................ a member o f the firm.”
3. Tenders w ill be received without deposit from incorporated banks and trust companies and from respon
sible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of
2 percent o f the face amount o f Treasury bills applied for, unless the tenders are accompanied by an express guaranty
o f payment by an incorporated bank or trust company.
4. If the language o f this tender is changed in any respect, which, in the opinion o f the Secretary o f the
Treasury, is material, the tender may be disregarded.

Payment by credit through Treasury Tax and Loan Account will not be permitted.

TE N FRASER
Digitized forT B - -1294-a

( over)

FEDERAL

RESERVE

BANK

NEW

President’s Report
to Directors
for 1954

CONFIDENTIAL

YORK

President’s Report
to Directors

fo r 1954

FEDERAL

RESERVE

BANK

NEW

YORK

FEDERAL RE SE R V E BANK

O F NEW YO R K
A pril 4, 1955
To the Directors o f the
Federal Reserve Bank o f New Y ork :

This is a report on the operations and policies o f the Federal Reserve Bank of New
York, prepared fo r the directors but used also by the officers of the Bank and made a part
o f the permanent records o f the Bank.
F or the second time since the end of W orld W ar II, the United States last year faced
the problem o f trying to make sure that an economic recession did not become an intoler
able depression and o f achieving an early recovery in the output o f goods and services.
This second test was especially important to the Federal Reserve System, not only because
it was operating in money and credit markets much freer than in 1949, but because its
restrictive policy in 1953 had been blamed for the later economic decline, sometimes in
apparent disregard o f the role played by the cut in defense spending and the shift o f the
private economy from inventory accumulation to liquidation. Moreover, while the eco
nomic recovery after the recession of 1949 encouraged some to credit our economy with
considerable basic strength, others thought that there had been no real test, since there
were then many unsatisfied postwar demands to stimulate recovery.
Grim warnings were not lacking in 1954. Early in the year an internationally known
economist predicted a virtual economic collapse unless billions o f dollars o f spending
power were immediately released through large tax reductions. A t home others urged
the need of huge public works, combined with m ajor tax reductions (and deficit financ
ing) to stimulate spending. None of these extreme counsels was adopted. The Government
did cut taxes somewhat, but only about as much as it cut spending. The Federal Reserve
kept credit readily and cheaply available. Lenders had no reason to press debtors for
payment (indeed they had a profit incentive to maintain their loan volume), and busi
nessmen were able to adjust gradually to the lower levels o f activity. Once again the
influence o f credit policy was discernible in the economic fringe areas where decisions
can be deferred or advanced. The marginal users of credit had been restricted in late
1952 and early 1953; now they were encouraged. In housing, fo r example, new legislation
made home buying more attractive to additional thousands of families, while credit policy
made the yield on the mortgages more attractive to lenders.
B y the end of the year credit policy was adopting an attitude appropriate to a vigor
ous, if thus far narrow, recovery. F or the second time in a decade, therefore, our economy
had kept a decline within modest limits and had generated a recovery without extreme
governmental intervention. It was still not clear at the close o f 1954 that the recovery was
widely enough based to insure its continuance, while evidence o f exuberance in the stock
market, in the swift expansion o f mortgage debt, and in the unbalanced production
schedule o f the automobile industry, was promising to pose problems o f a different nature
in 1955. But despite these qualifications, the diagnosis o f our current ills in 1954 appears
to have been correct, and the prognosis is favorable.
A s usual, this report covers many matters that cannot appropriately be discussed in
the more widely distributed annual or stockholders report; it is therefore marked con
fidential, and is intended for use only by those officially connected with the Bank.

Yours faithfully,

President.

CONTENTS
Page
Open

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

A b s o r p t i o n o f r e s e r v e s e a r l y i n t h e y e a r .....................................

M arket

L a te

O p e r a t io n s

s p r in g

and

su m m er— la r g e

pu rch ases

fo llo w e d

th e r e d u c t io n o f r e s e rv e r e q u ir e m e n ts a n d la r g e

Page
..........................................................................

New publications ..........................................................................

P u b lic I n fo r m a tio n

Speeches and a d d r e s se s ...............................................................

s a le s

Relations with schools and c o lle g e s ......................................

P r o v i d i n g r e s e r v e s t h r o u g h th e fin a l q u a r t e r o f t h e y e a r

Guided t o u r s ...................................................................................

R e fle c tio n s o f p o l ic y in th e m o n e y a n d s e c u r it ie s m a r k e t
d u r in g th e y e a r

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

P r o c e d u r a l d e v e lo p m e n t s in th e S e c u r it ie s f u n c t io n
T r a d in g te c h n iq u e s

....

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

I m p r o v i n g d a t a u p o n w h i c h o p e r a t i o n s a r e b a s e d ...............

S t a t i s t i c a l s u m m a r y o f o p e r a t i o n s ....................................................

F is c a l A g e n c y O p e r a t io n s

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

P u b lic d e b t

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

F o r e ig n O p e ra tio n s

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

Assets held fo r foreign and international a c c o u n t .........

Loans to central b a n k s ...............................................................

Gold movements

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

United States currency and c o i n .............................................

New foreign a c c o u n t ....................................................................

V o lu m e o f w o rk

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

I s s u e a n d r e d e m p t i o n o f S a v i n g s b o n d s .....................................

T e l e g r a p h i c t r a n s f e r s o f m a r k e t a b l e s e c u r i t i e s ....................

T r e a s u r y T a x a n d L o a n A c c o u n t ......................................................

I n t e r n a t io n a l B a n k f o r R e c o n s t r u c t io n a n d D e v e lo p m e n t

C o m m o d ity C r e d it C o r p o r a tio n

R e c o n s t r u c t io n

F in a n ce

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

C o r p o r a tio n

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

F o r e ig n

21
21

F oreign missions ..........................................................................

M eeting o f Technicians o f Central Banks o f the
Am erican Continent ...............................................................

S taff Group on F oreign I n te r e s ts ...........................................

F oreign visitors ............................................................................

R u b b e r P r o d u c i n g F a c i l i t i e s D i s p o s a l C o m m i s s i o n ............

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

F oreign travel ...............................................................................

F o r e ig n R e la t io n s

D e s tr u c tio n

Ch e ck

C o n tro l

o f u n fit c u r r e n c y

C o l l e c t io n

N assau

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

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

C o u n t y c l e a r i n g a r r a n g e m e n t ...........................................

C o n s o lid a t e d c h e c k s h ip m e n ts
C o n tr a c t m o t o r c a r r ie r s e r v ic e
C h eck R o u tin g
G overn m en t

11
12

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

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

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

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

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

ch eck s

O p e r a t io n s

23
23

F oreign and international studies and publications . . . .

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

R esearch

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

S ym bol program

P osta l m on ey orders

Cash

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

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

Domestic studies and p u b lic a tio n s .........................................
Library

A ssets

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

Salary administration .................................................................

H ead Office salary liability ......................................................

Number o f employees .................................................................

Em ployee benefits ........................................................................

P erson n el

Personnel improvement programs .........................................

Personnel research

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

T ran sfers

L ea sed

L oans and

w ir e

F unds

sy stem

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

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

O p e ra tin g C o s ts and B u d g et ........................................................

29
29

Pow er Plant ...................................................................................

B u f f a l o B r a n c h O p e ra tio n s ........................................................

W ire transfers o f f u n d s .............................................................

Cash operations ............................................................................

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

L o a n G u a ra n te e s f o r D e fe n s e P r o d u c t io n (R e g u la t io n V )

Bank

C r e d it s

M aiden Lane Annex ....................................................................

W ir e

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

Federal Reserve Club .................................................................
Cafeteria ..........................................................................................

P o s ta l d e p o s it p r o g r a m

S u p e r v is io n

C a ll-r e p o r t

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

B a n k ch an ges

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

m e c h a n iz a t io n

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

15
15

R F C i n v e s t m e n t i n m e m b e r b a n k s ....................................................

T r u s t d e p a r t m e n t i n c o m e a n d e x p e n s e s u r v e y ..........................

F o r e ig n

bran ch es

B a n k R e l a t io n s

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

Operating methods ......................................................................

Bank and pu blic relations ........................................................

31
31

Change in boundary ....................................................................

Personnel

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

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

Salary a d m in is tra tio n .................................................................

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

Branch b u i l d i n g ............................................................................

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

T e c h n ic a l a s s is ta n c e p r o g r a m
G r o u p m e e t in g p r o g r a m

30
30

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

B a n k v is it in g p r o g r a m

Collections .......................................................................................
Loans to member b a n k s .............................................................

F iscal agency operations ...........................................................

B a n k c a p i t a l .........................................................................................................

PRESIDENT’S REPORT TO DIRECTORS FOR 1954

rriHE recession in business activity that developed
A in mid-1953 was still in evidence as 1954 began,
and Federal Reserve credit policy during the
greater part o f the year was directed toward
creating easy credit conditions that might help to
halt and reverse the downward trend. Signs of
decline were to be found at the beginning o f the
year in nearly all the important statistical series
measuring the nation’s economic well-being. In
dustrial production had fallen by the spring
months o f 1954 to levels more than 10 per cent
below the peaks reached a year earlier, primarily
as the result o f steadily declining Government
expenditures for national defense and reduced
production and purchases by business concerns
as they attempted to work off part of the large
inventories they had built up during the latter
half o f 1952 and the first half of 1953. Gross
national product, measuring the value of all goods
and services produced, dropped by $15 billion, or
nearly 4 per cent, from the 1953 peak before
leveling off in the second quarter o f 1954. And
unemployment had more than doubled, increasing
to more than 3.6 million by February 1954. The
recession had been halted by late spring, however,
and after several months of sidewise movement,
broad economic revival became apparent in the
closing months of 1954. A t the end o f the year,
most signs pointed to further recovery and the
prospect of a prosperous 1955.
To combat the developing recession, the policy
o f active monetary ease adopted by the Federal
Reserve System during the last half o f 1953 was
carried over into 1954 and until the closing month
o f the year provided the framework within which
policy actions were taken. The policy o f active
ease was aimed at maintaining in the banking sys
tem a substantial supply o f funds which would
be continuously available to meet all reasonable
credit requests and which would induce banks to
push credit into the market through investment o f
their idle funds. W ith a relatively limited demand
fo r loans, commercial banks employed the liquid
funds thus supplied to them to add more than $11
billion to their total earning assets, principally
through purchases of Federal, State, municipal,
and other securities. The investment demand on
the part o f the commercial banks, superimposed
on the large volume o f personal savings, poured
a steady flood of funds into the capital markets,

lowering interest rates and facilitating the financ
ing o f new residential construction, new roads
and schools, and new business plans.
OPEN M ARKET OPERATIONS

The policy o f active ease in effect until the clos
ing days of 1954 relied in large measure fo r its
implementation upon open market operations in
Government securities, which were geared as
closely as possible to changing circumstances in
the money market. F or operating purposes active
ease was translated roughly into a range o f inten
tions fo r the level of free reserves held by the
banking system— with free reserves defined as
the difference between member bank excess re
serves and member bank indebtedness to the
Federal Reserve Banks. The primary objective
was to maintain at all times a substantial supply
of free reserves while avoiding a degree of sur
plus liquidity that would induce “ sloppy” money
market conditions, thus driving interest rates
down without adding to the actual availability of
funds to those seeking credit.
Open market operations, in pursuing the twin
objectives o f assuring decided ease and of avoid
ing sloppiness, involved a substantial volume of
both purchases and sales of Treasury bills over
the course o f the year. Total sales and redemp
tions o f securities from the System Open Market
Account amounted to more than $3.3 billion and
exceeded purchases by about $400 million. Total
transactions— purchases, sales, and redemptions
— aggregated approximately $6.2 billion, o f which
$4.2 billion represented market transactions and
$2.0 billion represented redemptions. This total
was significantly higher than in the preceding
year, although well below the volume of System
Account operations in 1952.
Repurchase agreements between the Federal
Reserve Bank o f New Y ork and dealers in Govern
ment securities were entered into less frequently
and in smaller aggregate volume in 1954 than in
either o f the two preceding years; purchases of
short-term securities on repurchase contracts
totaled $2.2 billion and resales amounted to $2.8
billion. (The net sale of $600 million represented
resales early in 1954 o f the repurchase agree
ments that had been outstanding at the end of
1953.)
l

A s shown in Chart I, the net effect of open mar
ket operations in 1954, including both transactions
fo r the System Open Market Account and repur
chase agreements fo r account o f the Federal R e
serve Bank of New York, was the withdrawal of
approximately $1 billion o f reserve funds from the
market. But as Chart I also shows, free reserves
in the banking system remained abundant
throughout the year, despite the net withdrawal of
funds through open market operations. During
the first half o f the year funds were not with
drawn through open market operations as rapidly
as other factors were increasing reserves, and
in the second half o f the year there was a reduc
tion o f $1.5 billion in reserve requirements.
Chart I
W eek ly Cumulative N et Changes in H oldings
o f Treasury Issues b y Federal Reserve Banks,
and W eek ly A verage Free Reserves
M illf a n a o f d o lla r*

1953
t C a «« In Ivt Ira n

1994
10,1 t i l .

The bulk of these open market operations
was concentrated in three periods during the
y e a r: first, early in the year, when large net sales
and redemptions were m ade; second, in the late
spring and summer, when large purchases were
followed by even larger sales; and finally, in the
fall period, when substantial net purchases were
made.
Absorption o f reserves early in the year

Open market operations early in the year were
directed at withdrawing the largest part of the
reserve funds which regularly return to the banks
after the year end. Altogether, $657 million o f
Treasury bills were sold or redeemed from the
System Open Market Account during January,
2

and $598 million o f short-term Government securi
ties that had been held under repurchase agree
ments at the end o f 1953 were resold. Despite the
heavy withdrawal o f bank reserves represented
by these transactions, the usual seasonal influ
ences supplying reserves to the banks, along with
unexpected releases of funds as a result o f net
expenditures from Treasury balances with the
Reserve Bank, resulted in unnecessarily large
temporary accumulations o f free reserves. In
turn, the surplus liquidity in the market brought
about conditions that verged on sloppiness, as
idle money surged about in search of investment.
The failure to anticipate accurately the volume
o f reserves released by Treasury operations in
January, and the consequences that ensued in the
investment markets, pointed up a problem that
has confronted the management of the System
Account fo r years— the unavoidable errors that
occur in the estimates and projections o f factors
influencing member bank reserves. A s discussed
later, progress was made in the year just ended
not only toward making the projections of reserve
changes somewhat more reliable, but also in fur
ther developing and systematizing those hourto-hour contacts with the “ fe e l” o f the market that
can provide an indispensable supplement to re
serve projections as guides fo r open market
operations.
Purchases and sales for the System Account
were generally offsetting during February and
March, and there were no transactions fo r the
System Account during all o f A pril and the first
half o f May. Repurchase agreements fo r account
of the Federal Reserve Bank o f New Y ork were
used occasionally, however, sometimes in substan
tial size but only fo r brief periods.
Late spring and summer— large purchases followed
by the reduction of reserve requirements and
large sales

The next period o f heavy activity began in the
last half o f May and the month o f June, when
security purchases totaling nearly $685 million
were made fo r the System Open Market Account,
only partly offset by sales and redemptions of
about $280 million. Purchases were necessary to
maintain free reserves at levels consistent with
the policy o f active ease. A substantial factor in
the reserve situation at this time was the pressure
on the reserve position o f member banks induced
by their subscriptions to the Treasury’s cash
offering in May o f $5.1 billion of 1% per cent

notes. Later in the summer, reserves were ab
sorbed by sales and redemptions o f Treasury
bills, following the reduction o f reserve require
ments announced on June 21, which added much
larger amounts to free reserves in July and
August than were actually needed at that time.
Developments during the summer months
created an interesting set o f problems for the
management of the System Account. The reduc
tion of reserve requirements became effective in
four steps. One of the steps was timed to coincide
with the Treasury’s offering of $3.7 billion o f tax
anticipation certificates, due March 1955, for pay
ment on August 2. But even the funds released in
this step were in excess o f the reserves needed by
the banking system, at that time, to take up its
subscriptions to the Treasury offering and for
other purposes, and the further funds released by
the staggered reduction o f reserve requirements
were not tied in with any immediate need. In
total, member banks acquired about $1.5 billion
o f excess reserves from the lowering of reserve
requirements, and the largest part of this total
had subsequently and temporarily to be absorbed
by sales and redemptions from the System Open
Market Account, in order to avoid immediately
sloppy market conditions. Beginning with re
demptions o f Treasury bills in the last week in
June and continuing with sales or redemptions of
bills in the last half o f July and throughout
August, the System Open Market Account reduced
its holdings of Treasury bills in the aggregate by
more than $1.3 billion. Later, as the banking sys
tem needed funds to meet fall credit demand, the
sales-absorption process could be reversed in
stages as required.
A paradox during much of this period, particu
larly in August and through to mid-September,
resulted from the fact that the reserve balances
o f member banks were so distributed that money
conditions in the central money market became
relatively tight although free reserves in the bank
ing system as a whole were generally $700 million
or more throughout the period. Despite this
abundance of unused reserves, some central re
serve city banks in New Y ork and Chicago and
reserve city banks in a few other money market
centers encountered difficulty week by week in
mobilizing sufficient reserves to cover their
requirements.
The pressures upon the central markets in
August and September resulted from several fac
tors. Debt operations o f the Treasury and the

Commodity Credit Corporation had the effect, on
balance, o f pulling funds out o f the money centers
and placing them in the country banks. In addi
tion, System Account security operations, under
taken to absorb a portion of the reserves released
by the reduction in requirements, drew funds
initially from the money centers, although the
funds presumably being absorbed had actually
been made available to each member bank in the
country. Moreover, some o f the money market
banks themselves had complicated the problem by
rapidly investing the funds released to them
directly by the reduction o f requirements, and
even by making investments in anticipation of
each scheduled release, so that when subsequent
drains upon the money market developed these
institutions found themselves fully invested and
compelled to liquidate investments or borrow in
order to maintain their reserves.
One worthwhile result of the money market
squeeze in August and September was the encour
agement given to participants in the New York
money market to develop wider contacts, on a
more flexible basis, with sources of funds outside
the City. In particular, dealers in United States
Government securities, confronted by high rates
and short supplies o f funds in New York, felt im
pelled to scour the country to find financing for
the securities they were carrying in position. B y
so doing, and aided by higher short term rates,
they eventually helped to mobilize part o f the
funds lying dormant throughout the country. This
not only helped to solve their own financing prob
lems but simultaneously was instrumental in
drawing funds back into the money market. The
experience gained in August and September, and
the stimulus given to a broader and more respon
sive flow o f funds through the money system by
that episode, may have helped in December when
the usual end-of-the-year pressures on the money
market were met with much less disturbance than
has been customary in other recent years.
Providing reserves through th e final quarter
o f th e year

The final period during which the Federal
Reserve System was an active participant in the
market fo r Treasury bills began in the last week
in September and extended through November.
Open market operations, on balance, resulted in
the addition o f $1.1 billion o f Government securi
ties to the System Open Market Account during
this period, gradually returning to the member
banks nearly all o f the reserves absorbed initially
3

and temporarily after the reductions in reserve
requirements during June, July and August. Not
all operations were on the purchase side during
the fall months, however, as sales were made
from time to time to prevent the usual intra
monthly swings in reserve balances from adding
unnecessarily to the already large supplies of
free reserves. Purchases during this season o f
the year constitute a regular feature of System
open market operations, as the steady flow o f
currency into circulation draws reserves from
the banking system while, simultaneously, the
seasonal demands fo r credit add to bank deposits
and reserve requirements.
Seasonal churning about in the money market
was less pronounced during December 1954 than
is usually expected in that month. In part, this
may have reflected a freer movement of reserve
balances in and out of the money market in
response to dealer operations. It also reflected
the less pressing need fo r funds to meet state
ment adjustments and dividend payments by
banks and other corporations at the end o f a
year in which money was steadily and abun
dantly available. A s a result, there were no mar
ket transactions undertaken for the System Open
Market Account during the last four weeks in the
year, and only sporadic and relatively minor use
was made o f the repurchase agreement facilities
at the Federal Reserve Bank o f New York. Some
tightening did occur as seasonal pressures in
creased during the first three weeks o f the month,
but this was in accord with a slight shift in Federal
Reserve policy which took place at that time.
Although limited relief was provided by releasing
a moderate amount o f reserves through repur
chase agreements, no outright purchases were
made to prevent the gradual development of
tighter conditions.
R eflections o f p o licy in th e m oney and securities
m arket during th e year

Federal Reserve credit policy in 1954 was re
flected in generally lower market rates o f interest
at most maturities, as shown in Chart II. B y the
end of 1953, rates on all maturities had declined
well below the peaks they had reached earlier in
that year. The temporarily excessive liquidity in
the money market during January 1954 tended to
accelerate the decline o f previous months. The
average issuing rate on three-month Treasury
bills, which was about 1.60 per cent for the issue
dated December 31, 1953, fell to approximately 1
per cent by the end o f January 1954. Continuing
4

the declines that began during the summer of 1953,
lower rates were also established throughout the
maturity range on virtually all types of invest
ments.
A s the chart shows, the Treasury bill rate was
generally stable in February and March around
the levels reached in the last half o f January. The
discount rates o f the Reserve Banks were lowered
from 2 per cent to 1% per cent in February as a
further expression o f policy and to bring dis
count rates closer to prevailing market rates.
Chart II
Selected Market Rates of Interest
P t r c «n t

Rates on longer maturities continued to decline
during February and M arch; the customary
sources of longer-term funds were supplemented
by bank funds as commercial banks sought higher
interest returns through lengthening maturities
in their portfolios. B y the end o f the first quarter
o f 1954, average yields on all types o f bonds—
corporate, municipal, and Federal Government—
were approximately one quarter o f one per cent
below end-of-December 1953 levels.
Discount rates of the Federal Reserve Banks
were lowered again in April, from 1% to l 1 per
/^
cent. This action helped to touch off another drop
in short-term rates. One important influence on
short rates during the spring months was the
tendency o f the market to allow its expectations
to outrun System intentions— a typical pattern
o f market behavior, whether policy is becoming
more restrictive or easier.
Rates o f interest on intermediate and longerterm obligations, however, moved counter to the
movement in the short-term market following the

A pril reduction of discount rates. Market yields
on these issues had declined during the winter and
early spring, despite the Treasury’s shift o f $11
billion o f its debt from the short to the inter
mediate area in its February refunding, but begin
ning early in May and continuing into June these
rates rose in response to continued demands upon
the capital markets by State and municipal gov
ernments, by private corporations, and by the
Federal Government in its May cash and refund
ing operation.
In June, yields on Government bonds declined
once again to near their spring lows. Short-term
rates also were at their lowest points o f the year,
with three-month bills averaging about 0.65 per
cent fo r the full month. The combination o f
aggressively easy Federal Reserve credit policy,
market anticipations, and Treasury debt manage
ment decisions had brought about a structure of
interest rates in the Government securities mar
ket that represented the lowest over-all level of
yields in several years.
During most o f the balance o f 1954 market rates
on Government issues tended to increase. Treas
ury bill rates, which had declined to as low as
0.60 per cent in the middle o f June, climbed fairly
steadily to a level above 1 per cent by the end of
August and remained at most times fairly close
to 1 per cent through the last four months of
1954, before rising above 1.30 per cent in Decem
ber. Yields on intermediate and longer-term Gov
ernment maturities also tended to rise during the
last four months o f 1954, and by the year end had
returned to approximately the levels reached
early in the year, prior to the drop in rates dur
ing the spring months. Despite the large volume
of new offerings o f corporate and municipal
issues, market rates o f interest on these obliga
tions, after rising in the spring months, declined
again in the last half year until December, when
an exceptionally heavy calendar pushed rates
higher.
The encouragement given to borrowers by the
lower levels of market rates, and the general
availability o f credit and capital funds, appar
ently contributed importantly to the increased
volume of capital offerings during 1954. One par
ticularly notable aspect was the direct effect of
the System ’s policy, and o f open market opera
tions, in predisposing security underwriters to
take on, and aggressively to seek, new commit
ments, confident both of their ability to obtain
adequate financing and o f the ultimate saleability

of corporate, State, and municipal offerings. The
declining levels o f interest rates (rising securities
prices) added, of course, to their willingness to
assume the underwriting risk.
Procedural developments in the
Securities function

A number o f changes affecting the work of the
Securities Department and the management of
the System Open Market Account were tried out
during 1954. Some of these changes represented
attempts to improve trading techniques. Others
were directed toward improving money market
statistics and projections so as to provide better
guides to the day-to-day scheduling of operations.
And still others took the form of improvements
in internal and external communications, between
the trading desk and other departments o f this
Bank, the Board of Governors and the other
Federal Reserve Banks, on the one hand, and
between the trading desk and outside agencies
and the money market on the other.
A fundamental change in departmental organi
zation, effective June 1, 1954, provided the under
lying basis fo r many o f these innovations. The
number o f officers assigned to the Securities func
tion was increased from three to four, and official
duties were redistributed among the officers in
a manner calculated to make possible many o f the
changes mentioned, as well as others still to
be developed. The work of the function at the
managerial level was expanded, but divided into
two parts, with one manager primarily respon
sible fo r trading activities and observation of
the markets through the trading desk, while the
other manager took over new duties in further
ing the direct liaison with m ajor banks, invest
ment houses, and investors that had form erly been
largely maintained only by the vice president.
The manager undertaking the liaison duties also
was given responsibility for general departmental
administration, accounting and records, the activi
ties o f the Bill (bankers’ acceptance) Division,
and the issuance o f Treasury securities. Each
manager now also serves as alternate fo r the
other, providing greater assurance of fully con
tinuous coverage o f all aspects of the function’s
operations.
Trading techniques

Nineteen fifty-four was the first full year in
which transactions fo r the System Account were
confined exclusively to Treasury bills, pursuant
5

to the policies adopted by the Federal Open Mar
ket Committee in 1953. From time to time some
difficulties were encountered in translating policy
into action because of relative shortages of bills
in the market. On the whole, however, effective
execution was given to the policy o f ‘ ‘ active mone
tary ease” through transactions in Treasury bills.
A n improvement in operating procedures was
effected when the Executive Committee of the
Federal Open Market Committee, on July 20,
form ally approved the execution o f purchases and
sales fo r System Open Market Account on a cash
delivery basis, i.e., fo r settlement and delivery
the same day, as distinguished from regular
transactions calling fo r payment and delivery the
next business day following the date of commit
ment. The first purchase transaction fo r cash
delivery was undertaken on August 25, and pur
chases or sales fo r cash were entered into on seven
later occasions during the remainder o f the year,
reaching an aggregate amount of one-half billion
dollars. Although a number o f operating prob
lems were encountered in working out cash trad
ing techniques, none proved to be a serious ob
stacle. Experience gained with cash transactions
during the last half o f 1954 indicated that the
instrument can be used effectively to place funds
in the market or take funds out o f the market on
the same day the decision to trade is reached, pro
vided the action is initiated by the trading desk
during the morning so that there will be time
enough, during the trading day, to complete the
transaction.
Adoption o f the cash trading technique for use
when it was desirable to have an immediate effect
upon bank reserves replaced in part the use o f
repurchase agreements during the latter part of
1954. Total transactions between the Federal
Reserve Bank o f New Y ork and Government
security dealers on repurchase agreements in 1954
included purchases o f $2.2 billion o f short-term
securities and sales of $2.8 billion, as shown in
the accompanying table. This volume o f trans
actions was the lowest since 1951, when active use
o f repurchase agreements as an important variant
of open market operations was just being re
sumed. More important than the development of
cash trading procedures in explaining the less
ened use o f repurchase agreements this year, how
ever, was the fact that there were fewer occasions
requiring this kind o f relief on a substantial scale.
6

Transactions in Short Term Securities
Under Repurchase Agreements
(In m illion s o f dollars)

Purchases
1948
1949
1950
1951
1952
1953
1954

Sales

-0279.7
598.0
2,341.8
5,491.2
6,119.9
2,413.4

-0279.7
544.9
2,198.2
5,024.2
6,185.7
2,967.3

Peak
balance

-010 2 .8
12 0 .0

306.0
873.5
671.0
503.2

Year-end
balance

-0 -053.1
196.7
663.7
597.9
44.0

Repurchase agreements are most useful in pro
viding temporary, but immediate, reserve assist
ance to the central money market at times o f un
usual strain on that market. Since money condi
tions were generally easier throughout 1954 than
they had been during the two preceding years, it
naturally followed that the occasions upon which
repurchase agreements were needed to meet tem
porary situations o f strain in the money market
were less frequent and less intense. A s the occa
sions fo r such swift influence upon reserves arise
in the future, there should be many opportunities
to execute outright transactions fo r cash settle
ment, instead o f making repurchase agreements
(which are also cash transactions), but the zone
o f useful action that can be filled only by repur
chase agreements will probably remain large.
Im provin g data upon w hich operations are based

A series o f attempts was made throughout 1954
to improve the projections o f the daily and weekly
dollar magnitudes o f the various market influ
ences affecting bank reserves. The emphasis upon
the use o f guide posts set in terms o f free reserves
gave impetus to a searching restudy o f data and
statistical techniques on the part of those mem
bers o f the Research Department who prepare
these projections. Because o f the time lag in re
ceipt o f data on bank reserve positions, transac
tions fo r the System Open Market Account must
always be undertaken one or two days before data
are available on the actual state o f bank reserves
fo r the country as a whole. In these circum
stances, the estimates and projections o f expected
changes in the supply of reserves play an impor
tant part in decisions that must be reached from
day to day as to whether or not specific purchases
or sales or redemptions o f Treasury securities
should be undertaken. The Manager o f the Sys
tem Account and his associates in the Securities
Department worked closely with the Research

Department in developing new sources of data,
new methods o f processing or analyzing the data,
and new reports fo r presenting the results in
usable form, including preparation o f detailed re
visions of the projections on a daily basis.
In an attempt to secure earlier reports on one
o f the most important factors that exerts a widely
fluctuating influence upon member bank reserves,
the Treasury’s cash balances at the Federal
Reserve Banks, discussions were conducted with
Treasury officials and with a number of Reserve
Bank officials concerning the possibility of speed
ing up reports on closing Treasury balances at the
Reserve Banks. W ith a full measure o f coopera
tion from all concerned, an earlier reporting sys
tem was put into effect in early December. By
gaining access to more current data on this influ
ence, a significant step was taken toward eliminat
ing some of the uncertainty in System Account
operations.
An attempt was made during 1954 to improve
contacts with the institutions active in the money
and capital markets. Considerable progress was
made by the manager assigned the special respon
sibility of keeping in touch with key individuals
who handle the money positions of the money mar
ket banks and execute money market transactions
with other leading investing or lending institu
tions. In this role, he has already developed in
form al relationships, and an awareness o f the
special needs o f the System Account, which pro
vides an opportunity fo r quick cross-checking of
reported developments with principals of various
institutions. Such relationships can only be fully
developed over a fairly long period o f time, but
it is already apparent, after six months of
effort, that substantial benefits will accrue to the
function from the assignment o f these special
responsibilities to one o f the managers in the
department.
Also, during the past year the management of
the System Open Market Account has attempted
to improve the flow of information from the trad
ing desk, situated in New Y ork City, to the mem
bers o f the Federal Open Market Committee at
the Board o f Governors in Washington and at
the other Reserve Banks throughout the country.
It is important that all members of the Federal
Open Market Committee have access to as com
plete information as possible on conditions and
developments in the money and securities markets
so as to be better able to discharge their respon
sibilities for open market policy. In addition to

the regular, extensive reports on conditions and
developments in the money and securities markets,
a further effort has been made to present regu
larly the kinds o f special information that can
only be obtained through the trading desk, be
cause of its unique role as the System ’s “ listening
p ost” in the market. As part o f the expanded
program to relay the “ inside” market story,
daily morning telephone calls were instituted be
tween the Manager o f the Account or his principal
assisting officer, in New York, and members of
the staff at the Board of Governors and at the
Federal Reserve Bank whose president (in addi
tion to the President o f the Federal Reserve Bank
o f New Y ork) is currently a member o f the Execu
tive Committee o f the Federal Open Market Com
mittee. Toward the same end of improving the
flow o f information, the regular reports from the
Manager o f the System Open Market Account to
the Committee have been broadened to give a
more detailed description of the background lying
behind all actions that have been taken. Occa
sional memoranda have also been prepared to
describe in detail certain operating developments
as they have arisen. Finally, some o f the mem
bers o f the Federal Open Market Committee,
other presidents o f the Federal Reserve Banks
and their senior staff people have visited the trad
ing desk during the year to familiarize them
selves with the manner in which operations are
conducted.
Statistical summary of operations

The Federal Reserve Bank o f New York, under
the direction and authorization of the Federal
Open Market Committee, made open market pur
chases o f Government securities fo r the System
Open Market Account during 1954 having a total
face value o f $2.9 billion and sold, or presented
for redemption, securities having a face value of
$3.3 billion. These outright transactions fo r the
System Account thus withdrew $400 million of
reserves from the market. The total o f repur
chase agreements outstanding at the end of 1954
was $0.6 billion smaller than a year earlier, bring
ing the over-all reduction o f reserves through
open market operations to $1.0 billion. The ac
companying table shows the effect that System
security operations and other relevant factors
had upon the availability of bank reserves in 1954.
On two occasions during the year, in January
and March, the Federal Reserve Bank of New
Y ork purchased special certificates o f indebted
7

ness directly from the Treasury in order to avoid
Treasury overdrafts at the Federal Reserve
Banks. Purchases were made in amounts o f $424
million in January and $190 million in March. In
both instances the sale of certificates by the Treas
ury was in anticipation o f tax receipts, and the
special certificates were retired by the Treasury
as rapidly as the anticipated tax revenues became
available.
Factors Affecting Member Bank Reserves— 1954
(In b illion s o f dollars)

Factors o f decrease
Decrease in Federal Reserve holdings
o f Government securities ..............................
Decline in the gold s t o c k ....................................
Increase in Treasury cash and deposits
at Reserve B a n k s ............................................
Decrease in Federal Reserve f lo a t ....................
Increase in other Federal Reserve deposits and
accounts .............................................................

1.0
0.3
0.3
0.1

In addition to the security transactions under
taken in the market for the System Open Market
Account and on repurchase agreement fo r this
Bank, a large volume o f transactions was carried
out by the Securities Department for account of
member banks, foreign accounts, Treasury ac
counts, and other investors. The total o f such
trades executed in the market, both purchases and
sales, came to $3.9 billion, and an additional $0.4
billion of trades was executed without recourse
to the market by dealing directly with organiza
tions having accounts with the Bank. The follow
ing table shows that the aggregate of trading
activity fo r these accounts was somewhat larger
in 1954 than in other recent years.
Trading in Securities by this Bank
for Other Accounts
(In m illions)

0 .1

Total .............................................................. 1.8
Factors o f increase
Decline in money in circu la tio n ...................... ... 0.3
Increase in Treasury currency outstanding . . . 0.1
Increase in Federal Reserve Banks’ loans,
discounts, and a d v a n ce s................................ ... 0 . 1
Total ..........................................................

0.5

Decrease in member banks’ reserves....................
Decrease in required reserv es..............................

1.3
0.8

Decrease in member banks’ excess reserves........

0.5

Total holdings of Government securities by the
Federal Reserve System at the end o f 1954
amounted to $24.9 billion, all but $44 million of
which was in the System Open Market Account.
The $44 million was held by this Bank under re
purchase agreements. Changes in the various
categories o f marketable securities in the System
Open Market Account growing out o f the pur
chases, sales, redemptions and exchanges o f these
instruments during 1954 include a decrease of
$429 million in Treasury bills, an increase of $8.0
billion in certificates of indebtedness, a decrease
o f $7.2 billion in Treasury notes and a decrease
o f $0.8 billion in Treasury bonds. This Bank’s
share in Government securities held by the
System Open Market Account at the year-end
amounted to $6.4 billion, compared with $6.5 bil
lion at the end o f 1953. The net decrease o f $100
million reflected the over-all decrease in System
Account holdings and, in addition, a reallocation

o f participations in the System Open Market
Account effected on A pril 1, 1954.

1954

1953

1952

Member banks .................. $ 170.5$ 137.8 $ 128.9
Foreign a ccou n ts..............
3,192.7 2,723.5
3,140.7
Treasury accou n ts............
509.8862.0
227.5
Other ..................................
8.9
18.7
23.0
Total .................. $3,881.9

$3,742.0

$3,520.1

FISCAL AGENCY OPERATIONS
Public debt

The raising of the statutory debt limit by Con
gress on August 28,1954, from $275 billion to $281
billion, and the later rise in the total outstanding
debt to $278.2 billion at the year-end, contributed
to an increase in the volume o f our securityhandling operations. During 1954 the Treasury
refunded eleven marketable issues and offered two
issues for cash, compared with nine refunding and
new financing operations in 1953. The refunding
operation in February 1954, amounting to $20.5
billion, was the largest in history, and the $17.3
billion refinancing in December the second largest.
Some economy resulted during the December re
funding from the issuance by the Treasury, at our
suggestion, o f new bearer securities in the unusual
denominations o f $100 million and $500 million for
System Open Market Account.
This Bank handled 64.4 per cent of the total
dollar volume o f the exchanges, issues, and re
demptions required by the T reasury’s financing
operations in marketable securities during 1954,
compared with 63.1 per cent o f the total in 1953.

The Bank’s share in handling nonmarketable
securities dropped from 30.6 per cent in 1953 to
18.7 per cent in 1954. The table below summarizes
our part in the financing operations o f the Treas
ury Department during 1954, together with com
parable figures fo r 1953.
Treasury Financing Handled by this Bank
(In millions o f dollars)
.

Certificates, notes and bonds:
Exchanged ......................... $ 29,700
Issued for c a s h .................
4,233
R edeem ed...........................
3,754

12,587,667
14,681,764
1,501,078

11,546,040
13,596,238
908,529

$1,121
1,345
243

$ 796
1,187
215

11,043

17,366

total
60.1
41.9
53.0

total
$ 22,083 63.2
3,324 35.6
634 32.4

Savings notes:
Redeemed and
reissued ...........

13,680

61,839

360

4,297

Special notes, Inter
national Monetary
Fund Series:
Issued, redeemed
and reissued . . .

436

294

Investment Series A
and B bonds:
Redeemed and
reissued ...........

1,780

3,968

116

436

T otal..........

28,797,105

26,134,044

$3,623

$7,229

Total marketable ........ $141,493 (64.4)

co u n try

-0 1,368
1,686

-0 17.8
19.4

3,054 (18.7)

5,359 71.0
44,065 63.0
47,996 66.6
$123,461 (63.1)
$

289 31.2
3,544 32.9
3,204 28.4
7,037 (30.6)

* Includes Savings bonds, Armed Forces Leave bonds. Savings notes,
Special notes, International Monetary Fund Series, and Investment Series A
and B bonds.

Volume o f work

There was an 11.4 per cent increase in 1954 over
1953 in the volume o f outstanding marketable
issues handled at this Bank, as shown in the fol
lowing table. This work included handling the
Treasury financing operations shown in the pre
ceding table and servicing unmatured securities
issued by the Government and several of its agen
cies. The servicing work consisted o f making
denominational exchanges; exchanges of bearer
securities fo r registered, and registered for
bearer; transfers of ownership o f registered
securities; and telegraphic transfers.
1954

1953

Marketable issues:
Issued, pieces......................
Exchanged, pieces...............
Redeemed, pieces.................

658,058
2.119,765
920,271

671,699
1,896,580
751,605

Total...........................

3,698,094

3,319,884

Nonmarketable issues handled in 1954, as com
pared with 1953, showed a 10.2 per cent increase
in the number of pieces handled but a decrease of
49.9 per cent in the dollar volume; the decrease
resulted mainly from the discontinuance o f the
sales of Treasury Savings notes in the latter part

1953

U. S. Savings bonds:
Is s u e d ...................
R edeem ed.............
Reissued ...............
Armed Forces
Leave bonds:
Redeem ed.............

Treasury bills:
Issued on exch an ge..........
6,165 77.3
Issued for c a s h ................. 45,210 62.2
Redeemed for c a s h ...........52,431 72.2

Total nonmarketable . . $

1954

A m ou n t

(In millions)
1954
1953

1953
% of

co u n try

N L d T lC e t d u le IS S U 6 S

NonmarTcetable issues*
Issued on ex ch a n g e ........
Issued for c a s h .................$
Redeem ed...........................

P ie ce s h andled

% of

1954
7 , ,,

o f 1953. A comparison o f pieces handled and dol
lar volume is shown in the table that follow s:

Issue and redemption o f Savings bonds

The Treasury Department amended its regula
tions on Savings bonds, effective January 1, 1954,
to authorize the issuance o f Series E bonds in the
names o f trustees of employees savings plans. Six
employees savings plans established and main
tained by industrial organizations located within
the Second Federal Reserve District have quali
fied under this amendment, which enables our
Savings Bond Department to issue each month
several large (including the new $100,000) denomi
nation bonds in the names of trustees instead of
issuing separate bonds for the many individual
employees participating in the plans.
In June the Treasury transferred to the New
York Regional Office of the Register of the Treas
ury all o f the machine accounting operations pre
viously perform ed in the Savings Bond Depart
ment o f this Bank. This change made it possible to
reduce the number of employees assigned to the
Savings Bond Department by 38. Procedural re
visions of operations that continue to be per
form ed here accounted fo r a further reduction of
30 employees. The total reduction of 68 employ
ees in the Department, or almost 27 per cent, de
creased annual payroll liability by about $249,000.
Telegraphic transfers o f marketable securities

While the number o f telegraphic transfers of
securities in 1954 increased only 2 per cent over
9

1953, the piece volume fo r 1954 increased by more
than 13 per cent over 1953 and the dollar volume
by more than 42 per cent. Fees for the service,
which are collected by the sending Federal R e
serve Bank, amounted at this Bank to $171,900,
compared with $123,080 in 1953, and were of
course credited to the account of the Treasurer
o f the United States.
The volume o f transfers in 1954 and the com
parable figures fo r 1953 follow :
1954

Transfers (outgoing) ....................
Transfers (incoming) ....................
Pieces handled (outgoing) ............
Pieces handled (in co m in g )............
Par amount, in millions (outgoing)
Par amount, in millions (incoming)

50,347
54,217
455,245
327,625
$33,036
$32,416

1953

57,070
45,385
396,259
291,510
$23,349
$22,510

Treasury Tax and Loan Account

In 1954, the number o f entries in the Treasury
Tax and Loan Accounts increased over the previ
ous year (although the dollar volume of with
drawals decreased) as shown below:
1954
1953
Trans
Amount
Trans
Amount
actions (In m illions) actions (In m illions)

Funds:
Deposits ............. 222,770
Withdrawals . . .
46,124
Collateral security:
D ep osits.............
Withdrawals . . .
Statements rendered

6,830
6,018
17,296

$11,850
$12,019

203,855
57,305

$11,161
$13,642

$ 5,294
$ 5,153

5,783
5,432
16,171

$ 4,370
$ 5,365

International Bank for Reconstruction
and Development

On January 21, 1954, as fiscal agent for the
International Bank fo r Reconstruction and Devel
opment, the Bank issued $100 million o f 3^ per
cent Fifteen-Year Bonds due 1969, and on Septem
ber 20 issued $50 million o f 2 ^ per cent Five-Year
Bonds due 1959. The $50-million issue was pur
chased by investors in 23 countries outside the
United States. On February 24, $60 million in 3 x/ 2
per cent Twenty-One-Year Bonds o f 1971 in tem
porary form were exchanged fo r definitive bonds,
and on February 15, $10 million in 2 per cent
Serial Bonds o f 1950, due in 1954, were redeemed.
A comparison o f the volume of transactions
follow s:
Pieces handled

I s s u e d ...............................
Redeemed and exchanged
10

1954
82,334
82,518

1953
40,521
192,751

Amount
(In m illions)
1954
1953
$150
$ 75
$190
$340

Commodity Credit Corporation

Continuing a practice inaugurated in 1953 to
relieve pressure on the Federal debt limit, the
Commodity Credit Corporation offered its own
securities in the market instead of borrowing
directly from the Treasury. The issues con
sisted of $250 million o f 2% per cent transferable
Certificates o f Interest, dated February 2, 1954,
maturing August 2,1954, and $1,150 million of 1%
per cent transferable Certificates o f Interest,
dated November 12, 1954, maturing August 2,
1955. The Federal Reserve Bank o f Chicago, as
Fiscal Agent and Custodian, received the sub
scriptions through the facilities of the Reserve
Banks and made allotments and deliveries of the
certificates.
A summary o f these financing operations and
our part in them follow s:
Certificates
of
Interest
2 % ’s maturing
August 2, 1 9 5 4 ... .
1 % ’s maturing
August 2, 1 9 5 5 ... .

Entire country Handled by this Bank
Sub
Allot
Sub
Allot
ments
scribers
scribers ments
(Millions)

(Millions)

2,912

$ 357.2

112

$ 57.9

3,753

$1,169.4

1G9

$212.1

Reconstruction Finance Corporation

On March 8, 1954, the Reconstruction Finance
Corporation offered approximately $50 million in
3M per cent Certificates o f Interest, dated A p ril 5,
>
1954; the offering reflected a desire to obtain
private financing fo r some o f the credit extended
by the public agency. No maturity date was
specified, but from the fixed requirements o f indi
vidual loans, it was estimated that the liquidation
period would be 41 months or less. The Federal
Reserve Bank of Chicago, as Fiscal Agent, re
ceived subscriptions and made allotments through
the facilities of the Federal Reserve Banks and
made deliveries o f the certificates direct to the
subscribing banks. O f the 929 subscriptions re
ceived and $47,165,000 allotted, 75 were handled
by this Bank and were allotted $11,000,000.
Rubber Producing Facilities Disposal Commission

A t the request of the Secretary o f the Treasury
and in accordance with an agreement dated A pril
9, 1954, between the Rubber Producing Facilities
Disposal Commission and this Bank, we received
fo r safekeeping funds and securities that were
tendered in support o f proposals submitted to the
Commission fo r the purchase of Government
owned rubber-producing facilities. Tenders were
submitted pursuant to the provisions o f the

Rubber Producing Facilities Disposal Act o f 1953.
Under this program during 1954 we received
$3,346,150 in cash and $2,114,500 in securities; at
year-end we were holding $1,468,500 in cash and
$1,464,500 in securities. W e expect that this serv
ice will terminate when the Commission completes
its task.
Foreign Assets Control

This Bank acts as fiscal agent o f the Treasury
Department in administering the Foreign Assets
Control Regulations. These regulations, in effect
since December 17,1950, block assets in the United
States of, and prohibit trade and financial trans
actions with, Communist China and North K orea
and their nationals.
Our Foreign Assets Control Department con
sults with the public on Foreign Assets Control
matters, furnishes forms and instructions, and
acts under authorization from the Treasury De
partment in granting or denying applications for
licenses. During the year 6,700 applications for
licenses were filed with us, bringing the total to
27,400 filed with us since the effective date o f the
regulations.
Destruction o f unfit currency

During 1954 we verified and destroyed fo r the
Treasury approximately 243 million pieces, aggre
gating $358 million, o f unfit United States cur
rency (silver certificates and United States notes)
in the $1, $2, $5, and $10 denominations. Our
volume in 1953 (fo r our first six months o f this
operation, beginning July 1) was 118 million
pieces aggregating $178 million. Although the
1954 volume represents an increase o f 7 million
pieces over a computed annual volume of the pre
vious year, the staff assigned to this operation
was reduced from 18 to 13, with an annual salary
saving o f $18,100.
A special incinerator was completed and put in
operation during the year and operated satisfac
torily fo r a period of one month. A n inspection
revealed that it needed repair and replacement of
worn parts. The contractor agreed to make the
replacements and the necessary suggested repairs
and improvements. These have not as yet been
completed and we are now using a fire box o f a
boiler in our power plant fo r the destruction of
unfit currency.
CHECK COLLECTION

The number o f commercial checks processed for
collection by the Head Office during 1954 reached

a new peak fo r the twenty-first consecutive year.
Approxim ately 436 million items were received for
collection, compared with 422 million in 1953, the
previous all-time high. This represents an in
crease o f 3.3 per cent over the 1953 volume and is
almost double the volume handled 10 years ago.
The record-breaking volume was processed by an
average staff o f 762 (2.3 per cent smaller than the
previous y ea r’s staff), with less equipment, sub
stantially fewer hours o f overtime, and about a 26
per cent reduction in holdover from the previous
year. A decline in the rate of turnover o f person
nel and a more selective employment policy fur
ther increased the efficiency o f the staff. Courses
designed to improve visual perception, which were
continued during the year, helped to increase the
speed o f operators, improve accuracy and reduce
fatigue.
Another important contribution to increased
efficiency and lower costs was a change in the
working hours o f most o f the evening staff as
signed to check operations. Early in 1954 the
evening force was composed o f 43 full-time proof
machine operators and clerks, and 32 part-time
operators and trainees, a total o f 75 people. On
June 24, 1954, the part-time work was eliminated
and the total evening staff was reduced to 50 full
time employees. A t the same time the workweek
of 41 o f these employees was changed from
Monday through Friday to Tuesday through
Saturday. These changes have eliminated much
of the overtime expense previously incurred on
Saturdays and have otherwise contributed to effi
cient operation.
Checks Handled and Operating Personnel
at H ead Office— 1945-54
M illio n s

Av. number

Nassau County clearing arrangement

These Reports fo r 1952 and 1953 described the
organization and operation of the Nassau County
Clearing Bureau in considerable detail. The Clear
ing Bureau has now completed its first full year
li

o f normal operations with every indication that it
is a success. The Bureau processed approximately
14 million items during 1954, or an average of
56,000 items daily, the greater part o f which
would have passed through our hands, and in
creased our expenses, had the Bureau not been in
existence. Our contribution toward the cost o f op
erating the Bureau in 1954 amounted to $89,647,
or $6.57 per thousand items. During the year
seven Suffolk County banks with nine banking
offices joined the arrangement, and at the end of
the year 42 banks with 89 banking offices in
Nassau, Queens and Suffolk Counties were active
participants. The success o f this operation has
resulted in a number of inquiries from banks in
other localities regarding the possibility o f estab
lishing similar check clearing facilities in this and
in other Reserve Districts.
Consolidated check shipments

The volume o f checks forwarded by air trans
portation to other Federal Reserve Banks and
Branches, under the consolidated shipment pro
gram inaugurated in 1946, continued to increase.
During 1954, shipments o f our own cash letters
and those of the 31 participating banks located in
the New Y ork metropolitan area averaged ap
proximately 819,000 checks daily, an increase of
about 4 per cent over 1953.

remittances was reduced by approximately $6
million.
Check Routing Symbol program

W e continued our active support o f the Check
Routing Symbol program, which is sponsored by
The American Bankers Association and the
Federal Reserve System. A nationwide survey of
checks drawn on par-remitting banks, as of Decem
ber 1, 1954, indicated that 93 per cent of all such
checks bore the symbol in the approved location,
a gain fo r the year of 1 per cent. O f the checks
drawn on banks in the Second Federal Reserve
District, 97 per cent were found to conform.
Government checks

During 1954, we processed 57.5 million Treas
ury checks aggregating $20 billion, an increase of
6 per cent over the number handled in 1953. The
increased volume is attributable in large part to
an upward trend in the number o f Social Security
payments. Reflecting a continuation o f the Treas
ury Department’s program to have disbursing
officers convert from the use o f paper to card
checks where volume warrants, the number of
paper checks handled during the year decreased
700,000 to 4.2 million.
Postal money orders

Contract motor carrier service

During the year, check deliveries by contract
motor carriers, which are used daily by 308 bank
ing offices in 14 suburban counties, were extended
to Albany, Columbia, Greene, Orange, Schenec
tady and Ulster Counties in New Y ork State. As
in the case of nearby banks, the use o f motor car
riers has resulted in more prompt delivery o f our
cash letters to the upstate banks that use the
service, and o f their cash letters to their New
Y ork City correspondents, or to this Bank.
In A pril 1954, only 165 of the 295 banking offices
then using contract motor carriers were returning
unpaid items and sending remittances for our cash
letters to us by such carriers. To expedite the
processing of unpaid items and reduce debit float
on delayed remittances fo r our cash letters, we
suggested to the 130 banking offices which were
not sending unpaid items and remittances to us
by carrier that they do so. A s a result o f the adop
tion o f our suggestion by virtually all o f the bank
ing offices, our operations improved and our
average daily debit float arising out o f delayed
12

During the year we handled for the Post Office
Department 49.7 million postal money orders
aggregating $790 million, a decrease o f 5 per cent
in number from 1953. W e believe that the de
crease may be attributable to the growing use of
bank money orders, which are now extensively
advertised fo r sale to the public, generally at
lower prices than postal money orders. The
decline in volume, combined with a change in sort
ing procedures which simplified and expedited
operations, made possible a 15 per cent reduction
in costs from the 1953 level.

CASH OPERATIONS

The extent o f our cash operations during the
year, compared with 1953, is illustrated below;
all figures are in millions.
1954
Currency
Coin
Amount paid o u t .................
$7,045
$215
Amount received .................
$7,018
$219
Pieces counted .....................
1,098
1,573
Pieces wrapped ...................
—
271

1953
Currency
$7,166
$7,044
1,090
—

Coin
$210
$213
1,431
278

The number and amount of counterfeits detected
by our currency counters showed a decrease from
previous years, as revealed in the following table :
Counterfeit currency:
Pieces ...............................
Amount .............................

1954

1953

508
$8,909

1,136
$17,722

1952

1951

920
2,263
$15,057 $34,311

Eighty per cent o f the counterfeits detected dur
ing 1954 were of the $10 and $20 denominations.
On July 19, 1954, Section 16 o f the Federal Re
serve Act was amended to permit Federal Reserve
Banks to pay out fit notes issued by other Re
serve Banks, a practice theretofore prohibited
under penalty o f a tax; on the following day we
began operating under the new procedure. This
change has simplified our currency sorting opera
tions and has eliminated the second handling of fit
notes of other Federal Reserve Banks and their
return to the Bank o f issue. As a result, we esti
mate that operating costs will be reduced by
approximately $165,000 a year.
Currency Handled and Counting Personnel
at H ead Office— 1945-54
M illio n s
of p ieces

A v .n u m b e r
of personnel

In 1916 when the Federal Reserve Banks under
took the collection of checks drawn on parremitting nonmember banks, many remittances
from such banks were in the form o f currency and
coin. Most remittances by nonmember banks are
now made by drafts on their correspondents.
A fter careful review, we, along with other Federal
Reserve Banks, decided to discontinue the practice
o f absorbing shipping charges and o f assuming
certain risks of loss in connection with shipments
o f currency and coin by nonmember banks to us.
From August 1, 1954, the date we discontinued
our practice, to the year-end, savings to us in ship
ping charges approximated $12,000.
During the year we began construction of a new
storage vault on A level to provide more storage
space for coin. When completed in the early part
of 1955, this facility will largely eliminate the
daily operation of transporting coin to and from
the vaults on D and E levels, thus increasing the
efficiency o f coin operations and relieving the
sometimes crowded condition in the lower vaults.
Postal deposit program

Effective July 1, 1954, a Postal Deposit Section
was established in the Cash Department to receive
and verify deposits o f surplus funds made by post
masters in the Second Federal Reserve District.
These deposits consist of currency, coin, paid
money orders, redeemed savings stamp albums,
and Government and commercial checks.

Coin Handled and Counting Personnel
at H ead Office— 1945-54
M illions
of coins

Av. num ber
of personnel

2 4 0 0 ,--------------------------------------------------------------------------------------------------------------- ,6 0

2000

1200

1945

’4 6

*47

’4 8

*49

'5 0

'51

Postmasters had form erly deposited these funds
with certain commercial banks designated as de
positaries, but in the interest of economy the
Treasury Department requested the Federal Re
serve Banks to act as depositaries for this pur
pose. The Reserve Banks undertook the function
after pilot operations at the Reserve Banks of
Philadelphia, Richmond and Atlanta revealed that
the operation could be undertaken on a workable
basis at the Federal Reserve Banks.
During the first six months of operations ended
December 31, 1954, 174,487 deposits aggregating
approximately $478 million were received and
processed, a daily average of 1,396 deposits
amounting to $3,800,000. Currency or coin was
included in 100,276 of the deposits and amounted
to $36,000,000, or approximately 7 per cent of the
aggregate dollar amount received.
13

W IRE TRANSFERS OF FUNDS

During 1954, we made 354,029 telegraphic
transfers o f funds aggregating $370 billion. These
figures represent increases o f 9 and 16 per cent,
respectively, over the comparable figures for
1953. About 78 per cent of all transfers handled
by us were conveyed over the facsimile equip
ment linking us directly with 14 o f the large down
town New Y ork City banks. A continuous upward
trend in wire transfers o f funds over the past
ten years indicates the importance o f our facili
ties as a principal channel fo r the flow o f funds
to and from the New Y ork money market. In
contrast to the 1954 volume, the record fo r 1945
showed 166,389 transfers aggregating $77 billion.
Leased, wire system

Last y ea r’s Report mentioned that we were
contemplating a further improvement in our
leased wire system so that certain messages now
sent in code between Federal Reserve Banks
would be transmitted in clear language in such a
form that the receiving mechanism would prepare
all o f the necessary advices and entry tickets. The
new method of transmission has been successfully
operated on an experimental basis between the
Federal Reserve Banks o f New Y ork and Boston
during the past year. Conversion work is now in
progress fo r expanding the improved procedure
throughout the System and is expected to be com
pleted by January 1956. When completed, it will
result in improved service to member banks
through quicker completion o f transfers of funds
and o f Government securities, and in savings to
the System through elimination o f the coding and
decoding process and the subsequent typing of
advices and tickets.

LOANS AND CREDITS

The dollar volume o f advances made to member
banks decreased sharply during 1954, compared
with 1953, and fewer banks made use of our credit
facilities. The lower level o f advances resulted,
o f course, from the System ’s open market opera
tions, which were directed toward maintaining
ease in the money market, and from the cuts in
reserve requirements that became effective from
June 16 to August 1.
The following tabulation reflects the changes in
member bank borrowings in 1954, compared with
the previous year.
14

Central reserve city banks ac
commodated ...........................

1954

1953

Change

No. o f accommodations . . . .

115

536

— 78.5%

Amount (in millions) ...........

$4,307

$17,715

— 75.7%
— 21.1%

— 38.1%

All banks accom m odated........

302

383

No. o f accommodations . . . .

1,939

4,262

— 54.5%

Amount (in millions) ...........

$5,312

$21,723

— 75.5%

Average o f daily outstand
ings .................................

$27.5

$163.5

High (June 23) .................

$332.1

$747.4

—

Low (December 31) .........

$0.5

$2.6

—

— 83.2%

All borrowings by member banks in 1954 were
secured by U. S. Government obligations.
A s in the previous three years, we received no
applications for working capital loans under Sec
tion 13b o f the Federal Reserve Act, although we
continued to receive occasional inquiries about
this type of financing during the year. No loans
o f this type have been on our books since March
14, 1952.
Loan Guarantees for Defense Production
(Regulation V)

The activity in the Y-loan program gradually
declined during the year, as it had in 1953. W e
issued 23 new Y-loan guarantees in 1954, against
19 in 1953, while terminations were 56 and 47,
respectively. The decline in the number of out
standing Y-loan guarantee agreements is attrib
utable largely to the completion of defense con
tracts without any considerable offset by new
awards. The average percentage o f guaranty was
74 per cent as of December 31, 1954.
A s in 1953, considerable effort was spent servic
ing requests for extensions of maturities of out
standing loans and for amendment o f their terms
and conditions. During the year, on instructions
of the guaranteeing agency, we purchased two
loans that were in distress; one o f these was later
repaid. Four loans purchased in prior years be
cause of adverse changes in the financial condition
o f the borrower were repaid during 1954. A t the
year end we had four purchased V-loans out
standing in an amount of $2,266,690; the eventual
loss to the Government on these loans will prob
ably be around $2,000,000.
Since the inauguration o f the V-loan program,
we have collected and credited to the respective
guaranteeing agencies $8,789,950 in interest and
in guarantee and commitment fees, while our re
imbursed expenses have been $742,901.

table

The accompanying
V-loan statistics:

1954
Number Amount
(In millions)
New V-loan applications . . .
25
$ 75.0
Requests for increases in
$ 12.5
12
V -lo a n s ...............................
V-loan guarantee agreements
New agreem en ts...............
Amendments .....................
Term inations.....................
In effect at year-end . . . .
Balance outstanding at
y e a r-e n d .........................

significant

shows

1953
Number Amount
(In millions)
25
$ 50.7
17

$ 25.8

23
12
56
69

$ 65.2
$ 20.3
$155.1
$288.7

19
18
47
102

$ 33.8
$ 18.0
$122.9
$422.9

—

$192.5

—

$328.8

tion on punch cards. This change was made to
achieve greater speed in obtaining final figures,
greater usefulness of the data, and a compilation
in a form more readily useful for varied pur
poses. It makes the preparation of such analyses
as the operating ratios circular, for example, an
easier task. The cost of processing call reports
mechanically is approximately offset by the elimi
nation of manual processing costs in the Bank
Examinations Department and of overtime work
on the operating ratios circular in the Research
Department.
Bank capital

BANK SUPERVISION
Bank changes

During 1954 the total number of commercial
banks in this District declined from 802 to 778,
while the number of member banks declined from
696 to 678. The net declines resulted from the fol
lowing changes:

National banks
Absorbed by other national ba n k s........................
Absorbed by State member b a n k s........................
Absorbed by State nonmember b a n k s..................
Newly organized national b a n k ..........................

11
1
3
1

Risk assets of member banks continued to in
crease during 1954, as did the need fo r additional
capital funds. Most of these needed funds were
obtained from retained earnings. In a few cases,
however, the growth in risk assets outstripped the
capital increment from earnings, and banks sold
stock to improve their capital position. During
1954, 49 member banks in this District sold
new common stock fo r an aggregate o f $144.5
million. Most of the increase was accounted for
by the sale of a substantial amount of new com
mon stock by one New Y ork City bank.
Sales of Common Stock— 1954

State member banks
Absorbed by national b a n k s..................................
Absorbed by other State member b a n k s..............

(In millions)

4
2

Nonmember state banks
Absorbed by State member b a n k s........................
Absorbed by other State nonmember banks........
Absorbed by national b a n k s..................................
Admitted to m em bership......................................
Converted from industrial b a n k ..........................

1
1
3
2
1

In the ten-year period from 1945 through 1954,
the total number o f commercial banks in this Dis
trict declined 178, from 956 to 778; there were 189
mergers and absorptions. During the same period,
the number o f member banks declined 139, from
817 to 678. In spite o f the continued decline in
the number o f commercial banks in 1954, the estab
lishment o f new branches brought about an in
crease in the number of banking offices in 1954
from 1,878 to 1,924.
C all-report mechanization

Beginning in June 1954, the processing o f the
Reports o f Condition and the Reports of Earnings
and Dividends o f member banks was largely
mechanized by recording the reported informa

N o . o f banks

State members
National b a n k s..

P a r value

Sale price

13
36

$ 3.5
53.6

4.5
140.0

$57.1

$144.5

A number o f other banks in the District plan to
raise capital because o f internal growth, or expan
sion by the acquisition of other institutions.
RFC investment in member banks

A t the end of 1953, six member banks in this
District still had R F C capital invested in them.
In each case the retirable value of the R F C invest
ment was in excess of its par value, and in two
instances exceeded the bank’s net worth. Under
the terms of the R FC Liquidation Act, the
corporate existence of the R FC was terminated on
June 30,1954, and its remaining assets transferred
to the Secretary of the Treasury fo r ultimate dis
posal. Accordingly, every effort was made to
encourage these banks to eliminate the R FC in
vestment. Four of the six banks eliminated the
RFC investment during 1954 either by retirement
or by replacement with local capital. In one case,
the R FC accepted a compromise settlement involv
15

ing a discount o f about $3,100,000 from retirable
value in order to liquidate its investment imme
diately. The remaining two banks are continuing
their efforts to eliminate the R FC capital. W e un
derstand that one o f them, a national bank, now has
a plan to replace the R F C investment o f $901,000
with local capital. The other, a State member
bank with an R FC investment o f $14,090,000, is
negotiating with the Treasury Department for a
feasible settlement.
Trust department income and expense survey

During 1954, our Bank Examinations Depart
ment, in cooperation with the State banking asso
ciations o f New Y ork and New Jersey, conducted
a survey o f trust department income and expense.
Participation in the survey was open to all banks
operating trust departments in New York, New
Jersey, and Fairfield County in Connecticut. Par
ticipation, which was on a voluntary basis, was
generally satisfactory. Calculated on the basis of
trust department gross income, the survey encom
passed approximately 90 per cent of the fiduciary
business in the area covered.
The survey was undertaken to provide banks
with a basis for comparing the income and expense
o f their trust departments with average results
in various size groups. The results were also sum
marized by State to afford better comparison in
view o f the different rate structures used in New
Y ork and New Jersey. The survey was well re
ceived and has been placed on an annual basis.
Foreign branches*

During 1954 three member banks and one
so-called agreement corporation in the Second
Federal Reserve District filed applications for
the establishment o f six foreign branches. The
Board o f Governors approved three o f these ap
plications and disapproved three. A t the yearend, five member banks and four corporations, in
* Foreign branches may be established in the following ways:
(1 ) National and State member banks.— National and State
member banks having a capital and surplus o f $1,000,000 or more
may, under the provisions o f the Federal Reserve Act, apply to
the Board o f Governors o f the Federal Reserve System for permis
sion to establish branches in foreign countries.
(2 ) Agreement corporations.— Under the provisions o f Section
25 o f the Federal Reserve Act, national banks may invest in the
stock o f a corporation chartered under the laws o f the United
States or o f any State thereof and principally engaged in
international or foreign banking. Such corporations enter into an
agreement with the Board o f Governors under which they subject
themselves to the requirement that the B oard’s prior approval must
be obtained before opening a foreign branch.
(3 ) Edge A ct corporations.— Banking corporations organized
under Section 2 5 (a ) (Edge A ct) o f the Federal Reserve A ct are
permitted under paragraph 7 (b ) o f the same section to establish
branches in foreign countries upon obtaining approval o f the
Board o f Governors o f the Federal Reserve System.
16

this District, were operating 86 foreign branches,
as follow s:
F o re ig n
bra n ch es

2
3
2
2

National b a n k s ................................
State member b a n k s ......................
Edge Act corp ora tion s ..................
Agreement corporations ..............

75
7
2
2
86

Only two other Federal Reserve Districts re
ported foreign branches at the end of 1953. They
were the San Francisco District with one national
bank operating nine foreign branches, and Boston
with one national bank operating 15 foreign
branches.
The Edge A ct (Section 25(a) o f the Federal
Reserve A ct) was enacted in 1919 for the purpose
o f fostering this country’s foreign trade. Five
companies have been chartered under this law;
only two, The Chase Bank and Bank o f America,
are now in existence. In 1954 the Board o f Gov
ernors appointed a System committee to study the
foreign operations o f American banks with par
ticular reference to the functions that are appro
priate to Edge Act corporations. The committee’s
report is now being considered by the Board of
Governors. The assistant vice president o f our
Bank Supervision function was a member o f the
committee, and a member o f our examining staff
acted in an advisory capacity.
One o f the interesting developments in the activi
ties o f Edge Act companies is the recent trend
toward using them as a means of providing needed
capital to economically underdeveloped countries
through the medium of affiliated organizations
domiciled abroad. One Edge A ct corporation is
operating a company in Brazil, and it has been
recently authorized by the Board o f Governors
to participate in the organization of a similar com
pany to be form ed in Canada. Another Edge Act
corporation has invested in somewhat similar
enterprises in Germany and Mexico, and the Board
of Governors also recently approved an applica
tion from it to invest in another company to be
form ed in India.
A recent amendment to Regulation K (relating
to Edge Act corporations) resulted in the proposal
of a New Y ork City bank to form an Edge Act
corporation for the purpose o f supplying inter
mediate credit to finance American exporters.
W e think the Edge A ct type of corporation
offers promise o f valuable service to American
foreign trade and finance, and of assisting mate

rially in promoting the nation’s foreign economic
policy.
BANK RELATIONS
Bank visiting program

More than 2,700 visits were made during 1954
under our visiting program, which calls for mak
ing two visits each year to every commercial bank
in the District and one visit each year to savings
banks and out-of-town branches of member banks.
These visits are carefully planned and conducted
conferences with each member bank; they provide
an effective two-way means o f communication
that has taken many years to build.
To improve the effectiveness of this program,
we have placed increasing emphasis on developing
our special representatives’ understanding of the
factors influencing the economy and the money
market so that they may intelligently discuss with
each of our member bankers the System ’s func
tions and policies, as well as operating matters of
mutual interest. W e feel that our program has
contributed substantially to support for our basic
objectives o f increasing banker understanding of
Federal Reserve policies and operations, and our
awareness of banker reaction to them.
Technical assistance program

During 1954, our Technical Assistance Division
continued its program of assisting member banks
with their operating and audit problems. Nearly
400 surveys were made, including 215 in the field
of audit and control, 199 in loan operation and
credit files, and 83 in transit and bookkeeping.
Requests fo r these services, including revisits,
continue to be received, and the division began
1955 with a considerable, although reduced, back
log of requests. Member bankers continually
tell us how valuable these services have proved,
and we are convinced that they are contributing
materially to the soundness o f the banking system.
Group meeting program

In the fall o f 1953, as a continuation of a group
meeting program fo r senior officers started in
1950, a series o f meetings was begun for junior
officers o f member banks. These meetings, called
“ operation confabs,” are limited to one repre
sentative from each o f fifteen banks o f similar size.
These junior officers come to the Head Office at
their own banks’ expense and participate in a
day-long program, consisting o f a tour o f our op
erating departments during the morning, a lunch
eon in the officers ’ dining room, and an afternoon
meeting in the Exhibit Room on the first floor.
The latter meeting is devoted to a flannelboard

presentation o f ‘ ‘ The Place o f the Federal Reserve
System in a Dynamic Econom y,” a discussion of
factors affecting bank earnings, and a panel dis
cussion o f various phases o f bank operations
led by members of our Technical Assistance staff
and others. During 1954, 238 member bank officers
attended 17 o f these meetings.
PUBLIC INFORMATION

Although we have a department specifically
responsible fo r carrying out a program of de
veloping public understanding of the purposes
and functions o f this Bank and o f the Federal
Reserve System, we continue to believe that good
public relations require the efforts o f every staff
member. W e have tried to see that each personal
contact and the answer to each telephone call or
letter helps to strengthen respect fo r and confi
dence in the Bank.
The following statistics, however, concern only
those activities whose primary aim is the improve
ment o f public understanding.
Some Public Information Statistics
1954

Film show ings............
Film audiences............ . . . .
Guided t o u r s .............. . . . .
Sp eech es......................
Speech audiences........ . . . .
V is ito r s ........................ . . . .

235
24,149!
1,133
186
15,200
7,089

1953

213
19,000
1,065
145
10,500
7,210

1 D oes n o t in clu d e film loaned fo r w eek o f S eptem ber 13,
1954 t o te le v isio n sta tio n W N B F -T V , B in gh am ton, N . Y .,
w h ich reported a p otential view in g a ud ience o f 3 53,496. A s
fa r as w e know , th is was the first tim e a m o tio n p ictu re on
th e F ederal R eserv e had been giv e n a te le v isio n sh o w in g in
the Second D istrict.

Publications Distributed
Booklets
A D ay’s W o r k ............................
Bank R eserv es............................
Coins and C u rren cy ....................
Monetary and Banking Legisla
tion in the Dominican Republic
Money Market E ssays................
Treasury and the Money Market
Periodicals
Annual R e p o r t............................
Monthly R ev ie w ..........................
National Summary of
Business Conditions................
Trend of B usiness......................
Weekly News R ev iew ..................

1954

42,456
13,065
27,254

1953

70,000
4,0002
181,950

45
7,312
15,3334

1,0273
11,500

21,723
22,537s

20,256
22,250

23,0526
2 ,6 6 8 7
2 1 ,2 0 0 8

22,860
2,400
18,000

2 O u t o f p rin t d u rin g m o st o f the year. a revised ed ition b eing
published in N ovem b er 1953.
3 F irs t p rin tin g , A u g u s t 1953.
4 F ir s t p rin tin g . M ay 1954, o f 15,000 c o p ie s ; secon d p rin tin g , N o v e m
ber 1954, 10,000 cop ies.
5 A v e ra g e m on th ly distrib u tion .
8 A v e ra g e m o n th ly d istrib u tion to 353 m em b er banks.
7 A v e ra g e m o n th ly d istrib u tio n to 452 m em ber ban ks’ se n io r officers.
8 A v e ra g e d istrib u tio n each w eek, w ith the cop ies g o in g t o 572 m em
ber banks in ou r D is tr ic t fo r re d istrib u tio n t o s elected cu stom ers.
17

New publications

W e added two new publications during the year
to the list of materials available from the Bank
without charge. The Treasury and the Money
Market appeared in May, the third in our series of
booklets prepared from Monthly Review articles.
The other new publication, Selected Economic
Indicators , appeared late in December. This
booklet of articles, also collected from the Monthly
Review, provides in convenient form a descrip
tion of the nature and significance of statistical
series that reflect economic conditions in the
United States.
Speeches and addresses

W e continued, during the year, to provide
speakers fo r appropriate occasions, such as for
a series o f meetings with Second District bankers
held in the Bank, fo r meetings o f county bankers
associations and clearing house groups, and for
such nonbank organizations as service clubs, pro
fessional societies, schools, colleges, and teachers
conferences. W e also continued to use our
flannelboard lecture presentation o f the eco
nomic role of money, credit, banking, and the
Federal Reserve System (it accounted for half
the speeches made during the year). B y y ea r’s
end we had developed two new flannelboard pres
entations, one dealing with the money market and
the other with some functions and fallacies of
bank reserves, and we were moving ahead to train
staff members in various departments in the use
of these demonstration materials.
Relations with schools and colleges

Our efforts to develop a strong program of
relations with schools and colleges, especially
with high school teachers o f social studies and
college teachers o f money and banking, were in
creased in 1954. A s a new activity, we began (in
November) mailing to teachers o f money and
banking in the Second Federal Reserve District
copies of the full texts o f speeches made by offi
cials o f the Federal Reserve System on credit
developments and monetary policy. This was
done in an effort to overcome the inadequacy of
newspaper accounts o f these speeches. Many
teachers have told us that they are happy to have
the texts and look forw ard to receiving others in
the future.
Last yea r’s Report noted our activities as liai
son agent between the Joint Council on Economic

Education and a special subcommittee o f the Sys
tem Committee on Education and Publications in
connection with the cooperative Joint CouncilSystem project o f developing an “ expert state
ment” on the role o f money in our economy. The
result of these activities is a manuscript titled
Money—Master or Servant f used last summer in
workshops held for secondary school teachers both
in and outside the District. A t y ea r’s end we had
contracted, at the request o f the System Committee
on Education and Publications, to publish the
statement in booklet form, and to give 5,000 copies
to the Joint Council on Economic Education and
the National Council fo r the Social Studies to be
bound into their jointly sponsored volume, A

Teacher’s Guide to Money and Banking.
Our work in the area o f school relations in 1954
was highlighted by the second three-day seminar
on central banking held in New Y ork City in March
for a group of 25 teachers o f money and banking
selected from Second District colleges and univer
sities. The purpose o f the seminar again was to
provide teachers attending with accurate and upto-date information on central banking operations
and policies. B y helping them to acquire such in
formation, we hope to facilitate the dissemination
o f accurate and complete knowledge about the pur
poses and functions o f the Federal Reserve Sys
tem among groups of college students, thus achiev
ing a “ multiplier effect” in promoting the objec
tives o f the Bank’s public information program.
In cooperation with the Board of Governors, we
adopted a new policy for handling their free dis
tribution lists fo r the Federal Reserve Bulletin.
Heretofore, the Board maintained and serviced a
list of college libraries, teachers o f money and
banking, and other educators and institutions who
were receiving complimentary copies o f the Bulle
tin. B y agreement with the Board, we began
servicing the list in 1954. B y doing so, we hope to
direct the attention o f interested educators and
institutions to this Bank as a ready source of in
formation and publications about the System, and
to make it possible for them to confirm their desire
to continue receiving System publications with
only one notice to us, rather than with separate
notifications to the Board and this Bank.
Guided tours

A s in the past, we have placed emphasis on
making tours o f the Bank appealing to high school
and college groups. In this connection we have,

wherever possible, arranged discussion sessions
fo r touring groups on Federal Reserve opera
tions and policy, often using our “ flannelboards ’ ’
as a visual aid fo r more effective presentation.
A classification o f visitors for 1953 and 1954 is
given below :
1954

1953

N et Change

3,330
1,257
917
1,246
339

2,277
1,751
906
1,581
695

+1,053
— 494
+
1 1
— 335
— 356

7,089

High S ch o o ls.......... . .
Colleges .................. . . .
Banks ......................
O th ers...................... . .
FRB employees

7,210

—

1 2 1

Our Exhibit Room (Room 145) continued to be
a popular meeting place. It was opened in May
1952 to provide an appropriate place to hold dis
cussion sessions fo r visiting groups, and fo r use
by groups within the Bank fo r informal meetings
and conferences. The table below shows its fre
quency o f use by departments in 1954:
U sed b y

Bank R elations..............................................
Foreign D epartm ent....................................
Research D epartm ent...................................
Public Information D epartm ent................
Personnel Departm ent..................................
Other ...............................................................

the Bank of France, though not quite so large in
absolute terms, was relatively more impressive.
The increase o f $356 million during the year more
than doubled French holdings and brought the
total to $659 million at year-end. There were still
other notable increases in gold and dollar holdings
of foreign countries: $95 million fo r Venezuela,
$70 million fo r Portugal, $65 million fo r the
Netherlands and $59 million fo r Switzerland. On
the other hand, there were declines of $131 million
fo r Thailand, $129 million fo r the United K ing
dom, $99 million fo r Mexico and $80 million for
Cuba. The accompanying chart shows the move
ments since 1947 o f the six largest foreign
accounts.
G old and D ollar A ssets at Y ear-E nds
in Principal F oreign A ccou n ts with this Bank
M i l li o n s
of d o lla r *

Number

20
8
6

93
21
18

T o t a l................................................ 168
FOREIGN OPERATIONS
Assets held for foreign and international account

Gold and dollar assets held at this Bank for
foreign account rose during the first ten months
o f 1954 at about the rate that had marked 1952
and 1953, and then turned down slightly. A record
peak o f $9.2 billion was reached in October 1954,
a gain of $600 million from December 1953. Gold
and dollar assets o f the International Monetary
Fund and the International Bank for Reconstruc
tion and Development, which are not included in
the above totals, also gained substantially. They
rose by $310 million during the year to a new high
o f $3.7 billion.
Assets held fo r the account of the central bank
o f Western Germany (Bank deutscher Laender),
which had risen $458 million in 1953, gained the
even more impressive total o f $470 million in 1954
and brought the account at year-end to $1,246 mil
lion, the largest on our books. The bank’s hold
ings of United States Government securities in
creased by $236 million and earmarked gold by
$243 million. The increase in the assets held for

Loans to central banks

A s in the recent past, there were few loans on
gold in 1954, but their dollar amount was sub
stantial. The Central Bank o f the Republic of
Turkey, which had been an almost continuous user
o f the facility fo r several years, was a borrower
again in 1954. Toward the end of the year, that
bank obtained two new longer term gold loans of
$20 million and $35 million from the Bank of
America, San Francisco, and the Guaranty Trust
Company, respectively, and paid off its indebted
ness o f $25 million at this Bank.
The Bank fo r International Settlements made
consistent use during the year o f the $25 million
standby arrangement, which was originally set
up in October 1953 and regularly renewed since.
There were 12 drawings on the credit during the
19

year, and on one occasion the full $25 million was
used. The standby has enabled the B.I.S. to
finance European Payments Union settlements
without liquidating its short term assets.
In July, the Bank o f Brazil, as fiscal agent of
the Brazilian Government, borrowed $80 million
to assist it in meeting a Brazilian balance o f pay
ments crisis. In September the Bank of Brazil
borrowed an additional $80 million and on October
22 the entire $160 million was consolidated into a
single loan to be amortized by 12 equal monthly
repayments. In order to meet the repayment
schedule the Bank o f Brazil arranged fo r a $200
million five-year gold loan from a group of 19
United States commercial banks. Under this loan,
in addition to $40 million of new money, Brazil can

draw each month as its payments on the Federal
Reserve loan fall due. Two such repayments were
made before the end o f the year.
The Central Reserve Bank o f E l Salvador bor
rowed $2 million fo r a short time in the latter part
o f the year under a loan arrangement that pro
vided for maximum drawings o f $4 million.
In 1954 the trend o f the Bank’s policy o f making
loans against gold fo r short periods was toward
greater flexibility. The Brazilian loan is an exam
ple of the effort made to suit the terms of loans to
the special needs of borrowers.
Gold movements

Compared with purchases o f gold from the
United States Treasury by foreign accounts of

Total Assets Held at
Federal Reserve Bank of New York
for Foreign and International Accounts
(In m illions)

End of
1953

Foreign Accounts
Earmarked gold ..................................................
Deposits ................................................................
U. S. Government secu rities..............................
Miscellaneous securities, commercial paper,
and bankers accep ta n ces.............................. .
Total— Foreign Accounts ........................ .

International Accounts
(International Monetary Fund & Inter
national Bank fo r Reconstruction and
Development)
Earmarked gold ..................................................
Deposits .................................................................
U. S. Government secu rities..............................
Miscellaneous securities ....................................
Total— International Accounts ................
G rand T

o ta l

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

End of
1954

Net Change
End of 1953 to
End of 1954

$ 5,448 (a)
423
2,586

$ 5,625(b)
490
2,908

+177
+ 67
+322

104(c)

104(d)

—

$ 8,561

$ 9,127

+566

$ 1,036
50
1,760 (e)
563(f)

$ 1,183
41
1,989(e)
506(g)

+147
— 9
+229
— 57

$ 3,409
$11,970

$ 3,719
$12,846

+ 31 0
+876

(a ) Includes $174.3 million held as collateral to loans made by domestic commercial banks to Bolivia, Spain, Turkey and
Venezuela and $15.3 million held as collateral to loans to Turkey by Federal Reserve Banks.
( b ) Includes $225.6 million held as collateral to loans made by domestic commercial banks to Brazil, Guatemala, Spain
and Turkey and $136.1 million held as collateral to loans to Brazil by Federal Reserve Banks.
(c ) Does not include bonds having face value o f 7.9 million Swiss francs (or a U. S. dollar equivalent o f $1.8 million).
(d ) Does not include bonds having face value o f 3.0 million Swiss francs (or a U. S. dollar equivalent o f $.7 million).
(e ) Includes noninterest-bearing nonnegotiable demand notes as follows: 1953, $1.3 billion; 1954, $1.5 billion.
( f ) Does not include bonds having face value o f 2.0 million Swiss francs (or a U. S. dollar equivalent o f $.5 million),
65 million Belgian francs ($1.3 million), 12.5 million Canadian dollars ($12.8 million), and .6 million pounds sterling
($1.7 million).
(g ) Does not include bonds having face value o f 51 million Belgian francs (or a U. S. dollar equivalent o f $1 million),
12.5 million Canadian dollars ($12.9 million), and .6 million pounds sterling ($1.7 million).
20

$1,164 million net in 1953, the net acquisition of
$316 million in 1954 indicates a tapering off in the
interest in gold for reserve purposes. Nine fo r
eign accounts purchased $422 million from the
Treasury; by far the largest buyer was Western
Germany, which purchased $226 m illion; Portugal
bought $55 m illion; the United Kingdom $50 mil
lion; and Venezuela $30 million. Three countries
sold $106 million of gold to the T reasury; $80 mil
lion of this represented two sales by Mexico. Gold
imported for earmark amounted to $13 million,
and exports also totaled $13 million.
Transfers o f gold in our vaults involved 53
separate transactions and a dollar amount of
about $393 m illion; $96 million o f this total repre
sented direct transfers between foreign accounts
on our books, $65 million was transferred by the
Bank fo r International Settlements to other ac
counts on our books, and $51 million was trans
ferred to the Bank for International Settlements
from other accounts. The International Monetary
Fund continued its gold operations, arranging
“ match o ffs ” between central bank buyers and
sellers; such transactions involved $33 million. As
in the past the Fund charged the buyer and seller
each y3 2 of one per cent of the value o f the gold
handled, compared with the Treasury’s charge of
1 4 o f one per cent for a purchase or sale.
United States currency and coin

The Foreign and the Cash and Collections func
tions handled receipts from foreign correspond
ents o f $19.4 million in United States currency and
$1.8 million in coin. They also processed the ex
portation of $9.6 million o f currency. The central
bank of Greece shipped us $8 million in bills;
France, $6.7 million; and Cuba $3.1 million, while
we arranged for the shipment o f $6.9 million of
currency to Cuba from the Jacksonville Branch
o f the Atlanta Reserve Bank.
New foreign account

The Bank of K orea opened an account with us,
as principal, in February. Authorities to operate
the account were certified by the Secretary of
State pursuant to section 25(b) of the Federal
Reserve Act. Later, in November, the gold that
this Bank, as fiscal agent of the United States, had
been holding in custody fo r K orea since 1950, was,
after melting and refining by the Assay Office,
transferred to the new account; the account main
tained as fiscal agent was then closed.

FOREIGN RELATIONS
Foreign travel

Robert G. Rouse, vice president in charge of
Open Market Operations, visited the Bank of
Canada and other financial institutions in the
Dominion during a week in April, to observe the
operation of the Canadian money and securities
markets and to study the influences guiding the
Canadian and provincial Governments in deter
mining whether or not to borrow in the American
market. Robert V. Roosa, assistant vice presi
dent, then assigned to Research and Statistical,
joined Mr. Rouse in that study and remained in
Canada another week to examine the impact of
Canadian and provincial governmental borrow
ings on the flow o f funds and the rate o f exchange
between Canada and the States. Beginning in
June, L. W erner Knoke, then vice president,
spent two weeks in London studying the proce
dures and operations o f the London gold m arket;
Mr. Knoke was accompanied by Alan Holmes, an
economist in our Research Department.
Foreign missions

Harold A. Bilby, vice president, assigned to
Personnel, in response to an invitation by Philip
Young, Chairman o f the Civil Service Commis
sion, and a form er director o f the Bank, served for
three weeks on an advisory committee to the Com
mission to study, and make recommendations re
garding, the cost o f living allowances and post
differentials fo r certain Federal employees in the
Territories o f the United States. The committee
met in Washington from time to time and visited
Puerto Rico and the Virgin Islands. F or about
two months beginning in September, Arthur I.
Bloomfield, senior economist, at the invitation o f
the Foreign Operations Administration, served on
an F O A mission to Indochina to assist in setting
up independent currencies and central banking
arrangements fo r the states o f Vietnam, Cam
bodia, and Laos. While in the Far East, Mr.
Bloomfield served on the United States Delegation
to the meeting o f the United Nations Economic
Commission for Asia and the Far East. John F.
Pierce, now a chief in our Bank Examinations
Department, returned to the Bank in June after
spending more than two years in Ceylon advising
the Central Bank in that country on the problems
o f commercial bank examination and supervision.
W arren D. McClam, an economist in the Research
Department, left the Bank at the end o f January
to work fo r about a year in the Monetary and
21

Econom ic Department o f the Bank fo r Interna
tional Settlements in Switzerland.

Session of the Center of Latin American Mone
tary Studies.— In June, July, and August, John J.
Clarke, assistant general counsel; George Garvy,
senior econom ist; and Horace L. Sanford, assist
ant vice president assigned to the Foreign func
tion, lectured fo r periods of two to three weeks
at the second annual session o f the Center of
Latin American Monetary Studies in Mexico City.
Mr. Clarke spoke on the legal aspects of the
check collection system o f the United States, Mr.
Garvy discussed recent developments in United
States monetary policy and the functions o f the
research department o f a central bank, and Mr.
Sanford lectured on the subject o f correspondent
relations between central banks. The sessions
were attended by research and operating person
nel from most o f the Latin American central
banks.
Meeting o f Technicians of Central Banks
o f the American Continent

W ith the Board of Governors and this Bank
acting as hosts, the fourth meeting o f the Techni
cians of the Central Banks o f the American Con
tinent, comprising more than 100 delegates from
17 Latin American republics and Canada and the
United States, the International Monetary Fund,
and the International Bank, was held in Washinging during the week o f May 3 and in New York
during the week o f May 10. The purpose o f the
meeting, like that o f previous meetings held in
Mexico, Chile and Cuba, was to engage in objective
study and discussion o f current monetary and
economic problems, as well as to consider central
bank problems o f an operating and technical
nature.
Staff Group on Foreign Interests

The Staff Group on Foreign Interests, which
consists o f representatives o f the foreign, legal,
and research staffs o f this Bank and o f the Board
o f Governors, held four meetings during the year
to discuss foreign and international policy issues
o f interest to the Federal Reserve System. The
group continuously reviewed developments relat
ing to international economic and financial poli
cies, with special reference to currency converti
bility and stand-by credit arrangements. A s in
earlier years, it gave particular consideration to
various aspects o f United States and International
Monetary Fund policies with regard to gold, and
22

reviewed Federal Reserve gold loan policies. It
discussed a plan under which the earmarking of
specific bars fo r the account o f foreign corre
spondents would be discontinued and a gold bar
pool established at the New Y ork Bank; the pool
plan, however, was found to be impracticable at
this time. W e therefore began to erect more com
partments in our vault to increase our capacity
for storing gold under present procedures. The
Group recommended a reconsideration o f the 1947
Treasury-Federal Reserve joint statement on the
financing by American banks and business enter
prises of international gold transactions at pre
mium prices; an exchange o f letters between the
Chairman o f the Board of Governors and the
Secretary o f the Treasury made a revised policy
effective, so that such transactions are no longer
discouraged. Another subject discussed was the
action taken by the International Monetary Fund
to widen the permissible margin on gold trans
actions by members from % of 1 per cent to
1 per cent.
The Group discussed the arrangements fo r the
fourth meeting of Technicians of Central Banks of
the American Continent, which was held in May in
Washington and New York, and after the meeting
it concerned itself with the remaining task o f com
piling and distributing to the participating insti
tutions a record o f the proceedings. A s in the
past, the Group assisted in the staffing o f missions
requested by foreign central banks and govern
ments, and by United States Government and
international agencies.
Foreign visitors

Again, as in recent years, we were visited by a
large number o f official representatives o f foreign
central banks and governm ents: the record o f 140
visits in 1953 only slightly exceeded the 132 o f last
year. In all, 41 foreign countries sent central bank
officers and two sent government officials; the
bankers included 33 chief executives. The largest
number o f visitors from a single country (25)
came, as usual, from the United Kingdom, eight
came from Germany, and five each from Australia,
France, Guatemala, and the Philippines. Besides
an official o f the Bank of France, who remained
with us throughout the year, there were staff mem
bers from other central banks staying for periods
o f a week or longer in order to observe our opera
tions and methods and those o f commercial banks.
Am ong these persons, fo r whom we provided
offices, were members of the staffs o f the central
banks o f Burma, Canada, China, Iran, Korea,

Mexico, New Zealand, Pakistan, Philippines, Thai
land, and Turkey; also government representa
tives from Saudi Arabia and Syria.
RESEARCH

Our research staff continued to focus much of
its work on various questions that emerged in the
course o f formulating and executing Federal Re
serve credit policies in a period o f readjustment.
A t the same time, the staff was called upon to pre
pare numerous studies o f problems in the inter
national financial field, particularly the problem
o f establishing a wider area of convertibility be
tween m ajor currencies.
In an effort to broaden the background o f the
members of our research staff, transfers o f econ
omists between divisions have been encouraged
whenever practicable; in 1954 four economists o f
the Foreign Research and Balance o f Payments
Divisions filled vacancies in the Domestic Research
Division, and there were a number o f other shifts
o f personnel among these divisions. One senior
staff member was appointed a special assistant
in the Research Department late in the year,
thereby freeing him from supervisory responsi
bilities and enabling him to devote his full atten
tion to work related to open market operations
and System policy problems. Finally, steps were
taken to consolidate the entire responsibility for
the collection and publication of basic statistical
data related to Second District financial and trade
developments within the Financial and Trade
Statistics Division, and of those related to inter
national finance within the Balance o f Payments
Division.
Domestic studies and publications

Several officers and senior staff members of the
function continued to participate in informal dis
cussions with the President o f the Bank concern
ing current credit policies. Preparation for these
discussions required many detailed analyses,
memoranda, and projections dealing with eco
nomic conditions, member bank reserve positions,
Treasury operations, and changes in the volume of
bank credit, and provided the principal focus for
our research work on the national scene. As a fur
ther aid to the officers responsible fo r the dayto-day operations of the System Open Market
Account, efforts were made to improve the regular
semi weekly projections o f factors affecting mem
ber bank reserves. In examining special problems
arising out o f the implementation o f credit policy

during the year, attention was given to the uneven
distribution of reserves at certain periods between
the central money markets and banks elsewhere in
the country. Am ong the more important studies
concerned with longer-range problems o f credit
policy were memoranda dealing with System com
mittee proposals fo r changes in the administration
o f the discount operations of the System and for
possible changes in methods o f regulating the ex
tension o f consumer credit, and with various pos
sible changes in member bank reserve require
ments.
A considerable amount o f research effort was
devoted to questions raised by the Flanders Sub
committee o f the Joint Congressional Committee
on the Economic Report concerning recent mone
tary and debt-management policies. Members of
our research staff participated with members of
the B oard ’s staff in a series o f talks with repre
sentatives o f banks and life insurance companies
designed to elicit information regarding the reac
tions of institutional investors to the successive
phases o f credit policy during the period since the
Treasury-Federal Reserve “ accord” in 1951.
In developing the essential background material
for decisions regarding credit policy, the cross
currents of business activity were given careful
scrutiny as they emerged during the year. Supple
menting the usual analyses o f significant trends in
the economy that regularly appear in the Business
and Financial Summary, in the Monthly Review,
or in internal memoranda and reports, were more
detailed studies devoted to specific aspects o f the
business situation, such as business profits, the
stock market, and the similarities and differences
between the recessionary tendencies evident in
1949 and in 1953-54. On a District basis, more
comprehensive tabulations o f data and files of
source materials were maintained in order to pro
vide a firmer basis fo r our current analyses of
business conditions in this area, and especially to
aid in the preparation o f an expanded quarterly
report fo r the Second District member of the
Federal A dvisory Council.
Our program o f improving the coverage, relia
bility, and usefulness of various statistical series
was continued. The series on velocity o f demand
deposits was thoroughly revised, and two new
velocity series were added. The commercial paper
data that the Bank has published monthly since
1919 were revised and enlarged to include the vol
ume o f directly-placed finance company paper out
standing. A m ajor revision o f the Bank’s monthly
23

indexes o f salaries and wages was undertaken and
was near completion at the year-end. A simplified
but more reliable method o f obtaining annual data
on the ownership o f demand deposits in the Dis
trict was used in early 1954. The results were
tested for statistical adequacy later in the year,
and some further improvements will be made in
1955.
A s usual, part o f our work in analyzing the
domestic economic scene has been carried forward
in conjunction with System-wide projects. In this
connection, several extensive surveys of real estate
finance and consumer credit terms in the District
were undertaken, and local businessmen were
interviewed regarding their inventory and orders
positions. On a more regular basis, we continued
to be represented at the meetings o f the various
System committees concerned with real estate
credit, reserve requirements, consumer credit, in
terregional flow o f funds, current business devel
opments, agriculture, and current reporting series.
F or the last named committee, staff members as
sumed responsibility for preparing “ handbooks”
of procedures fo r the “ weekly reporting member
bank” series and the “ commercial and industrial
loans by type o f industry” series. One o f our
senior economists served as chairman of the Sys
tem Committee on Real Estate Credit and, as a
member o f the ad hoc Committee on Reserve Re
quirements, prepared a memorandum on the role
of reserve requirements.
Some of the more important o f the special
studies prepared during 1954 w ere:
Changing Patterns o f Income Distribution
Effects on the Securities Markets o f the Proposed
Changes in the Taxation of Dividends
Profits in 1954
Levels and Distribution of Reserves, June 16 to
September 15, 1954
The Business Contractions of 1948-49 and 1953-54
Changes in the Distribution o f Interbank Demand
Deposits, 1928-1953
Earnings and Expenses o f the Second District Member
Banks in 1953
Foreign and international studies and publications

In the foreign and international field, our re
search staff continued to devote most o f its efforts
to working on the study of monetary conditions,
policies, and techniques in foreign countries and
on the international financial policies o f the United
24

States, with special reference to foreign opera
tions o f this Bank. Comprehensive studies were
made of international gold and dollar movements,
the question of the adequacy o f foreign gold and
dollar reserves, the prospects and conditions for
the achievement o f fuller convertibility of curren
cies and for the relaxation of restrictions on inter
national trade, and the balance of payments of the
principal foreign countries and areas. A m ajor
research project completed last year dealt with
the long-term prospects fo r increases in United
States imports, and the implications o f the pro
jected increases fo r the development o f world
trade.
In reviewing monetary developments abroad,
special emphasis was put on changes in central
and commercial bank legislation and in foreign
monetary policies; such related topics as budget
ary and debt-management problems and policies,
public and private nonbank financial institutions,
credit control instruments, and developments in
the money and capital markets were also explored.
An effort was made to appraise the performance,
the existing statutes, and the financial traditions
and institutional features o f foreign banking
systems.
A t the fourth meeting of Technicians of Central
Banks of the American Continent in Washington
and New Y ork last May, members o f the staff read
papers, participated in the discussions, and sum
marized the findings o f the conference.
During the early part of 1954, we completed
a detailed study of the Treasury Department’s
foreign exchange forms, with a view toward reduc
ing the work required by banks and brokers in
reporting capital movements statistics to the Re
serve Banks. A s a result o f this study, we recom
mended elimination of two form s and considerable
changes in others. In response to our recommen
dations, the Treasury Department amended its
regulations in March to raise the exemption level
of reportable foreign balances, to eliminate en
tirely the two reports, and to put one o f the re
ports on a semiannual instead o f a monthly basis.
Titles o f some o f the more significant studies on
international and foreign topics were as follow s:
Experiences Under Recent Central Bank Laws in
Underdeveloped Countries
The Sterling A rea’s Gold and Dollar Reserves and
Sterling Convertibility
GATT and Convertibility

European Trade and Payments in the Absence o f the
EPU as Now Constituted
Some Comments on Forward Exchange Rates and
Interest Rate Differentials
The Secular Increase in United States Imports and
W orld Trade
The United States Balance o f Payments and
International Equilibrium
Reopening o f the London Gold Market
Belgian Progress Toward Convertibility
The Blocked Mark Problem
The Reconstruction of Japan’s Foreign Trade
Recent Balance of Payments Developments in Latin
America
Recent Monetary Measures in the Netherlands

Altogether more than 400 memoranda and
studies on international and foreign topics were
prepared during the year, o f which approximately
one half were submitted in response to specific re
quests by officers o f the Bank. An article on an
international or a foreign topic appeared in each
issue of the Monthly Review.
Library

Evidence o f the value of the Library to the offi
cers and staff o f the Bank was the average
monthly circulation o f more than 1,100 books and
7.500 magazines. In addition, some 2,200 news
paper clippings were circulated each month. The
Library received an average o f 1,000 requests per
month for information, o f which more than 70 per
cent originated inside the Bank. Members o f the
Bank’s staff also made wide use o f materials
within the Library directly without reference aid.
The rate o f acquisition o f new materials fo r the
Library has continued to climb, with more than
3.500 books, pamphlets, and new periodical titles
being added during 1954. The Library continued
to issue the daily Newspaper Review (2,250 copies)
and the biweekly Library News (350 copies) to
restricted mailing lists.

(815 in response to advertised openings), com
pared with 6,842 in 1953 (o f whom 2,645 were
answering ads). W e continued to stress careful
selection in hiring, attempting to find the best
qualified among the applicants.
Salary administration

Our continuing surveys o f salaries paid in this
community by progressive employers with whom
we exchange salary information indicated that
during 1954 the Bank had maintained levels of
paid salaries and salary grade midpoints in good
relationship with the salaries paid by similar em
ployers fo r clerical work. It became increasingly
apparent during 1954 however that, while our
salaries paid fo r nonclerical jobs compared favor
ably with the average in the community, the mid
points of our salary grade structure were lagging
behind the community trend to a substantial de
gree, thereby producing an undesirable bunching
o f nonclerical salaries in the upper areas of the
salary grades affected. W e therefore proposed
the creation o f a separate nonclerical salary grade
structure, which was approved by the Board of
Governors, effective December 23, 1954. The new
structure consists o f eleven salary grades, as com
pared with the nine form er grades; it also provides
narrower spreads between grade minimum and
maximum salaries in the lower grades in keeping
with the pattern characteristic o f the market. The
development o f the new nonclerical salary struc
ture creates a more realistic relationship to actual
salaries paid and will permit greater flexibility in
the administration o f salaries on the basis of
meritorious performance.

PERSONNEL

Because our salaries were generally in good
relationship to community rates o f pay, we were
able to grant year-end salary increases chiefly to
reward meritorious performance. Our year-end
increases added 3.35 per cent to our annual salary
liability, compared with 4.10 per cent a year ago,
when we increased salaries in the upper grades
to correct inequities that had developed.

A lowering o f the rate o f turnover o f personnel,
a related increase in productivity, and a small rise
in the volume of the Bank’s work (offset in part
by a slight decline in fiscal agency operations),
combined to reduce our need to seek new em
ployees. Because there were more “ unsolicited”
applicants for jobs than in the previous year, we
were required to advertise job openings much less
frequently. In all, we had 5,762 applicants in 1954

The continuing review o f job descriptions estab
lished under our classification program resulted
in various actions aimed at recognizing changes
in job content. W e reviewed 213 job descriptions
throughout the Bank, revising 54 o f them and
changing the evaluation o f 39 jobs. The evaluation
changes produced new grade determinations for
14 jobs and, in addition, 46 new jobs were created
and 38 jobs were abolished.

During 1954, also, we began a comprehensive
analysis o f all senior administrative and specialist
jobs throughout the Bank. In addition to the em
ployment of certain new evaluation techniques,
this review makes use o f the judgments of officers
as to relative differences between jobs in terms of
basic requirements and responsibilities. Such
judgments are given consideration by the Job
Evaluation Committee along with the usual evalu
ation criteria.

ment further reduced our work force there by 30
employees; 21 of these, however, we were able to
place elsewhere in the Bank.
Fluctuations in Average Yearly Head Office
Employment— 1950-54
Thousonds
of e m p lo yees

Thousands
of em ployees

IN
R E IM B U R SA B L E
WORK

Head Office salary liability

On December 31, 1954, salary liability o f the
staff (including reimbursable salary) at the Head
Office was $14,203,000; the comparable figure in
even thousand dollar amounts fo r previous yearends was $14,515,000 (1953), $14,100,000 (1952),
$13,576,000 (1951), and $11,779,000 (1950).

IN
ALU OTHER
WORK

Number o f em ployees

The following table and chart present some
basic statistics on Head Office employment:
1950
Employees, close o f business
December 31 ......................... 3,385
Employees, average number en
gaged in work reimbursable
by U. S. Government and its
agencies ..................................
541
Employees, average number, all
o t h e r ........................................ 2,839
A p p lica n ts................................. 4,648
Hired ..........................................
553
Separationst .............................
602
Dismissals (included in
sep arations)...........................
109

1951

1952

1953

1954

3,775

3,744

3,773

3,517

530

540

494

406

3,084
9,092
1,245
852

3,263
6,229
835
866

3,269
6,842
855
834

3,251
5,762
477
720

129

A t the year-end we had 3,517 persons in our
employ at the Head Office, or 256 less than at the
close o f business on December 31, 1953. The de
crease of 256 came about, in the main, as a result
o f an increase in efficiency which, in a number o f
cases, made it unnecessary to replace individuals
who had left our employ. A reduction in our rate
o f turnover (18.41 per cent in 1954 as compared
with 21.91 per cent in 1953) was a significant fac
tor in increased efficiency. The separation o f 38
individuals from our employ was a direct result
o f a further transfer o f some operations o f our
Savings Bond Department to the Office o f the
Register o f the Treasury. (The 38 had the oppor
tunity to transfer to the Treasury’s staff.) Other
operational changes in the Savings Bond Depart

1951

1952

1953

1954

A s o f December 31, 1954, 809 employees or
approximately 23 per cent o f the staff had been
with the Bank fo r twenty years or more, and 610
employees or 17 per cent o f the staff had been with
the Bank for twenty-five years or more. The fo l
lowing table shows a distribution of Head Office
employees according to their length of service:
Number of
employees

Length of service

191

t Includes those who resigned, retired, died or were dismissed.

1950

Percentage of
total number
of employees

173
124
313
199
102
846
361

4.9
3.5
8.9
5.7
2.9
24.0
10.3

Less than 5 years ...................

1,399

39.8

Total (December 31,1954)

3,517

100.0

35 years or m ore.....................
30 years to 34 years, inclusive
25 years to 29 years, inclusive
20
15
10
5

years
years
years
years

to
to
to
to

24
19
14
9

years,
years,
years,
years,

inclusive
inclusive
inclusive
inclusive

Fifty-two employees o f the Bank are now in
the armed forces, eight of whom entered the
service during the year 1954. Eight employees
returned to the Bank from the armed forces in
1954.
Em ployee benefits

1.
Noncontributory active service death benefit.
— Nine Head Office staff members and three offi

cers died during the calendar year 1954. Their
beneficiaries received $77,353 in death benefits
under group insurance and a like amount in death
benefits from our Retirement System. These bene
fits were paid under coverage provided without
cost to employees.
2. Blue Cross Hospital and Blue Shield
Surgical-Medical Plans.— A total of 3,145 employ
ees, or 88.1 per cent o f our total staff, was enrolled
in the Blue Cross H ospital and Blue Shield
Surgical-Medical Plans at the end o f 1954, com
pared with 3,258 or 86.4 per cent enrolled at the
end o f 1953. Some o f those not included get cover
age under other plans, e.g., another employer o f
the spouse. The expense to the Bank, which pays
two thirds o f the total cost, was $132,848 compared
with $134,464 the preceding year. During 1954
members o f our Head Office staff filed 670 claims
fo r hospital care, involving a cost o f $102,846 and
800 claims fo r surgical and medical care, amount
ing to $44,088.
3. Medical Division.— 1954 was the first full
year o f operation of our State-licensed Compensa
tion Medical Bureau. Although an employee may
choose an outside doctor to treat him if he wishes
to do so, it was our experience that the large
m ajority o f employees who sustained injuries
arising out o f or in the course o f their employ
ment elected to be treated by our doctors. During
the year, there were 481 accidents which resulted
in 1,610 medical visits, 1,463 to doctors in our own
Medical Division and 147 to other physicians. The
Medical Division has been able to absorb these
additional visits without increasing its staff or
impairing its service. W hen it is considered that
the 1,463 treatments given last year by our own
doctors in connection with compensation cases
would have, in the absence o f a State-licensed
Compensation Medical Bureau, resulted in visits
to outside doctors whose fees would have been paid
by our insurance carrier, it is apparent that we
have reduced our W orkm en’s Compensation costs
materially.
A t the same time, of course, we have reduced
time lost by injured employees arising out o f visits
to doctors located off the premises which, with
attendant commutation time, form erly consumed
part o f a day. These visits, on occasion in the
past, continued during a period o f several weeks.
The time during which our injured employees are
disabled is further shortened by our referral
service fo r the taking o f diagnostic X-rays to
determine whether a fracture is present. Patients

can be kept under observation and can be given
limited duty instead o f remaining at home and
making repeated visits to their doctors. For
the first six months of 1953 (the period pre
ceding the establishment o f our State-licensed
Compensation Medical Bureau), we had a total
o f 46 cases which resulted in lost time. The time
lost, on the average, in these cases was 8.2 days.
F or the first six months of 1954 the number of
lost-time cases was reduced to 36 and the average
time lost to 4.5 days. Total absences because of
illness during the year were 28,302 days, an aver
age o f about eight days per employee.
Our dental consultant continued to be in atten
dance two mornings weekly. Visits to the Dental
Section fo r examinations and consultations, and
fo r limited X -ray and prophylactic treatments by
the hygienists, totalled 2,980.
A sight-screener, an optical device fo r meas
uring keenness o f vision, was installed in the
Medical Division. This piece o f equipment enables
us to test vision more accurately and to advise
individuals whether certain work is suitable for
them. In addition, it is an aid in early detection of
certain pathological conditions.
Visits to the Medical Division averaged approx
imately ten per employee for the year, unchanged
from the average o f the previous two years.
4.
Red Cross blood bank.— Members of the
staff, through the Federal Reserve Club, contrib
uted a total of 338 units o f blood in 1954; o f this
amount 225 units were credited to our account
and 113 units were credited for use o f the armed
forces. During the year 280 units were withdrawn
to meet the needs o f employees and their immedi
ate families. Withdrawals from the account are
made by our employees through the Club Office
without cost. In March, the Red Cross set up a
bloodmobile unit in our gymnasium and fo r five
days collected blood from members o f our staff
and from employees o f other banks in the vicinity.
Because of the difficulty of obtaining blood donors
during the summer months, the Red Cross set up
a bloodmobile unit in our gymnasium fo r one day
during July and fo r one day during August for
the convenience o f donors from this Bank and
other banks in the downtown area.
Personnel improvement programs

On September 20, 1954 our Supervisory Devel
opment Program was inaugurated. This is the
27

program mentioned in last yea r’s Report which
was developed by a committee o f our staff mem
bers. In establishing the committee, the personnel
officers felt that it would be preferable to use our
supervisory personnel as a committee rather than
engage the services of a consulting firm in devel
oping our program. The four-day program con
sists o f an intensive series of meetings during
which topics of importance to persons in super
visory positions are discussed. The cooperation
o f several other departments has given this pro
gram broad application and interest. Thus far
66 o f our staff members have attended and we
expect that an additional 200 will participate in
the short-range portion of the program. Ques
tionnaires sent to the various members after they
have completed the program have aided us in
making improvements.
The Visual Perception Training Program,
started originally in 1952 and continued fo r the
benefit o f the Check Department during 1953,
was again favorably received during 1954. Thus
far 281 trainees and operators in the Check
Department have participated in this course. The
program has been instrumental in lessening
fatigue and enables those who have participated
to read figures more accurately and more quickly.
W e continued sending our female employees
whose jobs require using the telephone to the
New Y ork Telephone Company fo r advanced
training in voice personality. During 1954, 22
female employees attended, making a total o f 106
who have been trained since the inauguration of
the program in 1951.
On the recommendation o f the vice presidents
and assistant vice presidents who participated in
our experimental Im proved Reading Program in
1953, we provided another course fo r officers and
senior staff members during 1954. The ten par
ticipants recommended that we make it available
to others. In 1955 officers and staff members
whose work involves a substantial volume of
reading will take the course.
Our testing program concerned itself with pro
ficiency and aptitude testing of clerical personnel,
key punch trainees, proof machine trainees,
typists and stenographers. In these categories
154 tests were administered in 1954 in an effort
to use our employees’ talents as effectively as
possible.
In line with our policy o f providing information
o f interest to all our new staff members, we
28

organized orientation meetings and tours o f the
Bank for 515 employees.
Personnel research

The new Performance Review Plan, which was
developed by a special committee o f the staff
during 1953, was used fo r the first time in June
1954. The committee has also prepared perfor
mance review scales fo r those employees who
operate business machines or count currency
and for whom specific records o f the quality and
volume o f their work are maintained. The new
plan has been particularly effective in producing
a more normal distribution of proficiency ratings.
Our new Performance Review Plan is designed
not only to appraise job performance but also
to appraise potentiality fo r future development
and to reveal those areas in which individuals
fall short qualitatively as candidates fo r advance
ment. The plan is proving useful, therefore, to
departmental management in preparing individ
ual programs fo r the development of their
personnel.
A booklet entitled “ What Job Evaluation and
Performance Review Mean to Y o u ” is being
prepared by the Personnel Department fo r dis
tribution to all members of the staff during 1955.
The booklet will describe these two specialized
techniques in nonprofessional language.
The conference at the Bank with teachers o f
business subjects studying at Teachers College,
Columbia University, which we first held in 1953,
was repeated in 1954. W e expect that this type
o f conference will become a permanent part of
the work o f our Personnel Department. The em
phasis at these meetings is upon informing the
high school teachers o f the strong and weak points
displayed by high school graduates on the job
and in making suggestions fo r curriculum devel
opment in the schools. A n article describing our
meetings with these teachers will appear in a
forthcoming issue of the Journal of Business
Education, a national magazine fo r teachers of
business subjects.
Federal Reserve Club

Our employees’ Club, in its thirty-sixth year
as a voluntary and cooperative enterprise for the
benefit o f employees o f the Bank, enjoyed another
successful year in its sponsorship o f a wide range
of social and recreational activities and in pro
viding special services and in encouraging indi
vidual educational development.
In 1954, under the Club’s Educational Program,
147 members o f the staff completed 459 study

courses at various schools and colleges in and
around New York. Through the Club’s counseling
service, these individuals were able to get advice
about the school or college to be chosen and the
course of study to be followed. Depending on their
scholastic records, students were reimbursed by
the Bank fo r 50 or 100 per cent of the costs o f
tuition, books, and fees. Under this program, the
amount reimbursed to employees in 1954 was
$16,650; 97 per cent of this amount was on the
basis of full reimbursement.
The Club Store, one of the Club’s services,
continued to sell a wide variety o f merchandise.
F or the fiscal year ending May 31, 1954, the Club
Store sales amounted to $155,215. Am ong its other
services, the Club issued more than 16,900 checks
fo r the convenience o f members who do not have
checking accounts, and maintained a reading and
circulating library that lent 1,504 books, purchased
302 new books, and placed 200 subscriptions to
various periodicals fo r Club members. Through
the Club, 380 books were sent to employees who
had been absent because o f illness fo r a period of
two weeks or longer.
Cafeteria

The Food Supply Division served 739,784 meals
during the year, a daily average of 2,936 as com
pared with 791,272, a daily average o f 3,140, in
the previous year. To provide this service, the
Bank spent $231,183 in 1954, or 46.0 per cent of
total cost, compared with $232,992 in 1953, or 44.9
per cent of total cost. In August a “ snack bar”
was installed for the service o f sandwiches, salads,
desserts and beverages. This installation, which
has permitted a substantial speed-up in service
throughout the entire cafeteria, has proved to be
a popular innovation, and an average o f about
600 employees patronize it daily.

ing areas was increased by the installation of
fluorescent lighting fixtures similar to those in
stalled in our main building. Because o f corrosion,
the original wrought iron cold water lines were
replaced with brass piping.
W hile this work was in progress, an air con
ditioning system was installed on the first, second,
third, seventh and eighth floors. The first, second,
third, and sixth floors are occupied by a tenant
whose lease was amended to provide for the
amortization o f the cost o f the equipment on those
floors. The seventh and eighth floors are occupied
by our Government Check Department, while the
other floors are used fo r record storage.
Power Plant

The year 1954 was the 30th full year of occu
pancy of the main building, and the following
comparative figures o f Power Plant operations
are indicative o f the increase of population and
activity in the building and mechanization of
operations:
1925

1954

Increase

Fuel oil consumed.
1,404,215 gals.
1,761,821 gals.
25%
Steam generated . . 153,637,000 lbs.
211,367,500 lbs.
37%
Water consumed . .
5,051,900 cu. ft.
5,631,000 cu. ft.
11%
Electricity gener
ated by our Power
Plant ...................
2,700,710 kw. hrs.
4,440,100 kw. hrs. 64%
Electricity
consumed (gener
ated in our plant
and purchased) . .
3,154,010 kw. hrs.
6,579,100 kw. hrs. 108%

The efficiency of the Power Plant, measured
in pounds o f steam generated per pound o f fuel
oil consumed, increased from 13.85 pounds in 1925
to 15.00 pounds in 1954 (8 pounds of fuel oil is
equivalent to 1 gallon). This increase is due
largely to the modernization o f the boilers, to the
use o f improved equipment and to more efficient
operating methods.

OPERATING COSTS AND BUDGET

BUFFALO BRANCH OPERATIONS

Total expenses of the Head Office amounted to
$25,167,000 during 1954, a decrease of $1,276,000
as compared with 1953, due mainly to the comple
tion in the early part of the year of the program
o f accumulating emergency supplies of Federal
Reserve notes. Total expenses also fell short of
budgeted expenses for 1954 by $598,000, the prin
cipal factor being a decline of $420,000 in the
reimbursable cost of fiscal agency operations.

Although business activity declined sharply in
Buffalo during 1954, and less markedly in Roch
ester, both cash and check operations o f the
Branch increased somewhat. These operations, of
course, account fo r the bulk of the volume o f work
at the Branch. The Buffalo Chamber of Commerce
index of business activity indicated the 1954 de
cline was 17 per cent from the level of the preced
ing y ea r; the importance of the steel industry in
the city ’s economy tended to magnify the effect of
the much smaller national recession. B y mid
summer of 1954, fo r example, steel production was
down to little more than half of rated capacity
(although it had risen to about 100 per cent of

Maiden Lane Annex

The electric wiring in our Annex Building at
89-95 Maiden Lane was replaced because of its
age and the need for a system of larger capacity.
A t the same time the illumination in the work

capacity by the end o f the year as the economy
recovered).
Net current expense at the Branch totaled
$1,123,200 in 1954 ($29,700 less than budgeted),
compared with $1,074,400 in 1953. Fiscal agency
and other reimbursable expenditures aggregated
$75,023 as against $67,521 in 1953.
W ire transfers o f funds

The Branch handled 15,102 transfers of funds
amounting to $6,994,918,000 during 1954, compared
with 12,810 transfers aggregating $4,479,277,000
in 1953. The increases over 1953 resulted mainly
from the purchase and sale o f Federal funds in
large amounts by Buffalo and Rochester banks.
Cash operations

The following table summarizes the operations
o f the Cash Division at the Buffalo Branch for
the year, compared with 1953:
1954

Currency and coin :
Paid out to ba n k s..........
Received from banks . . .
Net outflow ..............
Currency counted (pieces)
Coin counted (pieces) . . . .
Coin wrapped (pieces) . . .

$351,456,000
$327,657,000
$ 23,799,000
53,632,023
84,770,400
27,822,000

1953

$360,189,000
$306,814,000
$ 53,375,000
52,570,105
68,426,800
23,164,000

Fifty-eight counterfeit notes amounting to $670
were detected by our currency sorters during 1954,
compared with 54 notes aggregating $861 in 1953.
A n estimated saving o f about $8,800 was effected
in 1954 in the handling and shipping charges for
Federal Reserve notes as a result o f the change
in the law (effective July 19, 1954), which elimi
nates the need to return notes o f another Reserve
Bank to the issuing bank.
Arm ored trucking service fo r the pickup and
delivery of currency and coin to member banks in
the Branch territory was continued during 1954 at
a substantial saving over the cost that would have
been incurred had the same shipments been made
by registered mail. The number o f points to which
the service is provided increased from 69 to 70
during the year.
On August 1, 1954, the Bank discontinued reim
bursing nonmember banks fo r the cost o f shipping
currency and coin to it; the resultant savings at
the Branch were approximately $1,400 to the
year-end.
Collections

The average number o f cash items handled daily
by the Branch in 1954 was 156,959, compared with
147,803 in 1953, an increase o f 6.2 per cent.
30

A survey in 1954 of the checks passing through
the Branch showed that 97.9 per cent bore the
check routing symbol and transit number in the
approved location, compared with 97.4 per cent in
the survey of the previous y ea r; the first survey,
in 1949, indicated an 82.6 per cent compliance.
Through the continued use and improvement of
air transportation in check collection, the Branch
was able, beginning A pril 1, 1954, to give credit
one day after receipt, instead o f two, fo r cash
items payable in Jacksonville, Florida. W ith this
change the Branch gives credit one day after
receipt fo r items payable in 27 Federal Reserve
Bank and Branch cities.
Early in 1954, the Branch started preparing
punch cards on tabulating equipment fo r return
items. Each card shows the name o f the maker,
the drawee bank, reason fo r return, date o f return,
and amount o f the check. A t the end o f each
month, each remitting bank in the Branch terri
tory that returned items receives a list o f the items
it returned that month. This service has been well
received by the banks. It has enabled the banks to
determine whether the causes fo r the return items
form ed a pattern, such as the im proper drawing
o f the items, or whether a particular drawer has
been consistently drawing items that required
their return, and thus to take some remedial steps
against recurrence.
The Branch handled 55,450 noncash items total
ing $28,499,000 during 1954, compared with 66,424
noncash items aggregating $36,127,000 during
1953; and redeemed 40,222 Government coupons
having a value o f $1,469,000, compared with 46,869
coupons totaling $1,596,000 handled in 1953.
Loans to member banks

The number of loans granted in 1954 by the
Branch to member banks declined 40.3 per cent
from the number in 1953, as shown in the follow
ing table:
1954

309
Number of lo a n s ..............
Number of borrowing
b a n k s ..............................
42
Volume (in thousands) .. $202,205
Discounts ea rn ed ..............
$31,153

1953

518
41
$949,145
$138,625

The reduced borrowing from the Branch in 1954
reflected, of course, Federal Reserve policy in
making reserves more plentiful through other
means.
Operating methods

The Branch continued to broaden the operations
o f its tabulating machine unit by assigning to it

the preparation o f more reports and statements,
the Performance Review Plan, and the attend
ance and time records. Twenty-six types of work
involving 100 reports and statements are being
prepared by this unit for various divisions of the
Branch.
Throughout 1954, two employees classified as
administrative assistants continued the program
of planning work at the Branch. They studied
systems and methods, expenditures, the prepara
tion of the budget, and carried out certain special
studies. They also maintained all information
needed under our emergency program in the event
the operations at the Head Office or Branch are
disrupted.
Bank and public relations

Bank and public relations activities at the
Branch during 1954 included 346 visits to member
and nonmember banks and branches, o f which 270
were made to member banks and 76 to nonmember
banks. Eleven special surveys were made, prin
cipally in connection with applications for the
establishment o f branches, and, in one case, an
application to organize a national bank in the
Rochester area.
Officers and employees attended 98 meetings,
while officers made 58 addresses to banking, civic
and educational groups. Federal Reserve films
were shown on 31 occasions before a total of 2,481
persons. Flannelboard talks on “ The Role of
Money and Banking in Our Econom y” were given
at two public meetings and to several groups of
the Branch’s employees. The Bank’s currency
and coin exhibit was displayed at 14 member
banks.
During the year, 601 visitors were conducted
through the Branch to observe its operations.
Included in this number were 57 teachers o f the
public and parochial schools in Erie County out
side the City o f Buffalo who were entertained on
October 28 in conjunction with Business-IndustryEducation Day sponsored by the Buffalo Chamber
of Commerce.
Fiscal agency operations

The Securities Division issued 10,682 Series E,
H, J and K Savings bonds in 1954 with a maturity
value o f $19,414,550, compared with 6,452 bonds
aggregating $6,994,375 in 1953.
The Branch handled 322 requests in 1954 from
banks in its territory for the purchase, sale or
other disposition o f securities aggregating $273

million from or to security dealers or correspond
ent banks in New Y ork City. The instructions
were transmitted over the leased wire system to
the Head Office and enabled these banks to
effect their security transactions conveniently
and rapidly. Nineteen telegraphic transfers o f U. S.
Government securities aggregating $7,947,000
were made to the Head Office in 1954, compared
with 22 totaling $1,999,000 in 1953.
Change in boundary

On A pril 1, as last yea r’s Report noted, the
counties o f Ontario, Steuben, W ayne and Yates
were transferred from Head Office territory to the
Buffalo Branch territory. The transfer added 43
banking offices, including 24 member banks, seven
nonmember banks, one savings bank and 11 branch
offices o f member and nonmember banks, to the
number served by the Buffalo Branch. No prob
lems o f any consequence resulted from the realign
ment o f territory.
Personnel

The number of employees at the Buffalo Branch
at the year-end was 206, compared with 201 at the
beginning o f the year. A high o f 210 was reached
in October. There were 31 separations from serv
ice, and 36 new employees were hired after inter
viewing 220 applicants. The rate o f turnover was
15 per cent, compared with 28 per cent in 1953.
On December 31, 1954 the salary liability at the
Branch was $712,872, compared with $664,935 on
December 31, 1953. The difference was caused by
year-end salary adjustments of approximately
$26,000, promotional increases of $6,000, and merit
increases o f about $16,000 granted during 1954 to
junior employees in our automatic salary adjust
ment program.
During 1954, 82.52 per cent of our employees
signed authorizations fo r deductions from payroll
for the purchase of Series E bonds, the total de
ductions amounting to 3.22 per cent o f the payroll
at the end o f the year. In addition, 29.13 per cent
o f our employees contributed 3.10 per cent o f pay
roll to a special payroll savings plan providing
for deposits in a local savings bank.
A ll but 16 o f our employees were enrolled in the
Blue Cross and Blue Shield hospital and surgical
plans; the 16 were covered under similar plans
through other members o f their families or
through the Veterans’ Administration. During
1954 our contract with the Hospital Service Cor
poration was changed to reduce the waiting period
31

fo r enrollment of new employees from 90 to 30
days. W e are continuing to negotiate with the
corporation fo r a further change that will provide
coverage from the first day o f employment. Our
experience fo r the year 1954 shows that 346 days
o f hospitalization were paid fo r by Blue Cross.
The cost o f this service to our emplyees would
have been $6,433, or 77.66 per cent o f the total
premiums paid. Claims made under our Blue
Shield contract numbered 89 fo r $2,978, or a utili
zation rate of 55.36 per cent of the premiums paid.
The Blue Cross and Blue Shield plans will be made
available at group rates during the coming year to
retired members of the staff to give them cover
age at rates lower than they could obtain as
individuals.
Thirteen employees at the Branch, designated
as Assistant Federal Reserve examiners, spent 57
man-days assisting examiners from the Head
Office in the examination of banks in the Branch
territory. This work has provided valuable train
ing fo r these employees.
The Branch continued the program o f hiring
senior high school girls to work on Saturdays to
receive instruction and then to process checks.
When they graduated in June, nine o f these girls
were added to the staff as regular, full-time
employees.
During the year 221 employees received physi
cal examinations; 26 were also given electro
cardiographs, and 176 received chest X-rays.
Absences during the year fo r illness amounted to
1,380 days or an average o f approximately six
days per employee; these figures include three
employees on extended medical leaves fo r an
aggregate o f 247 days.
Our em ployees’ Club, which sponsored various
social activities throughout the year, has 100 per
cent membership. The Branch contributed approxi
mately $1,400 to the Club to further its programs.
The Branch also spent $2,300 on the 35th Anni
versary Party held in May 1954 and the annual
Christmas Party held during December. The Club
continued its participation in the Red Cross Blood
Bank, and during the year 44 units of blood were
contributed. Refunds to employees fo r tuition
fees paid fo r various approved educational
courses amounted to $475.
Salary administration

In February and again in August, surveys of
wage and salary rates paid by other Buffalo busi
32

ness concerns showed that our clerical salary
structure compared favorably with rates paid by
other progressive employers, and that no general
salary adjustment was necessary at the year-end.
The surveys showed, however, that our nonclerical
salaries were approximately 14 per cent below the
community rates. Because many of our non
clerical employees were at the maximum or close
to the maximum o f their grades, a new salary
structure was established fo r this group effective
December 23.
The Performance Review Plan developed at the
Head Office was adopted by the Branch following
a successful trial. Its use is expected to prove
highly beneficial in administering salary and pro
motion programs fo r members o f the Branch staff.
Beginning in October, supervisory personnel at
the Branch were sent in groups to the Head Office
to attend a supervisory development training
course, the objectives o f which are to develop par
ticipation in management, to promote leadership,
and to improve communications and efficiency.
Branch building

During the first half o f 1954, the architectural
firms o f Eggers and Higgins, of New York, and
James, Meadows and Howard, o f Buffalo, com
pleted the preliminary plans and specifications for
the new Branch building. A fter approval on
June 17 by the Bank directors’ Buffalo Branch
Building Committee, the designs and specifica
tions were forwarded to the Board o f Governors
in Washington. On August 10, the Board ap
proved the preparation o f detailed plans on the
basis o f the preliminary ones submitted.
During the latter half of 1954, the architects and
engineers, together with the members o f the
Officers Committee on Buffalo Branch Building,
assisted by certain members o f the staff of the
Head Office and Branch, have devoted their time
to preparing the detailed plans and specifications
fo r the new building, including the electrical,
plumbing, air conditioning and protection systems,
vaults and other features that will be included in
the building. The detailed plans and specifica
tions are nearing completion.
A s o f the close of business December 31, 1954,
the investment in land fo r the new building
amounted to $353,550 (original purchase price
$350,000) and preliminary expenditures in the
construction account totaled $77,090, including
$56,805 for architects’ fees.

FED ERAL RESER VE BANK
OF NEW YORK

A p r il 15, 1955.

To all Banking Institutions in the
Second Federal Reserve D istrict:

W e are pleased to announce that the F i r s t B a n k a n d
T r u s t C o m p a n y , M a d i s o n , N. J ., M adison, N ew Jersey, has

becom e a m em ber o f the F ed era l R eserve System effective
today.

llan

S proul,

President.