Annual Report of the Federal Reserve Board, 1956

FORTY-THIRD ANNUAL REPORT of the BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM COVERING OPERATIONS FOR THE YEAR 1956 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, ]une 3, 1957 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 Forty-third Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1956. Yours respectfully, WM. MCC. MARTIN, JR., Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONTENTS TEXT OF REPORT p age Introduction 1 Economic Background of Federal Reserve Policy 2 Growth in output and expenditures 2 Price and wage movements 3 Credit demands 5 Business finance 5 Consumer finance 6 Treasury finance 6 State and local governments 7 Supplies of credit 7 Personal saving 7 Institutional lenders 8 Bank credit 8 Monetary growth 10 Interest rates 11 Federal Reserve Policies and Bank Reserves 13 Record of Policy Actions—Federal Open Market Committee 17 Record of Policy Actions—Board of Governors 48 Bank Supervision by the Federal Reserve System 57 Examination of Federal Reserve Banks 57 Examination of State member banks 57 Bank holding companies 58 Trust powers of national banks 58 Foreign branches and banking corporations 59 Inter-Agency Bank Examination School 60 Federal Reserve membership 60 Legislation 61 Bank Holding Company Act of 1956 61 Purchase of Government obligations by Federal Reserve Banks. ... 61 Defense Production Act of 1950 61 Salary of Federal Reserve Board members 62 Reserve Bank Operations 62 Loan guarantees for defense production 62 Volume of operations 63 Earnings and expenses 63 Holdings of loans and securities 65 Foreign and international accounts 66 Bank premises 67 Board of Governors—Income and Expenses 67 iii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLES Page 1. Statement of Condition of the Federal Reserve Banks (in detail), Dec. 31, 1956 72 2. Statement of Condition of Each Federal Reserve Bank at End of 1956 and 1955 74 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1954, 1955, and 1956 78 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1954-56. . 79 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1952-56 79 6. Earnings and Expenses of Federal Reserve Banks during 1956. ... 80 7. Earnings and Expenses of Federal Reserve Banks, 1914-56 82 8. Member Bank Reserves, Reserve Bank Credit, and Related Items— End of Year 1918-56 and End of Month 1956 84 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1956 86 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1956 87 11. Federal Reserve Bank Discount, Interest, and Commitment Rates (in effect Dec. 31, 1956) 88 12. Member Bank Reserve Requirements 89 13. Maximum Interest Rates Payable on Time Deposits 89 14. Margin Requirements 90 15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950 90 16. Principal Assets and Liabilities and Number of All Banks, by Classes, Dec. 31, 1956 and 1955 91 17. Member Bank Earnings, by Class of Bank, 1956 and 1955 92 18 Analysis of Changes in Number of Banking Offices during 1956. . 93 19. Number of Banking Offices on Federal Reserve Par List and Not on Par List, by Federal Reserve Districts and States, Dec. 31, 1956. . . 94 20. Open Market Transactions of the Federal Reserve System during 1956 95 FEDERAL RESERVE DIRECTORIES AND MEETINGS Board of Governors of the Federal Reserve System 98 Federal Open Market Committee 99 Federal Advisory Council 100 Federal Reserve Banks and branches 101 Map of Federal Reserve Districts 118 Index 119 iv 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 In 1956 economic activity in the United States and abroad continued to expand and to generate upward pressures on prices as growing demands pressed against productive capacity in key industries. In this country consumer outlays for automobiles and homes gave way to business spending for plant and equipment as the principal expansive force in the economy. With output near capacity in industries producing basic materials and aggregate demands for goods and services mounting, prices at wholesale and retail rose throughout the year. In view of these output limitations, rising prices, and the strength of demands, there was need for a close rein on the pace of credit and monetary expansion. Federal Reserve policy, therefore, continued to exert restraint while providing for seasonal bank credit requirements and for some increase in the monetary base. The degree of restraint was altered from time to time during the year in response to changes in the economic climate. Reserve Bank discount rates were raised in April and in August, advancing from 2l/ to 3 2 per cent, and member bank borrowing from Reserve Banks showed a declining tendency during the year. The growth of the money supply amounted to $1.5 billion, or about 1 per cent. Deposit turnover rose sharply further. Total debt increased less than in 1955, but demands for credit continued to be large relative to the supply of loanable funds and relative to demands in most earlier years. As a result, interest rates advanced considerably—to the highest levels, in fact, since the early 1930's. Business demands for funds were especially heavy. The increase in debt of consumers was less than in the previous year, and Federal Government debt was reduced. In the latter part of the year there was some slackening in the growth of bank loans except for a temporary spurt in business loans toward the year-end. In securities and mortgage markets, however, demands for funds remained strong. 1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

L ANNUAL REPORT OF BOARD OF GOVERNORS ECONOMIC BACKGROUND OF FEDERAL RESERVE POLICY Growth in output and expenditures. The year began with resources of labor and materials intensively utilized and a limited potential for additional economic growth over the near term. Hence, expansion in total output of goods and services was not so great as in 1955, and pressure on prices continued. Gross national product in 1956, at $412 billion, was 5.5 per cent above 1955. Higher prices accounted for about half of the increase. The physical volume of agricultural output was up about 1 per cent and other output, including services, about 3 per cent. Employment rose further and unemployment remained at low levels. The average working week at factories exceeded 40 hours throughout the year. The moderate expansion in total output and expenditures reflected offsetting changes in major components. Outlays for new housing and automobiles, which together had accounted for one-fourth of the 1955 growth of gross national product, fell $4 billion in 1956. This decline was more than offset by an increase in business plant and equipment expenditures of $6.5 billion, or one-fifth, which provided the major expansive force in the economy in 1956. Business inventories were accumulated at about the same rate as in 1955. Expenditures by consumers for services and nondurable goods and by State and local governments continued to expand. Demands from abroad also contributed to domestic expansion in 1956. Exports of goods and services (excluding military grants) rose by one-sixth, and exceeded $23 billion. Rising exports reflected not only higher economic activity abroad but also larger foreign investments by United States business and Government programs to stimulate agricultural exports. Imports, which leveled off after the first quarter, were one-tenth greater than in 1955. Although there were important shifts in the composition of total output, basic materials industries operated near capacity throughout the year and employment remained at high levels. In the case of steel, for example, output was at capacity levels during the entire year (except for strike interruptions) despite a decline of more than one-fourth in automobile production, which usually absorbs about one-fifth of steel output. In construction, employment rose further in 1956, despite a reduced level of home building, as other Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM forms of construction increased sharply. While productive capacity was not fully utilized in some areas, the intensive employment of materials and labor meant that still greater growth of total output, to the extent possible, could have been achieved only with larger increases in prices and costs than were actually experienced. GROSS NATIONAL PRODUCT Billions of dollars, annual rates - 440 280 CONSUMER andj OTHER - 400 240 - 360 - 320 - 280 240 1950 1952 1954 1956 1950 1952 1954 1956 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Consumer and other includes consumer purchases of goods and services other than autos and parts; State and local government purchases of goods and services; net foreign investment; and business inventory change. Plant and equipment includes producers' durable equipment and private nonresidential construction. Autos relate only to consumer expenditures for automobiles and parts. Price and wage movements. The upward movement in prices that began in mid-1955 accelerated in 1956. Industrial commodity prices, which had increased 4 per cent in 1955, rose 4 per cent further. Agricultural prices, which had declined in 1955 as industrial prices advanced, rose in the first half of 1956 and in December were about 7 per cent above the level of a year earlier. Consumer prices, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4 ANNUAL REPORT OF BOARD OF GOVERNORS which had shown little change until the spring of 1956, increased almost 3 per cent in the last nine months of the year. The sharp expansion in demands for producers' equipment and nonresidential construction resulted in large increases in wholesale prices of metal products. Metals and metal products advanced 6 per cent and machinery and equipment prices increased 8 per SELECTED BUSINESS INDEXES 1947-49-100, monthly 140 INDUSTRIAL , WHOLESALE PRICES PRODUCTION / DURABLE /V f 160 MANUFACTURES^' \A Z""1 1 / 1' INDUSTRIAL ' 120 140 100 FARM and FOOD 120 80 NONAGRICULTURAL CONSUMER PRICES EMPLOYMENT _ NONMANUFACTURING yfZ. 120 120 TOTAL FOOD MANUFACTURING I 100 100 1954 1956 1954 1956 NOTE.—Seasonally adjusted series, except for prices. Bureau of Labor Statistics data for employment and prices, and Federal Reserve data for production. Industrial prices include those other than farm products and foods. cent in the course of the year. Prices of steel mill products, which had been raised sharply in mid-1955, were increased again in mid- 1956. At the end of the year they were nearly one-fifth higher than in the first half of 1955. Copper prices, however, turned down around midyear, after rising more than 50 per cent from early 1955. The upward movement in prices reflected the immediate strength Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 5 of demands for finished goods and for services, which in turn was translated into active demands for manpower and other resources that enter into production costs. In these circumstances, wage increases were widespread. An increasing number of wage agreements covered periods of more than one year and incorporated cost-ofliving escalator clauses and automatic annual wage increases. The increase in average hourly earnings in manufacturing, amounting to 6 per cent in 1956, exceeded the rise in output per man hour. About half of the gain in hourly earnings was matched by the rise in consumer prices. Credit demands. Developments in financial markets in 1956 reflected the shifts noted above in expansive forces in the economy. Nonfinancial businesses absorbed considerably more funds from credit markets than in 1955. Consumers and State and local governments borrowed somewhat less. The Federal Government became a net supplier of funds, as a cash surplus permitted reduction in Treasury debt held by the public. Business finance. Business demands for external financing were strong throughout the year as investment outlays increased sharply. Corporate profits rose little. With dividend payments higher, retained earnings declined, offsetting a major part of the increase in depreciation allowances. The gap between capital outlays and funds from current operations widened, and businesses drew heavily on internal cash resources, bank credit, and the securities markets. In the first half of 1956 corporate income tax payments, due in March and June, enlarged demands for funds that were already heavy. Loans to metal fabricating companies accounted for a substantial portion of business loan growth at banks in this period, when new orders for machinery and equipment were rising rapidly and steel stocks were being accumulated in anticipation of a midyear strike in the steel industry. The expansion of business loans at banks appeared to reflect not only enlarged short-term needs for funds but also some temporary financing of longer term outlays that ordinarily would be financed through security issues. Corporate security issues outstanding increased substantially in the first half of 1956. In addition, nonfinancial corporations obtained $6 billion of funds by liquidating United States Government securities. This was in contrast to the first half of 1955 when there was a reduction of only $500 million in such holdings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 ANNUAL REPORT OF BOARD OF GOVERNORS In the second half of 1956, the growth of bank loans to businesses other than sales finance companies slackened somewhat, but net corporate security issues were even larger than in the preceding six months. Although tax liabilities were accumulating in this period, corporations added only $1.2 billion to their holdings of Government securities, whereas in the second half of 1955 such holdings had been increased $4.7 billion. Over the entire year 1956 the liquidity position of nonfinancial corporations declined considerably. The ratio of cash and Government security holdings to total current liabilities fell from 54 per cent at the end of 1955 to 47 per cent at the end of 1956, the lowest level since before World War II. Sales finance companies were the only major group that appreciably reduced indebtedness to banks in 1956. At the same time, however, they continued to borrow on long-term securities and on short-term paper placed directly with investors. Credit extended by these companies to consumers and businesses increased only about one-sixth as much as in 1955, reflecting primarily developments in automobile sales and inventories. Consumer finance. The increase in indebtedness of consumers fell short of the record amounts of the previous year. Residential mortgage debt outstanding on 1- to 4-family houses rose $11.1 billion in 1956, compared with $12.4 billion in 1955. Nevertheless, the increase in 1956 was the second largest on record. The slowdown in rate of expansion of residential mortgage debt was accounted for entirely by the FHA and VA components. These Government-underwritten mortgages, with interest rate ceilings, became less attractive to investors as the general level of interest rates rose. Conventional mortgage debt outstanding on 1- to 4-family properties increased more than in 1955. Consumer short- and intermediate-term debt expanded $3.2 billion, about half as much as in 1955. Repayments on previously incurred instalment debt rose about one-tenth, and a decline in extensions of automobile credit offset most of the increase in extensions of other types of instalment credit. Treasury finance. Total outlays of the Federal Government rose in 1956 by about the same amount as in the previous year. Receipts increased considerably more than expenditures and the resulting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 7 surplus in the cash budget for the calendar year amounted to $5.5 billion, compared with a deficit of $700 million in 1955. Individual and corporate income taxes accounted for more than nine-tenths of the increase in Federal revenues. Most of the increase in Government spending was for national security outlays, which moved up in the second half of the year. The emergence of a surplus in the cash budget contributed to the restraint of inflationary pressures. The surplus enabled the Treasury to return $6 billion to the private economy through reduction in Federal debt held by the public. This represented Government savings that helped to finance the increase in private investment outlays, moderating upward pressures on interest rates. As Treasury debt was reduced, nonfinancial corporations and the banking system together liquidated more than $8 billion of Government securities in 1956, compared with about $3 billion in the previous year. All other investors taken together acquired about $2 billion of additional Government securities, compared with more than $3 billion in the previous year. State and local governments. Total outlays for goods and services by State and local governments rose about 9 per cent in 1956. Longterm security issues amounted to $5.4 billion, about one-tenth less than in 1955. Most of the reduction was accounted for by issues to finance toll highway construction. The amount of securities issued for school construction was about the same as in 1955, while expenditures for this purpose increased about 10 per cent. Supplies of credit. Cash balances that could be loaned in credit markets were less readily forthcoming in 1956 than a year earlier, while demands for loanable funds remained strong. As a result, interest rates rose more in 1956 than in 1955, even though total indebtedness in the economy rose less. In part, this reflected a cumulative decline in liquidity accompanying sustained economic expansion under conditions of credit restraint. Furthermore, in the case of businesses, funds that accrued in the course of 1956 were used more extensively to finance physical investment than to acquire financial assets. Savings institutions and commercial banks supplied a smaller volume of loan funds, but individuals added somewhat more to their security holdings than in 1955. Personal saving. Net personal saving, including the saving of unincorporated business, rose to 7.3 per cent of disposable personal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 ANNUAL REPORT OF BOARD OF GOVERNORS income in 1956, from 6.1 per cent in 1955. An important feature of this increase in the rate of personal saving was increased debt repayment along with a reduction in new borrowing by consumers. Another feature was a rise in holdings of financial assets by individuals. Institutional lenders. There was little change in 1956 in the aggregate flow of savings to life insurance companies, savings and loan associations, and mutual savings banks. However, supplementary sources of loanable funds that had been used by these institutions in 1955 were not drawn upon in 1956. The inflow of savings to savings and loan associations was about 5 per cent greater in 1956 than in the previous year, but these institutions repaid about $200 million of debt to the Federal home loan banks, whereas they had increased such debt by more than $500 million in 1955. Life insurance companies, whose assets rose less than in 1955, also reduced dependence on other sources of funds; in the previous year they had temporarily lodged mortgages with commercial banks in meeting heavy commitments to acquire new mortgages. The deposits and loans and investments of mutual savings banks increased about as much as in 1955. The growth of loan and investment portfolios of commercial and mutual savings banks, life insurance companies, and savings and loan associations, taken together, was less than in 1955. Nevertheless, the proportion of total public and private financing accounted for by these institutions increased in 1956, as the absorption of securities by other investor groups declined from the high levels of 1955. With liquidity drawn down as a result of developments in 1955, loanable funds were less readily available in 1956, and some sources reduced the amounts they supplied. Ban\ credit. Total loans and investments of commercial banks increased $4.2 billion in 1956, slightly less than in 1955. The growth of loans, amounting to $7.6 billion, was about one-third less than in 1955, but larger than in most other years. As in the previous year, commercial banks reduced United States Government security portfolios in order to expand loans. While total bank loans expanded at a slower pace in 1956, bank loans to businesses other than consumer and mortgage lenders increased more than in 1955. The expansion was strongest in the first half of the year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Bank loans outstanding to consumers increased about one-third less than in 1955, reflecting the general slowdown in total consumer credit expansion. The slower growth of real estate loans at commercial banks in 1956 was a reflection partly of the reversal in bank BANK LOANS AND INVESTMENTS ALL COMMERCIAL BANKS Billions of dollars TOTAL 150 140 130 100 1952 1954 1956 NOTE.—Figures are partly estimated. Data exclude interbank loans, and are for last Wednesday of month except for June and December call dates. lending to other financial institutions. In 1955, as mortgage lenders experienced difficulty in meeting commitments to acquire mortgages, banks had purchased from them a substantial amount of such mortgages under resale agreements. Banks had also extended loans to mortgage lenders and total bank credit to these lenders had increased about $1 billion in 1955. In 1956 the indebtedness of mortgage lenders to banks was reduced more than $100 million. Reflecting strong loan demands and Treasury debt retirement, banks reduced their Government security holdings $5 billion in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 ANNUAL REPORT OF BOARD OF GOVERNORS first half of the year. In the second half, as loan growth slackened somewhat and the Treasury offered new issues of bills and certificates, commercial banks added $1.9 billion to holdings of Government securities, reversing an almost steady decline that had begun in late 1954. A substantial part of the net increase in bank holdings of Government securities was at country member and nonmember banks, which also experienced much of the slowdown in loan growth in the second half of the year. While bank portfolios of Government securities declined $3 billion in 1956, their holdings of Government securities maturing in one year or less increased nearly $5 billion, as a result of acquisitions of newly issued bills and certificates and of the approach of maturities due to the passage of time. Consequently, the ratio of short-term Government securities to deposits rose during the year, and this tended to offset part of the decline in liquidity that commercial banks have experienced since late 1954. Monetary growth. Demand deposits adjusted and currency outside banks—the active money supply—rose $1.5 billion in 1956 compared with $3.8 billion in the previous year. The growth of time and savings deposits at commercial banks, at $2.2 billion, was the source of funds for one-half of the increase in bank loans and investments in 1956 as compared with only one-third in 1955. The $1.5 billion growth in the money supply during the year ending December 1956 represents an increase of about 1 per cent. From the fourth quarter of 1955 to the fourth quarter of 1956, gross national product increased 5.5 per cent, of which about half was accounted for by rising prices. The velocity of circulation of money thus increased considerably. This is evidenced by the growth in the rate of turnover of demand deposits; that is, the ratio of debits against deposit accounts to the amount of deposits. In reporting centers outside New York City, the rate of turnover rose 8 per cent in the year ending with the fourth quarter of 1956, after increasing 7 per cent in the previous year. A rising velocity of circulation of money—or a more active use of cash balances—is typical of periods of increasing economic activity. At such times incentives to economize the holding of cash balances become greater as interest rates rise and investment opportunities become more attractive. An increase in velocity is also likely to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

11 FEDERAL RESERVE SYSTEM MONEY SUPPLY AND RATE OF TURNOVER Seasonally adjusted, quarterly averages Billions Annual rate of dollars of turnover 135 DEMAND DEPOSITS 130 AND CURRENCY 22 125 21 120 20 19 18 1952 1954 1956 NOTE.—Figures for deposits and currency are quarterly averages of seasonally adjusted data for last Wednesday of month and are partly estimated. Demand deposits are for all banks in the U. S. and exclude U. S. Govt. and interbank deposits and items in process of collection. Currency excludes bank vault cash. Figures for turnover of demand deposits are quarterly averages of seasonally adjusted monthly data for 337 leading centers outside New York and 6 other financial centers. occur in an inflationary period when expectations of rising prices provide an additional incentive to minimize the holding of cash balances. Interest rates. With over-all demands for credit strong and the supply of loanable funds limited, interest rates continued to rise in 1956, reaching the highest levels since the early 1930's. The increase was especially marked in the long-term area where private debt expansion remained almost as large as in 1955. Differentials among yields on obligations of different maturities were smaller than in most other recent years. Market rates on corporate and State and local government bonds rose more than twice as much as in 1955. Yields on long-term Treasury issues rose less than those on corporate and municipal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 ANNUAL REPORT OF BOARD OF GOVERNORS INTEREST RATES Per cent - 2 - 1 —I /'COMMERCIAL PA V, ' OPEN MARKET 1953 1954 1955 1956 NOTE.—Market yield data are weekly averages of daily figures. Treasury bill rates are market yields on longest bills. Long-term U. S. Govt. yields are on 2 Ms per cent bonds. Commercial paper rate is on prime 4- to 6-month open market paper. Yields on corporate and State and local Aaa bonds are from Moody's Investors Service. bonds, while those on intermediate-term Government securities remained above long-term Treasury yields during most of the year. Treasury bill yields fluctuated with pressures on bank reserves but rose sharply in the second half of the year as credit market pressures increased. A special factor in the fourth quarter was the sale by the Treasury of three new issues of bills in addition to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 13 regular weekly offerings, increasing Treasury bills outstanding from $20.8 to $25.2 billion. Other short-term market rates moved in general with yields on Treasury bills. FEDERAL RESERVE POLICIES AND BANK RESERVES While maintaining a general condition of restraint on credit expansion in 1956, Federal Reserve operations were adjusted from time to time in accordance with changes in the climate of economic activity as well as with seasonal variations in the demand for bank credit. Furthermore, in recognition of the cumulative effects of a sustained period of credit restraint and of some reduction in bank liquidity positions, a moderate decline in member bank indebtedness to the Reserve Banks was not resisted. On balance, the reserves of member banks increased about $300 million in 1956. Required reserves increased about $240 million, and member bank indebtedness to Federal Reserve Banks declined about $150 million. About $500 million of reserves were supplied by an increase in the gold stock and by declines in foreign and other deposits at Federal Reserve Banks, while a corresponding amount of reserves was absorbed by an expansion of currency in circulation. Federal Reserve holdings of United States Government securities CHANGES IN MEMBER BANK RESERVES [Based on averages of daily figures for December; in millions of dollars] Item 1956 1955 Member bank reserves Total reserves +295 -39 Required reserves +237 +70 +58 -109 Excess reserves (sign indicates Principal factors affecting reserves effect on reserves) Federal Reserve credit: -151 +593 Discounts and advances to member banks Federal Reserve holdings of U. S. Govt. securities and + 194 -296 acceptances +244 +397 Float Currency in circulation -510 -516 Gold stock and foreign accounts +340 -42 Other factors + 181 -180 NOTE.—Figures may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 ANNUAL REPORT OF BOARD OF GOVERNORS and bankers' acceptances expanded over the year by about $200 million, and an increase in Federal Reserve float—or checks awaiting collection—also supplied reserves. Member bank borrowing at the Reserve Banks, which had increased rapidly in 1955 to $900 million in the fourth quarter of that year, reached $1.1 billion in April 1956 as bank loans expanded and Federal Reserve holdings of Government securities were reduced. RESERVES AND BORROWINGS Millions of dollars 2.0 ;\ 1 \ EXCESS RESERVES - 1.0 Is/ BORROWINGS I A / v AT F. 8. BANKS ,V ~"*+\*S' i ! 1952 1953 1954 1955 1956 NOTE.—Monthly averages of daily figures for member banks. Free reserves are excess reserves less borowings. In April borrowings exceeded excess reserves by $500 million. Member bank indebtedness declined after April, except for a temporary rise in August, as bank loan expansion moderated and conformed more closely to the usual seasonal pattern. In the fourth quarter of 1956 member bank borrowing at the Reserve Banks averaged $700 million, compared with excess reserves of $550 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 15 The cost of member bank borrowing at Reserve Banks was raised in April—by *4 percentage point to 2% per cent at 10 Reserve Banks and by l/ percentage point to 3 per cent at the Minneapolis 2 and San Francisco Banks. In August the other 10 Banks advanced discount rates to 3 per cent. Although the reserve position of member banks was somewhat easier at the end of 1956 than a year earlier, the cost to banks of acquiring additional reserves was higher. Reserve Bank discount rates at 3 per cent were up l/ percentage point and the prices at 2 which Government securities could be sold were lower. Furthermore, with reduced Government security portfolios, banks had become less willing to dispose of such securities in order to expand loans further. Banks also showed a tendency in the latter part of the year to repay borrowings at Reserve Banks more quickly. Thus, banks had become more sensitive to Federal Reserve policies and a given level of member bank borrowings represented a greater degree of restraint. As the year ended, Federal Reserve policies were continuing to limit bank credit expansion. Over the second half of the year the wholesale prices of industrial commodities had risen at an annual rate of nearly 6 per cent and consumer prices at a rate of 3 per cent a year. Average hourly earnings in manufacturing had risen at an annual rate of 8 per cent. In these circumstances and in the light of developments since mid-1955, the threat of an inflationary spiral, with price and wage increases feeding upon each other, was a matter of concern in the formation of Federal Reserve policy in the latter months of the year. The principal changes in Federal Reserve policy during the year are summarized on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 ANNUAL REPORT OF BOARD OF GOVERNORS DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, 1956 Period Action Purpose of action January Reduced System holdings of U. S. To offset seasonal return Government securities by over $1.4 flow of currency and reducbillion through sales in the market, tion in reserve needs and redemption of maturing bills, and restore degree of restraint termination of repurchase agree- prevailing before December ments. Member bank borrowings 1 action to moderate restraint increased to weekly averages of temporarily. $900 million in late January. February and Bought small amounts of Govern- To meet changing reserve March ment securities at times. Member needs and avoid an inbank borrowings declined somewhat creasing degree of credit rein February but increased substan- straint in view of growing tially in March as result of sharp tone of uncertainty as to increase in required reserves. economic prospects. April and Discount rates raised from 2^2 per To increase restraint on May cent to 2% per cent at 10 Reserve credit expansion, in view of Banks and to 3 per cent at 2 Banks sharp increase in bank around middle of April; System credit in March and indicaholdings of U. S. Government secu- tions of broad increase in rities reduced by $350 million. spending, growing demands Member bank borrowings at Re- for credit, and upward serve Banks rose to over $1 billion. pressures on prices and costs. Late May- Increased System holdings of U. S. To meet currency needs early August Government securities around end around holidays, to cover of May and end of June and main- added demands for reserves tained holdings at higher level than around tax payment and in previousjperiod. midyear settlement periods, and to avoid increasing the degree of restraint in view of uncertainties in economic situation. August- Discount rates raised late in August Discount rates increased in November to 3 per cent at the 10 Reserve conformity with rise in mar- Banks with rates of 2% per cent. ket rates resulting from System holdings of U. S. Govern- vigorous credit demands. ment securities increased by nearly Policies designed to increase $1 billion; member bank borrowings and maintain restraint on at Reserve Banks rose to average undue credit expansion of $900 million in August and aver- while covering seasonal and aged between $700 and $800 mil- other temporary variations lion in other months. in reserve needs, including effects of frequent Treasury financing operations. December System holdings of U. S. Govern- To supply reserve funds in ment securities and bankers' accept- recognition of additional ances increased by over $550 mil- pressures in money, credit, lion, including substantial repur- and capital markets resultchase agreements with dealers. ing from seasonal factors Member bank borrowings declined and international condito weekly averages of around $600 tions, at a time when lower million, except in last week of year, liquidity ratios of banks and at times were less than excess were themselves exerting restraint on bank lending. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 17 RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE At the beginning of the year 1956, the policy directive of the Federal Open Market Committee, issued to the Federal Reserve Bank of New York as Agent selected by the Committee to execute transactions for the System open market account, was the one that had been approved at the meeting on December 13, 1955, reading as follows: To make such purchases, sales, or exchanges (including replacement of maturing securities, and allowing maturities to run off without replacement) for the System open market account in the open market, or in the case of maturing securities, by direct exchange with the Treasury, as may be necessary in the light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary developments in the interest of sustainable economic growth, and (c) to the practical administration of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million; To sell direct to the Treasury from the System account for gold certificates such amounts of Treasury securities maturing within one year as may be necessary from time to time for the accommodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. The policy actions listed on the following pages were taken by the votes indicated at the nineteen meetings of the Federal Open Market Committee held during 1956. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 ANNUAL REPORT OF BOARD OF GOVERNORS January 10, 1956 Authority to effect transactions in System account. The Federal Open Market Committee renewed without change the directive that was in effect at the beginning of 1956, set forth above, which called for a policy of restraint on credit expansion. Votes for this action: Messrs. Martin, Chairman, Balderston, Earhart, Fulton, Irons, Leach, Mills, Robertson, Shepardson, Szymczak, and Treiber. Votes against this action: none. This action continued the policy of restraint on credit expansion in the same terms that had been used in each directive issued by the Committee since August 1955; that is, transactions in the System open market account were to be with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth." During the first four months of 1955, the directive had been in terms of "fostering growth and stability in the economy by maintaining conditions in the money market that would encourage recovery and avoid the development of unsustainable expansion;" and from May to August of 1955, the directive had likewise been in terms of fostering growth and stability, although the instruction to "encourage recovery" had been deleted in May. Restraints on credit expansion had been exercised by making it necessary for member banks to borrow to obtain additional reserves needed and by raising discount rates, and these restraints had become increasingly restrictive as banks reduced their liquidity in order to expand loans. In reviewing the domestic situation at the beginning of 1956, the Committee found that economic activity was still advancing with industrial output and industrial prices penetrating new high ground, and with many industries operating near existing capacities. Aggregate domestic demands were continuing to expand and pressing upward on prices. Data for other industrial countries similarly showed further advances in activity with manpower and productive facilities being utilized intensively and with prices tending to advance. At the same time, the Committee noted signs of slowing in the rate of expansion in key domestic areas such as automobile production and residential building, and it also took note of an apparent leveling off in consumer demand and of views expressed by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 19 some observers that a downturn in activity might occur during 1956. These factors were weighed against the indications that plant and equipment expenditures by business would establish new records during the year and that, if credit were too readily available at this stage, there could be an upward spiraling of prices based on increasing costs and shortages of some materials. The Committee reached the conclusion that the over-all situation was still inflationary in character, at least on the industrial side, and that a continuation of restraint on credit expansion was required. Until the economic outlook and the demand for credit had become clearer, however, and in view of the increased severity of restraints on banks, the Committee did not feel that the general level of restraint should be increased beyond that which had existed in the autumn of 1955. In considering the implementation of this general policy of restraint, the Committee observed that the usual year-end strains in the money market had been moderated by certain unusual factors as well as by System operations that had permitted some easing of member bank reserve positions in the last two weeks of 1955. The Committee believed it desirable to absorb some of the reserves that had been supplied at that period and thus to move toward recapturing the degree of restraint that had existed in November and early December. January 24, 1956 Authority to effect transactions in System account. The Committee modified its directive to the Federal Reserve Bank of New York at this meeting by adding to clause (b) an instruction that transactions for the System account, in addition "to restraining inflationary developments in the interest of sustainable economic growth," should take "into account any deflationary tendencies in the economy." Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Earhart, Fulton, Irons, Leach, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. The decision at this meeting to continue the directive calling basically for restraint on inflationary developments was made in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 ANNUAL REPORT OF BOARD OF GOVERNORS the light of the evidences that the current year had begun with activity and employment sharply above a year ago and, in many countries, close to capacity. It was recognized that further increases in over-all output in the United States could be achieved only slowly and that in such circumstances relatively small increases in demand might bring heavy upward pressure on prices. At the same time the Committee noted the currently reduced levels of farm prices and uncertainties in the housing and automobile markets; and it gave consideration to the view that the domestic economy after a year and a half of expansion might be nearing a cyclical peak and that a reaction might be in prospect before long. It observed likewise that some seasonal contraction in the volume of credit was then taking place and, although a rise during February and March might be anticipated, some of the rise would be to meet seasonal needs. The net of the Committee's review was that there had been a slight—perhaps almost imperceptible—change in the state of the economy in recent weeks, which might make some relaxation of restraint appropriate in the near future. It concluded that the situation at the moment did not call for a policy directive which gave sole emphasis to restraining inflationary forces. This did not mean that a reversal of the existing policy was called for, but a shift in emphasis seemed desirable as a means of indicating the intent to make credit available to permit the economy to work, to produce, and to consume at near-capacity levels. Thus, for the purpose of emphasizing flexibility, the Committee added the instruction to take into account any deflationary tendencies in the economy while carrying out operations directed toward restraining inflationary developments. February 15, 1956 Authority to effect transactions in System account. The Committee renewed its directive to the Federal Reserve Bank of New York with no change in the wording approved at the meeting on January 24, 1956. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Fulton, Irons, Leach, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Powell. Votes against this action: none. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 21 In its review of the economic situation at this time the Committee observed some continued diversity in tendencies with necessary realignment taking place in a number of important activities. However, industries generally were operating at very advanced levels and, even where this was not the case, evidence was not available to indicate an economic downturn. Some easing in the labor market had appeared, particularly in automobile manufacturing centers where reductions in both employment and working hours had been greater than had been previously expected. Markets for consumer durable goods were showing a mixed picture, but over-all retail trade continued at high levels. The rise in industrial prices persisted. The leveling off in economic activity noted at this time had been reflected in the credit situation with bank credit and the money supply having shown about the customary seasonal declines, compared with less than the usual seasonal reductions in early 1955. However, this did not indicate a general slackening in the demand for credit. Business plans for capital expenditures were still impressively strong. Member bank borrowing had increased somewhat in late January and member bank reserve positions had been relatively tight. On balance, the Committee concluded that the signs of economic strength continued to outweigh signs of weakness and that a relaxation of pressure on bank reserves was not indicated, although no increase in restraint appeared to be called for at the moment. March 6, 1956 This was the first meeting of the Federal Open Market Committee after the new members elected by the Federal Reserve Banks for the year beginning March 1, 1956 assumed their duties. 1. Authority to effect transactions in System account. The Committee again renewed its directive to the Federal Reserve Bank of New York in the same form that had been adopted at the meeting on January 24, 1956 calling for transactions in the System open market account to be with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while taking into account any deflationary tendencies in the economy." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. Domestic industrial production and gross national product had shown little change over the three months preceding this meeting, following uninterrupted and marked advances from mid-1954 to late 1955. Some selective reductions in demand had appeared recently, however, and at this meeting the Committee gave thorough consideration to their possible significance for economic prospects and credit policy. There were indications of diminishing expansionary forces in the consumer credit field, and mortgage lending and housing starts had declined somewhat from the high levels that had prevailed a few months earlier. Pressures on productive capacity seemed to be less than they had been three months earlier, and it appeared that the tremendous upsurge in over-all economic activity over the preceding year and a half was slowing down. Notwithstanding the foregoing elements, output of steel continued at capacity with reduced demand from the automobile industry being offset by takings of other industries. Evidence of still further rise in plans for capital expenditures by business had appeared, accompanied by widespread expressions of optimism regarding the future. Wholesale prices of industrial commodities and finished goods were continuing to advance, and some recovery in prices of farm products seemed to be getting under way. Judging from the current high level of activity in most parts of the economy, the Committee saw no evidence that the policy of credit restraint that had been followed for some months had been too restrictive. Even though some divergent tendencies were apparent at the time, a continuation of that policy appeared to be called for and there were indications that increased restraint might become necessary shortly. However, at the time of this meeting a Treasury financing was under way and the Committee desired to avoid action that might disturb the stability in the money market during the period of that financing. It also felt that the adjustments taking place in the automobile and residential building industries and some other areas might slow the growth of credit and help reduce rising price pressures. Its conclusion, therefore, was to continue the existing policy without any overt action toward Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 23 either increasing or lessening the degree of restraint that then existed. 2. Authorization to acquire bankers' acceptances and to enter into repurchase agreements. The Committee renewed the authorization that had been approved in March 1955 under which the Federal Reserve Bank of New York was authorized (a) to purchase or sell, at market rates of discount, prime bankers' acceptances of the kinds designated in the regulation of the Federal Open Market Committee, at such times and in such amounts as may be advisable and consistent with the general credit policy and instructions of the Federal Open Market Committee; and (b) to enter into repurchase agreements with nonbank dealers in bankers' acceptances covering prime bankers' acceptances, subject to certain conditions. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Shepardson, Szymczak, Vardaman, and Fulton. Vote against this action: Mr. Roberston. The Committee voted to continue the authority for purchases of bankers' acceptances and repurchase agreements covering such instruments in substantially the form approved at the meeting in March 1955. This was on the grounds that the System should assist in the further development of an acceptance market in the United States with a view to improving this country's means of financing foreign trade and the functioning of an international money market, and with the understanding that purchases of bankers' acceptances would be effected only at such times and in such amounts as might be advisable and consistent with the general credit policy and instructions of the Federal Open Market Committee. Mr. Robertson voted against the renewal of this authority because he felt that the Federal Reserve System should withdraw from active participation in the acceptance market unless it was clear that such participation would yield specific benefits. He did not believe that this had been the case since the authorization was granted in 1955. Further, he believed that if the Federal Reserve System desired to support and encourage the acceptance market, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

24 ANNUAL REPORT OF BOARD OF GOVERNORS it could accomplish that objective more effectively by standing ready to purchase acceptances at published rates that ordinarily would represent a fractionally higher rate of discount than market rates. 3. Review of continuing authorities or statements of policy. The Committee reviewed and reaffirmed all continuing statements of operating policy and specific authorities for operations (including authority for repurchase agreements with nonbank dealers in United States Government securities) which were in effect immediately prior to this meeting. Among these were the following statements: A. It is not now the policy of the Committee to support any pattern of prices and yields in the Government securities market, and intervention in the Government securities market is solely to effectuate the objectives of monetary and credit policy (including correction of disorderly markets). Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. B. Operations for the System account in the open market, other than repurchase agreements, shall be confined to short-term securities (except in the correction of disorderly markets), and during a period of Treasury financing there shall be no purchases of (1) maturing issues for which an exchange is being offered, (2) when-issued securities, or (3) outstanding issues of comparable maturities to those being offered for exchange; these policies to be followed until such time as they may be superseded or modified by further action of the Federal Open Market Committee. Votes for this action: Messrs. Martin, Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Vote against this action: Mr. Sproul, Vice Chairman. C. Transactions for the System account in the open market shall be entered into solely for the purpose of providing or absorbing reserves (except in the correction of disorderly markets), and shall not include offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System's portfolio; such policy to be followed until such time as it may be superseded or modified by further action of the Federal Open Market Committee. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 25 Votes for this action: Messrs. Martin, Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Vote against this action: Mr. Sproul, Vice Chairman. Renewal of these three continuing authorities or statements of policy was in the same form as that approved in March of 1954 and 1955. In voting against the continuation of statements B and C set forth above, Mr. Sproul, who had voted against their renewal a year earlier, stated that he was still opposed in principle and in practice to these operating rules. The other members of the Committee believed the continuation of the rules to be desirable. March 27, 1956 Authority to effect transactions in System account. The Committee modified its directive to the Federal Reserve Bank of New York by deleting from clause (b) of the first paragraph the instruction to take "into account any deflationary tendencies in the economy" while effecting transactions in pursuit of the general policy of "restraining inflationary developments in the interest of sustainable growth." Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. The economic review at this time confirmed the Committee's observations at the past few meetings that economic activity had ceased to advance toward the end of 1955 and had moved on a plateau during the first quarter of 1956. Industrial production had shown little change from the high level reached in the fall months of 1955, nonfarm employment had been steady, and gross national product was estimated to have been only slightly higher during the first quarter of 1956 than in the last quarter of 1955, although it continued at a record high, well above year-ago levels. The slight increase in total product during the quarter under review reflected mainly further growth in business fixed capital and inventory outlays, in State and local government purchases, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 ANNUAL REPORT OF BOARD OF GOVERNORS in consumer expenditures for services. Consumer goods purchases at retail had been about stable. Construction activity had been only moderately below the record rate of mid-1955, the decrease reflecting solely reduced residential building. Prices, which had shown signs of weakening early in 1956, had strengthened in March, and key prices were firm to rising, with agricultural prices displaying more than seasonal strength. In other industrial countries, consumer and business demands were continuing to grow, although at a slower pace. The question before the Committee was whether the economy would resume its advance, remain on the recent plateau, or decline; and the Committee's judgment was that available information pointed toward a further advance. Among the general factors leading to this conclusion were the much greater than expected plans of business concerns in all major lines for plant and equipment expenditures, the widespread optimism of consumers as to the economic outlook and their own financial position and income prospects, and evidence of an exceptionally heavy demand for bank credit in the current month. The Committee also noted that common stock prices had risen sharply further. Growing pressures for increases in prices and wages were evident, and there was danger that if supported by further credit expansion pressures would engender an inflationary spiral. The Committee discussed the extent to which monetary policy might be used to combat an inflationary cost-price spiral and the risk of incurring temporary unemployment on the one hand, as against the risk of undermining the basis of sustained employment on the other. It was suggested that while monetary policy could not be expected to achieve all of the task of combating inflationary pressures, the System would be derelict in its duty if it did not exercise additional restraint in this situation. In the circumstances, the Committee concluded that its instruction to take into account deflationary tendencies in the economy in effecting transactions for the System account was not consistent with the existing situation or the prospective renewal of growth in the economy. Accordingly, it deleted the qualification as to deflationary tendencies that had been added to clause (b) of the directive at the meeting on January 24, 1956, leaving an instruction to effect transactions for the System account with a view, among other things, "to re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 27 straining inflationary developments in the interest of sustainable economic growth." In reviewing credit measures at this meeting, the Committee also discussed the relation to open market policy of possible action by the directors of the Federal Reserve Banks to increase discount rates from the 2l/ per cent level that had been in effect at all Reserve 2 Banks since November 1955. It was noted that there was some feeling in the System that an increase might be necessary at an early date to prevent undue credit expansion for financing capital outlays through the banking system. On the other hand, there was some feeling that, with increasing credit demand, additional restraint would result from the Committee's policy of limiting additions to the supply of reserves to such amounts as were needed for sustainable growth in the economy. April 17, 1956 Authority to effect transactions in System account. The Federal Open Market Committee renewed without change the directive that had been approved at the meeting on March 27, 1956, which called for transactions in the System account with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth." Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. Since the preceding meeting eleven of the Federal Reserve Banks had increased their rates of discount effective April 13, 1956. Nine of the increases were from 2l/ to 2% per cent and two were from 2 2y to 3 per cent. (The remaining Reserve Bank increased its rate 2 to 2% per cent effective April 20.) At the time of this meeting, credit markets were in process of adjusting to the increase in discount rates that had just been announced. This added factor followed a period of several weeks during which the markets had been adjusting to the impact of corporate income tax payments in March, the Treasury refunding operation that had come at the same time as the tax payments, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 ANNUAL REPORT OF BOARD OF GOVERNORS and the heavy loan demand both in capital markets and at banks. The interest rate structure had risen sharply during this threeweek period. In considering policy for the period ahead, it was necessary for the Committee to judge the reactions of lenders and borrowers to the current restrictive policy: whether the actions taken thus far would effectively limit credit growth without serious disruption of the credit markets, or whether credit demands remained so strong as to cause further rises in interest rates and a weakening in securities markets that might threaten a money market crisis. As to economic developments, the Committee found activity continuing to move sidewise on the high plateau that had been maintained since late fall of 1955. The over-all picture was still somewhat mixed, but indications were that pressures growing out of expanding private investment were beginning to tilt activity upward. The automobile and housing markets appeared to have stabilized over the past few weeks, and other consumer markets had been on the firm to rising side. Business and investor psychology continued optimistic, and the picture was generally one of continuing business investment boom, not only in the United States but in other industrial countries as well. The Committee therefore agreed that there should be no relaxation of pressures. However, the restrictive policy should not be pressed too strongly pending more opportunity to observe reactions to the mid-April increase in discount rates, increased pressure on bank reserve positions, and clarification of the economic outlook. May 9, 1956 Authority to effect transactions in System account. The Committee renewed without change the directive issued to the Federal Reserve Bank of New York on March 27 and April 17, 1956 for effecting transactions in the System open market account. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. Since the meeting on April 17, 1956 no important change had become apparent in the state of the economy. Output of goods had continued at the high level that had prevailed for several Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 29 months. Upward pressures on prices of industrial commodities had continued and new increases in steel prices were anticipated following negotiations of a new wage contract later in the spring or summer. Business demands for goods and services had risen over the months and aggregate consumer demand, including demand for automobiles and housing, had about held its own. Money markets at the time of this meeting were not under quite as much pressure as they had been at the time of the meeting on April 17, which had followed by only a few days the increase in discount rates at the Federal Reserve Banks at a time when the credit markets were still adjusting to the unusual pressures of March. The Committee saw no evidence of a change in the economy that called for lessening restraint on credit expansion at this time. Demand for credit including demand in the capital markets suggested a further bulge, although there was some feeling that the actions already taken by the Federal Reserve System to restrain undue credit expansion might have a cumulative effect that would hold down the expansionary tendencies. Furthermore, there had been a decline in the liquidity position of business and of banks over a period of months which could have important effects. The Committee's decision to make no change in the existing policy reflected its belief that credit restraint continued suitable to the situation and that no change either toward increased pressure or toward relaxation would be justified at this time. May 23, 1956 Authority to effect transactions in System account. At this meeting the Committee restored to clause (b) of its directive to the Federal Reserve Bank of New York an instruction to take into account deflationary tendencies in the economy while pursuing a general policy of restraining inflationary developments. With this change, the clause read as it had from January 24, 1956 to March 27, 1956, that transactions be with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth while taking into account any deflationary tendencies in the economy." Votes for this action: Messrs. Martin, Chairman, Balderston, Erickson, Johns, Mills, Powell, Shepardson, Szymczak, Fulton, and Treiber. Votes against this action: none. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

30 ANNUAL REPORT OF BOARD OF GOVERNORS The Committee found less exuberance in the economic situation at the time of this meeting than had been observed at either of the two preceding meetings. Although a sidewise movement on a high plateau still seemed to be continuing, divergent tendencies had been noteworthy during the past few weeks. In particular, sales of new automobiles had been weak at the consumer level and dealer inventories of new cars had risen to around 900,000 units with the result that output was being cut back sharply. Use of consumer instalment credit had slowed down further. The Committee recognized the possibility that future developments could be affected by weaknesses in some parts of the economy and by a pessimistic business and investor psychology. Another factor was the less ready reception accorded new capital issues as large offerings came to the market seeking funds to carry out the large business spending programs. Stock prices had declined sharply. Bank reserves had been under greater pressure during the past three weeks than had been anticipated by the Committee, and member bank borrowing at the Federal Reserve Banks had risen to the highest level since early 1953 and held there for several weeks. Bankers and businessmen were expressing fears, at least privately, as to whether credit for needed purposes would be available even at higher interest rates during the months ahead. The Committee still believed that the basic economic factors were expansionary. Under the circumstances, however, it determined to restore to its directive the qualifying clause that would require the Management of the System Open Market Account, in carrying out transactions in pursuit of a generally restrictive credit policy, to take into account any deflationary tendencies that might be appearing in the economy. To implement this policy, the Committee agreed that during the immediate future additional reserves should be supplied to take care of seasonal and growth needs; it did not wish to permit a further tightening to develop as pressures for increased credit bore against the existing supply of reserves. June 5, 1956 Authority to effect transactions in System account. The Committee made no change in the directive to the Federal Reserve Bank of New York that had been approved at the preceding meeting held on May 23, 1956, stating a policy of restraining Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 31 inflationary developments while taking into account any deflationary tendencies in the economy. Votes for this action: Messrs. Martin, Chairman, Balderston, Erickson, Johns, Mills, Shepardson, Szymczak, Vardaman, Fulton, Leedy, and Treiber. Votes against this action: none. Economic data presented at this meeting confirmed that a sidewise movement in activity was continuing. May automobile sales had proved generally disappointing but sharp cutbacks in production had started to reduce the heavy dealer stocks of new cars. Some reduction in output of household appliances had been reported and production of textiles, particularly synthetics, had been reduced. Common stock prices had declined further during this period. In contrast to these indications of weakening in parts of the economy, little change in total employment and over-all output was evident and credit demand continued vigorous. A particularly significant development was indicated by the latest figures of business plans for plant expansion which showed a still further rise in such programs. It appeared that the continuation of the boom in business investments would largely offset the readjustment currently taking place in the automobile industry. On the financial side, a somewhat better tone had appeared in markets for new capital issues and additional offerings had been reported. Interest rates had steadied after the decline in long-term rates earlier in May. Bank reserve positions had been eased as a result of the System's action in putting nearly $300 million of reserves into the market during the preceding two weeks, in addition to making repurchase agreements available. Estimates indicated that additional reserves would have to be supplied in order to take care of seasonal and other temporary needs for credit and currency during the June tax payment and midyear settlement period and over the July 4 holiday. In view of the atmosphere of uncertainty that still existed in some quarters, it appeared desirable for the Committee to continue a program that would dispel any doubts as to its readiness to meet seasonal and other temporary reserve needs. It was recognized that the past momentum that had been evident in the economy did not necessarily indicate prospective economic conditions. The Committee did not wish policy to become more restrictive at this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 ANNUAL REPORT OF BOARD OF GOVERNORS stage of the sidewise movement in the economy, although it was satisfied that no material change from the general policy of restraining inflationary developments was called for. The decision to renew its directive without change thus contemplated a continuation of operations that would limit credit expansion but which would supply additional reserves during the next few weeks as a means of avoiding an increase in pressure. June 26, 1956 Authority to effect transactions in System account. The Committee again renewed its directive to the Federal Reserve Bank of New York without change from the instruction approved at the meeting on May 23, 1956. Votes for this action: Messrs. Martin, Chairman, Balderston, Erickson, Johns, Mills, Powell, Shepardson, Szymczak, Vardaman, Fulton, and Treiber. Votes against this action: none. The economic situation looked considerably stronger at the time of this meeting than at either of the two preceding meetings of the Federal Open Market Committee. While evidence of summer doldrums was beginning to appear and the imminent steel strike was creating uncertainties, total industrial production was holding steady within the narrow range maintained for some months. Retail sales of new automobiles had picked up noticeably during June, common stock prices had rebounded a little, business sentiment had a much more confident tone than during the second half of May, and demand for credit was showing exceptional strength. Average wholesale prices had shown little further advance in recent weeks although industrial commodities continued to rise. In the financial picture, Treasury operations had exerted less of a drain on reserves of commercial banks than had been expected. Reserve System operations had added to bank reserves, which on the whole had been more freely available during the past month than earlier in the spring, although the money market had not eased significantly. The Committee's decision to continue without change the existing directive calling for restraint on inflationary developments was taken on the basis that the composite picture at midyear, as judged Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 33 from data on production, trade, employment, and prices, was one of a basically strong and expanding economy. It believed, however, that in carrying forward its policy, it should for the present continue to take into account any deflationary tendencies and maintain as nearly as possible stability in the money market. It noted that immediate seasonal demands would require several hundreds of millions of reserves over the July 4 holiday period, and it also gave consideration to the prospective needs of the economy for perhaps $1.5 billion of additional reserves during the second half of 1956 in order to meet seasonal and growth needs, including needs connected with Treasury financing operations to be announced shortly. The Committee agreed that, within the framework of the restrictive policy it had been following, doubts should be resolved on the side of ease during the next few weeks, rather than on the side of actions that might be construed as additional restraint, even though there was the possibility that the System would find it desirable to move toward substantially greater restraint in the fall. July 17, 1956 Authority to effect transactions in System account. The Committee continued without change the directive to the Federal Reserve Bank of New York that had been approved on May 23, 1956 and at each meeting since. The policy stated in that directive was one of restraining inflationary developments while taking into account any deflationary tendencies in the economy. Votes for this action: Messrs. Martin, Chairman, Balderston, Johns, Mills, Powell, Shepardson, Treiber, Vardaman, Fulton, and Williams. Votes against this action: none. Economic data presented at this meeting showed continued broad strength in the economy with a further upward tilt to activity. Wholesale prices had been fairly steady for several weeks, but consumer prices had been rising. Credit demand continued active and business and financial sentiment optimistic. The impact of the steel strike had been limited mainly to that industry and closely related activities; it did not appear to have had a marked effect generally in the economy, partly because of the large inventories of steel that had been built up prior to the beginning of the strike. Gross Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 ANNUAL REPORT OF BOARD OF GOVERNORS national product had risen further during the second quarter of the year, and personal income also was above any previous level. Although farm income was still lower than a year ago, some recovery in prices of farm products appeared to be taking place. Retail trade had been at a near-record level during June despite reduced sales of automobiles. Industrial construction had increased sharply further during June and the number of housing starts, though reduced, was still running at a high annual rate. The strength indicated in the domestic and foreign economies was reflected in recent credit developments. Total bank credit had shown a net increase during the past six weeks. Banks were continuing to liquidate holdings of Government securities as their loans increased. New corporate issues for plant expansion and improvement continued in large volume and, reflecting the active demand for such financing, yields on the securities offered were relatively high. Even so, some accumulation of unsold securities had been reported in dealers' inventories. All evidence indicated that businesses were using available funds more actively than they had been earlier in the year. The increase in discount rates in April had been followed by a period of severe pressure in the money market, which the Committee had relieved somewhat by open market operations in late May and June. At the moment, continuation of firm restraint seemed necessary not only because most current indicators were tending upward but also because it was felt that whatever settlement of the steel strike was arrived at would create additional inflationary pressures. The Committee did not believe, however, that this was the time for clearly increased restraint. It recognized that if a settlement of the steel strike was delayed for a considerable period, action of an easing nature might become necessary. Another reason for the conclusion that no significant change in credit policy should be made at this time was the fact that the meeting was held in the midst of a Treasury refunding operation and at a time when it was expected that the Treasury very shortly would announce a substantial offering of securities for cash. In these circumstances, the Committee decided that continuation of firm restraint was appropriate for the time being. Such a program would permit it to move either toward greater restraint or toward easing, depending upon developments during the next few weeks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 35 August 7, 1956 Authority to effect transactions in System account. At this meeting, the Committee deleted from its directive the qualification that had been inserted on May 23 to take into account any deflationary tendencies in the economy, leaving the policy as one of "restraining inflationary developments in the interest of sustainable economic growth." With this change, the instruction returned to the wording that had been used from March 27 to May 23 of this year. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Vardaman, and Fulton. Votes against this action: none. Aggregate industrial output had dropped fairly sharply during July as a result of the work stoppages in the steel and related industries and some reduction in such nondurable goods industries as textiles and paperboard. Nevertheless, the composite of information confirmed the view presented at the preceding meeting that economic activity had resumed an upward slant. Wage and other costs were tending upward. Demand pressures continued strong. With settlement of the steel strike, business psychology was clearly on the buoyant side and prices of commodities were generally firm to rising. Some prices had reflected the Suez Canal crisis, but increases in numerous commodities were not directly related to that situation. In contrast to the general tendencies, prices of lumber and textile fibers continued on the soft side. Credit developments since the preceding meeting had not been particularly striking. Commercial loans had declined moderately during July, and loans on securities and holdings of securities also declined. Demands on the capital markets continued large, and a further rise in corporate bond yields on both outstanding securities and new issues had been recorded. Yields on long-term bonds, which had declined in May and June, had again risen to or above the previous highs for this year as well as the highs for 1953. All indications pointed to continued strong credit demands, although it was believed that credit growth during the remainder of the year might not be so strong as in the second half of 1955. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 ANNUAL REPORT OF BOARD OF GOVERNORS The Committee gave especial attention to the rate at which economic resources of the country were being used and to the tendencies of prices to rise in numerous markets. These price tendencies appeared to result from the competitive spending, investing, and borrowing propensities of a highly optimistic business and consumer public, rather than from fiscal and monetary policies, which had been anti-inflationary. It appeared that there was danger in misdirected use of resources, unwise judgment as to business and investment opportunity, over-optimism as to management's ability to pass along higher wages and other costs into higher prices, over-commitment of credit based on a discounting of the future, and a cumulative deterioration in the quality of credit. The Committee felt that at this stage monetary policy should minimize the dangers referred to by fostering as efficient an allocation of scarce resources, including savings, as could reasonably be effected by market processes. The Committee believed it should do what it could toward discouraging the financing of plant and equipment expenditures out of bank credit when such demands should be satisfied in the long-term capital market. At the same time, it wished to take care of normal growth and reasonable credit needs of the economy as such needs arose. In concluding that it was no longer appropriate to retain in the directive the instruction to take into account deflationary factors, the Committee also discussed other measures that might be taken to strengthen credit restraint, including the possible desirability of action by the Federal Reserve Banks to increase discount rates. It was felt that operations should not be modified materially until the current Treasury financing had been completed, but it was suggested that additional actions toward restraining credit expansion would more than likely be needed shortly. August 21, 1956 Authority to effect transactions in System account. The Committee made no change at this meeting in the directive to the Federal Reserve Bank of New York calling for continuation of operations with a view, among other things, "to restraining inflationary developments in the interest of sustainable economic growth." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 37 Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Vardaman, and Fulton. Votes against this action: none. Most of the measures of production, consumption, and prices presented at this meeting seemed to confirm that the economy was still definitely in an expanding phase. During the two weeks since the preceding meeting, there had been numerous and sizable price advances in industrial commodities, especially in metals and metal products. Industrial output had rebounded sharply from the July steel strike. In the central money markets, interest rates had risen appreciably. The tendency toward price increases was spreading in both raw materials and finished goods in response to recent wage increases. Heavy demand for capital funds, with business and personal savings insufficient to match the demand, was putting pressure on banks. This tendency was being accentuated by the reluctance of borrowers to accept sharply higher long-term interest rates, as indicated by the fact that several long-term capital issues had been deferred or withdrawn from the market recently. Bank loans had shown moderate seasonal increases for several weeks preceding this meeting, but banks appeared to be increasingly reluctant to reduce their liquidity ratios further by selling Government securities to procure funds for loan expansion. System operations had been directed toward supplying reserve funds to meet seasonal needs but the reserve position of banks had tightened since June and July. The Committee felt that credit policy should be made somewhat more restrictive, but in view of the fact that individual Federal Reserve Banks were known to be considering discount rate increases at a time when the market for Government securities was showing strain, the directive was renewed with no change in the general open market policy of restraint on credit expansion. September 11,1956 Authority to effect transactions in System account. The directive of the Federal Open Market Committee was renewed without change at this meeting, providing for continuation of a policy having as its objective the restraint of inflationary developments in the interest of sustainable economic growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, and Fulton. Votes against this action: none. Reports at this meeting showed that aggregate demand and supply were continuing to rise, that there was sustained vigor in the demands for credit and capital, and that business and financial psychology was confident. Prices of a number of raw materials had leveled off in recent weeks, but the general tendency of prices for fabricated industrial products continued upward as did prices of consumer goods. Capital expenditure programs were still pressing on supplies of materials, on manpower, and on the capital goods industries, and late information regarding business plans for plant and equipment expenditures during the fourth quarter of 1956 indicated a further rise to an annual rate of about $38 billion, compared with an expected total for the year of $35.5 billion, an amount about 25 per cent higher than for the year 1955. Industrial output for August had recovered sharply and in September appeared to be running at a rate in excess of the level before the steel strike in July. Employment for August showed a record high and unemployment showed more than the usual seasonal decline. Retail markets except for automobiles had been showing considerable strength. Construction activity in August had been at about the July record rate, a decline from the preceding year of about 12 per cent in residential construction having been offset by higher levels of industrial and commercial construction. Farm price developments, combined with larger marketings and soil bank payments, indicated that net income of farm operators in 1956 probably would exceed that of the preceding year. Increases in discount rates during the latter part of August to a uniform level of 3 per cent at all Federal Reserve Banks had produced little reaction in money markets. Total loans and investments of banks had increased during August. The money supply, which was barely 1 per cent higher than a year earlier, had shown relatively little change in recent months, but turnover had been at a faster rate. It did not appear that credit restraints thus far adopted had been too severe; additional reserves had been supplied in substantial amounts during the past three weeks to help meet seasonal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 39 needs, and credit demands were generally being met although there were indications that expansion of credit was being limited. Figures presented to the Committee at this meeting suggested prospective growth in bank credit during the autumn at least equal to normal seasonal expectations. In addition, there was some tendency for long-term borrowers to shift from capital markets to the commercial banks even though bankers were reported to be resisting the trend toward use of bank credit for capital purposes. Another factor was the prospect that the Treasury would have to borrow substantial additional amounts of new funds in October aside from refunding maturing certificates later in the year. Still another influence on the Treasury's need for funds was the high rate of redemption of savings bonds. The Committee's broad objective continued to be to restrain inflationary developments but, as always, it recognized that monetary and credit policy alone could not be successful in halting inflationary pressures. It believed it necessary to assist in meeting seasonal and growth demands for credit as well as the needs of the Treasury in its financing operations, even though the buoyant state of the economy clearly required a continuation of at least the existing degree of restraint. In renewing its directive without change, the Committee did so with an instruction to the Management of the System Account to maintain substantially the existing degree of stability in the market, with doubts being resolved on the side of tightness rather than of ease, but with the understanding that the Account Management would not initiate action toward more tightness. September 25, 1956 Authority to effect transactions in System account. At this meeting, the Committee again renewed without change its directive calling for a policy of restraining inflationary developments in the interest of sustainable economic growth. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, Vardaman, and Fulton. Votes against this action: none. Economic reports to the Committee at this meeting showed essentially a continuation of the trends reported at the meeting held Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 ANNUAL REPORT OF BOARD OF GOVERNORS two weeks earlier. There was general strength in expansive forces throughout the economy, with demands pressing against supplies in many sectors and with some further rise in wholesale prices. The rebound in economic activity since the end of the steel strike early in August had been even more rapid than was expected earlier. To a large extent the great strength of the business picture reflected a record level of capital formation, but consumer spending also had been well maintained. While residential building was at levels moderately below those of a year earlier, actual developments did not indicate that a substantial further decline was likely to be precipitated by lack of adequate mortgage credit. Continued expansion in employment and production to the extent permitted by capacity limits and further upward pressures on prices seemed likely during the immediate future. Wholesale prices had risen almost without interruption since the end of June, and the vigor of the current economic expansion pointed to some danger of renewed speculative building of inventories although there was not much evidence that this had actually taken place. Heavy demands had continued in capital markets and bank loans had risen considerably in the six weeks preceding this meeting, with business loans accounting for all of the increase. It seemed clear that credit restraints had not resulted in undue curtailment of either business or consumer spending, although they had no doubt kept banks from supplying some of the demands for credit, which continued strong. One of the factors given particular attention by the Committee at this meeting was the prospective borrowing by the United States Treasury of a substantial volume of new funds. The money market had been consistently tight recently and it appeared that the Treasury might have some difficulty in coming to the market at this time. The Committee considered on the one hand its responsibility for contributing to economic stability and minimizing inflationary pressures, and on the other hand the responsibility that it had in connection with the Treasury's financing problem. It directed its discussion toward how the System might take appropriate account of that situation while pursuing a policy that would restrain undue credit expansion in the economy as a whole. Its conclusion was that the general policy directive should not be changed, that operations for the System account should limit addi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 41 tions to reserves to meet seasonal needs so as to maintain pressures of about the same degree that had existed recently, but that in case of doubt operations should be resolved on the side of ease rather than restraint during the period immediately ahead. October 16, 1956 Authority to effect transactions in System account. Again the Committee renewed without change its directive stating a policy to restrain inflationary developments in the interest of sustainable economic growth. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Mills, Powell, Robertson, Shepardson, Szymczak, Bryan, and Fulton. Votes against this action: none. Domestically, the over-all economic picture at the time of this meeting continued to be one of general expansion of activity, rising average prices for industrial commodities, and high confidence in both near-term and longer term business prospects. Consumer demand was well sustained while unemployment had reached the lowest levels since 1953. There were, however, some indications that the inflationary pressures in the economy had become a little less intense than they were in the weeks immediately following the steel strike settlement. Sentiment while still buoyant seemed to be a little more cautious. Many price increases were still being reported, especially among finished and semi-finished goods, but there had been recent easing of several important raw material prices. Consumers appeared to be increasingly concerned over the price outlook. Growth in total bank loans during the third quarter of the year had been substantial but slower than in the first half of 1956 or the third quarter of 1955. Business loans had increased more over the past three months than total loans; real estate loans also had increased, while loans on securities had declined and all other loans (including consumer loans) had shown little change. The Treasury had successfully raised approximately $1.6 billion in new money. Notwithstanding a large volume of new corporate offerings, the bond market had had a better tone and yields on outstanding issues had been relatively stable in recent weeks. The calendar of prospective new capital issues continued large. Short- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 ANNUAL REPORT OF BOARD OF GOVERNORS term money rates had tended to rise further, despite a somewhat easier bank reserve position than had existed a few weeks earlier. The consensus of the Committee was that no change should be made at this time in the policy of restraint on inflationary developments. This did not imply a greater degree of restraint, for the Committee wished to avoid a tightening that might seriously unsettle the capital markets and intensify the demand for short-term credit. It observed that seasonal demands for credit could be expected automatically to cause some tightening during the next several weeks, besides which additional Treasury financings for cash and refunding would exert further pressure. The Committee also observed that banks could use the Federal Reserve discount facilities as pressure increased. In addition, it contemplated that, if undue tightening developed, reserves should be supplied through the open market with a view to maintaining substantially the present degree of restraint. November 13, 1956 Authority to effect transactions in System account. No change was made at this meeting in the wording of the Committee's directive that System operations in the open market be with a view, among other things, to restraining inflationary developments in the interest of sustainable economic growth. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. The over-all economic situation still appeared to be inflationary. Since the preceding meeting the Middle East war crisis had caused major uncertainties, however, and cumulative pressures from restrictive monetary and fiscal policies were showing up at the same time that there were indications that the upward momentum of the boom might be losing some of its force. Industrial output during October had increased slightly further from the September level and during the current month appeared to be at least equal to the October rate. Employment continued at a high level and upward drift in industrial prices persisted. On the other hand, information on industrial construction showed some decrease in recent weeks and residential construction, although still Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 43 high, continued below the record 1955 levels. Department store sales in October were only 1 per cent higher than a year earlier despite higher retail prices. Bank credit growth had slackened perceptibly during recent weeks. This slowing reflected in part restraint on bank lending because of the continued tight reserve position as well as the lowered liquidity position of the banks; it appeared that demand for funds was still strong. Capital markets continued under pressure from the large volume of new issues offered and awaiting offering, and bond yields had risen to postwar highs. Corporate profits were showing signs of leveling off or declining. The prospect for further seasonal expansion in demand for credit and for additional Treasury financing before the end of the year, with their possible effects on the money market, led the Committee to the conclusion that the degree of restraint should not be intensified at this time. Also, while there was no real indication that the boom had leveled off, there were a number of uncertainties growing out of the international situation, the profit squeeze that had been in evidence for almost a year, the somewhat reduced level of total construction, and the lack of factors pointing definitely to higher levels of economic activity in the future. Accordingly, in continuing its policy of credit restraint, the Committee did so with the thought that another meeting should be held within two weeks, that in the meantime the degree of pressure in the money market should remain substantially unchanged, and that the members of the Committee should be alert to the possible need for a modification of policy that might develop as a result of the divergent influences noted at this time. November 27, 1956 Authority to effect transactions in System account. The Committee continued its directive calling for a policy of restraining inflationary developments in the interest of sustainable economic growth, but it added a qualifying instruction to clause (b) that in carrying on such a program recognition should be given to additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 ANNUAL REPORT OF BOARD OF GOVERNORS Robertson, Szymczak, and Vardaman. Votes against this action: none. Since the meeting held two weeks previously, information becoming available had made it clearer that the economic effects of the Middle East crisis were serious and would not soon be overcome. Domestically, business advance was general, although housing was an important exception. At the same time, there were some "straws in the wind" suggesting possible slackening of activity later on. Industrial prices had continued upward because of advances in fabricated items and industrial materials, some of which reflected the Middle East situation. Wholesale prices had remained stable on the average reflecting the offsetting effects of lower farm products prices, mainly seasonal reductions in livestock prices. Consumer prices had continued to rise. Industrial output had increased somewhat further in November, and department store sales had rebounded from the reduced October level. The straws in the wind included October declines in the principal segments of construction—residential, industrial, and public utility. Preliminary data suggested that plant and equipment expenditures for 1957 would rise only slightly from the current rate. Inventories of most goods seemed abundant relative to sales, considerably higher than a year earlier. Business failures had risen to a new postwar high in October. Third quarter corporate earnings data showed that the cost-profit squeeze was continuing to increase with more than two-fifths of the large firms for which data were available showing earnings below the third quarter totals of 1955. Among financial developments, there had been a sharp decline in Treasury bond prices just before this meeting, accompanied by a rise in the Treasury bill rate to a new high level even though the reserve position of banks outside New York and Chicago had been relatively easy. Expansion in bank loans during the past four weeks had been smaller than in the comparable period of 1955 and banks had made further reductions in their investments. All in all, credit restraint seemed to have taken hold more effectively in the autumn of 1956 than at any time in the past two years. While the immediate situation impressed the Committee as continuing to be inflationary, it took cognizance of the suggestion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 45 that a fundamental change in the foreign and domestic outlook could be in the making. It did not wish the disturbed conditions in the securities market to become worse and bring on a disorderly situation which might require that more reserves be put into the market than would be necessary to meet the seasonal and growth demands. However, in adding to the directive the qualifying instruction to recognize "additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions" the Committee did not intend an overt change away from a policy of restraint; it desired to indicate that the Committee was alert to the kind of pressures that developed toward each year-end as well as to the uncertainties implicit in the international situation and in financial markets. December 10, 1956 Authority to effect transactions in System account. The Committee made no change in credit policy at this meeting, and the directive to the Federal Reserve Bank of New York was renewed in the same form as at the meeting held two weeks earlier. This directive called for continued restraint on inflationary developments in the interest of sustainable economic growth, while recognizing additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Erickson, Fulton, Johns, Mills, Powell, Roberston, Shepardson, and Szymczak. Votes against this action: none. Recent international developments had had important economic effects abroad including a substantial drain on British monetary reserves, curtailment of the flow of petroleum to Western Europe, and sharp increases in shipping rates. One result of the Middle East developments and the current British sterling crisis had been the announcement by the United States Treasury of an additional financing for cash in the amount of $1 billion. This announcement, which came just prior to this meeting, surprised the money market because it had been generally assumed that the Treasury's financing needs had been taken care of for the remainder of the calendar year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 ANNUAL REPORT OF BOARD OF GOVERNORS The review of the domestic business and financial situation indicated need for continued restraint on credit expansion in the near future, although it did not appear that additional restraining measures were necessary. Industrial production and industrial prices had continued to advance over recent months, reaching new high levels. Increases in both production and prices had been widespread. Unemployment was low, gross national product had continued to rise, and expansion in capital equipment expenditures had been greater than anticipated early in the year. Along with these indications of sustained or expanded activity, there were some evidences that the upward pressure of the boom might be diminishing. The previously noted reduction in housing construction persisted although volume was still at a high level; production of automobiles had not been up to 1955 volume; and outputs of lumber, synthetic fibers, and some paper items were well below capacity. Surveys of private capital expenditures for the coming year were indicating a flattening out of the current high level rather than any new sharp gains. Open market purchases had been fairly heavy during the past several weeks and had been designed to alleviate potential strains attributable to seasonal factors, Treasury financings, and the international situation. However, the market had continued under rather severe pressure. Loan expansion during the fall months had been less rapid than had been expected three months earlier or than had taken place in 1955. It was clear that the normal year-end needs would require additional funds of a temporary nature and that these demands would exert an increased restraining effect unless reserves were made available. The Committee issued its policy directive in the belief that additional restraint should not be applied over the year-end period and that, while the existing policy should not be changed, reserves should be supplied to assist in meeting the seasonal and other temporary needs for reserves that would arise during this period. At the beginning of the year 1956, the policy directive of the Federal Open Market Committee was, as set forth on page 17, one which provided for "restraining inflationary developments in the interest of sustainable economic growth." During the year, five changes were made in the wording of clause (b) of the directive. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 47 On January 24, there was added a qualifying instruction to take "into account any deflationary tendencies in the economy." On March 27, this qualifying instruction was deleted. On May 23, the Committee reinserted the instruction to take "into account any deflationary tendencies in the economy," and on August 7, the Committee again deleted the phrase. On November 27, the Committee added to the policy statement calling for restraint on inflationary developments the instruction that recognition be given to "additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions." With these changes, the directive that was in effect at the close of 1956, as approved at the last meeting of the year on December 10, read as follows: To make such purchases, sales, or exchanges (including replacement of maturing securities, and allowing maturities to run off without replacement) for the System open market account in the open market or, in the case of maturing securities, by direct exchange with the Treasury, as may be necessary in the light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary developments in the interest of sustainable economic growth while recognizing additional pressures in the money, credit, and capital markets resulting from seasonal factors and international conditions, and (c) to the practical administration of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million; To sell direct to the Treasury from the System account for gold certificates such amounts of Treasury securities maturing within one year as may be necessary from time to time for the accommodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 ANNUAL REPORT OF BOARD OF GOVERNORS RECORD OF POLICY ACTIONS BOARD OF GOVERNORS April 12, 1956 Increase in rates on discounts and advances by Federal Reserve Banks. Effective April 13, 1956, the Board approved actions by the boards of directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and Dallas establishing a rate of 2% per cent (an increase from 2l/ per cent) on discounts for and 2 advances to member banks under Sections 13 and 13a of the Federal Reserve Act; and actions by the Federal Reserve Banks of Minneapolis and San Francisco establishing a rate of 3 per cent (an increase from 2l/i per cent) on such discounts and advances. Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, Robertson, and Shepardson. Votes against this action: none. Pursuant to the policy established by this action, the Board also approved, effective April 20, 1956, a rate of 2% per cent (an increase from 2J4 per cent) for the Federal Reserve Bank of Chicago. Effective the same dates, the Board approved for the respective Federal Reserve Banks rates on advances to member banks under Section 10(b) of the Federal Reserve Act, which, as required by that section, were l/i of 1 per cent per annum higher than the new rates in effect at the Banks on discounts and advances under Sections 13 and 13a. In addition, the Board approved changes at some of the Federal Reserve Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act and on industrial loans and commitments under Section 13b. (In accordance with the provisions of the Federal Reserve Act, the Federal Reserve Banks establish, subject to review and determination of the Board of Governors, rates on discounts and advances to member banks at least every 14 days and submit such rates to the Board for consideration. No changes involving new policy had been made in these rates since those referred to on page 88 of the Board's Annual Report for 1955.) Economic activity in the early part of 1956 continued at approximately the level attained during the latter half of 1955, with principal indices substantially higher than for the comparable period of the preceding year. As the first quarter progressed, increasing optimism regarding the business outlook was reflected in surveys Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 49 which showed a marked upward revision in plans for plant and equipment expenditures during the remainder of the year. The market for producers' durable goods was particularly strong, there was a tendency toward inventory accumulation, and price pressures became more evident as output in some lines of production approached capacity limitations. Interest rates rose in March and April in response to increasingly heavy credit demands and the resulting pressure on commercial bank reserves. In the latter part of March, yields on Government securities advanced rapidly under the stimulus of these credit pressures and the large prospective volume of new corporate and municipal financing. The increase in the discount rates again brought these rates into better alignment with short-term market rates and represented a further step to strengthen the degree of credit restraint being exerted by Federal Reserve policy in the interest of preventing inflationary developments. It also served as a signal to those businesses planning to finance plant and equipment expansion through the capital markets that higher borrowing costs might be anticipated if the supply of savings was taxed further by demands for capital. April 23, 1956 Amendment to Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges. Effective May 1, 1956, the Board amended Regulation T (1) by striking out the words "three full business days" in subsection (b) of section 3 and substituting therefor the words "four full business days"; (2) by striking out the words "three-day period" wherever they appeared in subsections (e) and (f) of section 3 and substituting therefor the words "four-day period"; and (3) by striking out the words "or 'three-day riding'" in the footnote to subsection (e) of section 3. Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, and Robertson. Votes against this action: none. This technical amendment changed from three full business days to four full business days the maximum period allowed for a broker to obtain margin in a margin account. It recognized mechanical operating problems of brokers in the light of reduced daily Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 ANNUAL REPORT OF BOARD OF GOVERNORS deliveries of mail and brokers' machine bookkeeping methods. Regulation T continued to require that the broker in all cases obtain the necessary deposit of margin "as promptly as possible" and the new maximum period merely stated an outside limit to be used by the broker only to the extent that it is not possible for him to obtain the margin in less time. July 19, 1956 Adoption of Regulation Y, Bank Holding Companies. Effective September 1, 1956, the Board issued Regulation Y pursuant to the provisions of the Bank Holding Company Act of 1956. Votes for this action: Messrs. Martin, Balderston, Vardaman, Mills, and Shepardson. Votes against this action: none. Messrs. Szymczak and Robertson, who were not present when this action was taken, stated previously that they concurred in it. The Bank Holding Company Act of 1956, "To define bank holding companies, control their future expansion, and require divestment of their nonbanking interests", was approved May 9, 1956. A draft of Regulation Y, prepared pursuant to the provisions of that Act, was published in the Federal Register on May 29, 1956, and the Regulation was adopted by the Board of Governors following consideration of views and comments received from interested parties upon such publication. It was the decision of the Board that a Regulation in the form approved would best carry out the purposes of the Bank Holding Company Act and the responsibilities placed on the Board by that Act. The Bank Holding Company Act and the Board's Regulation Y were in addition to, and did not take the place of, provisions of other laws such as Section 5144 of the Revised Statutes, and the Board's Regulation P thereunder, which relate to "holding company affiliates" as distinguished from "bank holding companies". August 23, 1956 Increase in rates on discounts and advances by Federal Reserve Banks. Effective August 24, 1956, the Board approved actions by the boards of directors of the Federal Reserve Banks of New York, Philadelphia, Richmond, and Chicago establishing a rate of 3 per cent (an increase from 2% Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 51 per cent) on discounts for and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. Votes for this action: Messrs. Martin, Szymczak, Mills, Robertson, and Shepardson. Votes against this action: none. Governor Vardaman, who was not present when this action was taken, stated previously that he concurred in it. Pursuant to the policy established by this action, the Board also approved the same rate for the following Federal Reserve Banks, effective on the dates indicated: Cleveland August 27, 1956 Boston August 28, 1956 Atlanta August 28, 1956 St. Louis August 28, 1956 Dallas August 28, 1956 Kansas City August 31, 1956 Effective the same dates, the Board approved for the respective 10 Federal Reserve Banks a rate of 3% per cent on advances to member banks under Section 10(b) of the Federal Reserve Act. In addition, the Board approved changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act, and on industrial loans and commitments under Section 13b. During the period since April, when the discount rates of the Federal Reserve Banks were previously increased, there was continued heavy demand for goods, services, and credit. With output in many lines of production pressing against capacity, the price structure continued to be subject to persistent upward pressures. The strongest expansive force in the economy was provided by business expenditures for plant and equipment, which ran at a record high, considerably above the 1955 level. Since external funds were needed to finance a large part of the investment outlays by businesses and the demand for long-term funds strained the capacity of the capital markets, businesses were resorting in some measure to commercial bank loans to meet their financing requirements for these purposes. The resulting expansion in bank credit, together with increased use of existing funds, added to the demand for goods faster than output could be increased and thus contributed to upward pressures on prices. The current discount rate increases, which brought the rates at all Federal Reserve Banks to the level prevailing at the Minneapolis and San Francisco Banks since April, recognized the con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 ANNUAL REPORT OF BOARD OF GOVERNORS tinued upward trend in money market rates and served to indicate to the financial and business community, and the public generally, the need for credit restraint and for resistance to inflationary developments. December 3, 1956 Amendment to Regulation Q, Payment of Interest on Deposits. Effective January 1, 1957, the Board made changes as follows in the maximum permissible rates of interest payable by member banks of the Federal Reserve System on savings deposits and time deposits pursuant to the provisions of Regulation Q: From To (per cent) (per cent) Any savings deposit 2% 3 Any time deposit having a maturity date six months or more after the date of deposit or payable upon written notice of six months or more; and any postal savings deposit which constitutes a time deposit 2!/2 3 Any time deposit having a maturity date less than six months and not less than 90 days after the date of deposit or payable upon written notice of less than six months and not less than 90 days 2 2/4 No change was made in the maximum permissible rate of one per cent on any time deposit having a maturity date less than 90 days after the date of deposit or payable upon written notice of less than 90 days. Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, and Shepardson. Votes against this action: Mr. Robertson. Mr. Vardaman, who was not present when this action was taken, stated previously that he concurred in it. Section 19 of the Federal Reserve Act, as amended by the Banking Act of 1933 and the Banking Act of 1935, requires the Board of Governors to limit by regulation the rates of interest which may be paid by member banks of the Federal Reserve System, while the Federal Deposit Insurance Act requires that the Federal Deposit Insurance Corporation prescribe limitations on the maximum rates payable on such deposits by insured nonmember banks. The legislative history suggests that a primary purpose of these pro- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 53 visions was to prevent unsound practices in competition for time and savings deposits. Prior to the above action, the maximum permissible rates of interest prescribed by the Board on time and savings deposits had remained unchanged for more than 20 years. During nearly all of that period, however, the maxima were well above the rates actually paid, and only recently did the pressure of demand for credit begin to bring rates up to the ceilings. After extended consideration of this matter, during which the views of the Federal Reserve Banks and the Federal Advisory Council were obtained, the Board concluded that in a period of heavy demands for funds and a relatively high structure of interest rates generally, it would be desirable to permit individual member banks greater flexibility to encourage the accumulation of savings than was available under the existing maximum permissible rates. It also appeared to the Board that there was insufficient reason to prevent banks, in the exercise of management discretion, from competing actively for time and savings balances by offering rates more nearly in line with other market rates. By increasing the rate limitations only on savings deposits and on time deposits with maturities longer than 90 days, the Board continued to recognize the special thrift character of savings accounts and to preserve a differential between longer term time deposits and short-term time deposits representing essentially liquid balances.1 Effective the same date, the Federal Deposit Insurance Corporation made similar changes in its regulation prescribing the maximum interest rates permitted to be paid on time and savings deposits by insured nonmember banks. Governor Robertson voted against this action for the reasons set forth in the statement beginning on the following page. 1 Under the Supplement to the Board's Regulation Q, Payment of Interest on Deposits, a member bank may pay interest on time and savings deposits at the maximum rate prescribed by the Supplement regardless of the basis upon which interest is computed, provided the aggregate amount of interest paid does not exceed the amount which would be paid at the maximum rate when compounded quarterly. In view of a suggestion which had been made, the Board published in the Federal Register for February 25, 1956, a notice inviting comments with respect to a proposed amendment to Regulation Q which would have permitted member banks to compute interest at the maximum rate, provided the aggregate amount of interest paid did not exceed the amount which would be paid at the maximum rate when compounded monthly. However, in the light of comments received and after further consideration of the matter, the Board decided not to adopt the amendment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 ANNUAL REPORT OF BOARD OF GOVERNORS A. An increase to 3 per cent in the maximum interest rates that member banks may pay on (1) savings deposits and (2) time deposits not payable within six months would make it possible, it is alleged, for commercial banks to compete more effectively against other savings institutions for time deposits. Payment of such higher rates of interest might have these undesirable results: 1. It would increase bank operating costs and make it more difficult for banks to raise additional capital that they need. Since any bank offering higher rates would have to pay them on existing as well as new deposits, net profits after taxes of some member banks could be reduced by as much as 25 per cent—or more in the case of country banks—and this would lower net profits to below 6 per cent of capital accounts, compared with an average of around 8 per cent for many years. 2. To offset such additional costs, banks would be under pressure to seek higher yielding assets, which would probably be less liquid and more risky, and thus impair the liquidity and solvency of the commercial banking system. Probably the principal purpose of the legislation authorizing regulation of interest rates on time deposits was to prevent such a development, which was to some extent responsible for the banking difficulties of the 1930's. Furthermore, I have some doubts as to the effectiveness of such a raising of the interest ceiling in attracting savings to banks, because competing institutions could always pay higher rates. Their ability to pay more is due not to this limitation on banks but to other advantages with respect to such matters as taxation and restrictions as to the nature of assets that can be acquired. In addition, it is questionable whether generally higher rates on savings deposits would bring about a material increase in aggregate savings or would merely influence the form in which savings are held. It is plausibly argued that banks should be permitted to distribute to their customers as much of their earnings as they think they can afford, and that, since bank earnings are higher than they have been at times in the past, banks should be permitted to pay higher rates of interest on savings deposits. My answer is that Congress imposed on the Board the duty of preventing that very thing to the extent that it might jeopardize the soundness of the whole banking system. If the ceiling should be raised whenever a few banks feel they can afford to pay higher rates, there is no point in having a ceiling. In view of these possible undesirable consequences to the commercial banking system, and my doubts concerning the effectiveness of such an increase, I would question the wisdom of raising the ceiling at this time and would vote to retain the present maximum rates. The number of banks which are now paying ceiling rates is small and only a fractional percentage of these banks actively seeks the privilege of paying higher rates. I would not Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 55 accede to the wishes of those few banks and thereby, perhaps, adversely affect the whole banking system. B. An increase in the maximum rate which can be paid by banks on time deposits payable in less than six months is questionable for a number of reasons: 1. Many of the funds thus held are not genuine savings but are liquid balances subject to withdrawal either to meet cash needs or to invest in other liquid assets whenever a rise in short-term market rates of interest makes such a shift profitable. 2. Banks would tend to treat such deposits the same as savings and determine their asset structure accordingly. This tendency is illustrated by the present situation in New York City banks which have substantial time deposits consisting of foreign central banks' balances and other liquid funds, such as trust department deposits, but have permitted their holdings of liquid assets to fall to exceptionally low levels. They now want to raise interest rates payable on such deposits to keep from losing them because they are so ill-prepared to meet the withdrawals. 3. Payment of high rates of interest on short-term time deposits would encourage evasion of the prohibition against the payment of interest on demand deposits. 4. Any resulting tendency to shift from demand to time deposits would reduce required reserves and thus release reserves for lending. This would not be in harmony with existing Federal Reserve credit restraint policies. 5. Liquid funds of this nature should be invested in open market paper, so that holders would have to bear the burden and risks of fluctuating rates and not shift that risk to the banking system. Finally, it should be noted that if the ceilings are raised sufficiently to be effective, they will enable commercial banks to attract funds now invested in Government securities—short-term and long-term. This may have a detrimental effect on the Government securities market and even lead to higher levels of interest rates generally, as applied to the borrowing public. I doubt the need for, and prospective benefits of, a present change in the ceiling rates on time and savings deposits are such as to warrant risking this possible consequence. December 4, 1956 Revision of Regulation K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act. Effective January 15, 1957, the Board revised Regulation K, which relates to corporations doing foreign banking or other foreign financing under Section 25 or 25(a) of the Federal Reserve Act, in order to clarify and make more Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 ANNUAL REPORT OF BOARD OF GOVERNORS specific the rules applicable to such corporations, particularly the rules relating to their activities in the United States. (Prior to this revision, Regulation K was issued under the title "Banking Corporations Authorized to do Foreign Banking Business under the Terms of Section 25(a) of the Federal Reserve Act.") Votes for this action: Messrs. Martin, Balderston, Szymczak, and Shepardson. Votes against this action: Messrs. Mills and Robertson. Adoption of the revised Regulation K followed a lengthy review, prompted by numerous questions arising under the Board's supervisory responsibility, as to what activities were appropriate and inappropriate for an Edge Act corporation, particularly in the United States, in the light of the provisions of Section 25 (a) of the Federal Reserve Act. A primary objective of the study was to enable the Board to determine what changes should be made in existing regulations, agreements, and policies in order to deal with such questions on a general basis rather than on an ad hoc basis. For purposes of the study a special committee was set up, composed of personnel from the Board's staff and the Federal Reserve Banks, which functioned under relatively broad terms of reference, being requested among other things to consider the activities of various types of institutions engaged in international or foreign banking and to appraise the operations of United States financial institutions in the financing of foreign trade and commerce. Following receipt of the special committee's report, the Board created a legal committee, composed of counsel from the Board's staff and the Federal Reserve Banks, and directed such committee to prepare a draft revision of Regulation K reflecting the special committee's conclusions. When the draft revision was available, the Board gave extended consideration to it, received the views of affected corporations, published a proposed regulation in the Federal Register, and considered comments received from interested parties as the result of such publication. Regulation K, in the revised form adopted by the Board, applies both to Federal corporations organized under Section 25 (a) of the Federal Reserve Act for the purpose of engaging in international or foreign banking or other international or foreign financing operations and, to the extent specified in Section 11 of the Regulation, to State-chartered corporations having agreements or undertakings with the Board under Section 25 of the Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 57 The chief purposes of the revision were to bring the Regulation up to date, to reaffirm and clarify the separation of deposit banking and other foreign financing functions, as carried on by corporations subject to the Regulation, and to prescribe the activities that may and may not be carried on by such corporations in the United States incidental to their international or foreign business. A corporation engaged in foreign banking under the Regulation may conduct deposit business, accept drafts or bills of exchange, make loans related to foreign business, and, subject to the permission of the Board, invest in stock of other corporations engaged in foreign banking activities. It may not issue, underwrite, sell, or distribute securities or issue its own obligations, except within certain narrow limitations. On the other hand, a corporation engaged in foreign financing under the Regulation may finance itself by the issuance of debentures, bonds, and similar obligations and, with the advance permission of the Board, may make certain kinds of investments in other foreign corporations not engaged in banking business. Like the foreign banking corporation, a foreign financing corporation may make loans related to foreign business, but it may not receive deposits or accept drafts or bills of exchange. Governors Mills and Robertson voted against this action because in their opinion the revised Regulation K contained provisions relating to banking and financing activities of affected corporations which were unduly liberal, were inconsistent with the intent of the controlling statutes, and could tend to encourage undesirable practices. BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM Examination of Federal Reserve Banks. The Board's Division of Examinations examined each of the 12 Federal Reserve Banks and their 24 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 ANNUAL REPORT OF BOARD OF GOVERNORS 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 arc made by agreement with State authorities. The 1956 program for the examination of State member banks was practically completed. Bank holding companies. The Bank Holding Company Act of 1956 became effective on May 9, 1956. During the remainder of the year the Board approved the acquisition of voting shares of one bank by a bank holding company pursuant to Section 3 (a) (2) of the Act, and issued one tax certification in accordance with the tax provisions of the Act. During 1956, pursuant to the Banking Act of 1933, as amended, the Board authorized the issuance of four voting permits for general purposes and 10 permits for limited purposes to holding company affiliates of member banks. To provide information with respect to such organizations, regular annual reports were obtained from holding company affiliates 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 six organizations and rescinded one determination previously made. Trust powers of national banks. During 1956, 31 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 8 banks which previously had been granted certain trust powers. Trust powers of 28 national banks were terminated, 26 by voluntary liquidation, consolidation, or merger, and 2 by voluntary surrender. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 59 At the end of 1956, there were 1,722 national banks holding permits to exercise trust powers. Foreign branches and banking corporations. Under the provisions of Section 25 of the Federal Reserve Act, the Board approved during 1956 five applications made by member banks for permission to establish branches in foreign countries and overseas areas of the United States. One member bank opened a branch in Rio Piedras (San Juan), Puerto Rico. Another opened branches in Hato Rey (San Juan), Puerto Rico; Mayaguez, Puerto Rico; Panama, Republic of Panama; and Maracaibo, Venezuela. The latter two branches had been authorized by the Board in 1955. One office in Germany, heretofore shown as a branch, was removed from the list of foreign branches of member banks and is now regarded as a military banking facility. At the end of 1956, seven member banks had in active operation a total of 115 branches in 26 foreign countries and overseas areas of the United States. Of the 115 branches, three national banks were operating 89 and four State member banks were operating 26. The foreign branches were distributed geographically as follows: Latin America 58 Near East 4 Argentina 10 Egypt 1 Brazil 10 Lebanon 2 Chile 2 Saudi Arabia 1 * Far East 20 g? 2S Hong Kong 1 Mexlco I India 2 5 j 5 10 P eru Philippines 5 T U™guay I Singapore 1 Venezuela 3 Thailand 1 Continental Europe 5 United States Overseas Areas... 17 Belgium 1 Canal Zone 4 France 3 Guam 1 Germany 1 Puerto Rico 12 England 11 Total 115 There was no change in 1956 in the list of corporations organized under State laws which operate under agreements 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. One of these "agreement" corporations was examined in 1956 by an examiner for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

60 ANNUAL REPORT OF BOARD OF GOVERNORS Board of Governors. Of the four corporations in operation, one has no subsidiaries or foreign branches; one operates a branch in France; one has an English fiduciary affiliate; and one operates an agency at the New York International Airport, has a branch in England, and owns all the stock of a bank organized under the laws of, and operating in, Liberia. At the end of 1956 there were in operation three banking corporations organized under the provisions of Section 25 (a) of the Federal Reserve Act to engage in international or foreign banking. The home offices of these corporations are located in New York City and all were examined during the year by examiners for the Board of Governors. One such institution has no subsidiaries or foreign branches; one has a branch in France and an English fiduciary affiliate; and one operates branches in Germany, France, Singapore, and Lebanon (authorized by the Board in 1955 and opened in 1956). The Board approved during 1956 an application by one of the institutions for permission to establish a branch in Guatemala. In 1956, examiners for the Board of Governors, jointly and in cooperation with examiners for the Banking Department of the State of New York, examined the 12 Caribbean area branches of a State member bank. Inter-Agency Bank Examination School. During 1956, four sessions of the School for Assistant Examiners and one session of the School for Examiners were held. The Inter-Agency Bank Examination School is conducted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Since the Inter- Agency School was established in 1952, the various sessions have been attended by 626 men, representing the three Federal bank supervisory agencies, the State Banking Departments of Connecticut, Indiana, Louisiana, Maine, Michigan, Mississippi, Montana, New Hampshire, New Jersey, North Dakota, Ohio, Oklahoma, Oregon, and Virginia, the Treasury Department of the Commonwealth of Puerto Rico, and one foreign country. Federal Reserve membership. The 6,462 banks that were members of the Federal Reserve System at the end of 1956 accounted for 47 per cent of the number and held 85 per cent of the deposits of all commercial banks in the United States. State member banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 61 accounted for 20 per cent of the number of all State commercial banks and held 70 per cent of the deposits of these banks. The membership of 4,651 national banks and 1,811 State member banks reflected net declines for the year of 41 and 40 respectively. The continued decline in the number of member banks was largely the result of consolidations and absorptions; branch offices were opened in the former locations of most of these banks. Other declines included 14 State member banks that withdrew from membership and 3 national banks that converted into nonmember banks. Newly established banks included 30 national and 6 State members. Ten nonmember banks were admitted to membership and seven banks became members by conversion from nonmember to national banks. LEGISLATION Bank Holding Company Act of 1956. The Bank Holding Company Act of 1956, approved May 9, 1956, makes it unlawful for any bank holding company, as defined in that Act, to acquire bank stocks or take certain other actions without the prior approval of the Board of Governors of the Federal Reserve System. It further requires every bank holding company to divest itself of its interests in nonbanking organizations, with certain enumerated exceptions, by May 9, 1958. The Act also prohibits loans by subsidiary banks of a bank holding company to that bank holding company or to other subsidiaries of that company. Amendments to the Internal Revenue Code provide certain tax benefits with respect to distributions by bank holding companies of their interests in either banking or nonbanking organizations as required by the new Act. Purchase of Government obligations by Federal Reserve Banks. The authority of the Federal Reserve Banks under Section 14(b) of the Federal Reserve Act to purchase and sell direct or fully guaranteed obligations of the United States directly from or to the United States, which would have expired on June 30, 1956, was extended until June 30, 1958, by Act of June 25, 1956. Defense Production Act of 1950. The Defense Production Act of 1950, Section 301 of which is the basis for guarantees of loans for defense production, which would have expired on June 30, 1956, was amended and continued in force until the close of June 30, 1958, by Act of June 29, 1956. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 ANNUAL REPORT OF BOARD OF GOVERNORS Salary of Federal Reserve Board members. By Act of July 31, 1956, adjusting the compensation of certain officials of the Federal Government, the rate of basic compensation of the Chairman of the Board of Governors of the Federal Reserve System was increased from $16,000 to $20,500 per annum, and the rate of basic compensation for other members of the Board was increased from $16,000 to $20,000 per annum. This Act, in effect, amended Section 10 of the Federal Reserve Act. RESERVE BANK OPERATIONS Loan guarantees for defense production. Under the provisions of the Defense Production Act of 1950 as amended and the implementing Executive Orders, certain designated procurement agencies of the Government are authorized to guarantee loans made by commercial banks and other private financing institutions to finance and expedite production for national defense and to finance contractors and subcontractors in connection with or in contemplation of termination of their defense contracts. The guaranteeing agencies are the Departments of the Army, Navy, Air Force, Commerce, Interior, and Agriculture, the General Services Administration, and the Atomic Energy Commission. The present program is a reactivation of the V-loan program utilized during World War II. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies in receiving applications and in the making of such contracts of guarantee. During 1956, the guaranteeing agencies authorized the issuance of 57 guarantee agreements amounting to $186 million.2 During 1955, there were 44 guarantee agreements authorized amounting to $75 million. On December 31, 1956, guarantee agreements outstanding covered credits totaling $514 million, of which $389 million represented actual loans outstanding and $125 million was 2 Regulation V, Loan Guarantees for Defense Production, provides that rates of interest, guarantee fees, commitment fees, and other charges which may be made with respect to guaranteed loans and guarantees executed through the agency of any Federal Reserve Bank under the Regulation will from time to time be prescribed, either specifically or by maximum limits or otherwise, by the Board of Governors after consultation with the guaranteeing agencies designated in the Defense Production Act of 1950, as amended, and pertinent Executive Orders. In view of the higher prevailing structure of interest rates generally, the Board during 1956 gave consideration to increasing the existing 5 per cent maximum rate of interest which lending institutions are permitted to charge on loans made pursuant to Regulation V, but no action was taken in the year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 63 available to borrowers under guarantee agreements in force. Of the actual loans outstanding, 74 per cent on the average was guaranteed. This compares with total guarantee agreements outstanding December 31, 1955, of $464 million. During the year, approximately $1,122 million was advanced on V-loans, most of which are revolving credits. This compares with total advances of about $931 million made during 1955. From the beginning of the program in September 1950 through December 31, 1956, 1,468 V-loans totaling $2,761 million were authorized by the procurement agencies which may guarantee such loans under the Defense Production Act of 1950. Of the total number of loans authorized, 56 per cent of the number and 7 per cent of the amount were loans under $500,000 and 72 per cent of the number and 13 per cent of the amount were loans under $1 million. Of the total number of loans authorized 42 per cent of the number and 8 per cent of the amount were to borrowers having assets of under $500,000; 58 per cent of the number and 13 per cent of the amount were to borrowers having assets of under $1 million. Seventy-three per cent of the number and 19 per cent of the amount of loans authorized were to borrowers having less than 500 employees. Under the law as amended by the Defense Production Act amendments of 1956, authority for the V-loan program, unless further extended, will terminate on June 30, 1958. Volume of operations. Table 5 on page 79 gives the volume of operations in the principal departments of the Federal Reserve Banks for the years 1952-56. Checks handled continued their upward trend, exceeding the all-time high reached the previous year. Discounts and advances and the volume of currency received and counted also showed increases over 1955; on the other hand, coin received and counted declined slightly. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1956 are shown in detail in Table 6 on pages 80-81, and a condensed historical statement is shown in Table 7 on pages 82-83. The table on page 64 summarizes the earnings and expenses and the distribution of net earnings for 1956 and 1955. Current earnings of $595 million in 1956 were 44 per cent more than in 1955, reflecting a considerably higher average rate of interest Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 ANNUAL REPORT OF BOARD OF GOVERNORS on holdings of United States Government securities. Earnings from discounts and advances also were greater than in the year before, reflecting increases in the discount rate and a rise in the volume of discounts and advances. Current expenses of $121 million were about 10 per cent above 1955. Current net earnings amounted to $474 million, an increase of 57 per cent from 1955. Profit and loss additions and deductions were relatively small, leaving net earnings before payments to the United States Treasury at $474 million. EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS, 1956 AND 1955 [In thousands of dollars] Item 1956 1955 Current earnings 595,649 412,488 Current expenses 121,182 110,060 Current net earnings 474,467 302,428 Additions to current net earnings 1359 178 Deductions from current net earnings 383 1443 Net deductions 24 265 Net earnings before payments to U. S. Treasury 474,443 302,163 Paid U. S. Treasury (interest on F. R. notes) 401,555 251,741 Dividends paid 18,905 17,712 Transferred to surplus (Sec. 7) 53,983 32,710 1 Includes $268,000 of net profits in 1956 and $506 of net losses in 1955 on sales of U. S. Government securities. Statutory dividends to member banks amounted to $19 million, a rise of about $1 million over 1955 that reflected an increase in the capital and surplus of member banks and a consequent increase in the paid-in capital of the Federal Reserve Banks. Payments to the United States Treasury as interest on Federal Reserve notes amounted to $401 million in 1956. This was 90 per cent of net earnings after dividends and allowances for building up surplus to 100 per cent of subscribed capital of those Banks whose Section 7 surplus was below that amount. These allowances are consistent with the provisions of the franchise tax when it was in effect; for 1956 allowances for bringing surplus up to subscribed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

65 FEDERAL RESERVE SYSTEM capital were $9,366,000 for four Banks, and for 1955 they were $4,739,000 for two Banks. Total payments to the Treasury as interest on Federal Reserve notes since the policy of making such payments was begun in 1947 have amounted to $2,451 million. The $54 million of net earnings remaining after dividends and payments to the United States Treasury were added to surplus account. Holdings of loans and securities. Average daily holdings of loans and securities during 1956 were about the same as during 1955; holdings of discounts and advances increased $167 million and holdings of United States Government securities decreased $183 million. The average rate of interest earned on discounts and advances rose from 1.96 to 2.76 per cent, reflecting increases in the discount rate to 3 per cent; and the average rate on Government securities rose from 1.67 to 2.41 per cent. Total earnings on loans and securities amounted to $595 million, an increase of $183 million over 1955. The accompanying table shows holdings, earnings, and interest rates on loans and securities held by the Federal Reserve Banks during the past three years. RESERVE BANK EARNINGS ON LOANS AND SECURITIES, 1954-56 [Dollar amounts in thousands] Dis- In- U.S. Item and year Total counts dus- Accept- Governand trial ances ment advances loans securities Average daily holdings:1 1954 $24,866,567 $216,697 $1,179 $24,648,691 1955 124,570,401 666,152 607 $12,422 23,891,220 1956 24,563,390 833,297 837 20,662 23,708,594 Earnings: 1954 438,359 3,479 43 434,837 1955 412,303 13,085 24 216 398,978 1956 595,396 23,025 36 547 571,788 Average rate of interest (per cent): 1954 1.76 1.61 r3.64 1 76 1955 1.68 1.96 r3.99 1.74 1 67 1956 2.42 2.76 4.26 2.65 2.41 r Revised. 1 Based on holdings at openingof business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 ANNUAL REPORT OF BOARD OF GOVERNORS Foreign and international accounts. Gold and dollar assets held for foreign account at the Federal Reserve Banks increased by $68 million in 1956, substantially less than the rise for the previous year. At the end of the year holdings amounted to $9.9 billion, representing $5.5 billion of earmarked gold, $3.9 billion of United States Government securities, largely Treasury bills, $322 million in dollar deposits, and $139 million of miscellaneous securities. An account was opened for the newly established International Finance Corporation. The gold and dollar assets of the International Monetary Fund, the International Bank for Reconstruction and Development, and the International Finance Corporation held at the Federal Reserve Bank of New York declined by $471 million. Total holdings of these international institutions amounted to $3.3 billion at the year-end. Accounts were opened also for two central banks, one in Asia and the other in Africa. As in 1955 loans secured by gold collateral were of relatively minor importance. A loan of $1 million outstanding at the beginning of the year was liquidated in January. New credit arrangements amounted to a total of $36.5 million, of which $25 million was outstanding at the year-end. Loans on gold are ordinarily made to foreign monetary authorities to assist them in meeting seasonal dollar shortages. The Federal Reserve Bank of New York, as depositary and fiscal agent, continued to perform various services for the International Bank for Reconstruction and Development and the International Monetary Fund, and it also extended such services to the International Finance Corporation. As fiscal agent of the United States, the Bank operated the United States Exchange Stabilization Fund pursuant to authorization and instructions of the Treasury Department. On behalf of the Treasury Department it continued to administer the foreign assets control regulations pertaining to assets in the United States of, and transactions with, Communist China and North Korea and their nationals. Since the end of July 1956 it also has administered such regulations involving certain assets of the Egyptian Government and the Suez Canal Company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 67 Bank premises. During the year the Board authorized the construction of new buildings for the Nashville, El Paso, and Houston Branches, and the construction of an addition to the Branch building at Birmingham. With the approval of the Board, the Federal Reserve Bank of Chicago completed the program for acquiring property adjacent to the head-office building for future expansion. The Federal Reserve Bank of Atlanta consummated the purchase of property adjacent to its head-office building which had been occupied for the last five years under a lease-purchase agreement previously approved by the Board. BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1956 were audited by the public accounting firm of Arthur Andersen & Co., whose certificate follows: To the Board of Governors of the Federal Reserve System: We have examined the balance sheet of the Board of Governors of the Federal Reserve System as of December 31, 1956, and the related statement of income and expenses for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and expenses present fairly the financial position of the Board of Governors of the Federal Reserve System as of December 31, 1956, and the results of its operations for the year then ended, and were prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Arthur Andersen & Co. Washington, D. C, February 5, 1957. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 ANNUAL REPORT OF BOARD OF GOVERNORS BALANCE SHEET—DECEMBER 31, 1956 ASSETS Cash in Federal Reserve Bank of Richmond $ 776,998.74 Petty cash 800.00 Due from Federal Reserve Banks and Treasury Department 84,497.17 Travel advances and miscellaneous receivables 7,907.60 Stockroom and cafeteria inventories, at cost 18,172.47 Property and equipment: Reserve for At cost depreciation Land and improvements $ 792,852.42 $ — Building 3,832,774.61 — Furniture and equipment 486,519.36 297,711.97 Automobiles 10,368.22 10,368.22 $5,122,514.61 $308,080.19 4,814,434.42 $5,702,810.40 LIABILITIES AND FUND BALANCES Accounts payable $ 298,682.95 Employee income taxes withheld 127,885.52 Accrued payroll 162,229.47 Fund Balances: Balance, December 31, 1955 $4,886,418.56 Excess of income over expenses, per accompanying statement 225,447.17 Property and equipment adjustments 2,146.73 Balance, December 31, 1956 $5,114,012.46 Represented by— Property and Equipment Fund 4,814,434.42 Operating Fund 299,578.04 $5,702,810.40 NOTE—The Board provides for depreciation of furniture and equipment and automobiles, but depreciation of the building has not been recognized in the accounts inasmuch as the Board deems a provision for such depreciation as unnecessary since funds for replacement of the building will be obtained, when required, from outside sources. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 69 STATEMENT OF INCOME AND EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1956 INCOME: Assessments against Federal Reserve Banks $5,339,800.00 Bulletin sales 35,903.14 Other publications sales 18,114.96 Miscellaneous income 2,239.74 $5,396,057.84 EXPENSES: Salaries $3,379,468.32 Retirement and insurance contributions 270,300.40 Traveling expenses 284,605.09 Postage and expressage 53,210.13 Telephone and telegraph, including leased wire operations (net). . 80,623.25 Printing and binding. 191,392.28 Stationery and supplies 36,277.16 Equipment and other rentals 26,050.59 Provision for depreciation 24,137.12 Books and subscriptions 13,985.60 Heat, light, and power 41,784.28 Repairs, maintenance, and alterations 34,881.55 Insurance 5,707.55 Consumer Finances Surveys 158,723.31 Consumer Instalment Credit Surveys 308,522.73 Business Loan Survey 28,667.14 Retail Trade Survey 25,000.00 Legal, consultant, and audit fees and expenses 70,499.94 Security clearance investigations 60,095.00 Loss from operation of cafeteria (net) 47,090.46 Other 29,588.77 $5,170,610.67 EXCESS OF INCOME OVER EXPENSES $ 225,447.17 NOTES—In 1956, the Civil Service Retirement Act was amended to increase retirement benefits. The Board approved amending its Plan to incorporate such increased benefits. The additional costs for 1956 and for past service have not been determined and will not be paid until 1957. The amount is expected to be substantial. Salaries, and retirement and insurance contributions exclude approximately $70,500 and $7,400, respectively, which were charged direct to cafeteria operations. The Board's expenses in 1956, as shown in the statement above, include $323,001 for Consumer Instalment Credit Surveys and other costs incurred during the year for a study of consumer instalment Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 ANNUAL REPORT OF BOARD OF GOVERNORS credit undertaken by the Board of Governors at the request of the President through the Chairman of the Council of Economic Advisers. Also included are costs of $61,411 for emergency planning programs under Defense Mobilization Order 1-20. The Board received the following reimbursements in 1956 for expenditures which it makes on a reimbursable basis: Printing Federal Reserve notes $4,893,506.24 Currency Redemption Division (Office of the Treasurer of the United States) 406,708.00 Federal Reserve Issue and Redemption Division (Office of the Comptroller of the Currency) 186,894.63 Leased wire service (telegraph) 438,750.80 Leased telephone lines 8,728.00 Miscellaneous 22,097.81 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

72 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 1956 [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars.] ASSETS Gold certificates on hand: Held by Federal Reserve Banks 1,015,555 Held by Federal Reserve Agents 1,800,000 Gold certificates due from U. S. Treasury: Interdistrict Settlement Fund 7,740,838 Federal Reserve Agents' Fund 9,818,000 20,374,393 Redemption fund for Federal Reserve notes 894,951 Total gold certificate reserves 21,269,344 Federal Reserve notes of other Federal Reserve Banks 350,598 Other cash: United States notes 27,423 Silver certificates 238,381 Standard silver dollars 4,879 National bank notes and Federal Reserve Bank notes 1,564 Subsidiary silver, nickels, and cents 33,949 Total other cash 306,196 Discounts and advances secured by U. S. Govt. securities: Discounted for member banks 25,027 Discounted for others 25,027 Other discounts and advances: Discounted for member banks Foreign loans on gold 25,000 25,000 Total discounts and advances 50,027 Industrial loans. 794 Acceptances: Bought outright 33,541 Held under repurchase agreement 35,222 U. S. Government securities: Bought outright— Bills 1,721,270 Certificates 10,932,699 Notes 9,153,913 Bonds 2,801,750 Total bought outright 24,609,632 Held under repurchase agreement 305,100 Total U. S. Government securities 24,914,732 Total loans and securities 25,034,316 Due from foreign banks 22 Uncollected cash items: Transit items 5,192,796 Exchanges for clearing house 223,050 Other cash items 208,075 Total uncollected cash items 5,623,921 Bank premises: Land 18,547 Buildings (including vaults) 79,029 Fixed machinery and equipment 32,098 Total buildings Ill, 127 Less depreciation allowances 56,313 54,814 Total bank premises 73,361 Other assets: Miscellaneous assets acquired account industrial loans... 74 Less valuation allowances 25 Net 49 Reimbursable expenses and other items receivable 4,139 Interest accrued 238,193 Premium on securities 2,012 Deferred charges 1,745 Real estate acquired for banking house purposes 4,669 Suspense account 747 All other 500 Total other assets 252,054 Total assets 52,909,812 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 73 NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) —Continued LIABILITIES Federal Reserve notes: Outstanding (issued to Federal Reserve Banks) 28,532,527 Less: Held by issuing Federal Reserve Banks 969,278 Forwarded for redemption 87,592 1,056,870 Federal Reserve notes, net (includes notes held byU.S. Treasury andI by Federal Reserve Banks other than issuing Bank) 27,475,657 Deposits: Member bank reserves 19,058,790 U. S. Treasurer—general account 44, Foreign . 322,294 Other deposits: Nonmember bank—clearing accounts 98,951 Officers' and certified checks 9,809 Federal Reserve exchange drafts 329 International organizations1 62,594 All other ?54 64? Total other deposits 426,325 Total deposits 20,248,652 3,959,006 Other liabilities: Accrued dividends unpaid Unearned discount 144 Discount on securities 12,"166 Sundry items payable .... 4,360 Suspense account 296 All other 113 Total other liabilities 17,279 Total liabilities 51,700,594 CAPITAL ACCOUNTS Capital paid in ... 325,602 Surplus (Sec. 7) 747,593 Surplus (Sec. 13b) 27,543 Other capital accounts: Reserves for contingencies: Reserve for registered mail losses 10,480 All other 98,000 Total other capital accounts2 108,480 Total liabilities and capital accounts 52,909,812 Contingent liability on acceptances purchased for foreign correspondents 50,055 Industrial loan commitments 2,365 1 Includes International Bank for Reconstruction and Development, International Monetary Fund, and International Finance Corporation. 2 During the year this item includes the net of earnings, expenses, profits, etc., which are closed out on Dec. 31; see Table No. 6 on pp. 80-81. 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 1956 AND 1955 [In thousands of dollars] Total Boston New York Philadelphia Cleveland Richmond Item 1956 1955 1956 1955 1956 1955 1956 1955 1956 ASSETS Gold certificate account 20,374,39320,141,353 871,773 962,856 5,402,485 5,189,433 1,051,2731,105,7261,934,7991,702,3711,315,476 1,275,460 Redemption fund for Federal Reserve notes 894,951 867,842 57,026 53,542 198,738 180,781 63,053 61,738 77,869 78,193 71,140 72,427 Total gold certificate reserves. . . 21,269,34421,009,195 928,7991,016,398 5,601,223 5,370,2141,114,3261,167,4642,012,668 1,780,5641,386,6161,347,887 W Federal Reserve notes of other Banks. . 350,598 344,535 29,465 24,368 53,311 55,855 35,132 37,672 19,697 17,923 31,349 38,250 Other cash 306,196 340,898 22,291 23,567 61,624 65,444 13,116 16,770 21,212 27,270 18,749 23,788 Discounts and advances: Secured by U. S. Govt. securities. . 25,027 106,762 325 1,300 1,400 18,950 6,175 26,855 1,250 525 3,250 4,125 Other 25,000 1,000 1,475 60 7,150 292 1,800 73 2,275 91 1,275 50 Industrial loans 794 702 312 440 642 Acceptances: Bought outright 33,541 23,802 33,541 23,802 o Held under repurchase agreement.. 35,222 4,403 35,222 4,403 o U. S. Government securities: Bought outright 24,609,63224,391,058 1,352,6931,346,972 6,193,703 6,198,8651,478,8171,484,488 2,128,5612,096,241 1,515,1911,436,975 Held under repurchase agreement.. 305,100 393,575 305,100 393,575 Total loans and securities 25,034,316 24,921,302 1,354,8051,348,332 6,576,116 6,639,887 1,487,2321,512,0582,132,086 2,096,857 1,519,716 1,441,150 W Due from foreign banks 22 22 1 2 2 2 2 1 1 i Uncollected cash items 5,623,921 5,502,663 525,927 485,280 1,039,318 1,025,230 405,812 327,844 540,172 653,563 417,564 437,745 Bank premises 73,361 61,164 5,361 5,642 9,397 7,766 4,782 5,050 7,805 5,905 7,220 5,218 Other assets 252,054 160,227 13,445 8,412 62,069 39,165 14,884 9,264 21,489 13,551 15,336 9,161 Total assets 52,909,812 52,340,006 2,880,094 2,912,000 13,403,064 13,203,567 3,075,286 3,076,124 4,755,131 4,595,635 3,396,5513,303,200 1 After deducting $16,000 participations of other Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 27,475,657 26,920,941 1,623,169 1,613,946 6,414,299 6,120,412 1,756,490 1,839,839 2,592,654 2,492,709 2,181,2242,024,917 Deposits: Member bank reserves 19,058,790 19,004,930 778,900 861,914 5,540,767 5,552,721 859,677 868,4551,470,223 1,492,811 814,961 833,907 U. S. Treasurer—general account. 441,243 393,863 33,984 29,377 56,548 68,614 27,841 22,008 31,313 26,036 28,484 17,777 Foreign 322,294 401,986 17,464 23,160 2110,925 2128,673 21,312 28,178 26,936 35,126 15,096 19,300 Other 426,325 554,272 6,197 6,115 269,748 369,765 16,865 15,458 10,971 12,884 8,820 21,225 Total deposits 20,248,652 20,355,051 836,545 920,566 5,977,988 6,119,773 925,695 934,099 1,539,4431,566,857 867,361 892,209 Deferred availability cash items 3,959,006 3,917,294 348,117 308,187 672,671 642,671 306,868 219,651 513,240 432,141 283,634 325,780 Other liabilities 17,279 14,687 662 658 6,060 5,414 800 751 1,454 1,185 970 612 Total liabilities 51,700,594 51,207,973 2,808,493 2,843,357 13,071,018 12,888,270 2,989,8532,994,390 4,646,7914,492,892 3,333,189 3,243,518 CAPITAL ACCOUNTS Capital paid in 325,602 302,739 16,801 16,161 93,991 89,473 20,629 19,757 31,046 29,296 14,81 13,772 Surplus (Sec. 7) 747,593 693,612 43,948 41,667 208,002 195,827 52,301 49,491 66,393 62,563 37,59. 35,012 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 108,480 108,139 7,841 7,804 22,734 22,678 8,014 7,997 9,895 9,878 7,602 7,549 Total liabilities and capital accounts 52,909,812 52,340,006 2,880,094 2,912,000 13,403,064 13,203,567 3,076,1244,755,131 4,595,635 3,396,5513,303,200 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 44.6% 44.4% 37.83 40.1% 45.2% 43.9% 41.5% 42.1% 48.7% 43.9% 45.5% 46.2% Contingent liability on acceptances purchased for foreign correspondents 50,055 33,461 2,938 2,010 * 14,498 3 9,743 3,586 2,445 4,532 3,048 2,540 1,675 Industrial loan commitments 2,365 2,294 15 41 121 322 11 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 28,532,527 27,989,142 1,676,? 1,673,687 6,655,515 6,347,837 1,855,738 1,920,748 2,665,1452,613,518 2,251,832 2,107,742 Held by Federal Reserve Bank and forwarded for redemption. . 1,056,870 1,068,201 53,715 59,741 241,216 227,425 99,248 80,859 72,491 120,809 70,608 82,825 Federal Reserve notes, net4.. .. 27,475,657 26,920,941 1,623,169 1,613,946 6,414,299 6,120,412 1,756,490 1,839,889 2,592,6542,492,709 2,181,224 2,024,917 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 11,618,00011,713,000 580,000 640,000 2,870,000 2,870,000 660,000 725,000 1,130,000 1,070,000 945,000 845,000 Eligible paper 7,722 52,387 1,300 6,175 26,855 4,125 U. S. Government securities 17,605,00017,185,000 1,200,666 1,200,000 3,900,000 3,600,000 1,200,000 1,200,000 1,550,000 1,600,000 1,350,000 1,300,000 Total collateral 29,230,722 28,950,387 1,780,000 1,841,300 6,770,000 6,470,000 1,866,175 1,951,855 2,680,000 2,670,000 2,295,000 2,149,125 2 After deducting $211,344,000 participations of other Federal Reserve Banks on Dec. 31, 1956, and $273,288,000 on Dec. 31, 1955. 3 After deducting $35,557,000 participations of other Federal Reserve Banks on Dec. 31, 1956, and $23,718,000 on Dec. 31, 1955. ^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 1956 AND 1955—Continued [In thousands of dollars] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Item 1956 1955 1956 1955 1956 1955 1956 1955 1956 1955 1956 1955 1956 1955 ASSETS Gold certificate account 832,066 889,1113,606,373 3,657,307 821,262 895,248 351,393 339,279 798,610 832,999 727,344 785,592 2,661,539 2,505,971 Redemption fund for Federal Reserve notes 51,173 53,717 161,000 155,100 43,812 44,502 22,952 23,729 41,614 41,731 26,197 26,921 80,377 75,461 Total gold certificate reserves. 883,239 942,828 3,767,373 3,812,407 865,074 939,750 374,345 363,008 840,224 874,730 753,541 812,513 2,741,916 2,581,432 8 Federal Reserve notes of other Banks. 54,054 48,161 29,609 32,502 13,676 14,289 14,377 9,587 9,327 8,868 28,288 23,316 32,313 33,744 Other cash 23,034 27,113 48,569 50,521 23,357 20,063 9,319 7,908 12,462 15,129 14,956 16,879 37,507 46,446 Discounts and advances: Secured by U. S. Govt. securities. 1,850 19,700 5,500 3,200 150 1,800 3,530 1,355 1,397 16,952 2,000 200 10,000 Other 1,100 43 3,500 140 950 38 625 25 950 38 1,275 47 2,625 103 w Industrial loans 42 60 o Acceptances: Bought outright Held under repurchase agreement U. S. Government securities: Bought outright 1,265,4031,259,018 4,293,6924,254,459 1,027,4521,012,180 555,858 591,0681,066,3351,060,767 978,085 978,033 2,753,8422,671,992 Held under repurchase agreement z o Total loans and securities.... 1,268,3531,278,7614,302,6924,257,7991,028,5521,014,018 560,055 592,508 1,068,6821,077,757 979,360 980,080 2,756,6672,682,095 Due from foreign banks. 1 1 3 3 1 1 1 1 1 1 1 1 2 2 Uncollected cash items.. 411,223 376,499 951,921 900,964 208,733 225,904 135,945 137,663 254,312 222,454 250,706 227,375 482,288 482,142 Bank premises 4,687 4,045 5,882 6,071 4,443 3,399 4,719 2,194 4,346 3,490 3,970 2,146 10,749 10,238 Other assets 13,382 9,001 45,720 29,088 10,354 6,455 5,686 3,805 10,820 6,816 10,584 7,767 28,285 17,742 Total assets. 2,657,9732,686,4099,151,7699,089,3552,154,190 2,223,8791,104,4471,116,6742,200,1742,209,2452,041,4062,070,0776,089,7275,853,841 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 1,371,6071,398,4435,273,4395,190,330 1,211,029 1,248,229 498,236 531,7091,075,1901,051,429 726,041 720,0212,752,279 2,688,907 Deposits: Member bank reserves 905,111 851,4203,063,5672,987,410 699,664 716,406 398,117 405,586 860,424 884,226 1,013,2771,019,8152,654,1022,530,259 U.S. Treasurer—general account 24,258 39,760 69,236 40,009 31,063 7,888 22,652 25,108 37,771 34,666 39,654 47,589 38,439 35,031 Foreign 13,024 16,598 41,440 54,040 11,248 14,668 7,400 9,650 11,248 14,668 15,096 18,142 31,105 39,783 Other 7,233 5,766 22,804 16,540 7,248 26,322 3,835 5,693 6,157 4,835 6,884 2,590 59,563 67,079 Total deposits 949,626 913,5443,197,0473,097,999 749,223 765,284 432,004 446,037 915,600 938,395 1,074,9111,088,1362,783,2092,672,152 Deferred availability cash items 280,190 322,119 507,453 640,401 146,317 164,959 142,597 108,768 161,017 174,184 177,690 204,329 419,212 374,104 Other liabilities 684 591 3,196 2,480 540 545 595 411 534 521 440 401 1,344 1,118 Total liabilities 2,602,1072,634,6978,981,1358,931,210 2,107,109 2,179,0171,073,4321,086,925 2,152,3412,164,529 1,979,0822,012,8875,956,0445,736,281 CAPITAL ACCOUNTS Capital paid in 15,493 13,693 44,408 40,487 11,084 10,564 7,182 6,861 13,025 11,951 18,019 16,563 39,107 34,161 Surplus (Sec. 7) 33,179 30,841 110,421 101,894 29,331 27,649 18,520 17,586 27,983 25,960 37,508 33,847 82,413 71,275 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. 6,432 6,416 14,376 14,335 6,145 6,128 4,240 4,229 5,688 5,668 5,490 5,473 10,023 9,984 Total liabilities and capital accounts 2,657,973 2,686,409 9,151,769 9,089,355 2,154,190 2,223,8791,104,4471,116,674 2,200,174 2,209,245 2,041,406 2,070,077 6,089,7275,853,841 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 38.1% 40.8% 44.5% 46.0% 44.1% 46.7% 40.2% 37.1% 42.2% 44.0% 41.8% 44.9% 49.5% 48.2% Contingent liability on acceptances purchased for foreign correspondents 2,191 1,440 6,972 4,690 1,892 1,273 1,245 838 1,892 1,273 2,540 1,575 5,229 3,451 Industrial loan commitments , 101 2,128 1,920 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 1,437,7281,461,819 5,404,795 5,314,9151,265,8181,299,693 552,463 583,1541,106,1611,088,386 771,479 761,4192,888,969 2,816,224 Held by Federal Reserve Bank and forwarded for redemption. 66,121 63,376 131,356 124,585 54,789 51,464 54,227 51,445 30,971 36,957 45,438 41,398 136,690 127,317 Federal Reserve notes, net 4.. 1,371,6071,398,4435,273,439 5,190,3301,211,0291,248,229 498,236 531,709 1,075,1901,051,429 726,041 720,0212,752,279 2,688,907 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 450,000 500,0002,300,000 2,400,000 450,000 450,000 150,000 150,000 300,000 280,000 283,000 283,000 1,500,0001,500,000 Eligible paper 150 1,800 1,355 1,397 16,952 U. S. Government securities 1,000,0001,000,0003,200,000 3,000,000 900,000 910,000 460,000 500,000 820,000 850,000 525,000 525,000 1,500,0001,500,000 Total collateral. 1,450,0001,500,0005,500,000 5,400,000 1,350,1501,361,800 610,000 651,3551,121,3971,146,952 808,000 808,000 3,000,000 3,000,000 * 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

78 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, END OF DECEMBER 1954, 1955, AND 1956 [In thousands of dollars] Rate of December 3J Change during Type of issue interest (per cent) 1956 1955 1954 1956 1955 Treasury bonds: 1956-5?\ 12,493 12,493 12,493 1958 June 2X 1958 D 1957-55) 2% 339,096 339,096 339,096 1956-55> . 2M 690 ,690 71,690 1956-59 i 2% 1960 Nav. 1961 Sent 2% 1961 Nov 1959-62 June 2% 319,849 319,849 319,849 1959-62 Dec 2% 693 693,765 693,765 1958-63 l 1963 AiXg, 1960-6= 1 2% 1962-65 2V* 56,610 56,610 56,610 1963-6£\. . 1?? 585 ,585 1964-69 June 2}/, 800 203,890 203,890 1964-69 Dec. 2%£ 266,999 266 999 766,999 1965-70 2Vo 521 400 ,490 490 1966-71 2)1 132,707 132,707 132,707 1967-7;I June 49 766 49,266 49,266 1967-7;I Sept 18 2,552 2,552 2,552 1967-7;I Dec. 58,758 58,758 58,758 1978-8:5 1995 Feb 3 Total Treasury bonds. 2,801,750 2,801,750 2,801,750 Treasury notes: Mar. 15, 1955-A IK os,300 —95 300 Dec. 15. 1955-B 1M 235 173 -3,235 A M p a r r . . 1.5 , , 1 1 9 9 5 5 6 6 - - A EA... IX 4 1 ,0 0 6 0 6 0 , , 9 0 0 0 0 0 i ()()() ,666 - — 4 , 1 0 , 6 00 6, 0,0 9 0 0 0 0 +4,066 900 Aug. 1.5, 1956-B 2 7,451,415 -7,451,415 +7,451 415 Oct. , 1956-EO IX 500,000 500",ooo -500,000 Mar. K5. 1957-A . . 8 000 ,600 — 18,600 +26 600 Apr. 1- 1957-EA 2% 500,000 SOO000 SOO,000 May 1.5 1957-B 29,000 +29,000 Aug. . 1957-D.. . 2% 7 94 S06 5 +7,945, Aug. 15 1Q57-C 2 23,400 +23,400 Oct. 1, 1957-EO 713,848 713,848 713,848 Apr. I, 1958-EA June L 1958-A 2 V* Oct. L, 1958-EO Feb. 1.5 1959-A Apr. , 1959-EA Oct. L, 1959-EO . Apr. I 1960-EA Oct. I, 1960-EO li| Apr. L, 1961-EA Oct. i, 1961-EO \y 2 Total Treasury notes. 9,219,313 14,258,763 6,044,271 -5,039 450 +8,214 492 Certificates IX 7,440,065 -7,440 065 ,520 076 —2,520 076 3,922,200 -3,922 200 ix 12,700 -12 700 + 12 700 26,200 -26 200 +26 200 2% 5,025,500 5,962,899 -937 399 +5,962 899 2% 6,500 +6 500 5,943,499 +5,943 499 Total certificates 10,975 499 6,001,799 13,882,341 +4,973 700 -7,880 542 Treasury bills 1,918,170 1,722,321 2,204,000 + 195 849 -481 679 Tota holdings 24,914,732 24,784,633 24,932,362 + 130 099 -147 ,729 1 Partly tax-exempt. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

79 FEDERAL RESERVE SYSTEM NO. 4—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-56* [In millions of dollars] Date Amount Date Amount Date Amount Date Amount 1953—Mar. 18 110 1953—June 8 374 1953—June 20 992 1954—Jan. 21 306 19 104 9 491 *21 992 22 283 20 189 10 451 22 908 23 283 21 189 11 358 23 608 *24 283 *22 189 12 506 24 296 25 203 23 333 13 506 1954—Jan. 14 22 26 3 24 186 *14 506 15 169 Mar. 15 134 25 63 15 999 16 169 16 190 26 49 16 1,172 *17 169 June 5 196 17 823 18 323 1955—no transactions 6 196 18 364 19 424 *7 196 19 992 20 323 1956—no transactions * Sunday or holiday. 1 Under authority of Section 14(b) of the Federal Reserve Act. On November 9, 1953, the Reserve Banks sold directly to the U. S. Treasury $500 million of Treasury notes; this is the only use that has been made under the same authority to sell U. S. Government securities directly to the United States. NOTE.—Interest rate \i per cent throughout. Data for prior years beginning with 1942 are given in previous Annual Reports. There were no holdings on dates not shown. NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1952-56 [Number in thousands; amounts in thousands of dollars] 1956 1955 1954 1953 1952 NUMBER OF PIECES HANDLED1 Discounts and advances:2 Notes discounted and advances made 23 21 10 20 18 Currency received and counted 4,466,739 4,282,562 4,384,270 4,405,255 4,183,063 Coin received and counted... 6,908,325 7,008,777 7,064,082 5,889,238 5,716,379 Checks handled: U. S. Govt. checks 539,359 503,516 481,408 458,607 446,084 Postal money orders 342,313 347,351 354,368 366,807 371,318 All other3 2,822,601 2,643,561 2,512,998 2,414,167 2,292,017 Collection items handled: U. S. Govt. coupons paid. . 11,997 12,301 12,753 13,703 13,599 All other 17,813 16,368 15,443 14,360 14,172 Issues, redemptions, and exchanges of U. S. Govt. securities 198,519 191,922 191,112 177,596 163,568 Transfers of funds 2,123 1,960 1,808 1,718 1,595 AMOUNTS HANDLED Discounts and advances2.... 109,811,042 88,436,422 22,871,449 93,438,640105,549,326 Currency received and counted 29,104,496 27,461,048 28,482,428 29,514,663 27,001,076 Coin received and counted.., 739,896 752,345 698,819 607,205 558,416 Checks handled: U. S. Govt. checks 114,173,132 123,215,681 141,037,495140,739,438119,423,270 Postal money orders 5,941,097 5,814,754 5,943,178 6,091,173 5,996,899 All others 1,005,448,966 929,846,430 847,345,372 852,836,627808,521,799 Collection items handled: U. S. Govt. coupons paid. . 2,563,075 2,595,305 2,209,045 2,270,606 1,923,079 All other 5,495,317 5,354,604 5,085,695 4,615,970 5,103,262 Issues, redemptions, and exchanges of U. S. Govt. securities 421,612,394 429,701,960 469,247,400 381,877,330 355,234,532 Transfers of funds 1,233,509,5501,091,608,8911,038,100,606 876,838,475767,974,539 1 Two or more checks, coupons, etc., handled as a single item are counted as one "piece." 2 Exclusive of industrial loans. 3 Revised to exclude checks drawn on the Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1956 Phila- Cleve- Rich- Minne- Kansas San Item Total Boston New York delphia land mond Atlanta Chicago St. Louis apolis City Dallas Francisco CURRENT EARNINGS Discounts and advances. ... $23,024,697 $788,287 $5,617,842$1,903,609 $1,905,478 $893,227 $1,377,298 $5,942,710 $627,153 $1,010,077$1,363,059 $830,142 $765,815 Industrial loans 35,621 9,770 23,260 2,591 Commitments to make industrial loans 14,972 190 2,115 26 274 12,367 Acceptances 547,170 547,170 U. S. Government securities. 571,788,486 31,363,787 145,564,629 34,351,192 49,229,899 34,751,769 29,334,395 99,442,889 23,764,91313,086,844 24,718,650 22,699,658 63,479,860 All other 238,146 16,992 39,944 12,888 19,713 15,579 25,731 32,204 10,026 13,764 21,258 13,264 16,783 Total current earnings.. 595,649,092 32,178,836151,769,585 36,291,138 51,157,205 35,660,601 30,737,424 105,418,077 24,402,093 14,113,276 26,115,335 23,543,065 64,262,458 CURRENT EXPENSES Salaries: Officers 5,449,677 326,580 998,266 372,850 451,817 419,688 450,762 563,973 390,141 306,858 361,865 375,169 431,708 Employees 72,810,052 4,373,726 16,116,623 4,081,418 6,590,282 4,598,632 4,389,395 11,584,900 4,159,956 2,177,066 3,774,458 3,465,474 7,498,122 Directors and other fees ... 348,008 21,233 46,272 19,413 29,940 19,761 38,320 31,172 31,368 19,545 31,396 24,002 35,586 Retirement contributions.. 6,920,835 412,457 1,460,562 387,020 622,997 446,569 438,144 1,085,475 398,097 238,341 377,264 355,103 698,806 Traveling expenses 1,464,312 89,437 214,186 63,391 138,818 130,156 110,488 194,902 96,312 78,398 86,372 97,196 164,656 Postage and expressage. . . 15,586,655 1,246,644 2,344,388 824,418 1,262,852 1,483,925 1,336,636 2,249,258 822,107 496,231 866,245 790,905 1,863,046 Telephone and telegraph... 1,190,712 60,290 259,957 59,959 91,563 87,199 107,217 140,825 69,254 41,820 69,033 75,932 127,663 Printing, stationery, and supplies 5,574,919 423,458 1,000,137 278,776 486,611 372,880 394,003 964,650 363,037 159,928 335,045 270,818 525,576 Insurance 1,128,429 74,864 201,315 50,176 114,499 87,825 76,244 163,234 75,727 47,716 77,153 60,297 99,379 Taxes on real estate 3,138,279 507,615 684,919 123,384 262,139 140,385 151,397 413,408 107,448 165,196 136,911 81,769 363,708 Depreciation (building). . . 3,229,455 403,814 284,591 268,149 602,964 275,415 154,351 300,238 178,988 43,991 82,172 33,394 601,388 Light, heat, power, and water 1,278,129 108,414 224,855 87,838 130,584 109,405 61,931 166,330 89,447 44,276 95,386 50,501 109,162 Repairs and alterations. . . 1,380,489 30,916 65,381 94,084 157,318 138,650 50,696 45,379 179,936 383,976 29,960 49,855 154,338 Rent 458,354 9,991 5,060 15,679 78,391 4,467 121,476 88,874 2,889 61,468 678 50,914 18,467 Furniture and equipment: Purchases 2,343,523 53,328 136,276 76,354 254,742 460,617 149,563 262,540 329,798 184,450 67,774 214,801 153,280 Rentals 4,582,017 389,863 643,067 313,735 403,231 302,571 285,648 708,545 273,948 175,882 265,133 239,648 580,746 Assessment for expenses of Board of Governors. . . . 5,339,800 315,700 1,521,200 382,800 483,000 272,100 237,200 749,600 201,500 132,600 204,300 269,900 569,900 Federal Reserve currency.. 5,603,176 349,827 1,520,639 261,649 236,766 516,920 411,347 961,660 245,642 25,614 223,298 84,406 765,408 Allother U,712,081 124,472 301,644 127,448 430,753 110,026 119,440 293,802 106,449 87,627 136,612 95,945 193,189 Total 1139,538,902 9,322,629 28,029,337 7,888,54112,829,269 9,977,191 9,084,258 20,968,765 8,122,044 4,870,983 7,221,055 6,686,02914,954,128 Less reimbursement for certain fiscal agency and other expenses 118,356,406 953,996 3,485,188 918,438 1,785,491 1,033,564 1,296,262 3,319,761 1,190,764 524,399 1,306,406 1,073,099 1,884,366 Net expenses 121,182,496 8,368,632 24,544,149 6,970,10411,043,778 8,943,627 7,787,996 17,649,004 6,931,280 4,346,585 5,914,650 5,612,93013,069,761 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PROFIT AND LOSS Current net earnings 474,466,596 23,810,203127,225,43629,321,035 40,113,42726,716,974 22,949,428 87,769,07317,470,813 9,766,69120,200,686 17,930,135 51,192,697 Additions to current net earnings: Profits on sales of U. S. Government securities (net) 268,090 16,548 64,613 16,492 24,350 16,960 14,623 43,529 12,665 7,371 11,702 11,537 27,700 All other 91,025 5,350 13,898 441 5,926 4,039 131 44,821 4,541 377 1,388 37 10,076 Total additions 359,115 21,898 78,511 16,933 30,276 20,999 14,753 88,350 17,206 7,748 13,090 11,574 37,776 Deductions from current net earnings: Charge-offs on bank premises 20,147 20,147 Reserves for contingencies 340,270 37,017 56,055 16,475 16,896 52,928 14,591 41,017 17,370 11,458 19,999 17,892 38,572 All other 22,135 1,831 2,852 428 1,742 1,426 551 2,360 2,812 438 343 641 6,711 Total deductions 382,551 38,848 58,907 16,903 38,785 54,354 15,141 43,377 20,182 11,896 20,341 18,533 45,282 Net deductions 23,436 16,950 +19,604 +31 8,510 33,355 388 +44,973 2,976 4,148 7,251 6,959 7,507 Net earnings before payments to U. S. Treasury.. 474,443,16023,793,253127,245,040 29,321,066 40,104,917 26,683,619 22,949,039 87,814,045 17,467,836 9,762,54320,193,435 17,923,176 51,185,190 ^ Paid U. S. Treasury (interest on F. R. notes) 401,555,581 20,531,028109,579,944 25,295,834 34,468,380 23,237,53519,731,928 76,747,423 15,135,639 8,406,44917,409,249 13,223,260 37,788,912 Dividends paid 18,904,897 981,028 5,489,626 1,214,605 1,806,754 864,154 878,877 2,539,170 650,481 422,045 760,994 1,039,339 2,257,825 Transferred to surplus (Sec. 7) 53,982,682 2,281,197 12,175,470 2,810,627 3,829,784 2,581,930 2,338,235 8,527,453 1,681,716 934,049 2.023,192 3,660,57711,138,453 Surplus (Sec. 7) January 1. . 693,611,316 41,666,629195,826,856 49,490,515 62,563,178 35,011,853 30,841,102101,893,599 27,649,49317,586,15525,959,962 33,847,07271,274,903 Surplus (Sec. 7) December 31 747,593,99843,947,826 208,002,326 52,301,142 66,392,96137,593,783 33,179,336110,421,05129,331,210 18,520,204 27,983,154 37,507,649 82,413,356 1 After deducting $415,326 of prorated inter-Bank expenses to avoid duplication in combined totals. NOTE.—Details may not add to totals because of rounding. In some instances, the last digit of the amount shown as "Surplus (Sec. 7) January 1" differs from the corresponding figure in previously published tables because of a change in treatment of rounded figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-56 Bank and period e C a u rn rr i e n n g t s e C x u p r e r n e s n e t s U N . b S e e m . t f o T e e r n r e a e t r s a n p s i t a o n u y g r - y s * Div p i a d i e d nds F p r a a T id n r c e t h a o i s s u U e r . y t S ax . Pa ( T i S d 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 te 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 s u . f r e 1 p r 3 l r u b e s ) d T t r o ( a S n s e s u 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 . 102,380,5S3 19,339,633 78,367,504 5 011 832 2 703 894 70 651 778 1920 ... 181,296,711 28,258,030 149,294,774 5 654 018 60 724 742 82 916 014 1921 122,865,866 34,463,845 82,087,225 6,119,673 59 974,466 15 993,086 1922 50,498,699 29,559,049 16 497,736 6 307 035 10 8SO 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 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 9 581,954 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 104,3"91,829 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1950 275,838,994 80,571,771 231,561,340 13,082,992 196,628,858 21,849,490 1951 394,656,072 95,469,086 297,059,097 13,864,750 254,873,588 28,320,759 1952 456,060,260 104,694,091 352,950,157 14,681,788 291,934,634 46,333,735 1953 513,037,237 113,515,020 398,463,224 15,558,377 342,567,985 40,336,862 1954 438,486,040 109,732,931 328,619,468 16,442,236 276,289,457 35,887,775 1955 412,487,931 110,060,023 302,162,452 17,711,937 251,740,721 32,709,794 1956 595,649,092 121,182,496 474,443,160 18,904,897 401,555,581 53,982,682 Total—1914-56. . . 5,785,251,785 1,867,704,750 3,867,443,151 389,206,233 149,138,300 2,188,893 2,450,650,837 -3,658 2 876,262,542 Aggregate for each Federal Reserve Bank, 1914-56: Boston 370,384,973 133,774,427 234,346,599 25,135,654 7,111,395 280,843 147,505,231 +135,412 54,178,063 New York 1,482,598,302 423,654,583 1,056,309,555 129,900,188 68,006,262 369,116 613,641,917 -433,413 244,825,484 Philadelphia 393,164,158 128,741,110 264,118,032 32,406,417 5,558,901 722,406 158,217,621 +290,661 66,922,025 Cleveland 526,422,164 172,121,065 348,031,246 38,509,430 4,842,447 82,930 224,989,497 -9,907 79,616,848 Richmond 342,412,955 120,282,128 218,624,653 16,672,077 6,200,189 172,493 152,249,337 -71,516 43,402,074 Atlanta 297,970,009 100,787,663 191,605,237 14,791,649 8,950,561 79,264 129,326,904 +5,491 38,451,368 Chicago 877,475,792 260,742,011 606,402,289 47,096,480 25,313,526 151,045 408,068,067 + 11,681 125,761,488 St. Louis 273,038,182 102,302,974 165,403,802 13,464,750 2,755,629 7,464 114,778,151 -26,514 34,424,322 Minneapolis 168,873,072 62,428,506 104,666,567 9,173,310 5,202,900 55,615 67,707,578 +64,875 22,462,292 Kansas City 267,293,821 101,648,136 162,189,381 13,610,316 6,939,100 64,213 109,469,996 -8,674 32,114,430 Dallas . . .. 236,435,517 84,153,540 148,913,463 14,674,497 560,049 102,083 91,681,033 +55,336 41,840,463 San Francisco 549,182,841 177,068,607 366,832,326 33,771,464 7,697,341 101,421 233,015,505 -17,090 92,263,684 Total 5,785,251,785 1,867,704,750 3,867,443,151 389,206,233 149,138,300 2,188,893 2,450,650,837 -3,658 876,262,542 1 Current earnings less current expenses, plus and minus profit and loss additions and deductions. ^ 2 The $876,262,542 transferred to surplus was reduced by direct charges of $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation and $500,000 H for charge-off on bank premises, and was increased by $11,131,013 transferred from reserves for contingencies, leaving a balance of $747,593,998 on Dec. 31, 1956. 5 NOTE.—Details may not add to totals because of rounding. " OO 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 1918-56 AND END OF MONTH 1956 [In millions of dollars] Reserve Bank credit outstanding Deposits, other than Member bank member bank reserves, with F. R. Banks reserves U. S. Government Treas- Other securities ury Cur- Treas- Fed- End of year or Dis- Gold cur- rency ury eral month Total B r o o ig u u h t g - t ht r u c H e n h p e d a u l s e d r e r - v c a o a a n u n d c n d - e ts s Float ot A h l e l r1 Total stock2 s r t o e i a n n u n g c t * d - y - l c a i t r i i n c o u n - h i c n o a g l s d s h 4 - d T ep u re o ry a s s it - sde F e p i o o g r s n - itsd O ep t o h s e i r ts c s o R e a u r c e v n - - e ts5 Total qu R ir e e - d6 c E e x ss - 6 agreement 1918 239 239 1,766 199 294 2,498 2,873 1,795 4,951 288 51 96 25 118 1.636 1,585 51 1919... 300 300 2,215 201 575 3,292 2,707 1,707 5,091 385 31 73 28 208 1,890 1,822 68 1920 287 287 2,687 119 262 3,355 2,639 1,709 5,325 218 57 5 18 298 1,781 1921 234 234 1,144 40 146 1,563 3,373 1,842 4,403 214 96 12 15 285 L, 753 1,654 99 1922 436 436 618 78 273 1,405 3,642 1,958 4,530 225 11 3 26 276 L.934 1923 134 80 54 723 27 355 1,238 3,957 2,009 4,757 213 38 4 19 275 .898 1,884 14 1924... 540 536 4 320 52 390 1,302 4,212 2,025 4,760 211 51 19 20 258 2,220 2,161 59 1925 375 367 8 643 63 378 1,459 4,112 1,977 4,817 203 16 8 21 272 2,212 2,256 -44 1926 315 312 3 637 45 384 1,381 4,205 1,991 4,808 201 17 46 19 293 2,194 2,250 -56 1927... 617 560 57 582 63 393 1,655 4,092 2,006 4,716 208 18 5 21 301 2,487 2,424 63 1928 228 197 31 1,056 24 500 1,809 3,854 2,012 4,686 202 23 6 21 348 2,389 2,430 -41 1929 . 511 488 23 632 34 405 1,583 3,997 2,022 4,578 216 29 6 24 393 2,355 2,428 -73 1930 .. 729 686 43 251 21 372 1,373 4,306 2,027 4,603 211 19 6 22 375 2,471 2,375 96 1931 817 775 42 638 20 378 1,853 4,173 2,035 5,360 222 54 79 31 354 1,961 1,994 -33 1932 . 1,855 1,851 4 235 14 41 2,145 4,226 2,204 5,388 272 8 19 24 355 2,509 1,933 576 1933 2,437 2,435 2 98 15 137 2,688 4,036 2,303 5,519 284 3 4 128 360 2,729 1,870 859 1934 2,430 2,430 7 5 21 2,463 8,238 2,511 5,536 3,029 121 20 169 241 4,096 2,282 1,814 1935 2,431 2,430 1 5 12 38 2,486 10,125 2,476 5,882 2,566 544 29 226 253 5,587 2,743 2,844 1936 2,430 2,430 3 39 28 2,500 11,258 2,532 6,543 2,376 244 99 160 261 6,606 4,622 1,984 1937 2,564 2,564 10 19 19 2,612 12,760 2,637 6,550 3,619 142 172 235 263 7,027 5,815 1,212 1938 2,564 2,564 4 17 16 2,601 14,512 2,798 6,856 2,706 923 199 242 260 8,724 5,519 3,205 1939 2,484 2,484 7 91 11 2,593 17,644 2,963 7 598 2 409 634 397 256 251 11,653 6 444 5 209 1940 . 2,184 2,184 3 80 8 2,274 21,995 3,087 8,732 2,213 368 1,133 599 284 14,026 7,411 6,615 1941 2,254 2,254 3 94 10 2,361 22,737 3,247 11,160 2,215 867 774 586 291 12,450 9,365 3,085 1942 . 6,189 6,189 471 14 6,679 22 726 3,648 15 410 2 193 799 793 485 256 13,117 11 129 1 988 1943 11,543 11,543 5 681 10 12,239 21,938 4,094 20,449 2,303 579 1,360 356 339 12,886 11,650 1,236 1944 18,846 18,846 80 815 4 19,745 20,619 4,131 25,307- 2,375 440 1,204 394 402 14,373 12,748 1,625 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1945 24,262 24,262 249 578 2 25,091 20,065 4,339 28,515 2,287 977 862 446 495 15,915 14,457 1,458 1946 23,350 23,350 163 580 1 24,093 20,529 4,562 28,952 2,272 393 508 314 607 16,139 15,577 562 1947 22,559 22,559 85 535 1 23,181 22,754 4,562 28,868 1,336 870 392 569 563 17,899 16,400 1,499 1948 23,333 23,333 223 541 1 24,097 24 244 4,589 28,224 1,325 1,123 642 547 590 20,479 19,277 1,202 1949 18,885 18,885 78 534 2 19,499 24,427 4,598 27,600 1,312 821 767 750 706 16,568 15,550 1,018 1950 20,778 20,725 53 67 1,368 3 22,216 22,706 4,636 27,741 1,293 668 895 565 714 17,681 16,509 1,172 1951 23,801 23,605 196 19 1,184 5 25,009 22,695 4,709 29,206 1,270 247 526 363 746 20,056 19,667 389 1952. 24,697 24,034 663 156 967 4 25,825 23,187 4,812 30,433 1,270 389 550 455 777 19,950 20,520 —570 1953 25,916 25,318 598 28 935 2 26,880 22,030 4,894 30,781 761 346 423 493 839 20,160 19,397 763 1954. 24,932 24,888 44 143 808 1 25,885 21,713 4,985 30,509 796 563 490 441 907 18,876 18,618 258 1955 24,785 24,391 394 108 1,585 29 26,507 21,690 5,008 31,158 767 394 402 554 925 19,005 18,903 102 1956— January . 23,466 23,466 852 786 18 25,122 21,693 5,009 30,228 797 428 355 349 919 18,750 18,311 439 February 23,482 23,426 56 632 791 15 24,920 21,695 5,012 30,163 789 554 363 305 1,025 18,428 18,162 266 M!arch 23,636 23,587 49 872 1,238 15 25,761 21,716 5,020 30,339 777 534 354 623 1,069 18,799 18,276 523 April 23,345 23,245 100 1,204 744 14 25,307 21,743 5,025 30,210 783 578 330 404 984 18,784 18,325 459 IVIay 23,474 23,360 114 1,160 726 17 25,377 21,772 5,030 30,513 779 515 307 309 983 18,773 18,204 569 June 23,758 23,712 46 232 1,210 19 25,219 21,799 5,032 30,715 768 522 297 313 992 18,443 18,449 -6 July 23,438 23,438 452 959 19 24,868 21,830 5,035 30,604 761 513 308 288 950 18,308 18,104 204 August 23,854 23,828 26 832 771 23 25,480 21,858 5,041 30,757 768 422 350 252 943 18,888 18,377 511 September . 23,680 23,590 90 664 1,125 18 25,487 21,884 5,046 30,768 771 535 334 227 950 18,831 18,450 381 October 23,767 23,688 79 538 910 21 25,236 21,910 5,054 30,839 778 495 275 297 848 18,668 18,459 209 November 24,385 24,255 130 518 1,330 34 26,267 21,910 5,061 31,424 763 463 356 182 843 19,208 18,719 489 December 24,915 24,610 305 50 1,665 70 26,699 21,949 5,066 31,790 775 441 322 426 901 19,059 19,089 -30 1 Comprises acceptances and industrial loans. 2 Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation. * The stock of currency, other than gold, for which the Treasury is primarily responsible—silver bullion at monetary value and standard silver dollars, subsidiary silver and minor coin, and United States notes; also, Federal Reserve Bank notes and national bank notes for the retirement of which lawful money has been deposited with the Treasurer of the United States. Includes currency of these kinds held in the Treasury and the Federal Reserve Banks as well as that in circulation. * Gold other than that held against gold certificates and gold certificate credits, including the reserve against United States notes and Treasury notes of 1890, monetary silver other than that held against silver certificates and Treasury notes of 1890, and the following coin and paper currency held in the Treasury: subsidiary silver and minor coin, United States notes, Federal Reserve notes, Federal Reserve Bank notes, and national bank notes. 5 The total of Federal Reserve Bank capital paid in, surplus, other capital accounts, and other liabilities and accrued dividends, less the sum of bank premises and other assets. 6 These figures are estimated. Available only on call dates prior to 1929 (in 1920 and 1922, the call dates were December 29). NOTE.—For description of figures and discussion of their significance, see Banking and Monetary Statistics, Sec. 10, pp. 360-66. oo Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES DECEMBER 31, 1956 Cost Federal Reserve Bank or Net branch Building Fixed ma- book value Land (including chinery and Total vault)1 equipment Boston $ 1,628,132 $ 5,929,169 $ 2,956,474 $10,513,775 $ 5,361,085 New York 5,215,656 12,183,528 4,886,521 22,285,705 5,334,245 Annex 592,679 1,451,569 562,181 2,606,429 933,337 Buffalo 607,779 2,894,931 3,502,710 3,129,233 Philadelphia. .. 1,884,357 4,839,506 2,130,561 8,854,424 4,781,631 Cleveland 1,295,490 6,652,253 2,749,409 10,697,152 3,172,238 Cincinnati 400,891 1,200,943 968,093 2,569,927 1,506,049 Pittsburgh 1,189,941 2,833,106 689,889 4,712,936 3,126,963 Richmond 469,944 4,165,217 2,066,765 6,701,926 3,277,742 Baltimore 250,487 2,878,049 480,555 3,609,091 2,341,834 Charlotte 116,569 1,052,360 599,369 1,768,298 1,600,041 Atlanta 633,387 1,722,115 362,731 2,718,233 1,205,705 Annex 93,649 137,100 70,200 300,949 300,949 Birmingham. . . 327,352 574,430 70,511 972,293 565,638 Jacksonville. . . 164,004 1,734,071 629,574 2,527,649 2,120,401 Nashville 48,000 211,617 35,090 294,707 76,033 New Orleans... 277,078 762,456 265,700 1,305,234 418,373 Chicago 2,963,548 6,566,970 2,704,902 12,235,420 1,992,817 Detroit 1,147,734 2,820,131 1,214,162 5,182,027 3,889,161 St. Louis 1,496,060 2,136,438 1,391,137 5,023,635 1,243,547 Annex 179,720 1,035,281 524,429 1,739,430 952,751 Little Rock 85,007 264,604 161,837 511,448 178,646 Louisville 642,135 1,413,269 72,464 2,127,868 1,842,576 Memphis 128,542 287,468 105,442 521,452 225,061 Minneapolis. . . 600,521 6,095,690 646,249 7,342,460 4,641,447 Helena 15,709 126,401 44,143 186,253 78,050 Kansas City. . . 545,764 3,547,370 1,249,534 5,342,668 1,353,390 Denver 592,271 522,663 86,910 1,201,844 780,117 Oklahoma City 65,021 421,252 97,588 583,861 179,984 Omaha 444,176 1,865,954 94,548 2,404,678 2,032,715 Dallas 189,831 1,362,220 466,692 2,018,743 264,812 El Paso 289,003 119,739 32,575 441,317 283,830 Houston 708,581 622,539 112,111 1,443,231 1,044,014 San Antonio. . . 402,345 1,974,819 2,377,164 2,377,164 San Francisco.. 476,768 4,157,105 1,036,864 5,670,737 1,694,591 Los Angeles.... 736,867 4,115,783 1,560,794 6,413,444 4,765,710 Portland 161,239 1,678,512 630,919 2,470,670 1,922,918 Salt Lake City. 114,075 341,449 84,814 540,338 169,407 Seattle 274,772 1,891,564 642,240 2,808,576 2,196,245 Total 27,455,084 94,589,641 32,483,977 154,528,702 73,360,450 OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Richmond • • • 146 550 146 550 146 550 Nashville •.. 422 110 422,110 422 110 1,340,000 1,607,697 132,466 3,080,163 3,002,340 Dallas 496 412 496 412 496 412 San Antonio .. • 75,002 163,360 55,859 294,221 73,255 Los Angeles 40 747 29,464 70,211 70,211 Portland 37 000 37 000 37 000 Salt Lake City 421,598 421,598 421,598 Total 2,979,419 1,800,521 188,325 4,968,265 4,669,476 1 Includes expenditures incident to construction programs carried in unallocated accounts pending completion of programs and subsequent allocation of costs to appropriate accounts. 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, 1956] President Other officers Employees1 Total w Federal Reserve Bank (including branches) w Annual salary Number Annual salaries Number Annual salaries Number Annual salaries Boston $35 000 21 $264,000 1,241 $4,425,717 1,263 $4,724,717 New York 60,000 56 945,400 3,678 16,160,928 3,735 17,166,328 8 Philadelphia 35 000 27 355,000 1,035 4,039,804 1,063 4,429,804 w Cleveland 30,000 32 421,550 1,692 6,466,492 1,725 6,918,042 Richmond 35 000 30 373,900 1,300 4,412,981 1,331 4,821,881 Atlanta .... . .. ... 35,000 34 416,400 1,298 4,314,695 1,333 4,766,095 Chicago 50 000 39 542,100 2,895 11,413,056 2,935 12,005,156 St. Louis .... 35,000 30 340,000 1,133 3,920,232 1,164 4,295,232 Minneapolis 30,000 25 273,400 661 2,180,110 687 2,483,510 Kansas City . . .... . . ... 35,000 27 326,700 1,036 3,615,904 1,064 3,977,604 Dallas 30,000 30 353,200 1,003 3,536,940 1,034 3,920,140 San Francisco 30,000 36 428,000 1,936 7,406,734 1,973 7,864,734 Total $440,000 387 $5,039,650 18,908 $71,893,593 19,307 $77,373,243 1 Includes 897 part-time employees. GO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

oo NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES In effect December 31, 1956. For changes during the year, see "Record of Policy Actions of Board of Governors." [Per cent per annum] San Type of transaction Boston Y Ne o w rk d P e h lp il h a i - a C la le n v d e- m Ri o c n h d - Atlanta Chicago L S ou t. is M ap in o n li e s - K C an it s y as Dallas F c r is a c n o - Discounts for and advances to member banks: Advances secured by Government obligations and discounts of and advances secured by eligible paper (Sees. 13 and 13a of the Federal Reserve Act) 3 3 3 3 3 3 Other secured advances (Sec. 10b of the Federal Reserve Act) 334 334 334 3Y2 334 3H 8 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) 3% Loans to industrial or commercial businesses under Sec. 13b of the Federal Reserve Act, direct or in participation with financing institutions 234-5 3^-534 3-534 3-534 334-534 3-5H o Discounts for and purchases from financing institutions under Sec. 13b of the Federal Reserve Act: O O n n r p e o m rt a io in n i n f g o r p w or h t i i c o h n institution is obligated 0 (3 ) ) 0 (3 ) ) 0 (3 ) ) 0 (3 ) ) 0) 3 3 - - 5 5 3 3 4 4 3 ( - 3 3 ) V 2 0) 0 0 ) 0 0 (3 ) ) Commitments to make loans under Sec. 13b of the Federal Reserve Act: To industrial or commercial businesses 4-13" til 4-11 f-lfi 4-13 To financing institutions I 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. 8 Rate charged borrower. * Twenty-five per cent of loan rate on disbursed portion; 34 per cent per annum on undisbursed portion. 5 Rate on disbursed portion; M per cent per annum on undisbursed portion of loan. NOTE.—Maximum maturities. Discounts for and advances to member banks: 90 days for discounts and advances 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 advances secured by obligations of Federal intermediate credit banks maturing within 6 months are limited to maximum maturities of 15 days; 4 months for advances under Section 10(b). Advances to individuals, partnerships, or corporations under the last paragraph of Section 13: 90 days. Industrial loans and commitments under Section 13b: 5 years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

89 FEDERAL RESERVE SYSTEM NO. 12—MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits1 Time deposits Effective date of change ci C r ty e e s n e b t r a r v a n e l ks ci R ty e s b e a rv n e ks C b o a u n n k t s ry r r e e s s C e e b e r r a v v n n e e t k r a s c a l i n t d y C b o a u n n k t s ry 1917—June 21., 13 10 1936—Aug. 16. 19H 15 1937— M M a a y r. 1 1 . . 22% 20 14 1938—Apr. 16. 26 12 22% 1941—Nov. 1. 26 20 14 1942—Aug. 20. 24 Sept. 14. 22 Oct. 3. 20 1948—Feb. 27. 22 June 11. 24 Sept. 16. 16 Sept. 24. 26 22 TV2 1949—May 1. 15 May 5. 24 21 June 30. 20 July 1. 14 Aug. 1. 13 Aug. 11. 23 H Aug. 16. Aug. 18. 23 19 Aug. 25. 22 Y2 18* Sept. 1. 22 18 1951—Jan. 11 23 Jan. 16 19 13 Jan. 25 24 Feb. 1 20' 14 1953—July 1 13 July 9 22 19 1954—June 16 June 24 21 July 29 20 18 Aug. 1 12 In effect Jan. 1, 1957. 20 'is' 12 Statutory requirements: Minimum 13 10 7 Maximum 26 20 14 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) NO. 13—MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS* [Per cent per annum] Nov. 1, 1933— Feb. 1, 1935— Jan. 1, 1936— Effective Type of deposit Jan. 31, 1935 Dec. 31. 1935 Dec. 31, 1956 Jan. 1, 1957 Savings deposits Postal Savings deposits. Other time deposits payable: In 6 months or more 2V2 3 In 90 days to 6 months... 2H In less than 90 days 1 1 Maximum permissible rates for member banks established by Board of Governors in Regulation Q, which provides that rate paid by a member bank may not exceed maximum rate payable by State banks or trust companies on like deposits under laws of State in which member bank is located. Since Feb. 1, 1936, maximum rates established by Federal Deposit Insurance Corporation for insured nonmember banks, under authority of the Banking Act of 1935, have been the same as those in effect for member banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 14—MARGIN REQUIREMENTS 1 Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Per cent of market value] Jan. 21, Feb. 1, Mar. 30, Jan. 17, Feb. 20, Jan. 4, Effec- 1946— 1947— 1949— 1951— 1953— 1955— tive Jan. 31, Mar. 29. Jan. 16, Feb. 20, Jan. 4, Apr. 22, Apr. 23, 1947 1949 1951 1953 1955 1955 1955 Regulation T: For extension of credit by brokers and dealers on listed securities ... 100 75 50 75 50 60 70 For short sales 100 75 50 75 50 60 70 Regulation U: For loans by banks on stocks 100 75 50 75 50 60 70 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. Changes on Feb. 20, 1953 and Jan. 4, 1955 were effective after the close of business on these dates. NOTE.—For earlier data, see Banking and Monetary Statistics, Table 145, p. 504, and Annual Report of the Board of Governors for 1948, p. 77. NO. 15—FEES AND RATES ESTABLISHED UNDER REGULATION V ON LOANS GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950 [In effect December 31, 1956] Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan Guarantee fee Percentage of Percentage of loan guaranteed in (p te e r r e c s e t n t p a a g y e a b of le any f ee c o c m h m arg it e m d ent by borrower) borrower 70 or less.. . 10 10 75 15 15 80 20 20 85 25 25 90 30 30 95 35 35 Over 9S 40-50 40-50 Maximum Rates Financing Institution May Charge Borrower [Per cent per annum] Interest rate Commitment rate. lA Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 16—PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF ALL BANKS, BY GLASSES, DECEMBER 31, 1956 AND 19551 [In millions of dollars] Commercial banks Mutual savings banks Item ba A n l k l s Total2 Member banks no I n n m su e r m ed ber in N su o r n e - d Total Insured in N su o r n e - d Total National State December 31, 1956 Loans and investments, total 197,063 165,123 138,768 88,477 50,291 24,859 1,521 31,940 24,170 7,770 Loans . . ... 110,079 90,302 78,034 48,109 29,924 11,808 471 19,777 15,542 4,235 Investments 86,985 74,821 60,734 40,367 20,366 13,051 1,051 12,163 8,628 3,535 U. S. Govt. obligations ... 66,523 58,552 47,575 31,568 16,007 10,274 714 7,971 5,518 2,453 Other securities 20,461 16,269 13,159 8,800 4,359 2,777 336 4,192 3,110 1,082 Cash assets 49,641 48,720 42,906 27,006 15,900 5,448 369 920 739 182 Deposits, total 227,546 197,515 167,906 107,161 60,744 28,073 1,562 30,032 22,886 7,146 Interbank 17,595 17,593 16,855 9,844 7,012 427 310 2 2 Other demand 129,044 129,015 110,142 69,507 40,634 17,922 952 29 26 3 Other time 80,908 50,908 40,909 27,810 13,098 9,724 300 30,001 22,857 7,143 Total capital accounts 19,249 16,302 13,655 8,450 5,205 2,336 313 2,947 2,130 817 Number of banks 14,167 13,640 6,462 4,651 1,811 6,737 444 527 223 304 December 31, 1955 Loans and investments, total 190,780 160,881 135,360 86,152 49,208 23,829 1,716 29,898 22,331 7,567 Loans 100,057 82,601 70,982 43,428 27,554 11,108 520 17,456 13,563 3,893 Investments 90,722 78,280 64,377 42,723 21,654 12,721 1,197 12,442 8,768 3,674 U S. Govt obligations 70,052 61,592 50,697 33,579 17,118 10,081 827 8,460 5,858 2 601 Other securities 20,670 16,688 13,680 9,144 4,536 2,640 370 3,982 2,910 1,072 Cash assets 47,803 46,838 41,416 25,697 15,719 5,067 357 965 785 180 Deposits, total 220,441 192,254 163,757 103,903 59,854 26,779 1,742 28,187 21,237 6,950 Interbank 16,646 16,643 15,865 9,317 6,549 408 370 3 3 Other demand 126,951 126,896 108,726 67,903 40,823 17,119 1,051 55 52 3 Other time 76,844 48,715 39,165 26,683 12,482 9,252 322 28,129 21,182 6,947 Total capital accounts 18,112 15,300 12,783 7,915 4,868 2,199 320 2,812 2,006 806 Number of banks 14,243 13,716 6,543 4,692 1,851 6,677 499 527 220 307 1 All banks in the United States and one in Alaska that became a member in 1954. 2 Total for commercial banks excludes three member mutual savings banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 17—MEMBER BANK EARNINGS, BY CLASS OF BANK, 1956 AND 1955 [Dollar amounts in millions] Central reserve city banks Total ci R ty e s b e a rv n e ks C b o a u n n k t s ry Item New York Chicago 1956 1955 1956 1955 1956 1955 1956 1955 1956 1955 Earnings $6,078 $5,343 $1,014 $867 $243 $209 $2,402 $2,095 $2,419 $2,173 On U. S. Govt. securities 1,101 1,118 133 156 49 57 404 420 514 485 On other securities 308 296 47 51 16 15 116 112 129 117 On loans 3,725 3,083 633 484 143 105 1,511 1,232 1,438 1,263 All other 945 846 201 176 35 32 371 331 338 308 Expenses 3,680 3,265 536 472 123 111 1,441 1,274 1,579 1,408 Salaries and wages.... 1,735 1,571 275 253 60 56 677 605 724 658 Interest on deposits.... 650 543 59 43 19 17 266 230 305 254 All other 1,295 1,151 202 176 44 39 497 440 551 496 Net current earnings before income taxes.. 2,398 2,077 478 395 119 98 961 821 840 764 Recoveries and profits1 151 164 44 47 67 51 58 Losses and charge-offs2.... 577 426 109 222 174 206 157 Net addition to valuation reserves 229 139 67 25 63 43 91 63 Profits before income taxes 1,744 1,676 346 319 723 671 593 603 Taxes on net income... 691 157 133 302 278 229 246 718 Net profits 985 189 187 421 393 364 357 Gash dividends de- 1,027 clared3 501 133 124 223 202 168 154 547 (Per cent) Ratios: Net current earnings before income taxes to- Average total capital accounts 18.1 16.6 17.0 14.4 18.7 16.0 19,7 18.3 17.0 16.4 Average total assets.. 1.37 1.22 1.52 1.26 1.43 1.19 1.40 1.23 1.26 1.19 Net profits to— Average total capital accounts 7.7 7.9 6.7 6.8 8.2 8.6 8.8 7.4 7.7 Average total assets. . 0.59 0.58 0.60 0.59 0.63 0.60 0.61 0.59 0.55 0.56 Average return on U. S. Govt. securities 2.31 2.09 2.22 2.02 2.19 2.05 2.31 2.09 2.36 2.12 Average return on loans... 5.02 4.77 3.66 4.14 3.68 5.02 4.76 5.64 5.56 1 Includes recoveries credited to valuation reserves. 2 Includes losses charged to valuation reserves. 3 Includes interest on capital notes and debentures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

93 FEDERAL RESERVE SYSTEM NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 1956 l Commercial and stock savings banks and nondeposit trust companies Mutual savings All Member Nonmember banks banks banks banks Total tio N n a a - l * m S b t e e a m r t e a - su In re - d s N u i r o n e n - d - 2 su I r n e - d 2 s N u i o n re n - d - Number of banks, Dec. 31, 195514,243 13,716 4,692 1,851 6,677 499 220 307 Changes during 1956 New banks * + 123 + 123 +30 +6 +72 +15 Suspensions -3 -3 -1 -1 Consolidations and absorptions: Banks converted into branches. -166 -166 -65 -36 -61 -4 Other . -23 -23 -10 -3 -8 -2 Voluntary liquidations 4 -7 -7 -1 -1 -4 -1 Conversions: National into State —3 +3 State into national +9 -2 -6 -1 Federal Reserve Membership:8 Admissions of State banks . +10 -8 -2 Withdrawals of State banks — 14 +14 Federal Deposit insurance:6 Admissions of State banks . +59 -59 +3 Net increase or decrease -76 -76 -41 -40 +60 -55 +3 -3 Number of banks, Dec. 31, 195614,167 13,640 4,651 1,811 6,737 444 223 304 Number of branches and additional offices, Dec. 31, 1955 7. 7,040 6,710 3,196 1,916 1,563 35 234 96 Changes during 1956 De novo branches +560 +522 +307 +112 +100 +3 +17 +21 Banks converted into branches... +166 +166 +94 +50 +22 D In i t s e c r o c n la ti s n s u c e h d anges—Net " ... -38 -36 + -1 4 2 4 -1 -9 6 -3 -8 4 -i nil - - 1 7 Net increase or decrease +688 +652 +433 +137 +80 +13 +2 Number of branches and additional offices, Dec. 31, 1956 7. 7,728 7,362 3,629 2,053 1,643 257 109 Number of banking facilities, 37 Dec. 31, 1955 » 213 213 169 23 21 Changes during 1956 Established . . . . +20 +20 +1$ +1 +3 -6 -6 Interclass change +1 — 1 Net increase or decrease +14 +14 +11 +1 +2 Number of banking facilities, Dec. 31, 1956 • 227 227 180 24 23 1 Excludes banks in United States territories and possessions except one national bank in Alaska. 2 State member bank figures and insured mutual savings bank figures both include 3 member mutual savings banks, not included in the total for "commercial banks." State member bank figures also include one noninsured trust company without deposits. 8 Exclusive of new banks organized to succeed operating banks. * Exclusive of liquidations incident to the succession, conversion, and absorption of banks. 6 Exclusive of conversions of State member banks into national banks. 6 Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve membership, and vice versa. 7 Except banking facilities which are shown separately; see note 9. 8 For details of interclass branch changes, see Federal Reserve Bulletin, February 1957. • Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 ANNUAL REPORT OF BOARD OF GOVERNORS No. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, BY FEDERAL RESERVE DISTRICTS AND STATES, DECEMBER 31, 1956 i On par list Not on par list Total 2 (nonmember) Federal Total Member Nonmember Reserve district or State Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches & offices & offices & offices & offices & offices DISTRICT Boston 435 550 435 550 298 441 137 109 New York.... 685 1,382 685 1,382 586 1,282 99 100 Philadelphia.. 717 444 717 444 547 361 170 83 Cleveland.... 986 664 986 664 606 586 380 78 Richmond 987 885 819 735 470 479 349 256 168 150 Atlanta 1,298 370 721 324 391 274 330 50 577 46 Chicago 2,477 863 2,477 863 1,020 491 1,457 372 St. Louis 1,465 233 1,165 163 492 98 673 65 300 70 Minneapolis... 1,287 122 688 78 473 32 215 46 599 44 Kansas City. . 1,764 37 1,758 37 752 26 1,006 11 6 Dallas 1,075 110 986 97 634 71 352 26 89 San Francisco1 393 1,981 378 1,977 187 1,745 191 232 15 4 Total 13,569 7,641 11,815 7,314 6,456 5,886 5,359 1,428 1,754 327 STATEi Alabama 237 53 145 52 94 52 51 92 1 Arizona 9 111 9 111 4 88 5 23 Arkansas 236 27 125 7 73 4 52 3 111 20 California. . . . 132 1,302 132 1,302 82 1,180 50 122 Colorado. .... 157 5 157 5 95 4 62 1 Connecticut... 89 119 89 119 51 97 38 22 Delaware 28 40 28 40 10 17 18 23 Dist. of Col.. . 17 54 17 54 13 44 4 10 Florida 252 12 205 11 106 10 99 1 47 Georgia 412 67 133 65 65 57 68 279 Idaho 33 72 33 72 18 67 15 Illinois 925 4 923 4 521 4 402 Indiana 469 193 469 193 234 121 235 72 Iowa 667 161 667 161 165 4 502 157 Kansas 598 3 596 3 214 3 382 Kentucky. . . . 365 96 365 96 109 66 256 Louisiana 180 129 73 104 52 84 21 107 25 Maine 57 101 57 101 36 63 21 Maryland. . . . 150 180 150 18C 68 105 82 Mass 170 278 170 278 133 238 37 Michigan 405 41C 405 416 228 350 177 Minnesota.... 681 6 278 6 207 6 71 403 Mississippi.... 196 103 49 38 34 19 15 147 65 Missouri 606 4 549 4 175 4 374 57 Montana 113 113 84 29 Nebraska 415 2 415 2 140 2 275 Nevada 6 29 6 29 5 25 1 N. Hampshire. 73 2 73 2 51 1 22 New Jersey... 273 308 273 308 233 271 40 New Mexico. . 52 3. 52 35 34 19 18 New York.. . . 480 1,106 480 1,106 418 1,048 62 N. Carolina... 202 357 111 213 53 118 58 144 North Dakota. 154 26 57 7 40 1 17 19 Ohio 617 435 617 435 395 387 222 Oklahoma.... 385 6 379 6 222 4 157 Oregon 50 151 50 151 19 140 31 Pennsylvania . 786 538 786 538 601 470 185 Rhode Island.. 10 73 10 73 6 57 4 S. Carolina. . . 148 95 73 89 33 72 40 6 South Dakota. 171 54 72 29 60 24 12 25 Tennessee.... 295 152 213 137 82 98 131 15 Texas 947 22 907 22 579 22 328 Utah 48 54 48 54 21 48 27 Vermont 60 16 60 16 35 7 25 Virginia 312 199 311 199 203 140 108 Washington... 93 229 93 229 38 222 55 West Virginia. 182 181 112 69 Wisconsin. . . . 550 150 550 150 164 386 128 Wyoming 53 53 1 40 13 Alaska 18 3 1 15 Hawaii 5 5 1 Includes Alaska and Hawaii, assigned to the San Francisco District for check clearing and collection purposes. 2 Comprises all commercial banking offices on which checks are drawn, including 227 banking facilities. Number of banks and branches differs from Table 18 because of banks and trust companies on which no checks are drawn, 3 mutual savings member banks, and banks in Alaska and Hawaii. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 95 NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1956 [In millions of dollars] Net change in U. S. Government Bankers' holdings securities acceptances U. S. Outright Repurchase Month Govern- U.S. transactions agreements se a m c c a u c n e r e d n i p t t i t e - s s G e m c o u v e r e n i r t t i n e - s m G a r r o k s e s t m G a r r o k s e s t re C de a m sh p- G p r u o r s - s Gross r O ig u h t- t c r N e h p a e s u t e r s ances purchases sales tions chases sales January -1,329 -1,319 74 439 560 53 446 - 6 — 4 February.... + 14 + 17 143 109 73 280 225 - 3 March + 153 + 153 182 21 549 556 C1) April - 292 - 291 9 344 7 210 158 May + 132 4- 129 167 27 25 613 599 + 3 J Ju u l n y e + - 2 3 8 2 6 1 + - 3 2 2 8 0 4 4 28 0 9 3 518 4 5 5 1 3 2 3 7 3 40 7 1 2 V + 1 August + 421 + 416 411 20 303 277 + 3 S O N D e c e o p t c v o t e e b e m m e m r b b b e e e r. r r . . . . . . . . + + + - 5 6 1 9 6 3 7 0 6 1 9 + + + - 6 5 1 1 8 3 7 8 8 0 4 4 3 6 8 1 3 1 7 1 7 3 2 1 1 5 2 3 4 7 3 2 9 2 6 1 4 4 9 1,2 4 2 2 5 2 9 2 3 0 7 1 1,0 2 3 2 7 3 3 6 8 2 2 9 + + + 4 2 2 + + +2 1 9 5 +11 Total, 1956 + 171 -f 130 3,125 2,018 888 4,556 4,645 + 10 +31 i Less than $500,000. NOTE.—Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE DIRECTORIES AND MEETINGS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL OPEN MARKET COMMITTEE [December 31, 1956] MEMBERS WM. MCC. MARTIN, JR., Chairman (Board of Governors) ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New York) C. CANBY BALDERSTON (Board of Governors) J. A. ERICKSON (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) W. D. FULTON (Elected by Federal Reserve Banks of Cleveland and Chicago) D. C. JOHNS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) A. L. MILLS, JR. (Board of Governors) O. S. POWELL (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) J. L. ROBERTSON (Board of Governors) CHAS. N. SHEPARDSON (Board of Governors) M. S. SZYMCZAK (Board of Governors) JAMES K. VARDAMAN, JR. (Board of Governors) OFFICERS WINFIELD W. RIEFLER, Secretary WM. J. ABBOTT, JR., Associate Economist ELLIOTT THURSTON, Assistant Secretary L. MERLE HOSTETLER, Associate Economist GEORGE B. VEST, General Counsel FRANKLIN L. PARSONS, Associate Economist FREDERIC SOLOMON, Assistant General H. V. ROELSE, Associate Economist Counsel PARKER B. WILLIS, Associate Economist WOODLIEF THOMAS, Economist RALPH A. YOUNG, Associate Economist AGENT FEDERAL RESERVE BANK OF NEW YORK ROBERT G. ROUSE, Manager of System Open Market Account The Federal Open Market Committee met at least once each month during 1956 and held two meetings in the months of January, March, May, June, August, September, and November. 99 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1956] WM. MCC. MARTIN, JR., of New York, Chairman January 31, 1970 C. CANBY BALDERSTON of Pennsylvania, Vice Chairman January 31, 1966 M. S. SZYMCZAK of Illinois January 31, 1962 JAMES K. VARDAMAN, JR., of Missouri January 31, 1960 A. L. MILLS, JR., of Oregon January 31, 1958 J. L. ROBERTSON of Nebraska January 31, 1964 CHAS. N. SHEPARDSON of Texas January 31, 1968 ELLIOTT THURSTON, Assistant to the Board WINFIELD W. RIEFLER, Assistant to the Chairman WOODLIEF THOMAS, Economic Adviser to the Board ALFRED K. CHERRY, Legislative Counsel CHARLES MOLONY, Special Assistant to the Board S. R. CARPENTER, Secretary MERRITT SHERMAN, Assistant Secretary KENNETH A. KENYON, Assistant Secretary CLARKE L. FAUVER, Assistant Secretary GEORGE B. VEST, General Counsel HOWARD H. HACKLEY, Associate General Counsel FREDERIC SOLOMON, Assistant General Counsel DAVID B. HEXTER, Assistant General Counsel G. ROWLAND CHASE, Assistant General Counsel JEROME W. SHAY, Assistant General Counsel THOMAS J. O'CONNELL, Assistant General Counsel RALPH A. YOUNG, DIRECTOR, Division of Research and Statistics FRANK R. GARFIELD, Adviser, Division of Research and Statistics GUY E. NOYES, Adviser, Division of Research and Statistics ROLAND I. ROBINSON, Adviser, Division of Research and Statistics KENNETH B. WILLIAMS, Assistant Director, Division of Research and Statistics SUSAN S. BURR, Assistant Director, Division of Research and Statistics ALBERT R. KOCH, Assistant Director, Division of Research and Statistics LEWIS N. DEMBITZ, Assistant Director, Division of Research and Statistics ARTHUR W. MARGET, Director, Division of International Finance ROBERT F. LEONARD, Director, Division of Ban\ Operations J. E. HORBETT, Associate Director, Division of Ban\ Operations GERALD M. CONKLING, Assistant Director, Division of Ban\ Operations JOHN R. FARRELL, Assistant Director, Division of Ban\ Operations GEORGE S. SLOAN, Director, Division of Examinations ROBERT C. MASTERS, Associate Director, Division of Examinations C. C. HOSTRUP, Assistant Director, Division of Examinations FRED A. NELSON, Assistant Director, Division of Examinations ARTHUR H. LANG, Chief Federal Reserve Examiner, Division of Examinations GLENN M. GOODMAN, Assistant Director, Division of Examinations HENRY BENNER, Assistant Director, Division of Examinations EDWIN J. JOHNSON, Director, Division of Personnel Administration H. FRANKLIN SPRECHER, JR., Assistant Director, Division of Personnel Administration LISTON P. BETHEA, Director, Division of Administrative Services JOSEPH E. KELLEHER, Assistant Director, Division of Administrative Services GARDNER L. BOOTHE, II, Administrator, Office of Defense Loans EDWIN J. JOHNSON, Controller, Office of the Controller M. B. DANIELS, Assistant Controller, Office of the Controller Digitized for FRASER http://fraser.stlouisfed.org/ 98 Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1956] MEMBERS District No. 1—WILLIAM D. IRELAND, President, Second Bank—State Street Trust Company, Boston, Massachusetts. District No. 2—ADRIAN M. MASSIE, Chairman of the Board, The New York Trust Company, New York, New York. District No. 3—WILLIAM R. K. MITCHELL, Chairman of the Board, Provident Trust Company of Philadelphia, Philadelphia, Pennsylvania. District No. 4—FRANK R. DENTON, Vice Chairman, Mellon National Bank and Trust Company, Pittsburgh, Pennsylvania. District No. 5—ROBERT V. FLEMING, Chairman of the Board, The Riggs National Bank, Washington, D. C. District No. 6—COMER J. KIMBALL, Chairman of the Board, The First National Bank of Miami, Miami, Florida. District No. 7—HOMER J. LIVINGSTON, President, The First National Bank of Chicago, Chicago, Illinois. District No. 8—LEE P. MILLER, President, Citizens Fidelity Bank and Trust Company, Louisville, Kentucky. District No. 9—JULIAN B. BAIRD, Chairman of the Board, The First National Bank of St. Paul, St. Paul, Minnesota. District No. 10—R. CROSBY KEMPER, Chairman of the Board and President, The City National Bank and Trust Company of Kansas City, Kansas City, Missouri. District No. 11—GEO. G. MATKIN, President, The State National Bank of El Paso, El Paso, Texas. District No. 12—FRANK L. KING, President, California Bank, Los Angeles, California. EXECUTIVE COMMITTEE ROBERT V. FLEMING, ex officio FRANK R. DENTON, ex officio WILLIAM D. IRELAND HOMER J. LIVINGSTON ADRIAN M. MASSIE OFFICERS President, ROBERT V. FLEMING Vice President, FRANK R. DENTON Secretary, HERBERT V. PROCHNOW Assistant Secretary, WILLIAM J. KORSVIK Meetings of the Federal Advisory Council were held on February 19-21, May 20-22, September 16-18, and November 18-20, 1956. The Board of Governors met with the Council on February 21, May 22, September 18, and November 20. The Council is required by law to meet in Washington at least four times each year and is authorized by the Federal Reserve Act to consult with and advise the Board on all matters within the jurisdiction of the Board. Digitized for FRASER 100 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS AND BRANCHES [December 31, 1956] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Chairman and Federal Reserve Bank of— Deputy Chairman Federal Reserve Agent Boston Robert C. Sprague James R. Killian, Jr. New York Jay E. Crane Forrest F. Hill Philadelphia William J. Meinel Henderson Supplee, Jr. Cleveland John C. Virden Arthur B. Van Buskirk Richmond John B. Woodward, Jr Alonzo G. Decker, Jr. Atlanta Walter M. Mitchell Harllee Branch, Jr. Chicago BertR. Prall J. Stuart Russell St. Louis M. Moss Alexander Caffey Robertson Minneapolis Leslie N. Perrin O. B. Jesness Kansas City Raymond W. Hall Joe W. Seacrest Dallas Robert J. Smith Hal Bogle San Francisco A. H. Brawner Y. Frank Freeman 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. A meeting of the Conference of Chairmen was held on December 5-6, 1956, and was attended by members of the Board of Governors. Mr. Woodward, Chairman of the Federal Reserve Bank of Richmond, was elected Chairman of the Conference and of the Executive Committee in December 1955. Mr. Meinel, Chairman of the Federal Reserve Bank of Philadelphia, and Mr. Hall, Chairman of the Federal Reserve Bank of Kansas City, served with Mr. Woodward as members of the Executive Committee, Mr. Meinel also serving as Vice Chairman of the Conference. At the meeting held in December 1956, Mr. Meinel was elected Chairman of the Conference and of the Executive Committee. Mr. Hall was elected Vice Chairman and a member of the Executive Committee and Mr. Smith, Chairman of the Federal Reserve Bank of Dallas, was elected as the other member of the Executive Committee. Digitized for FRASER 101 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

102 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—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 member banks and, as a general rule, 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 1—Boston Term Expires DIRECTORS Dec. 31 Class A: Lloyd D. Brace President, The First National Bank of Boston, Boston, Mass 1956 Harold I. Chandler President, The Keene National Bank, Keene, N. H. 1957 Oliver B. Ellsworth President, Riverside Trust Company, Hartford, Conn 1958 Class B: Milton P. Higgins President, Norton Company, Worcester, Mass 1956 Frederick S. Blackall, jr President and Treasurer, The Taft-Peirce Manufacturing Company, Woonsocket, R.I 1957 Harry E. Umphrey President, Aroostook Potato Growers, Inc., Presque Isle, Me 1958 Class C: James R. Killian, Jr President, Massachusetts Institute of Technology, Cambridge, Mass 1956 Robert C. Sprague Chairman and Treasurer, Sprague Electric Company, North Adams, Mass 1957 Harvey P. Hood President, H. P. Hood & Sons, Inc., Boston, Mass. 1958 District 2—New York Class A: John R. Evans President, The First National Bank of Poughkeepsie, Poughkeepsie, N. Y 1956 Ferd I. Collins President and Trust Officer, Bound Brook Trust Company, Bound Brook, N. J 1957 Howard C. Sheperd Chairman of the Board, The First National City Bank of New York, New York, N. Y 1958 Class B.- Lansing P. Shield President, The Grand Union Company, East Paterson, N. J 1956 John E. Bierwirth President, National Distillers Products Corporation, New York, N. Y 1957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 103 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Clarence Francis Director, General Foods Corporation, New York, N. Y 1958 Class C: Jay E. Crane Director, Standard Oil Company (New Jersey), New York, N. Y 1956 Forrest F. Hill Vice President, The Ford Foundation, New York, N. Y 1957 Franz Schneider Consultant to Newmont Mining Corporation, New York, N. Y 1958 Buffalo Branch Appointed by Federal Reserve Bank: Robert L. Davis President, The First National Bank of Olean, Olean, N. Y 1956 Charles H. Diefendorf Chairman of the Executive Committee, The Marine Trust Company of Western New York, Buffalo, N. Y 1957 John W. Remington President, Lincoln Rochester Trust Company, Rochester, N. Y 1958 Leland B. Bryan President, First National Bank and Trust Company, Corning, N. Y 1958 Appointed by Board of Governors: Robert C. Tait Senior Vice President, General Dynamics Corporation, and President of its Stromberg-Carlson Company Division, Rochester, N. Y 1956 Clayton G. White Dairy farmer, Stow, N. Y 1957 Ralph F. Peo Chairman and President, Houdaille Industries, Inc., Buffalo, N. Y 1958 District 3—Philadelphia Class A: Wm. Fulton Kurtz Chairman of the Executive Committee, The First Pennsylvania Banking and Trust Company, Philadelphia, Pa 1956 W. Elbridge Brown President and Trust Officer, Clearfield Trust Company, Clearfield, Pa 1957 Lindley S. HurfF President and Trust Officer, The First National Bank of Milton, Milton, Pa 1958 Class B: Warren C. Newton President, O. A. Newton and Son Company, Bridgeville, Del 1956 Bayard L. England President, Atlantic City Electric Company, Atlantic City, N. J 1957 Charles E. Oakes President, Pennsylvania Power and Light Company, Allentown, Pa 1958 Class C: Lester V. Chandler Professor of Economics, Princeton University, Princeton, N. J 1956 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

104 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 William J. Meinel Chairman of the Board, Heintz Manufacturing Company, Philadelphia, Pa 1957 Henderson Supplee, Jr President, The Atlantic Refining Company, Philadelphia, Pa 1958 District 4—Cleveland Class A: J. Brenner Root President, The Harter Bank & Trust Company, Canton, Ohio 1956 Edison Hobstetter President and Chairman of the Board, The Pomeroy National Bank, Pomeroy, Ohio 1957 King E. Fauver Director, The Savings Deposit Bank and Trust Company, Elyria, Ohio 1958 Class B: Alexander E. Walker Chairman of the Board, The National Supply Company, Pittsburgh, Pa 1956 Joseph B. Hall President, The Kroger Company, Cincinnati, Ohio. 1957 Charles Z. Hard wick Executive Vice President, The Ohio Oil Company, Findlay, Ohio 1958 Class C.- John C. Virden Chairman of the Board, John C. Virden Company, Cleveland, Ohio 1956 Frank J. Welch Dean, College of Agriculture and Home Economics, University of Kentucky, Lexington, Ky 1957 Arthur B. Van Buskirk Vice President and Governor, T. Mellon & Sons, Pittsburgh, Pa 1958 Cincinnati Branch Appointed by Federal Reserve Bank: Leonard M. Campbell President, The Second National Bank of Ashland, Ashland, Ky 1956 Roger Drackett President, The Drackett Company, Cincinnati, Ohio 1957 Bernard H. Geyer President, The Second National Bank of Hamilton, Hamilton, Ohio 1957 William A. Mitchell President, The Central Trust Company, Cincinnati, Ohio 1958 Appointed by Board of Governors: Anthony Haswell President, The Dayton Malleable Iron Company, Dayton, Ohio 1956 W. Bay Irvine President, Marietta College, Marietta, Ohio 1957 Ivan Jett Farmer, Georgetown, Ky 1958 Pittsburgh Branch Appointed by Federal Reserve Bank: Albert L. Rasmussen President, The Warren National Bank, Warren, Pa. 1956 John H. Lucas Chairman of the Board, Peoples First National Bank & Trust Company, Pittsburgh, Pa 1957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 105 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Irving W. Wilson President, Aluminum Company of America, Pittsburgh, Pa 1957 Sumner E. Nichols President, Security-Peoples Trust Company, Erie, Pa 1958 Appointed by Board of Governors: Henry A. Roemer, Jr President, Forbes Steel Corporation, Canonsburg, Pa 1956 John C. Warner President, Carnegie Institute of Technology, Pittsburgh, Pa 1957 Douglas M. Moorhead Farmer, North East, Pa 1958 District 5—Richmond Class A: J. K. Palmer Executive Vice President and Cashier, Greenbrier Valley Bank, Lewisburg, W. Va 1956 Daniel W. Bell President and Chairman of the Board, American Security and Trust Company, Washington, D. C. 1957 Joseph E. Healy President, The Citizens National Bank of Hampton, Hampton, Va 1958 Class B: W. A. L. Sibley Vice President and Treasurer, Monarch Mills, Union, S. C 1956 Robert O. Huffman President, Drexel Furniture Company, Drexel, N. C. 1957 L. Vinton Hershey President, Hagerstown Shoe Company, Hagerstown, Md 1958 Class C: Alonzo G. Decker, Jr Executive Vice President, The Black & Decker Manufacturing Company, Towson, Md 1956 D. W. Colvard Dean of Agriculture, North Carolina State College of Agriculture and Engineering, Raleigh, N. C. 1957 John B. Woodward, Jr Chairman of the Board, Newport News Shipbuilding & Dry Dock Company, Newport News, Va. 1958 Baltimore Branch Appointed by "Federal Reserve Bank: Charles W. Hoff President, Union Trust Company of Maryland, Baltimore, Md 1956 Charles A. Piper President, The Liberty Trust Company, Cumberland, Md 1957 Stanley B. Trott President, Maryland Trust Company, Baltimore, Md 1958 John W. Stout President, The Parkersburg National Bank, Parkersburg, W. Va 1958 Appointed by Board of Governors: Theodore E. Fletcher Agriculturist, Easton, Md 1956 Clarence R. Zarfoss Vice President, Western Maryland Railway Company, Baltimore, Md 1957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

106 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Wm. Purnell Hall Executive Vice President, Maryland Shipbuilding and Drydock Company, Inc., Baltimore, Md.... 1958 Charlotte Branch Appointed by Federal Reserve Bank: Archie K. Davis Chairman of the Board, Wachovia Bank and Trust Company, Winston-Salem, N. C 1956 Ernest Patton Chairman of the Board, The Peoples National Bank of Greenville, Greenville, S. C 1957 I. W. Stewart President, The Commercial National Bank, Charlotte, N. C 1958 G. G. Watts President, The Merchants & Planters National Bank, Gaffney, S. C 1958 Appointed by Board of Governors: William H. Grier Executive Vice President, Rock Hill Printing & Finishing Company, Rock Hill, S. C 1956 Paul T. Taylor President, Taylor Warehouse Company, Winston- Salem, N. C 1957 T. Henry Wilson President and Treasurer, Henredon Furniture Industries, Inc., Morganton, N. C 1958 District 6—Atlanta Class A: Roland L. Adams President, Bank of York, York, Ala 1956 W. C. Bowman Chairman of the Board, The First National Bank of Montgomery, Montgomery, Ala 1957 William C. Carter Chairman and President, Gulf National Bank, Gulfport, Miss 1958 Class B: A. B. Freeman Chairman of the Board, Louisiana Coca-Cola Bottling Company, Ltd., New Orleans, La 1956 Pollard Turman President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga 1957 Donald Comer Chairman of the Board, Avondale Mills, Birmingham, Ala 1958 Class C: Harllee Branch, Jr President, Georgia Power Company, Atlanta, Ga... 1956 Henry G. Chalkley, Jr President, The Sweet Lake Land & Oil Company, Lake Charles, La 1957 Walter M. Mitchell Vice President, The Draper Corporation, Atlanta, Ga 1958 Birmingham Branch Appointed by Federal Reserve Bank: John Will Gay President, The First National Bank of Scottsboro, Scottsboro, Ala 1956 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 107 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Malcolm A. Smith First Vice President, Birmingham Trust National Bank, Birmingham, Ala 1957 Robert M. Cleckler President, First National Bank of Childersburg, Childersburg, Ala 1958 E. W. McLeod President, The Morgan County National Bank, Decatur, Ala 1958 Appointed by Board of Governors: Adolph Weil, Sr President, Weil Brothers-Cotton, Inc., Montgomery, Ala 1956 Edwin C. Bottcher Farmer, Cullman, Ala 1957 John E. Urquhart President, Woodward Iron Company, Woodward, Ala 1958 Jacksonville Branch Appointed by Federal Reserve Bank: James G. Garner President and Chairman, Little River Bank and Trust Company, Miami, Fla 1956 James L. Niblack President, The First National Bank of Lake City, Lake City, Fla 1957 Linton E. Allen Chairman, The First National Bank at Orlando, Orlando, Fla 1958 W. E. Ellis Chairman and President, The Commercial Bank and Trust Company, Ocala, Fla 1958 Appointed by Board of Governors: McGregor Smith Chairman of the Board and Director, Florida Power and Light Company, Miami, Fla 1956 J. Wayne Reitz President, University of Florida, Gainesville, Fla. 1957 Harry M. Smith President and Manager, Winter Garden Ornamental Nursery, Inc., Winter Garden, Fla 1958 Nashville Branch Appointed by Federal Reserve Bank: W. E. Tomlinson President, The Hamilton National Bank of Johnson City, Johnson City, Tenn 1956 J. R. Kellam, Jr Executive Vice President, Commerce Union Bank, Nashville, Tenn 1957 Stewart Campbell President, The Harpeth National Bank of Franklin, Franklin, Tenn 1958 C. L. Wilson Chairman and President, The Cleveland National Bank, Cleveland, Tenn 1958 Appointed by Board of Governors: Frank B. Ward Dean, College of Business Administration, University of Tennessee, Knoxville, Tenn 1956 A. Carter Myers Treasurer, Knoxville Fertilizer Company, Knoxville, Tenn 1957 Ernest J. Moench President, Tennessee Tufting Company, Nashville, Tenn 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

108 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Gont. Term Expires DIRECTORS—Cont. Dec. 31 New Orleans Branch Appointed by Federal Reserve Bank: Leon J. Minvielle President, The Peoples National Bank of New Iberia, New Iberia, La 1956 D. U. Maddox President, The Commercial National Bank and Trust Company of Laurel, Laurel, Miss 1957 H. A. Pharr President, The First National Bank of Mobile, Mobile, Ala 1958 William J. Fischer President, Progressive Bank and Trust Company, New Orleans, La 1958 Appointed by Board of Governors: E. E. Wild Rice grower, Midland, La 1956 Joel L. Fletcher, Jr President, Southwestern Louisiana Institute, Lafayette, La 1957 G. H. King, Jr Executive Vice President, King Lumber Industries, Canton, Miss 1958 District 7—Chicago Class A: Vivian W. Johnson President, First National Bank, Cedar Falls, Iowa.. 1956 Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 1957 Nugent R. Oberwortmann President, The North Shore National Bank of Chicago, Chicago, 111 1958 Class B.- William A. Hanley Director, Eli Lilly and Company, Indianapolis, Ind. 1956 Walter E. Hawkinson Vice President in Charge of Finance, and Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis 1957 William J. Grede President, Grede Foundries, Inc., Milwaukee, Wis. 1958 Class C: J. Stuart Russell Farm Editor, The Des Moines Register & Tribune, Des Moines, Iowa 1956 Bert R. Prall Winnetka, 111 1957 Robert P. Briggs Executive Vice President, Consumers Power Company, Jackson, Mich 1958 Detroit Branch Appointed by Federal Reserve Bank: Ira A. Moore President, Peoples National Bank of Grand Rapids, Grand Rapids, Mich 1956 Howard P. Parshall President, Bank of the Commonwealth, Detroit, Mich 1957 Ernest W. Potter President, Citizens Commercial & Savings Bank, Flint, Mich 1957 Raymond T. Perring President, The Detroit Bank and Trust Company, Detroit, Mich 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 109 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: J. Thomas Smith President, Detroit Harvester Company, Detroit, Mich 1956 John A. Hannah President, Michigan State University, East Lansing, Mich 1957 C. V. Patterson Executive Vice President, The Upjohn Company, Kalamazoo, Mich 1958 District 8—St. Louis Class A: William A. McDonnell President, First National Bank in St. Louis, St. Louis, Mo 1956 Phil E. Chappell President, Planters Bank & Trust Company, Hopkinsville, Ky 1957 J. E. Etherton President, The Carbondale National Bank, Carbondale, 111 1958 Class B.- Louis Ruthenburg Chairman of the Board, Servel, Inc., Evansville, Ind 1956 Leo J. Wieck Vice President and Treasurer, The May Department Stores Company, St. Louis, Mo 1957 S. J. Beauchamp, Jr President, Terminal Warehouse Company, Little Rock, Ark 1958 Class C: M. Moss Alexander President, Missouri Portland Cement Company, St. Louis, Mo 1956 Joseph H. Moore Farmer, Charleston, Mo 1957 CafFey Robertson President, Caffey Robertson Company, Memphis, Tenn 1958 Little Rock Branch Appointed by Federal Reserve Bank: Donald Barger President, Peoples Exchange Bank, Russellville, Ark 1956 H. C. McKinney, Jr President, The First National Bank of El Dorado, El Dorado, Ark 1957 E. C. Benton President, Fordyce Bank and Trust Company, Fordyce, Ark 1957 J. V. Satterfield, Jr President, The First National Bank in Little Rock, Little Rock, Ark 1958 Appointed by Board of Governors: T. Winfred Bell President, Bush-Caldwell Company, Little Rock, Ark 1956 Shuford R. Nichols Farmer, ginner, and cotton broker, Des Arc, Ark. 1957 A. Howard Stebbins, Jr President, Stebbins and Roberts, Inc., Little Rock, Ark 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

110 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Gont. Term Expires DIRECTORS—Cont. Dec. 31 Louisville Branch Appointed by Federal Reserve Bank: (Vacancy) M. C. Minor President, The Farmers National Bank of Danville, Danville, Ky 1957 W. Scott Mclntosh President, State Bank of Hardinsburg, Hardinsburg, Ind 1957 Magnus J. Kreisle President, The Tell City National Bank, Tell City, Ind 1958 Appointed by Board of Governors: David F. Cocks Vice President and Treasurer, Standard Oil Company (Kentucky), Louisville, Ky 1956 Pierre B. McBride President, Porcelain Metals Corporation, Louisville, Ky 1957 J. D. Monin, Jr Farmer, Oakland, Ky 1958 Memphis Branch Appointed by Federal Reserve Bank: John K. Wilson President, The First National Bank of West Point, West Point, Miss 1956 John A. McCall President, The First National Bank of Lexington, Lexington, Tenn 1957 William B. Pollard President, National Bank of Commerce in Memphis, Memphis, Tenn 1957 J. H. Harris President, The First National Bank of Wynne, Wynne, Ark 1958 Appointed by Board of Governors: John D. Williams Chancellor, The University of Mississippi, University, Miss 1956 A. E. Hohenberg President, Hohenberg Bros. Company, Memphis, Tenn 1957 Henry Banks Farmer, Clarkedale, Ark 1958 District 9—Minneapolis Class A: Harold N. Thomson Vice President, Farmers & Merchants Bank, Presho, S. D 1956 Harold C. Refling Cashier, First National Bank in Bottineau, Bottineau, N. D 1957 Joseph F. Ringland President, Northwestern National Bank of Minneapolis, Minneapolis, Minn 1958 Class B.- John E. Corette President and General Manager, Montana Power Company, Butte, Mont 1956 Ray C. Lange President, Chippewa Canning Company, Inc., Chippewa Falls, Wis 1957 Thomas G. Harrison President, Super Valu Stores, Inc., Hopkins, Minn. 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 111 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Class C.- Leslie N. Perrin Director, General Mills, Inc., Minneapolis, Minn. 1956 O. B. Jesness Head, Department of Agricultural Economics, University of Minnesota Institute of Agriculture, St. Paul. Minn 1957 F. Albee Flodin President and General Manager, Lake Shore, Inc., Iron Mountain, Mich 1958 Helena Branch Appointed by Federal Reserve Bank: J. Willard Johnson Financial Vice President and Treasurer, Western Life Insurance Company, Helena, Mont 1956 Geo. N. Lund Chairman of the Board and President, The First National Bank of Reserve, Reserve, Mont 1956 A. W. Heidel President, Powder River County Bank, Broadus, Mont 1957 Appointed by Board of Governors: Carl McFarland President, Montana State University, Missoula, Mont 1956 George R. Milburn Manager, N Bar Ranch, Grass Range, Mont 1957 District 10—Kansas City Class A: W. L. Bunten President, Goodland State Bank, Goodland, Kansas 1956 Harold Kountze Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo 1957 W. S. Kennedy President and Chairman of the Board, The First National Bank of Junction City, Junction City, Kansas 1958 Class B: K. S. Adams Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla 1956 Max A. Miller Livestock rancher, Omaha, Neb 1957 E. M. Dodds Chairman of the Board, United States Cold Storage Corporation, Kansas City, Mo 1958 Class C: Oliver S. Willham President, Oklahoma A. & M. College, Stillwater, Okla 1956 Joe W. Seacrest .President, State Journal Company, Lincoln, Neb... 1957 Raymond W. Hall Vice President and Director, Hallmark Cards, Inc., Kansas City, Mo 1958 Denver Branch Appointed by Federal Reserve Bank: Ralph S. Newcomer Executive Vice President, First National Bank in Boulder, Boulder, Colo 1956 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

112 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Arthur Johnson President, First National Bank in Raton, Raton, N. Mex 1956 Merriam B. Berger Vice President, The Colorado National Bank of Denver, Denver, Colo 1957 Appointed by Board of Governors: Ray Reynolds Cattle feeder and farmer, Longmont, Colo 1956 Aksel Nielsen President, The Title Guaranty Company, Denver, Colo 1957 Oklahoma City Branch Appointed by Federal Reserve Bank: F. M. Overstreet President, The First National Bank at Ponca City, Ponca City, Okla 1956 R. Otis McClintock Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Okla 1956 George R. Gear President, The City National Bank of Guymon, Guymon, Okla 1957 Appointed by Board of Governors: Phil H. Lowery Owner, Lowery Hereford Ranch, Loco, Okla 1956 Davis D. Bovaird President, The Bovaird Supply Company, Tulsa, Okla 1957 Omaha Branch Appointed by Federal Reserve Bank: William N. Mitten Chairman of the Board, First National Bank of Fremont, Fremont, Neb 1956 George J. Forbes President, The First National Bank of Laramie, Laramie, Wyo 1957 C. Wheaton Battey President, The Continental National Bank of Lincoln, Lincoln, Neb 1957 Appointed by Board of Governors: Manville Kendrick Rancher, Sheridan, Wyo 1956 James L. Paxton, Jr President, Paxton-Mitchell Company, Omaha, Neb. 1957 District 11—Dallas Class A: W. L. Peterson President, The State National Bank of Denison, Denison, Tex 1956 Sam D. Young President, El Paso National Bank, El Paso, Tex... 1957 J. Edd McLaughlin President, Security State Bank & Trust Company, Rails, Tex 1958 Class B.- John R. Alford Industrialist and farmer, Henderson, Tex 1956 D. A. Hulcy Chairman of the Board and President, Lone Star Gas Company, Dallas, Tex 1957 J. B. Thomas President and General Manager and Director, Texas Electric Service Company, Fort Worth, Tex 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 113 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Class C: Hal Bogle Rancher and feeder, Dexter, N. Mex 1956 Robert J. Smith President, Slick Airways, Inc., Dallas, Tex 1957 Henry P. Drought Attorney at Law, San Antonio, Tex 1958 El Paso Branch Appointed by Federal Reserve Bank: F. W. Barton President, The Marfa National Bank, Marfa, Tex. 1956 John P. Butler President, The First National Bank of Midland, Midland, Tex 1957 Floyd Childress Vice President, The First National Bank of Roswell, Roswell, N. Mex 1957 Thomas C. Patterson Vice President, El Paso National Bank, El Paso, Tex 1958 Appointed by Board of Governors: D. F. Stahmann President, Stahmann Farms, Inc., Las Cruces, N. Mex 1956 James A. Dick President, James A. Dick Investment Company, El Paso, Tex 1957 E. J. Workman President and Director of Research and Development Division, New Mexico Institute of Mining and Technology, Socorro, N. Mex 1958 Houston Branch Appointed by Federal Reserve Bank: I. F. Betts President, The American National Bank of Beaumont, Beaumont, Tex 1956 W. B. Callan President, The Victoria National Bank, Victoria, Tex 1957 L. R. Bryan, Jr Vice Chairman of the Board and Chairman of the Executive Committee, Bank of the Southwest National Association, Houston, Houston, Tex.. 1957 S. Marcus Greer Vice Chairman of the Board, First City National Bank of Houston, Houston, Tex 1958 Appointed by Board of Governors: Herbert G. Sutton T. O. Sutton and Sons, Colmesneil, Tex 1956 John C. Flanagan Vice President and General Manager, Texas Distribution Division, United Gas Corporation, Houston, Tex 1957 Tyrus R. Timm Head, Department of Agricultural Economics and Sociology, A. & M. College of Texas, College Station, Tex 1958 San Antonio Branch Appointed by Federal Reserve Bank: E. C. Breedlove President, The First National Bank of Harlingen, Harlingen, Tex 1956 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 V. S. Marett. President, The Citizens National Bank of Gonzales, Gonzales, Tex 1957 J. W. Beretta President, First National Bank of San Antonio, San Antonio, Tex 1957 Burton Dunn Chairman of the Executive Committee, Corpus Christi State National Bank, Corpus Christi, Tex. 1958 Appointed by Board of Governors: Clarence E. Ayres Professor of Economics, The University of Texas, Austin, Tex 1956 Alex R. Thomas Vice President, Geo. C. Vaughan & Sons, San Antonio, Tex 1957 Harold Vagtborg President, Southwest Research Institute, San Antonio, Tex 1958 District 12—San Francisco Class A: M. Vilas Hubbard President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif 1956 Carroll F. Byrd President, The First National Bank of Willows, Willows, Calif 1957 John A. Schoonover President, The Idaho First National Bank, Boise, Idaho 1958 Class B: (Vacancy) Reese H. Taylor Chairman of the Board, Union Oil Company of California, Los Angeles, Calif 1957 Walter S. Johnson Chairman of the Board, American Forest Products Corporation, San Francisco, Calif 1958 Class C: A. H. Brawner Chairman of the Board, W. P. Fuller & Company, San Francisco, Calif 1956 Philip I. Welk President, Preston-Shaffer Milling Company, Walla Walla, Wash 1957 Y. Frank Freeman Vice President, Paramount Pictures Corporation, Hollywood, Calif 1958 Los Angeles Branch Appointed by Federal Reserve Bank- Anderson Borthwick President, The First National Trust and Savings Bank of San Diego, San Diego, Calif 1956 James E. Shelton Chairman, Security-First National Bank of Los Angeles, Los Angeles, Calif 1956 Joe D. Paxton Chairman of the Board, County National Bank and Trust Company of Santa Barbara, Santa Barbara, Calif 1957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 115 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Charles Detoy Partner, Coldwell, Banker and Company, Los Angeles, Calif 1956 Shannon Crandall, Jr President, California Hardware Company, Los Angeles, Calif 1957 Portland Branch Appointed by Federal Reserve Bank: John B. Rogers President, The First National Bank of Baker, Baker, Oreg 1956 J. H. McNally President, The First National Bank of Bonners Ferry, Bonners Ferry, Idaho 1956 E. C. Sammons President, The United States National Bank of Portland, Portland, Oreg 1957 Appointed by Board of Governors: William H. Steiwer, Sr Livestock and farming, Fossil, Oreg 1956 Warren W. Braley Partner, Braley & Graham Buick, Portland, Oreg.. 1957 Salt Lake City Branch Appointed by Federal Reserve Bank: Russell S. Hanson Executive Vice President, The First National Bank of Logan, Logan, Utah 1956 George S. Eccles President, First Security Bank of Utah, National Association, Salt Lake City, Utah 1956 Harry Eaton President, Twin Falls Bank and Trust Company, Twin Falls, Idaho 1957 Appointed by Board of Governors: Geo. W. Watkins President, Snake River Equipment Company, Idaho Falls, Idaho 1956 Joseph Rosenblatt President, The Eimco Corporation, Salt Lake City, Utah 1957 Seattle Branch Appointed by Federal Reserve Bank: S. B. Lafromboise President, The First National Bank of Enumclaw, Enumclaw, Wash 1956 James Brennan President, First National Bank in Spokane, Spokane, Wash 1956 Charles F. Frankland President, The Pacific National Bank of Seattle, Seattle, Wash 1957 Appointed by Board of Governors: Ralph Sundquist President and General Manager, Sundquist Fruit and Cold Storage, Inc., Yakima, Wash 1956 D. K. MacDonald Chairman of the Board, D. K. MacDonald & Company, Inc., Seattle, Wash 1957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

116 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. PRESIDENTS AND VICE PRESIDENTS Federal Reserve President Vice Presidents Bank of— First Vice President Boston J. A. Erickson D. H. Angney Dana D. Sawyer E. O. Latham Ansgar R. Berge O. A. Schlaikjer New York Alfred Hayes H. A. Bilby Robert V. Roosa William F. Treiber John Exter Robert G. Rouse M. A. Harris T. G. Tiebout H. H. Kimball V. Willis A. Phelan R. B. Wiltse H. V. Roelse Philadelphia Alfred H. Williams Karl R. Bopp Wm. G. McCreedy W. J. Davis Robert N. Hilkert P. M. Poorman E. C. Hill J. V. Vergari Cleveland W. D. Fulton Dwight L. Allen Martin Morrison Donald S. Thompson Roger R. Clouse H. E. J. Smith A. H. Laning Paul C. Stetzelberger Richmond Hugh Leach N. L. Armistead James M. Slay Edw. A. Wayne Aubrey N. Heflin C. B. Strathy Upton S. Martin Chas. W. Williams Atlanta Malcolm Bryan V. K. Bowman L. B. Raisty Lewis M. Clark J. E. Denmark Earle L. Rauber John L. Liles, Jr. S. P. Schuessler Harold T. Patterson Chicago Carl E.Allen, Jr. Neil B. Dawes George W. Mitchell E. C. Harris W. R. Diercks H. J. Newman A. M. Gustavson A. L. Olson C. T. Laibly W. W. Turner St. Louis Delos C. Johns Wm. J. Abbott, Jr. H. H. Weigel Frederick L. Deming Geo. E. Kroner J. C. Wotawa Dale M. Lewis Minneapolis O. S. Powell C. W. Groth M. H. Strothman, Jr. A. W. Mills E. B. Larson Sigurd Ueland H. G. McConnell Kansas City H. G. Leedy John T. Boysen E. D. Vanderhoof Henry O. Koppang Clarence W. Tow D. W. Woolley Dallas Watrous H. Irons E. B. Austin L. G. Pondrom W. D. Gentry W. H. Holloway Morgan H. Rice T. W. Plant Harry A. Shuford San Francisco H. N. Mangels E. R. Millard H. F. Slade Eliot J. Swan R. H. Morrill O. P. Wheeler Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 117 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1956—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES Federal Reserve Bank of— Chief Officer New York... Buffalo I. B. Smith Cleveland Cincinnati R. G. Johnson Pittsburgh J. W. Kossin Richmond Baltimore D. F. Hagner Charlotte R. L. Cherry Atlanta Birmingham H. C. Frazer Jacksonville T. A. Lanford Nashville R. E. Moody, Jr. New Orleans M. L. Shaw Chicago Detroit R. A. Swaney St. Louis Little Rock Fred Burton Louisville Victor M. Longstreet Memphis Darryl R. Francis Minneapolis.. Helena Kyle K. Fossum Kansas City. . Denver Cecil Puckett Oklahoma City R. L. Mathes Omaha P. A. Debus Dallas El Paso Howard Carrithers Houston J. L. Cook San Antonio W. E. Eagle San Francisco Los Angeles W. F. Volberg Portland J. A. Randall Salt Lake City E. R. Barglebaugh Seattle J. M. Leisner 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. The Conference of Presidents held meetings on January 24-25, May 7-8, and September 26,1956, and the Board of Governors met with the Presidents on January 25, May 9, and September 27, 1956. Mr. Leedy, President of the Federal Reserve Bank of Kansas City, and Mr. Erickson, President of the Federal Reserve Bank of Boston, were elected Chairman of the Conference and Vice Chairman, respectively, at the meeting held in January 1956 and served as such during 1956. Mr. John T. Boysen, Vice President and Cashier of the Federal Reserve Bank of Kansas City, was elected Secretary of the Conference and served as such during 1956. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM BOUNDARIES OF FEDERAL RESERVE DISTRICTS oo AND THEIR BRANCH TERRITORIES d I S I BOUNDARIES OF FEDERAL RESERVE DISTRICTS BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANK CITIES FEDERAL RESERVE BRANCH CITIES RESERVE SYSTEM NOTE.—For a description of the Federal Reserve districts and branch territories, see the Annual Report of the Board of Governors for 1953, pp. 124-34; for recent changes in branch territory lines, see p. 57 of the 1954 Annual Report. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Acceptances, bankers': Authorization for Federal Reserve Bank of New York to acquire and to enter into repurchase agreements 23 Federal Reserve Bank holdings 72, 74, 76 Open market transactions during 1956 95 Assets and liabilities: Banks, by classes 91 Federal Reserve Banks 72-77 Bank credit, review for year 8 Bank holding companies (See also Holding company affiliates): Bank Holding Company Act of 1956 58, 61 Regulation Y, adoption of 50 Bank premises, Federal Reserve Banks and branches 67, 72, 74, 76, 86 Bank reserves and Federal Reserve policies 13 Bank supervision by Federal Reserve System 57 Banking offices, changes in number 93 Board of Governors: Accounts audited 67 Income and expenses 67 Members and officers 98 Members, salary of 62 Policy actions 48-57 Reimbursable expenditures 70 Branch banks: Domestic, changes in number 93 Federal Reserve (See Federal Reserve Banks) Foreign: Examination of Caribbean area branches 60 Number in operation 59 Business finance 5 Capital accounts: Banks, by classes 91 Federal Reserve Banks 73, 75, 77 Chairmen of Federal Reserve Banks 101 Charts: Bank loans and investments 9 Business indexes, selected 4 Gross national product 3 Interest rates 12 Money supply and rate of turnover 11 Reserves and borrowings, member banks 14 Commercial banks: Assets and liabilities 91 Banking offices, changes in number 93 Loans and investments 8, 91 Number, by classes 91 Condition statement of Federal Reserve Banks 72-77 Consumer finance 6, 9 119 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

120 INDEX Page Consumer instalment credit study 69 Credit, demands and supplies 5, 7 Defense Production Act of 1950, amendment 61 Defense production loans (See V-loans) Deposits: Banks, by classes 91 Federal Reserve Banks 73, 75, 77, 84 Growth of 10 Savings and other time deposits: Basis for compounding interest, decision not to change 53 Maximum rates: Changes in 52 Table of 89 Deputy Chairmen of Federal Reserve Banks 101 Directors, Federal Reserve Banks and branches 102 Discount rates at Federal Reserve Banks: Changes in 1, 15, 16, 48, 50 Table of 88 Discounts and advances by Federal Reserve Banks.... 65, 72, 74, 76, 79, 84 Dividends: Federal Reserve Banks 64, 81, 82 Member banks 92 Earnings: Federal Reserve Banks 63, 80, 82 Member banks 92 Economic background of Federal Reserve policy 2 Examinations: Federal Reserve Banks 57 Foreign banking corporations 59, 60 Holding company affiliates 58 State member banks and Caribbean area branches 57, 60 Expenses: Board of Governors 67 Federal Reserve Banks 63, 80, 82 Member banks 92 Federal Advisory Council: Meetings 100 Members and officers 100 Federal Open Market Committee: Meetings 99 Members and officers 99 Policy actions 17-47 Review of continuing authorities or statements of policy 24 Federal Reserve Act: Section 10, affected by statute increasing salaries of Chairman and members of Board of Governors 62 Section 14(b), amendment extending authority of Federal Reserve Banks to purchase and sell Govt. obligations directly from or to the U. S 61 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 121 Federal Reserve Banks: Page Assessment for expenses of Board of Governors 69, 80 Authority to purchase and sell Govt. obligations directly from or to the U. S., extension of 61 Bank premises 67, 72, 74, 76, 86 Branches: Bank premises 67, 86 Directors 102 Vice Presidents in charge of 117 Capital accounts 73, 75, 77 Chairmen and Deputy Chairmen 101 Condition statement 72-77 Directors 102 Discount rates: Changes in 1, 15, 16, 48, 50 Table of 88 Dividends 64, 81, 82 Earnings and expenses 63, 80, 82 Examination of 57 Foreign and international accounts 66 Officers and employees, number and salaries 80, 87 Presidents and other officers 116 Profit and loss 81 Treasury certificates, holdings of special short-term, purchased directly from the U. S 79 U. S. Govt. securities: Holdings of 65, 72, 74, 76, 78, 79, 84 Open market transactions during 1956 95 Volume of operations 63, 79 Federal Reserve notes: Condition statement data 72-77 Cost of printing 70 Interest paid to Treasury 64, 65, 81, 82 Federal Reserve policy: Bank reserves and 13 Digest of principal changes in 16 Economic background 2 Record of policy actions: Board of Governors 48-57 Federal Open Market Committee 17-47 Federal Reserve System: Bank supervision by 57 Map of 118 Membership, changes in 60 Foreign banking corporations: Examination of 59, 60 Number in operation 59, 60 Regulation K, revision of 55 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

122 INDEX Page Government securities (See U. S. Government securities) Holding company affiliates (See also Bank holding companies) 58 Industrial loans by Federal Reserve Banks 65, 72, 74, 76, 88 Inter-Agency Bank Examination School 60 Interest rates: Federal Reserve rates (See also Discount rates) 88 Regulation V loans 62, 90 Review for year 11 Savings and other time deposits, maximum rates: Changes in 52 Table of 89 Investments: Banks, by classes 91 Commercial banks 8, 91 Federal Reserve Banks 72, 74, 76 Member banks 91 Legislation: Authority of Federal Reserve Banks to purchase and sell Govt. obligations directly from or to the U. S., extension of 61 Bank Holding Company Act of 1956, enactment of 58, 61 Defense Production Act of 1950, amendment 61 Salaries of Chairman and members of Board of Governors 62 Loans (See also specific types of loans): Banks, by classes 91 Commercial banks 8, 91 Federal Reserve Banks 65, 72, 74, 76, 84, 88 Member banks 91 Margin requirements: Table of 90 Time for obtaining margin, amendment to Regulation T 49 Meetings: Chairmen of Federal Reserve Banks 101 Federal Advisory Council 100 Federal Open Market Committee 99 Presidents of Federal Reserve Banks 117 Member banks: Assets, liabilities, and capital accounts 91 Banking offices, changes in number 93 Earnings, expenses, and dividends 92 Foreign branches, number in operation 59 Number 60, 91 Reserve requirements 89 Reserves and related items 13, 84 Membership in Federal Reserve System, changes in 60 Monetary growth 10 Mutual savings banks 91, 93 National banks: Assets and liabilities 91 Banking offices, changes in number 93 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 123 National banks—Continued Page Foreign branches, number in operation 59 Number 61, 91 Trust powers 58 Nonmember banks 91, 93 Open market operations 17-47, 95 Par List, banking offices on, and not on, number 94 Policy actions, Board of Governors: Discounts and advances by Federal Reserve Banks, increases in rates on 48, 50 Regulation K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act, revision of 55 Regulation Q, Payment of Interest on Deposits, amendment to 52 Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendment to 49 Regulation Y, Bank Holding Companies, adoption of 50 Policy actions, Federal Open Market Committee: Authority to effect transactions in System account 17-22, 25-47 Bankers' acceptances, authorization to acquire and to enter into repurchase agreements 23 Review of continuing authorities or statements of policy 24 Presidents of Federal Reserve Banks: Conference of 117 List of 116 Meetings 117 Salaries 87 Price and wage movements 3 Regulations, Board of Governors: K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act, revision of 55 Q, Payment of Interest on Deposits: Amendment changing maximum permissible rates on savings and others time deposits 52 Basis for compounding interest on savings and other time deposits, decision not to change 53 T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendment with respect to time for obtaining margin 49 V, Loan Guarantees for Defense Production 62, 90 Y, Bank Holding Companies, adoption of 50 Repurchase agreements: Bankers' acceptances 23, 72, 74, 76, 95 U. S. Govt. securities 24, 72, 74, 76, 84, 95 Reserve requirements, member banks 89 Reserves: Federal Reserve Banks 72, 73, 74, 76 Member banks 13, 84 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

124 INDEX Page Salaries: Board of Governors 62, 69 Federal Reserve Banks 80, 87 Savings 7, 8 Savings deposits (See Deposits) State member banks: Assets and liabilities 91 Banking offices, changes in number 93 Examination of, and Caribbean area branches 57, 60 Foreign branches, number in operation 59 Number 61, 91 System open market account: Authority to effect transactions in 17-22, 25-47 Time deposits (See Deposits) Treasury finance 6 Trust powers of national banks 58 U. S. Government securities: Authority of Federal Reserve Banks to purchase and sell directly from or to the U. S., extension of 61 Bank holdings, by class of bank 91 Commercial bank holdings 9, 10, 91 Federal Reserve Bank holdings 65, 72, 74, 76, 78, 79, 84 Open market operations 17-47, 95 Repurchase agreements 24 Treasury certificates, Federal Reserve holdings of special short-term, purchased directly from the U. S 79 V-loans 62, 90 Voting permits issued to holding company affiliates 58 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis