Annual Report of the Federal Reserve Board, 1943

THIRTIETH ANNUAL REPORT of the BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM COVERING OPERATIONS F< THE YEAR Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1943] MARRINER S. ECCLES, Chairman RONALD RANSOM, Vice Chairman M. S. SZYMCZAK ERNEST G. DRAPER JOHN K. MCKEE R. M. EVANS LAWRENCE CLAYTON, Assistant to the Chairman ELLIOTT THURSTON, Special Assistant to the Chairman OFFICE OF THE SECRETARY CHESTER MORRILL, Secretary LISTON P. BETHEA, Assistant Secretary S. R. CARPENTER, Assistant Secretary FRED A. NELSON, Assistant Secretary LEGAL DIVISION WALTER WYATT, General Counsel J. P. DREIBELBIS, General Attorney GEORGE B. VEST, Assistant General Attorney B. MAGRUDER WINGPIELD, Assistant General Attorney DIVISION OF RESEARCH AND STATISTICS E. A. GOLDENWEISER, Director WOODLIEF THOMAS, Assistant Director DIVISION OF EXAMINATIONS LEO H. PAULGER, Chief C. E. CAGLE, Assistant Chief WILLIAM B. POLLARD, Assistant Chief DIVISION OF BANK OPERATIONS EDWARD L. SMEAD, Chief J. R. VAN FOSSEN, Assistant Chief J. E. HORBETT, Assistant Chief DIVISION OF SECURITY LOANS CARL E. PARRY, Chief DIVISION OF PERSONNEL ADMINISTRATION ROBERT F. LEONARD, Director OFFICE OF ADMINISTRATOR FOR WAR LOANS COMM EDWARD L. SMEAD, Acting Administrator GARDNER L. BOOTHE, II, Assistant Administrator FISCAL AGENT O. E. FOULK, Fiscal Agent JOSEPHINE E. LALLY, Deputy Fiscal Agent II Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONTENTS TEXT OF REPORT Summary i Full Production for War 3 Production for armed services 4 Production for civilians 5 Inflationary Forces 6 Pressure of rising incomes on prices 6 The problem of stabilization 7 Monetary policy and inflation 10 International Movement of Gold, Goods, and Capital 10 War Finance iz Federal expenditures and receipts iz Nonbank purchases of Government securities 13 Purchase of Treasury issues by commercial banks 14 Exemption of Treasury war loan deposits from reserve requirements 15 Federal Reserve purchases of Government securities. 15 Prospects on interest rates 18 Guaranteed loans to industry 19 Selective Credit Control by the Federal Reserve zz Margin requirements Z3 Restrictions on consumer credit Z3 Position of Banks in the War Economy Z5 Deposits and currency 2.5 Operations and structure Z9 Recommended Legislation on Bank Holding Companies 34 Wartime Services of the Reserve Banks 37 Fiscal agency operations 38 Enlarged responsibilities of Reserve Bank branches 4Z Bank Supervision by the Federal Reserve 43 Research and Advisory Services 46 Reserve Bank Personnel and Operations 50 Board of Governors—Staff and Expenditures 55 Federal Reserve Meetings 56 Legislation Relating to the Federal Reserve System and Reports to Congress 57 Changes in Regulations of the Board of Governors 58 TABLES No. 1. Statement of Condition of the Federal Reserve Banks (in detail), Dec. 31, 1943 60-61 No. z. Statement of Condition of Each Federal Reserve Bank at End of 194Z and 1943 6Z-65 in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

No. 3. Holdings of United States Government Securities by Federal Reserve Banks at End of December 1942. and 1943 .... 66 No. 4. Holdings of Special Short-term Treasury Certificates by the Federal Reserve Banks, 1943 67 No. 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1939-1943 67 No. 6. Earnings and Expenses of Federal Reserve Banks, 1943 . . 68-69 No. 7. Current Earnings, Current Expenses, and Net Earnings of Federal Reserve Banks and Disposition of Net Earnings, 1914-1943 70-71 No. 8. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1943 71 No. 9. Receipts and Disbursements of the Board of Governors of the Federal Reserve System for the Year 1943 72.-73 No. 10. Minimum Down Payments and Maximum Maturities on Consumer Credit Subject to Regulation W 73 No. 11. Federal Reserve Bank Discount, Interest, and Commitment Rates, and Buying Rates on Bills, Dec. 31, 1943 74 No. n. Maximum Rates on Time Deposits 75 No. 13. Member Bank Reserve Requirements 75 No. 14. Margin Requirements 75 No. 15. All Member Banks—Assets and Liabilities on Dec. 31, 1943, by Classes of Banks 7&~77 No. 16. All Member Banks—Classification of Loans and United States Government Direct Obligations on Dec. 31, 1943 . . 78 No. 17. Member Bank Reserve Balances, Reserve Bank Credit, and Related Items—End of Year 1918-1941 and End of Month !943 79 No. 18. Number of Banking Offices in United States, 1933-1943 ... 80 No. 19. Analysis of Changes in Number of Banking Offices, 1943. . 81 No. 2.0. Number of Banks on Par List and Nc>t on Par List, by Federal Reserve Districts and States, on Dec. 31, 1941-1943 81 No. 11. Money Rates, Bond Yields, and Stock Prices 83 No. 11. Business Indexes 84 APPENDIX Record of Policy Actions—Board of Governors 86-89 Record of Policy Actions—Federal Open Market Committee 90-98 Resolution of Federal Advisory Council regarding Final Settlement of Terminated Contracts, November 15, 1943 99-100 Board of Governors of the Federal Reserve System 101 Federal Open Market Committee 101 Federal Advisory Council 102. Senior Officers and Directors of Federal Reserve Banks 103-111 Map of Federal Reserve Districts 112. Index 113-113 Digitized for FRAIVSER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LETTER OF TRANSMITTAL BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Washington, April 2% 1944. THE SPEAKER OF THE HOUSE OF REPRESENTATIVES. Pursuant to the requirements of Section 10 of the Federal Reserve Act, as amended, I have the honor to submit the Thirtieth Annual Report, prepared by direction of the Board of Governors of the Federal Reserve System, covering operations during the calendar year 1943. Very truly yours, M. S. ECCLES, Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM During 1943 the enormous output of the American economy became a decisive factor in the progress of war toward victory. This demonstration of the nation's ability to organize effectively for a national purpose raises hopes that the country will be able also to meet successfully the problems of readjusting to a peacetime economy and of maintaining a high level of output and continuous employment. To finance the war effort the United States Treasury in 1943 expended 85 billion dollars. Total expenditures, including those for nonwar purposes, were 91 billion; net receipts, largely taxes, were 35 billion. War expenditures are determined by the maximum the nation can accomplish in the war effort and, after the amount to be obtained through taxation has been decided by Congress, the remainder has to be borrowed. The task of financial authorities is to make certain that the funds which have to be borrowed are raised promptly and smoothly on terms advantageous to the public interest, and that they exert a minimum of inflationary pressure on the economy. At the time the United States entered the war in December 1941, the Board of Governors issued a statement to the effect that the Federal Reserve System was prepared to use its powers to assure at all times an ample supply of funds for financing the war effort and to exert its influence toward maintaining conditions in the United States Government security market satisfactory from the standpoint of the Government's requirements. In discharging this responsibility during 1943 the System engaged in open-market operations to maintain stable conditions in the Government security market at interest rates in harmony with a pattern agreed upon with the Treasury. From time to time it provided such additional reserves as the banks needed in order to purchase Government issues that were not absorbed by other investors, and in other ways did everything in its power to assure the success of war financing. It also continued and expanded its work in connection with war production loans guaranteed Jby the War and Navy Departments and the Maritime Commission. The Federal Reserve authorities did what they could to help raise war funds as far as possible from investors other than banks, thus diminishing the inflationary pressure resulting from the purchase of Government securities by banks throughout the year. They actively cooperated with the Treasury by consulting on financing policies to be pursued and by assisting in every other way in carrying out the war financing program. In the aggregate the interest-bearing direct and guaranteed debt increased by 57 billion dollars during the year, of which 2.5 billion was taken by the banking system and 3Z billion by nonbanking investors. A total of 2.7 million persons participated in pay roll savings plans and holdings of savings bonds of all kinds increased by 12. billion dollars. While these figures are large, an increase in participation by individuals in financing the war, with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2. ANNUAL REPORT OF BOARD OF GOVERNORS less dependence on bank purchases of Government securities, should continue to be the objective of the war finance program. In the course of the year the Federal Reserve System increased its holdings of Government securities by 5.4 billion dollars. These purchases, which were made at different times in accordance with current market requirements, provided the banks with the major part of the reserves needed to offset an increase of 5 billion dollars in the demand for currency, a loss of gold and a growth in foreign balances at the Reserve Banks aggregating 1.5 billion, and an increase of 0.6 billion in required reserves at member banks. The relatively small increase in required reserves, in the face of a large growth of bank deposits, was due to the enactment of legislation during the year, at the Board's recommendation, which exempted war loan deposits from reserve requirements for the duration of the war emergency. The large growth of money in circulation, which is common to all countries engaged in the war, reflected principally the effects of growth in incomes together with dislocations of populations resulting from the war. Industrial output, which had expanded rapidly in the preceding two years, grew further in 1943 and was far larger than in any previous year. Growth of production was entirely in war industries, but civilian consumption in the aggregate remained close to the high levels of 1941 and 1941, indicating that American industry was able to meet the challenge of a global war without depriving the civilian population of goods and services required to keep up health and morale. The high level of civilian consumption reflected the fact that along with the growth of production there has been a wider distribution of income and a marked rise of consumption at lower income levels. Notwithstanding greatly increased taxes, incomes of individuals were far in excess of supplies of goods and services available to civilians. This current surplus of purchasing power, and the exceptional accumulation of liquid assets held by individuals, increased the difficulty of enforcing rationing, price, and manpower controls. During the year liquid funds held by corporations and individuals showed a large increase. Deposits at all banks increased by 18 billion dollars and currency holdings outside of banks by 5 billion. The large volume of cash resources, together with savings which the public has invested in Government securities, is a source of inflationary danger, but at the same time it forms a backlog of buying power which if properly used should be a powerful safeguard against postwar deflation. With the growth in military personnel and the expansion of war work, organization and distribution of manpower became the principal problems to be overcome in obtaining further increases in production. Recruitment of additional manpower became increasingly difficult and made it apparent that the anticipated expansion in war production during 1944 would have to be achieved principally by more effective utilization of the manpower already available. Shortages of materials and productive facilities, however, which had been acute in 1942. and the early part of 1943, had been eased Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 3 considerably by increased supplies, by the completion of many construction projects, and by reduced requirements for certain war products. Wholesale prices advanced 37 per cent from the beginning of the war to the end of 1943 and the rise in the cost of living for the same period was 2.5 per cent, according to official indexes. Pressures on the price and wage structures, which have been formidable and are increasing, are a serious threat to economic stability. To combat this danger now and in the period immediately following the war, there is need for an adequate further increase in taxation, for firmness in holding the line against price and wage advances, and for resistance all along the domestic front to pressures exerted by groups representing special interests rather than the public welfare. After the war this country, on the basis of its resources and the warstimulated expansion of its industrial capacity, will have an opportunity to enter upon an era of high and rising national income and sustained prosperity for all its people. To achieve this objective the country must avoid the danger of inflation, with its aftermath of economic collapse. Aside from maintaining wartime regulations during the transition period, nothing would contribute more to this end than rapid conversion of our industrial plant to assure a prompt resumption of the flow of goods to civilians, and planned redirection into other occupations of manpower released from war activities. Adequate financial machinery, both for equity investment and credit of all types, to meet the capital and current financial requirements of reconversion, and the maintenance of stable and relatively low long-term interest rates to encourage enterprise, should form a vital part of a postwar program. Longterm policy in regard to governmental investment in public works and the volume of tax levies should be flexible, with outlays increasing and taxes declining when business activity shows signs of slackening, and taxes rising and public works slowing down when consumer and capital demands begin to press against productive capacity. Sustained prosperity in this country would result in an upswing of international trade and would contribute greatly to world reconstruction from the ravages of war and to general improvement of economic conditions throughout the world. Economic, fiscal, and monetary policy, private and public, during and after the war, must seek to prevent the surplus income and surplus cash created by the war from resulting in inflation. In the critical postwar period ways must be found to promote full employment and stable prosperity by utilizing the people's abundant liquid resources and the expanded productive capacity of the country. FULL PRODUCTION FOR WAR Expansion of economic activity, which Had proceeded at a rapid rate since the inauguration of the war program in the middle of 1940, slackened during 1943. Raw materials for war production were obtained in greater supply than in previous years and many additional manufacturing facilities were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4 ANNUAL REPORT OF BOARD OF GOVERNORS completed. While resources and manpower were more fully utilized than in 1942. and output of goods and services was in record volume, the reduction in the size of the labor force limited the increase in output, especially in the latter part of the year. The armed services increased their strength by about 3.5 million persons during 1943. Employment in war industries continued to rise and manpower controls were established and extended to direct workers to essential jobs, eliminate labor hoarding, and minimize job-shopping for higher wages. Total employment outside of the armed forces declined in 1943 by about 2. million persons. A large share of this decline occurred in the construction industry, where activity was sharply reduced as military installations and new industrial facilities for the war program were largely completed. Employment on farms declined but total agricultural production increased somewhat further to a level x8 per cent higher than the 1935-39 average. Crop yields in the 1943 season were smaller than the record volume of 1942. but there was a continued large increase in output of livestock products. Transportation of freight and passengers increased to new record levels, reflecting the large amount of agricultural and industrial production and continued restrictions on the use of automobiles for private purposes. Ocean shipping facilities improved considerably in 1943 owing to an exceptionally large volume of new ship construction and a marked decline in shipping losses. Exports, chiefly lend-lease aid to our Allies, totaled 12..7 billion dollars for the year, which was 58 per cent larger than in 1942. and 5 5 per cent larger than the value of goods exported in 19x0, the previous high year. Shipments to the armed forces abroad, not included in these figures, rose rapidly. Improvement in shipping also resulted in larger supplies of imported materials. Value of imports in 1943 was Z3 per cent larger than in 1942.. In physical volume, however, imports were not as large as in prewar days, especially imports of goods for civilian use. Total output of the economy in current prices amounted to 187 billion dollars, compared with 152. billion in the next highest year, 1942., and 89 billion in the prewar year of 1939. This increase is enormous, even after allowance for price advances. Of the total for 1943, close to one-half represented output for war purposes. At factories and mines, where war production is concentrated, output in December was Z41 per cent of the 1935-39 average as compared with 1x3 at the end of 1942.. After the early part of 1943 output for war increased at a slower rate and output of manufactures and minerals for civilian use showed little change. Throughout the year the bulk of the increase in output continued to be in the industrial sector of the economy. Production for armed services. The further large shift of industrial activity in 1943 to output for war purposes is shown on the chart; in 1943 such production represented about 67 per cent of the total, compared with 54 per cent in the preceding year. In 1943 probably about one-half of the output for war purposes was accounted for by production of planes, ships, combat Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 5 vehicles, and ordnance. Most of this production had required considerable conversion of manufacturing facilities and large expansions, often of specialized character. The remaining half of industrial production for war was composed of supplies used in producing munitions and of food, clothing, and the like for the armed services and lend-lease export. INDUSTRIAL PRODUCTION 1935-1939 AVERAGE"100 200 OTHER MUNITIONS • 150 AND WAR SUPPLIES III CIVILIAN GOODS 1943 By the end of 1943 production rates for a number of war products were either close to or had passed their peaks. On the other hand, output of aircraft and certain other war products was scheduled to show further large increases in 1944. As a result of the leveling off of the production of heavy war products (including merchant ships), the reduction in construction activity, further increases in metal production, better controls over consumption, and cutbacks in parts of the war program, the metal supply situation by the end of 1943 was no longer a limiting factor in war production. Increased efficiency in mass production was partly responsible for a steady decline in the contract prices of munitions purchased by the Army during Production for civilians. With supplies of metals increasing beyond military requirements, consideration was being given at the end of 1943 to larger allotments for production of certain durable goods for civilians, but the volume indicated was small except for farm machinery and railroad equipment. Activity at furniture factories was maintained at a high level in 1943, but a number of the mills had shifted to war work and in December Federal restrictions to conserve lumber for essential uses were placed on the production of furniture. Purchases of durable goods by consumers in 1943 exceeded output and as a result inventories were further reduced. Inventories of many nondurable goods were also reduced. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 ANNUAL REPORT OF BOARD OF GOVERNORS Food production was one-third greater than the average for the years 1935-39 and, even though military and lend-lease requirements absorbed onefourth of the output, per capita food consumption by civilians in 1943 was somewhat higher than the average for 1935-39. In order to assure more equitable distribution of food supplies, rationing was extended to processed fruits and vegetables, meats, butter, cheese, and fats, and retail price controls for food were broadened. Production of such nondurable goods as textile, leather, and paper products for civilian use was generally reduced during 1943. Restrictions on apparel wool used for civilian consumption were lifted and cotton supplies were also in ample volume, but declining employment in the textile industries limited output of clothing. Sweeping changes in industrial facilities and great concentration of activity in war production have resulted over a period of several years in extraordinary shifts in employment opportunities, location of workers, and incomes. Readaptation of various resources to peacetime needs will also involve widespread economic changes. Capacity to produce materials for peacetime goods has been greatly expanded since 1939 and the full utilization of this capacity in the years ahead will require that markets for finished goods be expanded and maintained considerably above prewar levels. INFLATIONARY FORCES The phenomenal production record of 1943 brought a corresponding increase in incomes received by the American people and, since the additional output was for war purposes and only part of the additional income was absorbed in taxes, there was a widening spread between the amount of disposable income and the goods on which it could be spent. As a result, inflationary pressures increased throughout the economy. Excess dollars in the hands of consumers threatened to bid up retail prices and to strain price controls. Pressures developed 'from various economic groups to increase their gains at the expense of others and of the public at large. Pressure of rising incomes on prices. Incomes received by individuals increased by 2.6 billion dollars from 1941, as shown on the chart. Additional tax payments absorbed less than half of the increase, leaving the people with 15 billion more of disposable income than in the preceding year. Of this about 8 billion went into increased consumer expenditures, and since there had been no considerable increase in the supply of consumer goods, most of it was reflected in price increases. About 7 billion dollars was absorbed in an increase in current savings above the 1941 level, and was added to the reservoir of liquid funds in the hands of the public. The fact that taxes did not absorb a larger share of the growing consumer income exposed price and rationing controls to heavy pressures. Although the stabilization program held price increases within fairly narrow limits, controls failed to check the growth of inflationary pressures throughout the economy. The cost of living as measured by the Bureau of Labor Statistics index Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM continued to rise through the first half of 1943 but in the second half was stabilized and, in response to subsidy policies, even declined somewhat. At the end of the year the combined index stood 7 per cent above the 1942. average. The price of some commodities, food in particular, rose more sharply from the 1942. level. Net income of farm operators continued to rise sharply and for the year as a whole was more than 30 per cent higher than in 1942.. The increase in incomes was largely due to increased prices received by farmers rather than to an increase in output. The use of subsidies cushioned the impact of higher farm prices and was instrumental in preventing larger increases in prices to consumers. Average wage payments continued to increase because of shifts to industries with higher wages, fur- 1NDIVIDUAL INCOMES, EXPENDITURES, AND TAXES SEASONALLY ADJUSTED, ANNUAL BASIS BILLIONS OF DOLLARS QUARTERLY 160 1 140 120 120 100 100 80 1941 1942 NOTE.—Department of Commerce data through second quarter of 1943; data for last two quarters of 1943 are estimates. ther increases in hours worked, and upward adjustments of wage rates within the limits of the stabilization program. Total income of employees was x^ per cent above the 1942. level. Investment incomes received by individuals increased less rapidly than other types of income but corporation profits continued to rise and profits after taxes were slightly above the 1942. level. The problem of stabilization. At the end of 1943 the country was facing the problem whether inflationary increases in incomes would be permitted to continue and at what rate. Expansion of money incomes, which had accompanied the increase in output and employment during the earlier stages of the war production program, continued although the increase in war production had flattened out. Price and rationing controls, which have been reasonably successful in protecting prices against the pull of excessive Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

O ANNUAL REPORT OF BOARD OF GOVERNORS consumer demand, were threatened at the end of the year by the growing upward pressure of wages, farm prices, and profits. A stemming of this tide will be the most urgent task of stabilization policies in the coming year. The need for maintaining orderly controls over wartime prices and income is even more important in relation to the subsequent transition to a peacetime economy. The task of shifting to peacetime employment the millions of persons now engaged on war orders and the millions to be demobilized from the armed forces will be enormous. Should there be an interval between the termination of war in Europe and in the Far East, gradual reconversion of industry and gradual release of service men and war workers will simplify the problem. Public policy, however, must be prepared to meet a sudden cessation of active warfare on both fronts and to prevent large-scale unemployment should it threaten to develop. While some workers will withdraw from the labor market and a general shrinkage of hours of work will result in additional opportunities for employment, most of the personnel released from the services and from war industries will have to depend for jobs on increased production of civilian goods and services. The less delay in returning to a high volume of peacetime production, the smaller will be the unemployment problem in the transition period. But a relatively high level of income and employment in this period will also mean a continued pressure on the prices of those consumer goods of which supplies have not become ample. To assure a successful transition to a peacetime economy, it is thus most essential that price, wage, and rationing controls be maintained intact during the remainder of the war and be supported by adequate tax measures. Failure to do so will leave the economy with insufficient controls in the immediate postwar period, when public opinion may be expected to be less responsive to the adoption of new restrictive measures and the continuance of old ones. Maintaining orderly inflation controls during the war appears to be the first condition for a transition to a peacetime economy which will avoid maladjustments and assure the maintenance of a high level of income and employment. Continuing and strengthening monetary policies designed to hold monetary expansion to a minimum, and fullest cooperation from the public in carrying these policies into effect, are requirements of a successful transition to peace. The future problem is made more difficult by the fact that, up to the present, financing of war expenditures has been accompanied by an expansion in deposits arising out of the purchase of Government securities by banks. Bank deposits plus currency outside of banks expanded by more than 2.3 billion dollars during 1943, as shown by the chart. This followed a growth of about 2.1 billion in 1942. and brought the total to nearly 113 billion by the end of 1943. Adjusted demand deposits and United States Government deposits accounted for 14 billion of the growth and currency outside banks for 5 billion. Time deposits, which had shown little change in 1943, expanded by almost 4.5 billion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 9 Individuals have increased their liquid assets by more than 40 billion dollars in the past two years. Industrial corporations and other business enterprises have built up huge liquid balances, mainly for working capital in war production, and some of these will be released during the transition to peace. States, municipalities, and other local governments have also increased their liquidity by debt reduction and accumulation of reserves. These liquid funds can be an asset or a liability to the economy in the search for postwar security and prosperity, depending upon how they are used. If they are put to work creating useful peacetime goods and services, they will cushion the shock of the transition period and will help to maintain a high level of national income and employment. But if these funds are disbursed too early or too rapidly, they will contribute to inflationary price increases which may endanger postwar stability. BANK DEPOSITS AND CURRENCY BILLIONS OF DOLLARS BILLIONS OF DO 40 _. 140 A 120 00 TOTALDEPOSITS / AND CURREN< 80 80 - 60 60 — — — ** OEMAND DEPOSITS ADJUSTV 40 J 40 TIME DEPOSI -1 r 20 — •— — - CURRENCY 0UTS1DEBANKS - 0 V'T DEPOSITS 1938 If the United States is to continue to realize its potentialities in peacetime, it must aim for ever increasing production and consumption. The war has shown the enormous productive power of the economy when there is a demand for its product. The long-term problem of postwar prosperity will be to maintain a high level of demand for capital and consumption goods with a consequent high level of output, employment, and income. The wartime growth in the money supply carries with it a threat of inflationary price advances during and immediately after the war. The most effective means of preventing such inflationary developments is to raise as large a part of war expenditures as possible from taxation, and to depend as little as possible on borrowing and particularly on borrowing from the banking system. It is clear, however, that so far the additional revenue raised by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

IO ANNUAL REPORT OF BOARD OF GOVERNORS taxation in this country has not been sufficient in view of the growth in consumer and business incomes or of the country's urgent needs. Monetary policy and inflation. It is believed by many that inflation and deflation can be prevented by monetary action. The fact that the Federal Reserve System has the power, through changes in the discount rate, through open-market operations, and through modifications in reserve requirements, to make money dearer and scarcer in a boom and cheaper and more abundant in a depression has been taken as an indication that monetary authorities are able, by their actions alone, to maintain economic stability. This is a greatly magnified view of the influence of monetary action on the course of economic life. In the past quarter century it has been demonstrated that policies regulating the quantity and cost of money can not by themselves produce economic stability, or even exert a powerful influence in that direction. The country has gone through boom conditions at times when monetary restraints were being exerted and interest rates were extremely high, and it has continued in depression at times when an active policy of monetary ease was in effect and money was both abundant and cheap. Economic stability depends on a complex of forces and policies, of which credit policy is only one. In order to be effective in bringing about stability the regulation of the availability and cost of money must be integrated with a flexible fiscal policy and at critical times reinforced by direct controls over prices, wages, and supplies. Further experience with selective credit controls, which are discussed elsewhere in this Report, may also bring fruitful results. An important consideration at this time is that, while monetary policy can not by itself prevent inflation, inflationary conditions are certain to result in heavy upward pressure on money rates. When the buying power of money is declining holders of money prefer to exchange it for commodities, equities, or real estate, rather than to invest it at a fixed rate of return, and others are willing to pay high rates for money to be used in speculation and speculative ventures. Consequently, money rates are always extremely high during an inflation. This is an additional reason why, in view of the enormous growth of our public debt, it will be vitally important to keep direct controls in effect after the war is ended, and thus to hold the line on economic stability. These controls can not be abandoned with safety until the flow of civilian goods from the reconverted industrial plant will be sufficient to meet the deferred and current demand of the people backed by their unprecedented holdings of cash and liquid assets. INTERNATIONAL MOVEMENT OF GOLD, GOODS, AND CAPITAL The increased magnitude of our war effort in 1943 was reflected in a strengthening of the trends im international trade and finance which were evidenced in the preceding year. Although the merchandise export surplus was the largest in history, foreign countries acquired a considerable amount of gold from the United States while at the same time adding substantially to their dollar balances. These developments reflect the huge expansion of lend- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM II lease exports and the large expenditures for goods and services in foreign countries by the United States Government and by our troops serving abroad. Total exports in 1943 (excluding shipments to our armed forces abroad) were valued at some 12..7 billion dollars, of which 9.9 billion represented lend-lease goods; in 1941 exports totaled 8 billion dollars, of which 4.9 billion were on lend-lease account. "Cash" exports thus declined from 3.1 billion dollars in 1942. to x.8 billion in 1943, reflecting the increasing pressure of war requirements upon the output of goods for civilian use and upon the availability of shipping space. Merchandise imports, on the other hand, rose from 2..7 billion dollars in 1941 to 3.4 billion in 1943, largely because of increased deliveries from Latin America. Thus despite record exports in 1943, our international trade on a "cash" basis actually resulted in a net deficit of about Goo million dollars as compared with a surplus of 400 million in 1942.. At the same time, the "service" items in the international balance of payments of the United States, increasingly influenced by expenditures in foreign countries by the United States Government and by American troops serving abroad, also called for large net payments to foreigners during 1943. As a result primarily of the net payments by the United States to foreign countries on account of merchandise trade and services, these countries as a group were able to make substantial gold purchases in the United States and still to build up their dollar balances. The central banks of many Latin American countries and of some of the European neutrals converted sizable amounts of their existing or accruing dollar balances into gold, practically all of which was earmarked at the Federal Reserve Bank of New York. As a result of these and other transactions, the total gold holdings of foreigners in this country increased by 804 million dollars during 1943 to 3,477 million at the end of the year. This increase was almost matched by a reduction in the monetary gold stock of the United States, which declined by 788 million dollars during the year to 2.1,938 million; the net effect of other factors affecting the monetary gold stock (gold exports and imports, domestic gold production, and changes in the holdings of the Stabilization Fund) was insignificant. During 1942., gold under earmark for foreign account had increased by 458 million dollars, but this movement was almost wholly offset by other factors (especially gold imports and new domestic production) so that the monetary gold stock scarcely changed over the year as a whole. In addition to foreign purchases of gold, foreign banking funds in the United States were built up by a net amount of 1,176 million dollars during the year as compared with 464 million in 1941. In line with the wartime trend, practically all of this gain was in the accounts of foreign central banks and governments, which at the end of the year held short-term funds with banks in the United States amounting to 3,099 million dollars. Of this amount, 1,080 million represented investments in United States Treasury bills and certificates of indebtedness; almost half of the net increase in official foreign banking funds during 1943 was invested in this form. There was a capital inflow to the United States of 105 million dollars during 1943 as a result of transactions in securities, principally foreign bond redemp- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

II ANNUAL REPORT OF BOARD OF GOVERNORS tions in this market, but this gain was partly offset by an increase of 40 million dollars during the year in the special loan to the Chinese Government by the United States Treasury and by some small increase in outstanding Export- Import Bank credits. WAR FINANCE Monetary developments during 1943 were dominated by war finance. A great volume of funds was obtained through taxation and through the sale of United States Government securities to nonbank investors. Total financial requirements, however, exceeded the amounts raised from these sources and the balance was derived from the sale of Government securities to the banks. In wartime the determining factor of public finance is the amount needed to prosecute the war. To the extent that this is not met by tax revenue it must be raised by borrowing. It is the function of financial authorities to formulate and carry out a financing program that will supply funds as they are needed with the least disturbance to the monetary system and with as little inflationary effect upon the economy as possible. The Federal Reserve System did all in its power during 1943 to contribute to the achievement of these objectives. More specifically: It cooperated with the Treasury in the two major war loan drives and in the continuous effort to sell bonds through pay roll savings plans in order to secure as much nonbank investment as was possible. It took measures to assure sufficient reserves to the banking system to enable banks to purchase such Government securities as had to be issued in excess of those taken by other investors. It maintained stable conditions in the United States Government security market and kept prices and yields within a pattern agreed upon with the Treasury. This policy facilitated the sale of securities by removing all incentive for delaying investment and by encouraging purchasers to hold the securities they had acquired. The Board recommended to Congress that United States Government deposits with banks arising out of war loans be exempted from reserve requirements. Congress adopted this recommendation. In addition to using its powers and resources to facilitate Treasury financing, the Federal Reserve continued to participate in the Government program for guaranteeing loans to contractors and subcontractors engaged in war production. From the inception of this program in the spring of i94x until the fall of 1943, guarantees were in general restricted to loans made to furnish working capital. In September, to meet a situation arising out of changes in war requirements, loans to enable contractors to free their own working capital from war projects were made eligible for guarantee in case of contract cancellation. Federal expenditures and receipts. In this war Government expenditures for all types of war purposes have far exceeded those of the last war. The number of persons in the armed forces is larger and expenditures for subsistence and pay are correspondingly greater; much more elaborate and ex- Digitized fopre FnRsiAvSeE Req uipment is needed; transportation, communication, and storage http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 13 facilities cover a wider range of the world's area; and the Government has participated to a greater extent in financing expansion of plants, other facilities, and inventories needed for war production. Current expenditures for all these purposes, together with those for regular Government activities, have been greatly in excess of current tax receipts, and the balance has had to be obtained by borrowing from banks and the public. Government expenditures in 1943, including those of Government corporations, totaled 91 billion dollars, 85 billion of which was for direct war purposes, while Government receipts amounted to 35 billion. To balance expenditures and to enlarge the balance in the Treasury's fund, the interestbearing direct and guaranteed debt was increased by 57 billion, of which 39 billion was in marketable issues, 15 billion in nonmarketable issues, and the remainder in special issues sold to Government agencies and trust funds. The 57 billion dollar increase in debt should be viewed with reference to tax receipts of 35 billion, an increase of 18 billion over 1942.. The increase in tax receipts reflected greatly increased incomes during 1943, the higher tax levies adopted by Congress in 1942., the placing of personal income taxes on a current payment basis, and the introduction of a system of source collection during 1943. Legislation for additional revenue was under consideration at the close of the year. Nonbank purchases of Government securities. In the war loan drives of April and September, and in the campaign for the sale of savings bonds through pay roll savings plans, the Treasury and the Federal Reserve System constantly endeavored to place as large a part of the public debt as possible outside of the banking system. The authorities endeavored in every way to make it clear to the public that bond purchases were a protection against inflation now and a source of security after the war. The increase in ownership of Government securities by bank and nonbank holders is shown on the chart on the following page. Nonbank investors took 57 per cent of the increase in public debt during 1943 as compared with 51 per cent in 1942.. Increases in holdings outside banks totaled 3Z billion dollars in comparison with Z4 billion in the preceding year and consisted of 14 billion in savings bonds and tax notes, 4 billion in special issues to Government agencies and trust funds, and 14 billion in marketable issues. Millions of Americans bought securities in each drive, and purchases by individuals of longer-term marketable bonds and regular deductions from wages and salaries for investment in savings bonds increased substantially during the year. By December sales of Series E bonds under pay roll savings plans were 460 million dollars a month, an increase of 105 million over December 1942.. In terms of sales to nonbank investors and of total sales for the year the most important features of Treasury financing were the April and September drives. Purchases during the drives totaled 37 billion dollars and accounted for 65 per cent of the increase in the public debt during the year. In the April drive, when purchases by commercial banks were limited to 5.1 billion, nonbank investors bought 13.5 billion of securities; the corresponding figure was Digitized for FRASER http://frase1r.8s.t9lo ubiislfleido.no rgin/ the September drive, when sales to banks were not permitted. Federal Reserve Bank of St. Louis

* 4 ANNUAL REPORT OF BOARD OF GOVERNORS Sales to individuals, partnerships, and personal trust accounts, which absorbed funds that might otherwise have been used to bid up prices of the limited supply of consumer goods, were 5.4 billion in the fall drive as compared with 3.3 billion in the spring drive. This marks progress in the effort to finance the war in a noninflationary way. Insurance companies, mutual savings banks, and nonfinancial corporations invested 12..9 billion dollars in securities during the September drive, considerably more than in the April drive. OWNERSHIP OF U.S. GOVERNMENT SECURITIES BILLIONS OF DOLLARS SELECTED DATES 1929-41; END OF MONTH 1942-43 BILLIONS OF' DOLLARS 90 90 80 70 60 50 40 30 20 10 0 1936 1942 Important features of the war loan drives have been the offering of a variety of issues in order to attract funds from all groups of nonbank investors, full allotment of subscriptions, and a nation-wide organization of volunteer workers. In addition to the three types of savings bonds and the savings notes that are continuously available, during the drives three issues of marketable securities of different maturities were offered. They consisted of certificates, intermediate Treasury bonds, and long-term Treasury bonds. Purchase of Treasury issues by commercial banks. The increase in holdings of Government securities by commercial banks during 1943 amounted to 34 per cent of the increase in the public debt compared with 41 per cent in 1942.. In addition there were substantial purchases by the Reserve Banks which raised the total volume taken by the banking system to 43 per cent of the expansion in debt as compared with 49 per cent in 1941. Subscriptions by commercial banks were limited to 5.1 billion dollars in the April drive, were excluded from the September drive, and were restricted to 3.2. billion in the period immediately following that drive. In addition to subscriptions for new issues, banks purchased some securities in the market from other holders, and in the first half of the year took a portion of the increase in regular weekly offerings of Treasury bills. Most of the increase in bills outstanding, however, was absorbed by the Reserve Banks, Digitized for FRASER the larger part of which represented purchases under option agreements from http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 15 member banks needing reserves. The outstanding characteristic of bank investment during 1943 continued, as in 1942., to be a growth in both amount and proportion to total portfolio in holdings of short- and medium-term Government securities. At the end of the year 2.4 per cent of the marketable Government securities held by commercial banks had maturities of less than one year and 86 per cent were to mature within 10 years, compared with 10 per cent and 63 per cent respectively at the end of 1941. In 1943 as in most of 1942, bank subscriptions for new securities were limited by the Treasury to maturities not exceeding 10 years. Exemption of Treasury war loan deposits from reserve requirements. It has been the practice of the Treasury beginning with the first World War to authorize banks to pay for United States Government securities purchased for their own account or for account of their customers by giving the Treasury credit in so-called war loan accounts. This practice avoids large transfers of funds to the Reserve Banks when securities are sold and makes for greater stability in the money market. The Treasury gradually calls on depositary banks for such amounts as it requires, and since these calls correspond closely to current disbursements, the effect of Treasury transactions on the money market is greatly diminished. At the beginning of 1943 a great many commercial banks had not qualified for carrying war loan accounts, notwithstanding the urging of the Treasury and the Federal Reserve authorities that banks make full use of such accounts. To encourage their use the'Board recommended and in April Congress enacted legislation exempting war loan deposit accounts from reserve requirements and from assessments for deposit insurance. As a result of this legislation, the amount of reserves that banks were required to hold declined sharply in periods of extensive Government financing when bank customers drew on their deposits to pay for Government securities. This gave the banks additional temporary reserve funds, a part of which they invested in Treasury bills or other securities. Later, as the Treasury drew upon the war loan accounts and the funds returned to other accounts, thus increasing the amount of required reserves, the banks sold some of the securities in order to obtain the additional reserves needed. In these transactions the banks made use of the posted buying rate on Treasury bills established by the Federal Open Market Committee in 1942.. The establishment of a fixed rate of discount on bills, together with the option to repurchase at the same rate, was undertaken in 1942. for the purpose of stabilizing the bill market, effecting a broader distribution of bills, and facilitating prompt adjustment of bank reserves to changing conditions. During 1943 banks made extensive use of the facilities offered by the Federal Reserve to the bill market, and this practice helped to achieve the desired results. Toward the end of the year many banks sold certificates to the System Account in order to obtain needed reserves. Federal Reserve purchases of Government securities. Maintaining the structure of prices and yields of Government securities, and supplying banks with adequate reserves to enable them to purchase such amounts of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

i6 ANNUAL REPORT OF BOARD OF GOVERNORS Government securities as banks were called upon to take, continued to be the general objectives of Federal Reserve purchases of Government securities in 1943. During the year holdings of United States Government securities by the Reserve Banks increased by 5.4 billion dollars, as shown on the chart. Bill holdings increased by 5.8 billion and certificate holdings by 1.4 billion, while holdings of bonds and notes declined by 1.8 billion. RESERVE BANK HOLDINGS OF U S. GOVERNMENT SECURITIES WEDNESDAY FIGURES 1942 1943 Treasury bonds were sold by the Reserve System in the first half of the year, when there was a large demand in the market. These sales helped to maintain the structure of yields on Government securities. The increase in certificate holdings came toward the close of the year and reflected largely the purchase of certificates sold by commercial banks in order to replenish reserves drawn down by currency outflow and to meet increases in required reserves. Purchases of special short-term Treasury certificates directly from the Treasury were made by the Reserve Banks from time to time; principally to avoid temporary declines in member bank reserves around income tax dates. Holdings of such certificates, by dates, are shown on page 67. Throughout the year the Reserve Banks purchased and sold large amounts of Treasury bills in response to changes in the reserve position of member banks. The principal cause of the demand for reserve funds was the continuous growth of money in circulation, which amounted to 5 billion dollars in 1943 following an expansion of 4.2. billion in 1942.. The currency outflow was fairly evenly distributed throughout the year. Since a growth in money in circulation, other things being equal, occasions a dollar-for-dollar drain on bank reserves, it necessitates Federal Reserve purchases of Government securities in order to adjust the reserve position of the banking system. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Other influences contributing to loss of reserves were an 0.8 billion dollar decline in the monetary gold stock, which had remained steady at about 2.2..7 MEMBER BANK RESERVES AND RELATED ITEMS BILLIONS OF DOLLARS WEDNESDAY FIGURES BILLIONS OF DOLLARS 25 RESERVE BANK CREDH 1937 1938 1939 1940 1941 1942 1943 15 1941 1942 1943 billion from the middle of 1941 to the beginning of 1943, and a growth of 0.6 billion in funds held by foreign central banks and governments in their accounts at the Reserve Banks. Some additional reserves of a more or less Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 ANNUAL REPORT OF BOARD OF GOVERNORS temporary nature were supplied by the issuance of Federal Reserve Bank notes and by small reductions in Treasury and nonmember bank deposits at the Reserve Banks. The net result of the various factors was a relatively small decline in member bank reserve balances, as indicated by the chart. Required reserves increased somewhat, owing to the rapid growth of bank deposits which-was occasioned by bank purchases of Government securities. Deposits expanded by 18 billion dollars at all banks in the country, which is to be compared with an expansion of 5 billion in currency in circulation. The effect of this growth upon the reserve position of banks was relatively small, however, both because of fractional reserve requirements in general and because of the total exemption from reserve requirements of United States Government war loan accounts which became effective during the year. Excess reserves of member banks, which had been declining continuously from the peak of 7 billion dollars reached near the end of 1940, declined from a level of about 2. billion at the beginning of 1943 to about 1 billion at the end of the year. As in 1942., the heaviest drain on reserves was felt in New York, where the Treasury continued to raise more funds than it sp&nt there. Commercial banks in New York, Chicago, and in some other cities continued to follow a policy of relatively full investment of their funds and adjusted their reserve positions through the purchase and sale of Treasury bills under the buying rate and repurchase agreement of the Reserve Banks. At reserve city banks excess reserves declined from a level of about a billion dollars at the end of 1942. to about 300 million at the end of 1943. The buying rate on bills established by the Reserve System, combined with the option to repurchase at the same rate, works in the direction of giving banks greater flexibility in the management of their reserve funds. Also, the maintenance of the broad level of prices of other Government securities provides a high degree of liquidity. Under these policies and with the large volume of short-term securities held by banks, excess reserves no longer have the special significance for bank liquidity that has been attached to them in recent years. In general, however, most banks continue to carry some excess reserves and there appear to be a few which have the clear policy of not allowing their excess reserves to fall below certain fixed levels. Country banks have gained reserve funds as their requirements have grown and their excess reserves continued close to 800 million dollars in 1943 as in 1941. Prospects on interest rates. Rates of interest on Government securities were maintained during the year within a range from ^ of 1 per cent on three-month bills to x^ Per cent on long-term bonds. The bill rate was determined by the fact that, by direction of the Federal Open Market Committee, the Federal Reserve Banks stood ready to buy all Treasury bills offered at that rate, while the bond rate largely reflected conditions in the investment market. The long-term Government bond market was strong in 1943 and the System, as a part of its policy to maintain stable conditions in that market, sold substantial amounts of bonds in the early part of the year. Rates on other high-grade bonds also remained at low levels. Short Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 19 rates, after a sharp rise from the low point reached in 1940, are still low compared with past periods and could advance further in response to market conditions without affecting the rate on long-term money. Long-term rates on Government bonds have become stabilized at their present level after a decline lasting for many years. The present situation raises the question of the probable trend of long-term interest rates after the war. Prospects are that conditions in the postwar period will favor the continuance of low long-term interest rates. Individuals and corporations will have an enormous volume of liquid assets accumulated in the period of high incomes and restricted opportunity for the purchase of goods. In addition, so long as the national income remains high there will be a large amount of current savings available for investment. The situation will differ radically from that after the last war, when liquid accumulations of businesses and individuals were far smaller than now. Also, banks were then borrowing heavily, whereas now they are practically free from debt. Public policy with regard to long-term interest rates should be part of a program to achieve continuous full utilization of the country's material and human resources. It should be formed with reference to the fact that after the war this country will be the greatest creditor nation in the world and that in creditor countries, according to past experience, the interest rate on longterm capital is likely to be low. Over the years a low cost of money to borrowers on long-term should tend to promote increased employment by encouraging capital outlays in both old and new enterprises. It would facilitate the task of refunding the public debt and safeguard the value of Government security holdings of the millions of individuals, educational institutions, trusts, banks, insurance companies, and other investors, who have placed tens of billions of dollars in Government bonds to help finance the war. Guaranteed loans to industry. The program for guaranteeing loans to industry for war production, under which the Federal Reserve Banks are serving as fiscal agents for the War Department, the Navy Department, and the United States Maritime Commission, continued to provide financing for current war production and was also broadened in September 1943 to provide for the release of the working capital invested by contractors in war production at the time of contract terminations. The decision to broaden these credit facilities was reached with a view to preventing any lag in war production, as set forth in more detail on page zo. Guaranteed loans to industry for war production were first provided for by the President's Executive Order 9111, issued on March 2.6, 1942.. The War and Navy Departments and the United States Maritime Commission were authorized to guarantee and to make loans for the purpose of financing contractors, subcontractors, or others engaged in any business or operation deemed by those agencies to be necessary, appropriate, or convenient for the prosecution of the war. The Federal Reserve Banks were authorized to act as agents in carrying out the provisions of the Order, subject to the specific Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

iO ANNUAL REPORT OF BOARD OF GOVERNORS instructions of the guaranteeing agencies and the general supervision of the Board of Governors. After consultation with the guaranteeing agencies, the Board issued its Regulation V, effective April 6, 1941, prescribing general rules and policies for the guidance of Reserve Banks in handling guaranteed loans under the war financing program. There has been no necessity for changing the Regulation since that time. The adoption by the guaranteeing agencies of a new standard form of guarantee agreement, dated April 6,1943, made no change in policy with respect to loans. The new form incorporates the substance of the one formerly used, and the general intent of the agreement remains the same. The scope of operations under the guarantee program was enlarged by Executive Order 9336, issued by the President on April 2.4, 1943. This order authorized the Office of Lend-Lease Administration and the War Shipping Administration to indemnify any guarantees made on their behalf or for their benefit by the War and Navy Departments and the Maritime Commission. During the summer of 1943, it became increasingly evident that many businesses engaged in war production were reluctant to assume additional war contracts because of the fear that their working capital would be tied up in such contracts at the termination of the war. They felt this might delay their return to peacetime operations and thus put them in an unfavorable competitive position. In order that war production schedules might not be interfered with because of such fears, the guaranteeing agencies and the Board of Governors announced on September 1 a broadened basis for the guaranteeing of loans under Regulation V which enables contractors who make arrangements in advance to obtain the use of most of their own working capital promptly upon termination of their contracts. Loans guaranteed upon this broadened basis are known as VT loans to distinguish them from loans made without special reference to release of working capital. The maximum amount of credit which a contractor may obtain under a VT loan is based upon his receivables, inventories, work in process, and, without duplication, amounts paid or to be paid by him to subcontractors or suppliers because of contract cancellations. Guarantee agreements for VT loans provide that the percentage of the loan guaranteed is not subject to increase upon cancellation of war production contracts as is the case with V loans. Also, provision is made for the guaranteeing agency to share in any commitment fee charged the borrower on the undisbursed portion of the loan, which fee is limited to one-half per cent per annum. VT loans approved to the end of the year 1943, which are included in the figures of guaranteed loans given below, aggregated 914 million dollars for 132. loans. By the close of 1942. the War and Navy Departments and the Maritime Commission had approved 1,700 applications for guarantees of loans totaling z.j billion dollars. By December 31, 1943, the number of approved applications had increased to 5,300 and the amount to 6.6 billion dollars. Loans outstanding at the end of the year under executed agreements amounted to 1.9 billion dollars, of which 1.6 billion were guaranteed. In addition, about 3.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 21 billion dollars were available to borrowers under guarantee agreements outstanding. A recent analysis indicated that over one-half of the number of guaranteed war production loans were for $100,000 or less, and less than 12. per cent were for more than 1 million dollars. Loans of 25 million dollars or more constituted about one-half of the aggregate dollar amount of loans approved. The percentage distribution of the number of loans authorized, according to size of loan, is given below. Percentage of total Cumulative pe Amount of loan number of loans distributi Up to $5,000 3.6 3.6 $5,OOI-$IO,OOO 5-1 8.7 $IO,OOI-$2-5,OOO 11.9 10.6 $2.5,ooi-$5o,ooo J3-7 34-3 $5O,OOI-$IOO,OOO 16.7 51.0 $IOO,OOI-$2.5O,OOO 16.9 67.9 $2.5O.OOI-$5OO,OOO 12..4 80.3 $5OO,OOI-$I,000,000 7-9 88.2. $I,OOO,OOI-$5,000,000 9.0 97.2. $5,OOO,OOI-$IO, 000,000 1.4 98.6 $IO,OOO,OOI-$2-5,000,000 0.8 99-4 $2-5,OOO,OOI-$5O,OOO,OOO 0.3 99-7 Over $50,000,000 0.3 100.0 A majority of the borrowers have been relatively small business concerns. As shown by the second table, in which borrowers are classified according to assets, 2.5 per cent had assets of less than $50,000 each and 68 per cent had assets of less than $500,000 each. Assets of borrower Percentag;e of total number Under $50,000 24.7 $50,000 to $500,000 43.6 $500,000 to $5,000,000.. 25.1 $5,000,000 and over.... 6.1 No information 0.5 Total 3,245 100.0 1 Includes 171 borrowers, for whom asset size is not available, with loans of less than $50,000 each. 2 Includes 113 borrowers, for whom asset size is not available, with loans of between $50,000 and $100,000 each. Most of these loans and agreements to make loans were made by commercial banks, but other financing institutions have also participated. Very large loans have been handled through participations entered into by a number of institutions. In a few cases V-loan financing has been provided by the Federal Reserve Banks and by the Reconstruction Finance Corporation. Functions of the Reserve Banks with respect to the negotiation of V loans include analysis of the financial integrity of the applicant, determination of the type of financing best suited to meet the particular situation, and the preparation of the necessary documents. In the interest of decentralization and to speed up the V-loan procedure, applications for guarantees are handled without reference to Washington on behalf of the War Department when the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2.2. ANNUAL REPORT OF BOARD OF GOVERNORS amount of the loan is not more than $100,000 and on behalf of the Maritime Commission when the guaranteed portion of the loan is not more than $100,000. All other applications for guarantees are submitted to Washington for approval. Utilization of the twelve Federal Reserve Banks and their twenty-four branches has decentralized the financing of war production to a considerable extent, and facilitated the procedure for the Government as well as for loan applicants. SELECTIVE CREDIT CONTROL BY THE FEDERAL RESERVE As indicated in preceding sections of this Report, Federal Reserve policy during the year was principally concerned with supporting war financing with as little inflationary consequence as possible. Among the several instruments of credit control at the disposal of the Board of Governors, however, there are two which differ in principle and method from the others. These are the regulation of stock-market credit by fixing minimum margin requirements and the regulation of consumer credit by such methods as prescribing minimum down payments and fixing maximum maturities. The mechanism of these controls, like that of the others, is such that they can be either stiffened or relaxed from time to time, by administrative action, as circumstances may demand. They differ from the other methods, however, in two major respects. (1) They impose a limit on the amount of credit that borrowers and other credit users are in position to demand, rather than on the cost and volume of credit that lenders have available; they may, therefore, limit the use of credit, regardless of the fact that there may be an abundant supply. (2.) They influence the volume of credit by affecting the amount used for specified purposes rather than by limiting the amount used for all purposes. Because of this last characteristic, these instruments of credit control are sometimes called "selective" instruments. The addition of such instruments as these to the formal arsenal of a central banking system is a comparatively recent innovation. They have been used informally by different central banks for a long while, but significant legislation dates back only to 1934 when the Securities Exchange Act directed and empowered the Board to fix margin requirements "for the purpose of preventing the excessive use of credit for purchasing or carrying securities." The analogous power to regulate consumer credit was inaugurated in August 1941, when an Executive Order, effective for the present national emergency, was issued by the President. Up to the present time, therefore, the System's experience with these new instruments has been of short duration, but it has nevertheless been long enough to provide significant materials for the study of the principle which they embody. This principle has accordingly been under continuous study, both inside and outside the Federal Reserve System, not only in its application to the fields to which it has already been applied but also in more comprehensive applications. Such studies take account of the historical fact that there are times when the traditional monetary controls, such as the discount rate and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM open-market operations, are wholly or largely inapplicable. Constructive possibilities which the selective principle may offer in these and other types of credit, by way of contributing to the long-run stability of a progressive national economy, are worthy of thorough exploration. Margin requirements. Since November i, 1937, requirements under the Board's Regulations T and U relating to extensions of credit for the purpose of financing security transactions have remained the same. At that time, coincident with the decline in stock prices, margins on security purchases were reduced to 40 per cent and margins on short sales were set at 50 per cent. During the six-year period from November 1, 1937 to December 31, 1943, the stock market operated within a relatively narrow range. Only for a short time in the early part of 1941 did the price level fall below the low point of 1938, and it did not at any time rise above the high point of that year—although a sustained advance beginning in 1^1. had by July 1943 carried prices to a point above the high of 1941 and about level with the high points of 1938, 1939, and 1940. Subsequently prices fell off slightly but remained near the level attained in July. Throughout this six-year period the volume of trading was considerably below that of earlier years, although there was a considerable but short-lived increase in activity in the first half of 1943. Debit balances of customers of New York Stock Exchange firms which aggregated about 1.1 billion dollars in October 1937 declined to about 0.5 billion in August 1942.. Coincident with the recovery in the market, customers' debit balances rose to about 0.8 billion dollars at the end of July 1943, and they remained close to that general level throughout the rest of the year. The sustained advance in stock prices which began in April of 1942., coupled with the subsequent increase in trading and the growing total of customers' debit balances, particularly during the first half of 1943, emphasized the importance of giving careful attention to the various factors of the situation, including the possibility that a runaway stock market might contribute to inflationary sentiment in the country as a whole. Conditions did not, however, appear at any time to be such as to call for an increase in margin requirements, although it was recognized that the situation should be watched closely so that precautionary measures could be taken well in advance of dangerous developments. Restrictions on consumer credit. During 1943, restrictions on consumer credit, as applied through the Board's Regulation W, continued in much the same form as those made effective on May 6, 1942., when the Regulation was amended to expand its scope. On a wide list of consumer durable and semidurable goods, instalment sales are required to have down payments of at least 333^ per cent and maturities not exceeding ix months. Sales of listed articles in charge accounts must contemplate payment by the tenth of the second calendar month after the purchase. Instalment loans are also limited to ii months and single-payment loans are limited to 90 days with renewals totaling not more than 12. months from the date of the original loan. In the course of the year a few minor administrative changes were made in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2-4 ANNUAL REPORT OF BOARD OF GOVERNORS provisions of the Regulation for the purpose of helping merchants to meet operating problems. As is shown by the chart, outstanding consumer credit continued to decline during the year but at a less rapid rate than in 1941. At the lowest point, on August 31, the total amounted to about 4.8 billion dollars, which was is^ per cent less than the 6.2. billion dollars outstanding on December 31, 1942.. During the last four months of the year, largely for seasonal reasons, consumer credit expanded to about 5.x billion dollars, and the net decline for the year was about 1 billion. CONSUMER DEBT BILLIONS OF DOLLARS ESTIMATED FIGURES, END OF MONTH BILLIONS OF DOLLARS 12 12 • \ y \ * - > / - 1934 1936 1938 1940 1942 SOURCE.—This series was assembled by the Bureau of Foreign and Domestic Commerce from monthly estimates of consumer instalment debt 1919-1938, prepared by Duncan Holthausen while at the National Bureau, and annual estimates of all types of consumer debt originated by Rolf Nugent of the Russell Sage Foundation. In August 1942. the series was transferred from the Bureau of Foreign and Domestic Commerce to the Board of Governors. This series is limited to debt maturing within five years and consists of instalment and single payment loans and of charge account and instalment credit for goods and services. Regulation W has continued to play a part, although clearly a relatively small part, in the national effort to restrain inflationary forces. A certain amount of consumer income has been absorbed in retiring pre-existing debt; less new debt has been created than would otherwise have been the case; and what new debt has been incurred has been paid off more rapidly. For example, instalment purchases at furniture stores, which on the average were being paid off in about 10 months at the end of 1942., were beingspaid off in about 8 months at the end of 1943. These results were due not only to the specific provisions of the Regulation, but also to a spirit of restraint on the part of the public in asking for credit and on the part of credit grantors in extending credit, which was stimulated by the Regulation and by the Presi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 2.5 dent's "hold-the-line" program. In addition there was the important fact that the supply of goods commonly bought on long-term credit was greatly curtailed. It should be noted in this connection, however, that the field covered by the Regulation, as amended on May 6, 1942., was much broader in scope than the instalment purchasing of heavy durable consumer goods like automobiles, refrigerators, and washing machines. It was aimed at restraint on the creation of all kinds of consumer credit dollars, because these would add to the already excessive purchasing power of the public and would be used to bid for all kinds of goods and services with consequent upward pressure on their prices. Tendencies evident in the latter part of 1943 indicate that consumer credit outstandings may be approaching the lowest level likely to be achieved during the war period. It is not to be assumed from this fact, however, that the work of regulation has come to an end. The need for keeping consumer credit from expanding in any substantial amount will still be present. When production of the heavier durable consumer goods is gradually resumed but production of goods and services in general still falls short of effective demand it will be particularly desirable to prevent large amounts of consumer credit from being created. On the other hand, sufficient credit will be available to meet the vital needs of the public as tested by wartime criteria. As is shown on the chart, outstanding credit at the end of 1943 was as large as it was at the end of 1935. ^n ^act» consumer credit not directly associated with heavy durable consumer goods was, at its lowest point in 1943, about as high as it was in 1937 and 1938. POSITION OF BANKS IN THE WAR ECONOMY Banking developments in 1943 were influenced predominantly by the requirements of war finance. Investments continued to increase rapidly, reflecting almost entirely bank purchases of United States Government securities, and deposits showed a corresponding growth. There was little increase in loans. Loans made for the purpose of purchasing or carrying securities (mostly Government securities) increased, while consumer loans continued to decline. Loans to finance war contracts expanded further but business loans for nonwar purposes declined. Banking services expanded greatly, particularly those connected with the distribution of Government war bonds, the cashing of a continuously increasing volume of Government checks, the handling of ration coupons, and other phases of the war effort. DEPOSITS AND CURRENCY All groups of banks throughout the country shared in the growth in deposits and holdings of Government securities, but increases were relatively larger for reserve city and country banks than for banks in New York City -and Chicago. Changes in loans, investments, reserves, and deposits at different groups of member banks are shown on page 2.6. Banks in New York City and Chicago showed smaller increases in assets and deposits than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Xb ANNUAL REPORT OF BOARD OF GOVERNORS the other groups of banks. Having previously developed the practice of depending on sales of bills to the Reserve Banks in order to adjust reserve positions, by the end of 194Z the banks in the financial centers had employed practically all of their resources. Consequently they could expand their loans and investments in 1943 only as they obtained additional reserves. Banks in reserve cities and country banks, on the other hand, had a substantial amount of unused funds at the end of 1942. and gained deposits during the year. They were thus able to expand their holdings of Government securities by large amounts while their reserves also increased. CHANGE IN PRINCIPAL ASSETS AND LIABILITIES—ALL MEMBER BANKS DECEMBER 31, 1942. TO DECEMBER 31, 1943 [In billions of dollars] Central reserve city All member banks Reserve Country Item m b e a m nk b s er Y Ne o w rk - Chicago m b e c a m i n ty k b s er m b e a m nk b s er Loans and investments—total + 15.0 +2.0 +0.6 +6.6 +5.8 Loans . . +0.2 +0.3 +0.2 +0.1 -0.4 U. S. Government securities +15.4 +2.0 +0.4 +6.6 +6.3 Other securities -0.6 -0.3 -0.1 -0.1 Reserves with Federal Reserve Banks. -0.2 -0.8 -0.1 +0.2 +0.5 Demand deposits, adjusted +10.1 +2.0 +0.5 +3.8 +3.8 U S Government deposits + 1.6 -0.8 +1.4 +0.9 Time deposits +2.4 +0.1 +0.1 +1.1 +1.2 * Less than 50 million dollars. Expanding deposits increased the amount of reserves that banks were required to hold. At central reserve city banks there were practically no excess reserves during the year; at reserve city banks the increase in requirements more than absorbed the small gain in reserves, and excess reserves declined from an average of around a billion dollars in December 1942. to about 300 million in December 1943. At country banks, the growth in reserves kept pace with the growth in requirements, and excess reserves continued during the year at close to 800 million dollars. Distribution of deposit growth. During 1943 there were increases of about 14 billion dollars in demand deposits at all banks, 4.5 billion in time deposits, and 5 billion in currency outside banks. It is estimated that demand deposits of individuals increased by about 5 billion dollars during the year, and that the larger part of the reported increase in demand deposits was in business accounts. Most of the growth in time deposits, which moved upward in 1943 after several years of little change, and also the increase in currency, were accounted for by individual holdings. The increase in the total of bank deposits and currency in 1943 was somewhat more rapid than the increase in gross national product or in income payments and was considerably more rapid than total consumer expenditures and retail trade. There was a decline in the rate of turnover of deposits. This would indicate that an increasing portion of the deposits and currency represents idle balances or uninvested savings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM IT/ Since the beginning of 1942., and particularly during 1943, the course of Treasury receipts and expenditures has been a dominant influence on the distribution of deposits as well as on their growth. During war loan drives there have been wide shifts from private to Government accounts, while between drives, as the Treasury drew upon its war loan deposits to meet expenditures, the funds shifted back to private accounts and were widely distributed throughout the country. The Treasury built up its deposit balances in war loan accounts to a high level at the end of 1942. and generally maintained larger balances than usual throughout 1943. A large portion of the total increase in demand deposits and the largest percentage growth occurred in medium-size and small cities and towns. The growth in demand deposits has been shared by small and large business units, by depositors engaged in manufacturing and mining, in commerce and trade, and in agriculture, and by urban and rural communities in all sections of the country. . Information available for the first half of the year indicates that at least two-thirds of the increase during that period accrued to businesses, including unincorporated firms. In percentage terms expansion has generally been greatest in the southern and western districts of the United States, where there were increases of one-third to one-half in demand deposits, and least in the northeastern districts, particularly in large city banks. The exceptionally large growth in deposits in areas known to be active in war production reflects the general tendency for funds to be held near the point of production in periods of expanding activity rather than near the financial offices of business concerns. The rapid growth in agricultural income also contributed to the growth of deposits at country banks. For the year 1943 as a whole, as in 1942., New York City lost funds on balance through Treasury transactions and commercial and financial operations, and regained funds through the open-market operations of the Reserve System. Adjusted demand and United States Government deposits increased only 1.2. billion dollars as compared with an increase of 4.5 billion in 1942.. Treasury collection of taxes and sales of new securities continued to take more money from the New York market than was returned by Treasury expenditures. The market also lost heavily from currency withdrawals and transactions with foreign accounts. During the first six months of 1943 there was an inflow on commercial and financial accounts, in contrast to the steady outflow in 1942.. During the last half of the year, however, these accounts were again drawn down. The inflow of funds on commercial and financial accounts may have represented the accumulation of business balances in New York. Working balances in the areas of production may have become ample for current operations, and business concerns may have placed funds in excess of such needs on deposit in the money-market banks pending investment or other use. Another source of the inflow may have been purchases of Government securities in New York by banks and other investors outside the city. During the war loan drives in April and September, however, there was a heavy with- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2.8 ANNUAL REPORT OF BOARD OF GOVERNORS drawal of funds from New York, presumably to make purchases of securities elsewhere or to replenish working balances that had been exhausted in making subscriptions. The effect of these and of further heavy withdrawals in December on the supply of funds in the market was largely offset by Federal Reserve purchases of securities. Growth of currency. Growth of deposits during 1943, as in previous war years, was accompanied by expansion of currency in circulation. The rate of currency outflow was substantially more rapid in 1943 than the increase in wage and salary payments or consumer expenditures—the principal purposes for which currency is used—thus continuing a development that had prevailed in a less striking way during 1942.. More large denomination currency went into circulation in 1943 than in 1942., a fact which suggests that more funds were being held idle. Although 10 and 2.0 dollar bills accounted for the greater part of the increase in both years, in 1943 the relative increase in 50 and 100 dollar bills was greater than for any other denominations. Continued heavy income receipts by the low and middle income groups, movement of population to new centers of war production, expansion of the armed forces, and bank service charges on checking accounts appeared to be continuing factors in the large currency outflow. Currency growth in this country has not been materially different from that in other countries with highly developed deposit banking systems. Since 1939 the percentage increase here has been slightly smaller than in Canada and slightly larger than in Great Britain. Deposits after the war. The large expansion of bank deposits and currency in recent years raises the question as to what changes are likely to occur after the war in the volume and distribution of deposits and what effect such changes may have on the position of banks. Decline in the volume of deposits in all commercial banks taken as a whole can be caused by withdrawals of currency or by an outflow of gold from the country, or it may reflect a reduction in the banks' loans and investments. Only the last of these causes is likely to occasion a substantial decline in deposits in the postwar period. The volume of currency in circulation now is so large that it is much more likely to decline after the war (and thus increase deposits) than to expand further (and thus reduce deposits). Neither is there any likelihood of a gold outflow of sufficient volume to be of consequence in relation to the total volume of deposits. Since about two-thirds of the earning assets of banks at present consist of United States Government securities, any substantial reduction in bank credit would necessarily mean a decrease in the banks' holdings of these securities. Such a decrease might be the result of a rapid contraction of the Government debt or of the sale to nonbank purchasers of Government securities now held by banks. In case of either of these developments bank deposits would decline, but their decrease would release required reserves which would be available to serve as a basis of an expansion in loans and investments (and thus in deposits) equal to the previous contraction. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 29 When the present situation is compared with that prevailing after the last war or in the 1930's, the outstanding difference is that since the banks' portfolios now consist in large part of United States Government securities, the banks are not likely to be under pressure to liquidate assets, as they were in the earlier periods. At those times the expansion in deposits had been due in large part to increases in bank loans during periods of rising values. In the period preceding 19x0, much of the increase was [in loans on commodities based on rising commodity prices, while in the years ending in 1919 the expansion was in security loans based on rising stock prices. In both cases a collapse in values resulted in a weakening of the quality of bank assets, with consequent urgent pressure by the banks to liquidate loans. After the present war there is no prospect of a substantial contraction of deposits from this cause. Aside from such changes as may take place after the war in the total volume of deposits, there will no doubt be a considerable movement of deposits between banks and between regions. Growth of deposits during the war has been widely distributed over the country. It has been largest in places where war activity has expanded most. At financial centers, where tax payments and purchases of United States Government securities have been heaviest, the deposit growth has been least marked. It is possible that after the war there will be a flow of deposits from scattered communities to the financial centers. Individual banks may lose deposits through transfers to other banks and may find it necessary in meeting the drain to dispose of some of their Government securities. In such cases, however, other banks will receive the deposits and will be in a position to buy additional securities. The flexibility of the banking system and of many individual banks in meeting declines in deposits has been enhanced by the practice of adjusting the maturities in security portfolios to the character of deposits. In general, a large proportion of bank holdings of Government securities is in short maturities which are not subject to wide fluctuations in price. In case large and abrupt interbank movements of deposits should result in temporary disturbances, the Federal Reserve authorities would be in a position to take measures, in accordance with their well-established policy, to restore stability to the money market. OPERATIONS AND STRUCTURE Bank earnings. Earning assets of the banking system increased by about 2.5 per cent during 1943 following a 2.8 per cent increase during 1942.. At the close of the year they totaled around 98 billion dollars, over two-thirds of which consisted of Government securities. The increase in the total volume of assets more than compensated for lower yields on investments as compared with loans, and bank earnings were higher than at any time since the banking holiday. The large growth in holdings of Government securities, combined with the decline in loan volume, has produced widely different effects on the earnings Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3<3 ANNUAL REPORT OF BOARD OF GOVERNORS of individual banks. In 1942. net earnings of central reserve and reserve city banks increased while those of country banks declined. In 1943 earnings at all classes of banks increased, but the biggest gain was at the money-market banks in central reserve cities. These variations can be explained largely by differences in the spread between loan rates and investment yields. At large banks, where loan rates have not been much higher than rates on investments, earnings on an enlarged volume of Government securities have more than offset the decline in earnings on loans. At smaller banks, loan rates are generally much higher than rates on Government securities. Consequently, while showing an increase in the total volume of earning assets, some of these banks have suffered a decline in earnings. Capital accounts. As a result principally of larger earnings and no material change in the amount of cash dividends declared on bank stock, capital accounts of member banks increased about 374 million dollars in 1943, com~ pared with 114 million in 1942.. Towards the close of the year a number of the larger banks declared substantial stock dividends out of accumulated surplus and profits, thus increasing the "fixed" portion of their capital structures, and some sold additional common stock. All of this fits in with the general policy of bank supervisory authorities, that banks should strengthen their capital structures and take whatever other steps may be necessary to place them in the best possible position to meet postwar developments. Increases in banks' capital accounts in recent years have been much smaller, relatively, than increases in bank liabilities. There is, in other vsrords, less margin for the protection of the general depositors, if the nature of bank assets is disregarded. But most of the increase in liabilities has been accompanied by growth in assets involving no risk of loss, and the ratio of capital accounts to what are sometimes termed "risk assets" (all assets other than cash, reserves, due from banks, and Government securities) is higher now than it was at the beginning of the war. On December 31,1943, this ratio for all member banks as a group was 2.9 per cent, compared with 13 per cent on December 31, 1941. Change in number of banking offices. Continuing the trend of recent years, the number of banks declined slightly in 1943. It was 14,579 on December 31, or 101 below the number at the end of 1942.. The number of branches and additional offices, including banking facilities at military reservations, increased by 194 to 3,933 in 1943. Other than the special wartime offices, there was an increase of only two in the number of branches and additional offices established by banks. As in other recent years, the decrease in the number of banks was due almost entirely to consolidations and voluntary liquidations. These resulted in a gross decrease of 148 banks. Four banks suspended during the year—-two member banks and two insured nonmember banks. The number of banks newly organized in 1943 was 49, compared with 2.2. the year before. The net decrease in number of banks during the year was 101. The number of branches and additional offices established by banks, exclud- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM ing offices at military reservations, was 49, while the number discontinued was 47. The new branches were about equally divided between de novo banking offices and conversions of existing banks into branches. Threefourths of the 49 new branches and half of the 47 branches discontinued were located outside the cities of their respective head offices. The number of banking offices opened at military reservations was \^L\ all of these were established through arrangements made by the Treasury Department with banks designated as depositaries and financial agents of the Government. Increase in banking services. The volume of transactions handled by the banking system increased considerably during 1943, in reflection of the banks' continued contribution to the war effort. Aside from participating in the management of the war loan drives aijd purchasing securities for their own accounts, banks handled subscriptions to securities sold during the drives. In addition, throughout the year they sold and issued a large volume of savings bonds to the public and to their employees through pay roll savings plans. Banks certify owners' signatures on war savings bonds, which are redeemed outside of Washington solely by the Federal Reserve Banks. As previously indicated, banks have made many- loans to contractors and subcontractors engaged in war operations. Additional loans were made to finance the construction or repair of homes in war housing areas, and to finance the production of adequate food to meet the needs of the armed services and civilian personnel at home and abroad. At the request of the Treasury, banks have established facilities for the receipt of deposits and payment of checks at more than 2.00 military reservations since the war began. They also cash millions*of allotment and allowance checks issued to soldiers' and sailors' dependents, provide trust services for men and women in the armed services, etc. Many banks make up cash pay rolls for war industries and, in some cases, for the Army and Navy. The tax withholding program of the Treasury and the ration banking plan of the Office of Price Administration have created new functions for the banking system. The banks provide receipts for taxes withheld and transfer the funds to the Reserve Banks from time to time as required by the Treasury. Millions of ration coupons and stamps are received by the banks from dealers in rationed products. Accounts for certain rationed commodities are set up in much the same way as deposit accounts for cash and the banks keep a running balance between deposits of coupons and stamps and withdrawals to replenish stocks of rationed goods. After their expiration dates, coupons are kept for the period required by the Office of Price Administration and then destroyed. Toward the close of the year arrangements were completed for banks to act as distributing agents for millions of fibre tokens to be issued by the Office of Price Administration in connection with the rationing program. Banks assist the Treasury in its control of the movement of funds and assets belonging to "nonnationals" by effectuating the Treasury orders and licenses which make limited amounts of such funds available to their owners. The census of such funds and assets, which the banks had been making for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3 2- ANNUAL REPORT OF BOARD OF GOVERNORS Treasury, had been practically completed prior to 1943. Banks also are the principal means through which the Treasury is now endeavoring to obtain a complete census of American holdings of foreign assets. Increase of membership in Reserve System. Despite the net decrease of 101 in the total number of banks, membership in the Reserve System continued to increase in 1943 and registered a net gain of 59. National banks— required by law to be members of the Federal Reserve System—declined by a net of 41, principally because of consolidations. State member banks showed a net increase of 100—about the same as the year before, but considerably less than in 1940 and in 1941. The 6,738 member banks (including three small mutual savings banks) that were in operation on December 31, 1943, accounted for 48 per cent of the number and about 87 per cent of the deposits of all commercial banks in the United States. While nearly all of the larger banks are member banks, most of the member banks are of small or moderate size. In December i94x, for example, 57 per cent of the member banks had deposits of 2. million dollars or less each, and 80 per cent had deposits of 5 million or less. The gross number of State banks admitted to membership in 1943 (including four newly organized banks) was 117. All but one of the 113 operating State banks admitted to membership were already members of the Federal Deposit Insurance Corporation. Total deposits of these 113 banks amounted to about 3x0 million dollars. Admissions of State banks to membership were distributed throughout the twelve Federal Reserve districts, but twothirds of the total number admitted were in three districts—Chicago, Cleveland, and New York. In 1943 State bank membership in the Reserve System reached 1,698, its record peak. There were 50 more State banks in the System on December 31 than there had been in June 192.x, when membership for State banks was at its former peak. Relative to the number of State banks in existence on the two dates, State bank membership is now two and one-half times larger than in 1911. In June of that year State member banks were approximately 8 per cent of all State commercial banks; now they are 19 per cent. The proportion of State commercial bank deposits held by State member banks is also considerably higher than it was in 192.2., the percentage being 70 now as compared with 48 in lyiJL. Par and nonpar banks. The Federal Reserve Act provides that no exchange charges for the collection or payment of checks shall be made against the Federal Reserve Banks; consequently only checks on which no exchange is charged are collectible through the Reserve Banks. To facilitate collections, there is maintained a "Federal Reserve Par List," comprising all member banks—which are required to remit at par for checks presented to them by the Reserve Banks—and nonmember banks that have agreed to pay without deduction of exchange charges such checks drawn upon them as are forwarded for payment by the Reserve Banks. During 1943 there was a net increase of 79 in the number of banks on the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 33 par list, consisting of 59 member banks and zo nonmember banks. The total number of banks on the par list at the end of the year was 11,501, comprising 6,738 member banks and 4,763 nonmember banks. The number of nonmember banks (other than mutual savings banks and banks on which no checks are drawn) not on the par list was 2., 52.9, compared with 2.,7io a year earlier. The net reduction of 181 in the number of nonpar banks is the result principally of the transfer of 191 banks to the par list (111 in Iowa) and the termination of existence of 2.6 nonpar banks. The decrease in the number of nonpar banks took place largely in July, following the enactment in Iowa of a law providing for the clearing at par of checks drawn on all banks organized under the law of that State; there were in nonpar banks in Iowa at the beginning of 1943. A considerable number of nonmember banks were also added to the par list in December. The gross decreases in the number of nonpar banks were offset in part by the withdrawal of z6 banks from the par list and the organization of zo new nonpar banks. Of the x,5^9 nonpar banks at the end of the year, about 95 per cent were located in 16 States as follows: Minnesota 4x0, Georgia 2.63, Mississippi 174, Tennessee 166, Nebraska 154, Wisconsin 145, Arkansas 12.8, Alabama 117, North Carolina 1x7, South Carolina 114, North Dakota in, Louisiana 104, South Dakota 98, Missouri 94, Florida 88, and Texas 88. Of the remaining ix8 nonpar banks, 37 were located in Virginia, zz in Washington, zi in Montana, iz each in Illinois and Oklahoma, 10 in Kentucky, and a total of 14 in six Other States. Absorption of exchange charges. There was an important development during the year in connection with the practice pursued by some banks of absorbing exchange charges for correspondent banks. The Board was presented, in a specific case, with the question whether the absorption of exchange charges by a particular member bank constitutes a payment of interest on demand deposits in violation of Section 19 of the Federal Reserve Act, and of the Board's Regulation Q. The Board held that the absorption of exchange charges in the case under consideration was equivalent to "a payment to a depositor for the use of funds constituting a deposit," and, consequently, under the Board's definition of interest, was a payment of interest and was in violation of the law and the regulation. This ruling was published in the Federal Reserve Btdletin for September 1943. Prohibition of payment of interest on demand deposits was incorporated into the law by the Banking Act of 1933, which prohibits such payments made "directly or indirectly by any device whatsoever." By an amendment adopted in the Banking Act of 1935 the Board was authorized "to determine what shall be deemed to be a payment of interest" within the meaning of the statute. On February 11, 1937, the regulations of the Board and the Federal Deposit Insurance Corporation were amended by providing that for the purpose of both regulations the term "interest" shall mean "any payment to or for the account of any depositor as compensation for the use of funds constituting a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 ANNUAL REPORT OF BOARD OF GOVERNORS deposit." By joint announcement of the two agencies, it was made clear that the purpose of this action was to restate principles of law as decided by the courts and to provide for the consideration of each case that might arise upon the basis of the facts involved in the specific case. It was in accordance with the policy thus agreed upon in 1937 that the Board's ruling was made in 1943. The facts of the case upon which that ruling was based were developed in connection with examination of a member bank and were submitted to the Board with a request for an interpretation. In expressing its views, the Board was guided by what the courts have considered to be the collection or payment of interest. Principles of law thus announced by the courts were applied to the facts of the case before the Board, and the Board expressed the opinion that the practice followed by the bank in question came within the scope of the statutory prohibition. The bank to which the ruling applied and other banks in the same community subsequently announced their intention to comply with the Board's interpretation of the law. A number of other banks throughout the country, as well as clearinghouse associations, likewise conformed to the Board's ruling by announcing the discontinuance of the absorption of exchange charges. Late in 1943 this matter became the subject of hearings extending into 1944 in the Banking and Currency Committee of the House of Representatives, in which members of the Board and its General Attorney appeared as witnesses. Early in 1944, bills were introduced in both Houses of Congress (S. 1642.; H.R. 3956) for the purpose of amending Section 19 of the Federal Reserve Act to provide that the absorption of exchange and collection charges by member banks shall not be deemed to be a payment of interest. In response to a request for its opinion as to the merits of the proposed legislation, the Board of Governors addressed letters explaining its position to the Chairmen of the Banking and Currency Committees of the Senate and the House of Representatives. A copy of the Board's letter to the Honorable Robert F. Wagner, Chairman of the Senate Committee on Banking and Currency, dated January 14, 1944, was printed in the Federal Reserve Bulletin for February 1944. The letter includes a full statement with respect to the history of the question of absorption of exchange charges as well as to the Board's position in this matter. RECOMMENDED LEGISLATION ON BANK HOLDING COMPANIES In the Banking Act of 1933 the Congress undertook to provide for the supervision of bank holding companies. The Board, in the light of its experience, believes the present law inadequate to accomplish the purposes for which it was enacted, and accordingly the Board wishes to recommend certain broad changes which it believes should be incorporated in the law if it is to be effective. In the first place, the existing statutory definition of a bank holding company is inadequate. This definition, which is contained in Section x(c) of Digitized fothr eF RBAaSnEkRi ng Act of 1933, reads in part as follows: http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 35 cc(c) The term 'holding company affiliate' shall include any corporation, business trust, association, or other similar organization— "(i) Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of any one bank at the preceding election, * * * ." Effective control does not depend upon the ownership or control of a majority of the outstanding shares. It can be and often is exercised through the ownership or control of a much smaller proportion of total shares outstanding and this fact has been recognized by the Congress in corresponding legislation enacted in other fields. The number of shares owned or controlled as compared with the number of shares voted for the election of directors at the preceding election is an equally unsatisfactory basis for determining whether a holding company affiliate relationship exists. Such a restricted test puts it within the power of the holding company, under the statutory test, to establish an absence of control when, in fact, it is at that very time actually exercising most effective control. Moreover, regulation, to be effective, must have continuity, and a statutory yardstick under which a company may be a bank holding company one year and may not be the next year renders regulation difficult if not impossible in some important instances. In the Board's experience, the case in which regulation is most necessary is likely also to be the case in which advantage has been taken of the gaps in the statutory definition with respect to the number of shares owned or controlled. The Board believes that these gaps should be filled in by incorporating in the statute more realistic definitions envisaging the manner and means by which effective control actually is exercised. Secondly, the only limitation which the law imposes upon the control of subsidiary banks by bank holding companies is that the latter may not vote their stock in a controlled bank without securing a voting permit from the Board, and it is only as an incident to obtaining the voting permit that there is any regulation at all. When effective control is exercised without voting the stock, which is the case in important instances, obtaining a voting permit from the Board becomes a matter of no importance to the holding company. In such a case, the bank holding company can escape every consequence of the statute merely by not obtaining a voting permit and not voting its stock. Thus the option of whether or not it shall be regulated under the statute rests entirely with the holding company. The Board believes that all bank holding companies should be supervised, as are the banks which they control. Finally, even if the holding company chooses to subject itself to regulation, the effectiveness of the Board's supervision is hindered rather than helped by the penalties provided by the statute. For violation of the statute or of its agreement with the Board, the holding company's voting permit may, after hearing, be revoked. The consequences flowing from such a revocation are that the member bank whose stock is controlled can not receive Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 ANNUAL REPORT OF BOARD OF GOVERNORS deposits of public monies of the United States nor pay any further dividends to the holding company. Also, if the controlled bank is a national bank, its charter may be forfeited, and if it is a member State bank, its membership in the System may be terminated. The Board believes that means should be provided for reaching the holding company and its management directly rather than indirectly, as is now the case. While their operations are extensive in certain areas, bank holding companies are not numerous. Their management, on the whole, has been cooperative and the Board has enjoyed a satisfactory relationship with most of the holding companies to which it has issued voting permits. It is the exceptional case which now concerns the Board for it is in the exceptional case that the inadequacies of the statute are real impediments and in which the Board's ability to regulate is challenged. In the exceptional case, the Board has found that the corporate device of the holding company has not been used solely as a mechanism for the efficient operation of controlled banks but as a device to accomplish by indirection objectives which could not be accomplished directly. Accepted rules of law confine the business of banks to banking and prohibit them from engaging in extraneous businesses such as owning and operating industrial and manufacturing concerns. It is axiomatic that the lender and borrower or potential borrower should not be dominated or controlled by the same management. In the exceptional case, the corporate device has been used to gather under one management many different and varied enterprises wholly unallied and wholly unrelated to the conduct of a banking business. When the bank holding company has thus expanded its operations into other and unrelated activities, it tends more and more to have the characteristics of the type of institution to which the "Investment Company Act of 1940" was addressed. Yet, if the company controls banks and has a voting permit for any one of such controlled banks, it is exempted from the provisions of that Act. The Board believes that such a company should be required, by law, to adjust its affairs so as to become either a bank holding company or an investiment company. In no event should it be permitted to remain a hybrid beyond the period necessary for it to adjust its affairs in this respect. In the exceptional case, the Board has found that the corporate device of the holding company has been used to escape the supervisory powers of the various bank supervisory agencies. Briefly stated, Congressional policy with respect to the establishment of branches of banks, as reflected in current statutes, is designed to limit Federal permission to establish branches in each State to the legislative policy of the State. The Federal supervisory authorities now have authority to control the direct establishment of branches of banks under their respective jurisdictions. This is because national banks must first obtain permission from the Comptroller of the Currency to establish branches, State member banks from the Board and nonmember insured banks from the F.D.I.C. Through the corporate device of the holding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 37 company, however, these controls are defeated and the holding company by indirection can do what the bank can not do directly. Thus the same management which is restricted in its operation under a bank charter can, through the holding company device, acquire unit banks, operate them in the same manner branches would be operated, and thus defeat the expressed will of Congress regarding the establishment of branches. There is now no effective control over the expansion of bank holding companies either in banking or in any other field in which they may choose to expand. Moreover, the device lends itself readily to the amassing of vast resources obtained largely from the public which can be controlled and used by a few people and which give to them, when they choose so to use them, an unfair and overwhelming advantage in acquiring additional properties and in carrying out an unlimited program of expansion. In the exceptional case, these resources have been used to acquire independent banks by measures which leave the local management and minority shareholders little with which to defend themselves except their own strenuous protests. Likewise, these resources have been used to support the market for their own stocks and thus to facilitate the acquisition of independent banks by the exchange of stocks, as well as to create trading profits for favored participants. The Board believes, therefore, that it is necessary in the public interest and in keeping with sound banking principles that the activities of bank holding companies be restricted solely to the banking business and that their activities be regulated, as are the activities of the banks themselves. It is recognized that bank holding companies have served a useful purpose in some areas of the country and have contributed banking services which might not otherwise have been available or might not now be available, and a requirement that bank holding companies be immediately dissolved would more likely result in the liquidation of controlled banks in certain areas than in their sale to and continued operation by new owners. For these reasons the Board recommends that immediate legislation be enacted preventing further expansion of existing bank holding companies or the creation of new bank holding companies. Such legislation should be so designed as to prevent any such company from using the corporate device to circumvent and evade sound banking principles, regulatory statutes, and declared legislative policy. WARTIME SERVICES OF THE RESERVE BANKS Work performed by the Reserve Banks for the Government in connection with the prosecution of the war expanded further during 1943. In order to give the banks and the public the best possible service consistent with economical operation, a number of additional fiscal agency services were made available at the twenty-four branches of the Reserve Banks. This policy of decentralization in the Federal Reserve System helped to relieve somewhat the pressure at the head offices. Toward the middle of the year the operations of the Reserve Banks and their branches were designated an essential activity by the War Manpower Commission. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3 8 ANNUAL REPORT OF BOARD OF GOVERNORS FISCAL AGENCY OPERATIONS About i2.,ooo employees or half the System's total personnel were engaged in fiscal agency activities at the end of the year, a majority of such employees being assigned to war savings bond operations. The number of employees in fiscal agency departments alone is now somewhat larger than the total personnel of the Reserve Banks and branches before the war. Withholding tax program. One of the principal fiscal agency operations inaugurated during the year was the handling for the Treasury of much of the work in connection with the withholding tax program under the Current Tax Payment Act of 1943, which wTas enacted June 9. This work involved the issuance of Treasury instructions, the qualification of depositary banks, the acceptance of deposits from such banks, the matching of copies of depositary receipts received from Collectors of Internal Revenue with those received from depositary banks, and the issuance and safekeeping of 2. per cent depositary bonds. These bonds are sold to depositary banks for the purpose of compensating them for the additional costs they incur in receiving and accounting for deposits of withheld taxes. Ration banking. Another new fiscal agency activity was the handling of ration checks for the Office of Price Administration. Under the Ration Banking Plan, which was inaugurated on January 2.7, out-of-town ration checks deposited with banks carrying ration bank accounts are cleared through the Reserve Banks and their branches. During the year the Reserve Banks handled more than 52. million ration checks. Depositary services for the Treasury. During the early part of the year, the Reserve Banks were requested to act as agents of the Treasurer of the United States in paying a new type of Government check—a punch-card check designed to be handled through sorting and tabulating machines. These card checks are drawn on the Treasurer of the United States payable through a particular Federal Reserve Bank. During the year the Federal Reserve Bank of New York, for example, handled 34 million card checks, a majority of which represented payments to dependents of men in the armed forces. Checks now being issued in punch-card form payable through the Reserve Banks include also checks drawn by various Navy offices and yards and by Treasury regional disbursing offices. The number of Government checks handled by the Reserve Banks, including card checks, increased from 131 million in 1942 to 2.67 million in 1943. There was also a substantial increase in the number of checks deposited by Collectors of Internal Revenue and other Government officials for credit to the Treasurer's general account. Millions of such checks are now collected annually by the Reserve Banks. As depositaries of the United States, the Reserve Banks also pay and charge to the Treasurer's general account maturing coupons from Government securities, 17 million of which were paid during 1943. Federal Reserve Banks made substantial shipments of currency direct to Army and Navy posts in this country and to banks for use at such posts. The Federal Reserve Bank of Dallas estimated that direct payments of cur- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 39 rency and coin to authorized finance officers of the Army and Navy represented about one-fifth of its total volume of currency shipments. Issuing and servicing Government obligations. In point of number of employees engaged, the handling of war savings bonds continued during 1943 to be the largest single operation performed by the Federal Reserve Banks. In addition to the direct issue of savings bonds, the Reserve Banks, as fiscal agents, maintain consignment accounts with thousands of banks and other qualified issuing agents for Series E bonds. Stocks of bonds in the millions were furnished these issuing agents by the Reserve Banks during 1943 and, as the bonds were sold, reports and remittances were received, accompanied by the bond stubs which show the registration of each bond sold. Such stubs are consolidated with those representing bonds issued by the Reserve Banks, then tabulated and forwarded to the Treasury. The Reserve Banks supply all issuing agents except post offices with stocks of bonds. Many of these issuing agents are corporations and others which operate pay roll savings plans for the purchase of war savings bonds by their employees. About 75 per cent of the number of savings bonds issued during 1943 were in the $2.5 denomination, which largely accounts for the tremendous amount of work involved. Moreover, savings bonds are issued in registered form and require considerably more time to handle than bonds issued in bearer form. The Reserve Banks are the sole redemption agencies for savings bonds outside of Washington. As the sales of savings bonds have increased, the number of bonds redeemed has increased, and many Reserve Banks and branches have set up separate savings bond redemption departments outside their regular banking quarters. Almost 53 million units of Series E savings bonds were sold in the Third War Loan Drive and 33 million in the Second Drive. These issues were in addition to sales outside of the drives. Reissues of savings bonds increased considerably during the year, principally because of bonds being improperly inscribed at time of purchase. The Federal Reserve Bank of Chicago renders a special service to the Treasury's Chicago office in handling reissue cases that can not be settled without clearance with the Treasury. The Chicago Reserve Bank handles cases of this type from all parts of the country, whether submitted to the Treasury Department direct or through other Reserve Banks. The volume, which is currently running at an annual rate of 2.00,000 pieces, is rapidly increasing. The safekeeping facilities at the Federal Reserve Bank of Cleveland were expanded during the year to care for several million bonds to be deposited for the Navy's personnel. The Chicago Reserve Bank renders a similar service for the War Department. As contrasted with the number of pieces, the dollar volume of securities handled by the Reserve Banks was greatest in the Treasury's market issues, which were sold largely during the Second and the Third War Loan Drives. The wider distribution of securities achieved by greater efforts to sell securities to nonbank investors resulted, of course, in a larger number of individual Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 ANNUAL REPORT OF BOARD OF GOVERNORS pieces sold and consequently in an increase in the volume of work of the Reserve Banks. Concentration of security offerings into brief drive periods also resulted in sharp peak loads. In spite of increased staffs and employees borrowed from other departments, considerable overtime was necessary in the fiscal agency departments. The Federal Reserve Banks cooperated fully with the Treasury in the task of organizing and administering the war loan drives. This activity required a considerable part of the time of the Presidents of the Reserve Banks and other officers as well as the full time of a large number of employees. The work included assistance in the preparation and distribution of publicity materials such as manuals and letters of instruction to workers in the drives, printing and distribution of subscription blanks, and tabulation of detailed reports on the results of the drive for the information of the war finance committees and the Treasury. Efforts made during the year to increase the number of banks qualified as war loan depositaries were quite successful. Owing to the Treasury's large financing operations, many banks realized the desirability of paying for subscriptions to Treasury securities by credit in war loan accounts. Funds in war loan accounts are left in the depositary until actually- needed by the Treasury. Services for Government corporations. Since April 1943, a number of the Reserve Banks have been maintaining complete inventory records of machinery and equipment owned by the Defense Plant Corporation and used in war production plants. The Defense Supplies Corporation purchased large quantities of clothing, strategic materials, automobile tires and tubes, etc., which were paid for with checks drawn at its direction by the Reserve Banks on the Treasurer of the United States. Services somewhat similar to those performed for the Defense Plant Corporation and the Defense Supplies Corporation were performed by the Reserve Banks during the year for the Commodity Credit Corporation and for the Reconstruction Finance Corporation and its various other subsidiaries, including Metals Reserve Company, War Damage Corporation, Rubber Reserve Company, U. S. Commercial Company, Federal National Mortgage Association, Disaster Loan Corporation, and RFC Mortgage Company. The Reserve Banks disburse, by checks drawn on the Treasurer of the United States, the amount of loans and other payments made by such agencies and receive, examine, and hold the notes of the borrowers and other collateral. Payments of principal, interest, and commitment fees made in connection with such loans are received and applied by the Reserve Banks. All Reserve Banks continued to receive a large number of remittances from fiduciary agents representing premiums collected on War Damage Corporation insurance coverage. Stabilization Fund operations. The Federal Reserve Bank of New York carries out the operations of the United States Stabilization Fund in accordance with authorizations and instructions from the Treasury. Such opera- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 41 tions include the purchase and sale of gold and foreign exchange and the maintenance of accounts for various foreign central banks and foreign governments in connection with stabilization agreements and other arrangements between the United States and certain foreign countries. Foreign Funds Control. The activities of the Federal Reserve Banks as agents for the Foreign Funds Control in the Treasury continued to be important during 1943. The Foreign Funds Control regulations were modified and extended somewhat during the year, particularly with a view to facilitating legitimate transactions and to tightening up the barriers against Axis manipulation of dollar assets. The liberation of North Africa brought an increase in the number of applications for transactions with this area, and foreshadowed new problems when contact is resumed with European areas now occupied by the enemy. More than 100,000 applications for licenses were received by the Reserve Banks during the year, most of which were handled under general authorizations from the Treasury Department without the necessity of transmitting them to Washington. Several hundred thousand reports of transactions under license were also received and checked. Under special authorization, the Federal Reserve Bank of Dallas effected during the year about 8,500 releases of currency illegally brought into the United States from Mexico. At the request of the Treasury, the Reserve Banks distributed during the year several million copies of forms, circulars, and other documents relating to foreign funds control. The Reserve Banks participated during the year in the administration of the Treasury's general census of foreign property owned by persons subject to the jurisdiction of the United States, including all residents of the United States and all American citizens resident abroad. By the end of the year, approximately zoo,000 reports had been filed with the Federal Reserve Banks pursuant to this census, involving property in foreign countries valued at some 11 billion dollars. Foreign transactions. The Federal Reserve Bank of New York continued to engage in foreign transactions on an extensive scale. Gold under earmark for foreign account at the New York Bank increased by 804 million dollars to 3,477 million during 1943, while the deposits of foreign central banks and governments at that Bank increased by 568 million to 1,360 million at the end of the year. Gold or dollar accounts are held for the central banks or governments of 59 foreign countries; a few of these accounts are held by the New York Bank in its capacity as fiscal agent for the Treasury Department, but most of them are held by the Bank in its own name, and participated in by the other Reserve Banks pursuant to an agreement approved by the Board of Governors. A further element in the foreign transactions of the Federal Reserve Bank of New York which became increasingly important during 1943 was the handling of official remittances from the United States to foreign countries, particularly in connection with the maintenance abroad of American armed forces. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42- ANNUAL REPORT OF BOARD OF GOVERNORS The New York Reserve Bank also acts as agent of the Treasury in connection with transactions in gold and silver, but the decline in gold imports and the absorption of all silver imports by the market greatly reduced the volume of such transactions during the year. Near the close of the year arrangements were being made for the New York Bank, as fiscal agent, to open and maintain on its books an account for the United Nations Relief and Rehabilitation Administration. At the close of 1942. two loans on gold to a foreign central bank were outstanding for a total amount of 1.5 million dollars. Two further loans to the same bank were made in January 1943 by the Federal Reserve Bank of New York under the usual arrangements authorized by the Board of Governors. The maximum amount outstanding at any time during the year was 4 million dollars. These loans were all repaid during 1943, and at the end of the year no loans on gold were outstanding. ENLARGED RESPONSIBILITIES OF RESERVE BANK BRANCHES In line with the movement initiated by the Board of Governors in 1941, the Federal Reserve Banks continued to expand the operations and functions of their branches. Among important changes made during the year was the transfer in several instances of the reserve accounts of member banks and the clearing accounts of nonmember banks from a Reserve Bank to the branch serving the territory in which the banks are located. The Reserve Bank at Cleveland transferred such accounts to its Cincinnati and Pittsburgh Branches, the Reserve Bank at Atlanta to its Birmingham, Jacksonville, and Nashville Branches, and the Reserve Bank at Kansas City to its Oklahoma City Branch. All branches now carry on their books the reserve accounts of member banks in their territories. Branch participation in fiscal agency activities connected with Treasury financing was expanded, with the approval of the Treasury Department. Branches now handle transactions in connection with war savings bonds, Series E, F, and G, and Treasury savings notes, Series C. The war loan deposit accounts of banks in a number of branch territories have been transferred from the head office to the branch. Near the end of the year several Reserve Banks obtained Treasury authorization to maintain complete stocks of all market issues of Government securities at their branches, so as to be in a position to make denominational exchanges and effect delivery of shortterm securities under telegraphic instructions. New activities assumed by the Reserve System in connection with the handling of ration banking checks at the request of the Office of Price Administration, and with the withholding tax program at the request of the Treasury Department, are handled at all Reserve Banks and branches. Because of the increased responsibilities of their branches, the Federal Reserve Banks of Cleveland, Chicago, and Kansas City have designated vice presidents to serve as resident heads of their branches and Dallas has designated vice presidents to serve at its Houston and San Antonio Branches. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 43 At the end of the year eight of the twenty-four branches were under the immediate direction of resident vice presidents of their respective Federal Reserve Banks. There will be a further enlargement in the scope of branch activities in 1944. BANK SUPERVISION BY THE FEDERAL RESERVE The added functions and activities incident to the war effort and the volume of business handled by banks, which continued to expand in 1943, increased the duties and responsibilities of all bank supervisory agencies. The work of supervision was carried on during the year with efficiency despite a continued rapid turnover in personnel, and this accomplishment was due in no small measure to the cooperation evidenced by thousands of bank officers and employees. Bank supervisory agencies continued to cooperate in the national effort to further the control of inflation by encouraging the reduction of individual credit for nonproductive purposes and of credit for the accumulation of inventories of consumer goods; and, wherever consistent with sound banking principles, they also sought to pursue examination and supervisory policies and practices which would implement the financing of the war program, both private and governmental. Examination of Federal Reserve Banks. The twelve Federal Reserve Banks and their twenty-four branches were examined during the year, by the Board's Division of Examinations, as required by law. Examination of State member banks. State member banks are subject to examination at the direction of the Board of Governors or at the direction of the Federal Reserve Banks by examiners selected or approved by the Board of Governors. The established policy is to make at least one regular examination of each State member bank, including its trust department, during each calendar year, by examiners for the Reserve Bank of the district in which the State member bank is situated, with additional examinations if considered necessary or desirable. In order to avoid duplication and to minimize inconvenience to the banks examined, wherever practicable such examinations are made jointly in cooperation with State banking authorities or, by agreement with State authorities, alternate examinations are made. As stated in the Annual Report covering operations for the year 1941, members of the Board and its staff met in Philadelphia in September of that year with representatives of the bank examination departments of the Reserve Banks for a conference on bank examination and other supervisory responsibilities under wartime conditions. One of the principal problems discussed at the conference was the difficulty of making at least one regular examination of each State member bank during each calendar year, a difficulty which was believed certain to become greater and further complicated by the pressure upon the facilities of the several State supervisory authorities. It was determined to carry out the policy in full so far as possible and, certainly, without any sacrifice with respect to the scope and adequacy of examinations or the resultant reports. With the close cooperation of State authorities it has been possible prac- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 ANNUAL REPORT OF BOARD OF GOVERNORS tically to complete the program for examination of all State member banks in 1943. The very few banks not examined during the calendar year are scheduled for examination early in the year 1944 and it is hoped that it will be possible to maintain a satisfactory schedule throughout the coming year. In view of transportation difficulties and the pressure of other work it was not considered practicable to hold a conference between representatives of the Board and representatives of the bank examination departments of the twelve Federal Reserve Banks in 1943. It was possible, however, to hold a short and effective independent meeting between members of the Board's staff and representatives of the Reserve Banks attending the meeting of the National Association of Supervisors of State Banks in Cincinnati in September. Also, representatives of the Board's Division of Examinations participated in several conferences of examiners at various Reserve Banks. The coordination of the bank examination and supervisory activities under general policies of the Board was further effected through continuing contacts and correspondence. Bank holding companies. Bank holding companies, technically defined as "holding company affiliates," are required by law to obtain voting permits from the Board of Governors of the Federal Reserve System before stock of subsidiary member banks which the holding companies own or control may be voted. This requirement does not apply to the voting of stock of subsidiary banks which are not members of the Federal Reserve System, whether or not they are insured banks. In acting upon an application for a voting permit the Board is required by law to consider, among other things, the financial condition of the applicant and the general character of its management. The Board may, in its discretion, grant or withhold a voting permit, as the public interest may require. Regulation of bank holding companies by the Board is effected through the specific statutory powers to grant, withhold, or revoke voting permits, and through agreements predicated upon the general statutory powers and responsibilities of the Board and required to be executed by the holding companies before obtaining voting permits from the Board. The purpose of these statutes and agreements is that the holding companies and their subsidiaries, including member banks and nonmember banks, whether insured or uninsured, shall maintain sound financial condition and proper management policies and operating practices, including those involving intercompany transactions and relationships. Appropriate action was taken during the year in a number of cases with respect to various important matters in the regulation of bank holding companies. During the year the Board authorized the issuance of three general voting permits, i.e., permits unlimited as to time or matters which may be voted upon, and four limited voting permits, i.e., permits for limited periods of time and limited also as to subjects which could be voted upon. Under the authority of Section 301 of the Banking Act of 1935 the Board determined that five organizations were not engaged directly or indirectly as a business in holding the stock of, or managing or controlling, banks, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 45 banking associations, savings banks or trust companies, and that, therefore, they were not holding company affiliates except for the purpose of Section 2.3A of the Federal Reserve Act, which contains limitations on loans to affiliates and investments in or loans on their obligations by member banks. Trust powers of national banks. Under the provisions of Section n(k) of the Federal Reserve Act, the Board granted to 10 national banks authority to exercise one or more trust powers. This number includes the grant of additional powers to one bank which previously had been granted certain trust powers. Trust powers of 44 national banks were terminated, 15 by voluntary liquidation and 2.9 by voluntary surrender. At the end of 1943, there were 1,798 national banks holding permits to exercise trust powers. Increased acceptance powers. During the year the Board approved an application of a national bank made pursuant to the provisions of Section 13 of the Federal Reserve Act for permission to accept drafts and bills of exchange up to an amount not exceeding at any one time, in the aggregate, 100 per cent of its paid-up and unimpaired capital stock and surplus. No other applications were received. Foreign branches and banking corporations. One foreign branch of a member bank was closed during the year, the branch having been established with the Board's permission-in the previous year. No applications were received for permission to establish foreign branches pursuant to the provisions of Section 2.5 of the Federal Reserve Act. At the end of 1943, seven member banks were operating a total of 64 branches or offices in 14 foreign countries or dependencies or possessions of the United States, exclusive of branches or offices in enemy occupied territory. Of the 64 branches and offices, four national banks were operating 60 and three State member banks were operating 4. The foreign branches were distributed geographically as follows: Latin America. 42- England Argentina U. S. Insular Possessions and . . 10 Brazil. 4 Dependencies. . ^ Chile . . . . Canal Zone 4 . . . 2. Colombia Puerto Rico 7 Cuba. 16 Mexico . . . . 1 Total 64 Panama . .... . 1 Peru . . 1 Uruguay ...... 1 Venezuela 1 Far East 1 India 1 During the year there was no change in the list of the four corporations operating under agreements entered into with the Board of Governors pursuant to the provisions of Section 2.5 of the Federal Reserve Act relating to the investment by member banks in stocks of corporations engaged principally in international or foreign banking. One corporation operates a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4^ ANNUAL REPORT OF BOARD OF GOVERNORS branch in England and one has an English fiduciary affiliate. The other two corporations have no foreign offices. The head office of the one banking corporation in active operation, organized under the provisions of Section 15(a) of the Federal Reserve Act and chartered by the Board to engage in international or foreign banking, was examined during the year by the Board's Division of Examinations. The institution's three branches in the Far East and its two French offices are in enemy occupied territory. The Board's Regulation K relating to corporations organized under Section 15(a) was amended, in view of changes that had taken place since the enactment of the Section, so as to require the consent of the Board in each case before such corporation might invest in stock in other institutions. RESEARCH AND ADVISORY SERVICES The Board continued to modify and amplify its usual reporting services to meet changes and special problems growing out of the war. The System's regional research work, in which the twelve Reserve Banks and the Board cooperate, was considerably expanded and progress was made on the special postwar studies being conducted by the System's staff. The Board continued to maintain close contact with other Government agencies engaged in the war effort and in planning for reconstruction after the war, and information and advice were contributed to many interdepartmental conferences and committees. As indicated in other parts of this Report, representatives of the Board cooperated with representatives of other Government agencies in efforts to solve problems of public policy and procedure in wartime. A volume entitled Banking and Monetary Statistics was completed during the year and published by the Board early in 1944. It is a compilation of statistics on banking, monetary, and other financial developments for past years. Most of the financial series for which current data are published in the Federal Reserve Bulletin are included and some series of historical interest which are no longer published currently are also given. The series cover varying periods ending in 1941. They extend back to 1914 in many cases and in a few cases to earlier dates. A survey of the ownership of deposits in March 1943 was made by the Board and the Reserve Banks, because of the bearing that the distribution of deposits has on problems of inflation control, on business financial requirements, and on Government financing during and after the war. The survey was based on voluntary reports from a large sample of member banks throughout the country. It was developed in collaboration with participating banks, the Association of Reserve City Bankers, The National Bureau of Economic Research, and various interested Government agencies. Following analysis of the results of the March survey, it was generally agreed that such information should be obtained regularly, and the survey was established on a semiannual basis, beginning with July 31. New seasonal adjustment factors for money in circulation were released by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 47 the Board in the September 1943 issue of the Bulletin. The new adjustment factors are ratios based on total currency outstanding, and provide a better method of adjustment for seasonal changes in times of rapidly expanding circulation than do the constant dollar adjustments formerly used. Beginning early in 1944 seasonally adjusted figures were published regularly in the Bulletin. In order to ascertain the nature of the increase in business deposits and the factors contributing to them, analyses previously made of financial statements of large manufacturing corporations were greatly expanded and were extended to cover transportation and other public utility activities. These studies indicate the directions in which various industries had expanded their business assets during the war and the extent to which this expansion had been financed by Government funds, other borrowings, and retained earnings. A study was also made of the factors which have contributed to different profit trends in various industries during the war. The Board's previous studies of durable goods expenditures were continued and new estimates for capital expenditures in various manufacturing industries were developed from the financial statements of a large number of companies. A broad revision of the Board's index of industrial production was made during the year and the results were published in the October Bulletin. A number of new production series were developed to measure activity in war and civilian industries and improvements were made in various old series on the basis of new data which had become available as a result of the war program. Special studies of the index were continued in an attempt to obtain a breakdown between production for war and civilian purposes and the results of these studies were also published in the Bulletin. Work continued on developing physical production indexes of the monthly output of clothing and shoes for civilians as part of a general index of output of finished consumer goods. These indexes were supplied on a confidential basis to the War Department and other Federal war agencies. The System's monthly indexes of department store sales were revised during 1943 and the final results will be available to the public in the spring of 1944. The revised national index is computed by combining revised or new indexes for each of the twelve Federal Reserve districts into a total index. The district indexes are adjusted to 1919 and 1939 Census data where necessary and are computed on a 1935-39 average base. Upon completion of this revision the Board's weekly index of department store sales and the System's indexes of end-of-month department store stocks will be reviewed and revised where necessary. Several studies were made of analyses by Federal war agencies and private organizations relating to general production measurements and other economic problems, especially output and employment in war industries. Several special reports on department store sales and stocks were made for war agencies during the course of the year and the collection of regular Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 ANNUAL REPORT OF BOARD OF GOVERNORS monthly data showing considerable detail by departments, begun at the request of these agencies, was continued. Extensive work was done in the fields of price control, wage stabilization, taxation, and other aspects of the stabilization program. The Board's staff cooperated extensively with Walter R. Stark, Assistant Director of the Board's Division of Research and Statistics, who was granted a leave to act as an adviser to the Office of Economic Stabilization. At the request of the Ways and Means Committee of the House of Representatives, the Chairman of the Board submitted a proposal of a revenue program. Early in 1943 a special committee of representatives of the Reserve Banks and the Board of Governors was appointed to study various aspects of guaranteed loans to industry under the Board's Regulation V. The Committee gave particular attention to problems of meeting the capital requirements of industrial plants during the reconversion period after the war. The work of this committee was supplemented by intensive study by the Board and the Federal Advisory Council of all aspects of the final settlement of terminated war contracts. A resolution containing six recommendations for procedure in terminating contracts was adopted by the Council on November 15 and concurred in by the Board. The Board submitted the resolution to Government officials and agencies directly interested and on November 16 released it to the press. A copy of the resolution is given on pages 99-100 of this Report. The Board continued its study of postwar problems. Among the problems being studied are: postwar outlook for production and employment; financial needs of industry in the reconversion period; bank investment problems; international financial problems and mechanisms; monetary and fiscal policies; investment potentialities in various fields, both public and private; over-all surveys of public investment programs; urban redevelopment and Federal-State-local taxation and fiscal relations. Close contact is maintained with other agencies working on related programs, particularly with the Bureau of the Budget, the Department of State, the Treasury, the Bureau of Labor Statistics, the National Housing Agency, the Department of Agriculture, the Department of Commerce, the Securities and Exchange Commission, the Foreign Economic Administration, and the War Production Board. Expansion in the Federal Reserve System's regional research work continued in 1943. The research departments of the twelve Reserve Banks, working in cooperation with one another and with the Board's Division of Research and Statistics, are studying the significant economic developments in their respective districts in order to provide a basis on which to evaluate problems that may arise during the war and in the postwar period. The emphasis of the regional research work undertaken by the Federal Reserve Banks necessarily varies with the economic characteristics of each district, but studies on current banking problems, currency flows, the location and economic influence of war facilities, agricultural land values, and farm Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 49 credit conditions are in progress at most of the Reserve Banks. In a number of districts special studies are being made of the impact of the war on selected areas and industries, with particular reference to the postwar outlook for production, employment, and financial requirements for reconversion. In addition, some System-wide projects have been undertaken which include the continuing survey of the ownership of bank deposits, an investigation of the financial needs of business for the conversion to civilian goods production after the war, and a study of the problems incident to the increase in deposits and the banks' investment policies. Federal Reserve regional research work is directed primarily toward being of assistance to the System in the discharge of its responsibilities, but it is hoped that it may also serve to assist the various communities and the country as a whole in the solution of the economic problems that lie ahead. To this end, and in order to avoid duplication of effort, the research staffs are cooperating closely with other Government agencies and with public and private groups which are engaged in economic research on a regional or national basis. As a result of the increasing number and complexity of the international problems faced by the Government, the work of the Board in the field of international finance expanded considerably during 1943. In close collaboration with various Government departments, studies have been pursued in the fields of international currency stabilization and international investment, financial administration and reconstruction in liberated areas and in enemy territory, and monetary and banking reforms in Latin America. Members of the Board's staff have participated in the interdepartmental and intergovernmental negotiations with respect to the proposals concerning international monetary stabilization put forward by experts of the United States and British Treasuries. Informal discussions of these plans have proceeded with technical experts representing approximately 30 foreign countries, and on the basis of these discussions one revision of the plan drafted by the American experts has been issued. The discussions continue on a technical level, the responsibility of the respective governments having not yet been involved. Members of the Board's staff also participated in interdepartmental conferences with respect to the proposal for an international bank which was drafted by experts of the United States Treasury and communicated to the Finance Ministers of some 44 countries toward the end of the year. At the request of the War Department and civilian government agencies responsible for the development of financial policy relating to liberated areas and enemy territory, an extensive research program has been developed involving the analysis of current developments in those areas and of the problems which may be confronted in this field by American military and civilian personnel. Studies of central banking and money markets in Latin America have been actively pursued, especially as a result of various requests for technical Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 ANNUAL REPORT OF BOARD OF GOVERNORS assistance which have emanated from the central banks or governments of these countries. Pursuant to such a request a member of the Board's staff participated with Treasury experts in a joint mission to Honduras which submitted a report to the Honduran Government recommending establishment of a central bank in that country. Two members of the Board's staff also visited Paraguay late in the year, at the request of the Paraguayan Government, and new legislation embodying their recommendations for a reform of the currency system was passed in that country on October 5. Recommendations with respect to new central banking legislation and a general banking law are also being developed for submission to that Government. The Board and several of the Reserve Banks cooperated in the training program of the Inter-American Training Administration, making their facilities available to Latin American bankers and banking students and assisting in the planning of the work. The Uruguayan Bankers' Mission, comprising three officers of the central bank of Uruguay, spent about five months in the United States, under the auspices of the Inter-American Training Administration, making their headquarters with the Board. Members of the Board's staff continued to serve as Chairman and Secretary of the United States Committee of the Joint Economic Committees of Canada and the United States until these Committees were dissolved by action of the Canadian and United States Governments on March 14, 1944. It was agreed that the continued operation of the Committees had been rendered unnecessary by the development of other agencies for collaboration between the two countries. In addition to various other activities of the Committees during 1943, substantial progress was made in carrying out the joint project for the North Pacific area initiated in the latter part of 1942.. A number of surveys were conducted in this area and the results are to be embodied in a forthcoming report. During 1943 distribution to the general public of the Board's publications and releases continued to be substantially curtailed as a wartime economy measure and in cooperation with the policy of the Office of War Information. Distribution was continued to Government departments and agencies which make use of the factual information developed by the Board. RESERVE BANK PERSONNEL AND OPERATIONS As previously indicated, operations of the Reserve Banks were in considerably larger volume in 1943 than in 1942., particularly those relating to the issuance and redemption of securities and to other activities as fiscal agents of the United States. The expansion in operations necessitated an increase in personnel and the renting of considerable additional office space. PERSONNEL Directorates. Directors of a Federal Reserve Bank are elected or appointed for terms of three years. The Board of Directors of each Federal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 51 Reserve Bank consists of nine directors, three of whom are designated as Class A directors, three as Class B directors, and three as Class C directors. The six Class A and Class B directors are elected by the member banks of the district, while the three Class C directors are appointed by the Board of Governors of the Federal Reserve System. The Class A directors are chosen as representatives of the member banks and, as a matter of practice, are active officers of member banks. The Class B directors may not, under the law, be officers, directors, or employees of banks. At the time of their election they must be actively engaged in their district in commerce, agriculture, or some other industrial pursuit. The Class C directors may not, under the law, be officers, directors, employees, or stockholders of banks. They are appointed by the Board of Governors as representatives not of any particular group or interest, but of the public interest as a whole. Federal Reserve Bank branches have either five or seven directors, of whom a majority are appointed by the Board of Directors of the parent Federal Reserve Bank and the others are appointed by the Board of Governors. In making selections of directors, the Board has endeavored to stress the public interest and bring to the boards men who can make an effective contribution to the public service. A list of the directors of the Federal Reserve Banks and branches as of the close of the year is shown on pages 105-111. Appointments of directors. The Board made the following appointments of new directors either for terms beginning January 1, 1943, or to fill vacancies during the year: William I. Myers, Dean, New York State College of Agriculture, Cornell University, Ithaca, New York, was appointed a Class C director of the Federal Reserve Bank of New York for the term beginning January 1, 1943. On September 10 he was appointed Deputy Chairman for the remainder of the year 1943. On April 8, C. Canby Balderston, Dean, Wharton School of Finance and Commerce, University of Pennsylvania, Philadelphia, Pennsylvania, was appointed a Class C director of the Federal Reserve Bank of Philadelphia. On May 7, Lyle L. Hague, a farmer and stockman of Cherokee, Oklahoma, was appointed a Class C director of the Federal Reserve Bank of Kansas City. On September 13, Robert D. Calkins, Dean, School of Business, Columbia University, New York, New York, was appointed a Class C director of th^ Federal Reserve Bank of New York. J. S. Abercrombie, President, J. S. Abercrombie Company, Houston, Texas, was appointed a director of the Houston Branch of the Federal Reserve Bank of Dallas for the term beginning January 1, 1943. C. E. Myers, agriculturist, of Covina, California, was appointed a director of the Los Angeles Branch of the Federal Reserve Bank of San Francisco for the term beginning January 1, 1943. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

)Z ANNUAL REPORT OF BOARD OF GOVERNORS On February 18, Walter S. Byrne, General Manager, Metropolitan Utilities District of Omaha, Omaha, Nebraska, was appointed a director of the Omaha Branch of the Federal Reserve Bank of Kansas City. On February Z7, W. A. Alexander, Vice President, The Denver Tramway Corporation, Denver, Colorado, was appointed a director of the Denver Branch of the Federal Reserve Bank of Kansas City. On April 10, John J. Shaffer, Jr., a sugar planter of Ellendale, Louisiana, was appointed a director of the New Orleans Branch of the Federal Reserve Bank of Atlanta. On May 15, Charles S. Lee, who is engaged in cattle raising and farming at Oviedo, Florida, was appointed a director of the Jacksonville Branch of the Federal Reserve Bank of Atlanta. On May zi, W. C. Arthur, President, Talon, Inc., Meadville, Pennsylvania, was appointed a director of the Pittsburgh Branch of the Federal Reserve Bank of Cleveland. On June 5, George W. Stocking, Professor of Economics, University of Texas, Austin, Texas, was appointed a director of the San Antonio Branch of the Federal Reserve Bank of Dallas. On September 2.3, John D. Clark, Dean, College of Business Administration, University of Nebraska, Lincoln, Nebraska, was appointed a director of the Omaha Branch of the Federal Reserve Bank of Kansas City. Expansion in staff. At the end of the year the total number of officers and employees of the twelve Federal Reserve Banks and twenty-four branches was 2.4,741 as compared with I^^JT. at the close of the previous year. During the year 1,064 employees of the Reserve Banks left to enter military service. OPERATIONS In so far as extension of credit is concerned, Reserve Bank operations were predominantly in the form of purchases and sales of United States Government obligations. Discount operations were in somewhat larger volume than in other recent years, especially toward the end of the year as a few member banks found it necessary to borrow in order to maintain their required reserves. Industrial advances and commitments declined somewhat owing to the fact that most industrial enterprises needing working capital beyond amounts available from the usual sources were engaged in war production work and their needs were taken care of through loans guaranteed by the War Department, Navy Department, or Maritime Commission under Executive Order No. 91 iz and the Board's Regulation V. Figures showing the volume of operations in principal departments are given in Table 5, page 67. Earnings and expenses. Current earnings, current expenses,, and distribution of net earnings of the Federal Reserve Banks combined and of each Reserve Bank are given in detail in Table 6, pages 68-69. The first table on the opposite page shows a summary of these items for the year 1943 compared with 194Z. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 53 EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS IN 1943 AND 1942. [In thousands of dollars] Item 1943 1942 Current earnings 69,306 52,663 Current expenses 43,546 38,624 Current net earnings 25,760 14,039 Net additions to current net earnings 23,768 *1,569 Net earnings 49,528 12,470 Paid U. S. Treasury (Section 13b) 245 198 Dividends paid 8,911 8,669 Transferred to surplus (Section 13b) 135 49 Transferred to surplus (Section 7) 40,237 3,554 Total 49,528 12,470 Transferred from surplus (Section 7) to reserves for contingencies 12,551 647 * Net deductions. Increased current earnings of 17 million dollars in 1943 resulted from larger holdings of Government securities in the System Open Market Account and of Treasury bills acquired from member banks and others under agreements to resell on demand at a discount rate of z/% Per cent Per annum. Current expenses, after deducting reimbursable fiscal agency expenses, were 44 million dollars in 1943 as compared with 39 million in 1942., the increase being due principally to the larger volume of check collections and currency operations. Net earnings in 1943 were 50 million as compared with iz million in 1941, the increase reflecting larger earnings from holdings of Government securities and also profits on the sale of securities, which are included in the item "net additions to current net earnings." EARNINGS ON BILLS AND SECURITIES [Amounts in thousands of dollars] U. S. Govt. Item and year Total disc B o i u ll n s ted d s i e r c e u c r t iti a e n s d I a n d d v u a s n t c ri e a s l guaranteed Daily average holdings: 1940 2,429,984 4,046 2,416,761 9,177 1941 2,200,491 4,681 2,187,030 8,780 1942 3,209,649 6,610 3,191,259 11,780 1943 7,761,651 24,759 7,724,488 12,404 Earnings: 1940 42,677 51 42,174 452 1941 40,607 56 40,152 399 1942 51,943 65 51,404 474 1943 68,656 152 68,090 414 Average rate of earnings (per cent): 1940 1.76 1.26 1.75 4.93 1941 1.85 1.20 1.84 4.54 1942 1.62 0.98 1.61 4.03 1943 0.88 0.61 0.88 3.34 Distribution of net earnings was as follows: Payments to United States Treasury under provisions of Section 13b of the Federal Reserve Act relating to industrial advances, 3x45,000; dividends to member banks paid in accordance with the Federal Reserve Act, $8,911,000; and additions to surplus accounts, $40,371,000. Of the total added to surplus, $11,551,000 was trans- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 ANNUAL REPORT OF BOARD OF GOVERNORS ferred to reserves for contingencies. In case of liquidation of a Federal Reserve Bank any surplus remaining after payment of all debts, dividend requirements, and the return of capital paid in by member banks becomes the property of the United States. Average daily holdings of discounts, advances, and securities by the Federal Reserve Banks and average rates of earnings thereon during the past four years are shown in the second table on page 53. Retirement System. During the year a number of important changes were made in the Retirement System of the Federal Reserve Banks which provides retirement benefits for employees of the twelve Federal Reserve Banks and of the Board of Governors. The special committee which was appointed near the end of 1941 by the Conference of Presidents of the Federal Reserve Banks to review the operation of the Retirement System in the light of the experience since its establishment in 1934 concluded its studies and submitted its final report. Preliminary reports had been submitted previously and considered by the Conference of Presidents and by the Board of Governors. On the basis of the final report a number of changes were recommended by the Conference of Presidents and approved by the Board of Governors. The principal changes were a reduction in the interest basis from 4 per cent to 3 per cent and the provision of a compensating increase in the reserves; a liberalization of the benefits, particularly for the lower paid employees; and provision within the Retirement System of the Federal Reserve Banks of a separate retirement plan permitting employees of the Board of Governors to receive benefits comparable to those provided by the Civil Service Retirement System. In order that the Retirement System might continue to be fully funded under the new basis, special payments totaling 9.8 million dollars were made to the System, of which 2.-2. million was to adjust to the new interest basis the reserves from prior years' contributions of members and 7.6 million was to provide increased pension benefits. Building operations. Pressure for additional space at many of the Federal Reserve Banks and branches arising from expanded wartime operations, which was noted in the Annual Report for 1942., continued throughout the year. At the end of 1943 all but three of the twelve Federal Reserve Banks and all but six of the twenty-one branches owning their own bank buildings were renting outside space. The Cincinnati, Portland, and Seattle Branches, which rent their bank premises, found it necessary to rent additional space. At Pittsburgh, an old building which had not been occupied by the Bank since 1931 was reconditioned for use in handling increased wartime operations. The Federal Reserve Bank of Richmond took over its Annex Building, which had been rented to outside tenants. A building adjoining the bank premises of the Detroit Branch was purchased during the year, and the Board of Governors authorized the purchase of two buildings adjoining the Boston Bank building and of a vacant lot adjoining the Charlotte Branch. Construction of an additional story on the Memphis Branch building has been approved by the Board of Governors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 55 Interdistrict Settlement Fund. Effective March 15, 1943, the separate clearing for interdistrict balances arising from shipments of Federal Reserve notes of other Federal Reserve Banks to the Banks of issue or to Washington for redemption, which had been conducted by the Board of Governors since February 192-2., was discontinued. Under the new arrangement amounts due to other Federal Reserve Banks arising from such Federal Reserve note shipments are included with credits for checks and other collection items settled daily through the Interdistrict Settlement Fund. In connection with the program for enlarging the responsibilities of Federal Reserve Bank branches, which was undertaken in 1942., six branches were added to the list of direct settling branches, as follows: Birmingham October 4 Jacksonville November 1 Oklahoma City December 1 Nashville December 2.0 Cincinnati January 3, 1944 Pittsburgh January 3, 1944 There are now twenty-three branches which settle directly through the Interdistrict Settlement Fund in addition to the twelve Federal Reserve Banks. BOARD OF GOVERNORS—STAFF AND EXPENDITURES Staff. On December 31, 1943, the Board's employees, exclusive of those on military leave or on leave without pay, numbered 459 as compared with 42.2. at the end of 1942.. There was practically no increase in the number of office employees but during the year the employees of the Board's cafeteria, who had previously been on the pay roll of an outside contractor, became members of the Board's staff. At the end of the year 69 of the Board's permanent employees were on military leave. In addition, 2.4 employees who had received temporary appointments had resigned to enter military service. Walter R. Stark resigned in November as Assistant Director of the Board's Division of Research and Statistics in order to return to private business. During 1943 Board personnel maintained 100 per cent participation in the plan of pay roll savings for the purchase of war savings bonds. Deductions rose from 11.4 per cent of gross salaries in January to 12..7 per cent in April (Second War Loan Drive) and to 18.9 per cent in September (Third War Loan Drive). The percentages achieved during April and September placed the Board's organization at the top of the Honor Roll published by the President's Interdepartmental War Savings Bond Committee showing the comparative standing of governmental organizations operating such plans. No quota was assigned to the Board by the Interdepartmental Committee in the Second Drive. However, the quota set for the Board's organization in the Third Drive, which included both cash purchases and pay roll deductions, was oversubscribed by 2.8.6 per cent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

5 6 ANNUAL REPORT OF BOARD OF GOVERNORS The Board's organization also participated in the blood donor program, 174 individuals having made 375 donations during the year. As of the end of the year, four had made eight or more donations, two had made seven, five had made six, and eighteen had made five. Expenditures. The current expenses of the Board for the year 1943 aggregated $1,914,511. Two assessments were levied on the Federal Reserve Banks representing about seven-tenths of one per cent of their average paid-in capital and surplus for the year to cover the general expenses of the Board. Details are shown in Table 9, page 71. Under an arrangement with the Federal Reserve Bank of Richmond, the accounts of the Board for the year 1943 were audited by the Auditor of the Federal Reserve Bank of Richmond, who certified them to be correct. FEDERAL RESERVE MEETINGS The Federal Open Market Committee met in Washington on January 15-2.6, March 1, May 15, June 2.8, and October 18, 1943, and the executive committee of the full Committee met from time to time during the year. Under the provisions of Section 11A of the Federal Reserve Act, the Federal Open Market Committee has responsibility for determining the policies under which the open market operations of the Federal Reserve Banks shall be carried out. A record of the actions taken by the Committee on questions of policy will be found on pages 90-98 of this Report. The Chairmen of the Federal Reserve Banks met with the Board of Governors on November 8, 1943. The executive committee of the Chairmen's Conference met on March 3 and October 1, 1943, to discuss matters of interest to the Conference. The Conference of Presidents of the Federal Reserve Banks held meetings on January 11-2.4, March 1, June 15-17, and October 15-17, 1943, and the Board of Governors met with the Presidents on January 16, March 1, June 19, and October 19, 1943. The Board continued to have the benefit of consultations with the Federal Advisory Council. Meetings of the Federal Advisory Council were held on February 14-15, May 13-14, September 19-10, and November 14-15, 1943, and the executive committee of the Council met on January 6, April 7, October 6, and December 7, 1943. The Board of Governors met with the Council or its executive committee on each of these occasions. The Council is required by law to meet in Washington at least four times each year and is authorized by the Federal Reserve Act to consult with and advise the Board on all matters within the jurisdiction of the Board. During the year several conferences, attended by representatives of the Federal Reserve Banks and the Board of Governors, were held to discuss such matters as bank supervision, the research work of the Reserve System, and the administration of Regulations V and W relating to guaranteed war production loans and consumer credit, respectively. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 57 LEGISLATION RELATING TO THE FEDERAL RESERVE SYSTEM AND REPORTS TO CONGRESS War loarTdeposit accounts. By an Act of Congress, approved April 13, 1943, subsection (h)(i) of Section 11B of the Federal Reserve Act was amended so as to make it unnecessary for insured banks until six months after the cessation of hostilities to pay deposit insurance assessments on balances to the credit of the United States Treasury arising solely as a result of subscriptions for United States securities issued under the Second Liberty Bond Act, as amended. This Act also amended the last paragraph of Section 19 of the Federal Reserve Act so as to exempt member banks for the same period from the necessity of maintaining reserves with the Federal Reserve Banks against deposits payable to the United States arising solely as a result of subscriptions for such securities. Stabilization Fund. By an Act of Congress, approved April 2.9, 1943, the time within which the President may exercise his powers relating to the Stabilization Fund under the Gold Reserve Act of 1934, which would have expired on June 30, 1943, was extended until June 30, 1945, and a new provision was added which, according to the report of the Committee on Coinage, Weights and Measures of the House of Representatives "will carry out the view expressed by the Secretary of the Treasury that the Stabilization Fund should not be included in any international fund without the approval of the Congress." Government obligations as collateral for Federal Reserve notes. By an Act of Congress, approved May 2.5, 1943, the second paragraph of Section 16 of the Federal Reserve Act was amended so that the authority of the Board of Governors of the Federal Reserve System to .permit direct obligations of the United States to be used as collateral for Federal Reserve notes, which would have expired on June 30, 1943, was extended until June 30, 1945. Federal Reserve Banks as custodians for Commodity Credit Corporation. By an Act of Congress, approved July 16, 1943, the Federal Reserve Banks were authorized to act as depositaries, custodians, and fiscal agents for the Commodity Credit Corporation. The Reserve Banks had for some time performed services for the Corporation at the request of the Reconstruction Finance Corporation. Reports to Congress. During the year members of the Board were called upon on several occasions to appear before Committees of Congress to give information on proposed legislation. At the request of these Committees, and at the request of the Bureau of the Budget, the Board submitted reports on proposed legislation relating to the retirement of Federal Reserve Bank notes, the dissolution of the Regional Agricultural Credit Corporations, the extension of the time during which direct obligations of the United States may be used as collateral for Federal Reserve notes, the exemption of Government deposits from Federal deposit insurance assessments and reserve re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 ANNUAL REPORT OF BOARD OF GOVERNORS quirements, the restricting of branch banking, the collection of information by Government agencies, the payment of postage by the executive branch of the Government, the extension of the time during which the Land Bank Commissioner may make loans, the reduction of premium rate charged for insurance by the Federal Savings and Loan Insurance Corporation, the taxation of profits from the sale of farm land, and the financing of terminated war contracts. CHANGES IN REGULATIONS OF THE BOARD OF GOVERNORS The regulations of the Board of Governors were changed during the year 1943 in the following respects: Reserves of member banks. Effective April 13, 1943, the Board amended Regulation D, in order to conform to the change in Section 19 of the Federal Reserve Act made by the Act of April 13, 1943, referred to above. Extension of credit by brokers, dealers, and members of national securities exchanges. Effective July 2.4, 1943, the Board amended the portion of Regulation T relating to a "special cash account" so as to permit payment for certain issued registered securities which are traded in on a national securities exchange on a "when distributed" basis to be made within seven days after the distribution. Consumer credit. Effective September 1, 1943, the Board amended Regulation W. The changes were administrative and designed to help merchants meet manpower problems in extending charge account credit. Banking corporations authorized to do foreign banking business under the terms of Section 2 5 (a) of the Federal Reserve Act. Effective November 1, 1943, the Board amended Regulation K so as to make it necessary for such corporations to obtain the Board's consent in each case before investing in the stock or certificates of ownership of other corporations. Relations of Reserve Banks with foreign banks and bankers. Effective January 1, 1944, the Board amended Regulation N so as to conform to changes in the law and also in several administrative particulars. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS NO. 1-STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 19431 ASSETS [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars] Gold certificates with Federal Reserve agent 13,266,000 Interdistrict settlement fund with Board of Governors 5,256,136 Gold certificates on hand 1,010,444 Gold certificates on hand and due from U. S. Treasury. 19,532,580 Redemption fund—Federal Reserve notes 233,671 Total gold reserves 19,766,251 Other cash: United States notes 25,062 Silver certificates 270,702 Standard silver dollars 1,869 National and Federal Reserve Bank notes 14,076 Subsidiary silver, nickels, and cents 18,113 Total other cash 329,822 Total reserves 20,096,073 Bills discounted: Secured by U. S. Government obligations, direct and guaranteed: Discounted for member banks 5,255 For others Total secured by U. S. Govt. obligations, direct and guaranteed. 5,255 Other bills discounted: For member banks For others Total other bills discounted. Total bills discounted 5,255 Industrial advances 10,134 U. S. Government securities, direct and guaranteed: U. S. Government securities, bought outright: Bonds 1,629,479 Notes 677,900 Certificates 2,467,300 Bills 2,923,191 Total U. S. Government securities, bought outright 7,697,870 U: S. Government securities, bought under repurchase option: Bills 3,845,077 Total U. S. Government securities, direct and guaranteed... 11,542,947 Total bills and securities 11,558,336 Due from foreign banks 136 Federal Reserve notes of other Reserve Banks 90,598 Uncollected items: Transit items 1,828,220 Exchanges for clearinghouse 202,982 Other cash items 81,851 Total uncollected items 2,113,053 Bank premises (net) 38,293 Other assets: Industrial advances past due 399 Miscellaneous assets acquired account industrial advances. 1,023 Claims account closed banks (() Miscellaneous assets acquired account closed banks 267 Total 1,689 Less valuation allowances... 1,440 Net 249 Federal Deposit Insurance Corporation stock3... . Fiscal agency and other expenses, reimbursable... '13,182 Interest accrued 15,041 Premium on securities 29,278 Deferred charges. 779 Sundry items receivable 854 Real estate acquired for banking-house purposes., 830 Suspense account 548 All other 343 Total other assets 61,104 Total assets 33,957,593 1 Before closing books at end of year. 2 Less than $500.' 3 Charged off. See footnote 4, Table 7. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 61 No. 1—FEDERAL RESERVE BANKS (IN DETAIL)-Continued LIABILITIES {Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollarsl Federal Reserve notes outstanding (issued to Federal Reserve Banks) 17,512,088 Less: Held by issuing Federal Reserve Banks 580,119 Forwarded for redemption 25,610 605,729 Federal Reserve notes in actual circulation (including notes held by Treasury and by Federal Reserve Banks other than issuing Bank) 16,906,359 Deposits: Member bank—reserve account 12,885,516 U. S. Treasurer—general account 578,457 Foreign 1,360,488 Other deposits: Nonmember bank—clearing accounts 128,488 Officers' and certified checks 18,633 Federal Reserve exchange drafts 134 All other 208,681 Total other deposits 355,936 Total deposits 15,180,397 Deferred availability items 1,432,303 Other liabilities: Accrued dividends unpaid 467 Unearned discount 37 Discount on securities 3,361 Sundry items payable 821 Suspense account 437 All other liabilities 870 Total other liabilities 5,993 Total liabilities 33,525,052 CAPITAL ACCOUNTS Capital paid in 154,106 Surplus (sec. 7) 160,411 Surplus (sec. 13b) * 26,829 Other capital accounts: Reserve for contingencies 47,574 Earnings and expenses: Current earnings 69,306 Current expenses 43,546 Current net earnings 25,760 Add—profit and loss 26,772 Deduct—dividends accrued since January 1...' 8,911 Net earnings available for charge-oils, reserves and surplus 43,621 Total other capital accounts 91,195 Total liabilities and capital accounts 33,957,593 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO 2-STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1942 AND 1943 [In thousands of dollars] Total Boston New York Philadelphia Cleveland Richmond Item 1943 1942 1943 1942 1943 1942 1942 1943 1942 1943 ASSETS Gold certificates on hand and due from U. S. Treasury. .. 19,532,580 201,523,281 1,025,651 1,172,613 5,904,288 6,855,451 1,029,794 1,147,114 1,395,309 1,714,833 ,031,584 950,761 Redemption fund—Federal Reserve notes 233,671 30,449 22,457 1,152 22,844 1,364 24,120 5,665 31,000 1,140 23,648 5,559 329,822 354,084 30,199 39,891 74,244 73,223 24,499 21,191 24,477 43,580 23,041 19,535 Other cash c! 20,096,073 20,907,814 1,078,307 1,213,656 6,001,376 6,930,038 1,078,413 1,173,970 1,450,786 1,759,553 1,078,273 975,855 Total reserves Bills discounted: Secured by U. S. Government obligations, direct 5,255 3,030 1,610 320 2,185 235 700 2,140 265 190 420 25 o and guaranteed 2,541 1,063 240 271 110 Other bills discounted Indust T ri o a t l a l a d b v il a l n s c d e i s scounted 1 5 0 , ,1 2 3 5 4 5 1 5 3 , , 5 6 7 4 1 9 1,6 3 1 4 0 2 3 47 2 5 0 2,1 1 8 2 5 6 1,2 6 9 1 8 1 4,0 7 4 00 6 4 2 , , 7 3 1 8 0 0 3 2 9 6 0 5 8 46 2 1 0 4 23 2 5 0 6 1 7 3 7 5 U. S. Government securities, direct and guaranteed: Bonds 1,629,479 2,792,581 142,420 212,493 179,243 713,272 138,260 212,929 231,524 248,255 126,848 182,445 § Notes 677,900 1,345,059 59,250 102,346 74,569 343,553 57,519 102,557 96,319 119,572 52,772 87,873 Certificates 2,467,300 1,041,000 215,644 79,212 271,407 265,889 209,347 79,374 350,565 92,543 192,066 68,011 Bills 6,768,268 1,009,995 334,128 52,852 2,474,891 372,606 456,612 45,308 501,745 49,083 280,416 40,412 Total U. S. Government securities, direct and 3 guaranteed 11,542, 6,188,635 751,442 446,903 3,000,110 1,695,320 861,738 440,168 1,180,153 509,453 652,102 378,741 © Total bills and securities 11,558, 6,207,855 753,394 447,698 3,002,421 1,697,229 866,484 447,258 1,180,808 510,734 652,757 379,553 O Due from foreign banks 47 3 3 156 13 5 13 4 6 2 Federal Reserve notes of other Federal Reserve Banks .. 90, 57,053 1,912 923 12,394 7,019 4,620 2,541 5,061 2,869 12,099 10,794 Uncollected items 2,113, 1,717,800 146,184 167,471 502,634 382,789 117,062 114,046 249,227 200,909 153,090 141,375 Bank premises 35, 39,285 1,666 2,722 9,121 9,823 3,600 4,755 4,214 4,326 2,936 3,046 Other assets 61, 88,788 4,410 6,229 9,936 21,947 4,815 6,926 8,295 8,479 4,320 6,048 Total assets. 33,954,566 29,018,642 1,985,876 1,838,702 9,537,938 9,048,863 2,075,007 1,749,501 2,898,404 2,486,8741,903,481 1,516,673 1 After deducting $80,000 participations of other Federal Reserve Banks on Dec. 31, 1943, and $29,000 on Dec. 31, 1942. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes in actual circulation1 16,906,35912,192,986 1,155,295 881,534 3,766,861 2,799,735 1,149,726 848,682 1,495,780 1,133,5071,141,590 786,787 Deposits: Member bank—reserve account 12,885,98413,116.809 653,633 678,306 4,263,922 5,029,391 645,810 651,566 1,003,595 918,240 544,664 525,661 U. S. Treasurer—general account 578,617 799,449 46,850 97,848 210,279 144,933 31,375 52,643 75,109 132,279 17,131 35,397 Foreign 1,360,488 792,790 34,785 23,103 2600,236 2367,578 120,273 67,100 116,475 64,304 54,439 30,754 Other deposits 355,936 485,147 4,382 6,301 246,308 303,762 5,350 4,673 12,403 77,688 2,152 8,633 Total deposits 15,181,02515,194,195 739,650 805,558 5,320,745 5,845,664 802,: 775,982 1,207,582 1,192,511 618,386 600,445 Deferred availability items 1,432,303 1,247,053 61,605 124,925 301,754 271,518 84,032 89,503 154,352 125,478 124,195 112,605 Other liabilities including accrued dividends 5,589 3,568 501 614 1,154 342 875 524 521 162 180 403 Total liabilities 33,525,276 28,637,802 1,957,051 1,812,631 9,390,514 i,917,2592,037,441 1,714,691 2,858,235 2,451,658 1,884,3511,500,240 CAPITAL ACCOUNTS Capital paid in. 154,104 146,026 9,797 9,489 57,440 53,653 11,686 15,572 14,878 6,140 5,885 Surplus (sec. 7) 188,097 160,411 13,206 11,160 70,012 58,001 17,859 16,026 14,767 5,236 5,236 W O O Su th rp e l r u s c a ( p s i e t c a . l 1 a 3 c b c ) ounts 6 2 0 6 , ,9 1 6 2 5 4 4 2 7 6 , ,8 5 2 7 9 4 2 2, , 9 8 4 7 8 4 2 2, , 5 8 4 7 8 4 1 7 2 , f 0 ~ 9 ~ 2 1 7 2 , , 0 8 7 80 0 4 3 , , 4 6 2 0 1 0 1 7 , , 0 5 0 6 7 4 4 1, , 0 5 0 6 7 4 3 4 , , 2 4 9 6 0 4 3 2 , , 2 0 4 6 4 8 W Total liabilities and capital accounts 33,954,566 29,018,642 1,985,876 1,838,702 9,537,938 9,048,863 2,075,007 8,404 2,486,8741,903,4811,516,673 Commitments to make industrial advances 9,270 10,661 700 119 261 1,930 100 387 670 1,008 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve agent 17,512,i !,672,151 1,203,368 909,636 3,872,083 2,904,543 .183,454 873,297 1,552,379 1,175,580 1,180,700 824,238 Held by Federal Reserve Bank 605,729 479,165 48,073 28,102 105,222 104, i 33,728 24,615 56,599 42,073 39,110 37,451 In actual circulation1. 16,906,359 12,192,986 1,155,295 881.534 3,766,861 2,799,735 1,149,726 848,682 1,495,780 1,133,5071,141,590 786,787 3 W Collateral held by agent for notes issued to banks: Gold certificates on hand and due from U. S. Treasury 13,266,00012,467,000 761,000 898,000 3,540,000 2,915,000 715,000 795,000 955,000 1,180,000 775,000 727,000 Eligible paper 4,990 2,830 1,610 320 2,185 235 700 2,140 420 25 U. S. securities 4,488,690 355,000 450,00 0 20,000 350,000 475,000 100,000 600,000 450,000 125,000 Total collateral held. 17,759,68012,824,830 1,212,610 918,320 3,892,185 2,915,235 1,190,700 897,140 1,555,000 1,180,000 1,225,420 852,025 1 Includes Federal Reserve notes held by the U. S. Treasury or by a Federal Reserve Bank other than the issuing bank. 2 After deducting $759,843,000 participations of other Federal Reserve Banks on Dec. 31,1943, and $424,034,000 on Dec. 31,1942. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

No. 2-STATEMENT OF CONDITION-Continued [In thousands of dollars] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Item 1943 1942 1942 1943 1942 1943 1942 1943 1942 1943 1942 1943 1942 ASSETS Gold certificates on hand and due from U. S. Treasury 890,198 763,536 3,808,3833,570,031 643,405 721,665 365,112 477,051 668,768 662,054 468,987 520,889 2.,301,1011,967,283 Redemption fund—Federal Reserve notes 18,974 1,844 19,758 1,475 19,714 4,192 8,625 202 12,288 352 9,837 371 20,406 7,133 t Other cash 23,142 23,880 40,409 40,018 15,399 19,246 9,777 8,353 13,663 11,997 11,050 17,175 39,922 35,995 Total reserves 932,314 789,260 3,868,550 3,611,524 678,518 745,103 383,514 485,606 694,719 674,403 489,874 538,435 2,361,429 2,010,411 Bills discounted: 8 Secured by U. S. Government obligations, direct and guaranteed 75 10 O Other bills discounted 87 73 190 s Total bills discounted 87 305 120 55 137 200 Industrial advances 221 504 110 61 178 366 1,250 4,550 4,034 o U. S. Government securities, direct and guaranteed: Bonds 118,737 131,718 154,843 342,801 78,235 133,223 60,270 75,729 104,226 137,180 100,408 113,568 194,465 288,968 Notes 49,397 63,444 £4,418 165,109 32,547 64,170 25,074 36,474 43,361 66,074 41,772 54,702 80,902 139,185 Certificates 179,785 49,101 234,460 127,787 118,457 49,662 91,258 28,230 157,819 51,137 152,038 42,335 294,454 107,719 s Bills 249,956 23,763 940,272 241,198 304,038 40,764 181,594 13,746 238,081 34,617 208,643 17,040 597,892 78,606 o Total U. S. Government securities, direct o and guaranteed 597,875 268,026 1,393,993 876,895 533,277 287,819 358,196 154,179 543,487 289,008 502,861 227,6451,167,713 614,478 i Total bills and securities 598,096 268,6171,393,997 877,310 533,277 288,000 358,374 154,600 543,592 290,395 502,873 227,749 1,172,263 618,712 Due from foreign banks 5 2 17 6 3 1 2 4 1 4 1 10 Federal Reserve notes of other Federal Reserve Banks 8,932 4,827 9,906 6,415 6,852 4,162 3,291 2,108 4,851 5,449 3,930 2,695 16,750 7,251 Uncollected items 113,337 82,976 306,817 244,938 94,750 75,178 36,279 34,291 109,204 64,897 69,582 53,476 214,878 155,454 Bank premises 1,653 1,726 2,948 2,917 2,064 2,110 1,280 1,309 2,737 2,808 963 1,052 2,023 2,691 Other assets 3,893 4,022 5,807 10,859 2,912 4,158 2,162 2,513 3,726 4,410 3,633 3,590 7,265 9,607 Total assets 1,658,230 1,151,430 5,588,042 4,753,969 1,318,376 1,118,712 784,902 680,427 1,358,833 1,042,363 1,070,859 826,998 3,774,618 2,804,130 •Less than $500. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes in actual circulation1 954,983 546,9083,163,200 2,419,593 725,702 513,737 385,761 302,727 613,745 428,63! 416,356 251,7651,937,360 1,279,380 Deposits: Member bank—reserve account 535,969 476,5351,943,250 1,925,896 434,360 446,424 295,470 276,826 583,217 487,364 520,289 468,3881,461,8051,232,212 U. S. Treasurer—general account 10,305 23,562 56,515 71,445 18,687 56,544 25,045 35,354 19,241 36,209 26,840 27,947 41,240 85,288 Foreign 44,311 24,464 154,455 85,273 37,981 20,969 27,853 15,377 35,449 20,270 37,981 20,270 96,250 53,328 Other deposits 6,592 5,085 3,546 4,310 10,806 12,257 10,051 12,465 6,002 4,903 3,016 3,456 45,328 41,614 Total deposits 597,177 529,646 2,157,766 2,,086,924 501,834 536,194 358,419 340,022 643,909 548,746 588,126 520,0611,644,6231,412,442 Deferred availability items 89,896 60,;884 210,687 197,776 76,497 56,581 29,290 27,636 86,862 52,850 52,663 43,312 160,470 83,985 Other liabilities including accrued dividends 208 106 672 334 206 83 165 229 484 573 219 121 404 77 Total liabilities 1,642,264 1,137,544 5,532,325 4,704,6271,304,239 1,106,595 773,635 670,6141,345,000 1,030,8001,057,364 815,2593,742,8572,775,884 CAPITAL ACCOUNTS Capital paid in 5,453 5,188 17,916 16,306 4,705 4,549 3,236 3,075 5,029 4,725 4,657 4,450 12,473 12,081 Surplus (sec. 7) 5,725 5,725 26,490 22,925 6,330 4,966 3,669 3,221 4,554 3,613 4,831 4,083 14,159 11,044 Surplus (sec. 13b) 749 717 1,429 1,429 530 530 1,000 1,000 1,137 1,137 1,307 1,307 2,129 2,121 Other capital accounts 4,039 2,256 9,882 8,682 2,572 2,072 3,362 2,517 3,113 2,088 2,700 1,899 3,000 3,000 Total liabilities and capital accounts 1,658,230 1,151,4305,588,042 4,753,969 1,318,376 1 784,902 680,4271,358,8331,042,3631,070,859 826,998 3,774,618 2,804,130 Commitments to make industrial advances 135 337 3,000 1,826 2,524 3,892 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve agent 998,714 582,534 3,223,744 ,469,905 759,355 541,608 392,402 308,147 634,522 440,629 449,884 277,2112,061,4831,364,823 Held by Federal Reserve Bank 43,731 35,626 60,544 50,312 33,653 27,871 6,641 5,420 20,117 11,998 33,528 25,446 124,123 85,443 In actual circulation. 954,983 546,9083,163,200 2,419,593 725,702 513,737 385,761 302,727 613,745 428,631 416,356 251,7651,937,360 1,279,380 Collateral held by agent for notes issued to banks: Gold certificates on hand and due from U. S. Treasury 650,000 555,000 2,860,0002,500,000 400,000 480,000 225,000 310,000 400,000 440,000 261,000 283,000 1,724,000 1,384,000 Eligible paper 45 75 65 U. S. securities 375,000 30,000 400,000 363,690 75,000 175^000 250,000 5,000 200,000 400,000 Total collateral held... 1,025,000 585,0003,260,000 2,500,000 763,690 555,045 400,000 310,000 650,075 445,065 461,000 283,000 2,124,000 1,384,000 i Includes Federal Reserve notes held by the U. S. Treasury or by a Federal Reserve Bank other than the issuing bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS AT END OF DECEMBER 1942 AND 1943 [In thousands of dollars] Type of issue (P i R n e a t r e te r c e e o s n f t t) Dec 1 e 9 m 42 ber Dec 1 e 9 m 43 ber du C ri h n a g n 1 g 9 e 43 Treasury bonds: 1943-47 3% 91,107 —91,107 1943-45 3lA 129,886 -129,886 1944-46 3% 126,000 - 196,000 +70,000 1944-54 4 45,530 60,930 +15,400 1945-47 2% 122,199 121,200 —999 1945 2lA 55,602 19,000 -36,602 1946-56 3% 35,135 37,250 +2,115 1946-48 3 101,222 96,700 —4 522 1946-49 3H 48,852 47,852 — 1,000 1947-52 4M 17,159 13,000 -4,159 1947 2 11,250 — 11,250 1948-50* 2 125,528 38,100 -87,428 1948-51 2% 104,529 100,500 —4 029 1948 23,750 -23,750 1948-50 2 4,594 —4 594 1949-51* Tune 15 2 130,427 7,750 -122,677 1949-51* Sept 15 2 62,240 3,000 — 59,240 1949-51* Dec 15 2 141,018 -141,018 1949-52 3XA 35,889 32,500 —3 389 1949-53 2H 129,125 74,100 -55,025 1950-52* Mar 15 2 177,475 -177,475 1950-52* Sept. 15 2 88,700 +88,700 1950-52 Sept. 15 2Y> " 120,383" 75,000 -45,383 1951-54 2% 123,393 85,300 -38,093 1951-55 3 40,194 16,000 — 24,194 1951-53* 2 192,500 + 192,500 1951-53 2M 79,882 32,500 -47,382 1951-55* 2 53,291 — 53,291 1952-54* 2Yi 48,509 -48,509 1952-55* 2\i 87,019 26,500 — 60,519 1953-55 ... 2 37,050 16,700 -20,350 1954-56 2% 5,068 6,000 +932 1955-60 2Vs 89,312 8,000 -81,312 1956-58* 2Yi 71,861 7,790 —64,071 1956-59 2% 57,731 5,000 -52,731 1958 63 2% 64,037 40,900 -23,137 1960-65 2% 75,352 37,250 -38,102 1967-72* 2Vi 105,460 73,443 -32,017 Total Treasury bonds 2,777,059 1,559,465 -1,217,594 Treasury notes: Mar 15 1943* % 39,300 -39,300 June 15 1943 95,400 -95,400 Sept. 15, 1943 31,700 -31,700 Dec 15 1943 \VS 54,000 -54,000 Mar. 15, 1944 107,400 88^100 -19,300 June 15 1944 % 71,900 59,400 -12,500 Sept. 15, 1944 59,100 23.700 —35,400 Sept 15, 1944* % 23,200 +23,200 Mar. 15, 1945 % 85,600 55,600 -30,000 Mar. 15, 1945* \% 236,845 146,100 —90,745 Dec 15 1945* % 829 -829 Mar. 15, 1946* 1 16,725 -16,725 Dec. 15, 1946* 1H 525,000 268,800 -256,200 Total Treasury notes 1,323,799 664,900 -658,899 Certificates of indebtedness* 1,041,000 2,467,300 +1,426,300 Treasury bills: Bought under repurchase option* 578,118 3,845,077 +3,266,959 Other* 431,877 2,923,191 +2,491,314 Total Treasury bills 1,009,995 6,768,268 +5,758,273 Guaranteed securities: CCC May 1 1943 475 -475 CCC, Feb. 15, 1945* 8,610 2,500'" -6,110 RFC July 15 1943* IH 9,000 -9,000 RFC, Apr. 15, 1944* 3,175 10,500 +7,325 HOLC, 1944-52 3 • 7,145 34,501 +27,356 HOLC, 1945-47 IH 1,271 1,271 FFMC 1944-64 3H 2,000 7,925 +5,925 FFMC, 1944-49 5,106 26,317 +21,211 Total guaranteed securities 36,782 83,014 +46,232 Total holdings 6,188,635 11,542,947 +5,354,312 " Taxable issues. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM NO. 4 -HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES BY THE FEDERAL RESERVE BANKS, 1943 [In millions of dollars] Date Amount Date Amount Date Amount Jan. 29 115 Mar. 16 1,250 June 15 805 30 202 17 981 16 . . . 659 18 8^?6 17 350 Mar. 2 3 19 778 18 256 4 174 20 768 19 212 5 354 22 603 6 543 23 700 Sept. 8 11 8 591 24 512 9 126 9 648 25 . .. 432 10 243 10 632 26 384 11 246 11 790 27 304 13 214 12 940 29 104 14 179 13 1,043 30 40 15 424 15 1,302 16 258 NO. 5-VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1939-1943 [Number in thousands; amounts in thousands of dollars] 1939 1940 1941 1942 1943 NUMBER OF PIECES HANDLED1 Bills discounted: Applications 2 2 2 1 2 Notes discounted and advances made.. .. 6 4 4 1 2 Industrial advances: Advances made .2 .2 .6 1 .8 Commitments to make industrial advances .1 .2 .2 .2 .1 Bills purchased in open market for own account .1 Currency received and counted 2,134,908 2,248,290 2,529,703 2,678,801 2,874,099 Coin received and counted 2,644,418 2,705,344 3,216,761 3,761,445 3,810,300 Checks handled: U. S. Government checks 133,951 127,284 123,128 130,895 266,686 All other 1,023,189 1,057,072 1,142,465 1,204,648 1,246,384 Collection items handled: U. S. Government coupons paid2 17,145 15,444 15,047 14,990 16,520 All other 6,177 6,094 6,392 5,833 5,072 Issues, redemptions, and exchanges by fiscal agency department: TJ. S. Government direct obligations 3,528 3,752 13,479 117,425 3270,358 All other 1,162 485 411 .473 250 Transfer of funds 814 780 840 842 864 AMOUNTS HANDLED Bills discounted 86,975 61,884 125,178 193,278 2,840,341 Industrial advances: Advances made 3,805 2,860 15,695 68,032 60,265 Commitments to make industrial advances 4,621 4,374 19,530 22,207 10,221 Bills purchased in open market for own account 2,133 Currency received and counted 9,285,921 9,538,629 "ll ,283,817 13,010,185 "l5 ,"599 ,'680 Coin received and counted 276,589 288,140 327,555 355,581 381,254 Checks handled: U. S. Government checks 16,327,930 18,750,260 27,732,559 67,834,790 113,791,554 Allother 239,610,050 261,685,832 334,336,667 409,273,478 509,640,311 Collection items handled: U. S. Government coupons paid2 890,620 902,288 926,960 1,082,321 1,481,271 All other.... 5,442,645 5,068,674 6,003,082 6,167,564 7,882,053 Issues, redemptions, and exchanges by fiscal agency department: U. S. Government direct obligations 24,462,659 20,189,983 33,278,154 90,338,2253209,762,970 Allother 4,537,228 1,687,194 3,262,012 3,260,660 1,986,425 Transfer of funds 88,080,756 92,105,910 118,423,057 140,444,452 203,510,209 1 Two or more checks, coupons, etc., handled as a single item are counted as one "piece." 2 Includes coupons from obligations guaranteed by the United States. 3 Exclusive of Treasury savings certificates and war savings stamps received for redemption. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 6-EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1943 Item System Boston Y N o e r w k d P e h lp il h a i - a C l l a e n v d e- m Ri o c n h d - Atlanta Chicago Lo S u t. is M ap in o n li e s - K C a i n t s y as Dallas Fran S c a i n sco CURRENT EARNINGS Discounted bills $151,915 $11 568 $86,003 $9,947 $4,101 $6,742 $8,135 $3,918 $14,766 $564 $3,367 $1,666 $1,138 U. S. Government securities 68,089,456 4,857,42417,766,396 5 122,053 6643,854 4,072,265 3,339,535 8,606,0323,135,7871,977,717 3,128,5842,798,224 6,641*585 Industrial advances 414,281 30,118 18,623 174,568 28,384 20,568 12,064 2,453 139 5,669 8,365 1,075 112,255 Commitments to make ind. adv 48,904 3,022 236 206 2,274 8,906 648 5,591 78 27,943 All other 601,159 16,387 127,023 32,461 71,971 4,614 14,035 125,922 24,351 11,508 155,932 11,652 5,303 Total current earnings 69,305,715 4,918,51917,998,281 5339,235 6 750,584 4 113,095 3,374,417 8,738,3253,180,6341,995,458 3,296,3262,812,617 6,788,224 CURRENT EXPENSES Operating expenses; Salaries: Officers 2,505,826 111,601 543 751 127,143 215,705 162,186 143,871 288,992 166,978 153,829 160,423 149,248 282,099 Employees 41,950,755 2,228,206 9,189,941 2496,052 4 213,204 2,341,180 1,982,726 6,497,6382,233,4801,407,426 2,244,2752,358,531 4,758,096 Retirement System contributions for current service 2,512,998 123,995 557,657 144,067 217,591 144,358 136,573 392,271 147,791 89,056 142,913 145,534 271,192 Legal fees 54,770 14,512 2,562 10,349 20,245 69 25 113 4,648 2,029 11 207 Directors' fees and expenses 130,781 9,887 10,808 9,516 10,730 7,883 14,452 9,651 8,577 11,051 15,834 9,319 13,073 Federal Advisory Council, fees and expenses 14,827 950 1,036 794 949 581 1,063 1,442 1,350 1,423 1,289 600 3,350 Traveling expenses (other than of directors and members of Federal Advisory Council) 557,728 26,698 62,264 32,543 56,567 32,348 46,789 88,947 39,849 30,336 35,542 39,067 66,778 Postage and expressage 8,666,419 724,550 1,220,180 684,053 966,677 666,815 574,129 1,349,599 388,500 269,484 475,363 413,885 933,184 Telephone and telegraph 779,582 37,873 120,793 42,890 80,807 42,746 62,652 74,150 61,886 35,635 64,578 55,744 99,828 Printing, stationery, and supplies. 3,679,571 280,088 687,784 233,762 495,707 176,902 169,297 562,130 180,257 149,569 177,361 199,586 367,128 Insurance on currency and security shipments 282 450 37 986 40,454 18,109 21,718 29,178 24,304 28,087 7,693 6,807 13,197 13,509 41,408 Other insurance 218,879 13,574 52,180 15,964 20,209 14,656 10,549 23,054 11,555 9,252 14,620 10,860 22,406 Taxes on bank premises 1,475,344 131,200 452,215 91,436 128,270 77,245 62,755 198,167 51,588 65,330 92,075 31,676 93,387 Depreciation on bank building.. . 1,050,828 55,832 219,960 143,275 112,476 88,625 42,549 76,491 44,482 28,847 70,312 93,125 74,854 Light, heat, power, and water.... 559,387 44,465 124,582 33,148 64,825 39,649 37,116 65,871 33,627 23,233 22,516 36,402 33,953 Repairs, alterations to bank bldg. 263,741 8,831 55,314 5,694 40,470 14,348 23,243 31,406 18,108 7,379 25,836 23,226 9,886 Rent 751,693 14,542 157,901 21 703 170,399 7,576 46,765 177,774 18 856 8 262 9,390 19,675 98,850 Furniture and equipment 1,149,479 38,419 179,942 46,850 99,858 58,106 77,797 310,861 77,457 18,759 53,805 82,492 105,133 All other 1,873,265 170,976 310,983 152,077 206,621 69,564 110,147 335,846 92,584 97,173 106,357 90,680 130,257 Total operating expenses 68,478,323 4,074,18513,990,307 4 309,425 7143,028 3 974,015 3,566,802 10,512,4903,584,6182,417,499 3,727,7153,773,170 7,405,069 Less reimbursements for certain fiscal agency and other expenses 32,684,507 1,538,277 5,721,834 1811,474 3 617,977 1683,782 1,746,018 5,718,4721,744,8621,318,401 1,784,7972,150,546 3,848,067 Net operating expenses 35,793,816 2,535,908 8,268,473 2497,951 3 525,051 2 290,233 1,820,784 4.794,0181,839,7561,099,098 1,942,9181,622,624 3,557,002 Assessment for expenses of Board of Governors 2,415,630 169,983 862,086 229,359 223,201 104,021 84,336 294,209 72,801 53,062 68,718 71,271 182,583 Federal Reserve currency: Original cost 4,968,676 331,219 840,957 386,479 417,525 365,288 401,206 714,038 237,505 102 992 183,664 194,461 793,342 Cost of redemption 367,442 16,184 62,679 22,682 26,620 39,579 35,393 47,969 25,342 6,857 18,745 23,314 42,078 Total current expenses 43,545,564 3,053,29410,034,195 3 136,471 4 192,397 2 799,121 2,341,719 5,850,2342,175,4041,262,009 2,214,0451,911,670 4,575,005 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PROFIT AND LOSS Current earnings (above) 69,305,715 4,918,519 ,998,281 5,339,235 6,750,584 4,113,095 3,374,417 8,738,3253,180,6341,995,458 3,296,326 2,812,617 6,788,224 Current expenses (above) 43,545,564 3,053,29410,034,195 3,136,471 4,192,397 2,799,121 2,341,719 5,850,2342,175,4041,262,009 2,214,045 1,911,670 4,575,005 Current net earnings 25,760,151 1,865,225 7,964,086 2,202,764 2,558,187 1,313,974 1,032,698 2,888,0911,005,230 733,449 1,082,281 900,947 2,213,219 Additions to current net earnings: Profits on sales of U. S. Government securities , 35,902,055 2,629,09610,216,982 2,927,686 3,537,441 1,974,305 1,537,926 4,135,9041,658,2001,083,198 1,718,8241,387,780 3,094,713 Recoveries of and withdrawals from allowances for losses on industrial advances (net) 180,452 27,060 24,969 1U,534 50,624 37,500 14,773 59,606 Allother 511,416 107,166 3,035 "113," 535 413 264,540 12,102 1,788 ' 1,249 4,337 845 1,928 478 Total additions 36,593,923 2,763,32210,244,986 3,041,221 3,523,320 2,289,469 1,587,528 4,137,6921,659,4491,082,762 1,719,669 1,389,708 3,154,797 Deductions from current net earnings: Charge-offs and special depreciation on bank premises 3,332,292 1,000,099 482,312 1,012,225 243,691 593,965 Retirement System (interest base and increased benefits adjustments) 9,363,778 542,442 :, 388,556 624,295 803,689 528,506 470,507 1,266,073 521,905 331,041 542, 468,031 876,282 All other 129,571 11,024 7,159 5,851 96,044 5,386 311 357 110 879 660 1,697 Total deductions 12,825,641 1,553,565 2,878,027 1,642,371 899,733 777,583 470,818 1,266,430 522,015 331,920 542, 468,691 1,471,944 Net additions 23,768,282 1,209,757 ,366,959 1,398,850 2,623,587 1,511,8 1,116,710 2,871,2621,137,434 750,842 1,177. 921,017 1,682,853 Net earnings 49,528,433 3,074,982 5,331,045 3,601,614 5,181,774 2,825,860 2,149,4 5,759,353 2,142,664 ,484,291 2,259,406 1,821,964 3,896,072 Paid U. S. Treasury (sec. 13b) 244,726 55,807 17,878 599 24,307 15,139 50 148 738 43,135 Dividends paid 8,911,342 573,065 1,280,516 922,163 359,650 319,356 993,684 190,924 290, 271,378 730,663 Transferred to surplus (sec. 13b) 135,003 22,153 45,557 31,369 2 8,125 Transferred to surplus (sec. 7) 40,237,362 2,446,110 !,010,498 4,259,012 2,396,346 1,783,544 4,765,619 293,217 1,966,6891,549,848 1,114,149 Surplus (sec. 7), January 1 160,410,33" 11,159,938 58,001,53915,670,086 14,766,685 5,235,966 5,724,628 22,924,752 4,,966,322 3,220,823 3,612, 4,082,593 ,044,326 Addition, as above 40,237,362 2,446,110 12,010,498 2,788,552 4,259,012 2,396,346 1,783,544 4,765,6191,863,7781,293,217 1,966, 1,549,848 ,114,149 Transferred to reserves for contingencies -12,550,890 -400,000 -600,000 -3,000,000 -2,396,346-1,783,544-1,200,000-500,000-845,000 -1,0251,000-801,000 Surplus (sec. 7), December 31 188,096,81113,206,048 70,012,03717,858,638 16,025,697 5,235,966 5,724,628 26,490,371 6,330,100 3,669,040 4,554,370 4,831,44114,158,475 1 Net losses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 7-CURRENT EARNINGS, CURRENT EXPENSES, AND NET EARNINGS OF FEDERAL RESERVE BANKSAND DISPOSITION OF NET EARNINGS, 1914-1943 Earnings and expenses Disposition of net earnings Direct charges Bank and period Franchise tax Paid to U. S. Transferred Transferred to surplus e C a u rn rr i e n n g t s e C x u p r e r n e s n e t s ear N n e in t gs1 Div p i a d i e d nds pa T i r d e a to s u U ry . 2 S. ( T S r e e c a . s 1 u 3 r b y ) t ( o S e s c u . r 1 p 3 lu b s ) to ( S s e u c r . p 7 l ) us (Sec. 7) All Federal Reserve Banks by years: 1914-15 $2,173,252 $2,320,586 $-141,459 $217,463 1916 5,217,998 2,273,999 2,750,998 1,742,774 d 1917 16,128,339 5,159,727 9,582,067 6,804,186 $1,134,234 $1,134,234 1918 .... 67,584,417 10,959,533 52,716,310 5,540,684 48,334,341 IT1 1919 102,380,583 19,339,633 78,367,504 5,011,832 2,703,894 70,651,778 1920 181,296,711 28,258,030 149,294,774 5,654,018 60,724,742 82,916,014 1921 122,865,866 34,463,845 82,087,225 6,119,673 59,974,466 15,993,086 1922 50,498,699 29,559,049 16,497,736 6,307,035 10,850,605 -659,904 s 1923 50,708,566 29,764,173 12,711,286 6,552,717 3,613,056 2,545,513 1924 38,340,449 28,431,126 3,718,180 6,682,496 113,646 -3,077,962 1 1 9 9 2 2 5 6 4 47 1 , , 5 8 9 0 9 0 , , 5 7 9 0 5 6 2 27 7 , , 3 5 5 2 0 8 , , 1 1 8 6 2 3 1 9 6 , , 4 6 4 1 9 1 , ,7 0 4 6 5 6 6 7 , , 9 3 1 2 5 9 , , 9 16 5 9 8 8 5 1 9 8 , , 3 1 0 5 0 0 8 2 , , 4 4 6 7 4 3 , , 4 8 2 0 6 8 o o w 1927 43,024,484 27,518,443 13,048,249 7,754,539 249,591 5,044,119 $500,000 1928 64,052,860 26,904,810 32,122,021 8,458,463 2,584,659 21,078,899 1929 70,955,496 29,691,113 36,402,741 9,583,913 4,283,231 22,535,597 \ 1930 36,424,044 28,342,726 7,988,182 10,268,598 17,308 -2,297,724 1931 29,701,279 27,040,664 2,972,066 10,029,760 —7,057,694 1932 50,018,817 26,291,381 22,314,244 9,282,244 2,011,418 11,020,582 1933 49,487,318 29,222,837 7,957,407 8,874,262 -916,855 o© 1934 48,902,813 29,241,396 15,231,409 8,781,661 $-60,323 6,510,071 139,299,557 1935 42,751,959 31,577,443 9,437,758 8,504,974 $297,667 27,695 607,422 1936 37,900,639 29,874,023 8,512,433 7,829,581 227,448 102,880 352,524 2 1937 41,233,135 28,800,614 10,801,247 7,940,966 176,625 67,304 2,616,352 731,313 1938 36,261,428 28,911,608 9,581,954 8,019,137 119,524 -419,140 1,862,433 448,835 o 1939 .... 38,500,665 28,646,855 12,243,365 8,110,462 24,579 -425,653 4,533,977 1,964,919 s 1940 43,537,805 29,165,477 25,860,025 8,214,971 82,152 -54,456 17,617,358 12,272,706 1941 41,380,095 32,963,150 9,137,581 8,429,936 141,465 -4,333 570,513 132,696 1942 52,662,704 38,624,044 ' 12,470,451 8,669,076 197,672 49,602 3,554,101 646,641 1943 . .. 69,305,715 43,545,564 49,528,433 8,911,342 244,726 1.35,003 40,237,362 12,550,890 Total—1914-1943 1,522,696,437 761,770,194 719,254,998 212,541,890 149,138,300 1,511,858 3—581,421 356,644,371 4168,547,557 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate for each Federal Reserve Bank 1914-1943 Boston 103,469,668 55,226,381 47,540,972 15,330,948 7,111,395 163,689 -1,345 24,936,285 11,730,237 New York 443,836,414 184,389,662 256,941,685 72,249,184 68,006,262 135,142 -660,235 117,211,332 47,199,295 Philadelphia 119,406,568 58,377,094 60,409,052 20,000,407 5,558,901 547,411 222,812 34,079,521 16,220,883 Cleveland 137,581,261 71,023,886 61,271,002 21,507,232 4,842,447 74,881 -8,446 34,854,888 18,829,192 Richmond 74,701,738 42,841,475 29,335,250 8,991,817 6,200,189 163,788 -130,886 14,110,342 8,874,375 Atlanta 70,697,009 35,509,382 30,094,402 7,558,563 8,950,561 54,154 -8,464 13,539,588 7,814,960 Chicago 207,787,314 99,417,538 99,556,719 24,642,472 25,313,526 142,389 11,681 49,446,651 22,956,280 St. Louis 66,232,492 38,847,379 23,166,542 7,524,771 2,755,629 7,063 -18,262 12,897,341 6,567,240 Minneapolis 48,658,776 27,182,675 19,815,444 5,246,120 5,202,900 34,960 -7,445 9,338,909 5,669,868 Kansas City 73,111,657 45,709,143 25,093,985 7,173,283 6,939,100 45,355 -8,388 10,944,635 6,390,264 Dallas 54,854,006 34,001,358 17,643,020 6,809,158 560,049 99,891 55,336 10,118,586 5,287,145 San Francisco 122,359,534 69,244,221 48,386,925 15,507,935 7,697,341 43,135 -27,779 25,166,293 11,007,818 1 Current earnings less current expenses, plus other additions and less other deductions. 2 The Banking Act of 1933 eliminated the provision in the Federal Reserve Act requiring payment of a franchise tax. 3 On Dec. 31, 1943, surplus (Sec. 13b)—relating to funds received from the Secretary of the Treasury under Section 13b of the Federal Reserve Act for the purpose of making loans to industry—amounted to $26,964,890 ($27,546,311 received from the Secretary of the Treasury minus the $581,421 net debits shown here). 4 On Dec. 31, 1943, surplus (Sec. 7)—accumulated pursuant to Section 7 of the Federal Reserve Act—amounted to $188,096,814 ($356,644,371 retained net earnings, shown in preceding column, less $168,547,557 direct charges shown here). Direct charges represent amounts transferred to reserves for contingencies except as follows: 1927, charge-off on bank premises; 1934, charge-off cost of Federal Deposit Insurance Corporation stock. 0 6 NO. 8-NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS [December 31, 19431 Federal Reserve Bank President Other officers E w m ho p s l b e o u y s r e a s e e la s d , r i e t e o x s c b a e a r p e n t k r t e h i o m s - e E a m re p l r o e y im ee b s u w rs h e o d s e t o s a b l a a n r k ies Total < (including branches) W Annual salary Number s A a n la n r u ie a s l Number s A a n la n r u ie a s l Number s A a n la n r u ie a s l Number s A a n la n r u ie a s l Boston $25,000 11 $95,078 855 $1,291,221 542 $695,099 1,409 $2 106,398 New York 45,000 45 502,100 2,608 5,154,110 2,026 3,668,968 4,680 9,370,178 Philadelphia . 25,000 11 110,000 993 1,473,183 541 912,679 1,546 2,520 862 Cleveland 25,000 24 178,040 1,154 1,631,698 1,104 2,024,556 2,283 3,859,294 Richmond 21,000 19 148,800 764 1,180,478 664 946,464 1,448 2,296,742 Atlanta . 20,000 20 127.200 564 845 166 900 1,175,114 1,485 2 167 480 Chicago 30,000 32 278,400 1,646 2,985,335 2,186 3,649,403 3,865 6,943,138 St Louis \ • • 25,000 19 146,820 757 1,198,296 774 1,177,239 1,551 2,547,355 Minneapolis 25,000 18 133,000 327 529,966 558 758,714 904 1,446,680 Kansas Citv 20,000 20 153,980 617 1,008,975 732 1,097,196 1,370 2,280,151 Dallas 20,000 18 129,300 574 916,029 880 1,291,196 1,473 2,356,525 San Francisco 25,000 36 266,400 1,162 2,019,775 1,528 2,697,530 2,727 5,008,705 Total $306,000 273* $2,269,118* 12,021 $20,234,232 12,435 $20,094,158 24,741 $42,903,508 * Includes $567,291 reimbursed to the banks on account of salaries of 83 officers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72- ANNUAL REPORT OF BOARD OF GOVERNORS NO. 9—RECEIPTS AND DISBURSEMENTS OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FOR THE YEAR 1943 General fund account: Balance January 1, 1943: For general expenses of the Board $111,738.45 For expenses chargeable to Federal Reserve Banks 331,555.72 For purchase of war savings bonds for employees under Board's voluntary pay roll savings plan 8,359.60 $451,653.77 RECEIPTS For general expenses of the Board: Assessments on Federal Reserve Banks for estimated general expenses of the Board $2,415,630.64 Subscriptions to the Federal Reserve Bulletin 5,445.06 Other publications, sales 1,933.47 Reimbursements for leased wire service 50,695.47 vJafeteria operations 42,557.99 Miscellaneous receipts, refunds, and reimbursements 32,723.57 2,548,986.20 For expenses chargeable to Federal Reserve Banks: Assessments on Federal Reserve Banks for: Cost of printing Federal Reserve notes 3,983,986.82 Expenses of leased wire system (telegraph) 63,088.11 Expenses of leased telephone lines 10,713.75 Expenses of Federal Reserve Issue and Redemption Division (Office of Comptroller of the Currency) 56,834.41 Miscellaneous expenses 4,854.06 4,119,477.15 Employees' pay roll allotments for purchase of war savings bonds 198,670.80 Income and victory tax withheld from salaries 147,796.10 Total receipts 7,014,930.25 Total available for disbursement 7,466,584.02 DISBURSEMENTS For expenses of the Board: Current expenses of 1943 (per detailed statement) $1,914,512.29 Less accounts unpaid December 31, 1943 49,611.11 1,864,901.18 Expenses of prior years paid in 1943 36,747.72 Expenses of leased wire service, reimbursable 46,564.17 Retirement System (interest base and increased benefits adjustments) 437,442.00 Cafeteria operations 48,627.83 Miscellaneous refunds and items reimbursable 5,159.70 2,439,442.60 For expenses chargeable to Federal Reserve Banks: Cost of printing Federal Reserve notes 3,921,614.72 Expenses of leased wire system (telegraph) 61,751.09 Expenses of leased telephone lines 10,335.50 Expenses of Federal Reserve Issue and Redemption Division (Office of the Comptroller of the Currency) 56,834.41 Miscellaneous expenses 3,495.58 4,054,031.30 Purchase of war savings bonds and refunds under Board's pay roll plan— ._ 197,551.10 Collector of Internal Revenue—income and victory tax withheld from salaries ... 89,883.75 Total disbursements 6,780,908.75 Balance in general fund account December 31, 1943: For general expenses of the Board 221,282.05 For expenses chargeable to Federal Reserve Banks 397,001.57 For purchase of war savings bonds for employees under Board's voluntary pay roll savings plan 9,479.30 For income and victory tax withholdings due Collector of Internal Revenue.. 57,912.35 S685,675.27 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 73 NO. 9-RECEIPTS AND DISBURSEMENTS—Continued CURRENT EXPENSES OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, 1943 PERSONAL SERVICES: Salaries $1,537,054.89 Retirement contributions 84,413.73 Total personal services $1,621,468.62 NONPERSONAL SERVICES: Traveling expenses 105,409.16 Postage and expressage 1,084.30 Telephone and telegraph 45,399,75 Printing and binding 54,344.43 Stationery and supplies 15,551.58 Furniture and equipment 1,615.79 Books and subscriptions 6,841.05 Heat, light, and power 27,786.37 Repairs and alterations (building and grounds) 1,501.27 Repairs and maintenance (furniture and equipment) 3,662.52 Medical service and supplies 907.68 Insurance 2,880.21 Miscellaneous 26,059.56 Total nonpersonal services $293,043.67 GRAND TOTAL $1,914,512.29 NO. 10- MINIMUM DOWN PAYMENTS AND MAXIMUM MATURITIES ON CONSUMER CREDIT SUBJECT TO REGULATION W Prescribed by Board of Governors of the Federal Reserve System in accordance with Executive Order No. 8843 dated August 9, 1941 Sept. 1, 1941-March March 23, 1942-May Effective May 6, 22, 1942 5, 1942 1942 Type of credit Down Maximum Down Maximum Down Maximum payment maturity payment maturity payment maturity (months) (%)x (months) (months) Instalment sales:2 Automobiles 33% 15 33% 15 Mechanical refrigerators, washing machines, radios, vacuum cleaners. 20 18 33^ 15 33% 12 Stoves, ranges 20 18 20 15 33% 12 Furnaces, oil burners, plumbing and sanitary fixtures 15 18 20 18 33% 12 FFuurnritnutr.e 10 18 10 15 20 12 Flloor coverings 20 15 33% 12 Watches, clocks 20 15 33% 12 Jewelry 33% 12 Clothing, furs 33H 12 Materials (not elsewhere listed) for repair or improvement of residential structures 18 18 12 Instalment loans: To purchase listed articles (3) (3) (3) (3) (3) To pay charge account arising from sale of listed article, or to pay single-payment loan 18 15 6 Other 18 15 12 Consolidations of instalment sale or loan with previously outstanding instalment credit (3) (3) 15 (3) 12 Single-payment loans....; (3) 3 Charge sales of listed articles 10th day of 2nd month after sale 1 Down payments determined after deduction of any trade-in, except in case of automobiles. 2 Terms shown for selected articles. For terms on other listed articles, see regulation. 3 Where credit is to purchase listed articles, requirements same as on instalment sales of the respective articles. 4 Prior to Dec. 1, 1941, maximum maturity was 18 months. NOTE.—The above limitations have been subject to various exceptions; for exceptions in detail, and for additional provisions not reflected in this table, the regulation should be consulted. Where no figure is shown, there was no limitation imposed by Regulation W. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 11—FEDERAL RESERVEuBANK DISCOUNT, INTEREST, AND COMMITMENT RATES, AND BUYING RATES ON BILLS [Per cent per annum] In effect December 31, 1943 Type of transaction B to o n s- Y N o e r w k P a p d h h e i i l l a - - C l l a e n v d e- m Ri o c n h d - la A n t t - a c C a h g i o - L S o t u . i . s n M o e l i a i n s p - - K C s a a it n s y - D la a s l- P c S i 'r s a a c n n o - Rediscounts for and advances to member banks under Sees. 13 and 13a of the Federal Reserve Act: Advances secured by Government securities maturing or callable within one year Y2 H Y2 Yi All other Advances to member banks under Sec. 10(b) of the Federal Reserve Act IY2 IV2 Advances^ to individuals, partnerships, or corporations secured by direct obligations of the United States (last paragraph of Sec. 13 of the Federal Reserve Act): To nonmember banks.... 1 To others.. 2H 2Y2 Advances to industrial or commercial businesses under Sec. 13b of the Federal Reserve Act, direct or in participation with financing institutions 214-5 2^-5 2Y2-5 2Y2-5 2Y2-5 2Y2-5 2Y2S 2Y2S 2Y2S Discounts for and purchases from financing institutions under Sec. 13b of the Federal Reserve Act: On portion for which institution is obligated... (2)2 (I) I-IY2 0 o On remaining portion — 2Y2-5 Commitments to make advances under Sec. 13b of the Federal Reserve Act: To industrial or commercial businesses A -VA Y2-VAY2-V Y2-IX To financing institutions. V2-&1 Y2-V Y2-V4 Minimum buying rates on prime bankers' acceptances payable in dollars... 1-90 days 91-120 days 121-180 days Buying rate on Treasury bills6 1 Rate charged borrower by financing institution less commitment rate. 2 May charge same rate as charged borrower by financing institution, if less. 3 Rate charged borrower. 4 Financing institution is charged lA per cent on undisbursed portion of loan. 5 The same minimum rates in effect at the Federal Reserve Bank of New York apply to any purchases made by other Federal Reserve Banks. 6 Established rate at which Federal Reserve Banks stand ready to buy all Treasury bills offered. Purchases are made subject to the condition that the Reserve Bank upon request of the seller before maturity will sell back bills of like amount and maturity at the same rate of discount. NOTE.—Maximum maturities for discounts and advances to member banks are: 15 days for advances secured by obligations of the Federal Farm Mortgage Corporation or the Home Owners Loan Corporation guaranteed as to principal and interest by the United States, or by obligations of Federal Intermediate Credit Banks maturing within 6 months; 90 days for other advances and discounts made under Sections 13 and 13a of the Federal Reserve Act (except that discounts of certain bankers' acceptances and of agricultural paper may have maturities not exceeding 6 months and 9 months respectively); and 4 months for advances under Section 10(b). The maximum maturity for advances to individuals, partnerships, or corporations made under the last paragraph of Section 13 is 90 days. Industrial advances and commitments made under Section 13b of the Federal Reserve Act may have maturities not exceeding 5 years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 75 NO. 12-MAXIMUM RATES ON TIME DEPOSITS Maximum rates thai may be paid by member banks as established by the Board of Governors under provisions of Regulation Q [Percent per annum] In effect Type of deposit beginning Jan. 1, 1936 Savings deposits Postal Savings deposits Other time deposits payable in: 6 months or more 90 days to 6 months 2 Less than 90 days 1 NOTE.—Maximum rates that may be paid by insured nonmember banks as established by the Federal Deposit Insurance Corporation, effective February 1, 1936, are the same as those in effect for member banks. Under Regulation Q the rate payable by a member bank may not in any event exceed the maximum rate payable by State banks or trust companies on like deposits under the laws of the State in which the member bank is located. NO. 13-MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits! Net demand deposits1 Time Period in effect deposits (all res C e e rv n e tr a c l ity Reserve Country m b e a m nk b s e ) r banks city banks banks June 21, 1917-Aug. 15, 1936 13 10 7 3 Aug. 16, 1936-Feb. 28, 1937 15 M M N A o p a a r v y r . . . 1 1 1 6 1 , , , , 1 1 1 1 9 9 9 9 3 3 3 4 7 7 8 1 - - - - A A O A p p c u t r r g . . . . 3 3 1 1 0 9 1 5 , , , , 1 1 1 1 9 9 9 9 4 4 3 3 1 2 7 8 2 2 2 2 6 6 % 4 2 2 0 0 1 1 1 1 4 4 2 2 H 6 5 6 * Aug. 20, 1942-Sept. 13, 1942 24 20 14 6 Sept. 14, 1942-Oct. 2, 1942 22 20 14 6 Effective Oct. 3, 1942 20 20 14 6 1 Demand deposits subject to reserve requirements; i.e., demand deposits other than war loan deposits, minus cash items in process of collection and demand balances due from domestic banks. NO. 14-MARGIN REQUIREMENTS i Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Per cent of market value] Apr. 1,1936- Nov. 1, 1937 Oct.31,1937 and after For extensions of credit by brokers and dealers onlisted securities, under Regulation T . S S 40 For short sales, under Regulation T 50 For loans by banks on stocks, under Regulationu ... 40 1 Regulations T and U limit the amount of credit that may be extended on a security by prescribing a maximum loan value, which is a specified percentage of its market value at the time of the extension; the ''margin requirements" shown in this table are the difference between the market value (100%) and the maximum loan value. ^ Requirement under Regulation T was the margin "customarily required" by the broker. ° Regulation U became effective May 1, 1936. NOTE.—Regulations T and U also provide special margin requirements on "omnibus" accounts and loans to brokers and dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 15—ALL MEMBER BANKS-ASSETS AND LIABILITIES ON DECEMBER 31, 1943 BY CLASSES OF BANKS [Amounts in thousands of dollars] Item Ce m nt e r m al b e re r s b er a v n e k s c 1 ity m R b e a e c m n s i e t k y b r s v e * r e m C b o e a m u n n k b t s e r 1 y r m b e a A m n l b k l e s r n m b a e t a A m i n o l k l b n s e a r l m b S e a A m ta n l b t k l e e s r New York Chicago ASSETS Loans and investments 19,994,040 4,554,104 27,521,471 22,187,988 74,257,603 47,498,601 26,759,002 n Loans (including overdrafts) .... . 4,428,453 1,004,220 6,200,794 4,654,053 16,287,520 10,116,273 6,171,247 United States Government direct obligations 13,579,281 3,163,101 18,932,891 14,927,384 50,602,657 32,450,770 18,151,887 Obligations guaranteed by United States Government 983,898 74,453 748,976 537,811 2,345,138 1,614,001 731,137 Obligations of States and political subdivisions 444,267 157,767 913,092 1,213,526 2,728,652 1,928,627 800,025 Other bonds, notes, and debentures 453,834 134,121 607,543 777,353 1,972,851 1,239,869 732,982 Corporate stocks (including Federal Reserve Bank stock) 104,307 20,442 118,175 77,861 320,785 149,061 171,724 Reserves, cash, and bank balances 5,197,227 1,283,017 9,326,844 7,982,946 23,790,034 16,017,030 7,773,004 s Reserve with Federal Reserve Banks 3,595,906 820,622 5,115,643 3,303,078 12,835,249 8,323,142 4,512,107 Cash in vault 91,734 37,929 391,403 611,106 1,132,172 790,411 341,761 Demand balances with banks in the United States (except private banks and American branches of foreign banks) 59,451 156,050 1,740,548 3,451,410 5,407,459 4,119,804 1,287,655 Other balances with banks in United States . 1,250 1,605 17,232 22,421 42,508 33,646 8,862 O Balances with banks in foreign countries 13,265 1,557 3,626 1,660 20,108 14,588 5,520 Cash items in process of collection 1,435,621 265,254 2,058,392 593,271 4,352,538 2,735,439 1,617,099 Due from own foreign branches 320 9,399 9,719 9,399 320 Bank premises owned and furniture and fixtures 191,943 17,527 297,491 354,292 861,253 545,472 315,781 Other real estate owned 11,315 30,207 39,132 80,654 33,989 46,665 o Investments and other assets indirectly representing bank premises or other real estate .. .. 6,141 256 54,391 16,376 77,164 47,275 29,889 Customers' liability on acceptances 26,454 1,403 13,187 3,015 44,059 26,070 17,989 Income accrued but not yet collected .. 54,872 13,740 70,360 31,191 170,163 101,257 68,906 Other assets 16,189 6,236 35,302 23,239 80,966 47,419 33,547 Total assets 25,498,501 5,876,283 37,358,652 30,638,179 99,371,615 64,326,512 35,045,103 o S LIABILITIES Demand deposits .. 22,405,993 5,014,608 28,918,894 20,592,852 76,932,347 49,721,222 27,211,125 Individuals partnerships, and corporations 14,372,713 3,097,107 18,789,624 15,560,718 51,820,162 33,184,313 18,635,849 United States Government: War loan accounts 3,359,941 711,557 3,278,163 1,836,224 9,185,885 5,601,356 3,584,529 Other . ... 35,112 1,929 95,322 125,454 257,817 213,462 44,355 States and political subdivisions 251,716 174,420 1,448,418 1,727,291 3,601,845 2,678,747 923,098 Banks in United States 2 866,938 971,649 4,770,008 994,222 9,602,817 6,691,842 2,910,975 Banks in foreign countries 809,833 13,800 62,798 4,639 891,070 423,999 467,071 Certified and officers' checks, cash letters of credit and travelers' checks, etc 709,740 44,146 474,561 344,304 1,572,751 927,503 645,248 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Time deposits 850,496 507,971 6,150,644 7,820,902 15,330,013 10,239,446 5,090,567 Individuals, partnerships, and corporations 815,914 505,071 5,902,177 7,598,575 14,821,737 9,859,093 4,962,644 United States Government 5,199 2,250 55,381 52,635 115,465 93,844 21,621 Postal savings 901 3,751 4,652 3,912 740 States and political subdivisions "25,'688" 650 150,826 149,390 326,554 239,583 86,971 Banks in United States 1,145 39,859 16,551 57,555 38,964 18,591 Banks in foreign countries 2,550 1,500 4,050 4,050 Total deposits. 23,256,489 5,522,579 35,069,538 28,413,754' 92,262,360 59,960,668 32,301^692 Due to own foreign branches 203,508 203,508 168,189 35,319 Bills payable, rediscounts, and other liabilities for borrowed money 29,200 io,' no' 39,310 8,155 31,155 Acceptances outstanding 33,577 1,630 16,091 3,024 54,322 31,476 22,846 Dividends declared but not yet payable 17,036 1,130 12,288 8,259 38,713 23,733 14,980 Income collected but not yet earned 6,039 1,611 17,886 10,456 35,992 23,875 12,117 Expenses accrued and unpaid 55,941 19,140 79,815 30,659 185,555 118,273 67,282 Other liabilities 34,926 4,586 28,386 8,723 76,621 42,079 34,542 Total liabilities 23,636,716 5,550,676 35,224,004 28,484,985 92,896,381 60,376,448 32,519,933 a CAPITAL ACCOUNTS I Capital 570,667 131,000 785,156 929,551 2,416,374 1,527,715 888,659 Surplus , 979,570 130,350 889,242 770,615 2,769,777 1,616,996 1,152,781 Undivided profits 235,441 25,147 283,489 321,916 865,993 541,171 324,822 Other capital accounts 76,107 39,110 176,761 131,112 423,090 264,182 158,908 I Total capital accounts , 1,861,785 325,607 2,134,648 2,153,194 6,475,234 3,950,064 2,525,170 Total liabilities and capital accounts 25,498,501 5,876,283 37,358,652 30,638,179 99,371,615 64,326,512 35,045,103 MEMORANDA Mi Par or face value of capital 570,667 131,000 785,156 930,708 2,417,531 1,528,296 889,235 Capital notes and debentures. . 322 17,877 14,232 32,431 32,431 First preferred stock 8,426 73,752 97,656 179,834 117,941 61,893 Second preferred stock 850 12,461 13,311 9,551 3,760 Common stock 561,919 131,000 692,677 806,359 2,191,955 1,400,804 791,151 Retirable value of capital: First preferred stock 20,887 102,279 142,974 266,140 159,791 106,349 Second preferred stock 850 18,257 19,107 11,258 7,849 Net demand deposits subject to reserve 17,550,980 3,882,112 21,843,036 14,713,806 57,989,934 37,264,965 20,724,969 Demand deposits adjusted2 13,89S,548 3,050,419 18,654,211 17,039,042 52,642,220 34,055,124 18,587,096 Number of banks 37 13 357 6,331 6,738 5,040 1,698 For footnotes see next table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 16-ALL MEMBER BANKS—CLASSIFICATION OF LOANS AND UNITED STATES GOVERNMENT DIRECT OBLIGATIONS ON DECEMBER 31, 1943 BY CLASSES OF BANKS [In thousands of dollars] Item New C e m Y n e t o r m r a k l b r e e r s b er a v n C e k h s c i 1 c it a y go m R b e e a c s m n i e t k y b r s v e 1 e r C m b o e a u m n n k b t s e r 1 y r m b e a A m n i k l b s er n m b a e t a A i m n o l k b l n s e a r l A m b l e l a m S n b k ta e s t r e Loans 4,428,453 1,004,220 6,200,794 4,654,053 16,287,520 10,116,273 6,171,247 > Commercial and industrial loans, including open-market paper 2,515,262 763,124 3,058,2801 1,084,080 7,420,746 4,754,242| 2,666,504 z Loans on agricultural commodities covered by purchase agreements of j z Commodity Credit Corporation 22,117 3,713 157,887! 277,423J] 461,140 393,323! 67,817 c Other agricultural loans 2,047 2,554 121,152! 436,071j 561,824 452,150i 109,674 Loans to brokers and dealers in securities 1,054,421 102,140 216,857; 24,818Ji 1,398,236 517,3O7| 880,929 Other loans for purchasing or carrying securities 323,180 51,905 266,923!; 197,322 839,330 432,145! 407,185 Real estate loans: On farm land 26 517 54.211J 190,844 245,598 173,4751 72,123 W On residential property 61,749 14,578 1,109,595; 1,232,783 2,418,705 1,541,1021 877,603 c On other properties 45,151 6,840 256,395| 301,521 609,907 349,509! 260,398 Loans to banks 42,063 702 13,029| 1,632 57,426 24,804; 32,622 Consumer loans to individuals: Retail automobile instalment paper 2.138 3,3761 57,36lj 52,820 115,695 91,008; 24,687 Other retail and repair-modernization instalment loans 21,072 11,076 74,144! 50,580; 156,872 114,715| 42,157 Personal instalment cash loans 21,925 5,888 72,109: 115,612 215,534 148,191! 67,343 w All o S t i h n e g r l e l - o p a a n y s m ( e in n c t lu lo d a in n g s t o o v e in rd d r i a v f i t d s u ) als 2 1 0 10 6 , , 4 8 5 4 3 9 2 1 4 3 , , 3 4 3 7 1 6 4 28 5 8 4 , , 0 7 6 8 8 3 ! ! 3 3 7 0 8 9 , , 9 6 3 1 2 5 9 7 9 9 5 0 , , 5 9 7 2 8 9 6 5 2 0 3 1 . , 0 2 4 5 7 5 J ! 4 1 9 6 4 7 , , 3 8 2 8 3 2 o > United States Government direct obligations, 13,579,281 3,163,101] 18,932,891] 14,927,384 50,602,657 32,450,770| 18,151,887 Treasury bills 1,327,523 199,283 1,801,9731 1,031,646 4,360 425 2,761,718! 1,598,707 Treasury certificates of indebtedness 3,408,562 877,362 4,691,130'! 3,094,113 12,071,167 7,921,329! 4,149,838 Treasury notes 1,828,919 484,358 2,496,594: 2,096,152 6,906,023 4,531,1131 2,374,910 o United States savings bonds 472! 1,495 12,488: 156,306 170,761 124,934| 45,827 Other bonds maturing in 5 years or less 1,602,430 325,108 1,993,127! 1,338,778 5,259,443 3,121,798! 2,137,645 o Other bonds maturing in 5 to 10 years 3,889,304 629,735 5,521,9521 4,873,746 14,914,737 9,399,533| 5,515,204 Bonds maturing in 10 to 20 years 1,436,592 502,938 1,930,1681 1,694,262 5,563,960 3,607,743 1,956,217 Z Bonds maturing after 20 years 85,479 142,822 485,459 642,381 1,356,141 982,602 373,539 c 1 Banks are classified according to the reserves which they are required to carry (see Table 13, p. 75). Some banks classified as "country banks" are in outlying sections of reserve citor central reserve cities, and some banks classified as "reserve city banks" are in outlying sections of central reserve cities. Figures for each class of banks include assets and liabilities of their domestic branches, whether located within or outside the cities in which the parent banks are located. 2 Net demand deposits other than interbank and United States Government, less cash items reported as in process of collection. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 79 NO. 17-MEMBER BANK RESERVE BALANCES, RESERVE BANK CREDIT, AND RELATED ITEMS—END OF YEAR 1918-1942 AND END OF MONTH 1943 [In millions of dollars] Reserve Bank credit outstanding s jjj End of year or month £-3 IN I M> CJ O -3 to Urn 3 ""o s o Ho O 1918 1,766 287 239 206 2,498 2,873 1919 2,215 574 300 203" 3,292 2,707 1920 2,687 260 287 120 3,355 2,639 1921 1,144 145 234 40 1,563 3,373 1922 618 272 436 79 1,405 3,642 1923 723 355 134 27 1,238 3,957 1924 320 387 540 54 1,302 4,212 1925 643 374 375 67 1,459 4,112 1926 637 381 315 49 1,381 4,205 1927 582 392 617 64 1,655 4,092 1928 1,056 489 228 35 1,809 3,854 1929 632 392 511 48 1,583 3,997 1930 251 364 729 29 1,373 4,306 1931 638 339 817 59 1 853 4 173 1932 235 33 1,855 22 2,145 4,226 1933 98 133 2,437 20 2,688 4,036 1934 7 6 2,430 20 2,463 8,238 1935 5 2,431 45 2,486 10,125 1936 3 3 2,430 64 2,500 11,258 1937 . 10 1 2,564 38 2,612 12,760 1938 .. 4 1 2,564 33 2,601 14,512 1939 7 2,484 102 2,593 17,644 1940 3 2,184 87 2,274 21,995 1941 3 2,254 104 2,361 22,737 1942 6 6,189 484 6,679 22,726 1943—Jan 14 5,969 356 6,339 22,683 Feb 16 5,871 410 6,296 22,644 Mar 13 5,919 260 6,191 22,576 Apr 13 6,455 378 6,846 22,473 May 31 6,222 394 6,647 22,426 June 5 7,202 369 7,576 22,388 July 16 8,187 483 8,68522,335 Aug 59 9,088 319 9,466 22,243 Sept 12 8,919 453 9,384 22,175 Oct 26 9,354 443 9,823 22,116 Nov 52 10,348 363 10,76322,065 Dec 5 11,543 691 12,23921,938 -tuo a .2 a "o x\ xt un § £•- .a >> §^ 1 1 H H 1,795 4,951 288 1,707 5,091 385 1,709 5,325 218 1,842 4,403 214 1,958 4,530 225 2,009 4,757 213 2,025 4,760 211 1,977 4,817 203 1,991 4,808 201 2,006 4,716 208 2,012 4,686 202 2,022 4,578 216 2,027 4,603 211 2,035 5,360 222 2,204 5,388 272 2,303 5,519 . 284 2,511 5,536 3,029 2,476 5,882 2,566 2,532 6,543 2,376 2,637 6,550 3,619 2,798 6,856 2,706 2,963 7,598 2,409 3,087 8,732 2,213 3,247 11,160 2,215 3,648 15,410 2,193 3,830 15,590 2,199 3,946 16,088 2,221 3,989 16,250 2,224 4,012 16,660 2,235 4,069 17,114 2,257 4,077 17,421 2,268 4,086 17,955 2,264 4,087 18,529 2,271 4,094 18,844 2,267 4,101 19,250 2,288 4,097 19,918 2,289 4,094 20,449 2,303 htiw sknat Member bank reserve i balances o |1 -o cu &3 "g <u %!> o 3 o £^ o Ho w 51 121 118 1,636 51 31 101 208 1,890 68 57 23 298 1,781 96 27 285 1,753 99 11 29 276 1,934 38 23 275 1,898 " " 14 51 39 258 2,220 59 16 29 272 2,212 -44 17 65 293 2,194 -56 18 26 301 2,487 63 23 27 348 2,389 -41 29 30 393 2,355 — 73 19 28 375 2,471 96 54 110 354 1 961 —33 8 43 355 2,509 576 3 132 360 2,729 859 121 189 241 4,096 1,814 544 255 253 5,587 2,844 244 259 261 6,606 1,984 142 407 263 7,027 1,212 923 441 260 8,724 3,205 634 653 251 11,653 5,209 368 1,732 284 14,026 6,615 867 1,360 291 12,450 3,085 799 1,278 256 13,117 1,988 4 1,171 258 13,630 2,387 131 1,111 269 13,067 1,925 55 1,166 303 12,759 1,518 557 1,369 306 12,204 2,315 62 1,366 313 12,031 1,728 455 1,483 328 12,085 1,212 345 1,622 330 12,590 1,268 249 1,561 330 12,855 1,123 706 1,636 335 11,864 1,684 400 1,674 341 12,086 1,102 394 1,592 331 12,401 985 579 1,716 339 12,886 1,236 1 Includes Government overdrafts in 1918, 1919, and 1920; includes industrial advances outstanding since July 1934. 2 By proclamation of the President, dated Jan. 31, 1934, the weight of the gold dollar was reduced from 25 8/10 grains to 15 5/21 grains, nine-tenths fine. Between Jan. 31, 1934, and Feb. 1, 1934, the gold stock increased $2,985,000,000, of which $2,806,000,000 was the increment resulting from the reduction in the weight of the gold dollar and the remainder was gold which had been purchased by the Treasury previously but not added to the gold stock. The increment was covered into the Treasury as a miscellaneous receipt, and appeared together with the new gold as a General Fund asset. These transactions were also reflected in an increase in the item "Treasury cash." The increment arising from United States gold coin turned in by the public after Jan. 31, 1934, was also added to both gold stock and Treasury cash at the time of receipt. The increment from this source amounted to about $7,000,000, from Feb. 1 to Dec. 31,1934, to about $1,000,000 in 1935, to $1,800,000 in 1936, to $1,200,000 in 1937, to $500,000 in 1938, to $350,000 in 1939, to $450,000 in 1940, to $305,000 in 1941, to $280,000 in 1942, and to $195,000 in 1943. 3 Comprises outstanding United States notes, national bank notes, silver bullion, Treasury notes of 1890, standard silver dollars, subsidiary silver and minor coin, and the Federal Reserve Bank notes for the retirement of which lawful money has been deposited with the Treasurer of the United States, including the currency of these kinds that is held in the Treasury and«the Federal Reserve Banks as well as that in circulation. 4 Cash (including gold bullion) held in the Treasury excepting (a) gold and silver held against gold and silver certificates and (b) amounts held for the Federal Reserve Banks. & Item includes all deposits in Federal Reserve Banks except Government deposits and member bank reserve balances. 6 This item is derived from the condition statement of the Federal Reserve Banks by adding capital, surplus, other capital accounts, and "other liabilities, including accrued dividends," and subtracting the sum of bank premises and "other assets." 7 Represents excess of total reserve balances over reserves required to be held by member banks against their deposits. Figures not available prior to 1929 except on call dates, and since April 1933 are for licensed member banks only. For required reserves and changes in the percentages of requirements see Table 13, p. 75. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8o ANNUAL REPORT OF BOARD OF GOVERNORS NO. 18-NUMBER OF BANKING OFFICES IN UNITED .STATES, 1933-1943 Commercial banks Mutual savings Year All Member banks Nonmember banks1 banks banks Total Total ti N o a n - al m S em ta b te er Total su I r n e - d2 in N su o r n e - d2 su In r - ed in N su o r n e - d Number of banking offices 1933 17,940 17,236 8,092 6,275 1,817 9,144 9 144. 70 1934 19,196 18,491 8,666 6,705 1,961 9,825 39 82S 37P* 1935 19,153 18,455 8,668 6,715 1,953 9,787 8,562 1,225 67 631 1936 19 066 18,373 8,755 6,723 2,032 9,618 8,440 1 178 67 626 1937 18,927 18,236 8,820 6,745 2,075 9,416 8,342 1,074 67 624 1938 18,774 18,084 8,829 6,723 2,106 9,255 8,226 1,029 64 626 1939 . . .. 18,663 17,980 8,882 6,705 2,177 9,098 8,099 999 75 608 1940 18,561 17,875 9,027 6,683 2,344 8,848 7,892 956 84 602 1941 . 18 524 17,841 49,199 6,682 42,517 8,645 7,742 903 484 599 1942 18,419 17,736 49,294 6,673 42,621 8,445 7,602 843 /91 592 1943 . . 18 512 17,831 49,531 6,781 42,750 8,303 7,487 816 4279 402 Number of banks (Head offices) 1933 15,029 14,450 6,011 5,154 857 8,439 8,z39 579 1934 16 063 15,484 6,442 5,462 980 9,042 7,699 1,343 68 511 1935 15,869 15,299 6,387 5,386 1,001 8,912 7,734 1,178 56 514 1936 15 667 15,102 6,376 5,325 1,051 8,726 7,592 1,134 56 509 1937 15,387 14,824 6,341 5,260 1,081 8,483 7,451 1,032 56 507 1938 15,194 14,639 6,338 5,224 1,114 8,301 7,318 983 48 507 1939 15 034 14,483 6,362 5,187 1,175 8,121 7,172 949 51 500 1940 14,895 14,344 6,486 5,144 1,342 7,858 6,952 906 53 498 1941 14 825 14,277 46,619 5,117 41,502 7,661 6,810 851 52 496 1942 ;. 14,680 14,134 46,679 5,081 41,598 7,458 6,667 791 56 490 1943 14,579 14,034 46,738 5,040 41,698 7,299 6,535 764 184 361 Number of branches and additional offices 1933 2 911 2,786 2,081 1,121 960 705 715 125 1934 3 133 3,007 2,224 1,243 981 783 3783 3126 1935 3 284 3,156 2,281 1,329 952 875 828 47 11 117 1936 3,399 3,271 2,379 1,398 981 892 848 44 11 117 1937 3,540 3,412 2,479 1,485 994 933 891 42 11 117 1938 3,580 3,445 2,491 1,499 992 954 908 46 16 119 1939 3,629 3,497 2,520 1,518 1,002 977 927 50 24 108 1940 3,666 3,531 2,541 1,539 1,002 990 940 50 31 104 1941 3 699 3,564 2,580 1,565 1,015 984 932 52 32 103 1942 3,739 3,602 2,615 1,592 1,023 987 935 52 35 102 1943 . . 3,933 3,797 2,793 1,741 1,052 1,004 952 52 95 41 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 81 NO. 19—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 1943 Commercial banks Mu.ual savi Member Nonmember bariks All banks banks1 banks Total .Na- m St e a m te - In- Non- In- Nontional ber sured insured sured insured ANALYSIS OF BANK CHANGES Number of banks on December 31, 1942 14,680 14,134 5,081 21,598 6,667 791 256 490 Increases in number of banks: Primary organizations (newbanks)d +49 +49 +3 +4 +31 +11 +4 +1 +3 —4 -2 -2 Consolidations and absorptions 86 —86 ,-34 -7 -35 -10 —62 — 11 -2 —32 — 17 Unclassified 9 -1 -1 -1 Inter-class bank changes: Conversions— -7 +7 +10 —5 Federal Reserve membership5— Admissions of State banks +113 -112 -1 Withdrawals of State banks -3 +2 +1 Federal deposit insurance6— Admissions of State banks +13 -13 +128 -128 Withdrawals of State banks Net increase or decrease in number of banks 101 -100 -41 +100 -132 -27 +128 — 129 Number of banks on December 31, 1943 14,579 14,034 5,040 21,698 6,535 764 2184 361 ANALYSIS or BRANCH CHANGES7 Number of branches and additional offices on December 31, 1942 3 739 3,602 1,592 1,023 935 52 35 102 Increases in number of branches: De novo branches +25 +22 +3 +3 +14 +2 +3 Banks converted into branches +24 +24 +8 +9 +7 Decreases in number of branches: Branches discontinued 47 —43 -11 -14 — 18 Inter-class branch changes: From national to State -1 +1 From State member to national +2 -2 From State member to nonmember From nonmember to State member +5 r From noninsured to insured nonmember. . . +2 -2 +60 ""-60 Branches and additional offices established at military reservations +192 +192 +148 +29 +15 Net increase or decrease in number of branches and additional offices +194 +195 +149 +29 +17 +60 -61 Number of branches and additional offices on December 31, 1943 3,933 3,797 1,741 1,052 952 52 95 41 1 Includes unincorporated (private) banks. 2 The State member bank figures and the insured mutual savings bank figures both include three member mutual savings banks. These banks are not included in the total for "commercial banks" and are included only once in all banks. J Exclusive of new banks organized to succeed operating banks. * Exclusive of liquidations incident to the succession, conversion, and absorption of banks. 0 Exclusive of conversions of national banks into State bank members, or vice versa. Such changes do not affect Federal Reserve membership; they are included under "conversions." 6 Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve membership, or vice versa. Such changes do not affect Federal Deposit Insurance Corporation membership; they are included in the appropriate groups under "inter-class bank changes." 7 This analysis covers all branches and other additional offices at which deposits are received, checks paid, or money lent. Offices established at military reservations (shown separately) include "banking facilities" provided through arrangements made by the Treasury Department with banks designated as depositaries and financial agents of the Government. Four of these banking facilities are in each case operated by two national banks, each bank having separate tellers windows; each of these facilities is counted as one banking office only. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 20—NUMBER OF BANKS ON PAR LIST AND NOT ON PAR LIST, BY FEDERAL RESERVE DISTRICTS AND STATES, ON DECEMBER 31, 1942 AND 1943 To o t n a l w b h a ic n h ks Banks on par list Bank5 not Federal Reserve checks are on par list district or State drawn1 Total Member Nonmember1 (Nonmember)1 1943 1942 1943 1942 1943 1942 1943 1942 1943 1942 DISTRICT Boston 504 508 504 508 346 348 158 160 New York 976 987 976 987 806 799 170 188 Philadelphia 862 873 862 873 646 652 216 221 Cleveland 1,185 1,197 1,183 1,195 707 685 476 510 2 2 Richmond 1,008 1,010 724 722 465 460 259 262 284 288 Atlanta 1,096 1,098 400 405 316 318 84 87 696 693 Chicago 2,43.5 2,441 2,349 2,226 953 925 1,396 1,301 86 215 St. Louis 1,464 1,481 1,051 1,035 456 450 595 585 413 446 Minneapolis 1,270 1,275 555 557 454 454 101 103 715 718 Kansas City 1,760 1,781 1,593 1,608 741 744 852 864 167 173 Dallas..... 957 958 814 809 575 570 239 239 143 149 San Francisco 513 523 490 497 273 274 217 223 23 26 Total 14,030 14,132 11,501 11,422 6,738 6,679 4,763 4,743 2,529 2,710 STATE New England 532 536 532 536 361 361 171 175 Maine 66 66 66 66 40 40 26 26 New Hampshire 65 65 65 65 53 53 12 12 Vermont 71 72 71 72 39 40 32 32 Massachusetts 192 193 192 193 154 154 38 39 Rhode Island 22 23 22 23 13 14 9 9 Connecticut 116 117 116 117 62 60 54 57 Middle Atlantic 2,081 2,109 2,081 2,109 1,643 1,644 438 465 New York 699 710 699 710 586 584 113 126 New Jersey 350 350 350 350 292 289 58 61 Pennsylvania 1,032 1,049 1,032 1,049 765 771 267 278 East North Central 3,008 3,017 2,847 2,822 1,476 1,425 1,371 1,397 161 195 Ohio 681 684 681 684 414 391 267 293 Indiana 496 498 493 495 222 215 271 280 3 3 Illinois 828 826 816 794 464 447 352 347 12 32 Michigan 443 448 442 447 227 225 215 222 1 1 Wisconsin 560 561 415 402 149 147 266 255 145 159 West North Central 3,265 3,293 2,386 2,280 997 992 1,389 1,288 879 1,013 Minnesota 670 672 250 251 209 209 41 42 420 421 Iowa 653 654 653 543 162 158 491 385 111 Missouri 593 601 499 490 167 164 332 326 94 111 North Dakota 156 159 45 46 42 43 3 3 111 113 South Dakota 162 162 64 66 59 60 5 6 98 96 Nebraska 404 406 250 247 145 147 105 100 154 159 Kansas 627 639 625 637 213 211 412 426 2 2 South Atlantic 1,583 1,587 948 950 618 616 330 334 635 637 Delaware 41 42 41 42 17 18 24 24 Maryland 175 175 175 175 79 79 96 96 District of Columbia 22 22 22 22 18 17 4 5 Virginia 313 315 276 276 193 190 83 86 37 39 West Virginia 180 180 174 174 105 103 69 71 6 6 North Carolina 199 197 72 70 54 55 18 15 127 127 South Carolina 145 147 31 31 28 28 3 3 114 116 Georgia 343 346 80 86 64 68 16 18 263 260 Florida 165 163 77 74 60 58 17 16 88 89 East South Central 1,100 1,109 623 632 297 297 326 335 477 477 Kentucky .; 389 395 379 385 112 112 267 273 10 10 Tennessee 294 295 128 128 76 76 52 52 166 167 Alabama 216 217 89 88 84 83 5 5 127 129 Mississippi 201 202 27 31 25 26 2 5 174 171 West South Central 1,598 1,607 1,266 1,268 847 845 419 423 332 339 Arkansas 222 228 94 99 63 63 31 36 128 129 Louisiana 146 144 42 41 38 38 4 3 104 103 Oklahoma 384 388 372 376 213 217 159 159 12 12 Texas 846 847 758 752 533 527 225 225 88 95 Mountain 472 476 450 453 299 298 151 155 22 23 Montana 110 110 89 88 69 67 20 21 21 22 Idaho 47 46 47 46 26 26 21 20 Wyoming 56 56 55 55 36 36 19 19 1 1 139 140 139 140 92 93 47 47 New Mexico ., 41 41 41 41 27 27 14 14 Arizona 12 12 12 12 7 5 5 Utah 57 59 57 59 34 34 23 25 Nevada 10 12 10 12 8 8 4 Pacific 391 398 36* 372 200 201 168 171 23 26 Washington 128 131 106 108 56 57 50 51 22 23 Oregon 69 70 68 67 32 31 36 36 1 3 California 194 197 194 197 112 113 82 84 1 Does not include nonmember mutual savings banks, on a few of which some checks are drawn. Banks "not on par list" comprise nonmember banks which have not agreed to pay without deduction for exchange charges such checks drawn upon them as may be forwarded for payment through the Federal Reserve Banks. Checks on such banks are not collectible through the Federal Reserve Banks. The difference of 7 between the number of nonmember banks on December 31, 1943 shown in this table and in Table 18 is due to the fact that Digitized fothri sF tRabAleS eExRcl udes 126 banks (principally 56 industrial banks and 54 nondeposit trust companies) on which no checks are drawn, and includes 119 banks (principally 104 private banks and 13 cooperative banks) on which http://frasecrh.esctklos uarise fderdaw.onr gbu/ t which are not reporting to State banking department or are in liquidation. Federal ReseBrvaeck B fiagunrke so.—f SSet.e LBoaunkising and Monetary Statistics, Table 15, pp. 54-55.

PEDERAL RESERVE SYSTEM 83 NO. 21-MONEY RATES, BOND YIELDS, AND STOCK PRICES l Ope ( n p - e m N r e a c w r e k n e Y t t o p m r e k o r n C a e n i y t n y u r 2 a m te ) s in (per B ce o n n t d p y e i r e l a d n s n 3 um) Com (1 m 9 o 35 n - 3 s 9 to c = k 1 p 0 r 0 i ) ces4 U. S. Government U. S. Govern- Corporate securities ment Year and month P c r o i m m - e 9-to m m pa o e 4 p r n - c 6 e t i h r a , s l m b o i 3 l n - ls th 5 m f c ic e o 1 a r 2 n t t - t i e h - s 3- t y a b t e x o l a e a r 5 - - P a t e a a l x r l x y t - - i- T b a l x e a- Aaa Baa Total In tr d i u al s- R ro a a i d l- u P t u i b li l t i y c debt- notes empt edness Number of issues 1-3 2-6 2 30 30 402 354 20 28 1919 5.37 4.73 5.49 7.25 74.6 65.6 186.5 70.5 1920 7 50 5 32 6.12 8.20 67.8 59.8 169.6 63.6 1921 6.62 5.09 5.97 8.35 58.3 46.7 163.8 67.5 1922 4.52 4 30 5.10 7.08 71.5 58.4 192.7 82 8 1923 5.07 4 36 5.12 7.24 72.9 60.1 190.6 86.2 1924 3.98 4 06 5.00 6.83 76.9 62.9 203.5 92.1 1925 . . 4 02 3 86 4.88 6.27 94.8 79.9 237.5 110.9 1926 4.34 3.68 4.73 5.87 105.6 90.3 265.1 116.9 1927 .... 4.11 3 34 4.57 5.48 124.9 107.0 315.8 135.5 1928 4.85 3.33 4.55 5.48 158.3 139.4 340.9 173.9 1929 5.85 3.60 4.73 5.90 200.9 171.1 390.7 274.1 1930 3.59 3.29 4.55 5.90 158.2 127.0 331.3 250.7 1931 2.64 1.402 3.34 4.58 7.62 99.5 78.5 191.3 172.8 1932 2.73 .879 3.68 5.01 9.30 51.2 41.8 69.5 92.1 1933 1.73 .515 3 31 4.49 7.76 67.0 59.9 100.8 91.4 1934 1.02 .256 3.12 4.00 6.32 76.6 73.4 110.1 80.5 1935 .76 .137 2 79 3.60 5.75 82.9 82.2 90.2 83.9 1936 .75 .143 2.65 3.24 4.77 117.5 115.2 136.5 122.1 1937 .94 .447 2.68 3.26 5.03 117.5 118.1 129.8 110.4 1938 .81 .053 2.56 3.19 5.80 88.2 90.1 69.5 85.6 1939 .59 .023 2.36 3.01 4.96 94.2 94.8 74.7 98.6 1940 .56 .014 2.21 2.84 4.75 88.1 87.9 71.1 95.8 1941 .54 .103 .76 1.95 2.77 4.33 80.0 80.4 70.6 81.0 1942 .66 .326 1.13 r2.02 ' 2^35 2.83 4.28 69.4 71.3 66.1 61.3 1943 .69 .373 "!75" 1.31 1.91 2.31 2.73 3.91 91.9 94.1 88.7 82.1 1942 January .56 .214 .96 2.01 2.37 2.83 4.29 72.6 74.3 69.0 66.1 February .63 .250 .93 2.09 2.39 2.85 4.29 69.9 71.0 68.4 64.5 March . . .63 .212 .93 2.00 2.35 2.86 4.30 66 0 67 2 65 0 60.5 April .63 .299 .98 1.98 2.34 2.83 4.26 63.3 64.8 61.1 56.5 May .63 .364 1.03 1 97 2.35 2.85 4.27 63.2 64.7 60.3 57.2 June .69 .363 1.15 1.97 2.33 2.85 4.33 66.1 68.2 59.0 58.8 July .69 .368 1.20 2.00 2.34 2.83 4.30 68.2 70.6 62.9 58.4 August .69 .370 "80 " 1.25 2.02 2.34 2.81 4.28 68.3 70.5 65.4 58.8 September .69 .370 .76 1.27 2.03 2.34 2.80 4.26 69.4 71.6 66.7 59.5 October .69 .372 .75 1.28 2.05 2.33 2.80 4.24 74 2 76.5 72.7 63.7 November .69 .371 .80 1.28 2.06 2.34 2.79 4.25 75.2 77.2 73.0 66.2 December .69 .363 .80 1.34 2.09 2.36 2.81 4.28 75.9 78.5 69.3 65.2 1943 January .69 .367 .76 1.29 2.06 2.32 2.79 4.16 79.7 82.3 73.7 69.3 February .69 .372 .73 1.24 2.06 2.32 2.77 4.08 84.8 87.7 77.5 73.3 March .69 .373 .75 1.33 2.08 2.33 2.76 4.01 88.2 90.8 86.4 76.2 April .69 .373 .78 1.39 2.02 2.32 2.76 3.96 91.3 93.7 92.8 79.1 May .69 .373 .78 1.36 1.92 2.30 2.74 3.91 95.2 97.2 97.5 84.0 June .69 .374 .70 1.32 1.85 2.29 2.72 3.88 96.7 99.3 94.3 84.7 July .69 .374 .68 1.30 1.82 2.27 2.69 3.81 98.5 100.9 96.6 87.7 August .69 .375 .75 1.29 1.83 2.28 2.69 3.81 94.4 96.3 90.5 85.9 September .69 .375 .77 1.31 1.80 2.30 2.69 3.83 95.6 97.5 91.3 87.3 October .69 .375 .78 1.31 1.81 2.30 2.70 3.82 94.8 96.6 92.0 86.8 November .69 .375 .77 1.29 1.85 2.32 2.71 • 3.83 91.4 93.0 86.5 85.1 December .69 .375 .77 1.30 1.86 2.34 2.74 3.82 91.8 93.6 85.6 85.2 1 Annual data are averages of monthly figures. r Revised. 2 For commercial paper, monthly data are averages of weekly prevailing rates; for Treasury bills, average rates on new issues within period; for certificates of indebtedness, averages of daily figures for 9- to 12month issues; and for Treasury notes, averages of daily figures for 3- to 5-year issues. 3 Monthly data are averages of daily figures. U. S. Treasury bond yields are averages of all outstanding partially tax-exempt bonds due or callable in more than eight years from 1919 to 1925 and in more than twelve years beginning in 1926. Corporate average yields are as published by Moody's Investors Service; until 1928 each rating group included 15 bonds; since the early part of 1934 there have been less than 30 bonds in the Aaa group owing to the limited number of suitable issues in the industrial and railroad groups. 4 Standard and Poor's Corporation. Monthly data are averages of Wednesday figures. 6 Tax-exempt bills prior to March 1941; taxable bills thereafter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 ANNUAL REPORT OF BOAR© OF GOVERNORS 4 NO. 22—BUSINESS INDEXES1 [Adjusted for seasonal variation] Industrial production (physical volume)2 1935-39 Year and month 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 .... 1934 .... 1935 1936 1937 1938 1939 1940 1941 1942 1943 1942 January February March April May June July August September October November December 1943 January February March April May June July August September October November December latoT 72 75 58 73 88 82 90 96 95 99 110 91 75 58 69 75 87 103 113 89 109 125 162 199 239 181 183 186 189 191 193 197 204 208 215 220 223 227 232 235 237 238 236 240 242 245 247 247 241 elbaruD serutcafunam = 100 84 93 53 81 103 95 107 114 107 117 132 98 67 41 54 65 83 108 122 78 109 139 201 279 361 235 241 250 257 264 272 278 290 299 311 319 328 336 344 351 356 359 358 361 366 370 375 377 367 elbarudnoN serutcafunam 62 60 57 67 72 69 76 79 83 85 93 84 79 70 79 81 90 100 106 95 109 115 142 158 176 152 153 153 154 153 152 154 158 161 165 168 169 171 174 174 175 176 177 176 177 178 179 179 173 slareniM Construction con- tracts awarded (V2.1lld 1923-25 = 71 83 66 71 98 89 92 100 100 99 107 93 80 67 76 80 86 99 112 97 106 117 125 129 132 133 133 126 125 126 127 126 130 131 129 130 127 125 131 133 131 129 117 134 135 138 136 133 137 latoT 63 63 56 79 84 94 122 129 129 135 117 92 63 28 25 32 37 55 59 64 72 81 122 166 68 118 128 125 128 158 193 206 182 179 185 198 175 145 102 85 63 52 45 60 59 65 49 60 61 laitnediseR 100 44 30 44 68 81 95 124 121 117 126 87 50 37 13 11 12 21 37 41 45 60 72 89 82 40 82 100 95 82 76 76 74 65 70 83 90 91 79 56 42 33 31 32 36 35 35 34 37 35 rehto llA Employ- ment (number) 79 90 65 88 86 94 120 135 139 142 142 125 84 40 37 48 50 70 74 80 81 89 149 235 92 147 151 149 165 226 288 313 278 268 269 286 243 198 140 119 87 68 55 80 79 89 61 78 81 arutlucirganoN 001 = 9391 106.6 98.1 88.3 77.6 78.6 86.3 90.1 96.8 102.7 95.1 100.0 104.2 115.6 124.2 128.5 120.4 120.8 121.0 121.2 121.9 122.5 124.5 125.8 126.5 127.6 128.8 130.2 130.0 130.3 129.8 129.3 128.3 128.6 128.6 127.9 126.8 127.5 128.3 128.2 yrotcaF 001 = 9391 is Z 106.8 107.2 82.1 90.8 103.9 96.5 99.9 101.8 99.6 99.7 106.1 92.5 78.2 66.4 73.5 85.8 91.4 99.1 108.7 91.0 100.0 107.5 132.1 152.3 168.7 141.6 143.2 144.8 147.0 148.7 150.8 153.2 155.8 157.4 159.6 161.5 164.2 165.8 167.4 168.1 168.4 167.9 169.0 169.7 169.6 168.3 170.1 170.8 169.0 or yap yrotcaF 001 = 9391 106.2 127.1 82.0 88.0 111.6 104.1 109.7 113.1 111.0 112.3 119.8 96.9 73.5 50.7 54.4 70.0 80.4 93.0 111.2 85.1 100.0 114.5 242! 3 316.4 200.7 208.2 215.1 221.4 228.7 234.5 242.7 254.8 261.8 270.9 280.4 287.9 290.9 297.5 304.5 309.7 313.5 317.1 315.6 322.2 328.0 332.6 336.2 328.5 001 = ON -5391*gnivil fo tsoC 124.5 143.2 127.7 119.7 121.9 122.2 125.4 126.4 124.0 122.6 122.5 119.4 108.7 97.6 92.4 95.7 98.1 99.1 102.7 100 8 99.4 100.2 105 .'2 116.5 123.6 112.0 112.9 114.3 115.1 116.0 116.4 117.0 117.5 117.8 119.0 119.8 120.4 120.7 121.0 122.8 124.1 125.1 124.8 123.9 123.4 123.9 124.4 124.2 124.4 as er>(ts tnemtrapeD = 52:-3291 )eulav( 78 94 87 88 98 99 103 106 107 108 111 102 92 69 67 75 79 88 92 85 90 94 110 124 138 138 126 124 117 108 104 121 130 123 128 138 125 143 r167 136 128 125 129 142 142 132 140 158 131 * secir a 0 a imoc elaselohW 001 = 6291 si rt || a." 138.6 154.4 97.6 100.6 98!l 103 5 100 !o 95.4 96.7 95! 3 86.4 73.0 64.8 65.9 74.9 80.0 80.8 86.3 78.6 77.1 78.6 87.3 98.8 103.1 96.0 96.7 97.6 98.7 98.8 98 6 98.7 99.2 99.6 100.0 100.3 101.0 101.9 102.5 103.4 103.7 104.1 103.8 103.2 103.1 103.1 103.0 102.9 103.2 mocni lanoitaN -5391 )eulav( 122 9 109.1 92.3 70.6 68.9 78.7 87.1 101.3 107.7 98.5 105.5 113.8 171.9 211.4 155.2 157.1 159.1 163.4 165.4 169.6 172.8 176.2 178.4 183.0 189.2 193.4 196.5 200.6 204.4 207.3 208.7 211.3 213.1 215.5 215.6 218.0 221.5 224.8 * Without seasonal adjustment. r Revised. 1 Indexes compiled by the Board of Governors of the Federal Reserve System, except for indexes of wholesale commodity prices, cost of living, and factory pay rolls, compiled by the United States Bureau of Labor Statistics, and the index of income payments, compiled by the United States Department of Commerce. Descriptions and back figures for the Board's indexes may be obtained from the Division of Research and Statistics. 2 Recently revised from 1939 to date. For description of revision, see Federal Reserve Bulletin for October 1943. 3 Three-month moving average, centered at second month, based on F. W. Dodge Corporation data for 37 Eastern States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

APPENDIX Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

RECORD OF POLICY ACTIONS MEETING ON APRIL 13, 1943 Members present: Mr. Ransom, Vice Chairman; Mr. McKee; Mr. Draper; Mr. Evans. Amendment to Regulation D, Reserves of Member Banks. By unanimous vote, Regulation D was amended, effective April 13, 1943, to conform the regulation to a law approved on that date by providing that, until six months after the cessation of hostilities in the present war, no deposit payable to the United States by any member bank arising solely as the result of subscriptions made by or through such member bank for United States Government securities issued under authority of the Second Liberty Bond Act should be subject to reserve requirements. Beginning with the first World War, it was the practice of the Treasury to authorize banks to pay for United States Government securities purchased for their own account or for the account of their customers by giving the Treasury credit in so-called war loan accounts. This practice was convenient both for the Treasury and for the banks and tended toward greater stability in the money market. It avoided large transfers of funds from the market to the Reserve Banks at the time the securities were sold; the Treasury utilized the funds as they were needed; and since calls upon the funds corresponded closely to current disbursements by the Treasury the effect of Treasury transactions on the money market was greatly diminished. Commercial banks had been urged by the Treasury and the Federal Reserve authorities to make full use of war loan deposit accounts and, in order further to encourage their use, legislation was passed by Congress and signed by the President on April 13, 1943, which provided that, until six months after the cessation of hostilities in the present war, (1) banks would not be required to pay Federal Deposit Insurance assessments on deposits held in war loan accounts and (2.) member banks would not be required to maintain reserves against such deposits. The amendment to Regulation D referred to above was approved by the Board for the purpose of conforming the regulation to the provisions of the new law with respect to the maintenance by member banks of reserves against war loan deposits. MEETING ON MAY 12., 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Draper; Mr. Evans. Commitment Fees on Loans under Regulation V, War Financing. After consultation with the War and Navy Departments, the Maritime Commission, and the Federal Reserve Banks, and by unanimous vote, the Board decided that in any case in which a financing institution charged a borrower a commitment fee in connection with a loan that was guaranteed pursuant to 86 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 87 Executive Order 91 ix, the amount of such fee could not exceed J^ of 1 per cent per annum on the undisbursed portion of the loan and that no termination fee, service fee, or other fee of a similar character, except charges covering out-of-pocket expenses of a financing institution, could be charged a borrower in connection with such a guaranteed loan. This action was prompted by cases which had arisen in the past and which it was believed might arise in the future in which the borrower, who would have no immediate need for funds, would wish to arrange for a commitment to insure the availability of adequate funds to meet his future requirements, in which event the commitment on the part of the financing institution might be outstanding for some time before any funds were actually advanced under the loan agreement. In such circumstances, the financing institution would be justified in charging a fee for its commitment as remuneration for its obligation to make funds available over the period of the commitment, or as reimbursement for its costs in arranging the credit if only nominal amounts were borrowed. It was felt that in no event should the fee charged be in excess of J^ of 1 per cent per annum on the undisbursed portion of the loan and that the establishment of a maximum fee would permit an agreement between the financing institution and the borrower on any basis within the limitation that the surrounding conditions might justify. There was unanimous agreement that in the circumstances under which Regulation V loans were made there was no justification for charging termination fees, service fees, or other fees of a similar character, except charges covering outof-pocket expenses incurred by the financing institution. MEETING ON JULY 2.4, 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Evans. Amendment to Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges. By unanimous vote, Section 4(0X3) of Regulation T was amended, effective July £4, 1943, to permit purchases of securities which were bona fide cash transactions to be made on a basis which would enable payment therefor to be deferred, without a deposit having been made in the meantime, until the securities were available for delivery. The general effect of the amendment was to put "when distributed" trading on the same basis so far as credit was concerned as "when issued" trading. The amendment was adopted to meet a situation created by the initiation on a national securities exchange of trading in issued securities on a "when distributed" basis which involved delays in deliveries which were comparable in length and causation to the delays which characterized deliveries under the more common type of trading known as "when issued" trading. MEETING ON AUGUST 2.8, 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. Draper; Mr. Evans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 ANNUAL REPORT OF BOARD OF GOVERNORS Amendment to Regulation W, Consumer Credit. By unanimous vote, Regulation W was amended, effective September i, 1943, to (1) raise from $5 to $10 the value of a listed article that might be delivered by a merchant to a charge account customer without first determining whether the customer's account was in default, it being understood that if the merchant later discovered that the account was in default he would request the customer to return the purchase or pay for it immediately, and (z) authorize Federal Reserve Banks to grant to a merchant who desired to adopt "cycle billing" in order to effect operating economies, permission to use as the "default date*' for each of his groups of accounts the 40th day following the end of the applicable billing period instead of the tenth of the second calendar month after the month in which purchases were made. These changes, which were administrative in character, were designed to help merchants meet manpower problems in extending charge account credit. MEETING ON AUGUST 30, 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. Draper. Commitment Fees on Loans under Regulation V, War Financing. The decision having been reached by the War and Navy Departments and the Maritime Commission that guarantees under Regulation V would be made available for financing war production contractors for the purpose of providing (in addition to the needs of any such contractor for borrowed working capital) for freeing the contractor's own working capital upon cancellations of his war production contracts which might occur after the execution of the guarantee, the Board of Governors at this meeting voted unanimously to advise the Federal Reserve Banks that, after consulting with the War and Navy Departments and the Maritime Commission, the Board had decided that in any case in which special provision was made for freeing working capital upon cancellation of contracts, the amount of any commitment fee charged the borrower by the financing institution should not exceed 3^2 of 1 per cent per annum on the undisbursed portion of the loan. This action was taken in recognition of the fact that in most of the cases of the kind under consideration the larger part of the commitments would be to cover borrowings after the termination of war contracts and, therefore, the commitments would be outstanding for a longer period than credits for production purposes only, and that, inasmuch as the financing institution would be required to retain participation in the loan regardless of developments, the credit risks involved would be greater. In these circumstances a higher maximum commitment rate was believed to be justified with the understanding that in any particular case the borrower and the financing institution could agree upon such rate within the maximum as circumstances might require. Furthermore, provision had been made by the services under which the financing institution would be required to share with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 89 the Government any commitment fee in the same proportion as the guarantee fee charged in connection with the loan bore to the interest payable on the loan. MEETING ON SEPTEMBER 14, 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Draper; Mr. Evans. Amendment to Regulation K, Banking Corporations Authorized To Do Foreign Banking Business under the Terms of Section 2 5 (a) of the Federal Reserve Act. By unanimous vote, Section IX of Regulation K was amended, effective November 1, 1943, so as to discontinue the permission granted by that section of the regulation to corporations organized pursuant to the provisions of Section 2.5(a) of the Federal Reserve Act (known as the Edge Act) to invest in stock or certificates of ownership of corporations of certain kinds, and so as to require the consent of the Board in each case before such investments are made. In view of the changes that had taken place since the Edge Act was passed, there was unanimous agreement by the members of the Board that the question of legislative policy with respect to the Act should be reviewed by Congress, and that in the meantime any expansion of the operations of Edge-Act corporations through the purchase of stock in other institutions should be made only after the Board had had an opportunity to review the matter and had specifically consented to the purchase. Accordingly, it was decided that Regulation K should be amended to require, after November 1, 1943, the prior consent of the Board for investments by Edge-Act corporations in the stock of other corporations. MEETING ON DECEMBER 14, 1943 Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Draper; Mr. Evans. Amendment to Regulation N, Relations with Foreign Banks and Bankers. By unanimous vote, Regulation N was amended, effective January 1, 1944, (1) to make its provisions applicable to relationships and transactions between Federal Reserve Banks and recognized foreign states as defined by Section 2.5OO of the Federal Reserve Act, as well as to relationships and transactions between Federal Reserve Banks and foreign banks or bankers, and (2.) to make other changes of an administrative character in the language of the regulation. Since Regulation N was first adopted, Section 2.5(b) of the Federal Reserve Act had been amended to provide for the maintenance by the Federal Reserve Banks of accounts for recognized foreign states, and the first change in Regulation N referred to above was made to conform the regulation to this change in the law. The other changes were made in connection with a general review of the procedures in effect with respect to foreign relationships and transactions of the Federal Reserve Banks and were for the purpose of the further refinement of the regulation in the light of these procedures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE MEETING ON JANUARY 2.6, 1943 Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Draper; Mr. Evans; Mr. Williams; Mr. Gilbert; Mr. Young; Mr. Leedy. 1. Authority to Effect Transactions in System Account. Upon motion duly made and seconded, the following direction to the executive committee, which was in the same form as the direction issued at the meeting of the Federal Open Market Committee on December 14, 1942., was approved by unanimous vote: "That the executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration of the account, or for the purpose of maintaining about the present general level of prices and yields of Government securities, or for the purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury and Treasury bills purchased pursuant to the direction of the Federal Open Market Committee issued under date of September 2.8, 1942.) shall not be increased or decreased by more than 1 billion dollars. "That the executive committee be further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed 1 billion dollars." The open market policy under which purchases of Government securities were made in 1942. was determined with a view to adapting the System's open market operations as effectively as possible to the program of the Treasury for war financing and to carrying out the commitment of the System to use its powers to assure that an ample supply of funds would be available at all times for financing the war effort and to exert its influence toward the maintenance of conditions in the Government security market that were satisfactory from the standpoint of the Government's requirements. With the continued growth in the volume of production for war and in the absence of a very large increase in taxes, it was realized that the requirements of the Government for borrowed funds would be larger during the current year; that the needs of banks for reserve funds would continue to expand because of the growth in their deposits as a result of Government Digitized for FRA9S0ER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 91 borrowing and because of increases in currency circulation, and that it would be necessary for the System to continue to supply these reserve funds. It was agreed, therefore, that the existing policy of authorizing the executive committee to purchase or sell securities for the System account within stated limits for the purposes stated in the direction set forth above should not be changed and that the renewal of the existing direction to the executive committee would carry that decision into effect. 2. Replacement of Maturing Securities. Upon motion duly made and seconded, it was understood that, under the authority granted to the executive committee, it would undertake to arrange with the Treasury for an amendment to the terms under which the various issues of Government securities were offered so as to permit full allotment to the System of securities issued to refund maturing direct obligations, to the extent that replacement of such maturing securities held in the System account appeared to the executive committee to be desirable. On this motion Messrs. Eccles, Szymczak, McKee, Ransom, Draper, Evans, Gilbert, Young, and Leedy voted "aye" and Messrs. Sproul and Williams voted "no." This action was taken following consideration of the procedures that might be used to supply needed reserve funds to the market and was designed particularly to open the way for the direct replacement of maturing bills held by the Federal Reserve Banks. It was the majority view that inasmuch as the Reserve Banks held substantial amounts of maturing bills each week, which would have to be replaced with other securities in order to maintain the necessary volume of funds in the market, that could be accomplished most effectively if arrangements were made for full allotment of new bills in the amount of the maturing bills held by the Federal Reserve Banks. It was pointed out that this procedure, which was the same as that generally followed in the past in connection with the replacement of maturing certificates, notes, and bonds held in the System account, would not result in placing any additional funds in the market but would obviate the necessity on the part of the Treasury of redeeming the weekly maturities of bills followed by competition on the part of the Federal Reserve Banks in the market for a similar amount of new bills, in order to effect an indirect replacement that could be accomplished with less disturbance to the market by direct replacement. The availability of this arrangement was believed to be particularly desirable during a period when it was expected that the System would have to purchase in the market a very substantial amount of additional securities for the purpose of supplying needed reserve funds. It was the minority view that nothing should be done which might create public concern about the credit of the Government; that to embark on a program of direct buying of bills from the Treasury might create such concern; and that therefore direct purchases of bills from the Treasury, to replace maturing bills held by the Federal Reserve Banks, should not be resorted to until necessity forced such action, which could then be clearly explained. The minority felt that, for the present, the better procedure would be to continue to let the market take the bills it wanted, and, in so far as necessary, to replace System bill maturities indirectly through the market, or with other securities the market might wish to sell, this procedure having the advantage of public acceptance through previous experience. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92. ANNUAL REPORT OF BOARD OF GOVERNORS MEETING ON MARCH i, 1943 Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Evans; Mr. Paddock; Mr. Fleming; Mr. McLarin; Mr. Peyton (alternate for Mr. Day). 1. Purchase by Federal Reserve Banks of Treasury Bills at Posted Discount Rate. Upon motion duly made and seconded, the following direction to the Federal Reserve Banks was approved by unanimous vote, with the understanding that resales of Treasury bills held under option would be for immediate delivery when so requested by the holder: "Until otherwise directed by the Federal Open Market Committee, the twelve Federal Reserve Banks are directed to purchase all Treasury bills that may be offered to such Banks on a discount basis at the rate of 3/g per cent per annum, any such purchases, if desired by the seller, to be upon the condition that the Federal Reserve Bank, upon the request of the seller before the maturity of the bills, will sell to him Treasury bills of like amount and maturity at the same rate of discount. All bills purchased outright are to be purchased for the System open market account. All bills purchased under option to repurchase are to be held by the purchasing Federal Reserve Bank in its own account and prompt reports of all such purchases are to be made to the Manager of the System open market account." Under the law, the Federal Reserve Bank members of the Federal Open Market Committee are elected annually for terms beginning March 1 of each year. This was the first meeting of the new Committee, and the above direction, which was in the same form as the direction issued by the Federal Open Market Committee on September 2.8, 1942., was issued for the purpose of renewing the direction given by the old Committee and for substantially the same reasons. 2. Replacement of Maturing Securities. Upon motion duly made and seconded, it was understood that the executive committee would undertake to arrange with the Treasury for an amendment to the terms under which the various issues of Government securities were offered so as to permit full allotment to the System of securities issued to refund maturing direct obligations, to the extent that replacement of such securities held in the System account appeared to the executive committee to be desirable. On this action Messrs. Eccles, Szymczak, McKee, Ransom, Evans, Paddock, Fleming, McLarin, and Peyton voted "aye" and Mr. Sproul voted "no." This action constituted a renewal of the understanding reached at the meeting of the Committee on January 2.6, 1943. Since that meeting the problem of direct replacement of Treasury bills had not been an urgent matter and, therefore, no decision had been made with respect to it. However, it continued to be the majority view, for the reasons stated in connection with the earlier action, that the proposed arrangement should be put into effect so that it could be used to the extent that developments made such action desirable. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 93 3. Authority to Effect Transactions in System Account. Upon motion duly made and seconded, the following direction to the executive committee was approved unanimously: "That the executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration of the account, or for the purpose of maintaining about the present general level of prices and yields of Government securities, or for the purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for the .temporary accommodation of the Treasury and Treasury bills purchased pursuant to the directions of the Federal Open Market Committee issued under dates of September 2.8, 1942., and March 2., 1943) shall not be increased or decreased by more than 1.5 billion dollars. "That the executive committee be further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars." This direction was in the same form, and was approved for substantially the same reasons, as the direction adopted at the previous meeting of the Federal Open Market Committee except that the limitation on the authority of the executive committee to increase or decrease the amount of securities in the System account and to purchase short-term certificates for the temporary accommodation of the Treasury was increased from 1 billion dollars to 1.5 billion in each case. This action was considered appropriate on the basis of discussions of plans for the Second War Loan Drive, which it was contemplated would take place in April, as well as in the light of the possibility that the bill pending before Congress, which would remove the requirement that reserves be maintained against war loan deposits, might not be approved before the April drive, in which event the System might be called upon to purchase very substantial amounts of securities before and during the drive for the purpose of supplying banks with reserve funds. There was agreement that, in these circumstances, and in view of the decline that had taken place in excess reserves of member banks, higher limitations should be set on the authority of the executive committee. MEETING ON MAY 15, 1943 Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Draper; Mr. Evans; Mr. Paddock; Mr. Fleming; Mr. McLarin; Mr. Day. 1. Purchase by Federal Reserve Banks of Treasury Bills at Posted Discount Rate. Upon motion, duly made and seconded, it was agreed unanimously that, without changing the direction issued at the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 ANNUAL REPORT OF BOARD OF GOVERNORS • meeting of the Federal Open Market Committee on March i, 1943, with respect to the purchase by the Federal Reserve Banks of Treasury bills, it would be understood that the Reserve Banks would treat all purchases pursuant to this direction as being subject to the condition that, upon request of the seller before the maturity of the bills, the Reserve Bank would sell to him Treasury bills of like amount and maturity at the discount rate of 2/g per cent per annum. Under the direction of March 2., 1943, bills purchased outright were for the System open market account and bills purchased subject to the right of repurchase were held by the purchasing Federal Reserve Bank. The suggestion was made at this meeting that it would be helpful from an accounting and operating standpoint if the Federal Reserve Banks were instructed to hold in their own accounts all bills purchased under the direction. It was agreed that this could be accomplished most effectively by treating all such bills as being subject to the right of repurchase and holding them at the purchasing Federal Reserve Banks in accordance with the policy of having the bills available for immediate delivery if desired in the event of their repurchase. 2. Authority to Effect Transactions in System Account. Upon motion duly made and seconded, the following direction to the executive committee was approved by unanimous vote: "That the executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration of the account, or for the purpose of maintaining about the present general level of prices and yields of Government securities, or for the purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for- the temporary accommodation of the Treasury and Treasury bills purchased pursuant to the directions of the Federal Open Market Committee issued under dates of September x8, 1942., and March 2., 1943) shall not be increased or decreased by more than 1 billion dollars. "That the executive committee be further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars." Except for the limitation as to amount at the end of the first paragraph, the direction was in the same form as the directions issued at the meetings of the Federal Open Market Committee earlier this year and was approved for substantially the same reasons. The limitation on the authority of the executive committee to increase or decrease the amount of securities in the account was reduced from 1.5 billion dollars to 1 billion for the reason that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 95 it was anticipated that another meeting of the full Committee would be held during the latter part of June and that the lower limitation would be adequate to enable the executive committee to meet the situation during the intervening period. MEETING ON JUNE 2.8, 1943 Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Draper; Mr. Evans; Mr. Paddock; Mr. Fleming; Mr. McLarin; Mr. Day. 1. Purchase by Federal Reserve Banks of Treasury Bills at Posted Discount Rate. Upon motion duly made and seconded, the following direction was approved by unanimous vote, with the understanding that resales of Treasury bills held under option would be for immediate delivery when so requested by the holder: "Until otherwise directed by the Federal Open Market Committee, the twelve Federal Reserve Banks are directed to purchase all Treasury bills that may be offered to such Banks on a discount basis at the rate of ^ per cent per annum, any such purchases to be upon the condition that the Federal Reserve Bank, upon the request of the seller before the maturity of the bills, will sell to him Treasury bills of like amount and maturity at the same rate of discount. All bills purchased under this direction are to be held by the purchasing Federal Reserve Bank in its own account and prompt reports of all such purchases are to be made to the Manager of the System open market account." This direction, which superseded the direction issued by the Federal Open Market Committee on March z, 1943, represented no change in policy and was for the purpose of conforming the earlier direction to the understanding reached at the meeting of the Federal Open Market Committee on May 15, 1943, that the Federal Reserve Banks would treat all purchases made pursuant to the direction as being subject to the right on the part of the seller to repurchase the bills. 2. Authority to Effect Transactions in System Account. Upon motion duly made and seconded, the following direction was approved by unanimous vote: "That the executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration of the account, or for the purpose of maintaining about the present general level of prices and yields of Government securities, or for the purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury and Treasury bills purchased pursuant to the directions of the Federal Open Market Committee issued under dates of March 2. and June 2.8, 1943) shall not be increased or decreased by more than 1.5 billion dollars. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 ANNUAL REPORT OF BOARD OF GOVERNORS "That the executive committee be further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars." This direction was in the same form as the direction issued by the Committee on May 15, 1943, except that it increased from 1 billion dollars to 1.5 billion the limitation on the authority of the executive committee to increase or decrease the amount of securities held in the System account. The reasons for the direction were substantially the same as those stated in connection with the approval of the directions issued at previous meetings during the current year. The increase in the limitation on the authority of the executive committee to execute transactions for the System account was based on agreement by the members of the Open Market Committee that, in the absence of unforeseen circumstances, it would not be necessary to hold another meeting of the full Committee before some date in September and that, therefore, the executive committee should have increased authority to make purchases and sales of securities for the purposes stated in the direction. MEETING ON OCTOBER 18, 1943 Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Draper; Mr. Evans; Mr. Paddock; Mr. McLarin; Mr. Day; Mr. Young (alternate for Mr. Fleming). 1, Replacement of Maturing Treasury Bills. Upon motion duly made and seconded and by unanimous vote, the executive committee was directed to work out with the Treasury and put into effect an arrangement under which a tender would be made each week for new bills in an amount not exceeding the total amount of maturing bills in the System and option accounts. This action was taken with the understanding that when the arrangement went into effect the executive committee was authorized to issue a statement to the press in such form as in its judgment the circumstances required. Following the action with respect to direct replacement of Treasury bills which was taken at the meeting of the Federal Open Market Committee on March 2., 1943, the matter was discussed with the Treasury from time to time but was not carried to a conclusion for the reason that the situation in the market made it practicable to continue the existing practice under which Treasury bills were permitted to run off without replacement. However, in the period before this meeting the total amount of bills held in the System and option accounts increased to a point where the weekly maturities averaged between 400 and 500 million dollars. In addition, it was recognized that with the increase in required reserves that would occur in connection with the expenditure of funds held by member banks in war loan accounts it would be necessary for the System not only to replace maturing issues held in the System account but to purchase additional securities in substantial volume in order to supply the market with reserve funds. The procedure suggested by the Committee was believed to be desirable in a situation which had become mechanically more difficult as weekly maturities of bills held by the System account had increased until at times Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 97 they were equal to half of the weekly offerings. In the past the market had taken all of each week's offering of Treasury bills and promptly sold to the Federal Reserve Banks the portion of the offerings which it did not wish to hold. Thus, the Federal Reserve Banks indirectly replaced part or all of their Treasury bill maturities and, although this procedure worked well when the amount of maturing bills held by the Reserve Banks was a relatively small proportion of the weekly offering and allowed the market to determine directly the amount of the new issue of bills it wished to hold, under existing circumstances the continuation of that procedure meant that the market would have to place tenders for new issues of bills in amounts substantially in excess of market requirements, the excess being taken for the purpose of immediate sale to the System. In these circumstances, there was unanimous agreement that a more direct method of replacing maturing bills held by the Federal Reserve Banks should be adopted. It was again pointed out that the suggested procedure would not make new credit available or add new reserve funds to the market but would place the System in a position more readily to maintain the reserves already provided to support increased member bank deposits and currency circulation. A tender for new bills each week in an amount not to exceed the total amount of maturing bills held by the System would create a situation in which, if there were a demand for bills at a price to yield less than % of i per cent per annum, the System might obtain none of the tenders, whereas if there were no demand for bills at the higher prices the System might obtain the total amount of its tender, thereby permitting the market to determine the extent to which the System's holdings of Treasury bills should be replaced as a means of maintaining in the market the reserve funds previously provided. Following this meeting, members of the executive committee on several occasions discussed the proposal of the full Committee with representatives of the Treasury. However, the Secretary of the Treasury decided that at that time no change in the procedure for issuing Treasury bills should be made and for that reason the proposal was not made effective. In lieu thereof, he requested the Federal Reserve Bank of New York as fiscal agent of the United States to use its best efforts to see that sufficient tenders for bills were forthcoming from the market each week to insure the sale of whatever amount of Treasury bills was offered by the Treasury. 2. Authority to Effect Transactions in System Account. Upon motion duly made and seconded and by unanimous vote, the following direction was approved: "That the executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration of the account, or for the purpose of maintaining about the present general level of prices and yields of Government securities, or for the purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury) shall not be increased or decreased by more than 1.5 billion dollars. "That the executive committee be further directed, until otherwise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 ANNUAL REPORT OF BOARD OF GOVERNORS directed by the Federal Open Market Committee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars." This direction, which (except for the elimination of the reference contained in earlier directions to bills purchased at the posted rate) was in the same form as the direction issued at the meeting of the Federal Open Market Committee on June 2.8, 1943, was adopted for the purpose of continuing the existing open market policies and for the same reasons as prompted similar actions by the Committee at earlier meetings during the year. The reference to bills purchased at the posted rate was left out of the direction for the reason that the separate direction issued to the Reserve Banks at the meeting of the Committee on June 2.8, 1943, relating to such purchases provided that all such bills would be held by the purchasing Bank and would not be transferred to the System account. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

RESOLUTION OF FEDERAL ADVISORY COUNCIL REGARDING FINAL SETTLEMENT OF TERMINATED CONTRACTS NOVEMBER 15 1943 9 The larger part of the productive capacity of the country is now engaged in the production of war goods. When the war ends the task of converting this gigantic war economy to a peace economy will be a stupendous one, both for the Government and for business. Already some war contracts are being canceled. When peace comes a large percentage of contracts then outstanding will no doubt be canceled. Speedy and equitable settlement of these contracts will be essential if we are to avoid a disastrous business depression and mass unemployment. Millions of men discharged from military service and millions more now engaged in war plants will be looking for new jobs—and they will expect them promptly. If we delay in the transition from war to peace, if business is hampered one bit more than is unavoidable in its reconversion and in providing new jobs, mass unemployment and social distress will result, relief rolls will mount and the State and Federal treasuries will be subjected to the necessity of making huge grants for the relief of the unemployed. This must not and need not happen. Many factors are involved but the settlement of terminated war contracts is one of the most important. The Federal Advisory Council believes: (i) That war contracts which are terminated must be settled and settled promptly and finally by negotiated agreements between the contractor and the procuring agency of the Government which negotiated the original contract. (z) That settlements so negotiated should be final and not subject to review by any other agency except for fraud. Any amounts that might conceivably be saved the Government through a post-audit will fade into insignificance in comparison with grants for relief that will be necessitated by resulting delay, uncertainty, and unemployment. (3) That if settlements of terminated contracts when negotiated by the procuring agencies are not final, or if they are made subject to subsequent audit, credit for working capital needed for reconversion after the war may, in many cases, be unavailable until the settlement does become final and the basis of credit thereby becomes ascertainable. This applies particularly to those contractors whose capital is relatively small. (4) That Congress should relieve contracting officers who negotiate settlements from personal responsibility, except for fraud. (5) That Congress should enact legislation providing more adequate means 99 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

IOO ANNUAL REPORT OF BOARD OF GOVERNORS of interim financing of contractors whose contracts have been canceled when for unavoidable reasons there is delay in final settlement and payment. (6) That appropriate plans should be made in advance for the prompt removal of surplus Government materiel and facilities from plants whose contracts are terminated. In the opinion of the Federal Advisory Council, unless appropriate steps are taken by the Congress and the various Government agencies to relieve the minds of thousands of contractors large and small and to assure business that, when terminated, contracts will be settled fairly, quickly and finally, there is danger that war production will be hampered now and that peace production will be perilously delayed after the war. The Federal Advisory Council believes that these are risks that need not be taken. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1943] Term expires MARRINER S. ECCLES, of Utah, Chairman Tanuary 31, 1944 RONALD RANSOM, of Georgia, Vice Chairman January 31, 1956 M. S. SZYMCZAK, of Illinois January 31, 1948 JOHN K. MCKEE, of Ohio January 31, 1946 ERNEST G. DRAPER, of Connecticut January 31, 1950 R. M. EVANS, of Virginia January 31, 1954 LAWRENCE CLAYTON, Assistant to the Chairman ELLIOTT THURSTON, Special Assistant to the Chairman CHESTER MORRILL, Secretary LISTON P. BETHEA, Assistant Secretary S. R. CARPENTER, Assistant Secretary FRED A. NELSON, Assistant Secretary WALTER WYATT, General Counsel J. P. DREIBELBIS, General Attorney GEORGE B. VEST, Assistant General Attorney B. MAGRUDER WINGFIELD, Assistant General Attorney E. A. GOLDENWEISER, Director, Division 0} Research and Statistics WOODLIEF THOMAS, Assistant Director, Division of Research and Statistics LEO H. PAULGER, Chief, Division of Examinations C. E. CAGLE, Assistant Chief, Division of Examinations WILLIAM B. POLLARD, Assistant Chief, Division of Examinations EDWARD L. SMEAD, Chief, Division of Bank Operations J. R. VAN FOSSEN, Assistant Chief, Division of Bank Operations J. E. HORBETT, Assistant Chief, Division of Bank Operations CARL E. PARRY, Chief, Division of Security Loans ROBERT F. LEONARD, Director, Division of Personnel Administration EDWARD L. SMEAD, Acting Administrator, Office of Administrator for War Loans Committee GARDNER L. BOOTHE, II, Assistant Administrator, Office of Administrator for War Loans Committt O. E. FOULK, Fiscal Agent JOSEPHINE E. LALLY, Deputy Fiscal Agent FEDERAL OPEN MARKET COMMITTEE [December 31, 1943] Members MARRINER S. ECCLES, Chairman (Board of Governors) ALLAN SPROUL, Vice Chairman (Elected by Federal Reserve Bank of New York) WM. A. DAY (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco ERNEST G. DRAPER (Board of Governors) R. M. EVANS (Board of Governors) M. J. FLEMING (Elected by Federal Reserve Banks of Cleveland and Chicago) JOHN K. MCKEE (Board of Governors) W. S. MCLARIN, JR. (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) W. W. PADDOCK (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) RONALD RANSOM (Board of Governors) M. S. SZYMCZAK (Board of Governors) Officers CHESTER MORRILL, Secretary S. R. CARPENTER, Assistant Secretary WALTER WYATT, General Counsel J. P. DREIBELBIS, Assistant General Counsel E. A. GOLDENWEISER, Economist MALCOLM H. BRYAN, Associate Economist KENNETH H. MACKENZIE, Associate Economist OLIVER P. WHEELER, Associate Economist JOHN H. WILLIAMS, Associate Economist Agent FEDERAL RESERVE BANK OF NEW YORK R. G. ROUSE, Manager of System Open Market Account Digitized for FRASER IOI http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1943] OFFICERS President, EDWARD E. BROWN Vice President, GEORGE L. HARRISON Secretary, WALTER LICHTENSTEIN EXECUTIVE COMMITTEE EDWARD E. BROWN, ex officio W. F. KURTZ R. V. FLEMING C. E. SPENCER, JR. GEORGE L. HARRISON, ex officio B. G. HUNTINGTON MEMBERS District No. 1—CHARLES E. SPENCER, JR., President, The First National Bank of Boston, Boston Massachusetts. District No. 2.—GEORGE L. HARRISON, President, New York Life Insurance Company, New York, New York. District No. 3—WILLIAM F. KURTZ, President, The Pennsylvania Company for Insurances on Lives and Granting Annuities, Philadelphia, Pennsylvania. District No. 4—B. G. HUNTINGTON, President, The Huntington National Bank, Columbus, Ohio District No. 5—ROBERT V. FLEMING, President, The Riggs National Bank of Washington, D. C. Washington, D. C. District No. 6—H. LANE YOUNG, President, The Citizens and Southern National Bank, Atlanta Georgia. District No. 7—EDWARD E. BROWN, President, The First National Bank of Chicago, Chicago, Illinois. District No. 8—RALPH C. GIFFORD, President, First National Bank, Louisville, Kentucky District No. 9—LYMAN E. WAKEFIELD, President, First National Bank of Minneapolis, Min neapolis, Minnesota. District No. 10—W. DALE CLARK, President, The Omaha National Bank, Omaha, Nebraska. District No. 11—NATHAN ADAMS, President, The First National Bank in Dallas, Dallas, Texas. District No. 11—GEORGE M. WALLACE, President, Security-First National Bank of Los Angeles, Los Angeles, California. IO2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS [December 31, 1943] CHAIRMEN AND DEPUTY CHAIRMEN Federal Reserve Bank of— Chairman Deputy Chairman Boston Albert M. Creighton* Henry S. Dcnnison New York Beardsley Ruml William I. Myers Philadelphia Thomas B. McCabe Warren F. Whittier Cleveland G. C. Brainard* R. E. Klages Richmond Robert Lassiter W. G. Wysor Atlanta Frank H. Necly* J. F. Porter Chicago Simeon E. Leland W. W. Waymack St. Louis Wm. T. Nardin Oscar Johnston Minneapolis W. C. Coffey Roger B. Shepard Kansas City R. B. Caldwell Robert L. Mehornay Dallas Jay Taylor J. B. Cozzo San Francisco Henry F. Grady St. George Holden Each Federal Reserve Bank has nine directors divided equally into Classes A, B, and C. The term of office of a director is three years. The Class C directors are appointed by the Board of Governors of the Federal Reserve System, and can not be officers, directors, employees, or stockholders of any bank. The Class B directors, elected by member banks, must be actively engaged in some commercial, agricultural, or industrial pursuit and may not be officers, directors, or employees of any bank. The Class A directors are elected by the member banks as the banks' own representatives. For the purpose of electing Class A and Class B directors, the member banks in each Federal Reserve district are divided into three groups—large, small, and medium-sized banks. Each of the three groups elects one Class A and one Class B director. The Board of Governors of the Federal Reserve System designates one of the Class C directors as chairman and Federal Reserve agent, and another as deputy chairman. The Board of Directors of each Federal Reserve Bank appoints a president and first vice president, subject to the approval of the Board of Governors, to serve for terms of five years. The president is the chief executive officer of the bank and all other officers and employees are responsible to him. Federal Reserve Bank branches have either five or seven directors, of whom a majority, including the managing director if the by-laws provide for a managing director as the chief officer of the branch, are appointed by the Board of Directors of the parent Federal Reserve Bank and the others are appointed by the Board of Governors of the Federal Reserve System. * Served during the year on the Executive Committee of the Conference of Chairmen of the Federal Reserve Banks. Mr. Brainard was Chairman of the Conference of Chairmen, as well as Chairman of the Executive Committee. 103 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OP GOVERNORS SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943-Cont. PRESIDENTS AND VICE PRESIDENTS Federal Reserve President Vice Presidents Bank of— First Vice President Boston W. W. Paddock K. K. Carrick J. C. Hunter1 William Willett E. G. Hult Carl B. Pitman New York. , . . Allan Sproul R. M. Gidney J. M. Rice L. R. Rounds L. W. Knoke Robert G. Rouse Walter S. Logan John H. Williams Philadelphia.. . Alfred H. Williams W. J. Davis C. A. Mcllhenny2 Frank J. Drinnen E. C. Hill C. A. Sienkiewicz Cleveland M. J. Fleming Wm. H. Fletcher B. J. Lazar R. B. Hays J. W. Kossin K. H. MacKenzie A. H. Laning2 W. F. Taylor Richmond Hugh Leach J. G. Fry R. W. Mercer J. S. Walden, Jr Geo. H. Keesee1 Edw. A. Wayne Atlanta W. S. McLarin, Jr. L. M. Clark H. F. Conniff Malcolm H. Bryan Chicago C. S. Young Allan M. Black1 E. C. Harris H. P. Preston J. H. Dillard O. J. Netterstrom Charles B. Dunn Alfred T. Sihler St. Louis Chester C. Davis O. M. Attebery C. M. Stewart F. Guy Hitt Henry H. Edmiston Minneapolis. . . J. N. Peyton A. W. Mills1 Sigurd Ueland O. S. Powell Otis R. Preston A. R. Upgrer E. W. Swanson Harry I. Ziemer Kansas City. . . H. G. Leedy Raymond W. Hall D. W. Woolley2 Henry O. Koppang Dallas R. R. Gilbert E. B. Austin W. O. Ford E. B. Stroud R. B. Coleman W. D. Gentry2 W. J. Evans L. G. Pondrom San Francisco. Wm. A. Day C. E. Earhart H. N. Mangels1 Ira Clerk W. M. Hale R. B. West 1 Cashier. 2 Also Cashier. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PEDERAL RESERVE SYSTEM IO5 SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943—Cont. DIRECTORS OF FEDERAL RESERVE BANKS District No. 1—Boston Term Expires Dec. 31 Class A: Allen W. Holmes President, The Middletown National Bank, Middletown, Conn 1943 Allan Forbes President, State Street Trust Company, Boston, Mass 1944 Leon A. Dodge President, The First National Bank, Damariscotta, Maine... 1945 Class B: Ralph E. Flanders President, Jones & Lamson Machine Company, Springfield, Vt 1943 Philip R. Allen Director, Bird & Son, Inc., East Walpole, Mass 1944 Edward J. Frost President and Director, Wm. Filene's Sons Company, Boston, Mass 1945 Class C.- Henry I. Harriman Director and Vice Chairman, New England Power Association, Boston, Mass 1943 Albert M. Creighton Chairman of Board 1944 Henry S. Dennison President, Dennison Manufacturing Company, Framingham, Mass 1945 District No. 2—New York Class A: Leon Fraser President, First National Bank, New York, N. Y 1943 William J. Field Ptesident, Commercial Trust Company of New Jersey, Jersey City, N. J 1944 Warren W. Clute, Jr President, Glen National Bank of Watkins Glen, Watkins Glen, N. Y 1945 Class B: Donaldson Brown Vice Chairman and Vice President, General Motors Corporation, New York, N. Y 1943 Frederick E. Williamson President, The New York Central Railroad Company, New York, N. Y 1944 Carle C. Conway Chairman and President, Continental Can Company, Inc., New York, N. Y 1945 Class C.- Robert D. Calkins Dean, School of Business, Columbia University, New York, N. Y 1943 Beardsley Ruml Treasurer, R. H. Macy & Company, Inc.,New York, N. Y..... 1944 William I. Myers Dean, New York State College of Agriculture, Cornell University, Ithaca, N. Y 1945 Buffalo Branch Appointed by Federal Reserve Bank: R. B. Wiltse Managing Director, Buffalo, N. Y 1943 Raymond N. Ball President, Lincoln-Alliance Bank & Trust Company, Rochester, N. Y 1943 Robert R. Dew President, Dunkirk Trust Company, Dunkirk, N. Y 1944 Lewis G. Harriman President, Manufacturers and Traders Trust Company, Buffalo, N. Y 1945 Appointed by Board of Governors: Howard Kellogg President, Spencer Kellogg & Sons, Inc., Buffalo, N. Y 1943 Marion B. Folsom Treasurer, Eastman Kodak Company, Rochester, N. Y 1944 Gilbert A. Prole Genesee Farm Supply Company, Batavia, N. Y 1945 District No. 3—Philadelphia Class A.- John B. Henning President, Wyoming National Bank, Tunkhannock, Pa 1943 Howard A. Loeb Chairman, Tradesmens National Bank and Trust Company, Philadelphia, Pa 1944 George W. Reily President, Harrisburg National Bank, Harrisburg, Pa 1945 Class B: C. Frederick C. Stout President, John R. Evans & Company, Camden, N. J 1943 Harry L. Cannon President, H. P. Cannon & Sons, Inc., Bridgeville, Del 1944 Ward D. Kerlin Secretary & Treasurer, Camden Forge Company, Camden, N. J 1945 Class C: Warren F. Whittier Farmer, dairyman, and cattle breeder, Douglassville, Pa 1943 C. Canby Balderston Dean, Wharton School of Finance and Commerce, University of Pennsylvania, Philadelphia, Pa 1944 Thomas B. McCabe President, Scott Paper Company, Chester, Pa 1945 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

io6 ANNUAL REPORT OF BOARD OF GOVERNORS SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943-Cont. District No. 4—Cleveland Term DIRECTORS—Cont. Expires Class A: Dec. 31 H. B. McDowell President, McDowell National Bank, Sharon, Pa... . 1943 F. F. Brooks President, First National Bank, Pittsburgh, Pa.... . 1944 B. R. Conner President, First National Bank, Ada, Ohio . 1945 Class B: R. P. Wright Secretary-Treasurer, Reed Manufacturing Company, Erie, Pa 1943 G. D. Crabbs Chairman of Board, Philip Carey Manufacturing Company, Cincinnati, Ohio 1944 T. E. Millsop President, Weirton Steel Company, Weirton, W. Va 1945 Class C: G. C. Brainard President, General Fireproofing Company, Youngstown, Ohio. 1943 A. Z. Baker President and General Manager, Cleveland Union Stock Yards Company, Cleveland, Ohio 1944 R. E. Klages President, Columbus Auto Parts Company, Columbus, Ohio. 1945 Cincinnati Branch Appointed by Federal Reserve Bank: Frederick V. Geier .President, Cincinnati Milling Machine Company, Cincinnati, Ohio 1943 Buckner Woodford Vice President and Cashier, Bourbon-Agricultural Bank and Trust Company, Paris, Ky 1943 J. G. Gutting President, Second National Bank, Cincinnati, Ohio 1944 Appointed by Board of Governors: Francis H. Bird Professor of Commerce, College of Engineering and Commerce, University of Cincinnati, Cincinnati, Ohio 1943 Frank A. Brown Farmer, Chillicothe, Ohio 1944 Pittsburgh Branch Appointed by Federal Reserve Bank: Archie J. McFarland .President, Wheeling Steel Corporation, Wheeling, W. Va 1943 Clarance Stanley .President, Union Trust Company, Pittsburgh, Pa 1943 E. B. Harshaw .Vice President and Cashier, Grove City National Bank, Grove City, Pa 1944 Appointed by Board of Governors: Robert E. Doherty .President, Carnegie Institute of Technology, Pittsburgh, Pa.. 1943 W. C. Arthur .President, Talon, Inc., Meadville, Pa 1944 District No. 5—Richmond Class A: President, Planters National Bank & Trust Company, Rocky James C. Braswell Mount, N. C 1943 John A. Sydenstricker. Cashier, First National Bank in Marlin ton, Marlinton, W. Va.. 1944 Charles E. Rieman President, Western National Bank, Baltimore, Md 1945 Class B.- John H. Hanna . . .Chairman, Capital Transit Company, Washington, D. C 1943 Edwin Malloy .. .President & Treasurer, Cheraw Cotton Mills, Inc., Cheraw, S. C 1944 Charles C. Reed .. President, Williams & Reed, Inc., Richmond, Va 1945 Class C.- Robert Lassiter . .. Chairman of Board, Mooresville Cotton Mills, Mooresville, N. C 1943 Charles P. McCormick.. .. .President, McCormick & Company, Inc., Baltimore, Md 1944 W. G. Wysor ...General Manager, Southern States Cooperative, Inc., Richmond, Va 1945 Baltimore Branch Appointed by Federal Reserve Bank: W. R. Milford Managing Director, Baltimore, Md 1943 James Dixon President, Easton National Bank of Maryland, Easton, Md.. 1943 George W. Reed President, National Marine Bank, Baltimore, Md 1944 James C. Fenhagen Vice Chairman of Board, Baltimore National Bank, Baltimore, Md 1945 Appointed by Board of Governors: W. Frank Roberts President, Standard Gas Equipment Corporation, Baltimore, Md 1943 W. Frank Thomas Construction Engineer and Real Estate Management, Westminster, Md 1944 Joseph D. Baker, Jr Secretary and Treasurer, The Standard Lime and Stone Company, Baltimore, Md 1945 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM IO7 SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943—Cont. Charlotte Branch Term DIRECTORS—Cont. Expires Appointed by Federal Reserve Bank: Dec. 31 W. T. Clements Managing Director, Charlotte, N. C 1943 T. E. Hemby President, American Trust Company, Charlotte, N. C 1943 J. Gerald Cowan Vice President, Wachovia Bank & Trust Company, Asheville, N. C 1944 Angus E. Bird President, The Citizens and Southern National Bank of South Carolina, Charleston, S. C 1945 Appointed by Board of Governors: Geo. M. Wright President, Republic Cotton Mills, Great Falls, S. C 1943 Chas. L. Creech, Sr Chairman of Board, B. F. Huntley Furniture Company, Winston-Salem, N. C 1944 D. W. Watkins Director of Extension, Clemson College, Clemson, S. C 1945 District No. 6—Atlanta Class A: W. D. Cook Executive Vice President, First National Bank, Meridian, Miissss 1943 Geo. J. White President, First National Bank, Mount Dora, Fla 1944 Thos. K. Glenn Chairman, Trust Company of Georgia, Atlanta, Ga 1945 Class B.- Fitzgerald Hall President, Nashville, Chattanooga & St. Louis Railway, Nashville, Tenn 1943 Ernest T. George .President, Seaboard Refining Company Ltd., New Orleans, LLa 1944 J. A. McCrary Vice President and Treasurer, J. B. McCrary Company, Inc., Atlanta, Ga 1945 Class C: Rufus C. Harris President, Tulane University, New Orleans, La 1943 Frank H. Neely Executive Vice President and Secretary, Rich's, Inc., Atlanta, Ga 1944 J. F. Porter President and General Manager, Tennessee Farm Bureau Federation, Columbia, Tenn 1945 Birmingham Branch Appointed by Federal Reserve Bank: P. L. T. Beavers Managing Director, Birmingham, Ala 1943 John S. Coleman President, Birmingham Trust & Savings Company, Birmingham, Ala 1943 Gordon D. Palmer President, First National Bank, Tuscaloosa, Ala 1944 M. B. Spragins President, First National Bank, Huntsville, Ala 1945 Appointed by Board of Governors: Ed. L. Norton Chairman of Board, Voice of Alabama, Inc., Birmingham, Ala.. 1943 Donald Comer Chairman, Avondale Mills, Birmingham, Ala 1944 Vacancy 1945 Jacksonville Branch Appointed by Federal Reserve Bank: Geo. S. Vardeman, Jr Managing Director, Jacksonville, Fla 1943 J. C. McCrocklin President, First National Bank, Tarpon Springs, Fla 1943 J. L. Dart Vice President and Cashier, Florida National Bank, Jacksonville, Fla 1944 B. C. Teed Executive First Vice President, First National Bank, Palm Beach, Fla 1945 Appointed by Board of Governors: F. D. Jackson President and General Manager, Jackson Grain Company, Tampa, Fla 1943 Walter J. Matherly Dean, College of Business Administration, University of Florida, Gainesville, Fla 1944 Charles S. Lee Livestock and farming, Oviedo, Fla 1945 Nashville Branch Appointed by Federal Reserve Bank: Joel B. Fort, Jr Managing Director, Nashville, Tenn 1943 Geo. Neal Bass Cashier, First National Bank of Franklin County, Decherd, Tenn 1943 B. L. Sadler President, First National Bank, Harriman, Tenn 1944 Edward Potter, Jr President, Commerce Union Bank, Nashville, Tenn 1945 Appointed by Board of Governors: E. W. Palmer President, Kingsport Press, Inc., Kingsport, Tenn 1943 Clyde B. Austin President, The Austin Company, Inc., Greeneville, Tenn 1944 W. E. McEwen Director, County Farm Bureau, Williamsport, Tenn 1945 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

IO8 ANNUAL REPORT OF BOARD OF GOVERNORS SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943—Cont. New Orleans Branch Term DIRECTORS—Cont. Expires Appointed by Federal Reserve Bank: Dec. 31 E. P. Paris Managing Director, New Orleans, La 1943 O. G. Lucas President, National Bank of Commerce, New Orleans, La.... 1943 J. F. McRae President, Merchants National Bank, Mobile, Ala 1944 T. G. Nicholson President, First National Bank of Jefferson Parish, Gretna. La 1945 Appointed by Board of Governors: E. F. Billington Vice President, Soule Steam Feed Works, Meridian, Miss 1943 Alexander Fitz-Hugh President, P. P. Williams Company, Vicksburg, Miss 1944 John J. Shaffer, Jr Sugar planter, Ellendale, La 1945 District No. 7—Chicago Class A: Edward R. Estberg Chairman, Waukesha National Bank, Waukesha, Wis 1943 Frank D. Williams President, First Capital National Bank, Iowa City, Iowa 1944 Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company, Chicago, 111 1945 Class B: Clarence W. Avery President and Chairman, The Murray Corporation of America, Detroit, Mich 1943 Nicholas H. Noyes Vice President and Treasurer, Eli Lilly and Company, Indianapolis, Ind 1944 William C. Heath President, A. O. Smith Corporation, Milwaukee, Wis 1945 Class C: Paul G. Hoffman Simeon E. Leland W. W. Waymack Detroit Branch Appointed by Federal Reserve Bank: Walter S. McLucas Chairman, The National Bank of Detroit, Detroit, Mich 1943 Joseph M. Dodge President, The Detroit Bank, Detroit, Mich 1944 Rudolph E. Reichert President, Ann Arbor Bank, Ann Arbor, Mich 1944 Appointed by Board of Governors: L. Whitney Watkins Farmer, Manchester, Mich 1944 H. L. Pierson President, Detroit Harvester Company, Detroit, Mich 1945 District No. 8—St. Louis Class A: G. R. Corlis Cashier, Anna National Bank, Anna, 111 1943 Sidney Maestre President, Mississippi Valley Trust Company, St. Louis, Mo.. 1944 Max B. Nahm Vice President, Citizens National Bank, Bowling Green, Ky 1945 Class B: H. H. Tucker President, Fones Bros. Hardware Company, Little Rock, Ark.. 1943 John R. Stanley Secretary-Treasurer, Stanley Clothing Company, Evansville, Ind 1944 A. Wessel Shapleigh President, Shapleigh Hardware Company, St. Louis, Mo.... 1945 Class C.- Oscar G. Johnston President, Delta and Pine Land Company, Scott, Miss 1943 Douglas W. Brooks President, The Newburger Company, Memphis, Tenn 1944 Wm. T. Nardin Vice President and General Manager, Pet Milk Company, St. Louis, Mo 1945 Little Rock Branch Appointed by Federal Reserve Bank: A. F. Bailey Managing Director, Little Rock, Ark 1943 Arthur E. McLean President, Commercial National Bank, Little Rock, Ark 1943 Paul R. McCoy Chairman, Peoples National Bank, Stuttgart, Ark 1944 Chas. A. Gordon Vice President, Simmons National Bank, Pine Bluff, Ark.. .. 1945 Appointed by Board of Governors: I. N. Barnett Manager, Barnett Bros. Mercantile Company, Batesville, Ark 1943 S. M. Brooks President, Brooks Advertising Agency, Little Rock, Ark 1944 R. E. Short Farmer, Brinkley, Ark 1945 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM IO9 SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943-Cont. Louisville Branch Term DIRECTORS—Cont. Expires Appointed by Federal Reserve Bank: Dec. 31 C. A. Schacht Managing Director, Louisville, Ky 1943 Phil E. Chappell .President, Planters Bank & Trust Company, Hopkinsville, Ky 1943 Wallace M. Davis Vice President, Citizens Union National Bank, Louisville, Ky 1944 Lee L. Persise President, The State Bank of Salem, Salem, Ind 1945 Appointed by Board of Governors: Perry B. Gaines Farmer, Carrollton, Ky 1943 E. J. O'Brien, Jr President, E. J. O'Brien & Company, Louisville, Ky 1944 G. 0. Boomer Vice President, The Girdler Corporation, Louisville, Ky 1945 Memphis Branch Appointed by Federal Reserve Bank: W. H. Glasgow Managing Director, Memphis, Tenn 1943 B. A. Lynch President, Farmers Bank & Trust Company, Blytheville, Ark.. 1943 Oliver Benton President, National Bank of Commerce, Jackson, Tenn 1944 V. J. Alexander President, Union Planters National Bank & Trust Company, Memphis, Tenn 1945 Appointed by the Board of Governors: Rufus C. Branch Cotton planter and ginner, Pecan Point, Ark 1943 J. Holmes Sherard President, Jno. H. Sherard and Son, Sherard, Miss 1944 J. P. Norfleet President, Sledge and Norfleet, Memphis, Tenn 1945 District No. 9—Minneapolis Class A: S. S. Ford President, Northwestern National Bank, Minneapolis, Minn.. 1943 J. R. McKnight President, Pierre National Bank, Pierre, S. D 1944 F. D. McCartney Vice President, First National Bank, Oakes, N. D 1945 Class B: Homer P. Clark Chairman, West Publishing Company, St. Paul, Minn 1943 J. E. O'Connell President, Eddy's Bakeries, Inc., Helena, Mont 1944 Ray C. Lange President, Chippewa Canning Company, Chippewa Falls, Wis 1945 Class C: W. D. Cochran W. D. Cochran Freight Lines, Iron Mountain, Mich 1943 Roger B. Shepard President, Finch, Van Slyck & McConville, St. Paul, Minn... 1944 W, C, Coffey President, University of Minnesota, Minneapolis, Minn 1945 Helena Branch Appointed by Federal Reserve Bank: R. E. Towle Managing Director, Helena, Mont 1943 Peter Pauly President, Deer Lodge Bank & Trust Company, Deer Lodge, Mont 1943 P. B. McClintock Cashier, Farmers National Bank, Chinook, Mont 1944 Appointed by Board of Governors: H. D. Myrick Farmer, Square Butte, Mont 1943 R. B. Richardson President, Western Life Insurance Company, Helena, Mont... 1944 District No. 10—Kansas City Class A: ML A. Limbocker President and Chairman, Citizens National Bank, Emporia, Kan 1943 W. L. Bunten Vice President and Cashier, Goodland State Bank, Goodland, Kan 1944 T. A. Dines President, United States National Bank, Denver, Colo 1945 Class B: J. M. Bernardin Lumberman, Kansas City, Mo 1943 L. E. Phillips Phillips Petroleum Company, Bartlesville, Okla 1944 Willard D. Hosford Vice President and General Manager, John Deere Plow Company, Omaha, Neb 1945 Class C: Robert B. Caldwell Caldwell, Downing, Noble & Garrity, Kansas City, Mo 1943 Robert L. Mehornay President, North-Mehornay Furniture Company, Kansas City, Mo 1944 Lyle L. Hague ,... Farmer and Stockman, Cherokee, Okla 1945 Denver Branch Appointed by Federal Reserve Bank: Jos. E. Olson Managing Director, Denver, Colo 1943 W. C. Kurtz President and Gen. Mgr., Independent Lumber Company, Grand Junction, Colo 1943 Harold Kountze President, Colorado National Bank, Denver, Colo 1944 Digitized for FCRlaAreSnEceR H . Adams President, International Trust Company, Denver, Colo 1945 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

no ANNUAL REPORT OF BOARD OF GOVERNORS SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943-Cont. Term DIRECTORS—Cont. Expires Appointed by Board of Governors: Dec. 31 M. E. Noonen .. Sheep rancher, Kremmling, Colo 1943 J. B. Grant .. Lewis and Grant, Denver, Colo 1944 W. A. Alexander . . Vice President, Denver Tramway Corporation, Denver, Colo.. 1945 Oklahoma City Branch Appointed by Federal Reserve Bank: G. H. Pipkin Managing Director, Oklahoma City, Okla 1943 D. M. Tyler First Vice President, Dewey Portland Cement Company, Dewey, Okla 1943 Hugh L. Harrell Vice President, First National Bank & Trust Company, Oklahoma City, Okla 1944 A. E. Stephenson Chairman of the Board, Central National Bank, Enid, Okla... 1945 Appointed by Board of Governors: Phil C. Ferguson Stockman, Woodward, Okla 1943 Neil R. Johnson Rancher and farmer, Norman, Okla 1944 Lloyd Noble President, Noble Drilling Corporation, Tulsa, Okla 1945 Omaha Branch Appointed by Federal Reserve Bank: L. H. Earhart Managing Director, Omaha, Neb 1943 George A. Bible President, First National Bank, Rawlins, Wyo 1943 George^ W. Holmes President! First National Bank| Lincoln/Neb 1944 T. L. Davis President, First National Bank, Omaha, Neb 1945 Appointed by Board of Governors: John D. Clark T Dean, College of Business Administration, University of Nebraska, Lincoln, Neb 1943 L. E. Hurtz President, Fairmont Creamery Company, Omaha, Neb 1944 Walter S. Byrne General Manager, Metropolitan Utilities District of Omaha, Omaha, Neb 1945 District No. 11—Dallas Class A: Frank Turner President, First National Bank, Decatur, Texas 1943 J. E. Woods Chairman of Board, Temple National Bank, Temple, Texas.. 1944 Walter P. Napier President, Alamo National Bank, San Antonio, Texas 1945 Class B: Geo. A. Hill, Jr President, Houston Oil Company of Texas, Houston, Texas.. 1943 E. L. Kurth Vice President and General Manager, Angelina County Lumber Company, Keltys, Texas 1944 J. R. Milam President, The Cooper Company, Inc., Waco, Texas 1945 Class C: J. B. Cozzo Builder and manufacturer, Dallas, Texas 1943 Dolph Briscoe Stock raiser, Uvalde, Texas 1944 Jay Taylor Ranching and stockyards, Amarillo, Texas 1945 El Paso Branch Appointed by Federal Reserve Bank: R. W. McAfee Vice President, State National Bank, El Paso, Texas 1943 J. E. Moore Vice President, First National Bank, Roswell, N. M 1944 H. A. Jaaccoobbss .. Vice President, El Paso National Bank, El Paso, Texas 1945 John K. Hicks . .President and Manager, Hicks-Hayward Company, El Paso, Texas 1945 Appointed by Board of Governors: Jack B. Martin President, Arizona Ice and Cold Storage Company, Tucson, Ariz 1943 Frank M. Hayner President, Las Cruces Lumber Company, Las Cruces, N. M... 1944 R. E. Sherman President, Leavell and Sherman, Inc., El Paso, Texas 1945 Houston Branch Appointed by Federal Reserve Bank: W. N. Greer .President, Citizens State Bank, Houston, Texas 1943 J. W.McCullough .President, Hutchings-Sealy National Bank, Galveston, Texas 1944 B. C. Roberts .President, Wharton Bank & Trust Company, Wharton, Texas 1945 James A. Elkins .President, City National Bank, Houston, Texas 1945 Appointed by Board of Governors: George G. Chance .Farmer, Bryan, Texas 1943 Henry Renfert .Renfert-Helmbrecht Company, Galveston, Texas 1944 J. S. Abercrombie President, J. S. Abercrombie Company, Houston, Texas. ... 1945 San Antonio Branch Appointed by Federal Reserve Bank: J.A.Walker .Vice President, Del Rio National Bank, Del Rio, Texas 1943 T. C. Frost, Jr . Vice President, Frost National Bank, San Antonio, Texas .... 1944 E. J. Miller . President, South Texas National Bank, San Antonio, Texas .. 1945 Robert D. Barclay President, National Bank of Commerce, San Antonio, Texas .. 1945 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM III SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1943-Cont. Term DIRECTORS—Cont. Expires Appointed by Board of Governors: Dec. 31 Holman M. Cartwright Live stock and farming, Twin Oaks Ranch, Dinero, Texas 1943 J. M. Odom General Contractor, Austin, Texas 1944 George W. Stocking Professor of Economics, University of Texas, Austin, Texas .. 1945 District No. 12—San Francisco Class A: C. K. Mclntosh Chairman of the Board, The Bank of California, N. A., San Francisco, Calif 1943 Reno Odlin President, Puget Sound National Bank of Tacoma, Tacoma, Wash 1944 Carroll F. Byrd Chairman of the Board & Executive Vice President, The First National Bank of Willows, Willows, Calif 1945 Class B.- Elmer H. Cox President, Madera Sugar Pine Company, San Francisco, Calif 1943 Wm. G. Volkmann Partner, A. Schilling and Company, San Francisco, Calif 1944 Reese H. Taylor President, Union Oil Company of California, Los Angeles, Calif.. 1945 Class C: St. George Holden St. George Holden Realty Company, San Francisco, Calif... 1943 Henry F. Grady President, American President Lines, Ltd., San Francisco, Calif 1944 Harry R. Wellman Director,, Giannini Foundation of Aggr icultural Economics,, UUniivi ersity fo Cf Clailiffio rniBa, kBle rkeleCy,l ifCalif 1945 Los AngeleslBranch Appointed by Federal Reserve Bank: W. N. Ambrose .Managing Director, Los Angeles, Calif 1943 F. E. Snedecor .President, The First National Bank of Corona, Corona, Calif.. 1943 Herbert D. Ivey President, Citizens National Trust & Savings Bank of Los Angeles, Los Angeles, Calif 1944 A ppointed by Board of Governors: Y. Frank Freeman . Vice President, Paramount Pictures, Inc., Hollywood, Calif... 1943 C. E. Myers . Agriculturalist, Covina, Calif 1944 Portland Branch Appointed by Federal Reserve Bank: D. L. Davis Managing Director, Portland, Ore 1943 Paul S. Dick .President, The United States National Bank of Portland, Portland, Ore 1943 William C. Christensen .President, The Commercial National Bank of Hillsboro, Hillsboro, Ore 1944 Appointed by Board of Governors: George T. Gerlinger .President, Willamette Valley Lumber Company, Portland, Ore 1943 William H. Steen . Live stock and farming, Milton, Ore 1944 Salt Lake City Branch Appointed by Federal Reserve Bank: W. L. Partner .Managing Director, Salt Lake City, Utah 1943 Frederick P. Champ .President, Cache Valley Banking Company, Logan, Utah 1943 Orval W. Adams .Executive Vice President,The Utah State National Bank of Salt Lake City, Salt Lake City, Utah 1944 Appointed by Board of Governors: Herbert S, Auerbach .President and General Manager, Auerbach Company, Salt Lake City, Utah. 1943 R. C.Rich . Live stock and farming, Burley, Idaho 1944 Seattle Branch Appointed by Federal Reserve Bank: C. R. Shaw Managing Director, Seattle, Wash 1943 Andrew Price .President, The National Bank of Commerce of Seattle, Seattle, Wash 1943 Fred L. Stanton v . President, The Washington Trust Company, Spokane, Wash... 1944 Appointed by Board of Governors: Charles F. Larrabee .Vice President, Pacific American Fisheries, Inc., Bellingham, Wash 1943 FredNelsen.. .Farmer and dairyman, Seattle, Wash 1944 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES 0 \ / ^^ ^^^^^^ ' MINNEAPOLIS/ *JPW^$\ 1 I 1 NTJ(t owhl CHICA60I lc VpOh KANSAS CITYl ^7®T OT NoshV'Ue -?ATL / L DALLAS® 1 '-W^ Jacksonville \ i>w <"*^ Houston JL ^ fT = BOUNDARIES OF FEDERAL RESERVE DISTRICTS \^ ^\ • \ 9jyJ^^~S^\^J^jl ans • — BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES \ " "t°niCfjpr ^ \ ^L BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM \ ^f X 1 (g) FEDERAL RESERVE BANK CITIES V 1 • FEDERAL RESERVE BRANCH CITIES W O FEDERAL RESERVE BANK AGENCY JANUARY 2, 1943 BOARD OF GOVERNORS OF THE. FEDERAL RESERVE STSTEM NOTE.—There has been no change in district or branch territory boundaries since the publication of the description in the Annual Report of the Board of Governors for 1942, pp. 138-145. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Abercrombie, J. S., appointed director at Houston Branch 51 Absorption of exchange charges 33 Acceptances, buying rates 74 Acceptances to 100 per cent of capital and surplus, application granted 45 Agricultural loans 78 Alexander, W. A., appointed director at Denver Branch 52. Amendments to Federal Reserve Act: (JSee Legislation) Arthur, W. C, appointed director at Pittsburgh Branch 51 Assets and liabilities: (See Condition statements) Audit of accounts of Board for 1943 56 Balderston, C. Canby, appointed Class C director at Philadelphia 51 Bank holding companies: Regulation and supervision of 34 Voting permits issued to 44 Bank mergers 81 Bank premises: Federal Reserve Banks 54, 60, 62. Member banks, December 31, 1943 76 Bank supervisory agencies: Duties and responsibilities increased during year 43 Banking and Monetary Statistics, publication of 46 Banking offices: Number of: i933"I943 •••••. 80 1943, changes in 30 Banks: Branches: Number of: i933-!943 f 80 1943, analysis of changes 81 Capital account of 30 Consolidations, absorptions, etc 81 Earnings of 2.9 Loans to, by member banks, December 31, 1943 78 Movement of, changes during year 30 Number of: i933~I943 : 80 1943, analysis of changes in 81 Position in war economy 2.5 Purchase of Treasury issues by commercial 14 Services of, increase in 31 Suspensions, number of 81 (See also Federal Reserve Banks; Mutual savings banks; National banks; Nonmember banks; State member banks) Bills: Bought by Federal Reserve Banks: All banks combined: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Bought in open market by Federal Reserve Banks: Volume of operations 67 Discounted by Federal Reserve Banks: All banks combined: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 December 31, 1943 60 Each bank, end-of-year figures 62. Earnings on, each bank 68 Volume of operations 67 Board of Governors: Audit of accounts for 1943 by Federal Reserve Bank of Richmond 56 Expenditures for year 56 Members, list of 101 Officers 101 "3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 INDEX Board of Governors—Continued. Page Policy actions: (See Policy actions) Publications, distribution of 50 Receipts and disbursements for 1943 72. Regulations: (See Regulations) Research and advisory services 46 Staff, number of employees 55 Bonds: (See Government securities) Branch banks: Federal Reserve System: Building operations of 54 Direct settling branches, number added during year ^ Directors, list of 105 Examination of 43 Responsibilities enlarged 42. Vice presidents appointed at certain branches to be in charge of 42. Foreign, number in operation at end of year 45 Movement of, changes during year 30 Number of: i933-I943- • •. • • v 8o 1943, analysis of changes 81 Brokers and dealers in securities, loans to 78 Building operations of Federal Reserve Banks and branches 54 Business indexes 84 Byrne, Walter S., appointed director at Omaha Branch 52. Canadian Joint Economic Committees, dissolution of 50 Calkins, Robert D., appointed Class C director at New York 51 Capital: Accounts 30 Federal Reserve Banks 61, 63 International movement of 10 Member banks 77 Census of foreign property owned, participation of Federal Reserve Banks 41 Central reserve city member banks: Assets and liabilities 76 Classification of loans and Government direct obligations 78 Certificates of indebtedness, holdings of Federal Reserve Banks 66, 67 Chairmen of Federal Reserve Banks: List of 103 Meetings during year 56 Charts: Bank deposits and currency 9 Consumer debt 2.4 Individual incomes, expenditures, and taxes 7 Industrial production 5 Member bank reserves and related items 17 Ownership of Government securities 14 Reserve Bank holdings of United States Government securities 16 Clark, John D., appointed director at Omaha Branch 52. Clearing and collection: Absorption of exchange charges 33 Interdistrict settlement fund, changes in 55 Par list, number of banks on list and number not on list 32., 82. Volume of operations at Federal Reserve Banks 67 Coins received and counted by Federal Reserve Banks 67 Commercial paper: Discount rates, open market 83 Member bank holdings, December 31, 1943 78 Commitment fees: Loans under Regulation V, entry for policy record: Meeting of May 12. 86 Meeting of August 30 88 Commitment rates of Federal Reserve Banks 74 Committees: Executive, of Federal Advisory Council 102. Federal Open Market: (See Federal Open Market Committee) Joint Economic Committees of Canada and United States, work of staff of Board on.. 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX II5 Commodity Credit Corporation: Page Federal Reserve Banks as depositaries for, authorized by Act of Congress 57 Services performed by Federal Reserve Banks for 40 Condition statements: Federal Reserve Banks: All banks combined, December 31, 1943 60 Each bank, end-of-year figures 62. Member banks, December 31, 1943 76 Conferences: (See Meetings) Congress, reports by Board on proposed legislation 57 Consolidations, absorptions, etc., of banks 81 Construction contracts awarded: Indexes of value of 84 Consumer credit: Chart 2.4 Discussion of 2.4 Minimum down payments and maximum maturities 73 Regulation W, amendment to 58, 88 Restrictions on 2.3 Country member banks: Assets and liabilities 76 Classification of loans and Government direct obligations 78 Credit, bank: Federal Reserve: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Credit control, selective by Federal Reserve System 2.2. Credit facilities available 3 Currency: Chart on 9 Circulation, 1918-1943 79 Expansion during year 2.8 Federal Reserve notes: (See Federal Reserve notes) Received and counted by Federal Reserve Banks 67 Defense Plant Corporation, services performed by Federal Reserve Banks for 40 Defense Supplies Corporation, services performed by Federal Reserve Banks for 40 Department store sales: Index 84 Revision of index 47 Depositary services for Treasury 38 Deposits: Chart on 9 Expansion during year 8 Federal Reserve Banks: All banks combined, December 31, 1943 61 Each bank, end-of-year figures 63 Government : Federal Reserve Banks: All banks combined: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Each bank, end-of-year figures 63 Growth during year 2.5 Member banks, December 31, 1943 76 Nonmember deposits in Federal Reserve Banks: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Ownership of, survey being made by Board and Federal Reserve Banks 46 Reserves required from member banks 75 Savings, interest rates on 75 Time, interest rates on 75 War loan, exemption from reserve requirements 15, 57 Directors: Federal Reserve Banks: Balderston, C. Canby, appointed Class C at Philadelphia 51 Calkins, Robert D., appointed Class C at New York 51 Classes of 51 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Il6 INDEX Directors—Con tin ued. Federal Reserve Banks—Continued. Page Hague, Lyle L., appointed Class C at Kansas City 51 List of 105 Myers, William I., appointed Class C at New York 51 Federal Reserve branch banks: Abercrombie, J. S., appointed at Houston Branch 51 Alexander, W. A., appointed at Denver Branch 52. Arthur, W. C, appointed at Pittsburgh Branch 51 Byrne, Walter S., appointed at Omaha Branch 52. Clark, John D., appointed at Omaha Branch 52. Lee, Charles S., appointed at Jacksonville Branch 52. List of 105 Myers, C. E., appointed at Los Angeles Branch 51 Shaffer, John J., Jr., appointed director at New Orleans Branch 52. Stocking, George W., appointed at San Antonio Branch 52. Discount rates at Federal Reserve Banks 74 Dividends: Federal Reserve Banks: All banks combined, 1914-1943 70 Each bank, 1943 69 Down payment and maximum maturity on consumer credit under Regulation W 73 Durable manufactures index 84 Earnings and expenses: Federal Reserve Banks: All banks combined 70 During 1943 and 1942. 52. Each bank 68 Earnings of banks 2.9 Employees of Federal Reserve Banks, number and salaries 71 Employment: Factory employment index 84 Nonagricultural index 84 Examinations: Federal Reserve Banks 43 Foreign banking corporations 46 State member banks 43 Expenditures and receipts of Government as result of war financing 12. Expenses: Board of Governors of the Federal Reserve System 56, 72. Federal Reserve Banks 68, 70 Exports and imports: Amount of, for year 10 Factory employment, index !" 84 Federal Advisory Council: Meetings 56 Members and officers 102. Resolution regarding final settlement of terminated contracts 48, 99 Federal Deposit Insurance Corporation: Membership changes 81 Federal Open Market Committee: Meetings during year 56 Members and officers 101 Policy actions: (See Policy actions) Federal Reserve Act: Amendments: (See Legislation) Reports on bills introduced in Congress 57 Federal Reserve Bank of New York: Foreign transactions by 41 Stabilization Fund operations under instructions from Treasury 40 Federal Reserve Bank of Richmond: Audit of accounts of Board for 1943 56 Federal Reserve Banks: Assessment for expenses of Board of Governors 56 Branches: Building operations of 54 Direct settling branches, number added during year 55 Directors, list of 105 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 117 Federal Reserve Banks—Continued. Branches—Continued. Page Examination of 43 Responsibilities enlarged 42. Vice presidents appointed at certain branches to be in charge of 42. Building operations during year 54 Chairmen and Deputy Chairmen: List of 103 Meetings of 56 Depositary services for Treasury 38 Deputy Chairmen, list of 103 Directors: Appointment of Class C 50 Classes of 51 List of 105 Dividends paid: All banks combined, 1914-1943 70 Each bank, 1943 69 Earnings and expenses: All banks combined 70 Discussion of 52. During 1943 and 1942. 53 Each bank 68 Earnings on bills and securities 53 Employees, number and salaries 71 Examination during year 43 Financing of war program 1 Fiscal agency operations 38 Issuing and servicing of Government obligations 39 Officers: List of 104 Number and salaries of 71 Operations of 50 Personnel and operations of 50 Presidents: List of 104 Meetings 56 Profit and loss account 69 Purchases of Government securities by 15 Retirement System 54 Salaries of officers and employees 68, 71 Services performed for Government corporations 40 Staff, expansion during year 52. Vice presidents, list of 104 Volume of operations 67 Wartime services of 37 Federal Reserve districts, map showing outline of 112. Federal Reserve notes: Circulation > . 63 Clearing for interdistrict balances, discontinued 55 Collateral security, end-of-year figures 63 Government obligations as collateral for, amendment to Section 16 of the Federal Reserve Act 57 Issued 63 Redemption fund: All banks combined, December 31, 1943 60 Each bank, end-of-year figures 62. Federal Reserve System: Contributions to war financing program 12. Map of 112. Membership, changes in 32. Fiduciary powers: National banks granted authority to exercise, changes during year 45 Fiscal agency operations of Federal Reserve Banks . 38 Foreign banking corporations: Discussion 45 Regulation K, amendment to 58 Policy action 89 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Il8 INDEX Foreign banks: Page Deposits of, held by Federal Reserve Banks: All banks combined, December 31, 1943 61 Each bank, end-of-year figures 63 Foreign banks and bankers: Relations of Reserve Banks with, amendment to Regulation N 58, 89 Foreign branches of member banks and foreign banking corporations 45 Foreign Funds Control, activities of Federal Reserve Banks as agents 41 Foreign transactions by Federal Reserve Bank of New York 41 Franchise tax paid by Federal Reserve Banks to Government, 1917-1932. 70 Functions of banking system, enlarged scope of 31 Gold: International movement of 10 Stock: Chart 17 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Gold certificates: Federal Reserve Bank holdings: All banks combined, December 31, 1943 60 Each bank, 1942. and 1943 62. Government corporations: Services performed by Federal Reserve Banks 40 Government debt, amount of 1 Government securities: Bank holdings of 66, 67 Bond yields, table 83 Collateral for Federal Reserve notes, authority extended under Section 16 of the Federal Reserve Act 57 Federal Reserve Bank holdings: All banks combined: End of December, 1942.-1943 in detail 60 December 31, 1943 66 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Each bank, end-of-year figures ' 62. Earnings on 53 Federal Reserve purchases of 15 Fiscal agency operations of Federal Reserve Banks 38 Guaranteed securities 66 Issues: Amounts and types of j6 78 t Redemption and exchange of 67 Issuing and servicing of Government obligations by Federal Reserve Banks 39 Interest rate on 66 Discussion of prospects on 18 Member bank holdings 76, 78 Nonbank purchases of 13 Open market operations in 1 Ownership of, chart 14 Purchase by commercial banks 14 Reserve Bank holdings of, chart 16 Resolutions of Federal Open Market Committee authorizing transactions in 90-98 Review of war financing 1 Treasury bills, rates on 83 Treasury bonds and notes, holdings of Federal Reserve Banks 66 Treasury notes: Holdings by Federal Reserve Banks 66 Yields 83 Volume handled by Federal Reserve Banks 67 Guarantee charges and rates on loans under Regulation V 19 Hague, Lyle L., appointed Class C director at Kansas City 51 Holding company affiliates: Regulation and supervision of 34 Voting permits issued to 44 Honduras: Participation by staff of Board in joint mission to establish central bank 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 119 Income: Page National income payments, indexes 84 Pressure of rising incomes on prices 6 Indexes: Business 84 Department store sales, revision of 47 Industrial production, revision of 47 Industrial advances of Federal Reserve Banks: All banks combined, December 31, 1943 60 Commitments 63 Each bank, end-of-year figures 62. Earnings on 68 Rates on 74 Volume of operations 67 Industrial expansion during year 2. Industrial production: Chart of 5 Discussion of 4 Indexes 84 Revision of Board's index 47 Inflation: Forces tending toward and problem of control 6 Monetary policy as related to 10 Interdistrict collection system: Number of banks on list and number not on list 31, 82. Volume of operations at Federal Reserve Banks 67 Interdistrict Settlement Fund, changes during year 55 Interest rates: Federal Reserve Banks 74 Open market in New York City 83 Prospects on, discussion of 18 Savings deposits 75 Time deposits 75 United States Government securities 66 International monetary stabilization, discussion of plans for 49 Investments: Member banks, December 31, 1943 76 Lee, Charles S., appointed director at Jacksonville Branch 52. Legislation: Bank holding companies, changes suggested 34 Federal Reserve Act, proposed amendment to Section 19 to provide that absorption of exchange and collection charges by member banks shall not be deemed to be payment of interest '. 34 Federal Reserve Banks as depositaries for Commodity Credit Corporation 57 Government obligations as collateral for Federal Reserve notes 57 Reports to Congress on bills 57 Stabilization Fund, power of the President extended 57 War loan deposit accounts, amendment to Section i2.b of Federal Reserve Act 57 Loans: Brokers' loans by member banks 78 Contractors and subcontractors guaranteed by Government, discussion of 12. Guaranteed, to industry for war production 19 Industrial, rates on 74 Real estate loans of member banks 78 Security loans by member banks 78 Total for member banks, December 31, 1943 76, 78 VT loans, discussion of 2.0 Loans and investments: Member banks, December 31, 1943 76 Map: Federal Reserve districts 112. Margin requirements under Regulations T and U 2.3, 75 Meetings: Administration of Regulation V 56 Administration of Regulation W 56 Chairmen of Federal Reserve Banks 56 Examiners at Federal Reserve Banks, participation by representatives of Board's Division of Examinations 44 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

I2.O INDEX Meetings—Continued. Page Federal Advisory Council 56 Federal Open Market Committee c£ Presidents of Federal Reserve Banks 56 Research work of Federal Reserve System 56 Member banks: Changes 81 Condition statements, December 31, 1943 76 National banks: (See National banks) Number of. 80 State member banks: (See State member banks) Membership in Federal Reserve System: Analysis of increase during year 32., 81 Minerals, production index 84 Monetary policy and inflation 10 Money in circulation: Chart 17 New seasonal adjustment factors 46 1918-1941, end-of-year figures 79 1943, end-of-month figures 79 Money rates: Open market in New York City .. . 83 Mutual savings banks: Banking offices, 1933-1943 80 Branches: I933~I943 80 r 1943, analysis of changes in 81 Number of: I933~I943 ; 80 r 1943, analysis of changes in 81 Myers, C. E., appointed director at Los Angeles Branch 51 Myers, William I., appointed Class C director at New York 51 National banks: Acceptance powers granted to 45 Assets and liabilities, December 31, 1943 76 Banking offices, 1933-1943 80 Branches: Number of: I933~I943 •. 80 1943, analysis of changes in 81 Classification of loans and Government direct obligations 78 Number of: i933~I943 •. 80 1943, analysis of changes in 81 Trust powers authorized and terminated during year 45 Nondurable goods, production index 84 Nonmember banks: Deposits of, held by Federal Reserve Banks: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Insured banking offices: I933~I943 8o Branches 00, 81 Number of 80, 81 Par list, number of banks on list and number not on list 82. Nonpar banks, number of 82. Open market account: (See Policy actions, Federal Open Market Committee) Open market operations to aid war financing 1 Par list: Number of banks on list and not on list 32. Table 82. Paraguay: Visit by members of Board's staff in connection with new legislation for reform of currency system 50 Pay roll savings plan for purchase of war savings bonds 55 Pay rolls, factory, index 84 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX I'LI Policy actions: Page Board of Governors: Regulation D, Reserves of Member Banks, amendment to 86 Regulation K, Banking Corporations Authorized to do Foreign Banking Business Under Terms of Section 2.5a of Federal Reserve Act, amendment to 89 Regulation N, Relations with Foreign Banks and Bankers, amendment to 89 Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendment to 87 Regulation V, War Financing: Commitment fees on loans under 86, 88 Regulation W, Consumer Credit, amendment to 88 Federal Open Market Committee: Authority to effect transactions in System open market account: Meeting of January 2.6 90 Meeting of March 1. 93 Meeting of May 15 94 Meeting of June 2.8 95 Meeting of October 18 97 Purchase by Federal Reserve Banks of Treasury bills at posted discount rate: Meeting of March 2. 92. Meeting of May 15 , 93 Meeting of June 2.8 95 Replacement of maturing securities: Meeting of January 2.6 91 Meeting of March 2. 92. Replacement of maturing Treasury bills 96 Postal savings deposits: Interest rate on, paid by member banks 75 Postwar problems, consideration of 48 Presidents of Federal Reserve Banks: List of 104 Meetings 56 Salaries 71 Prices: Pressure of rising incomes on 6 Wholesale commodity, index 84 Production: Expansion for war effort 4 Industrial: (See Industrial production) Publications of Board: Distribution to public curtailed during 1943 50 Rates: Buying rates on bills 74 Commitment 74 Discount at Federal Reserve Banks 74 Industrial loans under Section 13b of Federal Reserve Act 74 Interest: Federal Reserve Banks 74 Government securities, prospects on 18 Open market rates in New York City 83 Savings deposits 75 Time deposits 75 Ration banking, handling of ration checks by Federal Reserve Banks 38 Real estate: Loans on, by member banks, December 31, 1943 78 Member bank holdings, December 31, 1943 76 Reconstruction Finance Corporation: Services performed by Federal Reserve Banks for ^.. . 40 Red Cross Blood Bank: Contributions of staff of Board 56 Regulations, Board of Governors: D, Reserves of Member Banks: Amendment to 58 Policy record 86 K, Banking Corporations Authorized to do Foreign Banking Business: Amendment to 46, 58 Policy record 89 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

IZ2. INDEX Regulations, Board of Governors—Continued. Page N, Relations with Foreign Banks and Bankers: Amendment to 58 Policy record 89 Q, Payment of Interest of Deposits: Absorption of exchange charges 33 T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges: Amendment to 58 Policy record 87 Margin requirements under 2.3, 75 U, Loans by Banks on Stocks: Margin requirements under 2.3, 75 V, War Financing: Commitment fees on loans under 86,88 Discussion of 19 Special committee appointed to study 48 W, Consumer Credit: Amendment to 58 Policy record : 88 Restrictions on XT, Reports to Congress on bills .' 57 Research and advisory services of Board 46 Reserve city member banks: Assets and liabilities, December 31, 1943 76 Classification of loans and Government direct obligations 78 Reserve requirements: Exemption of Treasury war loan deposits from 15, 57 Member banks 75 Regulation D, amendment to 58, 88 Reserves: Change during year 2. Federal Reserve Banks: All banks combined, December 31, 1943 60 Each bank, end-of-year figures 62. Member banks : Account in Federal Reserve Banks: All banks combined, December 31, 1943 60 Each bank, end-of-year figures 62. Amendment to Regulation D 58, 88 Chart 17 Discussion of 17 Excess: 1918-1942., end-of-year figures 79 1943, end-of-month figures 79 Total: I9i8-i94x, end-of-year figures 79 1943, end-of-month figures 79 Resolutions: Federal Advisory Council: Final settlement of terminated contracts 48, 99 Retirement System of Federal Reserve Banks: Changes in 54 Salaries at Federal Reserve Banks 68, 71 Savings deposits, interest rate on 75 Securities: Government: (See Government securities) Loans on, by member banks, December 31, 1943 78 Securities exchange administration: Amendment to Regulation T 58, 87 Services of banks increased 31 Shaffer, John J., Jr., appointed director at New Orleans Branch 52. Stabilization: International monetary, discussion of plans for 49 Policies needed as result of growing upward pressure of wages, farm prices, and profits 7 Stabilization Fund: Operations 4° Digitized for FRPoAwSeEr Ro f the President extended 57 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 12-3 Staff of Board of Governors: Page Contributions to Red Cross Blood Bank 56 Number of employees ' 55 Participation in interdepartmental conferences 49 Pay roll savings plan for purchase of war savings bonds 55 Stark, Walter R.: Granted leave as adviser to Office of Economic Stabilization 48 Resignation as Assistant Director of Division of Research and Statistics 55 Stark, Walter R.: (See Staff of Board) State member banks: Assets and liabilities, December 31, 1943 76 Banking offices, 1933-1943 80 Branches 80 Classification of loans and Government direct obligations 78 Examination of 43 Number of: I333-I943--: • 8o 1943, analysis of changes in 81 States and political subdivisions, deposits of 76 Stock prices: Table 83 Stocking, George W., appointed director at San Antonio Branch 52. Studies conducted by Board during year 47 Surplus: Federal Reserve Banks 69, 70 Member banks 77 Surveys: Ownership of bank deposits 46 Regional research work of Board and Federal Reserve Banks 48 Suspensions of banks 81 Taxes: Use in preventing inflation 9 Withholding, handling of work for Treasury by Federal Reserve Banks 38 Treasury bills, holdings of Federal Reserve Banks 66, 67 Treasury bonds and notes, holdings of Federal Reserve Banks 66t 6j Treasury currency outstanding, 1918-1943 79 Trust powers: National banks granted authority to exercise and to terminate during year 45 United States Government deposits: (See Deposits, Government) United States Government securities: (See Government securities) Uruguayan Bankers Mission: Headquarters with Board during period spent in United States 50 Voting permits issued to bank holding companies 44 War contracts: Resolution of Federal Advisory Council on settlement of terminated 48, 99 War finance: Contributions of Federal Reserve System to 12. Discussion of 12. Outline of 1 War loan deposit accounts: Amendment to Section i2.b of Federal Reserve Act 57 War loans: Commitment fees on loans under 86, 88 Guaranteed under Regulation V, discussion of 19 Special committee appointed to study 48 War savings bonds: Participation by staff of Board in pay roll savings plan 55 Wholesale prices: Advance during year 3 Index 84 Withholding tax program 38 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis