Annual Report of the Federal Reserve Board, 1949

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

LETTER OF TRANSMITTAL BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Washington, June 30, 1950. 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 Thirty-sixth Annual Report, prepared by direction of the Board of Governors of the Federal Reserve System, covering operations during the calendar year 1949. Yours respectfully, THOMAS B. MCCABE, Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONTENTS TEXT OF REPORT Page Introduction 1 Federal Reserve Credit Policy in 1949 3 Reduction in reserve requirements 4 More flexible open market operations 7 Maintenance of discount rates 11 Easing of consumer instalment credit terms 11 Reduction in margin requirements 14 Banking and Monetary Developments in 1949 15 Bank lending activity 16 Availability of bank reserves 18 Changes in the money supply 22 Regional changes in deposits 25 Bank earnings and profits 25 Bank earning assets 27 Capital accounts 27 Interest Rates 28 Yields on United States Government securities 29 Corporate and State and local government bond yields 30 Short-term commercial rates 31 Treasury Financing 31 Cash deficit 33 Composition of debt 33 Ownership of United States Government securities 35 Economic Developments in 1949 38 Recession in first half 39 Moderate recovery in second half 41 International Trade and Finance 43 United States balance of payments 44 Progress in European recovery 47 Changes in Banking Structure 48 Number of banking offices 48 Changes in Federal Reserve membership 49 Nonmember banks eligible for membership 50 Par and nonpar banks 51 Check routing symbols 51 III Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page Bank Supervision by the Federal Reserve System 52 Examination of Federal Reserve Banks 53 Examination of State member banks 53 Bank holding companies 53 Trust powers of national banks 54 Foreign branches and banking corporations 54 Changes in Regulations of the Board of Governors 55 Discounts for and advances to member banks 55 Reserves of member banks 56 Trust powers of national banks 56 Check clearing and collection 57 Margin requirements for purchasing securities 57 Consumer instalment credit 57 Hearing 58 Hearing under Clayton Antitrust Act 58 Legislation 58 Consumer instalment credit 58 Reserves of member banks 58 Salaries 58 International Bank obligations 59 Housing obligations 59 Real estate loans 59 Legislative Proposals 59 Bank holding companies 59 State member bank capital requirements 60 Federal Reserve branch buildings 60 Reserve Bank Operations 61 Volume of operations 61 Earnings and expenses 61 Holdings of loans and securities 62 Foreign transactions 63 Bank premises 64 Reserve Bank Personnel 65 Chairmen and Deputy Chairmen 65 Directors 67 Change in First Vice President 68 Staff 68 Board of Governors—Staff 68 Death of member of the Board 68 Staff 69 Board of Governors—Income and Expenses 70 IV Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page Research and Advisory Services 71 Publications and Releases 73 Federal Reserve Meetings 74 TABLES 1. Statement of Condition of the Federal Reserve Banks (In detail), Dec. 31, 1949 78 2. Statement of Condition of Each Federal Reserve Bank, End of 1949 and 1948 80 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1947, 1948, and 1949 84 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1943-49 85 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1945-49 85 6. Earnings and Expenses of Federal Reserve Banks during 1949 86 7. Earnings and Expenses of Federal Reserve Banks, 1914-49 88 8. Member Bank Reserves, Reserve Bank Credit, and Related Items— End of Year 1918-1949 and End of Month 1949 90 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1949 92 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1949 93 11. Federal Reserve Bank Discount, Interest and Commitment Rates, and Buying Rates on Acceptances (In effect Dec. 31, 1949) 94 12. Member Bank Reserve Requirements 95 13. Maximum Rates on Time Deposits 95 14. Margin Requirements 96 15. Minimum Down Payments and Maximum Maturities on Consumer Instalment Credit Subject to Regulation W 96 16. Analysis of Changes in Number of Banking Offices during 1949 97 17. Number of Banking Offices on Federal Reserve Par List and not on Par List, by Federal Reserve Districts and States, Dec. 31, 1949 98 APPENDIX Record of Policy Actions—Board of Governors 100 Record of Policy Actions—Federal Open Market Committee 110 Board of Governors of the Federal Reserve System 119 Federal Open Market Committee 120 Federal Advisory Council 121 Directors and Senior Officers of Federal Reserve Banks 122 Map of Federal Reserve Districts 138 Index 139 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 Moderate economic recession followed by upturn in this country and abatement of inflationary trends in other economies of the free world marked the year 1949, covered by this Thirty-sixth Annual Report of the Board of Governors of the Federal Reserve System. These changes led to more flexible use of domestic monetary and credit measures in the United States and to widespread readjustment of foreign exchange rates as a further step toward reestablishing a freer flow of international trade and convertibility of currencies. In this country, by the beginning of 1949—following three years of near-capacity production with generally rising prices— supplies of many types of goods exceeded demand at prevailing prices. Inventory accumulation in anticipation of rising prices and capital expenditures by business began to decline. Recessionary tendencies set in, and during the first half of the year prices of farm products and foods followed a downward trend begun in 1948. Prices of other products also declined, particularly in the case of some industrial materials; industrial production and employment fell off, and there was a moderate reduction in bank loans. About midyear, readjustment of prices and business inventories, together with continuation of strong consumer demand and relaxation of credit conditions, combined to check further recession. Subsequently, prices steadied, industrial production and employment expanded, and credit growth was resumed. At the year-end, prices, production, and employment had not regained the high levels of a year earlier, but the money supply in the hands of the public had reached a level only slightly below the postwar peak at the end of 1947. In other free economies, the shift in the general economic situation reflected the cumulative influence of further progress in postwar recovery, of more nearly adequate supplies of primary goods such as foods and fuels, and of policies directed toward Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 ANNUAL REPORT OF BOARD OF GOVERNORS monetary and fiscal stability. Inflationary forces were no longer as dominant as they had been earlier. Under the impact of these developments, as well as of moderate recession in this country, industrial production abroad increased somewhat less rapidly than it had before. With imports from the United States continuing at a very high level—sustained in part by this country's program of foreign aid—and with a decline in exports to the United States, the dollar gap on current account increased in many instances. In the case of the United Kingdom, this led to a serious decline in gold and dollar reserves. To meet this adverse development and, more basically, to provide needed strengthening of trade positions in world markets, numerous countries, beginning with the United Kingdom in September, devalued their currencies sharply in relation to the dollar. The devaluation was by 30.5 per cent in the case of the pound sterling and several other currencies and by varying amounts for the remainder. This action, taken at a time when the economic situation in the United States was improving, was followed by some increase in shipments of goods to the United States. There was also a decline in imports from the United States, and apparently some repatriation of capital. As a result, the reserve positions of many countries improved. The levels attained, however, were not generally sufficient to provide a cushion adequate for a self-sustaining system of international trade with currency convertibility at stable exchange rates. Following devaluation, price developments abroad were highly selective. For many finished products exported to the United States, dollar prices declined, generally by less than the extent of devaluation. Dollar prices of some other finished products showed no change. For most leading materials traded internationally, dollar prices were as high at the end of the year as they were before devaluation, although they had declined temporarily in the autumn. Thus, prices of these materials in devalued currencies were up sharply, but for the most part living costs abroad did not advance at this time. For the year as a whole, prices and living costs in other free countries showed much less rise than in other postwar years and, with supplies more nearly adequate, rationing and price controls were eased. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 5 While the recession in this country during the first half of 1949 appeared to mark an important turning point in postwar economic development, the readjustment was moderate, reflecting the continued existence of deferred demands, notably for passenger automobiles, houses, and public construction. The moderate nature of the recession also reflected increased Government expenditures, the influence of some price reductions, and adjustment of production patterns and of consumer and business demands generally. In addition, the wider diffusion and availability of credit were factors of importance. At the same time many basic problems of adaptation remained to be met. Within the United States, these included the various problems of maintaining stability with growth in a peacetime economy in which expenditures for military and foreign aid would continue to be large and an abundant supply of money and credit would be readily available. In the international field, there continued to be a dollar gap, pressure for further adjustment in patterns of trade and finance in response to devaluation of currencies, and a need for further progress towards freer exchange of goods, convertibility of currencies, and an expanding world trade. The paramount problem of maintaining world peace continued to overshadow all others. FEDERAL RESERVE CREDIT POLICY IN 1949 Throughout the year 1949, the general and selective instruments available to the Federal Reserve authorities were coordinated in a flexible program for adjusting the availability and cost of credit to the changing needs of the economy. As downward trends in business activity, employment, and prices appeared early in the year, the Board of Governors shifted the emphasis of credit policy from restraint to ease. Toward the end of the year, after increasing evidence of economic recovery, the open market operations of the Federal Reserve permitted short-term money rates to rise in response to growing demand for credit. As the Board has repeatedly emphasized, beginning with its Annual Report for 1945, the Reserve System lacked adequate means of restraining excessive credit expansion during the early postwar years. In striving at that time to moderate inflationary dangers, the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4 ANNUAL REPORT OF BOARD OF GOVERNORS System used such measures as it had at its disposal, including margin requirements, regulation of consumer instalment credit, discount rates, reserve requirements, and moderate increases in short-term money rates. Nevertheless easy money conditions with relatively low rates prevailed throughout this period of acute inflationary pressures. Because the System had not been in a position to exert greater monetary restraints, it had less scope for reversal of policy when the time came to relax credit restraints. Notwithstanding these limitations, the System acted promptly to adjust monetary and credit policy to the changed conditions of early 1949. The measures first adopted were directed toward easing terms in the areas of consumer instalment credit and stock market credit. As business reaction proceeded and bank loans declined, the System's restrictions were eased on the general availability of credit, particularly bank credit. By midyear, developments in the money market indicated that the lodgment of the large postwar volume of United States Government securities had become more stable and that open market operations could be conducted more with a view to the general credit needs of commerce, industry, and agriculture than to maintaining a fixed structure of yields on Government securities. Reduction in reserve requirements. By successive reductions in reserve requirements during 1949, the Board of Governors progressively eased the anti-inflationary reserve policy previously followed. Bank credit to private borrowers, following a significant slackening of expansion late in 1948, declined moderately during the first half of 1949, reflecting a sharp decline in loans to business. The volume of privately held deposits and currency also declined somewhat more than seasonally. Whereas slower expansion of bank credit in the latter part of 1948 had been partly induced by anti-inflationary measures taken by the Federal Reserve authorities and by voluntary restraint in lending on the part of banks, the decline after the turn of the year reflected primarily the liquidation of business inventories that accompanied continuing downward adjustments in production and prices. In view of this change in credit developments, the Board reduced reserve requirements early in May and again in August. Required reserves were also released on June 30 by the expiration of the Board's temporary additional authority over reserve require- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM ments. These three reductions lowered the requirements against demand deposits by 4 percentage points and those against time deposits by 2l/ percentage points at all classes of member banks. 2 A total of 3.8 billion dollars of reserves was released to banks within four months, including about 1 billion at central reserve city banks in New York and Chicago and about 1.4 billion each at reserve city banks and country banks. The reductions in requirements reestablished approximately the same reserve percentages that had been in effect during most of the period 1938-41. The changes in reserve requirements and their effective dates are shown in the table. MEMBER BANK RESERVE REQUIREMENTS IN 1949 | Percentage of deposits] Net demand deposits Time deposits Central Date Central reserve Reserve reserve Country and Country city city banks reserve banks banks banks city banks In effect, Jan. 1, 1948 20 20 14 Jan. 1, 1949 26 22 16 Changes in 1949, effective— May 1. . 15 May 5. . 24 21 June 30. 20 Julyl... 14 August 1. . 13 August 11. August 16. August 18. 23 19 August 25. . . 22 18 September 1. 22 18 In effect, Sept. 1-Dec. 31 22 18 12 By April 28, when the Board announced the May reduction in reserve requirements, there had been a decline of approximately 1.2 billion dollars in member bank loans since the first of the year. Of this decline, which exceeded substantially the usual seasonal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 ANNUAL REPORT OF BOARD OF GOVERNORS decline, about one-half had been at central reserve city banks and the remainder at reserve city banks. In consideration of this development, and also of the fact that requirements at central reserve city banks had been increased by 6 percentage points during 1948, the Board reduced requirements by 2 percentage points on net demand deposits for these banks as compared with 1 percentage point for all other member banks. MEMBER BANK RESERVES AND HOLDINGS OF U. S. GOVERNMENT SECURITIES BILLIONS OF DOLLARS BILLIONS OF DOLLARS 65 65 HOLDINGS OF U. S. GOVERNMENT SECURITIES'- MEMBER BANK RESERVES: 15 15 10 10 1947 1948 1949 Most of the funds released by this first easing of reserve requirements went into the Government securities market, as shown in the chart. Banks purchased large amounts of short- and medium-term issues. The Federal Reserve Banks supplied the short-term issues Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 7 in order to prevent a disorderly decline in short-term yields, and institutional investors supplied most of the medium-term issues and used the proceeds to purchase long-term bonds that were ineligible for bank purchase. The principal effect of this reduction in reserve requirements was an expansion of bank portfolios of short-term Government securities. With the expiration at the end of June of the Board's temporary additional authority over member bank reserves, there was another reduction in reserve requirements. Member banks again entered the market to acquire short- and medium-term Government securities and at the same time there was a strong demand by nonbank investors for long-term securities. In this period, pursuant to the action of the Federal Open Market Committee described below, the Federal Reserve made short-term securities available at somewhat lower yields and discontinued sales of Treasury bonds. The moderate decline in yields on Government securities that followed these actions had the effect of making Government securities a less attractive alternative to business and other loans, and, together with the further increase in bank liquidity, was conducive to more lenient lending policies by banks. Early in August the Board announced a third reduction in reserve requirements, which became effective gradually through September 1. About the same time a renewed expansion of bank loans, which continued through the remainder of the year, increased bank deposits and consequently the amount of reserves required by member banks. Part of the reserves released by the Board's action was absorbed by this expansion, but the greater part was used to purchase short-term Government securities which were made available from the Federal Reserve portfolio. More flexible open market operations. Government securities were in strong demand throughout 1949. The measures taken by the Federal Reserve and the Treasury to permit a rise in short-term rates between mid-1947 and October 1948 had encouraged banks to increase their holdings of short-term Government issues, and the widespread selling of Government bonds by savings institutions and other nonbank holders had slackened by the end of 1948. Without relinquishing its objective of maintaining orderly conditions in the Government securities market, the Federal Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 ANNUAL REPORT OF BOARD OF GOVERNORS was in a position to initiate a more flexible open market policy that could be integrated with policies relating to reserve requirements and discount rates and adapted to the credit needs of the economy. During most of 1949 Federal Reserve policies were directed primarily toward assuring private borrowers that ample credit would be available to facilitate readjustments in the economy. Throughout the first half of the year, the Federal Reserve sold Treasury bonds from the System portfolio in response to market demand, primarily from nonbank investors. These sales absorbed reserve funds released by seasonal declines in currency and deposits and a reduction in Treasury balances. As indicated earlier in the report, when the banks sought to purchase Government securities with reserves released by the reduction in reserve requirements early in May, the System made short-term securities available in order to prevent downward pressures on short-term money market rates. On June 28, just before the further reduction in reserve requirements on June 30, the Federal Open Market Committee issued the following statement: The Federal Open Market Committee, after consultation with the Treasury, announced today that with a view to increasing the supply of funds available in the market to meet the needs of commerce, business, and agriculture it will be the policy of the Committee to direct purchases, sales, and exchanges of Government securities by the Federal Reserve Banks with primary regard to the general business and credit situation. The policy of maintaining orderly conditions in the Government security market, and the confidence of investors in Government bonds, will be continued. Under present conditions the maintenance of a relatively fixed pattern of rates has the undesirable effect of absorbing reserves from the market at a time when the availability of credit should be increased. This policy announcement was soon followed by important developments in the Government securities market. When member banks sought to invest the reserves released on June 30 and July 1 in short- and medium-term Government securities, the Federal Reserve discontinued selling from the System account for a short period. Market prices and yields reacted sharply. Rates on Treasury bills fell within a few days from 1.16 per cent to below 1 per cent and, as shown in the chart, a similar drop occurred in yields on certificates. In order to restore more orderly conditions in the market, the Federal Reserve again made short- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM YIELDS ON U.S. GOVERNMENT SECURITIES PER CENT WEEKLY AVERAGES OF DAILY FIGURES PER CENT BONDS 15 YEARS OR MORE — -^ *- — —' CERTIFICATES OF INDEBTEDNE ss 9-12 MONTHS TREASURY BILLS NEW ISSUES 1 - 1947 1948 1949 NOTE.—For Treasury bills, rate is average discount on new issue offered during week. term securities available from its portfolio. Rates on short-term Government securities adjusted upward somewhat but remained below the levels that had prevailed before the end of June. After this upward adjustment in yields, rates on new Treasury bills varied between 1.01 and 1.12 per cent through the close of the year, and yields on 9-12 month certificates in general moved at a slightly higher level and within a somewhat narrower range. The spread between the yield on longer term certificates and that on 3-month bills was generally narrower than had prevailed previously. At times when conditions in the money market were less easy and yields on bills and certificates were at or near the upper end of the yield ranges mentioned above, the System purchased short-term Government securities in order to meet temporary reserve needs of member banks. During periods when there were surplus funds in the short-term money market and yields declined to the lower area of these ranges, the System made Treasury bills and certificates available to the market, or allowed bills held in the System portfolio to be redeemed at maturity without replacement. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 ANNUAL REPORT OF BOARD OF GOVERNORS In line with this practice, the Federal Reserve made an additional supply of short-term Government securities available at prevailing market yields in August and early September when member bank reserve requirements were further reduced. As is indicated by the chart, liquid short-term investments were thus provided for any excess reserve funds that banks were unable to utilize elsewhere. The liquidity of member banks was thus greatly increased by the Board's action to reduce reserve requirements. As a result of this action and System sales of short-term securities, nonliquid required reserves were converted into liquid short-term earning assets. This development, together with the decline in yields on liquid types of investments that resulted primarily from the redirection of System open market policy, tended to make bank credit more readily available to private borrowers when their demand for credit increased in late summer. RESERVE BANK HOLDINGS OF U.S. GOVERNMENT SECURITIES BILLIONS OF DOLLARS WEDNESDAY FIGURES BILLIONS OF DOLLARS 1947 1948 1949 Following the announcement of June 28, the Federal Reserve discontinued the practice of making Government bonds available in response to market demand. The purpose of this decision was to avoid absorbing funds that might otherwise be available for private borrowers. Market prices and yields on Government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 11 bonds reflected the interplay of private purchases and sales. The average yield on long-term Government bonds declined from 2.38 per cent for June to 2.24 per cent for August, and yields on mediumterm securities declined even more sharply. Between August and the end of December, yields on long-term Government bonds moved within narrow ranges at levels comparable with those prevailing in late 1946 and the first nine months of 1947. Federal Reserve sales of Treasury bonds were negligible in the last half of 1949 compared with sales of about 3 billion dollars in the preceding six months. Until the middle of November, Federal Reserve open market operations were carried on under the policy of monetary ease adopted early in the summer. At that time there was growing evidence that the recovery in economic activity would continue with increasing strength. In recognition of this change in conditions, the Federal Open Market Committee adopted a policy of permitting growing credit demands to be reflected in rising short-term rates. Treasury bill rates rose somewhat in November, but rates on certificates were held down until after Treasury refunding operations were completed on January 2. Early in 1950 the Federal Reserve sold securities, both short- and long-term, to absorb available reserves and to meet investor demands for securities. Accompanying this action yields on Government securities rose slightly and nonbank investors made substantial purchases of these securities from banks. In June 1949, for the first time since 1945, the Federal Reserve System made advances direct to the Treasury for its temporary accommodation. The special short-term certificates of indebtedness thus acquired were held by the Reserve Banks on June 15 and 16. Federal Reserve Bank holdings of special short-term Treasury certificates during the years 1943-49 are shown in Table 4 on page 85. Maintenance of discount rates. The Federal Reserve Banks maintained discount rates on eligible paper at V/ per cent throughout the 2 year 1949. Table 11 on page 94 shows the schedule of discount rates at the various Federal Reserve Banks on December 31, 1949. Easing of consumer instalment credit terms. Other credit actions by the Federal Reserve initiated early in the year relaxed previously imposed restraints on particular types of lending—con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 ANNUAL REPORT OF BOARD OF GOVERNORS sumer instalment credit and stock market credit. Modification of these selective credit regulations began in March and consequently exerted an easing influence on credit terms in these areas during the greater part of the year. Under temporary authority granted by the Congress, effective September 20, 1948 the Board of Governors had reimposed controls over consumer instalment credit with the objective of curbing its rate of expansion. The maximum maturities and minimum down payments then prescribed were more lenient than those prevailing when the power had lapsed the preceding November. A substantial amount of discretion in setting the terms of instalment contracts was left to retailers and lenders. Consumer buying pressures in this area had moderated significantly by the end of February 1949, and many of the commodities covered by the Board's Regulation W were in larger supply and in some cases at lower prices than formerly. Consumer instalment credit had been expanding less rapidly for several months, after having increased approximately fourfold from the abnormally low level reached during the war. In January and February the re-emergence of seasonal patterns—largely obscured during the period of rapid growth—brought the first month-to-month declines since 1945 in outstanding consumer instalment debt. To meet this changed situation, and taking into account as well the downward readjustments occurring in the economy generally, the Board of Governors relaxed its regulation of consumer instalment credit terms effective March 7 and again effective April 27. These actions probably helped to prevent further decline of consumer expenditures for durable goods. Notwithstanding the fact that maturities and down payments specified in contracts for listed articles generally stayed well within the limits set by Regulation W, there was a noticeable easing of credit terms after each relaxation of requirements. A further easing of terms, which spread to all areas of instalment financing, followed termination of regulation on June 30, when the Board's temporary regulatory authority expired. Expansion of instalment credit was resumed after February and was maintained throughout the remainder of the year, as is shown in the chart. Sales of automobiles continued at a rapid rate and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

13 FEDERAL RESERVE SYSTEM in the second half of the year sales of furniture and other durable household goods increased. Instalment balances also rose sharply, not only because of larger sales but also because of smaller down payments and longer maturities under the easier terms. CONSUMER INSTALMENT CREDIT BILLIONS OF DOLLARS END OF MONTH FIGURES BILLIONS OF DOLLARS 12 12 - I J 10 - 10 > - TOTAL / INSTALMENT CREDIT i / J \ \ \ \ \ K *w \ 1 V^ . ^ Sr Si S IW^TA! MFMT - •S SALE CREDIT INSTALMENT LOANS^ 1939 1941 1943 1945 1947 1949 By the end of 1949, instalment credit was at a record total of almost 11 billion dollars. The expansion in the last half of the year, after temporary postwar regulation had been removed, averaged approximately 295 million dollars a month. The corresponding figure for the period December 1947-August 1948 inclusive, after the termination of wartime controls, was 220 million. While regulation was in effect during most of 1947 and again in the last few months of 1948, monthly average increases were much smaller— 170 million and 137 million, respectively. The differences in growth reflected in some degree factors other than credit terms, but the presence or absence of regulation was important. Regulation of this limited credit area may of itself exert only a small influence in behalf of economic stability. Experience with Regulation W has indicated, however, that it can be helpful in that direction and that the easing and removal of controls is followed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 ANNUAL REPORT OF BOARD OF GOVERNORS by an easing of effective credit terms and an expansion of the amount of consumer instalment credit outstanding. Expansion was salutary during most of 1949, when the economy was in a phase of readjustment, and relaxation of general as well as selective credit controls was in order. Reduction in margin requirements. Beginning in March 1949, the Board eased the regulations governing the use of credit in the securities markets. The volume of credit for purchasing or carrying securities had been substantially contracted under the relatively restrictive margin regulations of the postwar period. In February 1949 stock market credit outstanding was close to the lowest level on record. Owing partly to high margin requirements and to the public preference for holding liquid assets as against equity securities, the market was generally free of speculative tendencies. Easing of the Board's regulations in 1949 permitted somewhat more buying of stocks on credit and thus provided increased credit support for the expansion of equity financing. Margin requirements under the Board's Regulations T and U were reduced, effective March 30, 1949, from 75 per cent to 50 per cent. The change restored the same required margin as that in effect from February to June of 1945, which was only moderately higher than the 40 per cent requirement effective during the period 1938-44. Effective May 16, 1949, the regulations were amended to permit a 25 per cent margin in the case of securities acquired through subscription rights when certain conditions are met. Other amendments, effective May 1 and July 20, 1949, relaxed or removed certain administrative provisions of the regulations. Borrowing in margin accounts expanded substantially after margin requirements were reduced. The immediate increase in purchases of securities on credit came at a time when stock prices had been declining and therefore tended to have a stabilizing effect on the stock market. As shown by the chart, the amount owed by customers to member firms of the New York Stock Exchange increased sharply from March to June 1949 while common stock prices were declining to the lowest level since 1945. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 15 MARGIN REQUIREMENTS AND THE STOCK MARKET PER CENT OF MARKET VALUE MONTHLY PER CENT OF MARKET VALUE 100 1 1' IOO r - 1 MARGIN REQUIREMENTS 50 50 - 0 PER CENT MILLIONS OF DOLLARS STOCK PRICES STANDARD AND POOR'S CORP., 416 COMMON STOCKS — 1935-39=100 40 CUSTOMERS DEBIT BALANCES MEMBER FIRMS OF N. Y. STOCK EXCHANGE SCALE 1944 1945 1946 1947 1948 1949 Stock market credit continued to expand in the second half of 1949. By the end of the year credit extended by brokers to their customers totaled 881 million dollars, the largest amount since the spring of 1946 though still well below the 1.2-1.5 billion dollars outstanding in the period 1933-37 and again in 1945. The downward movement of stock prices was reversed in June and prices rose steadily thereafter. By the end of the year, common stock prices had reached a level close to the peak of the preceding two years; by May 1950 they were close to the 1946 peak, which was the highest level since 1930. Participation of the public in the stock market, which had been relatively small in the first eight months of 1949, increased somewhat in the last four months of that year and in the early months of 1950. BANKING AND MONETARY DEVELOPMENTS IN 1949 Bank credit to private borrowers declined until midsummer 1949 and then increased substantially during the remainder of the year. The currency and deposits of individuals and businesses declined sharply in the first quarter of the year and increased steadily thereafter to almost 170 billion dollars at the end of the year. This Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 ANNUAL REPORT OF BOARD OF GOVERNORS exceeded the year-end figure for 1948 by about 700 million dollars but was slightly below the peak reached at the end of 1947. Bank lending activity. Sharp contraction of business borrowing at commercial banks in the first half of 1949 was followed by rapid expansion beginning in August. At year-end business loans at insured commercial banks were about 1.8 billion dollars below the level of a year earlier but about 1.0 billion above the year's low in early August. The rate of growth in other major types of bank loans slowed down in the early part of the year and then increased again, but for the year as a whole the aggregate increase was considerably less than that of 1948. The decline for the year in loans to commerce and industry was more than offset by increases in loans to farmers (nearly 200 million dollars), to real estate owners (700 million), and to consumers (1.2 billion dollars). Loans for purchasing and carrying securities also increased (300 million dollars). As a result total loans at insured commercial banks increased by more than 500 million dollars in 1949 to a new peak of 42.5 billion. Loans at mutual savings banks, largely real estate mortgages, increased by 900 million dollars, the largest growth in recent years. Business borrowing at insured commercial banks declined about 2.5 billion dollars from December 31, 1948 to June 30, 1949, as is shown in the chart. This decline, most of which came after March, was considerably greater than the amount normally attributable to seasonal factors. It undoubtedly reflected in part the high level of business profits and retained earnings in late 1948, as well as some curtailment and postponement of business capital expenditures, liquidation of inventories, and reduction in other working capital requirements. In addition, businesses paid off large amounts of bank credit with proceeds of security flotations, including both public offerings in the market and private placements with insurance companies. Beginning in August, the decline in bank loans to business gave way to expansion, reflecting both seasonal needs for working capital and more than the usual seasonal rise in production. Between then and the end of the year the expansion totaled Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 17 LOANS OF COMMERCIAL BANKS ALL INSURED BANKS BILLIONS OF DOLLARS JUNE AND DECEMBER BILLIONS OF DOLLARS 20 i 'd!0 J \^ 15 15 BUS1NESS i 10 / 10 4 y 5 . _L RE/^L ESTATE 5 1 ,—- _ CONSUMER^.^ • •«»-• 0 AGRICULTURAL 0 5 LOANS FOR PURCHASING b OR CARRYING SECURITIES: _^~^>J0 OTHERS -<^T0 BROKERS ^ 0 ' AND DEALERS 0 1940 1942 1944 1946 1948 NOTE.-—All insured commercial banks in the United States. Business loans include commercial and industrial loans, open market commercial paper, and acceptances. Consumer loans are partly estimated prior to Dec. 31, 1942. about 1 billion dollars, somewhat more than in the corresponding period of 1948. Consumer instalment credit extended by banks and other lenders contracted somewhat in January and February, for the most part seasonally. Expansion was resumed in March and accelerated in the late summer and fall. In the last half of the year, monthly growth in consumer instalment indebtedness averaged approximately 295 million dollars compared with about 230 million in the second quarter. The growth was more marked in automobile sale credit outstanding than in other instalment segments but all reached new highs by the end of the year. Total instalment indebtedness increased by 2.3 billion dollars during 1949 to an estimated 10.9 billion on December 31. Real estate lending was in smaller volume during the first half Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 ANNUAL REPORT OF BOARD OF GOVERNORS of 1949 than in the corresponding period of earlier postwar years, but it increased rapidly in the second half of the year when residential building rose sharply. For the year as a whole, mortgage lending continued at about the same high level as in 1948 and 1947. The increase in outstanding mortgage debt slowed down, however, because debt retirement was greater in 1949 than in the earlier years. Holdings of real estate loans increased considerably less at commercial banks than at savings and loan associations, life insurance companies, or savings banks. During the second half of 1949, when mortgage loans held by banks and other institutional lenders increased substantially, mortgage portfolios at insured commercial banks expanded by about half a billion dollars. This increase was about the same as in the corresponding period of 1948 and about double that in the first half of 1949. Savings and loan associations and savings banks also increased their mortgage holdings at a faster rate during the second than the first half of 1949, but this was not generally true of insurance companies. The reductions in member bank reserve requirements, particularly at mid-1949 and thereafter, and the decline in yields on United States Government securities, reacted favorably on the market for securities of State and local governments. These issues became relatively more attractive outlets for investment funds. Insured commercial banks increased their holdings about 650 million dollars in the last half of the year. Bank credit for purchasing and carrying listed stocks increased moderately after the Board of Governors relaxed margin requirements in March. There were wide fluctuations in loans to dealers in Government securities, which were in large part related to the refinancing of maturing issues. Availability of bank reserves. The principal factor influencing member bank reserve positions in 1949 was the series of reductions in reserve requirements described earlier in this report. Additional reserves were also made available to banks by the return of currency from circulation and a small gold inflow, as shown in the table and in the chart on page 20. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

19 FEDERAL RESERVE SYSTEM In the first quarter of 1949 banks obtained reserve funds primarily from a return flow of currency, and some existing reserves were freed by a decline in deposits subject to reserve requirements. These funds, however, were not sufficient to meet a drain on reserves that resulted from Treasury cash transactions and purchases by nonbank investors of long-term Government securities made available MAJOR FACTORS AFFECTING MEMBER BANK RESERVES | In billions of dollars] 1949 Factor 1948 First Second Third Fourth Year quarter quarter quarter quarter Factors affecting total reserves:1 Gold inflow +0.1 +0.2 +0.1 -0.2 +0.2 + 1.5 Return of currency from circulation +0.8 -0.1 +0.1 -0.2 +0.6 +0.6 Treasury cash transactions 2. . -1.4 +0.9 -0.7 +0.4 -0.9 -5.7 Federal Reserve purchases (+) or sales (-) of U. S. Govt. securities in the open market, net3 -0.6 -2.2 -1.3 +0.9 -3.3 +6.3 Other factors, net -0.3 -0.1 -0.1 -0.3 -0.5 -0.1 Changes in member bank reserves: Total reserves -1.4 -1.3 -1.9 +0.6 -3.9 +2.6 Kxcess reserves -0.5 +0.3 -0.2 +0.2 -0.2 -0.3 Required reserves -0.8 -1.5 -1.7 +0.4 -3.7 +2.9 Factors affecting required reserves: Board action on reserve requirements 4... . -1.6 -2.2 -3.S +3.0 Deposit changes 4 -0.8 +0.1 +0.5 +6'i +0.1 -0.1 1 Signs preceding figures in columns indicate effect on total bank reserves. 2 Changes in Treasury deposits at the Reserve Banks after adjustment for withdrawals resulting from retirement of U. S. Government securities held by the Reserve Banks. 8 Figures for market sales include decreases in Federal Reserve holdings of maturing Treasury bills resulting from incomplete exchanges of maturing issues for new issues. 4 Signs preceding figures in columns indicate effect on required reserves. NOTE.—Changes are based on figures for Dec. 31, 1947, Dec. 31, 1948, Mar. 31, 1949, June 30, 1949, Sept. 30, 1949, and Dec. 31, 1949. Figures may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 ANNUAL REPORT OF BOARD OF GOVERNORS by the Federal Reserve Banks. Banks sold short-term Government securities in the market, some of which were purchased for the System account. MEMBER BANK RESERVES AND RELATED ITEMS BILLIONS OF DOLLARS WEDNESDAY FIGURES BILLIONS OF DOLLARS 30 25 20 15 15 10 10 1942 1944 1946 1948 In the second quarter reductions in reserve requirements and a net payment of funds out of Treasury deposits at Reserve Banks into private accounts held at commercial banks made available a substantial amount of reserve funds. These were used to purchase short-term Government securities, which came directly or indirectly from the Federal Reserve System portfolio. In the third quarter additional reserves were freed by further reductions in reserve requirements. These were more than sufficient to meet a temporary drain on bank reserves from Treasury cash transactions and to supply the additional reserves needed to cover the increase in deposits that resulted from a renewed expansion of bank loans. Other freed reserves were absorbed by Federal Reserve sales of Govern- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21 FEDERAL RESERVE SYSTEM ment securities which were largely purchased by banks. During the last quarter of the year Treasury operations and market purchases of Government securities by the Federal Reserve supplied banks with more than enough reserve funds to offset an outflow of gold and a seasonal increase of currency in circulation. By the end of the year total member bank reserves were nearly 4 billion dollars smaller than at the beginning, reflecting the combined effect of the reductions in reserve requirements and the redirection of System open market policy. Member bank holdings of cash, excess reserves, and short-term Government securities increased almost 5 billion dollars between the end of April, when the first reduction in reserve requirements was announced, and the end of September, after the last reduction, as is shown in the table below. The increase was almost entirely in short-term Government securities, made available in substantial part by the Federal Reserve and purchased with funds released by reductions in reserve requirements. During this period yields on liquid types of investments, primarily short-term Government securities, declined somewhat. Accordingly, banks not only had more funds for lending but found the holding of highly liquid assets to be less profitable than it had MEMBER BANK HOLDINGS OF CASH, EXCESS RESERVES, AND SHORT-TERM GOVERNMENT SECURITIES [Partly estimated, in billions of dollars] Amount held Change Change Asset Apr. 27- Apr. 27- Apr. 27, Sept. 28, Dec. 31, Sept. 28 Dec. 31 1949 1949 1949 Total 12.3 17.1 16.3 +4.8 +4.0 Cash in vault 1.7 1.7 1.5 -0.2 Excess reserves 0.5 0.9 1.0 +0.4 +0.5 Treasury bills and certificates 10.1 14.5 13.8 *+4.4 1 4-3.7 Required reserves 18.5 15.1 15.6 -3.4 -2.9 1 About 1 billion dollars of this increase was due to refunding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 ANNUAL REPORT OF BOARD OF GOVERNORS been early in the spring. These developments tended to promote greater availability of credit to private borrowers and to State and local governments. Changes in the money supply. The total of currency outside banks plus demand and time deposits, adjusted to exclude United States Government and interbank deposits and cash items in process of collection, declined by about 5 billion dollars in the first quarter of the year and thereafter increased by more than 5.5 billion, as is shown on the chart. The year-end total was slightly below the peak level at the end of 1947. Expansion of the money supply in the last quarter of 1949 amounted to 3.5 billion dollars and was much greater than in the corresponding period of 1948. BANK DEPOSITS AND CURRENCY BILLIONS OF DOLLARS BILLIONS OF DOLLARS 160 160 TOTAL DEPOSITS ADJUSTED AND CURRENCY 120 120 DEMAND DEPOSITS ADJUSTED 80 80 40 40 1942 1944 1946 1948 NOTE.—Figures are partly estimated. Deposits are for all banks in the United States. Demand deposits adjusted exclude U. S. Government and interbank deposits and items in process of collection. Time deposits include deposits in the Postal Savings System and in mutual savings banks. Figures are for June and December, 1942; end of month, 1943-46; last Wednesday of month, 1947-49 except for June and December call dates. The amount of currency outside banks declined in 1949 for the third successive year. At the end of the year it was 700 million dollars less than a year earlier and 1.3 billion dollars less than in December 1946. The total of 25 billion dollars was still more than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 23 three times the amount outstanding at the end of 1940. The return of currency from circulation since 1946 has been primarily in bills of $10 and $20 denominations, but in 1948 and 1949 there was some return of bills of $50 denomination or larger. Privately owned demand deposits in 1949, as in 1948, declined during the first quarter and expanded during the remainder of the year. The decline in the first quarter, when tax payments were heavy, was not as large as in 1948, and the expansion in the last months of the year was somewhat larger than in 1948. The volume of privately owned demand deposits was slightly larger at the end of 1949 than at the end of 1948. Time deposits increased further in 1949. As in 1948, the growth amounted to about 1 billion dollars and occurred almost entirely in the first half of the year. Mutual savings banks, which are important in the northeastern part of the country, accounted for most of the expansion. Liquid assets held by individuals and businesses in the form of United States Government securities and of shares in savings and loan associations also increased during the year. In 1949, both the expansive and the contractive forces affecting the money supply held by individuals and businesses were moderate, in contrast with 1948, when a small net decline reflected a balancing of large movements in various factors. For 1949 as a whole expansion of the money supply through growth in bank loans was small in comparison with 1948. The total increase in bank credit to borrowers other than the United States Government, including both loans and investments, was only about 2.6 billion dollars, as compared with 5.9 billion in the preceding year. Gold inflow was moderate during the first three quarters of 1949, and there was a small outflow following currency devaluations by many foreign countries beginning in September. The net gold inflow for the year as a whole amounted to one-eighth of that in 1948. Market transactions in Government securities by nonbank investors had little net effect on the money supply in either 1948 or 1949. Treasury transactions were the principal factor contracting the private money supply in both years. In 1949 the Treasury increased its cash balance somewhat and its cash retirements of bank-held Government securities exceeded its cash sales of new issues to banks by nearly 1 billion dollars. The contractive influences of Treasury Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

24 ANNUAL REPORT OF BOARD OF GOVERNORS transactions were felt in the first quarter when income tax and other receipts exceeded expenditures considerably, and again in the third quarter of the year, when sales of savings notes were exceptionally heavy. During other periods of the year Treasury operations tended to increase rather than reduce private holdings of money. The magnitudes of these factors are given in the accompanying table. MAJOR FACTORS AFFECTING DEPOSITS AND CURRENCY [In billions of dollars, partly estimated] 1949 Factor 1948 First Second Third Fourth quarter quarter quarter quarter Year Factors affecting deposits and currency:1 Gold inflow +0.1 +0.2 +0.1 -0.2 +0.2 + 1.5 Loans—commercial and mutual savings banks -1.1 +0.9 + 1.6 + 1.4 +5.2 Securities of State and local governments and corporations held by commercial and mutual savings banks. . +0.1 +0.4 +0.7 + 1.2 +0.7 Treasury deposits, decrease (+) or increase (—) -1.5 +2.3 -2.1 +0.8 -0.5 -1.3 Treasury sale (+) of new U.S. Govt. securities to, or retirement ( —) of maturing securities held by, banking system,3 net -1.4 -0.2 +0.8 -0.1 -0.9 -5.9 Market purchases (+) or sales ( —) of U. S. Govt. securities by the banking system, net -2.0 +0.3 + 1.3 + 1.1 +0.7 -0.1 Other factors, net -0.2 -0.5 -1.0 +0.3 -1.4 -1.0 Changes in deposits and currency held by individuals and businesses: Total -4.9 + 1.4 +0.7 +3.5 +0.7 -0.9 Demand deposits adjusted. . . -4.4 +0.8 + 1.2 +2.7 +0.2 -1.6 Time deposits 4 +0.5 +0.5 -0.1 +0.2 + 1.1 + 1.1 Currency outside banks -1.0 +0.2 -0.4 +0.5 -0.7 -0.4 1 Signs preceding figures in columns indicate effect on deposits and currency. 2 Less than 50 million dollars. 3 Includes commercial banks, mutual savings banks, and Federal Reserve Banks. 4 Includes changes in deposits at commercial banks, mutual savings banks, and the Postal Savings System. NOTE.—Except for transactions in U. S. Government securities, which are for endof-quarter dates, changes are based on figures for Dec. 31, 1947, Dec. 31, 1948, Mar. 30, 1949, June 30, 1949, Sept. 28, 1949, and Dec. 31, 1949. Figures may not add jto totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 25 Regional changes in deposits. There were no striking changes during 1949 in the regional distribution of deposits. The absence of a pronounced general movement of funds among major areas of the country in 1949 is in sharp contrast with the situation during the war and in the early postwar period. In those years funds were flowing into the southern and western areas, and deposits expanded considerably more rapidly at banks in these sectors of the country than elsewhere. Also, deposits at country banks generally increased more than those at city banks. These movements, which had continued through 1948, appear to have been reversed slightly in 1949. The change from the early postwar period probably reflects among other things a change in the relationships between agricultural and industrial prices. Bank earnings and profits. In 1949 net current earnings of member banks before income taxes continued their upward trend of recent years, advancing to 1,097 million dollars, an increase of 64 million over 1948. Increases of 119 million in earnings on loans and of 38 million in other earnings more than offset an increase of 94 million in operating expenses. A small increase in earnings from United States Government securities reversed the downward trend of 1947 and 1948. Net profits (after adjustments for losses, recoveries, profits on securities, valuation reserves, and income taxes) amounted to 686 million dollars, 65 million more than in 1948. This increase reflected higher net current earnings, smaller additions to valuation reserves, and larger net profits and recoveries on securities; these were offset in part by larger income taxes and losses on loans. Transfers to valuation reserves, which amounted to 172 million dollars in 1949, have become an important factor in the interpretation of reported bank profits. When transfers exceed losses charged against the reserves, as they have in the past three years, there is a decline of reported net profits in relation to net current earnings. However, when the losses exceed the transfers, the reserves will help maintain the level of profits. All classes of banks except central reserve city banks in New York City reported increases in net profits. The decline at New York City banks reflected mainly larger net transfers to valuation reserves and increased provisions for income taxes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 ANNUAL REPORT OF BOARD OF GOVERNORS Approximately 313 million dollars, or 46 per cent of net profits of member banks in 1949, was paid out as dividends, compared with 47 per cent in 1948. The rate of dividend payments on total capital accounts was 3.5 per cent in 1949, up slightly from the year before. Net profits of member banks were 7.6 per cent of average total capital accounts as compared with 7.2 per cent in 1948. This was the first increase since 1945, when profits on securities sold or redeemed were very high and the net profits ratio reached the peak of 10.9 per cent. The ratio of net current earnings to average total capital accounts increased slightly from 12.0 per cent in 1948 to 12.2 per cent in 1949. As indicated on the accompanying chart, EARNINGS RATIOS OF MEMBER BANKS PERCENTAGES OF CAPITAL ACCOUNTS CENT ANNUAL FIGURES PER CENT 15 10 -10 1920 1925 1930 1935 1940 1945 NOTE.—Net current earnings are total earnings from current operations less current operating expenses. Net profits are net current earnings after adjustments for losses, recoveries, profits on securities, transfers to and from reserves, and taxes on net income. Capital accounts consist of all forms of capital, including capital notes and debentures, surplus, undivided profits, reserves for contingencies, and other miscellaneous capital accounts. Prior to 1927 profits on securities were included in current earnings; beginning in 1942 taxes on net income were excluded, while recurring depreciation was included, as a current operating expense deduction from earnings. Capital figures are averages of June and December call-date figures 1919-40, of three or four call-date figures 1941-48, and of three call-date and 10 intervening last-Wednesday-of-the-month figures for 1949. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 27 this approximates the high level of the 1920's and is considerably above the level of the 1930's. In contrast, and largely because of the relatively greater growth in assets than in capital, the ratio of net current earnings before income taxes to total assets was 0.85 per cent in 1949 and 0.79 per cent in 1948, considerably below the level of the 1920's and early 1930's. Bank earning assets. Earning assets of member banks at the end of 1949 were 6 billion dollars more than at the end of 1948 and approximated 102 billion; a 5 billion dollar increase in holdings of United States Government securities accounted for most of the increase. However, average holdings and the rate of earnings on Government securities during 1949 were practically unchanged from 1948 and resulted in an increase of only 4 million dollars in earnings from this source. Although loan holdings at the year-end showed an increase of 170 million dollars over a year ago, average holdings for the year were considerably higher. During the year there were some important shifts in the types of loans held. Commercial and industrial loans declined for the first time since 1942. This decline was largely offset, however, by increases in real estate and consumer loans. The shift toward loans with higher yields and rate advances for some categories of loans increased the rate of earnings on loans from 3.83 per cent in 1948 to 4.05 per cent in 1949. The higher rates, together with larger average holdings for the year, brought earnings on loans for 1949 to 1,427 million dollars, up 119 million from 1948. Holdings of securities other than United States Government obligations continued to increase and amounted to more than 8 billion dollars at the end of 1949, approximately a billion higher than at the end of 1948. Capital accounts. Capital accounts of member banks amounted to 9,174 million dollars on December 31, 1949, an increase of 373 million over the previous year. Retention of profits accounted for the increase. The percentage of net profits retained rose slightly to 54 as compared with 53 in 1948. Sales of additional common stock amounting to about 37 million dollars were largely offset by retirements of preferred stock and capital notes amounting to 10 million and by capital repayments to stockholders incident to mergers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 ANNUAL REPORT OF BOARD OF GOVERNORS As indicated on the accompanying chart, the ratio of average total capital accounts to average total assets increased from 6.6 to 7.0 per cent in 1949. The ratio of average total capital accounts to average "risk assets" (total assets less Government securities and cash assets) also increased slightly, in contrast to declines in other recent years. CAPITAL RATIOS OF MEMBER BANKS PERCENTAGES OF TOTAL ASSETS AND "RISK ASSETS" PER CENT ANNUAL RATES PER 30 30 25 / 25 / CAPITAL TO "RISK ASSETS" \ / \ 20 V — 20 — 15 15 * \ V ^ . 10 CAPITAL TO TOTAL ASSETS ^*S 10 ^— 5 0 t i i i i i i i t < ii ( 1 I 1920 1925 1930 1935 1940 1945 NOTE.—"Risk assets" represent total assets other than cash assets and U. S. Government securities. Capital and asset figures are averages of June and December call-date figures 1919-40, of three or four call-date figures 1941-48, and of three call-date and 10 intervening last-Wednesday-of-the-month figures for 1949. INTEREST RATES Financial policies of business enterprises, investment demand, and the open market policy of the Federal Reserve System greatly influenced the level and structure of interest rates in 1949. In general, both long- and short-term rates were fairly stable during the first six months of the year and declined thereafter. Bond yields declined rapidly in July and August and more gradually throughout the remainder of the year. Short-term rates dropped abruptly in late June and early July and subsequently fluctuated within a narrow band. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 29 Yields on United States Government securities. For the year as a whole, there was some decline in the yields on all maturities of United States Government securities. Longer term and shortterm yields changed little in the first half of the year and subsequently declined, as is indicated by the chart. Yields on mediumterm securities eligible for bank purchase, however, at midyear were considerably below first-of-year levels. MONEY RATES PER CENT WEEKLY AVERAGES OF DAILY FIGURES PER CENT BUSINESS LOANS AT BANKS BANKERS' ACCEPTANCES 90 DAYS 1946 1947 1948 1949 NOTE.—For Treasury bills, rate is average discount on new issue during week. Federal Reserve discount rate is for the Federal Reserve Bank of New York. Rate on business loans at banks is average for loans made at banks in 19 selected cities in the first 15 days of March, June, September, and December. Rate on bankers' acceptances is weekly prevailing rate. In the first half of the year the repayment of commercial loans reduced bank deposits and released reserves which, together with reserves freed by a reduction in reserve requirements early in May, were used largely to purchase short- and medium-term United States Government securities. The Federal Reserve System made some of these maturities available during this period. Rates on short-term issues were maintained but yields on medium-term securities declined considerably. Through midyear, rates on one- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

30 ANNUAL REPORT OF BOARD OF GOVERNORS year Treasury certificates continued at about 154 per cent and average yields on new issues of Treasury bills held close to 1.16 per cent. Following the statement of the Federal Open Market Committee on June 28 and reduction in reserve requirements, yields on shortterm Government securities fell abruptly. The decline was arrested and partly reversed, however, by the sale of bills and certificates by the Federal Reserve and by the redemption of bills from the System portfolio. Throughout the remainder of the year the System bought and sold bills and certificates in order to supply banks with reserves needed to meet current demands for credit and currency, but at the same time to moderate movements in bank reserves and hence in short-term money rates. Yields of certificates and of bills moved closer together, as is shown in the chart on page 9, and there was some narrowing of the spread between short-term and long-term rates. At the year-end, rates on both one-year certificates and Treasury bills were about ll/$ per cent, compared with nearly 1% per cent for certificates and about 1.16 for bills at the beginning of the year. Average yields on long-term Treasury bonds declined by a fourth of 1 per cent during the year. During the first half of 1949 there was a substantial demand by savings banks and private pension and trust funds for long-term Government securities, arising partly from an inflow of funds and partly from shifts out of medium-term Government security holdings. This was met largely by sales of securities from the Federal Reserve portfolio. In these circumstances, the decline in average yield of taxable Government bonds with a maturity of 15 years or more was moderate—from 2.44 per cent in December 1948 to 2.38 per cent in March 1949. This yield was maintained until the decline in yields on all maturities of Government securities after June 28. Thereafter the average yield on long-term bonds declined gradually until it reached 2.19 per cent in December. Corporate and State and local government bond yields. A record half-year volume of new corporate security issues, coupled with the competition of long-term Government securities, maintained yields on corporate bonds during the first half of 1949. After a decline in 1948, average yields of Aaa corporate bonds remained at about 2.71 per cent until July 1949, as is shown in the chart on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 31 page 29. There was very little change in the spreads between yields on this and other grades of corporate bonds. In the second half of the year, however, yields on corporate securities declined, reflecting the decline in yields on United States Government bonds and the substantial decline in new corporate security offerings. The average yield on high-grade corporate bonds fell from 2.71 per cent in June to 2.58 per cent in December. The spreads among the various grades of corporate bonds had narrowed slightly by the end of the year. Yields on securities sold by State and local governments to finance their expanding construction and capital improvement programs increased somewhat in the late spring and early summer, mainly because of the heavy volume of new issues, and some important issues were postponed awaiting more favorable terms. Yields on these securities declined during the last half of the year notwithstanding a continuing large volume of new issues. Short-term commercial rates. Average rates on short-term commercial loans by banks, which had increased somewhat in 1948, changed little during 1949. They advanced slightly from an average of 2.64 per cent in December 1948 to 2.74 per cent in June 1949, notwithstanding the decline in bank credit. In the third quarter of the year, however, the average declined to 2.63 per cent and remained essentially unchanged in the fourth quarter. The changes were less pronounced in New York City than in other cities. Other short-term rates, both open market rates and customer rates, remained stable over the first half of the year and declined after June in adjustment to the lower yields of short-term Government issues. Offering rates on prime 90-day bankers' acceptances, for example, were marked down from 1%6 to 1/46 per cent on July 5, corresponding roughly with the reduction in Treasury bill yields. Late in the year acceptance yields were below those of Treasury bills for the first time since 1937. TREASURY FINANCING A Treasury cash deficit of 1.3 billion dollars in the calendar year 1949 contrasted sharply with substantial surpluses in each of the two preceding years. Cash income exceeded cash outlays in the first quarter of the year, when income tax payments were heavy, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 ANNUAL REPORT OF BOARD OF GOVERNORS but this surplus was more than offset by the deficit incurred during the remaining three quarters of the year. Funds acquired through cash borrowing exceeded the deficit and provided a small increase in the Treasury cash balance. As a result primarily of such borrowing, but also through the accrual of interest on savings bonds and notes, United States Government securities held by the public increased 2.3 billion dollars in 1949 and amounted to 218 billion by the year-end. The Treasury also issued about 2 billion dollars of special securities for investment of money accumulated by Federal agencies and trust funds. The total United States Government debt of all forms, including securi- TREASURY CASH OPERATIONS AND UNITED STATES GOVERNMENT DEBT HELD BY THE PUBLIC [In billions of dollars] Calendar year Item 1949 1948 1947 Cash operating income 1 41.4 45.0 44.3 Cash operating outgo * 42.6 36.9 38.6 Net cash surplus (+) or deficit (—) -1.3 +8.1 +5.7 Change in Treasury cash balance +0.5 + 1.1 2-2.2 Change in debt held by the public: Net cash borrowing (+)3 + 1.7 -7.0 -7.9 Accrual of interest on debt, etc. (+)4 +0.5 -0.1 +2.0 Change in total held by the public +2.3 -7.1 -5.9 Debt held by the public, end of period 5 217.8 215.5 222.6 1 The cash budget differs from the Budget based on the Treasury's daily statement principally in that it includes transactions of Federal agencies and trust funds and excludes major intragovernmental transactions and noncash transactions with the public. 2 Includes also a decrease of 1.8 billion dollars in the Exchange Stabilization Fund in part payment of the United States contribution to the International Monetary Fund. 3 Includes principally net changes in marketable debt adjusted to reflect net market sales or purchases of marketable issues by Government agencies and trust funds, and net sales or redemptions of savings bonds and savings notes. 4 Includes principally net accrued interest on savings bonds and Treasury bills, and amounts of Federal securities issued in payment of certain budget expenditures, such as armed forces leave bonds. Includes also small adjustment to exclude changes in nonguaranteed debt and in holdings of the Postal Savings System. 6 Excludes securities held by U. S. Government agencies and trust funds. Includes guaranteed debt. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 33 ties held by the public and by Federal agencies and trust funds, amounted to 257 billion dollars on December 31, 1949. This was about 4 billion dollars more than the total on December 31 of the previous year. Cash deficit. The shift in the Federal Government's financial position from a large surplus in 1948 to a deficit in 1949 resulted mainly from an expansion of cash outlays, and to a lesser extent from a decline in cash income. Total outlays in 1949 amounted to 42.6 billion dollars, 5.7 billion more than in the previous year. Expenditures on national defense and international finance and aid increased by about 2 billion dollars, and outlays by the Commodity Credit Corporation, the Reconstruction Finance Corporation, and the Unemployment Trust Fund also increased. Payments of veterans' allowances and benefits declined somewhat. Treasury cash income declined by 3.6 billion dollars. As a result of a decline in personal income in 1949, together with a reduction in tax rates in mid-1948, personal income tax collections declined by 2.4 billion dollars and tax refunds rose by more than half a billion. Receipts from sales of surplus property were substantially lower than in 1948. There was a partly offsetting rise of nearly 1 billion dollars in receipts from the tax on corporate profits, reflecting the high level of corporate earnings in 1948. Composition of debt. Continuing the trend of the previous three years, the total volume of marketable United States Government securities held by the public declined during 1949, but holdings of nonmarketable issues increased by a more than offsetting amount. The reduction in marketable securities reflected the fact that no new marketable securities except Treasury bills were offered for cash while a small portion of each maturing issue was redeemed for cash rather than refunded. In the first quarter of the year there were also small retirements of maturing securities held by the Reserve Banks. The volume of Treasury bills outstanding showed almost no net change for the year, retirements during the first half having been offset by increased offerings in the second half. Treasury bonds called for redemption amounted to 6.6 billion dollars, of which 6.3 billion were refunded into certificates and notes, and the remainder was paid off in cash. A substantial portion—about 4.2 billion dol- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 ANNUAL REPORT OF BOARD OF GOVERNORS lars—of bonds called for redemption was refunded into 4%-year notes issued in December. These notes are the longest term marketable securities that have been offered since the Victory Loan Drive of 1945. Previously all maturing marketable securities that were not paid off in cash were refunded into short-term securities. Shortterm notes and certificates issued in exchange for bonds amounted to 2.1 billion dollars. This expansion was more than offset, however, by cash retirements amounting to 2.1 billion dollars and the refunding of half a billion dollars of maturing certificates with the 414-year notes issued in December. / UNITED STATES GOVERNMENT DEBT HELD BY THE PUBLIC AT END OF 1949, BY TYPE OF ISSUE [In billions of dollars] Change during Decem- Type of issue ber 31, 1949 1949 1948 1947 Debt held by the public, total * 217.8 +2.3 -7.1 -5.9 Marketable issues, total2 149.8 -2.2 -8.5 -9.8 Bills. 12.3 +0.2 -3.0 -1.9 Certificates and notes 37.8 +4.2 + 1.1 -7.4 Bonds 99.7 -6.6 -6.6 -0.5 Nonmarketable public issues, total 65.9 +4.6 +19 +2.7 Savings bonds 56.7 + 1.7 +3.0 +2.3 Savings and tax notes 7.6 +3.0 -0.8 -0.3 Other 1.6 -0.1 -0.3 +0.8 Debt bearing no interest 2.1 -0.1 -0.5 +1.2 Detail on marketable issues, due or callable: Within 1 year 56.3 +7.4 -1.7 -4.2 1-5 years 34.9 -8.9 -5.8 + 10.6 5 years and over, total 58.7 -0.7 -1.0 -16.2 Bank-eligible bonds 13.6 -0.5 -0.7 -17.1 Restricted bonds 45.1 -0.1 -0.3 +0.9 1 Excludes securities held by U. S. Government agencies and trust funds. Includes guaranteed securities. 2 Includes a small amount of postal savings and prewar bonds not shown separately. At the end of the year, approximately 69 per cent of the United States Government debt held by the public was in marketable issues, compared with 71 per cent at the end of 1948. During the past three years, while the total marketable debt declined by 21 bil- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 35 lion dollars, the amounts due or callable in less than five years showed little change. The proportion of the marketable debt due or callable in less than five years increased from 55 per cent at the end of 1946 to 61 at the end of 1949. The increase during 1949 in nonmarketable forms of debt held by the public was primarily in savings notes, although there was also some increase in the outstanding amount of savings bonds. Sales of savings notes reached a total of 6.0 billion dollars for the year, with redemptions amounting to 2.9 billion. Approximately half of the redemption was for payment of taxes and the other half was for cash. Sales of Series E bonds exceeded redemptions by 900 million dollars, excluding interest, and sales of F and G bonds exceeded redemptions by 800 million dollars. Taking also into account redemption of about 600 million dollars of maturing Series D bonds, net cash borrowing by the Treasury through its savings bonds sales amounted to about 1.1 billion dollars during 1949. Ownership of United States Government securities. The cash deficit of the Government in 1949 was financed fully by net sales of securities to nonbank investors. Holdings of Government securities by commercial banks and Federal Reserve Banks, taken as a group, showed little net change over the year. Commercial banks increased their portfolios of Government securities 4.4 billion dollars, utilizing a large part of the reserve funds freed by reductions in reserve requirements or obtained from gold inflows and the return of currency from circulation. The Reserve Banks, as shown by the following chart and table, reduced their holdings by a like amount. Commercial bank portfolios of bills, certificates, and notes increased 5.7 billion dollars, while their holdings of Treasury bonds declined about 1.4 billion. The net increase in holdings occurred during the last half of the year, when reserve requirements were reduced and money rates declined. The reduction in bond holdings reflected the fact that the bonds purchased by commercial banks, which were supplied by Federal Reserve Banks, mutual savings banks, and insurance companies, amounted to less than bond holdings called for redemption. The called bonds were exchanged principally for notes maturing in four and one-half years and in lesser amounts for short-term types of securities. Commercial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 ANNUAL REPORT OF BOARD OF GOVERNORS banks also increased their holdings of short-term types of securities through substantial net market purchases during the year. At the end of the year about 81 per cent of commercial bank portfolios of Government securities was due or callable within five years, compared with 67 per cent at the end of 1946. OWNERSHIP OF U. S. GOVERNMENT SECURITIES BILLIONS OF DOLLARS END OF MONTH FIGURES BILLIONS OF DOLLARS 100 100 80 80 60 60 40 — 40 20 '~ 20 1942 1944 1946 1948 1942 1944 1946 1948 NOTE.—Chart relates to gross debt, direct and guaranteed. Reported holdings are shown for Federal agencies and trust funds and for Federal Reserve Banks, and Treasury estimates for other groups. Reduction in the Reserve System's portfolio of Government securities in 1949 amounted to 4.4 billion dollars. Almost half of this reduction was accounted for by sales of long-term restricted bonds to nonbank investors and mutual savings banks. These groups in turn sold over 2 billion dollars of shorter term bonds to the commercial banks. The Reserve Banks also sold about 1 billion dollars of bank-eligible bonds and a small amount of short-term issues. About 1.2 billion dollars of maturing Government securities held by the System were retired for cash. The nonbank public increased its total holdings of Government securities by 2.3 billion dollars, approximately the same amount as the total increase in the Federal debt held outside Federal agencies Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 37 and trust funds. About 1 billion dollars of the increase in nonbank portfolios was due to accrual of interest on savings bonds. Purchases of both savings bonds and savings notes, however, were larger than redemptions, and holdings of marketable restricted issues also increased. Nonbank holdings of bank-eligible marketable securities declined, reflecting primarily cash redemptions of maturing issues. Insurance companies continued to reduce their portfolios of Government securities, and holdings of mutual savings banks changed little over the year. Other corporations, associations, and individuals, however, considerably increased their aggregate invest- OWNERSHIP OF UNITED STATES GOVERNMENT SECURITIES [Partly estimated. Par values, in billions of dollars] Amount Change in held on Type of investor Dec. 31, 1949 1949 1948 1947 Total of securities outstanding * 257.2 +4.3 -4.1 -2.5 Held by U. S. Government agencies and trust funds, total * 39.3 +2.0 +3.0 +3.4 Marketable issues 5.3 +0.2 -1.0 -0.2 Special issues 33.9 +2.2 +2.8 +4.4 Held by the public, total 217.8 +2.3 -7.1 -5.9 Federal Reserve Banks, total 18.9 -4.4 +0.8 -0.8 Bills, certificates, and notes 11.7 -0.7 -7.4 -2.9 Bank-eligible bonds 2.3 -1.6 + 1.7 + 1.5 Restricted bonds 4.9 -2.1 +6.4 +0.6 Commercial banks, total 66.8 +4.4 -6.3 -5.8 Bills, certificates, and notes 22.5 +5.7 +0.7 -4.8 Bonds, due or callable: Within 5 years 30.5 -2.4 -6.1 + 10.5 After 5 years 11.6 + 1.0 -1.3 -11.3 Nonmarketable issues 2.2 +0.1 +0.4 -0.2 Mutual savings banks 11.4 () -0.5 +0.2 Insurance companies 20.5 -1.0 -2.8 -1.0 State and local governments 8.1 +0.2 +0.6 + 1.0 Other corporations and associations 4 22.6 + 1.2 +0.2 -1.2 Individuals 5 69.5 + 1.9 + 1.0 + 1.7 1 Includes guaranteed securities. 2 Includes the Postal Savings System and also includes nonmarketable issues not shown separately. 3 Less than 50 million dollars. 4 Includes savings and loan associations, dealers and brokers, and investments of foreign balances and international accounts in this country. 5 Includes partnerships and personal trust accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 ANNUAL REPORT OF BOARD OF GOVERNORS ment in Government securities, and holdings of State and local governments showed a small further rise. ECONOMIC DEVELOPMENTS IN 1949 Production, employment, and incomes in the United States declined in the first half of 1949, increased moderately in the second half, and for the year as a whole were at levels which, though below those of 1948, were high relative to most other periods. Production in manufacturing and mining, down 8 per cent from the 1948 level, was nevertheless 76 per cent above the 1935-39 average— as compared with a 16 per cent increase in population—and 40 per cent above the 1940 level. Production other than manufacturing and mining and related transportation activities was reduced much less; aggregate output of goods and services was down only moderately from the 1948 level. With some reduction in employment— reflecting increased productivity as well as reduced output—and a further growth in the labor force, unemployment in 1949 was above the low levels prevailing earlier in the postwar period. The shift in demand-supply conditions reflected in the decline in output and employment was also evident in a decline in commodity prices, but here again the decline was limited largely to the first half of the year and was moderate. Wholesale prices at the end of the year, while 11 per cent below the August 1948 peak and 8 per cent below the 1948 average, were still nearly double the prewar level. The cost of living showed very little decline during 1949 and was still two-thirds above prewar. With a generally easier labor market and the cost of living tending to decline rather than advance, wage rates showed much less rise during 1949 than in earlier postwar years and changes to a greater extent took the form of increased pensions and other such benefits. Reflecting chiefly inventory losses as contrasted with inventory gains in 1948, corporate profits in 1949 were about one-sixth below the peak year 1948. Common stock prices advanced steadily in the second half of 1949 to levels equal to the highest reached during 1948, reflecting such factors as more favorable profit reports than had been anticipated and a reappraisal of the whole situation accompanying the favorable turn of affairs in midyear. Farm land values, although under some downward pressure as a result of a 15 per cent reduction in net farm income from 1948 to 1949, at the year-end Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

RESERVE SYSTEM 39 were still double the prewar average. Urban property values were at levels close to postwar peaks. Recession in first half. Within the year 1949, economic conditions showed very marked changes, some of which are indicated on the accompanying chart. At the beginning of the year the in- SELEGTED BUSINESS INDEXES PER CENT SEASONALLY ADJUSTED, EXCEPT PRICES; 1947* 100 PER 120 120 110 - PERSONAL INCOME ^-*— -* 110 100 100 90 - 90 80 80 120 120 no N0NA6RICULTURAL 110 EMPLOYMENT 100 100 V INDUSTRIAL X / \/ 90 PRODUCTION \l * 90 80 V 80 130 130 WHOLESALE COMMODITY PRICES 70 70 1946 1947 1948 1949 NOTE.—Income, Department of Commerce; employment, Bureau of Labor Statistics and Federal Reserve; stock prices, Standard and Poor's Corporation (416 shares); wholesale prices, Bureau of Labor Statistics. These series and industrial production index converted to 1947 base by Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 ANNUAL REPORT OF BOARD OF GOVERNORS fluence of long-sustained high rates of production, large supplies of goods on hand, and declining prices for numerous commodities came to be felt over a widening area of the economy. Prices of agricultural products continued the decline of the latter part of 1948. Weakness in markets for textiles, paper, and some other nondurable goods was reflected in some part in price reductions but to a large extent in reductions in output, beginning in the latter part of 1948 and continuing until mid-1949. In metal markets the strong situation of late 1948 was reversed and beginning in January prices of metal scrap generally and of new nonferrous metals declined sharply. This weakening followed a marked reduction in consumer takings of household equipment beginning in the autumn of 1948 and, much more important, reductions in business orders for machinery and a wide variety of other finished metal products. Steel consuming industries accumulated steel stocks during the winter and spring, and after March the changed demand situation was reflected in a declining rate of steel production. Also, a greater than seasonal decline in residential building in the latter part of 1948 and in early 1949 contributed to a curtailment of demands for building supplies and to the weakening in the general situation at that time. On the other hand, an expanded volume of exports under the Economic Cooperation Administration program tended to strengthen the situation early in the year and the operation of the farm price support program—extended somewhat at the time—limited price declines for many agricultural products. Continuing strong demand for automobiles was a sustaining factor in this period. In the second quarter, while prices of materials and industrial production continued to decline, residential building increased much more than seasonally. This increase, leading eventually to a total of over 1 million new housing units in 1949 as compared to 930,000 in 1948, followed some downward adjustment in prices of new houses and some easing of credit terms. Activity in this field proved to be one of the major factors leading to a reversal of the downward movement in the economy in midyear and an advance thereafter. Another important factor was sustained spending for consumer goods and services. Consumer expenditures as a whole showed no decline after the first quarter and, with some decline in retail Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 41 prices, unit purchases showed some increase. Automobile purchases reached new high levels as more new cars became available and as instalment credit terms were relaxed. Purchases of household equipment revived somewhat toward the end of the second quarter. Government outlays for goods and services increased further in this period, with outlays for some purposes expanding substantially. Unemployment payments also increased, offsetting to some degree the net loss of wage income in manufacturing and mining and on the railroads. Exports continued at a high level during the second quarter despite a marked decline in imports and deterioration in the monetary reserve positions of some foreign countries. Moderate recovery in second half. With production of both nondurable goods and durable goods curtailed more than consumption, inventories were reduced somewhat during the second quarter and the way was paved for a revival of production. New orders for producers' equipment, moreover, had been for a considerable period at levels much below current production and unfilled orders had been drawn down from earlier high levels. Under these circumstances, in midsummer, with demands in the residential building, public construction, and automobile fields very strong, business buying revived and the downward movement in prices and production was stopped before the recession had extended far into the economy. Thus, while industrial production in June and July averaged 15 per cent below the peak reached in the autumn of 1948, aggregate output of goods and services in the economy was down only about 6 per cent in dollar terms and less than that in physical volume. The decline in personal income from the peak was very moderate—only about 4 per cent. With the revival of business buying in midsummer, prices of industrial materials recovered somewhat and production at factories and mines rose. The increases in output were marked in nondurable lines where inventories had been depleted. Thus, revival in the textile and paper industries came very fast. Owing to the continuing threat of a steel strike, steel consumers continued to hold large stocks of steel and, with consumption remaining at a high level, output at steel mills during the third quarter was generally above 80 per cent of capacity. Automobile demand for steel reached new high levels. Meanwhile, reflecting the strengthening in the whole situa- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 ANNUAL REPORT OF BOARD OF GOVERNORS tion, buying of some producers goods rose from earlier low levels and production of machinery, which had declined at a rapid rate in the first half of the year, showed little further change, at a level one-fifth lower than in 1948. Industrial production as a whole was up 9 points in September from the June-July average, at 174 instead of 165. In October and the early part of November output in the steel industry was reduced by a prolonged strike but the effects of the strike in reducing output in other industries were very limited. Then steel output increased again to more than 90 per cent of capacity, reflecting demands for steel to replenish inventories as well as to meet current requirements. Building material output was high throughout the fourth quarter. So also was output of nondurable goods. Fuel production, on the other hand, was interrupted by strikes, and demand for fuels was limited by mild weather and a level of activity in industry and on the railroads still below the highs of 1948. Total industrial production in December was at 180 per cent of the 1935-39 average, halfway between the June-July low and the 1948 autumn high. During the second half year there was some further decline in prices of farm products and foods and, although prices of industrial materials rose somewhat, other prices as a group showed little change. Crops were again large in 1949 and supplies of livestock products became more plentiful, reflecting the influence of the heavy grain crops of 1948. Nonferrous metal prices, which had declined by 40 per cent in the first half-year, advanced moderately in the third quarter as buying increased. Finished steel prices, which had been mostly maintained, except for premium charges of various sorts, were advanced 4 per cent in December. Consumer prices for goods and services generally were stable in the second half of the year except mainly for declines in food prices at the year-end and a continued gradual advance in rents and utility charges. Thus prices both at wholesale and retail were unusually stable in the second half of 1949. The devaluations of foreign currencies beginning in mid-September apparently had little effect on the price level in this country, partly because of the strengthening of domestic markets which had begun in midyear. The longer term effects Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 43 of the devaluations on markets abroad and in this country could not be immediately determined. Wage rates in manufacturing continued to show little change during the second half of the year except in terms of pension benefits agreed to in the steel industry after the strike and in some other cases after negotiations. Railroad wage rates rose as scheduled hours for nonoperative personnel were reduced in September, in accordance with a contract made earlier, and there were also some advances in the pay of Government employees. INTERNATIONAL TRADE AND FINANCE Unprecedentedly rapid and widespread readjustments of foreign currency values were the outstanding development of 1949 in international trade and finance. These began on September 18 with the devaluation of the pound sterling by 30.5 per cent or from $4.03 to $2.80. Changes followed in the currencies of 29 countries, including most countries in the sterling area and Western Europe, as well as Canada, Egypt, and others. The sterling area, Scandinavia, and several other countries with close economic ties to the United Kingdom devalued by the full 30.5 per cent necessary to keep their currencies at par with sterling. Other countries devalued less. A number of countries, chiefly in Latin America, altered their multiple rate structures so as to reduce the effective rates of exchange applicable to various types of transactions. The International Monetary Fund concurred in the changes made by its member countries. The currency changes were precipitated by a sharp deterioration in the British gold and dollar position in the second and third quarters of 1949. More basic causes, however, are to be found in the postv/ar distortions affecting price-cost relations and trade patterns, which persisted in Europe and other parts of the world despite the encouraging progress in recovery and reconstruction which had been achieved by the end of 1948. There was growing recognition that these distortions would probably prevent the achievement of balance-of-payments equilibrium by the end of the European Recovery Program, if more drastic measures were not taken. At the same time, the recovery of European production and the general tapering off of internal monetary expansion favored the success of currency devaluation in 1949 as a step toward longer term economic equilibrium. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 ANNUAL REPORT OF BOARD OF GOVERNORS The immediate effects of the currency changes on trade and gold and dollar positions were favorable, partly because the speculative positions taken earlier against the devalued currencies were reversed. Total foreign holdings of gold and short-term dollar balances, which had declined from 14.9 billion dollars at the beginning of the year to 14.6 billion on September 30, rose to 15.2 billion by the end of December. British gold and dollar reserves recovered by about 350 million dollars from September 18 to the end of the year. Tightening of import and exchange controls by some countries contributed to the over-all gain in foreign gold and dollar reserves. Changes in dollar prices consequent to the currency devaluations were varied. On the whole, dollar prices of exports from devaluing countries declined. This improved their general competitive position in world markets. At the same time, the dollar prices of raw materials imported by the United States from devaluing countries declined much less than the average price level of their exports, and by the year-end, dollar prices of most leading imported raw materials had risen to pre-devaluation levels. This development, resulting in part from the expanding business activity in the United States, had additional favorable effects on the dollar position of the devaluing countries. United States balance of payments. Changes in the United States balance of payments during 1949 reflected in part the factors already referred to in connection with currency devaluations. The current account surplus in the United States balance of payments, which had been reduced from the postwar peak level of 11.5 billion dollars in 1947 to 6.7 billion in 1948, increased to an annual rate of 8.0 billion in the second quarter of 1949. Contributing to this increase were both an increase in United States exports and a decline in imports. There was a sharp decline in the current account surplus during the remainder of the year. The decline in economic activity and the accompanying inventory adjustments in the United States during the first half of the year contributed to the reduction of the value of imports, although part of the reduction (and also of the increase in exports) was due to anticipation of currency devaluations. In some countries, particularly in the sterling area, this decline in United States imports had serious repercussions. In other countries, particularly on the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 45 European continent, it was more than compensated by the decline in prices of United States exports. Because of the increase in the United States surplus on current account, gold sales to the United States increased in the second quarter of 1949, and foreign dollar bank balances, which had been increasing during 1948 and in the first quarter of 1949, were again drawn down to meet foreign needs. As will be seen by reference to the table on the following page, this occurred despite the large amount of United States foreign aid extended in the second quarter. In the third quarter, the current account surplus dropped sharply from 2 billion dollars to 1.3 billion, almost entirely because of a decline in exports. Part of this decline was due to increased restrictions by sterling area governments on dollar imports as a means of combating unfavorable dollar positions. Following foreign currency devaluations, the current account surplus declined in the fourth quarter to its lowest postwar level, 1.1 billion dollars. The rise in recorded United States imports from 1.5 billion dollars in the third quarter to 1.8 billion in the fourth quarter was in part a seasonal development, in part a result of the upturn in United States business activity, and in part a reflection of increases in the price of coffee. The price effects of the devaluations also began to be felt, especially where imports had previously been deferred in anticipation of the devaluations. The low recorded export figure of 2.6 billion dollars for the fourth quarter was partly attributable to restrictive measures taken by foreign countries on their imports and to increased production abroad. Partly as a consequence of the movements in trade, gold movements were abruptly reversed in the fourth quarter, with a net outflow from this country of 150 million dollars. The outflow was also attributable in part to the reversal of speculative positions against foreign currencies and to gold purchases by foreign monetary authorities wishing to inspire confidence in newly established currency values. For 1949 as a whole, the reduction from 1948 in the United States current account surplus was the consequence of the decrease in export proceeds. This decrease resulted from reductions in prices and, in the latter part of the year, a decline in export volume. The latter decline would have had more serious effects in the United Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 ANNUAL OF States had not the devaluation of foreign currencies coincided with an upturn in business activity here. With United States Government foreign loans and grants at higher levels than at any time except during the war years, and with foreign gold and dollar reserves near their postwar low, the decline in United States exports FOREIGN TRADE OF THE UNITED STATES AND MEANS OF FINANCING l [In billions of dollars] 1949 Item 1948 First Second Third Fourth Year quarter quarter quarter quarter U. S. exports, total 4.3 4.4 3.7 3.6 16.0 17.1 Recorded exports 3.3 3.4 2.7 2.6 12.0 12.7 Other goods and services... 1.0 1.0 1.0 1.0 4.0 4.1 U. S. imports, total 2.6 2.4 2.3 2.4 9.7 10.4 Recorded imports 1.8 1.6 1.5 1.8 6.6 7.1 Other goods and services... 0.8 0.8 0.8 0.6 3.1 3.4 Net purchases from U. S. by foreign countries 1.8 2.0 1.3 1.1 6.2 6.7 Sources of financing utilized by foreign countries: U. S. Government, net total.. 1.7 1.7 1.5 1.1 5.9 5.1 Credits 0.3 0.1 0.2 0.1 0.6 0.9 Donations 1.4 1.5 1.3 1.1 5.3 4.2 U. S. private, net total 0.3 0.2 0.3 0.3 1.1 1.5 Foreign investment, long- and short-term. 0.2 0.1 0.2 0.2 0.6 0.9 Donations 0.1 0.1 0.1 0.1 0.5 0.7 International Bank and Monetary Fund 0.1 0.1 0.4 Foreign countries' capital assets, net total 0 4 0 1 -0.4 0.8 Sales of gold to U. S.... 0.1 0.2 0.1 -0.2 0.2 1.5 Liquidation of longand short-term dollar assets -0.1 0.2 3-0.3 -0.2 s-0.7 Errors and omissions. -0.3 -0.3 -0.5 +0.1 -1.0 -1.0 1 This table is derived largely from U. S. balance-of-payments data compiled by the U. S. Department of Commerce, as revised and published in Survey of Current Business, June 1950, pp. 11-18. 2 Less than 50 million dollars. 8 Increase. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 47 could have been avoided only by an increase in United States imports or a larger volume of private investment abroad. In an effort to encourage the expansion of foreign private investment, several bills have been introduced in Congress in connection with the President's Point Four program for technical assistance to underdeveloped countries. Consideration has been given to a bill that would empower the Export-Import Bank to extend guarantees to United States investors against certain risks peculiar to foreign investment. The President has also recommended that Congress enact more favorable tax provisions for income from foreign sources, and the State Department is engaged in negotiating treaties providing equitable treatment for United States investments in foreign countries. Progress in European recovery. Production continued to increase in European countries receiving American aid in 1949. Prewar levels of production were exceeded by about 15 per cent in industry and were almost reached in agriculture. Toward the end of the year, however, a slackening of the increase in industrial production became noticeable in most European countries. Inflationary pressures abated in many countries during 1949. France, for instance, where prices had risen by 62 per cent in the course of 1948, consolidated the stabilization that had been achieved toward the end of 1948. In the United Kingdom, on the other hand, inflationary pressures were still felt as a result of higher Government expenditures, of inventory accumulation prior to devaluation, and of increases in sterling prices of many imports following devaluation. At the same time, unemployment remained or became a problem in countries like Germany, Italy, and Belgium. With the decisive breaking of production bottlenecks and the stoppage of the most dangerous inflationary conditions in European countries, the first aim of the European Recovery Program has been achieved. There remains the problem of reducing the large dollar gap in the balances of payments of these countries, which is being approached along three main lines. The first is a direct and immediate expansion of European dollar earnings. The currency adjustments already made will help to bring this about. Also, the United States Government is continuing to negotiate for reciprocal tariff concessions under the Trade Agree- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 ANNUAL REPORT OF BOARD OF GOVERNORS ments Act and to work toward simplifying our customs procedures. Secondly, the Economic Cooperation Administration proposes to modify its method of allocating funds among European countries so as to give them increased incentives to improve their dollar balances of payments. Future aid to individual countries would not be based on new calculations of "requirements," but would generally reflect uniform percentage cuts from 1949-50. This would assure European countries that any improvement in their balances of payments beyond the target would result in increases of their monetary reserves rather than in less aid during a subsequent period. Finally, an effort is being made to remove obstacles to the functioning of the European economy as an efficient unit. To promote productivity, intra-European competition, and the efficient allocation of European resources, an attempt has been initiated to remove quantitative restrictions of imports—the most disruptive impediment to a free intra-European flow of goods and services. Among further steps, it is contemplated that the European countries will set up a payments system which will make the European currencies transferable among the countries participating in the Recovery Program. CHANGES IN BANKING STRUCTURE Number of banking offices. The number of banking offices in the United States increased by 207 in 1949, as a result of a decrease of 16 in the number of banks and an increase of 223 in the number of branches and additional offices. The net increase of 207 in the number of banking offices was the sixth consecutive annual increase. It was slightly more than the increase of 189 in 1948 and identical with the increase in 1947. At the end of 1949 there were 19,371 banking offices (14,687 banks and 4,684 branches and additional offices). All of these figures exclude banking facilities at military and other Government establishments, of which there were 94 at the end of 1949, an increase of 24 for the year. There were about 350 of these banking facilities at the end of the war. For the second successive year the number of banks (head offices) declined. The net decrease was 16, as compared with 11 in 1948 and with increases in the three preceding years. The number of new banks opened for business declined for the third consecutive year; of the 73 opened, 18 were member banks, 43 were insured non- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 49 member banks, and 12 were noninsured banks. A total of 95 banks went out of existence through consolidations, liquidations, and suspensions, but 59 of them became branches. Four small noninsured banks (three of which were unincorporated private banks) suspended operations; their aggregate deposits were about 2.5 million dollars. Of the 14,687 banks in operation on December 31, 14,156 were commercial banks and 531 were mutual savings banks. The number of branches and additional offices, exclusive of banking facilities at military and other Government establishments, increased by a net of 223 during the year. This was the largest increase since 1934, and compares with 200 in 1948. The number of such offices has increased in every year since 1933 except in 1942, when it remained unchanged. About a third of the new banks opened for business in 1949 were in Illinois and Texas, where branch banking is prohibited, and in Georgia, where branches may be established only in the large cities. About a third of the new branches established were in California, Massachusetts, Michigan, and New York, where either State-wide or city branch banking has had considerable development. Changes in Federal Reserve membership. As a result principally of consolidations and conversions of banks into branches, the number of member banks decreased by 26 during 1949, compared with a net decrease of 5 in 1948 and with net increases totaling 585 in the preceding nine years. National banks decreased by 16 and State member banks by 10. Consolidations, absorptions, withdrawals from membership, etc., more than offset accessions to membership. Of the 36 banks added to membership, 15 were national banks and 21 were State banks; and of the latter, 6 were newly organized and 15 were already in operation. These 15 had total deposits of 161 million dollars, and all but 3 were already insured. The 6,892 member banks in operation at the end of 1949 accounted for 49 per cent of the number and 85 per cent of the deposits of all commercial banks in the country. State member banks accounted for 21 per cent of the number and 65 per cent of the deposits of all State commercial banks. These percentages have varied only fractionally during the past few years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 ANNUAL REPORT OF BOARD OF GOVERNORS Although nearly one-half of all commercial banks in the country are members of the Federal Reserve System, the proportion that are members in the various States ranges from 87 per cent in New York to 24 per cent in Iowa. The States with the largest number and proportion of member banks are, with some exceptions, in the northern and eastern sections of the country, while the nonmember banks are concentrated more in the midwestern and southern sections of the country. The differences in proportion of member and nonmember banks in the various States may be attributed to a number of factors, including the extent to which banking facilities are provided by means of branch systems rather than by single-unit banks, the number of nonpar banks, and differences between State capital requirements and those prescribed by Federal law for admission to Federal Reserve membership. Nonmember banks eligible for membership. As mentioned briefly in last year's report, preliminary analysis of a survey made by the Reserve Banks as of December 31, 1948 indicated that nearly one-third of the nonmember commercial banks were ineligible for membership in the Federal Reserve System on the basis of minimum statutory capital requirements. Further study of the survey data indicates that 5,081 nonmember commercial banks, or slightly over 70 per cent of the total, were eligible for membership and 1,890 were ineligible.1 Of the 1,890 ineligible banks, 475 were ineligible because they were operating one or more branches that were established outside their respective head-office cities after February 25, 1927, the date of the enactment of the McFadden Act. Of these 475 banks, 218 were in the Chicago Federal Reserve District, with Iowa and Wisconsin accounting for 163. These banks would be eligible for membership if it were not for the statutory capital stock requirements applicable to banks operating such branches. In addition, it is estimated that at least 200 banks would become eligible for Federal Reserve membership if they converted a relatively small portion of surplus and undivided profits into capital stock. With their pres- 1The following classes of banks were excluded from this study: 131 private banks, 67 trust companies without deposits, 37 noncheck industrial banks, 24 cash depositories in South Carolina, 9 guaranty savings banks in New Hampshire, 7 cooperative exchanges in Arkansas, and 10 miscellaneous financial institutions, a total of 285 banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 51 ent capital structure, they are ineligible for membership, because the law prescribes capital requirements in terms of capital stock. Par and nonpar banks. During 1949 there was a net increase of 117 in the number of banks on the Federal Reserve Par List and a net decrease of 138 in the number of nonpar banks.2 These changes were considerably larger than in other recent years and reflected principally changes in Wisconsin. The Wisconsin par clearance bill became effective in June 1949; it provided for the clearing at par of checks drawn on all banks organized under the law of that State and, as a result, 107 nonpar banks were added to the par list. During the year, a total of 196 banks were added to the par list, 3 were withdrawn, and 76 banks formerly on the list terminated existence. Of these 76 banks, 71 were absorbed by other par banks (including 53 that were converted into branches), 1 suspended, and 4 were liquidated. At the end of 1949 there were 12,178 par-remitting and 1,873 nonpar banks. The latter represented only 13 per cent of the banks on which checks are drawn and held only a very small proportion of the deposits with all commercial banks in the country. There were 4,289 par-remitting branches and 273 nonpar branches of commercial banks. At the end of the year there were 6 Federal Reserve districts and 29 States and the District of Columbia in which all banks were on the Federal Reserve Par List. In each of 5 other States the number of nonpar banks was less than 10. Over 99 per cent of the banks not on the par list were in the following 14 States: Minnesota 414; Georgia 291; Mississippi 162; Arkansas 123; North Carolina 114; Louisiana 103; South Dakota 99; Alabama 96; Tennessee 93; South Carolina 88; North Dakota 87; Missouri 66; Florida 62; and Texas 57. Check routing symbols. The program inaugurated by the American Bankers Association and the Federal Reserve System in June 1945 to facilitate check collection by use of routing symbols made additional progress during 1949. A survey conducted as of December 1, 1949 showed that practically all banks handling a sizable volume of checks made extensive use of the routing symbols. It 2 The Federal Reserve Par List comprises all member banks, which are required under the law to remit at par for checks forwarded to them by the Federal Reserve Banks for payment, and also such nonmember banks as have agreed to do so. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 ANNUAL REPORT OF BOARD OF GOVERNORS was also found that 67 per cent of all checks cleared through Federal Reserve Banks carried routing symbols in the approved location; this percentage compares with 58 on December 1, 1948. BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM On July 15, 1949, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Executive Committee of the National Association of Supervisors of State Banks, and the Board of Governors issued a joint statement announcing the adoption of certain changes in the bank examination and reporting procedure which had been followed by the supervisory agencies since July 1938. The revision provided for abandonment of Roman numerals II, III, and IV in the examiners' classification of bank assets, and the substitution of the terms "substandard," "doubtful," and "loss." It provided also for the discontinuance of the practice of appraising Group 2 securities on the basis of the 18-month average of market value and, instead, their appraisal at current market value. The purpose of the revision was the clarification and simplification of procedure in the interest of more uniform application. It did not involve a fundamental change in procedure nor signify any intention on the part of the supervisory authorities to become more severe in the classification of assets. In accordance with the practice of previous years, a conference of the Vice Presidents in charge of bank examination and supervision at the several Federal Reserve Banks, and the chief examiners at such banks, was held in Washington in early 1949. The representatives of the Reserve Banks met with members of the Board of Governors and members of the Board's staff to consider current supervisory problems. Representatives of the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency also attended the conference. At the annual convention of the National Association of Supervisors of State Banks, held in Reno, Nevada, in October, effective discussions were held between representatives of the Board and officers of the bank examination departments of each of the Reserve Banks, who were in attendance at the convention. During the year the Board continued to maintain formal and informal contacts on matters of mutual interest pertaining to bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 53 examination and supervision with the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Executive Committee of the National Association of Supervisors of State Banks. Examination of Federal Reserve Banks. The Board's Division of Examinations examined each of the twelve Federal Reserve Banks and their twenty-four branches during the year as required by law. Examination of State member banks. State member banks are subject to examinations made by direction of the Board of Governors or of the Federal Reserve Banks by examiners selected or approved by the Board of Governors. The established policy is to conduct 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 bank is situated, with additional examinations if considered desirable. In order to avoid duplication and to minimize inconvenience to the banks examined, wherever practicable joint examinations are made in cooperation with the State banking authorities or alternate examinations are made by agreement with State authorities. The 1949 program for the examination of State member banks was practically completed. Bank holding companies. During 1949 the Board authorized the issuance of two voting permits for limited purposes to holding company affiliates of member banks. The regular annual reports were obtained from holding company affiliates to provide information with respect to the organizations to which voting permits have been granted. In accordance with established practice, a number of holding company affiliates were examined during the year by examiners for the Federal Reserve Banks in whose districts the principal offices of the holding companies are located. Section 301 of the Banking Act of 1935 provides that the term "holding company affiliate" shall not include, except for the purposes of Section 23A of the Federal Reserve Act, any organization which is determined by the Board not to be engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies. During the year the Board made such determinations with respect to three organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 ANNUAL REPORT OF BOARD OF GOVERNORS Trust powers of national banks. During the year 1949, 13 national banks were granted authority by the Board to exercise one or more trust powers under the provisions of Section ll(k) of the Federal Reserve Act. This number includes the grant of additional powers to 3 banks which previously had been granted certain trust powers. Trust powers of 22 national banks were terminated, 17 by voluntary liquidation or consolidation and 5 by voluntary surrender. At the end of 1949, there were 1,776 national banks holding permits to exercise trust powers. A list of such banks, with indication of the power or powers each bank is authorized to exercise, will be supplied to those requesting it. Foreign branches and banking corporations. During 1949 the Board approved two applications made by member banks pursuant to the provisions of Section 25 of the Federal Reserve Act for permission to establish foreign branches. Member banks opened three foreign branches in 1949, one each in China, Japan, and Thailand. Two of the three branches so established had been authorized in previous years. The types of banking operations conducted by branches in Germany and Japan continue to be restricted by the terms of the licenses issued by the occupation authorities. At the end of 1949, seven member banks had in active operation a total of 92 branches in 23 foreign countries and possessions of the United States. Of the 92 branches, four national banks were operating 86, and three State member banks were operating 6. The foreign branches in active operation were distributed geographically as follows: Latin America 46 England 10 Argentina 10 Far East 20 Brazil 8 China 2 Chile 2 Hong Kong 1 Colombia 3 India 2 Cuba 16 Mexico 1 Japan 8 Panama 3 Philippines 5 Peru 1 Singapore 1 Uruguay 1 Thailand 1 Venezuela 1 U. S. Possessions 11 Continental Europe 5 Canal Zone 4 Belgium 1 Puerto Rico 7 France 1 Germany 3 Total 92 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 55 There was no change during the year in the corporations organized under State laws which operate under agreements entered into with the Board pursuant to Section 25 of the Federal Reserve Act relating to investment by member banks in the stock of corporations engaged principally in international or foreign banking. These four corporations are First of Boston International Corporation, International Banking Corporation, Morgan & Cie. Incorporated, and Bankers Company of New York. One of the four has no affiliates or branches, one operates a branch in England and one in France, one operates a branch in France, and one has an English fiduciary affiliate. During the year the Board's Division of Examinations examined the head office of The Chase Bank, organized under the provisions of Section 25(a) of the Federal Reserve Act and chartered by the Board to engage in international or foreign banking. Currently the bank has a fiduciary affiliate in England, and operates one branch each in France, China, and Hong Kong. One branch formerly operated in China was closed during the year under the provisions of the Board's Regulation M, due to disturbed conditions. The Board approved in 1949 an extension for a period of 20 years of the bank's corporate existence, which would have expired in 1950. Bank of America, New York, New York, an affiliate of Bank of America National Trust and Savings Association, San Francisco, California, was organized in late 1949 under the provisions of Section 25(a) of the Federal Reserve Act and chartered by the Board to engage in international or foreign banking. CHANGES IN REGULATIONS OF THE BOARD OF GOVERNORS Discounts for and advances to member banks. The Board's Regulation A, relating to discounts for and advances to member banks by Federal Reserve Banks, was amended effective February 17, 1949, to permit the discount of notes evidencing loans which are made pursuant to a commodity loan program of the Commodity Credit Corporation and are subject to a commitment to purchase by that Corporation. Provision also was made for the use of certificates of interest such as are issued by the Commodity Credit Corporation under its cotton loan program as security for advances to member banks. An obsolete provision concerning loans subject Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 ANNUAL REPORT OF BOARD OF GOVERNORS to guarantees or commitments pursuant to Executive Order No. 9112 or the Contract Settlement Act of 1944 was eliminated. Reserves of member banks. The Board's Regulation D, relating to reserves required to be maintained by member banks with Federal Reserve Banks, was amended effective May 5, 1949, as to banks in reserve and central reserve cities, and effective May 1, 1949, as to other member banks, to reduce the required reserves against time deposits from 7.5 to 7 per cent for all member banks, and to reduce the required reserves against demand deposits from 26 to 24 per cent for central reserve city banks, from 22 to 21 per cent for reserve city banks, and from 16 to 15 per cent for other member banks. In connection with the expiration on June 30, 1949, of the temporary authority of the Board to require increased reserves for member banks, Regulation D was amended effective June 30, 1949, as to banks in reserve and central reserve cities, and effective July 1, 1949, as to other member banks, to require reserves against time deposits of 6 per cent for all member banks, and reserves against demand deposits of 24 per cent for central reserve city banks, 20 per cent for reserve city banks, and 14 per cent for other member banks. In August 1949, Regulation D was amended to reduce the required reserves of all member banks by 2 percentage points on demand deposits and 1 percentage point on time deposits. The reduction as to demand deposits became effective in one-half per cent amounts on August 11, 18, and 25, and September 1, 1949, for reserve and central reserve city banks, and in 1 per cent amounts on August 1 and 16, 1949, for other member banks. The reduction as to time deposits became effective August 11, 1949, for reserve and central reserve city banks, and on August 16, 1949, for other member banks. Trust powers of national banks. The Board's Regulation F, relating to trust powers of national banks, was amended effective May 20, 1949, to provide that any security which is a direct obligation of the United States may be regarded as a readily marketable security within the meaning of Section 17, which relates to common trust funds. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 57 Check clearing and collection. As stated in the Board's Annual Report for 1948, the Board's Regulation J, relating to the clearing and collection of checks by Federal Reserve Banks, was amended effective January 1, 1949, to permit conditional payment of checks and other cash items and the return of unpaid items on the following day. Margin requirements for purchasing securities. The Board's Regulation T, relating to the extension and maintenance of credit by brokers, dealers, and members of national securities exchanges, and Regulation U, relating to loans by banks for the purpose of purchasing or carrying stocks registered on a national securities exchange, were amended effective March 30, 1949, to reduce the margin requirements from 75 per cent to 50 per cent. Effective May 1, 1949, Regulations T and U were amended to relax the provisions relating to substitutions of securities in undermargined accounts, and Regulation T was amended to simplify operations in special cash accounts. Effective May 16, 1949, the regulations were amended to permit a 25 per cent margin in the case of securities acquired through subscription rights when specified conditions are met. Effective July 20, 1949, Regulations T and U were amended to remove margin requirements applicable to credit for financing the functions of specialists on securities exchanges designated by the Board as requiring suitable reports concerning the use of such credit; and the New York Stock Exchange was so designated, effective until further notice. Regulation T also was amended to relax requirements with respect to the period within which payment must be obtained for "when distributed" securities purchased in a special cash account. Consumer instalment credit. The Board's authority to issue Regulation W, relating to consumer instalment credit, expired on June 30, 1949, and the regulation ceased to be operative after that date. As stated elsewhere in this report, the regulation had been amended effective March 7 and again effective April 27 to relax its requirements in various respects. Through these two actions, the standard maximum maturity for all credits under Regulation W became 24 months instead of 15 to 18 months, and the minimum down payment on listed articles such as furniture and appliances was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 ANNUAL REPORT OF BOARD OF GOVERNORS reduced from 20 to 10 per cent. The one-third down payment on automobiles remained unchanged. Articles costing less than $100 were exempted from the regulation, compared with the previous exemption of articles costing less than $50. Certain technical changes in the regulation were made, effective January 1 and March 7, 1949. HEARING Hearing under Clayton Antitrust Act. As noted in the previous Annual Report, the Board, on June 24, 1948, issued its Complaint against Transamerica Corporation, San Francisco, California, together with a notice of hearing to determine whether an order should be entered requiring the Corporation to cease and desist from violating Section 7 of the Clayton Antitrust Act. The actual taking of testimony began in Washington on February 2, 1949, with the presentation of evidence on behalf of the Board. The hearings were conducted before a member of the Board, R. M. Evans, who had been designated by the Board as Hearing Officer. On February 15, 1949, the hearings were adjourned to San Francisco where they were reconvened on March 28, 1949. The Board's Solicitor rested his case on July 8, 1949. After an interval, during which certain motions were argued and a recess was taken, the hearing of evidence on behalf of the Respondent was begun on September 19, 1949. The hearing had not been concluded at the end of 1949. LEGISLATION Consumer instalment credit. Under the terms of the Joint Resolution approved August 16, 1948, which authorized the Board to regulate consumer instalment credit during a period ending June 30, 1949, the Board's authority to regulate such credit expired on the latter date. Reserves of member banks. The additional authority to increase member bank reserve requirements which was granted to the Board by an amendment to Section 19 of the Federal Reserve Act contained in the Joint Resolution approved August 16, 1948, expired on June 30, 1949. Salaries. An Act approved October 15, 1949, in effect amended Sections 10 and 12B of the Federal Reserve Act by increasing the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 59 rate of basic compensation of the members of the Board of Governors of the Federal Reserve System and the Board of Directors of the Federal Deposit Insurance Corporation from $15,000 to $16,000 per annum. International Bank obligations. An Act approved June 29, 1949, amended Section 5136 of the Revised Statutes of the United States so as to remove restrictions upon national banks and State member banks with respect to dealing in and underwriting obligations issued by the International Bank for Reconstruction and Development, subject to the limitation that a bank's holdings of such obligations shall not exceed 10 per cent of its capital and surplus. The Act also amended the Bretton Woods Agreements Act to exempt from the provisions of the Securities Act of 1933, and the Securities Exchange Act of 1934, securities issued or guaranteed by the International Bank. Housing obligations. The Housing Act of 1949, approved July 15,1949, amended Section 5136 of the Revised Statutes of the United States so as to remove restrictions upon national banks and State member banks with respect to dealing in, underwriting, and purchasing for their own accounts certain obligations of local public agencies and public housing agencies secured by agreements with Federal housing authorities. The Act also amended Section 5200 of the Revised Statutes to provide that the limitations upon loans by a national bank to any one borrower shall not apply to similar obligations of such agencies. Real estate loans. An Act approved October 25, 1949, amended Section 24 of the Federal Reserve Act, relating to real estate loans by national banks, to permit such banks to make loans on certain types of long-term leaseholds under rules and regulations prescribed by the Comptroller of the Currency, and also to permit them to finance the construction of military rental housing under Title VIII of the National Housing Act. LEGISLATIVE PROPOSALS Bank holding companies. In previous Annual Reports the Board has recommended legislation to provide more effective supervision and control of bank holding companies, including provisions controlling expansion and requiring the divorcement of activities unre- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

60 ANNUAL REPORT OF BOARD OF GOVERNORS lated to banking. Hearings on this subject were held by the Senate and House Committees on Banking and Currency of the 80th Congress and a bill recommended by the Board was reported favorably by the Senate Committee. Thereafter, the proposed legislation was discussed further with various interested groups and, with a number of changes which did not affect its basic objectives, was introduced in the present Congress. State member bank capital requirements. Upon the recommendation of the Board, S. 2494 and H. R. 5749 have been introduced for the purpose of modifying the capital requirements for the admission of State banks to membership in the Federal Reserve System and for the establishment of out-of-town branches by State member banks. The present requirements prevent many sound banks with adequate capital from becoming members of the Federal Reserve System. They also tend to force State member banks which would like to remain in the System to withdraw from membership and operate as nonmember banks in order to establish branches. The proposed legislation would vest in the Board discretion to determine the adequacy of the capital of State banks applying for membership and of State member banks desiring to establish branches, except that a minimum capital stock of $50,000 (or $25,000 for banks heretofore organized) would be required for membership. Federal Reserve branch buildings. In 1947 the Board called attention to the fact that the need for more adequate building facilities at the branches of the Federal Reserve Banks could not be met because of a statute providing that in no case should the cost of the building proper (exclusive of vaults, permanent equipment, furnishings, and fixtures) exceed $250,000. To meet the most urgent needs, the law was amended on July 30, 1947, to provide that this limit should not apply as long as the aggregate of such costs incurred thereafter with the approval of the Board was not in excess of 10 million dollars. This amount, however, has been inadequate to cover branch building programs which are necessary to efficient operation. Therefore, the Board has recommended legislation to increase the aggregate amount which may be used for this purpose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 61 RESERVE BANK OPERATIONS Volume of operations. On the whole, the volume of operations in the principal departments of the Federal Reserve Banks increased over the level of 1948. Most of the normal peacetime operations were in excess of previous years, but continuing the earlier postwar decline there was further contraction in operations as fiscal agents for the United States Treasury and other Government agencies. Table 5 on page 85 shows the volume of operations in the principal departments of the Federal Reserve Banks for each of the past five years. Discounts and advances were less numerous in 1949 than in 1948, but greater in amount. The number of banks accommodated through rediscounts or advances in 1949 was 1,006 as compared with 1,166 in 1948. The amount of industrial loans declined but the number increased somewhat, and at the end of the year 1949 outstanding loans were higher than at any year-end since 1944. The volume of currency and coin received and counted and of checks handled set new records in 1949, although a decline was shown in the aggregate amounts of the currency and checks handled. For the fourth consecutive year there was a decrease in the number and aggregate amount of issues, redemptions, and exchanges of United States Government securities. Transfers of funds increased in both number and amount. Earnings and expenses. Current earnings and expenses of the various Federal Reserve Banks in 1949 are given in detail in Table 6 on pages 86-87, and a condensed annual statement since 1914 for all the Reserve Banks combined is shown in Table 7 on pages 88-89. The table on page 62 summarizes the distribution of Federal Reserve Bank earnings for the year 1949 in comparison with 1948. Current earnings of 316 million dollars in 1949 were 12 million more than in 1948. Current expenses increased by somewhat over 4 million dollars, and current net earnings were 239 million in 1949, as compared with 231 million for the previous year. Net additions to current net earnings, resulting for the most part from net profits on the sale of Government securities, aggregated 28 million dollars as compared with 6 million in 1948. Transfers to reserves for contingencies totaled 40 million dollars, about the same as in 1948, and payments to the United States Treasury as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 ANNUAL REPORT OF BOARD OF GOVERNORS EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS 1949 AND 1948 [In thousands of dollars] Item 1949 1948 Current earnings 316,537 304,161 77,478 72,710 Current expenses 239,059 231,451 Current net earnings 31,664 6,517 Additions to current net earnings 3,392 414 Deductions from current net earnings Net additions 28,272 6,103 Transferred to reserves for contingencies 40,394 40,421 Paid U. S. Treasury (interest on outstanding F. R. notes) 193,146 166,690 Net earnings after reserves and payments to U. S. Treasury 33,791 30,443 Dividends paid 12,329 11,920 Transferred to surplus (Sec. 7) 21,462 18,523 interest on outstanding Federal Reserve notes amounted to 193 million, or 26 million more than in 1948. The 6 per cent dividend to member banks on their holdings of capital stock of the Federal Reserve Banks, as required by the Federal Reserve Act, amounted to 12 million dollars. Remaining net earnings of 21 million dollars were transferred to the Section 7 surplus account. Holdings of loans and securities. The table on page 63 presents a comparison of average holdings, earnings, and rates of interest on holdings of loans and securities of the Federal Reserve Banks during each of the past four years. Continuing the trend of the past few years, average holdings of United States Government securities in 1949 declined 2 billion dollars, the largest decrease for any year since 1946, the peak year. This reduction in Reserve Bank credit was made possible largely by decreases in the requirements for member bank reserves and in the volume of currency in circulation, which supplied member banks with additional reserve funds. Earnings on holdings of Government securities increased somewhat, despite the decrease in holdings, reflecting an increase from 1.39 per cent for 1948 to 1.60 per cent for 1949 in the average rate of interest received. Holdings of discounts and advances and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 63 of industrial loans, and earnings from both these sources, declined from 1948. RESERVE BANK EARNINGS ON LOANS AND SECURITIES, 1946-49 [Dollar amounts in thousands] U.S. Dis- Accept- Government Induscounts ances Item and year Total securities trial and purdirect and loans advances chased guaranteed Average daily holdings: 1946 $23,570,260 $310,308 $8,457 $23,250,195 $1,300 1947 1... 22,552,491 218,755 384 22,331,740 1,612 1948 1 21,841,623 330,706 21,509,321 1,596 1949 1 19,804,711 231,201 19,572,664 846 Earnings: 1946 149,703 2,497 43 147,125 38 1947 157,823 2,195 4 155,564 60 1948 . 303,316 4,371 298,903 42 1949... 315,754 3,472 312,241 41 Average rate of interest (per cent): 1946 0.64 0.80 0.51 0.63 2.90 1947 0.70 1.00 1.01 0.70 3.75 1948 1.39 1.32 1.39 2.64 1949 1.59 1.50 1.60 4.85 1 Based on holdings at opening of business. Foreign transactions. Continuing the upward trend which began in the latter part of 1947, total dollar and gold assets held by the Federal Reserve Banks for foreign account increased by about 700 million dollars net during 1949 to nearly 5 billion dollars. This net increase took the form largely of earmarked gold and dollar deposits, which rose by 482 million dollars and 124 million dollars, respectively. Gold and dollar assets held by the Federal Reserve Bank of New York for the International Bank for Reconstruction and Development and the International Monetary Fund, on the other hand, declined by a moderate amount. This contrasted with a sharp net rise in 1947 and a relatively moderate increase in 1948. Combined assets held for foreign and international account amounted to around 8 billion dollars at the end of the year, or close to the peak reached in February 1947. The demand for loans on gold by foreign central banks showed a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 ANNUAL REPORT OF BOARD OF GOVERNORS decline during the year. While outstanding loans had reached a peak of nearly 260 million dollars in August 1948, by the end of 1949 the total had receded to slightly less than 70 million. Loans had been outstanding to five central banks at the end of 1948; three of these banks retired their loans in full during 1949 and the other two are expected to liquidate their indebtedness within several months. New loans were made to two central banks, one of which had reduced its indebtedness by the end of the year, while the other was still indebted for the full amount. The policy with respect to loans on gold remains unchanged. It contemplates shortterm advances for temporary, usually seasonal, dollar deficiencies; interest is at the discount rate of the Federal Reserve Bank of New York, which was ll/ per cent throughout 1949. 2 One regular foreign central bank account was opened during the year, and another account was opened by the Federal Reserve Bank of New York acting as fiscal agent of the United States. On the other hand, one wartime account which had been maintained for a foreign government was closed. The Federal Reserve Bank of New York, in its capacity as United States depositary for the International Bank and the International Monetary Fund, continued to perform a variety of services for those institutions, including the earmarking of gold, handling investments in United States Government securities, and holding securities in custody. The Federal Reserve Bank of New York, as fiscal agent of the United States, continued to operate the United States Stabilization Fund in accordance with authorization and instructions from the Treasury Department. Its fiscal agency function for the Office of Alien Property of the Department of Justice in the administration of foreign funds control, however, was terminated on May 31, 1949. Bank premises. In May 1949 the Board modified its postwar policy with respect to construction work at Federal Reserve Banks and branches to permit alterations and improvements necessary to provide satisfactory working conditions. The Federal Reserve Bank of San Francisco was authorized to let contracts for buildings to house its Portland and Seattle Branches, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 65 which are presently occupying leased quarters. Upon occupancy of these two new buildings, all Reserve Banks and branches will be housed in their own buildings for the first time in the history of the System. Authorization was given the Federal Reserve Bank of Chicago to erect an addition to and make substantial alterations in the Detroit Branch building. Other building projects authorized by the Board in 1949 were the construction of a garage and other improvements to the St. Louis property of the Federal Reserve Bank of St. Louis and extension of the mezzanine floor and alterations in its Little Rock Branch building, modernization and extension of the air conditioning system in the head-office building of the Federal Reserve Bank of Kansas City, and air conditioning and other improvements to the building of the Baltimore Branch of the Federal Reserve Bank of Richmond. Purchase of a lot forming a part of the land upon which the St. Louis Bank building is situated was consummated early in 1950. A strip of land contiguous to the Pittsburgh Branch property was purchased by the Federal Reserve Bank of Cleveland, with a view to constructing an addition to the present building. Property which had been acquired in 1945 as a building site for an annex to the Pittsburgh Branch was disposed of at a small profit. Preparation of detailed plans and specifications was authorized during 1949 for an addition to the building of the Federal Reserve Bank of Richmond, for a new building to house the Jacksonville Branch of the Federal Reserve Bank of Atlanta, and for an addition to the Los Angeles Branch quarters of the Federal Reserve Bank of San Francisco. The cost of bank premises owned by the Federal Reserve Banks is given in Table 9 on page 92. RESERVE BANK PERSONNEL Chairmen and Deputy Chairmen. One of the three Class C directors appointed by the Board of Governors for each Federal Reserve Bank is designated annually to serve as Chairman of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 ANNUAL REPORT OF BOARD OF GOVERNORS Board of Directors and as Federal Reserve Agent, and another Class C director is appointed annually as Deputy Chairman. A list of the Chairmen and Deputy Chairmen is shown on page 122. The Chairmen and Deputy Chairmen at the Federal Reserve Banks were redesignated to serve as such for the year 1949, except for the following changes: Warren F. Whittier, Agricultural Consultant, Chester Springs, Pennsylvania, who had served as a Class C director of the Federal Reserve Bank of Philadelphia since December 2,1939, and as Deputy Chairman since July 1, 1941, on March 18, was designated Chairman and Federal Reserve Agent for the remaining portion of the year 1949. C. Canby Balderston, Dean, Wharton School of Finance and Commerce, University of Pennsylvania, Philadelphia, Pennsylvania, who had served as a Class C director of the Federal Reserve Bank of Philadelphia since April 8,1943, on March 18, was appointed Deputy Chairman for the remaining portion of the year 1949. A. Z. Baker, Chairman of the Board, The Cleveland Union Stock Yards Company, Cleveland, Ohio, who had been a Class C director of the Federal Reserve Bank of Cleveland since August 8, 1942, was appointed Deputy Chairman for the year 1949. Charles P. McCormick, President and Chairman of the Board, McCormick & Company, Inc., Baltimore, Maryland, who had been a Class C director of the Federal Reserve Bank of Richmond since August 31, 1939, and Deputy Chairman since January 1, 1947, was designated Chairman and Federal Reserve Agent for the year 1949. John B. Woodward, Jr., President and General Manager, Newport News Shipbuilding and Dry Dock Company, Newport News, Virginia, was appointed Deputy Chairman of the Federal Reserve Bank of Richmond for the year 1949, after having been appointed a Class C director, effective January 1, 1949, for the unexpired portion of the term ending December 31, 1949. Rufus C. Harris, President, The Tulane University of Louisiana, New Orleans, Louisiana, who had been a Class C director of the Federal Reserve Bank of Atlanta since January 28, 1938, was appointed Deputy Chairman for the year 1949. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 67 F. }. Lunding, President, Jewel Tea Company, Inc., Barrington, Illinois, was appointed Deputy Chairman of the Federal Reserve Bank of Chicago for the year 1949, after having been appointed a Class C director for the term beginning January 1, 1949. Directors. A list of the directors of the Federal Reserve Banks and branches as of the close of the year is shown on pages 123-35. The Board of Governors made the following appointments of new directors either for terms beginning January 1, 1949, or to fill vacancies during the year: Class C Directors. Philip T. Sharpies, Chairman, The Sharpies Corporation, Philadelphia, Pennsylvania, was appointed a Class C director of the Federal Reserve Bank of Philadelphia for the unexpired portion of the term ending December 31, 1951. Mr. Sharpies assumed his duties on June 9. L. L. Rummell, Dean, College of Agriculture, The Ohio State University, Columbus, Ohio, was appointed a Class C director of the Federal Reserve Bank of Cleveland for the term beginning January 1, 1949. John B. Woodward, Jr., President and General Manager, Newport News Shipbuilding and Dry Dock Company, Newport News, Virginia, was appointed a Class C director of the Federal Reserve Bank of Richmond, effective January 1, 1949, for the unexpired portion of the term ending December 31, 1949. Paul E. Reinhold, President, Foremost Dairies, Inc., Jacksonville, Florida, was appointed a Class C director of the Federal Reserve Bank of Atlanta for the term beginning January 1, 1949. F. J. Lunding, President, Jewel Tea Company, Inc., Barrington, Illinois, was appointed a Class C director of the Federal Reserve Bank of Chicago for the term beginning January 1, 1949. Branch Directors. Ernest H. Hahne, President, Miami University, Oxford, Ohio, was appointed a director of the Cincinnati Branch of the Federal Reserve Bank of Cleveland for the term beginning January 1, 1949. Sidney A. Swensrud, President, Gulf Oil Corporation, Pittsburgh, Pennsylvania, on February 3, was appointed a director of the Pitts- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 ANNUAL REPORT OF BOARD OF GOVERNORS burgh Branch of the Federal Reserve Bank of Cleveland for the unexpired portion of the term ending December 31, 1949. John W. Taylor, President, University of Louisville, Louisville, Kentucky, was appointed a director of the Louisville Branch of the Federal Reserve Bank of St. Louis for the term beginning January 1, 1949. James A. McCain, President, Montana State University, Missoula, Montana, was appointed a director of the Helena Branch of the Federal Reserve Bank of Minneapolis for the term beginning January 1, 1949. G. Norman Winder, Rancher, Craig, Colorado, was appointed a director of the Denver Branch of the Federal Reserve Bank of Kansas City for the term beginning January 1, 1949. Change in First Vice President. Mr. Charles B. Dunn resigned as First Vice President of the Federal Reserve Bank of Chicago effective November 1. Mr. Dunn had served as General Counsel of the Federal Reserve Bank of Chicago from January 1, 1934 to February 26, 1942, when he was appointed Vice President as well as General Counsel. He was appointed First Vice President effective October 25, 1945. Staff. At the end of 1949, the total number of officers and employees of the twelve Federal Reserve Banks and their twenty-four branches was 17,967, representing a decline of 1,120 since the end of 1948. The total Reserve Bank personnel has declined each year since 1943 when it was at its peak owing to the great expansion in the volume of operations resulting from the war. The total number of officers and employees of the Reserve Banks and branches at the end of each year beginning with 1942 was as follows: 1942 19,972 1946 21,430 1943 24,741 1947 19,364 1944 24,442 1948 19,087 1945 23,522 1949 17,967 BOARD OF GOVERNORS—STAFF Death of member of the Board. Lawrence Clayton, who had been a member of the Board of Governors since February 1947, died on December 4, 1949. Mr. Clayton first became associated with the Board of Governors in December 1934, as Assistant to the Chair- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 69 man of the Board, which position he held until the beginning of 1945 when he resigned to engage in private business. Staff. On December 31, 1949, the Board's staff, exclusive of those on leave without pay, numbered 540, as compared to 517 at the end of 1948. Frank A. Southard, Jr., resigned as Associate Director of the Board's Division of Research and Statistics effective February 28, 1949, to accept the appointment as United States Executive Director of the International Monetary Fund. Mr. Southard became associated with the Board on August 16, 1948, having previously served as Director of the Office of International Finance of the Treasury Department. G. Howland Chase was appointed by the Board as Assistant Solicitor effective June 26, 1949. Mr. Chase became associated with the Board's Legal Division on May 2, 1932, and served in that Division until December 7, 1948, when he was appointed Attorney in the Office of the Solicitor. Woodlief Thomas, who had been Director of the Board's Division of Research and Statistics since February 1945, was appointed to the newly created position of Economic Adviser to the Board, effective October 1, 1949. With the exception of a period during 1929 and 1930 when Mr. Thomas served with the Transfer Commission (Office for Reparations Payments) in Berlin, Germany, he has been engaged in research work for the Federal Reserve System since 1920, serving at various times with the Federal Reserve Bank of Philadelphia, the Federal Reserve Bank of New York, and the Board of Governors. Ralph A. Young was appointed to succeed Mr. Thomas as Director of the Division of Research and Statistics. Mr. Young, who had been Associate Director of the Division since December 1947, joined the Board's staff as Assistant Director of the Division of Research and Statistics in March 1946, prior to which he had served for a number of years as Director of the Financial Research Program of the National Bureau of Economic Research and concurrently as Professor of Economics at the Wharton School of Business and Finance of the University of Pennsylvania. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 ANNUAL REPORT OF BOARD OF GOVERNORS BOARD OF GOVERNORS—INCOME AND EXPENSES The following table shows the income and expenses of the Board for the year 1949: OPERATING SURPLUS, January 1, 1949 $ 311,169.60 Adjustment in 1949 applicable to preceding years... 1,496.71$ 312,666.31 INCOME: Assessments on Federal Reserve Banks 3,242,500.00 Sale of Federal Reserve Bulletin 13,673 .02 Sale of other publications 21,766.49 Miscellaneous 4,618.74 3,282,558.25 3,595,224.56 EXPENSES: Salaries 2,262,124.51 Retirement contributions—regular 171,895 .54 Retirement contributions—special 20,884.72 Traveling expenses 179,669.44 Postage and expressage 10,750.46 Telephone and telegraph 66,809 .55 Printing and binding 144,576.61 Stationery and supplies 27,128.85 Furniture and equipment, including rental 47,896.64 Books and subscriptions 11,556.71 Heat, light, and power 33,045 .68 Repairs and alterations (building & grounds).... 7,399 .19 Repairs and maintenance (furniture & equipment) 6,107 .50 Medical service and supplies 1,521.87 Insurance 4,622 .40 Miscellaneous: Surveys of consumer finances... . $162,571.92 Cafeteria (net) 34,460 .10 Legal and consultant fees and expenses 26,490.85 Allother 53,104.71 276,627.58 3,272,617.25 OPERATING SURPLUS, December 31, 1949 $ 322,607.31 In addition to the foregoing, the Board made certain expenditures on a reimbursable basis for which it received reimbursements in 1949 as follows: Printing Federal Reserve notes $4,221,433.00 Leased wire service (telegraph) 102,963.05 Leased telephone lines 9,684.00 Federal Reserve Issue and Redemption Division (Comptroller of the Currency) 98,550.20 Miscellaneous 24,859.57 The accounts of the Board for the year 1949 were audited by the Auditor of the Federal Reserve Bank of Boston, who certified them to be correct. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 71 RESEARCH AND ADVISORY SERVICES As in former years, the Board continuously studied the interrelationships between the banking and monetary situation and general economic developments. The areas analyzed included changes in both business and consumer incomes and expenditures, employment and unemployment, production and prices, Treasury financing, business financing and the market for equity capital, commercial bank loans, and the general financial position of business and consumers. Close attention was also given to economic and financial developments in foreign countries, including the relationships between developments in the United States and abroad. From time to time members of the Board supplied Congressional committees with information concerning banking and monetary matters related to Federal Reserve responsibilities. Members of the Board's staff gave technical assistance to several Congressional committees engaged in investigating special monetary and economic problems, and participated in numerous governmental and private conferences relating to current and prospective economic conditions. Staff members also served on interdepartmental committees concerned with analyzing a wide range of economic developments and with improving and extending statistical and other information of value in analyzing economic tendencies. Among the projects with which the staff helped in this manner were the "Standard Industrial Classification Manual for Nonmanufacturing Industries," sponsored and published by the Bureau of the Budget; a discussion and training program for foreign experts, sponsored by the Organization for European Economic Cooperation, the Economic Cooperation Administration, and the Bureau of Labor Statistics; and a study of appropriate standards for industrial production indexes, sponsored and published by the United Nations. The Board continued its sponsorship of the Survey of Consumer Finances—a comprehensive study in the field of noncorporate private finance. These surveys, made annually since 1946, have provided significant data on the distribution of consumer incomes, ownership and use of liquid and nonliquid assets, consumer saving, and housing expenditures and finance. The surveys have also provided information concerning the attitudes of consumers toward business conditions in general, their own financial status, and their Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 ANNUAL REPORT OF BOARD OF GOVERNORS potential expenditures for houses, automobiles, and other types of durable goods. Results of the 1949 survey, conducted for the Board by the Survey Research Center of the University of Michigan, were published in the Federal Reserve Bulletin in a series of articles beginning in June 1949. Results of a supplementary survey, conducted in July 1949, were published in the October issue of the Bulletin. A fifth annual survey was begun in January 1950. Work has continued on the project to develop estimates of moneyflows for major sectors of the economy. Substantial progress was made in bringing accounts for most sectors up to date. For the banking sector a monthly series relating assets of the entire banking system to the money supply was initiated and since June 1949 has been released currently and later published in the Federal Reserve Bulletin. Considerable progress was made during the year in assembling, revising, and tabulating an historical statistical series of the principal assets and liabilities of all banks in the United States, by class of bank and by State. A general revision of the Board's Index of Industrial Production was undertaken in order to utilize new information provided by the 1947 Census and other sources. Further refinement of the Board's statistics on consumer credit was undertaken in 1949. In December the Board published a pamphlet, Distribution of Ban\ Deposits by Counties, which gives separately the demand and the time deposits of individuals, partnerships, and corporations as of June 30, 1949. A similar pamphlet was last published in July 1948 with data as of December 31, 1947. The deposit figures supplement other information available on a county basis for analyzing local business conditions. Data for the latest pamphlet were prepared from bank and branch condition reports, which were obtained by the Comptroller of the Currency from national banks, by the Federal Reserve Banks from State member banks, and by the Federal Deposit Insurance Corporation from nonmember banks. Prior to 1949, branch condition reports were last obtained in 1941, and then for member banks only. In October the Board issued an historical supplement to its monthly Federal Reserve Chart Boo\ on Ban\ Credit, Money Rates, and Business. The book, as enlarged in a substantially revised edition Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 73 issued in March 1950, contains 113 pages of charts going back to at least 1919 in most cases and for longer periods in other cases. The Board continued to work on problems involving United States policy decisions in the international economic and financial field. A large part of this work was related to the activities of the National Advisory Council on International Monetary and Financial Problems of which the Chairman of the Board is a member, and was carried out in close collaboration with the other agencies represented on the Council. Representatives of the Federal Reserve System participated in the Second Conference of Central Bank Experts of the Western Hemisphere held in Santiago, Chile, in December, and the Board continued to cooperate in projects of an international nature by supplying members of its staff for assignments abroad. These included assisting the Government of Ceylon to prepare central bank legislation, giving advice on policy to the new Central Bank of the Philippines, making a preliminary survey of financial conditions in Korea for the Economic Cooperation Administration, assisting the International Bank for Reconstruction and Development to analyze economic and financial conditions in Germany and in Chile, and helping to prepare a report on the fiscal problems of Guatemala for the Government of that country. Members of the Board's staff assisted the Economic Cooperation Administration in work on specific problems from time to time and attended the meetings of ECA Finance Officers in Paris in April and November. The Director of the Board's Division of Research and Statistics spent three months in Europe visiting central banks and studying economic and financial conditions abroad. The Board facilitated the work of numerous officials of foreign central banks and governments and other persons who came to the United States on official business or to study American banking policies and practices or American methods of analyzing economic developments. PUBLICATIONS AND RELEASES There was a continuing demand for the Board's publications and releases during 1949. The volume of requests for the booklet entitled, THE FEDERAL RESERVE SYSTEM—ITS PURPOSES AND FUNC- TIONS, made a second printing necessary. The mailing list for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 ANNUAL REPORT OF BOARD OF GOVERNORS articles relating to surveys of consumer finances expanded greatly, and several periodic releases were initiated. In addition to regulations and various reprints, the following publications were issued. FEDERAL RESERVE BULLETIN. Issued monthly. FEDERAL RESERVE CHARTS ON BANK CREDIT, MONEY RATES, AND BUSINESS. Issued monthly. STATE BANK MEMBERS AND NONMEMBER BANKS THAT MAINTAIN CLEARING ACCOUNTS WITH FEDERAL RESERVE BANKS. Complete list in February with monthly supplements. LIST OF STOCKS REGISTERED ON NATIONAL SECURITIES EXCHANGES. Supplements in February, May, August, and November. MEMBER BANK CALL REPORT. Three issues, one each in April, July, and September. BANKING STUDIES (1941). Reprinted in March. AMENDMENTS TO RULES OF ORGANIZATION AND RULES OF PROCE- DURE (Board of Governors of the Federal Reserve System). Published in June. RETAIL CREDIT SURVEY—1948. Published in July. THIRTY-FIFTH ANNUAL REPORT OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. Published in August. PAR LIST. Complete list in August with monthly supplements. HISTORICAL SUPPLEMENT TO FEDERAL RESERVE CHARTS ON BANK CREDIT, MONEY RATES, AND BUSINESS. Published in October. REPLY OF THE CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (TO the Questionnaire of the Joint Congressional Committee on the Economic Report). Published in November. THE FEDERAL RESERVE SYSTEM—ITS PURPOSES AND FUNCTIONS (1947). Reprinted in December. DISTRIBUTION OF BANK DEPOSITS BY COUNTIES, June 30,1949. Published in December. FEDERAL RESERVE MEETINGS The Federal Open Market Committee met in Washington on February 28, March 1, May 3, June 28, August 5, and December 13, 1949, and the executive committee of the full Committee met from time to time during the year. Under the provisions of Section 12A of the Federal Reserve Act, the Federal Open Market Committee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 75 has responsibility for determining the policies under which the open market operations of the Reserve Banks will be carried out. A record of the actions taken by the Committee on questions of policy will be found on pages 110-18 of this report. A Conference of the Chairmen of the Federal Reserve Banks was held on May 28-30, 1949, and was attended by members of the Board of Governors. The Conference of Presidents of the Federal Reserve Banks held meetings on February 25-26, May 2, November 2-4, and December 14, and the Board of Governors met with the Presidents on February 28, May 3, and December 14. Meetings of the Federal Advisory Council were held on February 13-15, May 15-17, September 18-20, and November 13-15. The Board of Governors met with the Council on February 15, May 17, September 20, and November 15. 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 in all matters within the jurisdiction of the Board. 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

78 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 1949 ASSETS [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars] Interdistrict settlement fund 7,247,986 Gold certificates on hand 1,015,444 Gold certificates with Federal Reserve Agent 14,359,000 Gold certificates on hand and due from U. S. Treasury 22,622,430 Redemption fund for Federal Reserve notes 553,793 Total gold certificate reserves 23,176,223 Other cash: United States notes 31,768 Silver certificates 182,703 Standard silver dollars 2,630 National and Federal Reserve Bank notes 4,349 Subsidiary silver, nickels, and cents 36,395 Total other cash 257,845 Discounts and advances secured by U. S. Government securities: Discounted for member banks 8,259 Discounted for others 8,259 Other discounts and advances: Discounted for member banks 86 Foreign loans on gold 69,500 69,586 Total discounts and advances 77,845 Industrial loans 2,070 U. S. Government securities in System Open Market Account: Bills 4,829,247 Certificates 6,275,450 Notes 562,200 Bonds 7,217,700 Total U. S. Government securities 18,884,597 Total loans and securities 18,964,512 Due from foreign banks 38 Federal Reserve notes of other Federal Reserve Banks 162,306 Uncollected items: Transit items 2,740,285 Exchanges for clearing house 168,593 Other cash items 37,903 Total uncollected items 2,946,781 Bank premises: Land 13,710 Buildings (including vaults) 47,207 Fixed machinery and equipment 18,248 Total buildings 65,455 Less depreciation allowances 45,427 20,028 Total bank premises 33,738 Other assets: Industrial loans past due 109 Miscellaneous assets acquired account industrial loans.. 77 Miscellaneous assets acquired account closed banks.... 43 Total 229 Less valuation allowances 166 Net 63 Fiscal Agency and other expenses, reimbursable 2,468 Interest accrued 62,334 Premium on securities 30,443 Deferred charges 1,413 Sundry items receivable 2,212 Real estate acquired for banking house purposes 2,006 Suspense account 483 All other 232 Total other assets 101,654 Total assets 45,643,097 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 79 NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) —Continued LIABILITIES Federal Reserve notes outstanding (issued to Federal Reserve Banks).... 24,358,525 Less: Held by issuing Federal Reserve Banks 815,186 Forwarded for redemption 60,693 875,879 Federal Reserve notes, net (includes notes held by U. S. Treasury and by Federal Reserve Banks other than issuing Bank) 23,482,646 Deposits: Member bank—reserve account 16,568,088 U. S. Treasurer—general account 821,354 Foreign 766,521 Other deposits: Nonmember bank—clearing accounts 90,763 Officers' and certified checks 10,645 Federal Reserve exchange drafts 588 International organizations * 319,740 All other 328,533 Total other deposits 750,269 Total deposits 18,906,232 Deferred availability items 2,412,620 Other liabilities: Accrued dividends unpaid Unearned discount 7 Discount on securities 7,099 Sundry items payable 1,994 Suspense account 219 All other liabilities 155 Total other liabilities 9,474 Total liabilities 44,810,972 CAPITAL ACCOUNTS Capital paid in 210,891 Surplus (Sec. 7) 488,173 Surplus (Sec. 13b) 27,543 Other capital accounts: Reserves for contingencies: Reserve for registered mail losses 7,518 All other 98,000 Earnings and expenses: Current earnings (2) Current expenses (2) Current net earnings (2) Add—profit and loss (2) Deduct—dividends accrued since January 1 (2) interest on Federal Reserve notes (2) Unallocated net earnings (2) Total other capital accounts 105,518 Total liabilities and capital accounts 45,643,097 1 Includes such organizations as the International Bank for Reconstruction and Development and the International Monetary Fund. 2 Amount in this account closed out at end of year. 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 1949 AND 1948 [In thousands of dollars] Total Boston New York Philadelphia Cleveland Richmond Item 1949 1948 1949 1948 1949 1948 1949 1948 1949 1948 1949 1948 ASSETS Gold certificates 22,622,430 22,335,430 865,183 757,179 7,250,198 7,390,4401,208,5081,011,0541,539,1111,442,1561,087,376 971,500 Redemption fund for Federal Reserve r1 notes 553,793 630,650 51,417 54,026 49,736 55,182 48,915 60,212 59,127 75,340 52,047 57,788 Total gold certificate reserves 23,176,223 ,966,080 916,600 811,205 7,299,934 7,445,6221,257,4231,071,2661,598,2381,517,4961,139,4231,029,288 w Other cash 257,845 292,303 26,367 32,787 41,720 42,544 14,489 17,967 21,343 22,367 21,367 20,827 l Discounts and advances: Secured by U. S. Govt. securities. . 8,259 32,680 1,241 1,090 1,415 17,860 1,695 2,095 455 215 2,400 1,275 Other 69,586 190,125 4,378 11,978 21,962 60,840 5,560 15,400 6,394 17,492 3,406 9,316 Total discounts and advances. . . 77,845 222,805 5,619 13,068 23,377 78,700 7,255 17,495 6,849 17,707 5,806 10,591 Industrial loans 2,070 832 1,885 767 1 106 65 U. S. Government securities: Bills 4,829,247 5,487,406 333,160 340,112 1,144,483 1,317,805 328,959 391,965 445,406 526,077 310,023 356,374 Certificates 6,275,450 6,077,569 432,931 408,558 1,487,219 1,457,291 427,471 434,121 578,791 582,657 402,865 394,702 Notes 562,200 790,550 38,785 53,144 133,236 189,560 38,296 56,469 51,852 75,790 36,092 51,341 o Bonds 7,217,70010,977,221 497,935 737,933 1,710,523 2,632,140 491,655 784,103 665,6961,052,386 463,355 712,905 8 Total U. S. Govt. securities 18,884,597 23,332,746 1,302,811 1,539,747 4,475,461 5,596,796 1,286,381 1,666,658 1,741,7452,236,910 1,212,335 1,515,322 Total loans and securities 18,964,512 23,556,383 1,308,430 1,552,815 4,498,838 5,675,496 1,295,521 1,684,920 1,748,5952,254,617 1,218,247 1,525,978 Due from foreign banks 38 49 U6 i Federal Reserve notes of other Federal Reserve Banks 162,306 186,738 7,982 7,511 24,252 20,331 10,369 10,935 10,825 10,515 19,976 33,918 Uncollected items 2,946,781 2,860,271 225,098 239,342 546,227 507,095 172,456 173,597 267,302 290,167 291,047 243,580 Bank premises 33,738 32,348 1,129 1,185 7,872 8,023 2,987 3,053 4,936 4,867 2,470 2,557 Other assets 101,654 148,699 7,140 10,004 23,583 35,252 6,492 10,279 9,249 14,209 6,475 9,682 Total assets 45,643,097 50,042,871 2,492,749 2,654,852 12,442,438 13,734,379 2,759,740 2,972,021 3,660,4914,114,242 2,699,007 2,865,832 1 After deducting $26,000 participations of other Federal Reserve Banks on Dec. 31, 1949, and $33,000 on Dec. 31, 1948. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 23,482,64624,161,103 ,397,1441,421,708 5,430,282 5,582,2971,632,1891,662,5312,050,0792,144,650 1,580,1601,657,802 Deposits: Member bank—reserve account. . . 16,568,088 20,479,200 711,482 859,338 5,347,438 6,701,274 788,335 951,2331,185,9871,510,027 708,359 848,901 U. S. Treasurer—general account. . 821,354 ,122,900 69,946 85,223 255,479 184,745 63,750 104,176 66,722 104,469 62,147 69,937 Foreign 766,521 641,692 47,918 40,049 1246,250 1209,368 60,848 51,492 69,975 58,484 37,269 31,150 Other 750,269 547,252 7,750 6,025 464,380 430,976 5,131 6,060 9,162 12,347 43,503 5,918 Total deposits 18,906,23222,791,044 837,096 990,635 6,313,547 7,526,363 918,0641,112,9611,331,8461,685,327 851,278 955,906 Deferred availability items 2,412,620 2,319,336 204,434 193,312 446,138 390,869 143,300 134,949 201,506 213,208 223,472 212,326 Other liabilities including accrued dividends 9,474 10,652 718 642 2,303 2,670 557 674 979 1,086 518 624 Total liabilities 44,810,97249,282,135 2,439,3922,606,297 12,192,270 13,502,199 2,694,110 2,911,1153,584,410 4,044,2712,655,428 2,826,658 CAPITAL ACCOUNTS Capital paid in 210,891 201,351 12,001 11,364 72,425 69,333 15,084 14,681 19,432 19,073 9,223 8,717 Surplus (Sec. 7) 488,173 466,711 30,778 29,347 148,149 143,019 38,205 36,704 45,957 43,968 23,779 22,417 Surplus (Sec. 13b) 27,543 27,543 3,011 3,011 7,319 7,319 4,489 4,489 1,006 1,006 3,349 3,349 Other capital accounts. 105,518 65,131 7,567 4,833 22,275 12,509 7,852 5,032 9,686 5,924 7,228 4,691 Total liabilities and capital accounts . 45,643,097 50,042,871 2,492,7492,654,852 12,442,43813 ,734,379 2 ,759,740 2 ,972 ,0213,660,4914,114,242 2,699,007 2,865,832 Contingent liability on acceptances purchased for foreign correspondents. 10,507 3,329 210 23,319 21,065 841 270 967 306 515 163 Commitments to make industrial loans. 2,288 1,643 75 689 46 886 969 15 131 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent 24,358,525 255,127,171 1,452,2441,492,676 5,598,022 5,749,057 1,681,5771,730,9922,143, ,234,859 1,647,4861,732,817 Held by Federal Reserve Bank and forwarded for redemption 875,879 966,068 55,100 70,968 167,740 166,760 49,388 68,461 93,039 90,209 67,326 75,015 Federal Reserve notes, net3 23,482,64624,161,103 1,397,1441,421,708 5,430,282 5,582,297 .632,189 ,662,5312,050,079 2,144,650 1,580,160 1,657,802 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificates 14,359,00013,579,000 440,000 460,000 4,670,000 4,870,000 750,000 550,000 1,000,000 745,000 670,000 625,000 Eligible paper 7,701 30,080 1,240 1.090 1,415 17,810 1,695 2,095 2,401 1,275 U. S. Government securities 10,800,00012,200,000 1,100,0001,100,000 1,000,000 1,000,000 ,000,000 1,200,0001,150,0001,500,000 1,000,000 1,150,000 Total collateral held 25,166,701 25,809,080 1,541,240 1,561,090 5,671,415 5,887,810 1,751,695 ,752,095 2,150,000 2,245,000 1,672,401 1,776,275 i After deducting $520,250,000 participations of other Federal Reserve Banks on Dec. 31, 1949, and $432,276,000 on Dec. 31, 1948. * After deducting $7,188,000 participations of other Federal Reserve Banks on Dec. 31, 1949, and $2,264,000 on Dec. 31, 1948. OO * Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing bank. 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 1949 AND 194&-Continued K> [In thousands of dollars] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Item 1949 1948 1949 1948 1949 1948 1949 1948 1949 1948 1949 1948 1949 1948 ASSETS Gold certificates 995,7001,059,483 4,375,007 4,371,528 686,840 669,692 424,248 470,419 828,480 827,337 685,083 574,293 2,676,696 2,790,349 Re n d o e t m es ption fund for Federal Reserve 39,851 44,408 82,957 106,421 42,929 44,871 22,338 23,136 34,766 36,192 27,142 26,711 42,568 46,363 r-1 Total gold certificate reserves.. ,035,5511,103,8914,457,964 4,477,949 729,769 714,563 446,586 493,555 863,246 863,529 712,225 601,004 2,719.264 2,836,712 Other cash 21,132 23,506 29,800 40,332 18,957 16.622 5,907 12,128 12,170 11,516 13,849 14,918 30,744 36,789 Discounts and advances: Secured by U. S. Govt. securities. 29 35 125 2,300 500 49 175 850 7,035 100 Other ; 2,850 7,795 9,627 25,857 2,502 6,845 1,738 4,753 2,552 6,654 2,432 6,464 6,185 16,731 O Industr T ia o l ta lo l a d n i s scounts and advances. 2,879 7,830 9,752 28,157 2,502 7,345 1,78 7 7 8 4,928 3,402 13,689 2,432 6,464 6,185 16,831 5 U. S. Government securities: Bills 258,911 275,100 720,606 797,316 260,982 302,977 156,337 167,963 233,581 255,774 208,889 248,684 427,910 507,259 N Ce o r t t e i s ficates 33 3 6 0 , , 4 1 4 4 6 1 3 3 04 9 , , 6 6 8 3 7 3 93 8 6 3 , , 4 8 0 9 4 0 8 1 6 1 3 2 , , 5 3 5 2 0 8 33 30 9 , , 3 1 8 3 2 8 33 4 5 3 , , 5 6 6 4 1 8 20 1 3 8 , , 1 2 5 0 6 0 1 2 8 4 6 , , 1 0 9 2 8 9 30 2 3 7 , , 5 1 3 9 0 3 2 3 8 6 3 , , 8 2 4 8 8 1 2 2 7 4 1 , , 3 4 1 4 8 4 2 3 7 5 5 , , 8 4 2 2 7 9 5 4 5 9 6 , , 8 0 1 5 5 5 55 7 1 1 , , 7 7 0 6 3 4 o Bonds 386,962 550,320 1,077,0031,559,731 390,059 606,086 233,658 336,001 349,106 511,660 312,202 497,477 639,546 996,479 i Total U. S. Govt. securities... 1,012,460 1,169,740 2,817,903 3,332,9251,020,5611,288,272 611,351 714,191 913,4101,087,563 816,8531,057,4171,673,326 2,127,205 Total loans and securities 1,015,3391,177,570 2,827,655 3,361,0821,023,063 1,295,617 613,216 719,119 916,812 1,101,252 819,285 1,063,8811,679,5112,144,036 Due from foreign banks 1 1 1 Federal Reserve notes of other Federal Reserve Banks 18,865 19,581 18,464 22,147 8,781 8,853 5,154 9,274 6,386 8,153 11,715 10,122 19,537 25,398 Uncollected items 211,621 180,309 435,849 464,344 171,468 160,762 79,245 73,484 163,207 154,841 134,637 126,991 248,624 245,759 Bank premises 1,523 1,574 3,514 3,191 1,926 1,941 1,146 1,177 2,323 2,386 717 756 3,195 1,638 Other assets 5,499 7,536 15,363 21,183 6,803 8,593 3,190 4,465 4,942 6,820 4,208 6,738 8,710 13,938 Total assets. 2,309,532 2,513,9697,788,614 8,390,2351,960,768 2,206,9531,154,4451,313,2031,969,0872,148,499 1,696,63711,824,4124,709,5895,304,274 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 1,290,9991,329,2724,501,280 4,598,4261,090,4601,144,264 612,217 631,349 918,194 939,231 640,274 623,7212,339,368 2,425,852 Deposits: Member bank—reserve account. 685,366 874,4512,627,072 3,121,362 611,854 776,122 394,920 506,653 768,824 942,409 814,892 967,5611,923,559 2,419,869 U. S. TreasureV—general account. 50,493 75,302 56,269 114,069 31,881 84,998 36,733 74,130 44,989 80,835 40,242 71,341 42,703 73,675 Foreign 31,185 26,064 104,963 86,455 27,382 22,885 19,015 15,893 27,382 22,249 26,621 21,614| 67,713 55,989 Other 31,948 3,939 12,519 10,925 29,880 10,236 4,997 2,842 35,695 3,133 31,700 3,053! 73,604 51,798 Total deposits 798,992 979,756 2,800,823 3,332,811 700,997 894,241 455,665 599,518 876,8901,048,626 913,4551,063,569 2,107,579 2,601,331 Deferred availability items 182,689 171,763 370,515 353,456 136,306 138,815 63,781 61,750 141,514 131,455 111,613 108,995 187,352 208,438 Other liabilities including accrued dividends 454 490 1,679 1,753 474 563 354 381 396 457 325 418 717 894 Total liabilities 2,273,134 2,481,2817,674,297 8,286,4461,928,2372,177,8831,132,0171,292,9981,936,9942,119,7691,665,6671,796,7034,635,016 5,236,515 CAPITAL ACCOUNTS Capital paid in 8,240 7,874 26,885 25,480 6,894 6,693 4,709 4,472 7,379 6.968 8,456 7,852 20,163 18,844 Surplus (Sec. 7) 21,194 20,028 72,029 68,842 19,118 17,974 12,494 11,797 18,045 17,008 15,873 14,954 42,552 40,653 Surplus (Sec. 13b) 762 762 1,429 1,429 521 521 1,073 1,073 1,137 1,137 1,307 1,307 2,140 2,140 Other capital accounts. 6,202 4,024 13,974 8,038 5,998 3,882 4,152 2,863 5,532 3,617 5,334 3,596 9,718 6,122 Total liabilities and capital accounts 2,309,532 2,513,969 7,788,614 8,390,2351,960,768 2,206,9531,154,4451,313,2031,969,0872,148,4991,696,637 ,824,4124,709,589 5,304,274 Contingent liability on acceptances purchased for foreign correspondents 431 136 1,450 453 378 120 263 83 378 117 368 113 935 293 Commitments to make industrial loans 288 54 31 500 144 103 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent.... 1,361,4041,399,057 4,603,840 4,747,7881,133,2251,186,204 622,585 648,743 949,986 969,727 683,605 659,057 2,481,4332,576,194 Held by Federal Reserve Bank and forwarded for redemption. 70,405 69,785 102,560 149,362 42,765 41,940 10,368 17,394 31,792 30,496 43,331 35,336 142,065 150,342 Federal Reserve notes, net *... 1,290,9991,329,272 4,501,280 4,598,4261,090,4601,144,264 612,217 631,349 918,194 939,231 640,274 623,7212,339,368 2,425,852 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificates 675,000 575,000 3,060,000 2,765,000 400,000 315,000 210,000 210,000 280,000 280,000 204,000 184,000 2,000,000 2,000,000 Eligible paper. 500 50 175 900 7,035 100 U. S. Government securities.... 700,000 850,000 1,600,000 2,000,000 800,000 950,000 450,000 450,000 700,000 700,000 500,000 500,000 800,000 800,000 Total collateral held. 1,375,000 1,425,000 4,660,000 4,765,000 1,200,0001,265,500 660,050 660,175 980,900 987,035 704,000 684,000 2,800,000 2,800,100 1 Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank. OO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, END OF DECEMBER 1947, 1948, AND 1949 [In thousands of dollars] December 31 Change during Rate of Type of issue interest (Per cent) 1949 1948 1947 1948 Treasury bonds: 1948-50* 49,600 -49,600 1948-51 100,500 -100,500 1948* 66,000 -66,000 1949-51*, June. . 102,360 4,700 -102,360 +97.660 1949-51*. Sept.. . 247,081 5,706 -247,081 +241.375 1949-51*. Dec... 170,365 18,551 -170,365 +151,814 1949-52 24,525 32,000 -24,525 -7,475 1949-53 72,600 77,600 -72.600 -5,000 1950-52*. Mar.. . 116,766 139,284 8,065 -22,584 +131,219 1950-52*. Sept.. . 400,000 421,524 57,261 -21,524 +364,263 1950-52, Sept.. . . 63,200 63,200 71,350 -8.150 1951-54. 41,500 61,175 86,400 -i9,675 -25,225 1951-55 11,900 12,229 19,520 -329 -7,291 1951-53* 695,600 787,429 400,666 -91,829 +386,763 1951-53 18,105 44,270 -18,105 -26,165 1951-55* 9,366' 13,148 3,700 -3,848 +9,448 1952-54*. Mar.. . 65,200 83,994 38,242 -18,794 +45,752 1952-54*. June. . 443,900 504,323 174,796 -60,423 +329,527 1952-55*. June. . 110,100 130,603 50,236 -20,503 +80,367 1952-54* Dec... 280,100 476,707 283,810 -196,607 + 192,897 1953-55 16,238 -16,238 1954-56 3,150 -3,150 1955-60 30,545 -30,545 1956-58* 36,700 83,461 63,269 -46,761 +20,192 1956-59* 59,700 338,363 291,591 -278,663 +46,772 1956-59 21,316 -21,316 1958-63 11,725 72,591 -11,725 -60,866 1959-62*1, June.. 483,800 991,121 55.524 -507,321 +935,587 1959-62*1, Dec.. . 807,300 929,097 113,693 -121,797 +815,404 1960-65 63,250 96,185 -63,250 -32,935 1962-67*1 28,100 181,670 16,260 -153,570 + 165,410 1963-68*1 119.300 285,409 20,672 -166,109 +264,737 1964-69*1, June. . 29,000 161,276 8,437 -132,276 + 152,839 1964-69*1, Dec.. . 220,100 359,980 13,328 -139,880 +346,652 1965-70*1 368,700 434,582 51,017 -65,882 +383,565 1 1 1 1 9 9 9 9 6 6 6 6 7 7 6 7 - - - - 7 7 7 7 2 2 1 2 * * * * 1 1 1 . , , S D J e u p e n t c . e . . . . . . 1, 9 8 3 6 1 0 4 9 5 8 , , , , 7 0 3 5 0 0 0 0 0 0 0 0 2 1 , , 3 2 1 1 1 3 0 6 0 7 0 0 , , , , 7 0 0 6 8 9 9 6 2 3 8 7 2 1 6 1 1 3 1 0 0 , , , , 1 3 8 7 5 1 4 7 2 6 0 7 - - - - 2 1 5 6 6 4 0 5 4 8 2 , , , , 7 9 0 2 8 9 6 9 2 3 8 7 + + 1 2 , , + + 1 1 7 0 4 9 5 0 9 7 , , , , 2 4 3 5 5 7 0 1 7 7 5 6 Total Treasury bonds 7,217,700 10,977,221 2,852,869 -3,759,521 +8,124,352 Treasury notes:* Sept. 15. 1948.... 548,150 -548,150 Oct. 1, 1948.... 928,400 -928,400 Jan. 1, 1949.... 244^050 -244,050 +244,050 Apr. 1, 1950.... 298,100 546,500 -248,400 +546,500 Mar. 15. 1954.... 264,100 +264,100 Total Treasury notes 562,200 790,550 1,476,550 -228,350 -686,000 Certificates* 6,338,863 -6,338,863 457,642 -457,642 1,803,000 4,550,372 -2,747,372 +4,550,372 4,472,450 1.527,197 +2,945,253 +1,527,197 Total certificates 6,275.450 6,077,569 6,796,505 + 197,881 -718,936 Treasury bills* 4,829,247 5,487,406 11.433,410 -658,159 -5,946,004 Total holdings 18,884,579 23,332,746 22,559,334 -4,448,167 +773.412 * Taxable. 1 Restricted as to commercial bank ownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

85 FEDERAL RESERVE SYSTEM NO. 4r—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1943-49 » [In millions of dollars] Date Amount Date Amount Date Amount 1943—jan- 29 115 1943—Mar. 19 778 1943—Sept. 9 126 30 202 20 768 10 243 31* 202 21* 768 11. 246 Mar. 2 3 22 603 12* 246 4 174 23 700 13 214 5 354 24 512 14 179 6 543 25 432 15 424 7* 543 26 384 16 258 8 591 27 304 1945—Mar. 15 4 9 648 28* 304 Dec. 4 107 10 632 29 104 5 318 11 790 30 40 6 374 12 940 June 15 805 7 484 13 1,043 16 659 8 484 14* 1,043 17 350 9* 484 15 1,302 18 256 10 202 16 1,250 19 212 1949—June 15 220 17 981 20* 212 16 .... 127 18 836 Sept. 8 11 1 There were no issues during the years 1944, 1946, 1947, and 1948. Interest rate \i per cent throughout. * Sunday or holiday. NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1945-49 [Number in thousands: amounts in thousands of dollars] 1945 1946 1947 1948 1949 NUMBER OF PIECES HANDLED1 Discounts and advances: Notes discounted and advances made 10 8 Industrial loans: Loans made .3 .4 Commitments to make industrial loans () () () (*) () Currency received and counted. 3,016,719 423,547 3,491,962 3,754,584 3,809,865 Coin received and counted.. . . 4,562,709 743,862 6,159,697 6,531,128 7,294,363 Checks handled: U. S. Govt checks 510,608 380,634 331,914 331,866 357,044 All other 1,341,342 .597,377 1,668,651 1,780,185 1,847,807 Collection items handled: U. S. Govt coupons paid.. 18,292 20,192 19,003 17,417 16,334 All other 4,483 4,551 •7,135 11,373 11,451 Issues, redemptions, and exchanges of U. S. Govt securities 382,067 245,904 177,351 164,556 151,103 Transfer of funds 939 1,059 1,148 1,220 1,232 AMOUNTS HANDLED Discounts and advances 34,778,804 20,133,819 17,234,926 19,138,175 20,216,071 Industrial loans: Loans made 14,043 3,445 9,296 15,994 4,005 Commitments to make industrial loans 2,350 8,845 6,069 2,187 4,130 Currency received and counted. 18,307,687 20,945,847 22,099,562 24,307,644 23,841,612 C C h oi e n c k r s e c h e a iv n e d d l e a d n : d counted.... 445,892 519,892 622,054 578,857 623,678 U. S. Govt checks 124,610,917 80,419,096 72,577,329 69,605,341 64,379,607 All other 563,498,349 651,457,054 719,630,054 799,771,839 758,342,771 Collection items handled: U. S. Govt coupons paid... 2,348,172 2,817,311 2,491,424 2,379,155 2,303,038 All other 9,295,666 9,312,790 6,455,968 4,965,273 4,175,169 Issues, redemptions, and exchanges of U. S. Govt securities 302,353,553 278,422,685 254,060,950 321,953,221 289,312,802 Transfer of funds 223,490,280 252,991,164 316,459,625 393,459,807 415,887,444 1 Two or more checks, coupons, etc., handled as a single item are counted as one "piece." 2 Less than 50. »Increase reflects midyear change in method of counting items. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1949 Phila- Cleve- Rich- Minne- Kansas San Item System Boston New York delphia land mond Atlanta Chicago St. Louis apolis City Dallas Francisco CURRENT EARNINGS Discounts and advances $3,471,924 $181,165 $1,425,130 $196,459 $285,904 $197,358 $110,509 $418,125 $133,749 $68,198 $175,421 $86,360 $193,546 Industrial loans 41,013 37,728 20 2,769 496 Commitments to make industrial loans 10,280 451 79 6,897 734 713 435 17 954 U. S. Government securities.. 312,240,932 21,419,245 74,083.054 21,269,71728,798,07520,042,91716,734,21346,578,291 16,872,99410,104,92815,098,53413,506,250 27,732,714 All other 772,781 10,348 131,663 6,954 240,360 16,975 34,513 55,148 15,391 5,408 223,847 12,652 19,522 Total current earnings... 316,536,930 21,611,209 75,639,84721,510,93729,331,256 20,260,75316,879,948 47,051,99917,022,13410,179,03015,497,81913,605,26227,946,736 CURRENT EXPENSES Operating expenses: Salaries: Officers 3,649,245 224,230 718,563 176,180 297,441 245,889 264,700 451,219 244,115 200,910 247,877 229,588 348,533 Employees 50,024,026 3,263,147 12,257,194 3,016,305 4,214,252 3,187,576 2,276,971 7,817,701 2,943,024 1,495,522 2,664,030 2,313,414 4,574,890 Retirement System contributions 5,292,429 338,648 1,246,846 309,532 442,256 353,927 258,983 824,887 306,939 153,594 299,676 256,407 500,734 Legal fees 18,907 68 23 1,053 8,568 1,212 6,598 1,220 2 163 Directors' fees and expenses. 276,448 17,913 20,651 18,325 19,047 18,711 38,447 17,460 22,125 17,863 27,423 25,067 33.416 Federal Advisory Council, fees and expenses.. 22,164 1,540 1,372 1,424 1,518 1,110 2,283 1,976 1,293 1,950 2,019 2,496 3,183 Traveling expenses (other than of directors and members of Federal Advisory Council) 850,247 49,109 104,126 32,968 71,201 73,652 56,301 120,899 66,656 62,117 62,860 53,968 96,390 Postage and expressage.. 8,845,639 833,094 1,371,694 540,775 757,692 756,801 679,304 1,228,574 474,204 303,587 514,708 466,321 918,885 Telephone and telegraph. 519,097 23,612 101,416 31,156 47,032 30,440 42,344 32,923 45,345 26,905 39,636 34,446 63,842 Printing, stationery, and supplies 3,686,535 328,275 683,692 218,841 267,725 208,009 236,198 654,627 257,068 101,447 216,506 189,532 324,615 Insurance 650,526 43,701 159,806 30,454 54,712 37,361 30,610 91,516 38,046 21,611 42,701 32,270 67,738 Taxes on real estate 1,937,416 203,253 482,167 91,436 215,922 87,096 79,760 301,363 80,521 98,688 105,724 49,577 141,909 Depreciation (building).. 1,340,323 55,832 261.866 66,352 244,966 115,160 50,607 176,790 110,472 31,406 105,601 41,309 79,962 Light, heat, power, and water 701,661 48,889 140,171 43,858 93,747 47,709 39,397 93,691 53,603 26,470 31,534 40,313 42,279 Repairs and alterations.. 835,401 25,407 62,208 31,494 203,635 78,743 27,345 160,121 59,524 57,226 69,612 24,219 35,867 Rent 271,011 1,262 7 849 4,868 7,608 19,915 68,541 6,490 1,268 13,732 9,944 129,534 Furniture and equipment, including rental 3,540,338 210,971 731,105 259,661 370,602 289,833 156,344 580,241 211,728 89,319 191,195 168,359 280,980 All other 1,313,481 96,349 177,731 78,276 247,784 62,210 65,919 161,354 87,598 90,426 71,626 61,588 112,620 Inter-Bank expenses 28,952 -314,334 36,764 42,279 22,518 18,842 63,418 16,544 11,489 16,544 16,084 40,900 Total operating expenses 83,774,894 5,794,252 18,206,297 4,992,703 7,605,247 5,624,353 4,344,270 12,848,513 5,031,893 2,791,798 4,724,224 4,014,904 7,796,440 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Less reimbursement for certain fiscal agency and other expenses.... 15,844,034 907,219 3,146,763 833,222 1,231,421 901,269 903,985 2,808,274 981,091 507,750 979,791 912,463 1,730,786 Net operating expenses.. 67,930,860 4,887,033 15,059,534 4,159,481 6,373,826 4,723,084 3,440,28510,040,239 4,050,802 2,284,048 3,744,433 3,102,441 6,065,654 Assessment for expenses of Board of Governors 3,242,500 203,600 1,022,800 260,300 298,100 161,000 133,800 446,200 117,300 80,800 117,200 113,000 288,400 Federal Reserve currency: Original cost 5,582,979 337,026 1,135,259 413,412 456,129 441,215 454,701 1,005,538 345,540 98,048 204,355 213,288 478,468 Cost of redemption 721,337 44,886 132,268 44,144 58,120 61,572 65,138 116,364 38,513 18,213 30,328 34,146 77,645 Total current expenses. . 77,477,676 5,472,545 17,349,861 4,877,337 7,186,175 5,386,871 4,093,924 11,608,341 4,552,155 2,481,109 4,096,316 3,462,875 6,910,167 PROFIT AND LOSS Current net earnings 239,059,254 16,138,664 58,289,986 16,633,600 22,145,081 14,873,882 12,786,024 35,443,658 12,469,979 7,697,921 11,401,503 10,142,387 21,036,569 Additions to current net earnings: Profits on sales of U. S. Government securities (net) 31,361,686 2,125,355 7,652,704 2,272,116 2,961,697 1,995,190 1,638,435 4,268,571 1,646,280 912,889 1,499,577 1,395,483 2,993,389 All other 302,118 51,347 7,747 1,607 107,433 768 385 131,944 126 32 329 72 328 Total additions....... 31,663,804 2,176,702 7,660,451 2,273,723 3,069,130 1,995,958 1,638,820 4,400,515 1,646,406 912,921 1,499,906 1,395,555 2,993,717 Deductions from current net earnings: Charge-offs and special depreciation on bank premises 515,035 218,696 178,577 117,762 Retirement System (adjustment for revised benefits) 2,613,424 158,177 667,315 178,515 224,183 163,430 98,399 328,771 153,522 84,292 186,597 114,429 255,794 All other 263,473 203,729 2,615 590 1,348 5,128 6,240 36,737 1,096 358 1,239 790 3,603 Total deductions...... 3,391,932 580,602 669,930 179,105 404,108 168,558 104,639 483,270 154,618 84,650 187,836 115,219 259,397 Net additions 28,271,872 1,596,100 6,990,521 2,094,618 2,665,022 1,827,400 1,534,181 3,917,245 1,491,788 828,271 1,312,070 1,280,336 2,734,320 Transferred to reserves for contingencies 40,394,146 2,733,910 9,765,231 2,820,890 3,760,963 2,537,242 2,178,868 5,936,360 2,116,055 1,288,565 1,915,442 1,738,520 3,602,100 Paid U. S. Treasury (interest on outstanding Federal Reserve notes) 193,145,837 12,877,827 46,165,51313,510,43817,903,138 12,261,570 10,490,252 28,681,442 10,294,486 6,268,253 9,328,916 8,272,07617,091,926 Net earnings after reserves and payments to U. S. Treasury...., 33,791,143 2,123,027 9,349,763 2,396,890 3,146,002 1,902,470 1,651,085 4,743,101 1,551,226 969,374 1,469,215 1,412,127 3,076,863 Dividends paid 12,329,373 692,023 4,220,220 895,650 1,156,753 539,948 485,448 1,556,097 407,193 272,831 432,591 492,888 1,177,731 Transferred to surplus (Sec. 7) 21,461,770 1,431,004 5,129,543 1,501,240 1,989,249 1,362,522 1,165,637 3,187,004 1,144,033 696,543 1,036,624 919,239 1,899,132 Surplus (Sec. 7), January 1. . 466,711,126 29,347,150 143,019,197 36,704,21743,967,550 22,416,66720,027,863 68,841,817 17,973,827 11,797,316 17,008,400 14,954,200 40,652,922 Surplus (Sec. 7), December 31. 488,172,896 30,778,154 148,148,740 38,205,45745,956,799 23,779,189 21,193,500 72,028,821 19,117,860 12,493,859 18,045,024 15,873,439 42,552,054 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-49 oo oo Bank and period e C a u r r n r in en g t s e C x u p r e r n e s n e t s U N . b S e e m t . f o e T e r n a r e t r e s n a p s t i a n o u y g r - s y » Div p id ai e d nds F p r a T a i r d n e c a t h o s i u s U r e y . t l a S x . Pa ( T S id r e e c t a . o s 1 u U 3 r b . y ) S. P F ( a I . T n id R r t e e . t r a o e n s s u o U t r t . e y o s n S ) . T t ( r o S a e n s c u s . f r e 1 p r 3 l r u b e s ) d T t r o ( a S n s e u s c f r . e p r 7 l r u ) e s d 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 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 1919 102,380,583 19,339,633 78,367,504 5,011,832 2 703,894 70 651,778 Q 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 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 1925 41,800,706 27,528,163 9,449,066 6,915,958 59,300 2,473,808 1926 47,599,595 27,350,182 16,611,745 7,329,169 818,150 8,464,426 1927 . 43,024,484 27,518,443 13,048,249 7,754,539 249,591 5,044,119 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 1934 48 902 813 29 241 396 15 231 409 8,781 661 $—60 323 6 510 071 1935 42,751,959 31,577,443 9,437,758 8,504,974 $ 297 667 27,695 607,422 i 1936 37,900,639 29,874,023 8,512,433 7,829,581 227 448 102,880 352,524 1937 41,233,135 28,800,614 10,801,247 7,940,966 176,625 67,304 2,616,352 1938 36,261,428 28,911,608 9,581,951 8,019,137 119,524 —419,140 1,862,433 1939 38,500,665 28 646,855 12,243,365 8,110,462 24 579 —425 653 4 533 977 1940 43,537,805 29,165,477 25,860,025 8,214,971 82,152 -54,456 17,617,358 § 1941 41,380,095 32,963,150 9,137,581 8,429,936 141,465 —4,333 570,513 1942 52,662,704 38,624,044 12,470,451 8,669,076 197,672 49,602 3,554,101 1943 69,305,715 43,545,564 49,528,433 8,911,342 244,726 135,003 40,237,362 1944 104 391 829 49 175,921 58 437,788 9,500,126 326 717 201 150 48 409 795 1945 142,209,546 48,717,271 92,662,268 10,182,851 247,659 262,133 81,969,625 1946 150,385,033 57,235,107 92,523,935 10,962,160 67,054 27,708 81 467 013 1947 158,655,566 65,392,975 95,235,592 11,523,047 35,605 $75,223,818 86,772 8,366,350 1948 . . ... 304,160,818 72,710,188 197,132,683 11,919,809 166 690 356 18 522 518 1949 316,536,930 77,477,676 226,936,980 12,329,373 193,145,837 21,461,770 Total—1914-49. .. 2,699,036,159 1,132,479,332 1,482,184,244 278,959,256 149,138,300 2,188,893 435,060,011 3 -3,658 * 616,841,442 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate for each Reserve Bank, 1914-49: Boston 181,642,341 80,516,232 96,756,479 19,236,765 7,111,395 280,843 28,983,673 +135,412 41,008,391 New York 734,068,904 270,029,230 452,896,407 95,640,049 68,006,262 369,115 104,342,496 -433,413 184,971,898 Philadelphia. . . 202,317,585 83,836,016 115,688,226 24,923,287 5,558,901 722,406 31,366,631 +290,661 52,826,340 Cleveland 248,173.731 105,259,095 133,175,905 28,012,568 4,842,447 82,930 41,067,181 -9,907 59,180,686 Richmond 148,700,514 67,575,390 75,587,350 11,773,565 6,200,189 172,493 27,925,138 -71,516 29,587,481 Atlanta 131,221,475 55,465,890 68,343,648 10,069,265 8,950,561 79,265 22,773,535 +5,491 26,465,531 Chicago 375,082,879 151,810,221 208,091,413 32,693,889 25,313,526 151,045 62,552,014 +11,681 87,369,258 St. Louis 126,712,457 60,136,107 59,485,614 9,676,109 2,755,629 7,464 22,861,953 -26,514 24,210,973 Minneapolis. . . 83,226,575 38,438,114 41,934,982 6,701,195 5,202,900 55,615 13,474,451 +64,875 16,435,946 Kansas City.. . 129,481,758 65,131,593 59,397,404 9,396,589 6,939,100 64,213 20,829,874 -8,674 22,176,302 Dallas 104,430,416 50,511,720 49,014,486 9,223,606 560,049 102,083 18,867,159 +55,336 20,206,253 San Francisco.. 233,977,524 103,769,724 121,812,330 21,612,369 7,697,341 101,421 40,015,906 -17,090 52,402,383 Total 2,699,036,159 1,132,479,332 1,482,184,244 278,959,256 149,138,300 2,188,893 435,060,011 3,658 616,841,442 1 Current earnings less current expenses, plus other additions and less other deductions. 1 The Banking Act of 1933 eliminated the provision in the Federal Reserve Act requiring payment of a franchise tax. 3 On Dec. 31, 1949, 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 $27,542,653 ($27,546,311 received from the Secretary of the Treasury minus the $3,658 net debits shown here). 4 On Dec. 31, 1949, surplus (Sec. 7)—accumulated pursuant to Section 7 of the Federal Reserve Act—amounted to $488,172,896 ($616,841,442 retained net earnings, shown f h o e r r e c , o m nt i i n n u g s e n $ c 1 i 3 es 9 ) ,2 . 99,557, charge-off cost of Federal Deposit Insurance Corporation stock, and $500,000, charge-off on bank premises, plus $11,131,011 transferred from reserves 3C/5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 8—MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—END OF YEAR 1918-49 AND END OF MONTH 1949 [In millions of dollars] Reserve Bank credit outstanding Member bank End of year or month v co a D a a n u n d i c n s d - - e ts s Tot U al . S s . e G B cu o o r v n i e d ti r s e n s me c c n B e a t r i t t l e i l f s s i , , - ot A he ll r » Total s G to o c ld k T s r t o c e u r i a u n e n u r n a y r g c t d - - s y - - c M i u n l o a c n t i i e r o y - n T h c i u r o n a e r l g s a y d h s s - - R u F T B p r e w e y r o a d s e i s n e e t a d i h r k r t s e v s a s - - e l m de N e p m o o n s b - i e ts r R F c O e e o a d s t u h c e e n - e r r t v r a s e l Tot b a r l a e l s a e n r c E v e e x s cess 2 1 and notes 1918 1,766 239 28 211 493 2,498 2,873 1,795 4,951 288 51 121 118 1,636 51 1919 2,215 300 27 273 777 3,292 2,707 1,707 5,091 385 31 101 208 1,890 68 1920 2,687 287 26 261 380 3,355 2,639 1,709 5,325 218 57 23 298 1,781 1921 1,144 234 32 202 185 1,563 3,373 1,842 4,403 214 96 27 285 1,753 99 1922 618 436 29 407 351 J .405 3,642 1,958 4,530 225 11 29 276 1,934 1923 723 134 30 104 382 1,238 3,957 2,009 4,757 213 38 23 275 1.898 14 1924 320 540 75 465 441 1,302 4,212 2,025 4,760 211 51 39 258 2,220 59 1925 643 375 61 314 441 1,459 4,112 1,977 4,817 203 16 29 272 2,212 —44 1926 637 315 48 267 430 1,381 4,205 1,991 4,808 201 17 65 293 2,194 -56 1927 582 617 291 326 456 1,655 4,092 2,006 4,716 208 18 26 301 2,487 63 8 1928 1,056 228 54 174 524 1,809 3,854 2,012 4,686 202 23 27 348 2,389 —41 1929 632 511 77 434 440 1,583 3,997 2,022 4,578 216 29 30 393 2,355 -73 I 1930 . .... 251 729 164 565 393 1,373 4,306 2,027 4,603 211 19 28 375 2,471 96 1931 638 817 360 457 398 L.853 4,173 2,035 5,360 222 54 110 354 1,961 —33 1932 . . .. 235 1,855 422 1,433 55 2,145 4,226 2,204 5,388 272 8 43 355 2,509 576 1933 98 2,437 443 1,994 153 2,688 4,036 2,303 5,519 284 3 132 360 2,729 859 i 1934 7 2,430 396 2,034 26 2,463 8,238 2,511 5,536 3,029 121 189 241 4,096 1,814 1935 .... .... 5 2,431 216 2,215 50 2,486 10,125 2,476 5,882 2,566 544 255 253 5,587 2,844 1936 3 2,430 491 1,939 67 2,500 11,258 2,532 6,543 2,376 244 259 261 6,606 1,984 1937 10 2,564 752 1,812 39 2,612 12,760 2,637 6,550 3,619 142 407 263 7,027 1,212 1938 4 2,564 841 1,723 33 2,601 14,512 2,798 6,856 2,706 923 441 260 8,724 3,205 1939 7 2,484 1,351 1,133 102 2,593 17,644 2,963 7,598 2,409 634 653 251 11,653 5,209 1940 3 2,184 1,285 899 87 2,274 21,995 3,087 8,732 2,213 368 1,732 284 14,026 6,615 1941 3 2,254 1,467 787 104 2,361 22,737 3,247 11,160 2,215 867 1,360 291 12,450 3,085 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1942 6 6,189 2,793 3,396 484 6,679 22,726 3,648 15,410 M93 799 1,278 256 13,117 1,988 1943 5 11,543 1,630 9,913 691 12,239 21,938 4,094 20,449 2,303 579 1,716 339 12,886 1,236 1944 80 18,846 1,243 17,603 819 19,745 20,619 4,131 25,307 2,375 440 1,598 402 14,373 1,625 1945 249 24,262 947 23,315 580 25,091 20,065 4,339 28,515 2,287 977 1,308 495 15,915 1,458 1946 163 23,350 753 22,597 581 24,093 20,529 4,562 28,952 2,272 393 822 607 16,139 562 1947 85 22,559 2,853 19,706 536 23,181 22,754 4,562 28,868 1,336 870 961 563 17,899 1,499 1948 223 23,333 10,977 12,356 542 24,097 24,244 4,589 28,224 1,325 1,123 1,189 590 20,479 1,202 1949— January... 456 22,109 10,224 11,885 349 22,914 24,271 4,589 27,580 1,336 1,514 1,194 611 19,540 477 February.. 251 22,342 9,883 12,459 262 22,855 24,290 4,588 27,557 1,323 1,423 1,194 618 19,617 808 March.... 245 21,688 9,241 12,447 333 22,267 24,314 4,592 27,439 1,309 1,482 1,154 670 19,118 686 April 303 21,094 8,902 12,192 340 21,737 24,332 4,593 27,417 1,324 984 1,243 618 19,076 638 May 247 19,704 8,356 11,348 141 20,092 24,342 4,596 27,507 1,315 628 930 628 18,024 794 June 103 19,343 7,780 11,563 250 19,696 24,466 4,5,97 27,493 1,307 438 941 713 17,867 948 July 316 18,529 7,780 10,749 393 19,238 24,520 4,593 27,394 1,298 514 1,018 690 17,437 752 August 531 17,524 7,775 9,749 171 18,225 24,608 4,593 27,393 1,308 610 914 690 16,512 1,175 September, 109 18,010 7,538 10,472 297 18,415 24,602 4,593 27,412 1,311 1,176 1,051 713 15,947 771 October... 283 17,316 7,536 9,780 261 17,860 24,584 4,592 27,407 1,307 595 1,187 690 15,850 589 November. 321 17,682 7,513 10,169 263 18,267 24,479 4,596 27,543 1,317 517 1,238 689 16,038 671 December. 78 18,885 7,218 11,667 536 19,499 24,427 4,598 27,600 1,312 821 1,517 706 16,568 1,018 1 Includes Government overdrafts in 1918, 1919, and 1920. 2 Figures available only on call dates prior to 1929. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES DECEMBER 31, 1949 Cost Federal Reserve Bank or Net Branch Building Fixed ma- book value Land (Including chinery and Total vaults) equipment Boston $ 1,246,726 $ 3,542,603 662,157 $ 5,451,486 $ 1,129,116 New York. 5,215,656 12,183,528 4,835,045 22,234,229 6,667.687 Annex. . 592,679 1,451,570 215,418 2,259,667 828,798 Buffalo 255,000 465,707 720,707 375,701 Philadelphia. 1,884,357 4,463,369 920,743 7,268,469 2,986,586 Cleveland. . 1,295,490 6,464,253 1,639,034 9,398,777 2,280,817 Cincinnati.. 380,744 1,038,384 200,131 1,619,259 1,193,092 Pittsburgh. 1,189,941 1,049,450 379,694 2,619,085 1,461,758 Richmond. 271,924 2,101,178 663,667 3,036,769 1,037,981 Annex. . 80,333 482,482 109,132 671,947 139,014 Baltimore. 250,487 1,247,262 331,970 1,829,719 885,925 Charlotte.. 105,701 291,175 154,449 551,325 406,669 Atlanta 283,000 1,461,474 308,082 2,052,556 712,021 Birmingham. 124,137 330,680 65,491 520,308 131,775 Jacksonville. . 45,842 238,231 39,669 323,742 84,099 Nashville 48,000 211,616 35,091 294,707 96,345 New Orleans. 277,078 762,455 212,281 1,251,814 499,062 Chicago. 2,963,548 6,438,744 2,131,139 11,533,431 2,352,914 Detroit. , 1,022,064 1,301,593 160,241 2,483,898 1,161,281 St. Louis. .. 1,355,374 2,126,302 1,320,670 4,802,346 1,313,604 Little Rock. 85,007 240,733 151,092 476,832 185,013 Louisville. . 131,177 226,259 72,463 429,899 165,469 Memphis... 128,542 287,468 105,662 521,672 262,048 Minneapolis. 600,521 2,316,746 660,969 3,578,236 1,042,162 Helena 15,710 126,401 44,142 186,253 103,465 Kansas City 495,300 3,391,101 969,821 4,856,222 1,496,343 Denver 101,512 449,876 79,268 630,656 268,523 Oklahoma City. 65,021 409,890 95,480 570,391 215,933 Omaha 176,427 397,938 94,548 668,913 342,574 Dallas 189,831 1,350,945 451,242 1,992,018 413,053 El Paso 39,003 114,644 30,191 183,838 42,311 Houston. . . . 78,812 313,335 112,111 504,258 147,609 San Antonio. 75,002 159,743 55,859 290,604 113,553 San Francisco... 412,996 3,144,407 784,102 4,341,505 879,629 Los Angeles 443,488 988,109 323,195 1,754,792 466,614 Portland 159,980 1469,739 629,719 629,719 Salt Lake City. . 114,075 341,449 84,814 540,338 217,210 Seattle 250,000 1752,242 1,002,242 1,002,242 Total 22,450,485 63,133,081 18,499,063 104,082,629 33,737,715 OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Boston 372,988 78,793 451,781 239,600 New York.... 45,000 125,864 170,864 62,600 Richmond 113,183 1,099 114,282 78,849 Charlotte 10,868 10,868 10,868 Atlanta 35,000 35,000 35,000 Jacksonville. . M55.617 155,617 155,617 St. Louis 176,055 3 1,161,339 146,456 1,483,850 1,328,194 San Francisco 60,000 60,000 60.000 Los Angeles. . 35,000 35,000 35,000 Total.... 1,003,711 1,367,095 146,456 2,517,262 2,005,728 1 Cost of building under construction; Branch occupies rented quarters. J Includes building on site. 1 Includes cost of remodeling in process. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 10—NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS [December 31, 1949] President Other officers Employees x Total Federal Reserve Bank (Including branches) Annual salary Number Annual salaries Number Annual salaries Number Annual salaries Boston. ... $25 000 19 $204,950 1 220 $3,247,654 1,240 $3,477,604 New York 50,000 49 680,700 3,623 11,419,914 3,673 12,150,614 Philadelphia 25 000 13 153,000 1,054 2,919,352 1,068 3,097,352 Cleveland 25,000 29 276,150 1,657 4,117,352 1,687 4,418,502 Richmond 25 000 23 226,400 1 222 3,047,963 1,246 3,299,363 Atlanta 25,000 29 239,600 923 2,195,188 953 2,459,788 Chicago . 35,000 37 397,500 2,685 7,552,951 2,723 7,985,451 St Louis 25,000 26 229,300 1,070 2,798,683 1,097 3,052,983 Minneapolis 25,000 23 205,750 614 1,488,597 638 1,719,347 Kansas City . 25,000 24 220,200 1,035 2,571,291 1,060 2,816,491 Dallas 25,000 23 202,500 927 2,304,555 951 2,532,055 San Francisco 25,000 35 328,400 1,595 4,406,898 1,631 4,760,298 Total $335,000 330 $3,364,450 17,625 $48,070,398 17,967 $51,769,848 1 Includes 302 part-time employees. NOTE.—During the year 1949, the Banks were reimbursed $10,126,990 on account of salaries of officers and emplo Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES, AND BUYING RATES ON ACCEPTANCES [Per cent per annum] In effect December 31, 1949 New Phila- Cleve- Rich- St. Minne- Kansas San Type of transaction Boston York delphia land mond Atlanta Chicago Louis apolis City Dallas Francisco Discounts for and advances to member banks under Sees. 13 and 13a of the Federal Reserve Act IK IK IK IK IK Advances to member banks under Sec. 10(b) of the Federal Reserve Act 2 2 2 2 2 Advances to individuals, partnerships, or corporations other than member banks secured by direct obligations of the United States (last paragraph of Sec. 13 of the Federal Reserve Act) 2H 2H 2H 2V2 2H Loans to industrial or commercial businesses under Sec. 13b of the Federal Reserve Act, direct or in participation with financing institutions 3-5 Discounts for and purchases from financing institutions under Sec. 13b of the Federal Reserve Act: On portion for which institution is obligated 0) C1) On remaining portion (3) (•) Commitments to make loans under Sec. 13b of the Federal Reserve Act: mi To industrial or commercial businesses i-iX K-iX -iX xx-\x To financingi nstitutions i-iX XiX *X Effective minimum buying rates on prime bankers' ac- XX-iX ceptances payable in dollars 1-90 days 91-120 days 121-180 days 1 Rate charged borrower by financing institution less commitment rate. 2 Rate charged borrower, but not to exceed 1 per cent above the discount rate. * Rate charged borrower. * Financing institution is charged X per cent on undisbursed portion of loan. 6 The same minimum rates in effect at the Federal Reserve Bank of New York generally apply to any purchases made by other Federal Reserve Banks. 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 credic 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 loans 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

95 FEDERAL RESERVE SYSTEM NO. 12—MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits 1 Time deposits Effective date of change (All member Central reserve Reserve Country banks) city banks city banks banks 1917—June 21. 13 10 1936—Aug. 16. 15 1937—Mar. 1. 22 M May 1. 26 20 14 1938—Apr. 16. 17H 12 22H 1941—Nov. 1 26 20 1942—Aug. 20 24 Sept. 14 22 Oct. 3 20 1948—Feb. 27 22 June 11 24 Sept. 16 16 271, Sept. 24 26 22 1949—May 1 15 27 May 5 24 21 37 June 30 20 July 1 14 36 Aug. 1 13 26 A Au u g g . . 1 1 6 1 23V2 3 2 5 5 Aug. 18 23 " 19 Aug. 25 183 Sept. 1 18 In effect Jan. 1, 1950 22 18 12 1 Demand deposits subject to reserve requirements, which beginning Aug. 23, 1935, have been total demand deposits minus cash items in process of collection and demand balances due from domestic banks (also minus war loan and series E bond accounts during the period Apr. 13,1943-June 30,1947) 2 Requirement became effective at country banks. ' Requirement became effective at central reserve and reserve city banks. NO. 13—MAXIMUM RATES ON TIME DEPOSITS [Per cent per annum] Nov. 1, 1933 Feb. 1, 1935 In effect Type of deposit to to beginning Jan. 31, 1935 Dec. 31, 1935 Jan. 1, 1936 Savings deposits 3 2H 2Y2 Postal Savings deposits 3 2*4 2H Other time deposits payable: In 6 months or more 3 2H V. In 90 days to 6 months 3 In less than 90 days 3 1 NOTE.—Maximum rates that may be paid by member banks as established by the Board of Governors under provisions of Regulation Q. Under this regulation 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. Maximum rates that may be paid by insured nonmember banks as established by the Federal Deposit Insurance Corporation, effective Feb. 1, 1936, are the same as those in effect for member banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 14—MARGIN REQUIREMENTS * Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Per cent of market value] Feb. 5, 1945- July 5, 1945-Jan.21, 1946- Feb. 1, 1947- Effective July 4, 1945 Jan. 20, 1946 Jan.31, 1947 Mar. 29, 1949Mar. 30, 1949 Regulation T: For extensions of credit by brokers and dealers on listed securities.... 50 75 100 75 50 For short sales 50 75 100 75 50 Regulation U: For loans by banks on stocks 50 75 100 75 50 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 per cent) and the maximum loan value. NO. 15—MINIMUM DOWN PAYMENTS AND MAXIMUM MATURITIES ON CONSUMER INSTALMENT CREDIT SUBJECT TO REGULATION W Prescribed by Board of Governors of the Federal Reserve System effective September 20, 1948, and expired June 30, 1949, in accordance with Public Law 905, approved August 16, 1948 September 20, 1948- March 7, 1949- April 27, 1949- March 6, 1949 April 26, 1949 June 30, 1949 Type of credit p ( M P a e d i y n r o m i w m c e e n n u n t m t ) 1 M m (M a a t x o u i n m r t i h t u y s m ) 2 p ( M P a e i d y n r o m i w m c e e n n u n t m t ) 1 M ( m M a a x o t i u n m r th i u t s y m ) p M (P a e i d y n r o m i w m c e e n u n n m t t ) l M ( m M a a x o t i u n m r th i u t s y m ) Instalment sales: Group A 15-18 21 33^ 24 Automobiles Group B 20 15-18 15 21 10 24 Other listed articles3 Instalment loans: To purchase listed articles 15-18 21 24 Other . 15-18 21 24 1 Down payments determined after deduction of any trade-in, except in case of automobiles. 2 Maximum maturities for all instalment credits under the regulation prior to Mar. 7, 1949, were 15 months for credits of $1,000 or less, and 18 months for credits over $1,000, provided that if the maturity was more than 15 months the monthly payment must have been at least $70. 3 Other articles consisted of cooking stoves and ranges, dishwashers, ironers, mechanical refrigerators, washing machines, combination units incorporating any of the foregoing, room-unit air conditioners, radio or television sets and phonographs, sewing machines, vacuum cleaners, furniture and soft-surface floor coverings. * Where credit was to purchase listed articles, requirements were same as on instalment sales of the respective articles. NOTE: The regulation, amendments, and supplements thereto contained additional provisions and various exceptions to limitations not shown in this table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 97 NO. 16—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 1949 Commercial and stock savings banks and nondeposit trust companies Mutual savings All Member Nonmember banks banks banks banks Total Na- State In- Non- In- Nontional member sured insured sured insured Number of banks, Dec. 31, 1948. 14,703 14,171 4,991 6,498 758 U93 339 Changes during 1949: New banks 2 +73 +72 +12 +6 +42 +12 +1 Suspensions -4 -4 Consolidations and absorptions: Banks converted into branches.. -59 -58 -24 -14 -20 -1 Other -20 -19 -7 -3 -9 -1 — 12 12 —2 —2 g Other changes—net * +6 +6 +6 Interclass changes: Conversions— National into State • -2 +1 +1 +7 -4 -2 -1 Federal Reserve membership:6 +15 -12 -3 Withdrawals of State banks .... -11 +11 Federal deposit insurance:6 Admissions of State banks +34 -34 Withdrawals of State banks +1 Net increase or decrease -16 -15 -16 -10 +42 -31 Number of banks, Dec. 31, 1949. 14,687 14,156 4,975 6,540 1192 339 727 Number of branches and additional offices,7 Dec. 31, 1948... 4,461 4,279 1,913 1,219 1,079 68 132 50 Changes during 1949: De novo branches +175 +158 +75 +47 +32 +4 +9 +8 Banks converted into branches... . +59 +58 +27 +19 +11 +1 +1 Discontinued -12 -11 -1 —4 -1 Other changes +1 +1 +1 Interclass branch changes: National to State member -4 +4 S S t t a a t t e e m m e e m m b b e e r r t t o o n n o a n ti m on em al ber +1 -8 +8 Nonmember to national +1 — 1 Nonmember to State member +12 -1 -11 +6 -6 Net increase or decrease +223 +206 +99 +69 +53 -15 +9 +8 Number of branches and additional offices,7 Dec. 31, 1949... 4,684 4,485 2,012 1,288 141 58 1,132 53 Number of banking facilities8 on Dec 31, 1948 70 70 52 13 5 Established during 1949 +24 +24 +21 +1 +2 On Dec 31, 1949 94 94 73 14 1 The State member bank figures and the insured mutual savings banks 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." 2 Exclusive of new banks organized to succeed operating banks. 3 Exclusive of liquidations incident to the succession, conversion, and absorption of banks. * An increase of seven, less one decrease. Seven industrial banks, eliminated from the series in 1947 since they were not authorized by State law to accept deposits, restored to series because law passed in 1949 authorizing acceptance of deposits. One institution, not engaged in banking business, eliminated from series. 6 Exclusive of conversions of national banks into State member banks, 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 "interclass bank changes." 7 Covers all branches and other additional offices at which deposits are received, checks paid, or money lent, except banking facilities that are shown separately. 8 Banking facilities are provided through arrangements made by the Treasury Department with banks designated as depositaries and financial agents of the Government at military and other Government establishments. These figures do not include branches that have also been designated by the Treasury Department as banking facilities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 17—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, BY FEDERAL RESERVE DISTRICTS AND STATES, DECEMBER 31, 1949» Total banks on On par list which checks are Not on par list drawn, and their (Nonmember) Federal Reservebranches & offices Total Member Nonmember district or State Branches Branches Branches Branches Branches Banks and Banks and Banks and Banks and Banks and offices offices offices offices offices DISTRICT Boston 485 318 485 318 329 247 156 71 New York 894 896 894 896 768 827 126 69 Philadelphia... . 836 150 836 150 640 113 196 37 Cleveland 1,125 292 1,125 292 700 252 425 40 Richmond .... 1,012 500 804 375 479 238 325 137 '"208' 125 Atlanta 1,188 197 577 159 351 140 226 19 611 38 Chicago 2,490 594 2,490 594 1,001 240 1,489 354 St. Louis 1,472 140 1,135 80 496 42 639 38 337 60 Minneapolis.... 1,278 110 678 69 478 26 200 43 600 41 Kansas City... . 1,749 10 1,740 10 756 6 984 4 9 Dallas 1,022 47 914 38 623 24 291 14 108 9 San Francisco. . 500 1,308 500 1,308 266 1,232 234 76 Total 14,051 4,562 12,178 4,289 6,887 3,387 5,291 902 1,873 273 STATE Alabama 225 23 129 23 92 23 37 96 Arizona 9 51 9 51 5 38 4 13 Arkansas .... 232 21 109 6 68 2 41 4 123 15 California 196 949 196 949 118 904 78 45 Colorado 144 1 144 1 92 1 52 Connecticut.... 109 36 109 36 63 31 46 5 Delaware 38 15 38 15 17 5 21 10 Dist. of Col. 19 41 19 41 15 32 4 9 Florida 185 3 123 3 73 3 50 62 Georgia 396 38 105 34 67 32 38 2 291 4 Idaho 43 53 43 53 25 48 18 5 Illinois 887 3 885 3 505 3 380 2 Indiana . . 488 100 488 100 236 44 252 56 Iowa 663 164 663 164 161 502 164 Kansas 610 608 215 393 2 Kentucky 383 41 383 41 112 25 271 16 Louisiana 162 72 59 49 46 43 13 6 103 23 Maine 63 69 63 69 38 37 25 32 Maryland 164 115 164 115 77 77 87 38 Massachusetts.. 178 169 178 169 142 153 36 16 I^ichigan 441 225 441 225 231 173 210 52 Minnesota 680 6 266 6 207 6 59 414 Mississippi 202 64 40 12 31 5 9 7 162 52 Missouri 593 527 180 347 66 Montana 111 111 84 27 Nebraska 408 2 408 2 142 2 266 Nevada 8 19 8 19 6 18 2 1 New Hampshire 75 2 75 2 52 1 23 1 New Jersey.... 329 151 329 151 281 136 48 15 New Mexico. . . 51 12 51 12 35 2 16 10 New York 638 755 638 755 558 700 80 55 North Carolina. 211 194 97 74 54 39 43 35 '"iii" 120' North Dakota.. 150 22 63 6 43 20 6 16 Ohio 661 215 661 215 424 188 237 27 87 Oklahoma 384 1 376 1 224 1 152 Oregon 69 96 69 96 29 87 40 9 8 Pennsylvania... 972 181 972 181 742 153 230 28 Rhode Island... 18 45 18 45 10 32 8 13 South Carolina. 151 41 63 36 33 30 30 6 " ' 88' 5 South Dakota. . 169 48 70 23 62 20 8 3 99 25 Tennessee 294 87 201 74 82 58 119 16 93 13 Texas 900 5 843 5 571 5 272 57 Utah 55 23 55 23 31 21 24 2 Vermont 69 11 69 11 40 2 29 9 Virginia 312 109 307 109 204 60 103 49 5 Washington.. . . 122 133 122 133 53 126 69 7 ...... West Virginia. . 180 179 108 71 Wisconsin . 551 151 551 151 164 21 387 ""'136" 53 53 39 14 1 Does not include mutual savings banks, on a few of which some checks are drawn, but does include 94 banking facilities (see footnote 8, Table 16). The difference in the number of member banks on Dec. 31, 1949 shown in this table and in Table 16 is due to the fact that this table excludes 2 nondeposit trust companies and 3 mutual savings banks on which no checks are drawn. The difference between the number of nonmember commercial banks is due to the fact that this table excludes 103 banks and trust companies on which no checks are drawn. Digitized for FRBaAcSk EfiRgu res.—See Banking and Monetary Statistics, Table 15, and previous Annual Reports. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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RECORD OF POLICY ACTIONS BOARD OF GOVERNORS FEBRUARY 17, 1949 Amendments to Regulation A, Discounts for and Advances to Member Banks by Federal Reserve Banks. Effective February 17, 1949, Regulation A was amended to permit the discount by the Federal Reserve Banks of nonnegotiable notes evidencing loans made pursuant to commodity loan programs of the Commodity Credit Corporation, to provide for the use of certificates of interest issued by that Corporation under commodity loan programs as security for advances to member banks, and to eliminate a provision relating to certain loans guaranteed by the Government during World War II. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Evans, Vardaman, and Clayton. Votes against this action: none. A requirement in Regulation A that notes must be negotiable in order to be discounted by the Federal Reserve Banks prevented the discount of notes evidencing loans made by banks pursuant to commodity loan programs of the Commodity Credit Corporation. Since some member banks which were restricting their holdings of these notes had indicated that they were influenced in part by delays in payment when the notes were tendered to the Commodity Credit Corporation and that it might be feasible for them to hold greater amounts of the notes if they were eligible for discount for temporary periods, one of the Reserve Banks proposed that Regulation A be amended to permit the discount of the notes. It was urged that the negotiability requirement could be safely waived in this instance and that such action might be helpful to member banks and their customers and reduce the need for direct loans by the Commodity Credit Corporation. Other Reserve Banks proposed that, in order to be of value in connection with loans under the cotton loan program of the Commodity Credit Corporation, the amendment also provide for advances to member banks at the regular discount rate on the security of certificates of interest issued by the Corporation under that program. It was recognized that the Reserve Banks probably would handle relatively little of this paper, but after consultation with the Reserve Banks and the Commodity- Credit Corporation, it was deemed desirable to adopt these proposals. A provision in Regulation A which waived the negotiability requirement in 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 101 connection with notes evidencing war production and contract termination loans guaranteed by the Government during World War II was eliminated because it had become obsolete. MARCH 2, 1949 Amendment to Regulation W, Consumer Instalment Credit. Mr. Vardaman moved that Regulation W be amended to provide for a maximum maturity of 21 months instead of 15 to 18 months on all listed articles and unclassified loans subject to the Regulation and for a minimum down payment on listed articles other than automobiles of 15 per cent instead of 20 per cent. Mr. Clayton moved to amend Mr. Vardaman's motion to provide for a uniform maximum maturity of 18 months for instalment sales credits and for unclassified loans, and for down payments on listed articles other than automobiles of 15 per cent. Votes for Mr. Clayton's motion: Mr. Clayton. Votes against: Messrs. McCabe, Eccles, Szymczak, Draper, and Vardaman. Votes for Mr. Vardaman's motion: Messrs. McCabe, Szymczak, Draper, Vardaman, and Clayton. Votes against: Mr. Eccles. To carry Mr. Vardaman's motion into effect, an amendment to Regulation W was approved by unanimous vote, effective March 7, 1949, to provide a maximum maturity of 21 months instead of 15 to 18 months on extensions of consumer instalment credit and to reduce down payments on listed articles other than automobiles from 20 per cent to 15 per cent. The amendment retained the 33^ per cent down payment requirement on automobiles and made two other minor changes in the Regulation. The majority of the Board disapproved Mr. Clayton's motion because it was felt that current conditions called for a greater relaxation of the Regulation than his motion would provide. Mr. Eccles voted against both motions because he felt any relaxation of the Regulation at this time was premature. The majority of the Board approved Mr. Vardaman's motion because they felt that action was called for by the changed conditions since the Regulation was reinstated on September 20, 1948. At that time economic conditions generally and in the specific lines covered by the Regulation were strongly inflationary. Consumer instalment credit was expanding at the rate of approximately 2 billion dollars a year and there was a substantial excess of money demands over the supply of consumers' durable goods. In the following five months some slackening in the rate of growth of instalment credit became evident accompanied by a reduction of sales particularly in the household Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

102 ANNUAL REPORT OF BOARD OF GOVERNORS appliance field. Over the same period a considerable diminution of general inflationary pressures became evident. The two minor changes were made to (1) exempt from the Regulation loans to finance residential units such as house trailers, and (2) provide a maximum maturity of 24 instead of 20 months on renewals of existing extensions of credit to avoid undue hardship in certain specified circumstances. MARCH 28, 1949 Amendments to Regulation T, "Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges," and Regulation U, "Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange." The supplements to Regulations T and U were amended, effective March 30, 1949, to reduce the margin requirements for registered securities in general accounts from 75 per cent to 50 per cent, these requirements to be applicable both to purchases of securities and to short sales. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. This action was taken in the light of changes in business and credit conditions in recent months. There were increasing evidences that inflationarypressures were subsiding and that a readjustment from a highly inflationary situation was taking place. It was the view of the Board that, in these conditions, the time had arrived when action to reduce margin requirements should be taken. APRIL 19, 1949 Amendments to Regulation T, "Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges," and Regulation U, "Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange." Regulations T and U were amended, effective May 1, 1949, to relax the rules regarding withdrawals and substitutions in undermargined accounts, and Regulation T was further amended to clarify and relax somewhat the rules regarding "cash transactions." Votes for this action: Messrs. McCabe, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. These amendments were adopted for the purpose of facilitating and simplifying operations under the Regulations. Under the rule previously in effect, securities might be substituted in an undermargined account on the same day. The amendment restored the rule which had been in effect from 1938 to 1945, which allowed a customer, upon the sale of a security, to withdraw the margin required for the purchase of the security. The changes in Regulation T in regard to "cash transactions" were largely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 103 of a technical nature. The period of seven days within which payment must be obtained in the cash account was changed from seven calendar days to seven full business days. The amount owing in the cash account which a broker was authorized to disregard was increased from $50 to $100. Certain changes of a clarifying and relaxing character were made in the existing requirement that in the event of a security being purchased in a cash account and then for any reason sold or delivered to any broker or dealer without having been previously paid for in full by the customer, the customer for the succeeding 90 days must have cash in the account to cover any security he purchases. APRIL 22, 1949 Amendment to Regulation W, Consumer Instalment Credit. Effective April 27, 1949, Regulation W was amended to provide for a minimum down payment of 10 per cent on all listed articles other than automobiles and a maximum maturity of 24 months on all listed articles and unclassified loans subject to the Regulation, to increase to 27 months the maximum maturity of renewals of credit to prevent undue hardship in certain specified circumstances, and to provide for the exemption from the Regulation of all listed articles having a cash price of less than $100 instead of less than $50. The amendment did not change the requirement of a down payment of 33 l/z Per cent on automobiles. Votes for this action: Messrs. McCabe, Szymczak, Draper, Evans, Vardaman, and Clayton. Votes against this action: none. This further step in the liberalization of Regulation W was in conformity with the Board's policy of using flexibly credit and monetary authority entrusted to the Federal Reserve System. It was taken in view of the fact that most of the articles subject to the Regulation were in greater supply than was the case in 1948 and also of the further abatement of general inflationary pressures since the previous amendment to the Regulation. APRIL 28, 1949 Decrease in Reserve Requirements of Member Banks and Amendment to Regulation D, Reserves of Member Banks. The Supplement to Regulation D was amended to reduce member bank reserve requirements against net demand deposits by two percentage points for banks in central reserve cities and one percentage point for other member banks, and to reduce reserve requirements against time deposits by l/ percentage point for all member banks, effective May 1, 2 1949 as to banks in nonreserve cities and May 5, 1949 at other banks. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Evans, and Vardaman. Votes against this action: none. In a press release dated April 28, 1949, the Board stated that the effect of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

104 ANNUAL REPORT OF BOARD OF GOVERNORS these decreases would be to lower the required reserves of banks in central reserve cities by approximately 500 million dollars, of banks in reserve cities by approximately 350 million dollars, and of banks in nonreserve cities by 350 million dollars. The reasons for taking this action were stated in the press release as follows: "The present action was taken in furtherance of the Board's policy of adjusting all of its credit regulations in accordance with changing economic conditions and the credit requirements of the current business situation. Since the first of the year there has been a decline of approximately one and one-half billion dollars in loans at member banks. About one billion of this decline has occurred at member banks in New York and Chicago—the central reserve cities. The remainder of the decline was largely at banks in reserve cities. In view of this trend of loans and the fact that requirements at the New York and Chicago banks had been increased from 20 to 26 per cent during 1948 the Board felt that it was appropriate at this time to reduce the requirements for the central reserve city banks somewhat more than for other member banks. We have frequently stated that credit regulations are not a one-way street. They should be tightened or relaxed as general economic conditions require." MAY 13, 1949 Amendments to Regulation T, "Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges," and Regulation U, "Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange." Regulations T and U were amended, effective May 16, 1949, to increase from 50 to 75 per cent the maximum loan value for securities acquired through the exercise of subscription rights, whether exercised by the original holder or by a purchaser of the rights. The amendments specified that such transactions should be set aside in a special account and that substitutions or withdrawals might not be made in the account. They also specified that no new credit might be granted to a customer on the preferential terms if such a credit had been outstanding more than nine months without being changed to the 50 per cent basis generally applicable under the Regulations. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. This action was taken in order to facilitate the exercise of subscription rights on a basis which would encourage repayment within nine months of any credit extended in excess of that permitted under the regular provisions of the Regulations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 105 MAY 20, 1949 Amendment to Regulation F, Trust Powers of National Banks. Regulation F was amended, effective May 20, 1949, to provide specifically that, for the purposes of Section 17 of the Regulation, relating to common trust funds, the term "readily marketable security" should include any security which is a direct obligation of the United States. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. This action was taken by the Board for the reason that from time to time questions had arisen with respect to whether Series G United States Savings Bonds, which were redeemable but not salable, could be regarded as readily marketable securities for common trust fund purposes. While the classification of the bonds as readily marketable securities was consistent with the purposes of the pertinent provisions of Regulation F, the bonds did not appear to comply technically with the definition of the term "readily marketable security" contained in the Regulation, and, in order to clarify that situation, the Board amended the Regulation so as to specify that the term should include any direct obligation of the United States. JUNE 29, 1949 Decrease in Reserve Requirements of Member Banks and Amendment to Regulation D, Reserves of Member Banks. The Supplement to Regulation D was amended to require that member banks maintain reserves with their Federal Reserve Banks as follows: banks in central reserve cities, 24 per cent of net demand deposits and 6 per cent of time deposits, effective June 30, 1949; banks in reserve cities, 20 per cent of net demand deposits and 6 per cent of time deposits, effective June 30, 1949; and banks not in central reserve or reserve cities, 14 per cent of net demand deposits and 6 per cent of time deposits, effective July 1, 1949. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Evans, Vardaman, and Clayton. Votes against this action: none. This action was taken by the Board in order that reserve requirements would be within the statutory limitations that would be in effect after the expiration on June 30, 1949, of the temporary authority to increase reserve requirements which had been granted by Congress in August 1948. The changed requirements resulted in a reduction of approximately 800 million dollars in required reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

106 ANNUAL REPORT OF BOARD OF GOVERNORS JULY 19, 1949 Amendments to Regulation T, "Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges," and Regulation U, "Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange." Regulations T and U were amended, effective July 20, 1949, to remove margin requirements applicable to credit for financing the functions of "specialists" on an exchange designated by the Board. The amendment also made certain technical changes concerning "when distributed" securities. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Evans, Vardaman, and Clayton. Votes against this action: none. The action with respect to specialists was in some respects similar to action in 1945 and again in 1946, when margin requirements regarding specialists had been held at 50 per cent as requirements were increased in general accounts from 50 per cent to 75 per cent and later to 100 per cent. Studies made in considering the amendment indicated that the specialist is subject to close regulation and supervision by his exchange and that in recent years total credit used by specialists has been small. The Board concluded that it would be reasonable to test the operation of such an amendment, which had been requested by the New York Stock Exchange as a means of improving the market, provided specialists were required to make certain reports to the exchange on which they operate. The New York Stock Exchange complied with these reporting requirements and the Board designated it as qualifying under the amendment. The amendment with respect to "when distributed" securities was essentially one to simplify operations. AUGUST 5, 1949 Decreases in Reserve Requirements of Member Banks and Amendment to Regulation D, Reserves of Member Banks. The Supplement to Regulation D, Reserves of Member Banks, was amended to reduce reserve requirements in several steps, as follows: On net demand deposits: Effective Central reserve city ban\s From 24 to 23 ^ per cent August 11, 1949 From 23}4 to 23 per cent August 18, 1949 From 23 to 22 ^ per cent August 25, 1949 From 2254 to 22 per cent September 1, 1949 Reserve city ban\s From 20 to 19J4 per cent August 11, 1949 From 19!/2 to 19 per cent August 18, 1949 From 19 to 18J4 per cent August 25, 1949 From 18/2 to 18 per cent September 1, 1949 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 107 Nonreserve city batiks From 14 to 13 per cent August 1, 1949 From 13 to 12 per cent August 16, 1949 On time deposits: Central reserve and reserve city ban\s From 6 to 5 per cent August 11, 1949 Nonreserve city ban\s From 6 to 5 per cent August 16, 1949 Votes for this action: Messrs. McCabe, Eccles, SzymczaK, uraper, and Clayton. Votes against this action: none. The effect of these decreases was to lower the reserve requirements of banks in central reserve cities by approximately 500 million dollars, of banks in reserve cities by approximately 675 million dollars, and of banks in nonreserve cities by approximately 625 million dollars. The reasons for this action were the same as those which prompted the action of the Federal Open Market Committee as recorded on page 115 of this report. At a meeting of the Federal Open Market Committee just before this meeting of the Board it was stated that if the Federal Open Market Committee were willing to allow the System's holdings of short-term Treasury securities to go into the market in amounts sufficient to absorb the reserves that would be released by a reduction in reserve requirements, the Board of Governors would reduce reserve requirements by 2 percentage points of demand deposits and possibly 1 percentage point of time deposits of member banks to become effective on various dates. The Federal Open Market Committee concurred in the suggested program and accordingly the above action on reserve requirements was taken by the Board. The purpose of this combined action was to increase the ability of banks to meet credit demands, but to avoid sharp decreases in short-term money rates by providing banks with short-term securities for investment of surplus funds pending other demands. OCTOBER 10,1949 Proposed Change in Rate on Discounts and Advances to Member Banks under Sections 13 and 13a of the Federal Reserve Act. The Board informed the Federal Reserve Bank of New York that it was not prepared to approve a reduction from 1% per cent to 1% per cent in the rate on discounts and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

108 ANNUAL REPORT OF BOARD OF GOVERNORS On September 15, 1949, the directors of the Federal Reserve Bank of New York voted, subject to review and determination of the Board of Governors of the Federal Reserve System, to reduce the rate on discounts and advances to member banks as indicated above, stating that the action was taken in the light of need and appropriateness with respect to the existing structure of interest rates in the market resulting from prior reductions of reserve requirements and open market operations, and with a view to helping retain initiative with respect to the domestic situation and international developments. The New York Bank believed that the reduction should be announced on Friday, September 16, effective Monday morning, September 19. The proposed rate reduction was considered at a meeting of the Board on Friday, September 16, at which time the members of the Board present did not feel that the underlying economic and credit situation called for a reduction. For that reason, it was agreed that the New York Bank should be informed that action by the Board on the new rate would be deferred until the following week to afford an opportunity to discuss the matter further. Over the ensuing week end, the devaluation of the British pound was announced. During the next week the proposal was given special consideration by the Board and there was a division of opinion as to whether the reduction should be approved. The matter was also discussed with the Presidents of all of the Federal Reserve Banks and at meetings of the executive committee of the Federal Open Market Committee and of the Board with the Federal Advisory Council. On September 21, the New York Bank was informed that action was being again deferred. On September 22, the Bank reaffirmed its proposal to reduce the rate and was again advised by the Board that action was being deferred. On October 6, the New York Bank acted a third time to reduce the rate and in its advice to the Board indicated that if the Board did not approve the reduction the Board of Directors of that Bank contemplated acting at future meetings to reestablish the existing rate unless and until there were further changes in the situation which would affect possible discount rate policy. At a meeting of the Board of Governors on October 7, it was decided to inform the New York Bank that the Board was not prepared at that time to approve the reduced rate but that the matter would be given further consideration at a meeting early in the following week and if there were any change in the Board's position the Bank would be advised. On October 10, it was agreed unanimously by the Board that the reduction in the rate should not be approved for the following reasons: The upturn in economic activity and in credit expansion during recent weeks had been sufficiently general to suggest the possibility of a resumption of inflationary conditions later on and the situation then existing was not one that needed the stim- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 109 ulation of a lower discount rate. The elements that might be most depressing to the economy, such as existing or prospective strikes in the coal, steel, railroad, and automobile industries were not monetary in character and their effects could not be corrected by monetary action. While foreign currency devaluation might tend to have a depressing effect on commodity prices in this country and might cause some hesitation on the part of buyers in making commitments, there was no evidence that such tendencies were appearing. Under the circumstances, it seemed inadvisable for the System to indicate a belief that the effect of devaluation would be depressing. OCTOBER 10,1949 Changes in Rules for Uniform Application by Federal Reserve Banks in Waiving Penalties for Deficiencies in Reserves of Member Banks. The rules prescribed by the Board of Governors under which the Federal Reserve Banks are authorized to waive penalties for deficiencies in reserves of member banks were liberalized somewhat, effective October 10, 1949. The principal provisions of the revised rules permit waiver of penalties (1) to the extent that a deficiency in a given reserve computation period is offset by excess reserves during the immediately following reserve computation period, provided that the deficiency does not exceed 2 per cent of the member bank's required reserves, (2) to the extent that a deficiency during a reserve computation period ending on a nonbusiness day is offset by the inclusion of that day in the next reserve computation period. Votes for this action: Messrs. McCabe, Eccles, Szymczak, Draper, Vardaman, and Clayton. Votes against this action: none. As was the case with previous revisions of these rules, this further liberalization authorizing the Federal Reserve Banks in their discretion to waive penalties was adopted in recognition of the fact that a member bank sometimes has difficulty in avoiding a deficiency within the prescribed weekly or semimonthly reserve computation period. It was felt that if, in the circumstances described, a nominal deficiency in one computation period was made up during the immediately succeeding period, the requirements of law with respect to reserves would be complied with and at the same time the number of occasions on which member banks would have to pay deficient reserve penalties would be reduced. In taking this action, the Board emphasized that the law contemplates that member banks should make an attempt to hold and maintain the prescribed reserve balances from day to day, making allowances for unforeseen fluctuations in deposits and reserves, even though penalties are assessed on daily average deficiencies over prescribed periods. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE MARCH 1, 1949 (A meeting of the Federal Open Market Committee—the last before the members of the Committee took office who were elected as representatives of the Federal Reserve Banks for a term of one year beginning March 1, 1949 —was held on February 28, 1949, for the purpose of ratifying actions which had been taken under existing policies and of discussing developments in the monetary and credit situation since the last meeting of the Committee. No policy actions were taken at that meeting.) 1. Authority to Effect Transactions in System Account. The following direction to the executive committee which, except for one change, was in the same form as the direction issued at the meeting on November 30, 1948, was approved. The executive committee is 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 light of changing economic conditions and the general credit situation of the country, for the practical administration of the account, for the maintenance of stable and orderly conditions in the Government security market, and for the purpose of relating the supply of funds in the market to the needs of commerce and business; 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 2 billion dollars. The executive committee is 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 110 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 111 that the total amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars. Votes for this action: Messrs. McCabe, Chairman; Sproul, Vice Chairman; Clayton, Draper, Earhart, Eccles, Gidney, Leach, McLarin, Szymczak, and Vardaman. Votes against this action: none. Throughout the entire year 1948 the Federal Open Market Committee followed a policy of limiting the availability of bank reserves, as a means of restraining the expansion of bank credit in an inflationary situation, and at the same time continued its policy of maintaining stable and orderly conditions in the Government securities market. At the time of the meeting of the Committee on November 30, 1948, the downward pressure on prices in the long-term Government security market had eased and, although the economy continued to operate at a high level, the outlook for total expenditures was obscure because increases were expected in Government expenditures while reductions might occur in consumer and business demands. In the interim following the November meeting economic developments had shown a further and more general tendency toward relaxation of inflationary pressures. The underlying situation indicated the probability of either a period of stability in demand and production or a moderate downturn accompanied by downward movements in prices and production. While a period of healthy readjustment appeared to be the more likely probability, there were a number of important uncertainties in the situation which made it difficult to forecast which way the economy would turn. A more detailed discussion of the outlook during this period is contained in the Annual Report of the Board of Governors for the year 1949 of which this record is a part. There had also been further discussions with representatives of the Treasury, during the three-month period since the previous meeting, relating to shortterm rates of interest, the retirement of maturing Government debt, steps that might be taken to encourage investment and reinvestment in savings bonds, and other matters involved in the determination of open market and debt management policy. When this meeting was held the Committee felt that, because of the uncertainties in the situation, it should replace the existing policy of exercising restraint on credit expansion with a policy which would relax such restraint without following an aggressive easy money policy. This decision was reached with the understanding that consideration was being given by the Board of Governors and the Federal Reserve Banks to what should be done through the medium of discount rates, consumer credit regulation, margin requirements, and changes in reserve requirements so that the entire credit policy of the System would be consistent and free to stand or to move in either direction depending on developments that might occur. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

112 ANNUAL REPORT OF BOARD OF GOVERNORS The above direction was issued to enable the executive committee to carry out the new policy. The direction was in the same form as that issued at the meeting of the Committee on November 30, except for one change which made it clear that the policy was adopted in the light of changing economic conditions as well as the existing general credit situation. MAY 3, 1949 1. Authority to Effect Transactions in System Account. The following direction to the executive committee which was in the same form as the direction issued at the meeting of the Committee on March 1, 1949, was approved. The executive committee is 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 light of changing economic conditions and the general credit situation of the country, for the practical administration of the account, for the maintenance of stable and orderly conditions in the Government security market, and for the purpose of relating the supply of funds in the market to the needs of commerce and business; 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 3 billion dollars. The executive committee is 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 total amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars. Votes for this action: Messrs. Sproul, Vice Chairman; Clayton, Draper, Earhart, Eccles, Gidney, Leach, McLarin, Szymczak, and Vardaman. Votes against this action: none. At the time of this meeting economic developments had shown a sufficiently broad and consistent downward movement to justify the expectation of a continued modest recession for some months to come. Although the decline in employment, production, and prices from the high levels reached in 1948 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 113 had been relatively small, the outlook was for even further declines. In reviewing the entire matter at this meeting, at which consideration was also given to the recommendations to be made to the Treasury with respect to Treasury financing, it was felt that the downward readjustments that had taken place were desirable and in the interest of more stable economic conditions and that, with national economic policies operating to cushion such declines, the movement would not be more than a moderate one. It appeared, however, that the policies of the System should now be directed toward somewhat easier credit conditions to assist in keeping the movement from going too far. As referred to elsewhere in this report, a number of actions in this direction had been taken by the Board of Governors before this meeting of the Committee was held. Effective early in May reserve requirements of member banks were reduced; Regulation W was amended effective March 7 and April 27 to reduce the maximum maturities and down payments required in connection with consumer instalment loans; and Regulations T and U were amended effective March 30 to reduce the margin requirements prescribed therein from 75 to 50 per cent. The above direction was adopted by the Committee as a part of this program. It provided for an increase from 2 billion dollars to 3 billion dollars in the authority of the executive committee to increase or decrease the total amount of securities in the System account because it was felt that, in view of prospective market developments before another meeting of the full Committee, it would be desirable for the executive committee to have the increased authority. JUNE 28, 1949 1. Authority to Effect Transactions in System Account. The following direction to the executive committee which, except for one change, was in the same form as the direction issued at the meeting on May 3, 1949, was approved. The executive committee is 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 light of changing economic conditions and the general credit situation of the country, for the practical administration of the account, for the maintenance of orderly conditions in the Government security market, and for the purpose of relating the supply of funds in the market to the needs of commerce and business; 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 ANNUAL REPORT OF BOARD OF GOVERNORS from time to time for the temporary accommodation of the Treasury shall not be increased or decreased by more than 3 billion dollars. The executive committee is 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 total amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars. Votes for this action: Messrs. McCabe, Chairman; Sproul, Vice Chairman; Clayton, Draper, Earhart, Eccles, Evans, Gidney, Leach, McLarin, Szymczak, and Vardaman. Votes against this action: none. By late June the decline in business activity had gone further than had been considered likely at the beginning of the year and there were indications that it would go somewhat further. On the date of this meeting it was clear that Congress would not extend the temporary authority of the Board of Governors to increase reserve requirements of member banks and that the lapse of this authority at the end of June would reduce reserve requirements of member banks by about 800 million dollars and, therefore, would have a substantial easing influence on the money market. It was also clear that Congress would not extend the temporary authority of the Board for the regulation of consumer instalment credit which would result in greater availability of credit in this field. It was agreed at this meeting that the easing influence of the reduction of 800 million dollars in reserve requirements should be permitted to make itself felt in the market, and that open market operations should be so conducted, in the light of developments after the reduction in reserve requirements became effective on July 1, as to continue the System's policy of monetary ease. The direction set forth above was adopted for that purpose. The only change from the previous direction was in the reference to orderly conditions as distinguished from stable and orderly conditions in the Government security market. This was a significant change in the direction and grew out of the suggestion that the declines in business activity that had taken place and the credit policy being currently followed by the Federal Reserve System afforded the Federal Open Market Committee an opportunity to adopt a more flexible policy, first with respect to the general business and credit situation, and second, with respect to support of the Government security market. Discussions at this meeting were in the light of further conferences that had been held by representatives of the Committee with the Secretary of the Treasury in which the view was expressed that the time had arrived when the Federal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 115 Open Market Committee should begin to determine its policies on the basis of the general business and credit situation and orderly conditions in the Government security market, without attempting to maintain a relatively fixed pattern of prices and yields on United States Government securities. Under existing conditions, the revised policy contemplated increased availability of reserve funds and some further decline in rates, and in all conditions somewhat freer movements in prices and yields in the Government security market. The members of the Committee were favorable to such a change in existing policy. The statement issued to the press in connection with this change was as follows: The Federal Open Market Committee, after consultation with the Treasury, announced today that with a view to increasing the supply of funds available in the market to meet the needs of commerce, business, and agriculture it will be the policy of the Committee to direct purchases, sales, and exchanges of Government securities by the Federal Reserve Banks with primary regard to the general business and credit situation. The policy of maintaining orderly conditions in the Government security market and the confidence of investors in Government bonds will be continued. Under present conditions the maintenance of a relatively fixed pattern of rates has the undesirable effect of absorbing reserves from the market at a time when the availability of credit should be increased. AUGUST 5, 1949 1. Authority to Effect Transactions in System Account. The following direction to the executive committee, which was in the same form as the direction issued at the meeting of the Committee on June 28, 1949, was approved. The executive committee is 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 light of changing economic conditions and the general credit situation of the country, for the practical administration of the account, for the maintenance of orderly conditions in the Government security market, and for the purpose of relating the supply of funds in the market to the needs of commerce and business; 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 3 billion dollars. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

116 ANNUAL REPORT OF BOARD OF GOVERNORS The executive committee is 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 total amount of such certificates held in the account at any one time shall not exceed 1.5 billion dollars. Votes for this action: Messrs. Sproul, Vice Chairman; Clayton, Draper, Earhart, Eccles, Gidney, Leach, and McLarin. Votes against this action: none. During July the decline in business activity continued for the eighth consecutive month. The decline had been orderly and, because of supporting factors in the economy with high levels of activity in some segments, had been relatively mild. The outlook was for a continued high level of activity with a likelihood of some moderate increase in the immediate future. It was not clear, however, whether the corrections that had been made had been sufficient to prevent further declines over a longer term period. The indications were that present credit policy should be one of continued monetary ease as one means of encouraging a high level of business activity while at the same time avoiding conditions of such ease as would prevent needed adjustments in the economy or would encourage undue expansion. At this meeting it was stated that, if the Federal Open Market Committee should be willing to allow the System's holdings of Treasury securities to go into the market in amounts sufficient to absorb the reserves that would be released by a reduction in reserve requirements, the Board of Governors would reduce reserve requirements by two percentage points on demand deposits and possibly one percentage point on time deposits of all member banks, to become effective on various dates in August and September. It was agreed by members of the Federal Open Market Committee that, in view of the tendency for declining economic activity in the United States, the release of additional funds to banks by the proposed reduction in reserve requirements was desirable. It was recognized, however, that unless banks were supplied with securities for immediate investment of their additional funds, there would be disorderly conditions in the money market and an unnecessarily sharp and largely temporary decline in interest rates. It was felt that sales of short-term securities by the System would provide banks with liquid assets and prevent an undue decline in interest rates without interfering with the major goal of the reserve-requirement reduction, namely, to encourage the extension of credit beneficial to increased production and employment. Accordingly, the members of the Committee indicated that if the Board of Governors should reduce reserve requirements by the amount proposed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 117 (approximately 1.8 billion dollars) they would act to reduce the System's holdings of securities to offset the released reserves, and that securities would be sold from the System account until transition to the lower reserve requirements had been made so that the reduction would not result in a general further lowering of short-term rates. The above direction was adopted for that purpose and for the further purpose of continuing the System policy of monetary ease. DECEMBER 13, 1949 1. Increase in Short-Term Rates. The members of the Federal Open Market Committee, on November 22, 1949, upon recommendation of the executive committee, authorized the purchase and sale of bills and certificates in the market at somewhat lower prices (higher yields) than had recently prevailed. At this meeting this informal action was approved, ratified, and confirmed. Votes for this action: Messrs. McCabe, Chairman; Sproul, Vice Chairman; Draper, Earhart, Eccles, Gidney, Leach, McLarin, Szymczak, and Vardaman. Votes against this action: none. Until the middle of November, operations in the System open market account continued to be carried on under the policy of monetary ease adopted at the meeting of August 5, 1949, as one means of restraining further declines in production and employment. However, when the executive committee met on November 18, 1949, there had been a moderate recovery from the lows reached during the summer. The strength of the movement and the indication that it would continue well into 1950 prompted the executive committee of the Federal Open Market Committee to recommend to the full Committee that it authorize the executive committee to increase short-term rates somewhat in order to indicate a change from a policy of monetary ease to a policy of mild restrictions on the availability of bank reserves through open market operations. The purpose of this change in policy was to indicate the view on the part of monetary authorities that economic conditions had changed, that it was believed to be desirable to adopt a policy of some restraint and that, depending on developments, some further increases in rates might be called for. The full Committee approved the increase for the reasons that prompted the executive committee to make its recommendation. 2. Authority to Effect Transactions in System Account. The following direction to the executive committee, which was in the same form as the direction issued at the meeting on August 5, 1949, was approved. The executive committee is directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

118 ANNUAL REPORT OF BOARD OF GOVERNORS 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 light of changing economic conditions and the general credit situation of the country, for the practical administration of the account, for the maintenance of orderly conditions in the Government security market, and for the purpose of relating the supply of funds in the market to the needs of commerce and business; 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 2 billion dollars. The executive committee is 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 total amount of such certificates held in the account at any one time shall not exceed 1 billion dollars. Votes for this action: Messrs. McCabe, Chairman; Sproul, Vice Chairman; Draper, Earhart, Eccles, Gidney, Leach, McLarin, and Szymczak. Votes against this action: none. Before this meeting of the Committee there had been further discussions with the Secretary of the Treasury relating to Treasury financing and it had been decided that the issues of Treasury securities maturing on December 15 would be refunded with a 4 % year 1 % per cent note and that a 1 % per cent certificate would be exchanged for the maturing January 1 certificate. It was suggested that the likelihood of a higher level of economic activity during the next few months, accompanied by substantial Treasury deficits, indicated the desirability of greater flexibility in interest rates in order that the System's policy could respond to changes in the economic situation. In the circumstances, it was felt that the System should follow a policy of mild restraint within the limits imposed by the necessity of supporting a 1 % per cent one-year rate in connection with the January refunding, and that after Christmas the substantial amounts of funds which would seasonally be coming into the market should be absorbed by the sale of securities from the System account in order to keep interest rates from declining. The above direction was adopted for that purpose, the limitation of 2 billion dollars in the first paragraph of the direction being fixed with the thought that in carrying out the policy set forth above it would not be necessary to decrease the total securities held in the System account by more than that amount. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1949] Term Expires THOMAS B. MCCABE of Pennsylvania, Chairman January 31, 1956 MARRINER S. ECCLES of Utah January 31, 1958 M. S. SZYMCZAK of Illinois January 31, 1962 ERNEST G. DRAPER of Connecticut January 31, 1950 R. M. EVANS of Virginia January 31, 1954 JAMES K. VARDAMAN, JR. of Missouri January 31, 1960 ELLIOTT THURSTON, Assistant to the Board CHESTER MORRILL, Special Adviser to the Board WINFIELD W. RIEFLER, Assistant to the Chairman WOODLIEF THOMAS, Economic Adviser to the Board S. R. CARPENTER, Secretary BRAY HAMMOND, Assistant Secretary MERRITT SHERMAN, Assistant Secretary GEORGE B. VEST, General Counsel FREDERIC SOLOMON, Assistant General Counsel JOHN C. BAUMANN, Assistant General Counsel J. LEONARD TOWNSEND, Solicitor G. HOWLAND CHASE, Assistant Solicitor RALPH A. YOUNG, Director, Division of Research and Statistics EDWIN R. MILLARD, Director, Division of Examinations GEORGE S. SLOAN, Assistant Director, Division of Examinations C. C. HOSTRUP, Assistant Director, Division of Examinations ROBERT F. LEONARD, Director, Division of Ban\ Operations J. E. HORBETT, Assistant Director, Division of Ban\ Operations LOWELL MYRICK, Assistant Director, Division of Ban\ Operations FRED A. NELSON, Director, Division of "Personnel Administration LISTON P. BETHEA, Director, Division of Administrative Services GARDNER L. BOOTHE, II, Assistant Director, Division of Administrative Services 119 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL OPEN MARKET COMMITTEE [December 31, 1949] MEMBERS THOMAS B. MCCABE, Chairman (Board of Governors) ALLAN SPROUL, Vice Chairman (Elected by Federal Reserve Bank of New York) ERNEST G. DRAPER (Board of Governors) C. E. EARHART (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) MARRINER S. ECCLES (Board of Governors) R. M. EVANS (Board of Governors) RAY M. GIDNEY (Elected by Federal Reserve Banks of Cleveland and Chicago) HUGH LEACH (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) W. S. MCLARIN, JR. (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) M. S. SZYMCZAK (Board of Governors) JAMES K. VARDAMAN, JR. (Board of Governors) EXECUTIVE COMMITTEE OFFICERS THOMAS B. MCCABE, Chairman CHESTER MORRILL, Secretary ALLAN SPROUL, Vice Chairman S. R. CARPENTER, Assistant Secretary MARRINER S. ECCLES GEORGE B. VEST, General Counsel JAMES K. VARDAMAN, JR. WOODLIEF THOMAS, Economist HUGH LEACH EARLE L. RAUBER, Associate Economist DONALD S. THOMPSON, Associate Economist AGENT O. P. WHEELER, Associate Economist CHARLES W. WILLIAMS, Associate Economist FEDERAL RESERVE BANK OF NEW YORK JOHN H. WILLIAMS, Associate Economist ROBERT G. ROUSE, Manager of System Open Market Account 120 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1949] MEMBERS District No. 1—CHARLES E. SPENCER, JR., Chairman, The First National Bank of Boston, Boston, Massachusetts. District No. 2—W. RANDOLPH BURGESS, Chairman, Executive Committee, The National City Bank of New York, New York, New York. District No. 3—FREDERIC A. POTTS, President, Philadelphia National Bank, Philadelphia, Pennsylvania. District No. 4—SIDNEY B. CONGDON, President, The National City Bank of Cleveland, Cleveland, Ohio. District No. 5—ROBERT V. FLEMING, President and Chairman, The Riggs National Bank, Washington, District of Columbia. District No. 6—J. T. BROWN, President, The First National Bank of Jackson, Jackson, Mississippi. District No. 7—EDWARD E. BROWN, Chairman, The First National Bank of Chicago, Chicago, Illinois. District No. 8—W. L. HEMINGWAY, Chairman, Mercantile-Commerce Bank and Trust Company, St. Louis, Missouri. District No. 9—HENRY E. ATWOOD, President, First National Bank of Minneapolis, Minneapolis, Minnesota. District No. 10—JAMES M. KEMPER, Chairman, Commerce Trust Company, Kansas City, Missouri. District No. 11—J. E. WOODS, Chairman, Temple National Bank, Temple, Texas. District No. 12—RENO ODLIN, President, The Puget Sound National Bank of Tacoma, Tacoma, Washington. EXECUTIVE COMMITTEE EDWARD E. BROWN, ex officio W. RANDOLPH BURGESS CHARLES E. SPENCER, JR., ex officio FREDERIC A. POTTS ROBERT V. FLEMING, ex officio SIDNEY B. CONGDON OFFICERS President, EDWARD E. BROWN First Vice President, CHARLES E. SPENCER, JR. Second Vice President, ROBERT V. FLEMING Secretary, HERBERT V. PROCHNOW 121 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

122 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS [December 31, 1949] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Chairman and Federal Reserve Bank of— Deputy Chairman Federal Reserve Agent Boston Albert M. Creighton Harold D. Hodgkinson New York Robert T. Stevens William I. Myers Philadelphia Warren F. Whittier C. Canby Balderston Cleveland George C. Brainard A. Z. Baker Richmond Charles P. McCormick John B. Woodward, Jr. Atlanta Frank H. Neely Rufus C. Harris Chicago Vacancy Franklin J. Lunding St. Louis Russell L. Dearmont Wm. H. Bryce Minneapolis Roger B. Shepard W. D. Cochran Kansas City Robert B. Caldwell Robert L. Mehornay Dallas J. R. Parten R. B. Anderson San Francisco Brayton Wilbur Harry R. Wellman CONFERENCE OF CHAIRMEN The Chairmen of the Federal Reserve Banks are organized into a Conference of Chairmen which meets from time to time to consider matters of common interest, and to consult with and advise the Board of Governors. Mr. Dearmont, Chairman of the Federal Reserve Bank of St. Louis, who was elected Chairman of the Conference and as Chairman of the Executive Committee in December 1948, continued to serve during 1949. The other members of the Executive Committee, Mr. Wilbur, Chairman of the Federal Reserve Bank of San Francisco, and Mr. Stevens, Chairman of the Federal Reserve Bank of New York, who were also elected in December 1948, continued to serve during 1949. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 123 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. DIRECTORS Class A and Class B directors are elected by the member banks of the district. 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 of the Federal Reserve System. District No. 1—Boston Term Expires Dec. 31 Class A: Earle W. Stamm President, The National Bank of Commerce of New London, New London, Conn 1949 Allan Forbes President, State Street Trust Company, Boston, Mass. 1950 Russell H. Britton Executive Vice President and Cashier, First National Bank of Rochester, Rochester, N. H 1951 Class B: Roy L. Patrick President, Rock of Ages Corporation, Burlington, Vt. 1949 Philip R. Allen Director, Bird & Son, inc., E. Walpole, Mass 1950 Frederick S. Blackall, jr President and Treasurer, The Taft-Peirce Manufacturing Company, Woonsocket, R. 1 1951 Class C.- Harold D. Hodgkinson Vice President, General Manager and Chairman of Management Board, Wm. Filene's Sons Company, Boston, Mass 1949 Albert M. Creighton Chairman of the Board 1950 Ames Stevens Treasurer and Director, Ames Worsted Company, Lowell, Mass 1951 District No. 2—New York Class A: Winthrop W. Aldrich Chairman of the Board, The Chase National Bank of the City of New York, New York, N. Y 1949 Frederic E. Worden Chairman of the Board and President, The National Bank of Auburn, Auburn, N. Y 1950 Roger B. Prescott President, The Keeseville National Bank, Keeseville, N. Y 1951 Class B.- Lewis H. Brown Chairman of the Board, Johns-Manville Corporation, New York, N. Y 1949 Marion B. Folsom Treasurer, Eastman Kodak Company, Rochester, N. Y 1950 Jay E. Crane Director, Standard Oil Company (New Jersey), New York, N. Y 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

124 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Class C.- Robert D. Calkins Vice President and Director, General Education Board, New York, N. Y 1949 Robert T. Stevens Chairman of the Board, J. P. Stevens and Company, Inc., New York, N. Y 1950 William I. Myers Dean, New York State College of Agriculture, Cornell University, Ithaca, N. Y 1951 Buffalo Branch Appointed by Federal Reserve Ban\: Raymond F. Leinen Executive Vice President, Lincoln Rochester Trust Company, Rochester, N. Y 1949 C. George Niebank President, Bank of Jamestown, Jamestown, N. Y... 1949 Clyde C. Brown President, The Cuba National Bank, Cuba, N. Y.. .. 1950 George G. Kleindinst President, Liberty Bank of Buffalo, Buffalo, N. Y.. . 1951 Appointed by Board of Governors: Thomas Robins, Jr President, Hewitt-Robins, Inc., Buffalo, N. Y 1949 Lewis B. Swift President, Taylor Instrument Companies, Rochester, N. Y 1950 Carl G. Wooster Farmer, Union Hill, N. Y 1951 District No. 3—Philadelphia Class A: John B. Henning President, Wyoming National Bank, Tunkhannock, Pa 1949 Archie D. Swift Chairman of Board, Central-Penn National Bank, Philadelphia, Pa 1950 George W. Reily President, Harrisburg National Bank, Harrisburg, Pa.. 1951 Class B: William J. Meinel President and General Manager, Heintz Manufacturing Company, Philadelphia, Pa 1949 Walter H. Lippincott President and Director, Lobdell Company, Wilmington, Del 1950 Albert G. Frost Chairman of the Board, The Esterbrook Pen Company, Camden, N. J 1951 Class C: Warren F. Whittier Agricultural Consultant, Chester Springs, Pa 1949 C. Canby Balderston Dean, Wharton School of Finance and Commerce, University of Pennsylvania, Philadelphia, Pa 1950 Philip T. Sharpies Chairman, The Sharpies Corporation, Philadelphia, Pa 1951 District No. 4—Cleveland Class A: John D. Bainer President, The Merchants National Bank and Trust Company of Meadville, Meadville, Pa 1949 John T. Rohr President, The Toledo Trust Company, Toledo, Ohio. 1950 Ben R. Conner President, The First National Bank of Ada, Ada, Ohio 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 125 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Class B: Ross Pier Wright Secretary-Treasurer, Reed Manufacturing Company, Erie, Pa 1949 C. L. Austin Executive Vice President, Jones & Laughlin Steel Corporation, Pittsburgh, Pa 1950 Joel M. Bowlby Chairman of the Board, The Eagle-Picher Company, Cincinnati, Ohio 1951 Class C.- George C. Brainard President and General Manager, Addressograph- Multigraph Corporation, Cleveland, Ohio 1949 A. Z. Baker Chairman of the Board, The Cleveland Union Stock Yards Company, Cleveland, Ohio 1950 Leo L. Rummell Dean, College of Agriculture, The Ohio State University, Columbus, Ohio 1951 Cincinnati Branch Appointed by Federal Reserve Ban\: Waldo E. Pierson President, The First National Bank of Cincinnati, Cincinnati, Ohio 1949 Walter H. J. Behm President, The Winters National Bank and Trust Company of Dayton, Dayton, Ohio 1950 Spears Turley Vice President and Trust Officer, State Bank and Trust Company of Richmond, Richmond, Ky 1951 Joseph B. Hall President, Kroger Company, Cincinnati, Ohio 1951 Appointed by Board of Governors: S. Headley Shouse Tobacco and livestock raiser, Lexington, Ky 1949 Paul G. Blazer Chairman of the Board, Ashland Oil & Refining Company, Ashland, Ky 1950 Ernest H. Hahne President, Miami University, Oxford, Ohio 1951 Pittsburgh Branch Appointed by Federal Reserve Ban\: R. E. Bowie President, Security Trust Company, Wheeling, W. Va 1949 T. C. Swarts Executive Vice President, Woodlawn Trust Company, Aliquippa, Pa 1950 Laurence S. Bell Executive Vice President, The Union National Bank of Pittsburgh, Pittsburgh, Pa 1951 Montfort Jones Professor of Finance, The University of Pittsburgh, Pittsburgh, Pa 1951 Appointed by Board of Governors: Sidney A. Swensrud President, Gulf Oil Corporation, Pittsburgh, Pa 1949 Josiah M. Koch Vice President, Quaker State Oil Refining Corporation, Oil City, Pa 1950 A. H. Burchfield, Jr President and General Manager, Joseph Home Company, Pittsburgh, Pa 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

126 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. District No. 5—Richmond Class A: Warren S. Johnson President, Peoples Savings Bank and Trust Company, Wilmington, N. C 1949 John A. Sydenstricker Cashier, First National Bank in Marlinton, Marlinton, W. Va 1950 James D. Harrison President, First National Bank of Baltimore, Baltimore, Md 1951 Class B: H. L. Rust, Jr President, H. L. Rust Company, Washington, D. C.. . 1949 Cary L. Page President and Treasurer, Jackson Mills, Wellford, S. C 1950 Charles C. Reed President, Williams & Reed, Inc., Richmond, Va 1951 Class C.- John B. Woodward, Jr President and General Managei, Newport News Shipbuilding and Dry Dock Company, Newport News, Va 1949 Charles P. McCormick President and Chairman of Board, McCormick & Company, Inc., Baltimore, Md 1950 W. G. Wysor Management Counsel, Southern States Cooperative, Inc., Richmond, Va 1951 Baltimore Branch Appointed by Federal Reserve Ban\: George M. Moore Vice President, The Union National Bank of Clarksburg, Clarksburg, W. Va 1949 Eugene G. Grady President, The Western National Bank of Baltimore, Baltimore, Md 1949 W. Bladen Lowndes President, Fidelity Trust Company, Baltimore, Md.. . 1950 Holmes D. Baker President, The Citizens National Bank of Frederick, Frederick, Md 1951 Appointed by Board of Governors: L. Vinton Hershey President and General Manager, Hagerstown Shoe Company, Hagerstown, Md 1949 James M. Shriver President, The B. F. Shriver Company, Westminster, Md 1950 James E. Hooper Vice President, William E. Hooper and Sons Company, Baltimore, Md 1951 Charlotte Branch Appointed by Federal Reserve Ban\: Allen H. Sims Executive Vice President and Trust Officer, Citizens National Bank in Gastonia, Gastonia, N. C 1949 George S. Crouch President, Union National Bank, Charlotte, N. C... 1949 N. S. Calhoun President, Security National Bank, Greensboro, N. C. 1950 Thomas J. Robertson President, The First National Bank of South Carolina of Columbia, Columbia, S. C 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 127 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Coot. Term Expires Dec. 31 Appointed by Board of Governors: W. A. L. Sibley Vice President and Treasurer, Monarch Mills, Union, S. C 1949 R. E. Ebert President, Dixie Home Stores, Inc., Greenville, S. C 1950 R. Flake Shaw Executive Vice President, North Carolina Farm Bureau Federation, Greensboro, N. C 1951 District No. 6—Atlanta Class A: W. D. Cook Director, First National Bank in Meridian, Meridian, Miss 1949 George J. White . .President, The First National Bank of Mount Dora, Mount Dora, Fla 1950 R.C.Williams ..President, The First National Bank of Atlanta, Atlanta, Ga 1951 Class B.- Donald Comer Chairman of the Board, Avondale Mills, Birmingham, Ala 1949 A. B. Freeman Chairman of the Board, Louisiana Coca-Cola Bottling Company, Ltd., New Orleans, La 1950 J. A. McCrary Vice President and Treasurer, J. B. McCrary Company, Inc., Atlanta, Ga 1951 Class C: Rufus C. Harris President, The Tulane University of Louisiana, New Orleans, La 1949 Frank H. Neely Chairman of the Board, Rich's Inc., Atlanta, Ga.. . 1950 Paul E. Reinhold President, Foremost Dairies, Inc., Jacksonville, Fla.. . 1951 Birmingham Branch Appointed by Federal Reserve Banfc James G. Hall Executive Vice President, The First National Bank of Birmingham, Birmingham, Ala 1949 R. L. Adams President, Bank of York, York, Ala 1949 W. C. Bowman Chairman of the Board, The First National Bank of Montgomery, Montgomery, Ala 1950 D. C. Wadsworth President, The American National Bank of Gadsden, Gadsden, Ala 1951 Appointed by Board of Governors: Thad Holt President and Treasurer, Voice of Alabama, Inc., Birmingham, Ala 1949 J. Roy Faucett Faucett Brothers, Northport, Ala 1950 Wm. Howard Smith President, McQueen-Smith Farms, Prattville, Ala 1951 Jacksonville Branch Appointed by Federal Reserve Ban\: Max Losner President, The First National Bank of Homestead, Homestead, Fla 1949 H. S. Moody Executive Vice-President, Manatee River Bank & Trust Company, Bradenton, Fla 1949 J. W. Shands President, The Atlantic National Bank of Jacksonville, Jacksonville, Fla 1950 J. D. Camp President, Broward National Bank of Fort Lauderdalc, Fort Lauderdale, Fla 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

128 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS—Cont. Appointed by Board of Governors: Howard Phillips Vice President and General Manager, Dr. P. Phillips Company, Orlando, Fla 1949 Marshall F. Howell Secretary-Treasurer, Bond-Howell Lumber Co., Jacksonville, Fla 1950 J. Hillis Miller President, University of Florida, Gainesville, Fla.. . . 1951 Nashville Branch Appointed by Federal Reserve Ban\: Leslie R. Driver President, The First National Bank in Bristol, Bristol, Tenn 1949 T. L. Cathey President, Peoples and Union Bank, Lewisburg, Tenn 1949 W. H. Hitchcock President, First and Peoples National Bank, Gallatin, Tenn 1950 Parkes Armistead President, The American National Bank of Nashville, Nashville, Tenn 1951 Appointed by Board of Governors: W. Brattcn Evans President, Tennessee Enamel Manufacturing Company, Nashville, Tenn 1949 C. E. Brehm President, University of Tennessee, Knoxville, Tenn.. 1950 H. C. Meacham Farmer, Franklin, Tenn 1951 New Orleans Branch Appointed by Federal Reserve Bank.* John Legier President, National American Bank of New Orleans, New Orleans, La 1949 W. S. Johnson , Executive Vice President, The First National Bank of McComb City, McComb, Miss 1949 T. J. Eddins President, Bank of Slidell, Slidell, La 1950 J. C. Bolton President, Rapides Bank and Trust Company in Alexandria, Alexandria, La 1951 Appointed by Board of Governors: E. O. Batson President, Batson-McGehee Company, Inc., Millard, Miss 1949 H. G. Chalkley, Jr President, Sweet Lake Land and Oil Company, Inc., Lake Charles, La 1950 John J. Shaffer, Jr Planter, Ellendale, La 1951 District No. 7—Chicago Class A: Horace S. French President, The Manufacturers National Bank of Chicago, Chicago, 111 1949 Vivian W. Johnson President, First National Bank, Cedar Falls, Iowa. . 1950 Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 129 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Coilt. Class B.- William J. Grede President, Grede Foundries, Inc., Milwaukee, Wis.. . 1949 Nicholas H. Noyes Chairman, Finance Committee, Eli Lilly and Company, Indianapolis, Ind 1950 Wm. C. Heath President, A. O. Smith Corporation, Milwaukee, Wis 1951 Class C.- Paul G. Hoffman Director, The Studebaker Corporation, South Bend, Ind 1949 Allan B. Kline President, American Farm Bureau Federation, Chicago, 111 1950 F. J. Lunding President, Jewel Tea Company, Inc., Barrington, 111.. 1951 Detroit Branch Appointed by Federal Reserve Bank.: Chas. T. Fisher, Jr President, The National Bank of Detroit, Detroit, Mich 1949 Chas. A. Kanter Chairman, The Manufacturers National Bank of Detroit, Detroit, Mich 1950 John A. Stewart, Vice President and Cashier, Second National Bank & Trust Company, Saginaw, Mich 1950 Appointed by Board of Governors: Ben R. Marsh Vice President and General Manager, Michigan Bell Telephone Company, Detroit, Mich 1949 Ernest Gilbert Farmer, Waldron, Mich 1950 District No. 8—St. Louis Class A: G. R. Corlis President, Anna National Bank, Anna, 111 1949 Tom K. Smith Chairman of Board, Boatmen's National Bank, St. Louis, Mo 1950 Phil E. Chappell President, Planters Bank and Trust Company, Hopkinsville, Ky 1951 Class B: K. August Engel President, Arkansas Democrat Company, Little Rock, Ark 1949 Louis Ruthenburg President and General Manager, Servel, Inc., Evansville, Ind 1950 M. Moss Alexander President, Missouri Portland Cement Company, St. Louis, Mo 1951 Class C.- Russell L. Dearmont Chief Counsel for Trustee, Missouri-Pacific Lines, St. Louis, Mo 1949 Wm. H. Bryce Vice President and Director, Dixie Wax Paper Company, Memphis, Tenn 1950 Vacancy 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

130 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Little Rock Branch Appointed by Federal Reserve Ban\: Emmet Morris Chairman, Worthen Bank and Trust Company, Little Rock, Ark 1949 Geo. S. Neal President, Bank of Russellville, Russellville, Ark.. . . 1950 Lloyd Spencer President, First National Bank, Hope, Ark 1951 Thomas W. Stone Executive Vice President, The Arkansas National Bank of Hot Springs, Hot Springs, Ark 1951 Appointed by Board of Governors: Ralph E. Plunkett President, Plunkett-Jarrell Grocer Company, Little Rock, Ark 1949 A. Howard Stebbins, Sr Chairman of Board, Stebbins and Roberts, Inc., Little Rock, Ark 1950 Cecil C. Cox Farmer, Stuttgart, Ark 1951 Louisville Branch Appointed by Federal Reserve Ban\: A. C. Voris President, Citizens National Bank, Bedford, Ind 1949 Noel Rush President, Lincoln Bank and Trust Company, Louisville, Ky 1950 H. Lee Cooper President, Ohio Valley National Bank, Henderson, Ky 1951 Ira F. Wilcox Cashier and Director, The Union National Bank of New Albany, New Albany, Ind 1951 Appointed by Board of Governors: Smith D. Broadbent, Jr Farmer, Cadiz, Ky 1949 Alvin A. Voit President, Mengel Company, Louisville, Ky 1950 John W. Taylor President, University of Louisville, Louisville, Ky.. . 1951 Memphis Branch Appointed by Federal Reserve Ban\: W. W. Campbell President, National Bank of Eastern Arkansas, Forrest City, Ark 1949 W. P. Kretschmar Chairman of Board, Commercial National Bank, Greenville, Miss 1950 Norfleet Turner President, First National Bank, Memphis, Tenn 1951 H. W. Hicks President, First National Bank, Jackson, Tenn 1951 Appointed by Board of Governors: Hugh M. Brinkley Farmer, Hughes, Ark 1949 M. P. Moore Partner, E. E. Moore and Company, Senatobia, Miss.. 1950 Leslie M. Stratton, Jr Executive Vice President, Stratton-Warren Hardware Company, Memphis, Tenn 1951 District No. 9—Minneapolis Class A: Clarence E. Hill Chairman of the Board, Northwestern National Bank, Minneapolis, Minn 1949 J. R. McKnight Chairman, Pierre National Bank, Pierre, S. D 1950 C. W. Burges Vice President and Cashier, The Security National Bank of Edgeley, Edgeley, N. D 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 131 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec.31 DIRECTORS Cont. Class B: Homer P. Clark Chairman of the Board, West Publishing Company, St. Paul, Minn 1949 Walter H. McLeod President, Missoula Mercantile Company, Missoula, Mont 1950 Ray C. Lange President, Chippewa Canning Company, Chippewa Falls, Wis 1951 Class C: W. D. Cochran GMC Truck Distributor, Iron Mountain, Mich. 1949 Roger B. Shepard Chairman of the Board 1950 Paul E. Miller Director of Agricultural Extension Division, University of Minnesota, St. Paul, Minn 1951 Helena Branch Appointed by Federal Reserve Ban\: B. M. Harris President, Yellowstone Bank, Columbus, Mont 1949 Theodore Jacobs President, First National Bank, Missoula, Mont.... 1950 E. D. MacHaffie President, State Publishing Company, Helena, Mont.. 1950 Appointed by Board of Governors: Malcolm E. Holtz Agriculturist, Great Falls, Mont 1949 James A. McCain President, Montana State University, Missoula, Mont.. 1950 District No. 10—Kansas City Class A: M. A. Limbocker Chairman of the Board and President, Citizens National Bank, Emporia, Kan 1949 W. L. Bunten Executive Vice President, Goodland State Bank, Goodland, Kan 1950 T. A. Dines Chairman of the Board, United States National Bank, Denver, Colo 1951 Class B: }. M. Bernardin Lumberman, Kansas City, Mo 1949 L. C. Hutson Chairman of the Board, Chickasha Cotton Oil Company, Chickasha, Okla 1950 Willard D. Hosford Vice President and General Manager, John Deere Plow Company, Omaha, Neb 1951 Class C.- Robert B. Caldwell Caldwell, Downing, Noble and Garrity, Kansas City, Mo 1949 Robert L. Mehornay President, North-Mehornay Furniture Company, Kansas City, Mo 1950 Lyle L. Hague Farmer and stockman, Cherokee, Okla 1951 Denver Branch Appointed by Federal Reserve Ban\: P. K. Alexander Vice President, The First National Bank of Denver, Denver, Colo 1949 J. D. Allen President, The First National Bank of Eagle County, Eagle, Colo.. 1950 Albert K. Mitchell. Rancher, Albert, N. M 1950 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

132 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Appointed by Board of Governors: W. A. Alexander President, The Denver Tramway Corporation, Denver, Colo 1949 G. Norman Winder Rancher, Craig, Colo 1950 Oklahoma City Branch Appointed by Federal Reserve Bank'- S. A. Bryant President, The Farmers National Bank, Cushing, Okla 1949 Robert L. Bosworth Financial Vice President, Continental Oil Company, Ponca City, Okla 1950 Frank A. Sewell Chairman of the Board and President, Liberty National Bank, Oklahoma City, Okla 1950 Appointed by Board of Governors: Cecil W. Cotton President, C. W. Cotton Supply Company, Tulsa, Okla 1949 Rufus J. Green Rancher and farmer, Duncan, Okla 1950 Omaha Branch Appointed by Federal Reserve Ban\: Walter S. Byrne General Manager, Metropolitan Utilities District of Omaha, Omaha, Neb 1949 I. R. Alter President, First National Bank, Grand Island, Neb.. . 1949 Fred W. Marble President, Stock Growers National Bank, Cheyenne, Wyo 1950 Appointed by Board of Governors: Joseph W. Seacrest Co-Publisher and Co-Editor in Chief, The Journal Newspapers, Lincoln, Neb 1949 Fred S. Wallace Farmer, Gibbon, Neb 1950 District No. 11—Dallas Class A: J. Edd McLaughlin Vice President, Security State Bank and Trust Company, Rails, Texas 1949 W. L. Peterson President, The State National Bank, Denison, Texas. 1950 P. P. Butler President, First National Bank in Houston, Houston, Texas 1951 Class B: George L. MacGregor Chairman of the Board, President and General Manager, Dallas Power and Light Company, Dallas, Texas 1949 W. F. Beall President and General Manager, 3 Beall Brothers 3, Department Stores, Jacksonville, Texas 1950 J. R. Milam President, The Cooper Company, Inc., Waco, Texas. . 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 133 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Class C: J. R. Parten President, Woodley Petroleum Company, Houston, Texas 1949 G. A. Frierson G. A. Frierson & Son, Shreveport, La 1950 R. B. Anderson General Manager, W. T. Waggoner Estate, Vernon, Texas 1951 El Paso Branch Appointed by Federal Reserve Ban\: George G. Matkin President, State National Bank, El Paso, Texas 1949 W. H. Holcombe Executive Vice President, Security State Bank, Pecos, Texas 1950 W. S. Warnock Vice President, El Paso National Bank, El Paso, Texas 1951 W. Henry Wooldridge President, Lone Star Motor Company, El Paso, Texas 1951 Appointed by Board of Governors: Hiram S. Corbett President, J. Knox Corbett Lumber Company, Tucson, Ariz 1949 Hal Bogle Livestock feeding, farming and ranching, Dexter, N. M 1950 Dorrance D. Roderick President, Newspaper Printing Corporation, El Paso, Texas 1951 Houston Branch Appointed by Federal Reserve Bank.: Melvin Rouff First Vice President, Houston National Bank, Houston, Texas 1949 R. Lee Kempner Chairman of the Executive Committee, United States National Bank, Galveston, Texas 1950 O. R. Weyrich President, Houston Bank and Trust Company, Houston, Texas 1951 P. R. Hamill President, Bay City Bank and Trust Company, Bay City, Texas 1951 Appointed by Board of Governors: George A. Slaughter Farming, Wharton, Texas 1949 Vacancy 1950 Ross Stewart President, C. Jim Stewart and Stevenson, Inc., Houston, Texas 1951 San Antonio Branch Appointed by Federal Reserve Ban\: Riley Peters Executive Vice President, First State Bank, Kerrville, Texas 1949 E. R. L. Wroe President, American National Bank, Austin, Texas. . 1950 C. L. Skaggs President, The First National Bank of Weslaco, Weslaco, Texas 1951 E. A. Baetz President, Bexar County National Bank, San Antonio, Texas 1951 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

134 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Appointed by Board of Governors: Holman Cartwright Livestock and farming, Twin Oaks Ranch, Dinero, Texas J 1949 Edward E. Hale Chairman of the Department and Professor of Economics, The University of Texas, Austin, Texas. . 1950 Henry P. Drought Attorney at Law, San Antonio, Texas 1951 District No. 12—San Francisco Class A: William W. Crocker President, Crocker First National Bank of San Francisco, San Francisco, Calif 1949 Chas. H. Stewart President, Portland Trust and Savings Bank, Portland, Ore 1950 Carroll F. Byrd President, The First National Bank of Willows, Willows, Calif 1951 Class B: Walter S. Johnson President, American Box Corporation, San Francisco, Calif 1949 St. George Holden St. George Holden Realty Company, San Francisco, Calif 1950 Reese H. Taylor President, Union Oil Company of California, Los Angeles, Calif 1951 Class C: Brayton Wilbur President, Wilbur-Ellis Company, San Francisco, Calif 1949 Wm. R. Wallace, Jr Member of the firm, Williamson & Wallace, Attorneys at Law, San Francisco, Calif 1950 Harry R. Wellman Director, Giannini Foundation of Agricultural Economics, University of California, Berkeley, Calif.. . 1951 Los Angeles Branch Appointed by Federal Reserve Ban\: W. R. Bimson President, The Valley National Bank of Phoenix, Phoenix, Ariz 1949 M. Vilas Hubbard President, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif 1950 Frank L. King President, California Bank, Los Angeles, Calif... 1950 Appointed by Board of Governors: Y. Frank Freeman Vice President, Paramount Pictures, Inc., Hollywood, Calif 1949 Fred G. Sherrill Vice President, J. G. Boswell Company, Los Angeles, Calif 1950 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 135 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949-Cont. Term Expires Dec. 31 DIRECTORS Cont. Portland Branch Appointed by Federal Reserve Bank.: E. B. MacNaughton Chairman of the Board, The First National Bank of Portland, Portland, Ore 1949 W. W. Flint President, The First National Bank of Cottonwood, Cottonwood, Idaho 1950 Frank Wortman President, The First National Bank of McMinnville, McMinnvillc, Ore 1950 Appointed by Board of Governors: Aaron M. Frank President, Meier and Frank Company, Inc., Portland, Ore 1949 R. B. Taylor Livestock and farming, Adams, Ore 1950 Salt Lake City Branch Appointed by Federal Reserve Ban\: D. F. Richards President, American National Bank of Idaho at Idaho Falls, Idaho Falls, Idaho 1949 Chas. L. Smith Chairman of the Board, First Security Bank of Utah, N. A., Salt Lake City, Utah 1950 John A. Schoonover President, The Idaho First National Bank, Boise, Idaho 1950 Appointed by Board of Governors: Henry Aldous Dixon President, Weber College, Ogden, Utah 1949 Merle G. Hycr Livestock and farming, Lewiston, Utah 1950 Seattle Branch Appointed by Federal Reserve Ban\: Lawrence M. Arnold Chairman of the Board, Seattle-First National Bank, Seattle, Wash 1949 Fred C. Forrest Chairman of the Board and President, The First National Bank of Pullman, Pullman, Wash 1950 Benj. N. Phillips Chairman of the Board, First National Bank in Port Angeles, Port Angeles, Wash 1950 Appointed by Board of Governors: Henry C. Isaacson President, Isaacson Iron Works, Seattle, Wash 1949 John M. McGregor Manager, McGregor Land & Livestock Company, Hooper, Wash 1950 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

136 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949—Cont. SENIOR OFFICERS OF FEDERAL RESERVE BANKS [December 31, 1949] Federal Reserve President Vice Presidents Bank of— First Vice President Boston Joseph A. Erickson Robert B. Harvey x Alfred C. Neal William Willett E. G. Hult Carl B. Pitman E. O. Latham O. A. Schlaikjer R. F. Van Amringe New York Allan Sproul H. H. Kimball H. V. Roelse L. R. Rounds L. W. Knoke Robert G. Rouse Walter S. Logan V. Willis A. Phelan R. B. Wiltse Philadelphia Alfred H. Williams Karl R. Bopp E. C. Hill W. J. Davis L. E. Donaldson Wm. G. McCreedy Robert N. Hilkert P. M. Poorman 2 Cleveland Ray M. Gidney Roger R. Clouse A. H. Laning 2 Wm. H. Fletcher W. D. Fulton Martin Morrison J. W. Kossin Paul C. Stetzelberger Donald S. Thompson Richmond. ...... Hugh Leach R. L. Cherry C. B. Strathy J. S. Walden, Jr. R. W. Mercer 2 K. Brantley Watson W. R. Milford Edw. A. Wayne Charles W. Williams Atlanta W. S. McLarin, Jr. P. L. T. Beavers Joel B. Fort, Jr. L. M. Clark V. K. Bowman T. A. Lanford J. E. Denmark E. P. Paris S. P. Schuessler Chicago C. S. Young Allan M. Black * John K. Langum Vacancy Neil B. Dawes O. J. Netterstrom W. R. Diercks A. L. Olson E. C. Harris Alfred T. Sihler W. W. Turner St. Louis Chester C. Davis O. M. Attebery Paul E. Schroeder F. Guy Hitt Wm. E. Peterson William H. Stead C. A. Schacht C. M. Stewart Minneapolis J. N. Peyton H. G. McConnell Otis R. Preston O. S. Powell A. W. Mills 2 R. E. Towle Sigurd Ueland Kansas City H. G. Leedy L. H. Earhart John Phillips, Jr. Henry O. Koppang Delos C. Johns G. H. Pipkin R. L. Mathes C. E.Sandy x D. W. Woolley Dallas R. R. Gilbert E. B. Austin W. H. Holloway W. D. Gentry R. B. Coleman Watrous H. Irons H. R. DeMoss L. G. Pondrom 2 W. E. Eagle C. M. Rowland Mac C. Smyth San Francisco.... C. E. Earhart Albert C. Agnew W. L. Partner H. N. Mangels W. N. Ambrose C. R. Shaw D. L. Davis H. F. Slade J. M. Leisner a W. F. Volberg O. P. Wheeler 1 Cashier. * Also Cashier. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 137 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1949—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES OF FEDERAL RESERVE BANKS Federal Reserve Bank of- Branch Chief Officer New York Buffalo I. B. Smith x Cincinnati W. D. Fulton Cleveland Pittsburgh J. W. Kossin Baltimore W. R. Milford Richmond Charlotte R. L. Cherry Birmingham P. L. T. Beavers Atlanta Jacksonville T. A. Lanford Nashville Joel B. Fort, Jr. New Orleans E. P. Paris Chicago Detroit E. C. Harris St. Louis Little Rock C. M. Stewart Louisville C.A. Schacht Memphis Paul E. Schroeder Minneapolis.... Helena R. E. Towle Kansas City.... Denver G. H. Pipkin Oklahoma City R. L. Mathes Omaha L. H. Earhart Dallas El Paso C. M. Rowland Houston W. H. Holloway San Antonio W. E. Eagle San Francisco. . . Los Angeles W. N. Ambrose Portland D. L. Davis Salt Lake City W. L. Partner Seattle C. R. Shaw 1 General Manager. CONFERENCE OF PRESIDENTS The Presidents of the Federal Reserve Banks are organized into a Conference of Presidents which meets from time to time to consider matters of common interest, and to consult with and advise the Board of Governors. Mr. Davis, President of the Federal Reserve Bank of St. Louis, and Mr. Peyton, President of the Federal Reserve Bank of Minneapolis, who had served during 1948 as Chairman of the Conference and Vice Chairman, respectively, were re-elected to serve until the close of the first meeting of the Conference held during or after February 1950. Mr. Charles G. Young, Jr., Counsel of the Federal Reserve Bank of St. Louis, who was appointed Secretary of the Conference in May 1948, continued to serve during 1949. 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 > > w o I I g ===== BOUNDARIES OF FEDERAL RESERVE DISTRICTS BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES i( BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ® FEDERAL RESERVE BANK CITIES • FEDERAL RESERVE BRANCH CITIES 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. 138-45. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Acceptances, bankers, buying rates on 94 Activity of bank lending during 1949 16 Amendments to Federal Reserve Act: (See Federal Reserve Act) American Bankers Association, check routing symbol system inaugurated by 51 Assets, earning, of member banks 27 Assets and liabilities of Federal Reserve Banks 78, 80 Audit of accounts of Board by Federal Reserve Bank of Boston 70 Baker, A. Z., appointed Deputy Chairman at Cleveland 66 Balance of payments in United States 44 Balderston, C. Canby, appointed Deputy Chairman at Philadelphia 66 Bank earnings and profits 25 Bank holding companies: Annual reports obtained from 53 Examination of 53 Legislation to provide more effective supervision, proposed 59 Voting permits issued during year 53 Bank loans, activity during 1949 16 Bank premises of Federal Reserve Banks and branches: Alterations and improvements to 64 Value of land and buildings 78, 80, 92 Bank supervision by the Federal Reserve System 52 Banking and monetary developments in 1949 15 Banking offices: Analysis of changes 97 Number of 48 Board of Governors: Audit of accounts by Federal Reserve Bank of Boston 70 Employees 69 Income and expenses for 1949 70 Members: Clayton, Lawrence, death of 68 Salaries increased by amendment to Federal Reserve Act 58 Officers 119 Publications and releases 73 Reimbursable expenditures for 1949 70 Research and advisory services 71 Staff: (See Staff of Board) Bonds: Government: (See Government securities) Yields on corporate and State and local government bonds 30 Branch banks: Domestic: Capital requirements of member bank, proposed legislation to modify 60 139 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

140 INDEX Page Branch banks—Continued Domestic—Continued Changes during the year 49 Number, and analysis of changes 97 Federal Reserve System: Bank premises 92 Buildings, proposed bill to increase limit of expenditure 60 Directors, list of 123 Examination of 53 Vice Presidents in charge of 137 Foreign: Applications approved during year 54 Number in active operation 54 Buildings of Federal Reserve Banks, alterations and improvements to.... 64 Buildings of Federal Reserve branch banks, proposed bill to increase limit of expenditure 60 Buying rates on acceptances at Federal Reserve Banks 94 Capital accounts: Federal Reserve Banks 79, 81 Member banks 27 Capital requirements of State member banks, proposed bills to modify. . 60 Cash: Deficit of Federal Government 33 Holdings of member banks 21 Operations of Treasury 32 Chairmen of Federal Reserve Banks: Appointment of 65 Conference of 122 Executive Committee 122 List of 122 McCormick, Charles P., designated at Richmond 66 Meeting of 75 Whittier, Warren F., appointed at Philadelphia 66 Changes in banking structure 48 Charts: Bank deposits and currency 22 Capital ratios of member banks 28 Consumer instalment credit 13 Earnings ratios of member banks 26 Loans of commercial banks 17 Margin requirements and the stock market 15 Member bank reserves and holdings of United States Government securities 6 Member bank reserves and related items 20 Money rates 29 Ownership of United States Government securities 36 Reserve Bank holdings of United States Government securities 10 Selected business indexes ,,,,,. • 39 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 141 Page Charts—Continued Yields on United States Government securities 9 Chase, G. Howland, appointed Assistant Solicitor of Board 69 Check routing symbols, use of 51 Clayton, Lawrence, death of 68 Clayton Antitrust Act: Complaint against Transamerica Corporation under 58 Clearing and collection: Check routing symbols, use of 51 Par list: Changes in par and nonpar banks during year 51 Number of banks on list and number not on list, by States 98 Regulation J, amendment to 57 Commitment rates at Federal Reserve Banks 94 Committees: Executive, of Chairmen's Conference 122 Executive, of Federal Advisory Council 121 Executive, of Federal Open Market Committee 120 Commodity Credit Corporation, amendment to Regulation A to permit discount of notes 55 Comptroller of the Currency, joint statement on bank examination procedure 52 Condition reports of Federal Reserve Banks: All banks combined 78 Each bank 80 Conferences: Second conference of central bank experts of Western Hemisphere in Santiago, Chile, participation by representatives of Federal Reserve System 73 Vice Presidents in charge of bank examinations and supervision 52 {See also Meetings) Consumer finances, annual survey of 71 Consumer instalment credit: Amendments to Regulation W 57, 101, 103 Easing of terms 11 Expiration of legislation 58 Minimum down payments and maximum maturities, Regulation W. . 96 Regulation W, expiration of 57 Credit: Bank, to private borrowers, changes in 15 Consumer: {See Consumer instalment credit) Federal Reserve, policy in 1949 3 Stock market, expansion of 15 Currency: Foreign, readjustments during year 43 Major factors affecting 24 Supply of 22 Deaths: Clayton, Lawrence, member of Board of Governors 68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

142 INDEX Page Debt, Government: (See Government debt) Deficit, cash, of Federal Government 33 Deposits: Federal Reserve Banks 79, 81 Major factors affecting 24 Privately owned during year 23 Regional changes in 25 Reserve requirements in 1949 5 Time, increase during 1949 23 Time, maximum rates on 95 Deputy Chairmen of Federal Reserve Banks: Appointment of 65 Baker, A. Z., appointed at Cleveland 66 Balderston, C. Canby, appointed at Philadelphia 66 Harris, Rufus C, appointed at Atlanta 66 List of 122 Lunding, F. J., appointed at Chicago 67 Woodward, John B., Jr., appointed at Richmond 66 Devaluation of foreign currencies 43 Directors, Federal Reserve Banks: Appointment of 61 Classes of 123 List of 123 Lunding, F. J., appointed Class C at Chicago 61 Reinhold, Paul E., appointed Class C at Atlanta 61 Rummell, L. L., appointed Class C at Cleveland 61 Sharpies, Philip T., appointed Class C at Philadelphia 61 Woodward, John B., Jr., appointed Class C at Richmond 61 Directors, Federal Reserve branch banks: Hahne, Ernest H., appointed at Cincinnati Branch 61 List of 123 McCain, James A., appointed at Helena Branch 68 Swensrud, Sidney A., appointed at Pittsburgh Branch 67 Taylor, John W., appointed at Louisville Branch 68 Winder, G. Norman, appointed at Denver Branch 68 Directory: Board of Governors of the Federal Reserve System 119 Federal Advisory Council 121 Federal Open Market Committee 120 Federal Reserve Banks, directors and officers 122 Discount rates at Federal Reserve Banks 11 Dividends: Federal Reserve Banks 62, 87 Member banks 26 Dunn, Charles B., resignation as First Vice President at Chicago 68 ( Earning assets of member banks 27 Earnings: Member banks 25 Ratios of member banks 26 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 143 Page Earnings and expenses, Federal Reserve Banks: 1948 and 1949 61, 86 1914-1949 88 Economic Cooperation Administration, allocation of funds among European countries, proposal to modify 48 Economic developments in 1949 38 Employees: Board of Governors, number of 69 Federal Reserve Banks: Number of 68 Number and salaries of 93 Employment during 1949 38 European recovery, progress during year 47 Examinations: Bank holding companies 53 Banks, conference of Vice Presidents in charge of 52 Banks, joint statement issued by bank supervisory authorities 52 Chase Bank, conducted by Board of Governors 55 Federal Reserve Banks 53 State member banks 53 Expenses: Board of Governors for 1949 70 Board of Governors, reimbursable for 1949 70 Federal Reserve Banks 86 Export-Import Bank, proposed bill to allow to extend guarantees to U. S. investors 47 Exports: {See Imports and exports) Federal Advisory Council: Executive Committee 121 Meetings of 75 Members and officers 121 Federal Deposit Insurance Corporation: Joint statement on bank examination procedure 52 Federal Open Market Committee: Executive Committee 120 Meetings 74 Members and officers 120 Policy actions 110 Policy of permitting growing credit demands to be reflected in rising short-term rates 11 Press statement on purchases and sales of Government securities 8 Federal Reserve Act: Sections 10 and 12B, amendment increasing salaries of members of Board of Governors 58 Section 24, amendment relating to real estate loans by national banks. . 59 Federal Reserve Bank of Boston: Audit of accounts of Board of Governors 70 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

144 INDEX Page Federal Reserve Bank of Chicago: Staff: Dunn, Charles B., resignation as First Vice President 68 Federal Reserve Bank of New York: Discount rate, proposed change under Sections 13 and 13a of Federal Reserve Act 107 Foreign accounts of 64 Federal Reserve Banks: Assets and liabilities of 78, 80 Bank premises 64, 78, 80, 92 Branches; {See Branch banks, Federal Reserve System) Chairmen: {See Chairmen, Federal Reserve Banks) Condition of 78 Directors: {See Directors, Federal Reserve Banks) Discount rates 94 Dividends 62, 87 Earnings and expenses 1914-1949 88 Earnings and expenses 1949 61, 86 Earnings on loans and securities 63 Employees 68, 93 Examination of 53 First Vice Presidents 136 Foreign transactions 63 Holdings of Government securities 84 Holdings of loans and securities 62 Holdings of special short-term Treasury certificates 85 Officers, list of 122 Officers and employees: Number of 68 Number and salaries of 93 Presidents 136 Vice Presidents 136 Volume of operations 61 Volume of operations in principal departments 85 Federal Reserve notes: Cost of printing 70 Issued to and held by Federal Reserve Banks 79, 81 Federal Reserve System: Changes in membership 49 Map 138 Financing of foreign trade of United States, means of 45 First Vice Presidents of Federal Reserve Banks, list of 136 Foreign accounts of Federal Reserve Bank of New York 64 Foreign banking corporations: Bank of America, organization of 55 Branches established during year, and in active operation 54 Chase Bank, examination of 55 Number in operation 54 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 145 Page Foreign relationships of Federal Reserve System, cooperation of representatives of Federal Reserve System in assignments abroad 73 Foreign trade 43,46 Foreign transactions of Federal Reserve Banks 63 Government debt: Composition of , 33 Held by the public 32, 34 Government securities: Demand during 1949 7 Federal Reserve System portfolio during 1949 36 Holdings by Federal Reserve Banks 10, 62, 84 Holdings by the public 34 Ownership of 37 Press statement issued by Federal Open Market Committee on purchases and sales 8 Short-term, holdings of member banks 21 Yields on 9, 29 Hahne, Ernest H., appointed director at Cincinnati Branch 67 Harris, Rufus C, appointed Deputy Chairman at Atlanta 66 Hearings: Clayton Antitrust Act, complaint against Transamerica Corporation . 58 Imports and exports: United States during 1949 2, 46 Income and expenses of Board of Governors 70 Incomes during 1949 , 38 Interest rates, trend during 1949 28 International Bank for Reconstruction and Development, amendment to Revised Statutes removing certain restrictions 59 International trade and finance 43 Legislation: Bank holding companies, proposed 59 Capital requirements of State member banks, bills introduced to modify 60 Consumer instalment credit, expiration of 58 Federal Reserve Act, amendment to Sections 10 and 12B increasing salaries of members of the Board of Governors 58 Federal Reserve Act, amendment to Section 24 relating to real estate loans by national banks 59 Federal Reserve branch buildings, bill recommended to increase amount 60 Guarantees by Export-Import Bank to United States investors against certain risks peculiar to foreign investment, consideration of bill. . 47 Housing Act of 1949, amendment to Revised Statutes removing certain restrictions, obligations of 59 International bank obligations, amendment to Revised Statutes removing restrictions 59 Reserves of member banks, expiration of additional authority 58 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

146 INDEX Page Loans: Mortgage during 1949 18 National banks, amendment to Revised Statutes as to limitation on . . 59 Real estate, amendment to Section 24 of Federal Reserve Act relating to 59 Real estate during 1949 17 Short-term commercial rates on 31 Loans and securities, earnings of Federal Reserve Banks on 63 Lunding, F. J.: Appointed Class C director at Chicago 67 Appointed Deputy Chairman at Chicago 67 Map of Federal Reserve System 138 Margin requirements: Amendments to Regulations T and U, reducing 57, 102, 104, 106 Regulations T and U, table 96 Reduction in 14 McCain, James A., appointed director at Helena Branch 68 McCormick, Charles P., designated Chairman and Federal Reserve Agent at Richmond 66 Meetings: Chairmen of Federal Reserve Banks 75 Federal Advisory Council 75 Federal Open Market Committee 74 Presidents of Federal Reserve Banks 75 Member banks: Analysis of changes 97 Capital accounts 27 Capital ratios of 28 Earning assets of 27 Earnings during 1949 25 Profits during 1949 25 Reserve requirements in 1949 5 Reserves, major factors affecting 19 Membership in Federal Reserve System: Capital requirements of banks, proposed bill to modify 60 Changes in 49 Nonmember banks eligible for 50 Money supply, changes during year 22 Mutual savings banks, analysis of changes 97 National banks: Analysis of changes 97 Trust powers., amendment to Regulation F 56, 105 Trust powers granted during year 54 Nonmember banks: Analysis of changes 97 Eligible for membership . . 50 Par list, number on list and number not on list . 98 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 147 Page Open market operations, trend during 1949 7 Ownership of United States Government securities 35 Par list: Increase in number of banks on 51 Number of banks on list and not on list by Federal Reserve districts and States 98 Policy actions, Board of Governors: Changes in rules for uniform application by Federal Reserve Banks in waiving penalties for deficiencies in reserves of member banks. . 109 Proposed change in rate on discounts and advances to member banks under Sections 13 and 13a of the Federal Reserve Act 107 Regulation A, discounts for and advances to member banks by Federal Reserve Banks, amendment to 100 Regulation D, reserves of member banks, amendment to. . . .103, 105, 106 Regulation F, trust powers of national banks, amendment to 105 Regulation T, extension and maintenance of credit by brokers, dealers, and members of national securities exchanges, amendments to 102, 104, 106 Regulation U, loans by banks for the purpose of purchasing or carrying stocks registered on a national securities exchange, amendments to 102, 104, 106 Regulation W, consumer instalment credit, amendments to 101, 103 Policy actions, Federal Open Market Committee: Authority to effect transactions in System account: Meeting of March 1 110 Meeting of May 3 112 Meeting of June 28 113 Meeting of August 5 115 Meeting of December 13 117 Increase in short-term rates 117 Postal savings deposits, interest rates on 95 Presidents of Federal Reserve Banks: Conference of 137 List of . . 136 Meetings of 75 Press statements: Bank examination and reporting procedure, joint statement issued by bank supervisory authorities 52 Purchases and sales of Government securities, issued by Federal Open Market Committee 8 Prices: Discussion of 42 Farm products and foods during 1949 1 Materials, decline in 40 Production during 1949 38 Profits, member banks during 1949 25 Public debt: (See Government debt) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 INDEX Page Publications: Distribution of bank deposits by counties 72 Federal Reserve Chart Book on Bank Credit, Money Rates, and Business 72 Federal Reserve Par List, number of banks on 51 List of 73 Rates: Buying, on acceptances 94 Discount at Federal Reserve Banks 11, 94 Discount, proposed change under Sections 13 and 13a of the Federal Reserve Act 107 Interest, trend during 1949 28 Postal savings deposits ... 95 Savings deposits 95 Short-term, rise during 1949 7 Short-term commercial 31 Time deposits 95 Ratios of member banks capital 28 Ratios of member bank earnings 26 Real estate: Loans by national banks, amendment to Section 24 of Federal Reserve Act relating to 59 Loans during 1949 17 Recession in first half of 1949 39 Regulations, Board of Governors: A, discounts and advances to member banks, amendment to 55, 100 D, reserves of member banks, amendments to 56, 103, 105, 106 F, trust powers of national banks, amendment to 56, 105 J, check clearing and collection, amendment to 57 T, extension and maintenance of credit by brokers, dealers, and members of national securities exchanges: Amendments to 57, 102, 104, 106 Margin requirements, table 96 Reduction in margin requirements 14 U, loans by banks for the purpose of purchasing or carrying stocks registered on a national securities exchange: Amendments to 57, 102, 104, 106 Margin requirements, table 96 Reduction in margin requirements 14 W, consumer credit: Amendments to 57, 101, 103 Expiration of 57 Minimum down payments and maximum maturities 96 Relaxation of terms 11 Reinhold, Paul E., appointed Class C director at Atlanta 67 Research and advisory services of Board 71 Reserve Bank credit, table 90 Reserve Bank operations 61 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 149 Page Reserves of member banks: Amendments to Regulation D reducing 56, 103, 105, 106 Availability of 18 Changes in rules for uniform application by Federal Reserve Banks in waiving penalties for deficiencies 109 Excess of member banks 21 Expiration of additional authority 58 Major factors affecting 19 Requirements 4, 95 1918-1949 90 Resignations: Dunn, Charles B., as First Vice President at Chicago 68 Southard, Frank A., Jr., as Associate Director of Division of Research and Statistics 69 Revised Statutes: Amendment to Section 5136 to remove certain restrictions on dealings in housing obligations 59 Amendment to Section 5136 to remove restrictions as to obligations issued by International Bank 59 Rummell, L. L., appointed Class C director at Cleveland 67 Salaries: Members of the Board of Governors, amendment to Federal Reserve Act increasing 58 Officers and employees of Federal Reserve Banks 93 Securities exchange administration, reduction in margin requirements ... 14 Sharpies, Philip T., appointed Class C director at Philadelphia 67 Southard, Frank A., Jr., resignation as Associate Director of Division of Research and Statistics 69 StafT, Board of Governors: Chase, G. Howland, appointed Assistant Solicitor 69 Number of 69 Southard, Frank A., Jr., resignation as Associate Director of Division of Research and Statistics 69 Thomas, Woodlief, appointed Economic Adviser to the Board 69 Young, Ralph A., appointed Director of Division of Research and Statistics 69 State member banks: Analysis of changes 97 Capital requirements, proposed legislation to modify 60 Examination of 53 Studies being conducted by Board 71 Swensrud, Sidney A., appointed director at Pittsburgh Branch 67 Taylor, John W., appointed director at Louisville Branch 68 Thomas, Woodlief, appointed Economic Adviser to the Board 69 Transamerica Corporation, complaint against, hearing under Clayton Antitrust Act 58 Treasury cash operations 32 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 INDEX Page Treasury certificates, holdings of special short-term by Federal Reserve Banks 85 Treasury financing 31 Trust powers: National banks, amendment to Regulation F 56, 105 National banks, granted during year 54 United Kingdom, devaluation of currency 2 United States, balance of payments 44 Volume of operations of Federal Reserve Banks 61, 85 Voting permits issued to bank holding companies during year 53 Whittier, Warren F., appointment as Chairman and Federal Reserve Agent at Philadelphia 66 Winder, G. Norman, appointed director at Denver Branch 68 Woodward, John B., Jr.: Appointed Class C director at Richmond 67 Appointed Deputy Chairman at Richmond 66 Yields: Corporate bonds 30 Government securities 10, 29 State and local government bonds 30 Young, Ralph A., appointed Director of Division of Research and Statistics 69 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis