Annual Report of the Federal Reserve Board, 1958

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

LETTER OF TRANSMITTAL BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Washington, June 24, 1959 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-fifth Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1958. Yours respectfully, WM, MCC. MARTIN, JR., Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONTENTS TEXT OF REPORT Page Introduction 1 Recession and Recovery 1 Federal Reserve action to combat recession 3 Broader effects of monetary action 4 Changing expectations 6 Moderation of Federal Reserve policy 8 Regulation of margin requirements 10 Situation at close of 1958 10 Changes in Gold Reserves 11 Gold and the balance of international payments 13 Gold and the United States monetary system 15 Gold and Federal Reserve policy 16 Demand and Supply of Funds in 1958 , 17 Credit demands 18 Government 18 Business 21 Consumers 22 International capital transactions 24 Credit supplies 25 Consumer saving 26 Institutional lenders 27 Bank credit 27 Digest of Principal Federal Reserve Policy Actions, 1958 30 Record of Policy Actions—Federal Open Market Committee 32 Record of Policy Actions—Board of Governors 72 Bank Supervision by the Federal Reserve System 89 Examination of Federal Reserve Banks 89 Examination of member banks 89 Federal Reserve membership 90 Bank holding companies 90 Trust powers of national banks 91 Acceptance powers of member banks 91 Foreign branches and foreign banking and financing corporations 92 Inter-Agency Bank Examination School 93 Legislation 94 Defense Production Act 94 iii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page Purchase of Government obligations by Federal Reserve Banks... 94 Alaskan Statehood 94 Real estate loans by national banks 94 Small Business Investment Act 95 Bank Holding Company Act 95 Reserve Bank Operations 95 Loan guarantees for defense production 95 Volume of operations 96 Earnings and expenses 97 Holdings of loans and securities 98 Foreign and international accounts 99 Bank premises 100 Board of Governors—Income and Expenses 101 TABLES 1. Statement of Condition of the Federal Reserve Banks (in detail), Dec. 31, 1958 106 2. Statement of Condition of Each Federal Reserve Bank at End of 1958 and 1957 108 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1956, 1957, and 1958 112 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1953-58 113 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1954-58 113 6. Earnings and Expenses of Federal Reserve Banks during 1958. . 114 7. Earnings and Expenses of Federal Reserve Banks, 1914-58 116 8. Member Bank Reserves, Reserve Bank Credit, and Related Items, End of Year 1918-58 and End of Month 1958 118 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1958 120 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1958 121 11. Federal Reserve Bank Discount, Interest, and Commitment Rates (in effect Dec. 31, 1958) 122 12. Member Bank Reserve Requirements 123 13. Maximum Interest Rates Payable on Time Deposits 123 14. Margin Requirements 124 15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950, Dec. 31, 1958 124 16. Principal Assets and Liabilities, and Number of All Banks, by Classes, Dec. 31, 1958 and 1957 125 iv Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 17. Member Bank Earnings, by Class of Bank, 1958 and 1957 126 18. Analysis of Changes in Number of Banking Offices during 1958 127 19. Number of Banking Offices on Federal Reserve Par List and Not on Par List, Dec. 31, 1958 128 20. Open Market Transactions of the Federal Reserve System during 1958 129 FEDERAL RESERVE DIRECTORIES AND MEETINGS Board of Governors of the Federal Reserve System 132 Federal Open Market Committee 133 Federal Advisory Council 134 Federal Reserve Banks and Branches 135 Map of Federal Reserve Districts 153 Index 154 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

OF THE FEDERAL RESERVE SYSTEM The year 1958 brought vigorous recovery from a brief but sharp recession in economic activity in the United States. From a low point in early spring, output of goods and services rose rapidly and, by year-end, gross national product in current dollars exceeded and in real terms was close to earlier peaks. As is characteristic of early phases of recovery movements, employment rose less rapidly than output, and unemployment remained relatively high. Abroad, economic expansion was resumed at the end of 1958 after temporary interruptions in many countries. The Federal Reserve adapted its policies to the changing economic environment by fostering bank credit expansion during the recession early in the year and by moderating the availability of funds in the last five months as economic activity gained momentum. Demands for credit remained slack early in 1958 and interest rates continued to decline. In the last half of the year, when private and public demands for credit were rising, particularly those of the Federal Government to finance the large current deficit, interest rates rose sharply. Consumer and wholesale prices, after rising somewhat early in the year, were fairly stable during most of 1958. Stock prices, however, rose rapidly throughout the year. RECESSION AND RECOVERY At the beginning of 1958, economic activity in this country was receding. Contraction in output and employment was general, and unemployment was rising at a disturbing pace. No one could be sure how far the downward adjustment would go, or how long it would last. Even at that time, however, some were beginning to view the outlook more optimistically. In January, corporations, taking advantage of easier conditions and lower interest costs in financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 ANNUAL REPORT OF BOARD OF GOVERNORS markets, were offering an appreciable volume of new issues in anticipation of future needs for funds, and to refund shorter term debt. State and local governments were bringing to market bond issues that had been deferred earlier, and were stepping up the pace of bond offerings to provide for public works. SELECTED ECONOMIC INDICATORS 1947-49=100 INDUSTRIAL NONAGRICULTURAL PRODUCTION EMPLOYMENT 160 - 140 NONMANUFACTURING 140 - 120 MANUFACTURING^^ 120 - 100 v, 1 1 1 1 1 .. 140 140 CONSUMER PRICES WHOLESALE PRICES MATERIALS S^y^sJ? ^ 120 - 120 CS*'^'- FINISHED GOODS FOODS 100 - 100 ,. I I l l I .. 1954 '56 '58 1954 '56 '58 NOTE.—Seasonally adjusted series, except for prices. Bureau of Labor Statistics data for employment and prices and Federal Reserve data for production. Farmers continued to foresee favorable output and price conditions in agriculture and were bidding up further the prices of farm land. Bankers, with slackened customer demand for credit and strengthened reserve positions, were bidding more aggressively for investments. By February, bankers were accelerating expansion of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 3 assets and deposits of their institutions, thus increasing more rapidly the economy's stock of cash balances and raising its over-all liquidity. By the early part of the second quarter, personal income and consumer spending had ceased to decline and, in fact, were rising slightly. Production and employment turned upward soon after. Whether these developments, though encouraging, foreshadowed wide revival in activity was not known at the time; not until summer did the current flow of information and reports provide substantial confirmation that general economic recovery was under way. From that stage on, currently available data reflecting market trends, production, and employment showed that recovery was both broadly based and vigorous. At year-end, eight months after recovery had set in, total output approximated the peak of 1957 and it was growing with increasing momentum. FEDERAL RESERVE ACTION TO COMBAT RECESSION Federal Reserve policy began to move in a counter-recession direction in late October of 1957. At that time, the System began to shift its open market operations toward supplying reserves more liberally to the banking system. In November, it reduced the discount rates on member bank borrowings from the Reserve Banks. As the stream of factual information verified the emergence of recessionary trends, Federal Reserve actions and policies became more aggressive, and discount rate, open market, and reserve requirement instruments were actively applied in complementary fashion to foster ease in credit markets and encourage bank credit and monetary expansion. From late fall 1957 through April 1958, there were four reductions in Federal Reserve Bank discount rates, from 3^2 Per cen^ to 1% per cent. Through continuing open market operations from late fall of 1957 to early summer of 1958, the Reserve System supplied the commercial banks with some $2 billion of reserve funds. Through three successive reserve requirement reductions in late winter and early spring of 1958, the System released for the use of member banks about $1.5 billion of their required reserves. The total amount of reserve funds supplied by the Federal Reserve System over the nine months November 1957-July 1958 was enough to enable member banks to reduce their discounts at the Reserve Banks from $800 million to about $100 million, to offset sales of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4 ANNUAL REPORT OF BOARD OF GOVERNORS gold to foreign countries amounting to about $1.5 billion, and to finance a commercial bank credit expansion of almost $8 billion. Monetary expansion from February through July stimulated by this Federal Reserve action was at an exceptionally rapid rate— at an annual rate of 13 per cent for all deposits, including time and demand deposits. For the active money supply, that is, demand deposits and currency, the rise was at an annual rate of 8 per cent. After the shift in Federal Reserve policy in the summer, expansion in the active money supply slackened, and for the year as a whole it amounted to about 4 per cent. BROADER EFFECTS OF MONETARY ACTION Although the immediate impact of Federal Reserve policy was on commercial banks, it clearly had broader effects upon the economy generally. For one thing, since commercial banks are direct participants in some degree in all important credit markets, expansion in bank lending and investing activities intensified competition among all lenders for the acquisition of the available supply of creditworthy loans and securities. This widened access of all potential borrowers to credit funds. It also worked to reduce the cost of financing to borrowers generally—businesses, farmers, consumers and home buyers, and all levels of government. Another effect of the credit ease was a greater willingness on the part of banks and other lenders to make new loans to business customers and to renew outstanding credits. This permitted the orderly run-off of excess business inventories accumulated in the preceding boom. It also facilitated the completion of business programs of plant and equipment expansion begun in that period. With a $6 billion reduction in business inventory holdings and a significant cutback in fixed investment programs during the recession, business loans outstanding declined only $1.5 billion in the year ending September 1958. The ability of businesses to maintain their bank borrowing and also to borrow more readily in capital markets not only cushioned downward pressures on investment spending but helped many companies to minimize cutbacks in their working force and payrolls, to maintain dividends, and to strengthen liquidity positions. In housing markets, the easier conditions broadened the avail- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 5 ability of mortgage funds. Discounts were reduced on FHA and VA mortgages subject to ceiling interest rates, and interest rates on new conventional mortgages fell. As bank credit expansion gained in momentum, banks participated in mortgage investment more actively than at any time since the boom housing year of 1955. The increased availability of mortgage funds at lower cost, together with the maintenance of personal income, was promptly reflected in a step-up of builder activity in constructing new houses. GROSS NATIONAL PRODUCT Billions of dollars, annual rates 500 300 TOTAL 460 260 CURRENT DOLLARS 420 I I I I 220 \r GOVERNMENT 1954 DOLLARS 380 - INVESTMENT <^-- 340 40 RESIDENTIAL CONSTRUCTION 1 1 300 I- I I 1954 '56 '58 1954 '56 '58 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. "Investment" includes producers' durable equipment, private construction other than nonfarm residential, change in business inventories, and net exports of goods and services. In the consumer instalment credit area, the increased availability of funds made it possible for lenders to meet sound demands for credit more readily, thus bolstering lagging demand for consumer durable goods. On some transactions, terms were eased and, in addition, new credit plans were developed and extended. Easier Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 ANNUAL REPORT OF BOARD OF GOVERNORS credit conditions permitted lenders to be more liberal in granting renewals and extensions of time for repayment of outstanding credit. Thus, the volume of repossessions and credit losses was less than would otherwise have been the case, with benefits to both borrowers and lenders. Increased availability of funds also had an impact on State and local government financing. In some cases, the lower cost of financing encouraged States and municipalities to borrow in order to finance capital projects. Lower market rates also enabled certain State and local governments that had a ceiling on interest rates to return to the market. The increase in annual rate of spending by State and local governments from the summer of 1957 to the summer of 1958 was a billion dollars more than in the preceding year. These observable effects of easier monetary conditions which developed from efforts to combat recession were, of course, important and salutary. They are not to be overly stressed, however, for monetary action is always only one element in Government counterrecession policy. In turn, Government policy is always only one element in the total economic scene. Businesses, individuals, and State and local governments, in the light of their own circumstances, were taking actions to adjust and adapt their situations and to redirect their energies. Their actions undoubtedly shaped the recovery and gave it momentum. Restraint of inflationary pressures during the preceding boom undoubtedly contributed to an underlying economic situation favorable to recovery and made the economy responsive to these monetary and other anti-recession actions. CHANGING EXPECTATIONS Achievement of monetary ease to combat recession so promptly and amply was not without its problems. One of the most acute was the build-up of prices in the bond market as speculators counted on continuing business recession, credit ease, and still higher bond prices. Psychological reactions and expectations always play a role in swings in economic and financial developments, but they were of particular importance in financial markets in the summer of 1958 as the economic outlook rapidly changed from one of a continuing recession to one of early, vigorous recovery. At that time, the improved economic outlook led to a sharp Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 7 change in expectations in regard to renewed inflationary pressures and a turnabout in the trend of interest rates. A much larger Federal deficit loomed up than had been estimated, as well as the crisis and threat of military action in the Middle East. Concern about the drain of gold from the nation's monetary reserves through sales of gold to the industrial nations of Europe was a further cause of uncertainty. The fact that the Canadian Government announced a major refunding operation at sharply higher interest rates was also a complicating factor. In these circumstances, heavy market sales by holders of United States Government securities in anticipation of higher interest rates sharply depressed bond prices. Initially, this selling stemmed from temporary holders who had bought in anticipation of a continued rise in Government securities prices. Some of these holdings had been acquired with funds borrowed on thin margins in connection with the Treasury's June financing operations. In this financing, investors had exchanged the major portion of maturing issues for 6%year bonds rather than for the 11-month certificates also included in the exchange offering. In many cases, selling was forced because the margins vanished as securities prices declined. Prices of Government securities continued to decline under pressure of steady liquidation and the reluctance of investors to purchase market offerings in view of changed prospects for credit demands and inflationary threats. During the period from June 19 through July 9, the Treasury purchased nearly $600 million of the bonds previously taken in the exchange, retiring about three-fourths of these and placing the remainder in Treasury investment funds. On July 18, the Federal Open Market Committee concluded that the market situation had become disorderly and decided to intervene temporarily in the medium- and long-term sectors of the Government securities market. This action was within the framework of the Committee's established operating rules. From July 18 to July 23 the System purchased $1.2 billion of securities involved in a Treasury refinancing, largely "when issued" securities, and a small amount of other notes and bonds. Thereafter, as market conditions became more orderly, no further Federal Reserve open market transactions were effected outside the usual area of short-term Government securities. During late July Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 ANNUAL REPORT OF BOARD OF GOVERNORS and early August, sales of Treasury bills by the System together with other factors affecting reserves more than absorbed the redundancy of reserves that threatened to result from Federal Reserve intervention in the Government bond market. MODERATION OF FEDERAL RESERVE POLICY By August, there was clear evidence in current statistics that recovery in economic activity and production had gained considerable momentum and was likely to go forward without serious setback. Moreover, in view of the strength of consumer demand, appreciable further decline in business inventory holdings and capital outlays was no longer likely. About this time, inflationary expectations began to spread. The abrupt upward shift of interest rate levels in central money markets, while precipitated by liquidation of speculative positions in Government securities, reflected in part investor demand for an interest premium to cover the risk of a depreciating purchasing power of invested funds. There was a large shift by investors, including institutional investors such as pension funds, in the allocation of newly available funds to common stocks instead of fixed interest obligations, with hedging against inflation a frequent explanation of the change in investor policy. Large current and prospective demands for credit by the Federal Government, State and local governments, and home purchasers also influenced the rising cost of borrowed funds. In the stock market, the volume of trading was expanding rapidly and the rise in stock prices reduced the yields on common stocks below the yields on high-grade corporate bonds. In the light of the rapidly changing economic situation, in most respects highly encouraging but with inflationary and speculative psychology spreading, the Federal Reserve, during the summer, began to move away from its anti-recession policy of low discount rates, high excess reserves, and reductions in reserve requirements. System open market operations after midsummer supplied only a portion of the reserves needed to meet rising credit demands and to offset the reserve drain of a continued gold outflow. As a result, member banks drew down their excess reserves somewhat and at the same time increased their borrowings from the Federal Reserve Banks. Such borrowing was made much more costly when Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM RESERVES AND BORROWINGS Billions of dollars 2.0 BORROWINGS A/ r / EXCESS RESERVES 1.0 1954 1956 1958 NOTE.—Monthly averages of daily figures for member banks. Net reserve position indicates excess reserves minus borrowings. Bank discount rates were raised in the late summer from 1% per cent to 2 per cent, and in midautumn to a level of iy pe^ cent. 2 From late summer through the end of the year, bank credit and the money supply continued to expand but at a rate much reduced from earlier in the year. Some seasonal expansion in business loans was supplemented by a rapid growth of real estate loans. On the other hand, bank holdings of short-term United States Government securities rose only moderately despite a substantial increase in the supply of such securities to finance the Treasury's deficit. With business sales and liquidity showing rapid rise, the higher interest rates that developed in the market helped to attract a substantial volume of funds of nonbank investors, especially business corporations, into the purchase of the new short-term Treasury issues. As a consequence, the Treasury was able to finance most of its deficit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 ANNUAL REPORT OF BOARD OF GOVERNORS outside the banking system, and at the same time banks were able to meet private credit demands accompanying economic recovery, with only a moderate further growth in total bank credit and money. REGULATION OF MARGIN REQUIREMENTS In addition to its broader monetary responsibilities, the Federal Reserve is directed by law to prescribe margin requirements to guard against excessive use of credit for purchasing or carrying stock market securities. By providing a means of dealing directly with this volatile type of credit, margin requirements serve as a specialpurpose supplement to the general instruments of Federal Reserve action. Since the flow of credit into the stock market tends to fluctuate with general business conditions, changes in margin requirements are usually correlated with policy actions that affect general credit availability. Following the stock market decline in the early fall of 1957, total credit to customers for purchasing and carrying stock market securities declined by about 5 per cent and was back to about the level outstanding in mid-1955. With this indication of abatement of credit use in the stock market, the Board of Governors, early in January 1958, reduced the required margin from 70 to 50 per cent. With the increasing activity and rise in stock prices accompanying economic recovery, stock market credit rose sharply, reaching by July a level about 20 per cent above the volume at the beginning of the year. In view of the rapid rise in credit to finance trading in or temporary ownership of stocks, and the emerging investment psychology favoring purchase of stocks as an inflation hedge, the Board, early in August, restored the required margin to 70 per cent. As outstanding stock market credit continued to rise following this action, the Board, in mid-October, raised the required margin to 90 per cent. SITUATION AT CLOSE OF 1958 Monetary policy during the autumn aligned monetary conditions more closely with developments in the economy. Consumer spending on durable goods and housing continued to expand and was reflected in high levels of output of household durable goods, in a more than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 11 seasonal pickup in auto production, and in a rise in housing starts to the highest level in recent years. Business inventory policies were switching from liquidation toward accumulation, and there was a widespread, though small, upturn in capital expenditures. At the same time, Federal, as well as State and local government spending, was expanding rapidly in accordance with budgetary authorizations adopted earlier. In financial markets moderate curtailment of credit availability and higher interest rates helped to dampen speculative excesses then developing, to restrain and spread out the volume of new corporate and municipal securities financing, and to facilitate the financing of the large Federal deficit outside the banking system. The reduction of corporate and municipal securities financing followed some anticipatory borrowing by these issuers earlier in the year when long-term interest rates were lower. At the turn of the year, there was a large calendar of authorized but unissued State and local government securities. Total economic activity, measured in real terms, had nearly regained its earlier peak. The active money supply had risen about 3y 2 per cent above its pre-recession level, and holdings of other liquid assets, including time deposits, were up sharply. The financial basis for further growth was established. CHANGES IN GOLD RESERVES Developments in international trade and finance in 1958, and especially the decline in United States gold reserves, brought to public attention the interdependence of events in free market economies here and abroad. At the end of the year, announcement by a dozen European countries of the restoration of external convertibility for their currencies testified to the postwar renewal of Europe's economic and financial strength. Unlike most components of domestic demand, external demand for United States exports failed to turn up during 1958. Exports of goods and services, which in the previous cyclical expansion had increased from $18 billion in 1954 to an annual rate of $27 billion in the first half of 1957, remained throughout 1958 at the level of $23 billion to which they had fallen early in the year. The position of the United States in world trade is unique, in that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 ANNUAL REPORT OF BOARD OF GOVERNORS it is the leading exporter of manufactured products and at the same time the most important exporter of crude and semi-finished materials and fuels. Like other exporters of primary products, the United States was affected by worldwide recessions in steel and textile industries, which checked its previously swollen exports of coal, scrap metal, steel, and raw cotton. Like other exporters of manufactures, this country was affected by cyclical adjustments of demand, not only in other industrial countries, but also in the less industrialized countries whose international earnings had fallen. U.S. BALANCE OF PAYMENTS Billions of dollars - TOTAL r PAYMENTS FROM U.S. y - 6 EXPORTS OF GOODS / / - AND SERVICES S^ / _s«er-^/ -•»' IMPORTS OF GOODS S' N^/****—' AND SERVICES -_ 4 3 1 ,,illl Him li. nil 1 i NET TRANSFERS OF GOLD AND DOLLARS 1 1 ! I I 1954 1956 1958 NOTE.—Department of Commerce seasonally adjusted quarterly data. Total payments from the United States include imports of goods and services, remittances, Government nonmilitary grants and loans, and net U. S. private capital outflow. Exports of goods and services exclude military transfers under aid programs. Net transfers of gold and dollars include gold purchases from the United States and net increases in foreign holdings of short-term assets in the United States and of U. S. Government long-term securities. Exports in first quarter of 1954 adjusted to include, and exports in second quarter to exclude, shipments delayed by port strike in March 1954. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 13 Moreover, United States export trade in manufactures became subject to increasingly effective competition from Europe and Japan, areas whose capacity for exporting had greatly increased. And while United States demand for imported raw materials was relatively low in 1958, demand for imported consumer goods continued to increase. One consequence of developments such as these was that the surplus of exports over imports of goods and services was much smaller than in 1957, and fell far short of matching the large continuing outflow of private loans and investments and of Government loans and grants. The export surplus was only moderately larger than in the years immediately preceding the 1956-57 upsurge, but the capital outflow was much larger. In its total balance of international payments—on current and capital account—the United States thus had an unusually large deficit in 1958. It is the purpose of this section of the Annual Report to indicate how gold movements were related, on the one hand, to this deficit, and, on the other hand, to the functioning of the United States monetary system. GOLD AND THE BALANCE OF INTERNATIONAL PAYMENTS A deficit in a country's balance of international payments (an excess of payments to foreigners over receipts from foreigners) involves the transfer of international means of payment from domestic to foreign holders. In relations between the United States and foreign countries or international institutions, two kinds of international means of payments are used: gold and liquid dollar assets. The United States Treasury sells gold to, and purchases gold from, foreign monetary authorities for the settlement of international transactions at the fixed price of $35 an ounce, plus or minus a commission charge of one-fourth of one per cent. Dollar assets are freely transferred between United States holders and foreign monetary authorities or (as far as foreign countries' exchange regulations permit) private persons. Liquid dollar assets held by foreigners include deposits with the Federal Reserve Banks and other banking institutions, holdings of Treasury bills and other United States Government securities, and, to a smaller extent, holdings of bankers' acceptances and other short-term dollar claims. In 1958, a major part of the $3.4 billion deficit in the United Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 ANNUAL REPORT OF BOARD OF GOVERNORS States balance of international payments was settled in the form of gold. The amount of net gold sales to foreigners during the year, $2.3 billion, was larger than in any other 12-month period with the exception of the period immediately following the outbreak of the Korean war in 1950. Some of the factors accounting for the large deficit in the United States balance of international payments have already been discussed. The reason why a large fraction of that deficit was settled in gold lies primarily in the regional distribution of the balanceof-payments surpluses of foreign countries. The practices of foreign monetary authorities vary widely in regard to the proportion of their reserves held in the form of gold on the one hand, or dollars or other foreign exchange on the other. Some countries, such as the United Kingdom, Belgium, the Netherlands, and Switzerland, have for many years held most of their official reserves in the form of gold, and have held liquid dollar assets only insofar as they were needed for working balances. Most other European nations also have held a substantial part of their reserves in gold. In 1958 the countries that experienced the greatest gain in reserves were highly industrialized countries, including many European countries. This development was the consequence of the slowdown in economic expansion throughout most of the free world and of the relatively greater decline in export earnings for rawmaterial producing countries than for industrial countries other than the United States. Sales of gold to the four countries that generally take practically all of their reserve gains in the form of gold (the United Kingdom, Belgium, the Netherlands, and Switzerland) accounted for threefourths of United States net gold sales in 1958; sales to three other industrial countries (Austria, Italy, and Japan) accounted for virtually all the rest. Within the year 1958, net gold sales were largest in the second quarter, and gradually declined during the third and fourth quarters. This decline in the gold component of balance-of-payments settlements did not reflect a decline in the balance-of-payments deficit itself. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 15 GOLD AND THE UNITED STATES MONETARY SYSTEM A balance-of-payments deficit for the United States means, in the first instance, a transfer of liquid assets from domestic to foreign residents or monetary authorities. This transfer need not affect total bank assets or liabilities in the United States as long as the deficit is settled exclusively by transfers of dollar assets. For example, if a United States deficit is settled by the transfer of dollar deposits to residents of foreign countries and then to their monetary authorities, no change in total deposits with United States banks occurs. If foreign monetary authorities receiving dollars then invest in money market paper, such as United States Treasury bills, unless the bills are purchased from banks the effect generally will be simply a decrease in domestic nonbank holdings of bills accompanying the increase in foreign holdings, with the volume of bank deposits remaining unchanged. If transfers of dollar assets to foreign monetary authorities are followed by sales of gold to them, further monetary effects of a somewhat more complicated kind occur. Under the monetary system of the United States, gold is both a means of international payments and the ultimate reserve basis of the United States money supply. Movements of gold directly affect the money supply, the reserves of commercial banks, and the reserves of the Federal Reserve Banks. The great bulk of the gold holdings of the United States (at the end of 1958, $20.0 billion out of a total of $20.6 billion) is held in the Treasury as security against a corresponding amount of gold certificates issued to the Federal Reserve Banks. These gold certificates owned by the Reserve Banks, together with their holdings of United States Government securities, advances to member banks, and other assets, serve as backing for Reserve Bank liabilities. Under the Federal Reserve Act, holdings of gold certificates must be not less than 25 per cent of Federal Reserve note and deposit liabilities; actually the amounts held greatly exceed this minimum. Federal Reserve deposit liabilities represent primarily reserves that the member banks are required to hold against their own deposits. Member bank deposits in turn are a major component of the country's money supply. The way in which the money supply, member bank reserves, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 ANNUAL REPORT OF BOARD OF GOVERNORS Federal Reserve Bank reserves are affected by international transfers of gold may be explained by describing the consequences of a gold sale by the United States to a foreign monetary authority. (A sale of gold by a foreign monetary authority to the United States Treasury would have exactly the opposite effects on bank deposits, member bank reserves, and gold certificate holdings of the Federal Reserve Banks.) In preparing to buy gold, the foreign authority usually accumulates funds in its account with the Federal Reserve Bank of New York, either by selling money market paper or by transferring funds from deposits with commercial banks. In either case, the immediate effect is a reduction in commercial bank deposits, generally those of member banks, and along with this a reduction in member bank reserves. When the foreign authority purchases gold from the Treasury, it transfers funds from its foreign account with the Federal Reserve Bank of New York to the Treasury's account with the Federal Reserve Bank. (This is usually done through the intermediation of the Stabilization Fund of the Treasury, which handles these transactions through its fiscal agent, the Federal Reserve Bank of New York.) The Treasury in turn uses the proceeds in most cases to redeem a corresponding amount of gold certificates owned by the Reserve Banks. The effects of the transaction thus include, first, a reduction in money in the form of bank deposits; second, a drain on member bank reserves; and, third, a reduction in the gold certificate reserves of the Federal Reserve Banks. GOLD AND FEDERAL RESERVE POLICY Gold movements and the underlying developments in international trade and payments are among the elements of the economic situation constantly under review in the determination of monetary policy. In the administration of policy, the effects of gold movements upon member bank reserves are of immediate importance, since changes in member bank reserves usually have further multiple effects upon the money supply through bank credit contraction or expansion. The Federal Reserve takes into account the impact upon member bank reserves of gold transactions and of all other factors that affect those reserves, including changes in currency in circulation, movements in Treasury deposits at the Reserve Banks, and fluctuations Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 17 in Federal Reserve float. When, as in early 1958, the combined effect of such factors on member bank reserves would be in a direction contrary to policy objectives, the Federal Reserve takes offsetting action. In the first seven months of the year, Federal Reserve policy was aimed at adding substantially to member bank reserves. Gold sales, however, were draining about $1.5 billion of reserves, and this drain was offset only in small part by other factors affecting reserves. In order to complete the offset, and in addition to ease reserve positions and provide for monetary expansion, member bank reserve requirement percentages were lowered, releasing $1.5 billion of reserves, and additional reserve funds were supplied through open market operations. In the latter part of the year, continued although reduced sales of gold further drained bank reserves. Also, the rise in currency in circulation drained more reserves than were supplied by the rise in Federal Reserve float. Since in this period the Federal Reserve was moderating the availability of reserves, only part of the contractive impact of these and other factors upon the reserves of member banks was offset through open market operations. Member banks provided the rest of the reserves needed for deposit expansion through borrowing from the Federal Reserve Banks. Over the year as a whole, the ratio of gold certificate reserves of the Federal Reserve Banks to their note and deposit liabilities dropped from 46.3 per cent to 42.1 per cent, but it remained well above the statutory minimum of 25 per cent. There was a moderate increase in liabilities for Federal Reserve notes in circulation. Deposit liabilities of the Reserve Banks declined; the increase in required reserves of member banks brought about by growth in their deposits was more than offset by the lowering of member bank reserve requirement percentages. DEMAND AND SUPPLY OF FUNDS IN 1958 Total public and private debt rose more in 1958 than in 1957, although much less than the record postwar growth in 1955. Record postwar expansion of commercial bank credit provided a large part of the funds to absorb this rise in debt, but funds available for investment from nonbank sources also rose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 ANNUAL REPORT OF BOARD OF GOVERNORS Availability of funds in relation to demand changed considerably over the year, mainly in response to shifts in the business outlook and in Federal Reserve policy. In the first half of 1958, when business and consumer demands for credit were slack and the availability of bank reserves increased, funds seeking outlets pressed against demand and interest rates declined. Total bank credit rose contraseasonally as banks increased their holdings of securities. In the last half, when the availability of bank reserves was more restricted, vigorous economic recovery, together with a large Federal Government deficit, generated additions to demands for financing and interest rates rose sharply. Expectations of still more active credit demands and of possible creeping inflation tended to make lenders reluctant to invest in fixed interest obligations, especially on longer term, and accentuated the rise in interest rates. The channeling of an increased volume of available funds into stocks, also in response to expectations of inflation, was a further factor of upward pressure on interest rates. CREDIT DEMANDS Credit growth in 1958 reflected mainly increased borrowing by all levels of government. Rising Federal expenditures and reduced tax revenues resulted in a large cash deficit, in contrast with a small surplus in the previous year. State and local governments increased their outstanding debt more than in 1957. Private debt expanded further, but the annual rate of growth continued the downtrend that had prevailed since 1955. Business borrowing fell off substantially, reflecting reduced plant and equipment outlays and heavy inventory liquidation. Consumer indebtedness for the purchase of goods and services declined during the year, reflecting principally a decrease in automobile purchases. Mortgage financing of residential properties, however, showed an accelerated increase. Outstanding farm mortgage debt also continued to rise and other loans to farmers by banks went up nearly one-fourth. Government. The Federal Government had a cash deficit of $7.3 billion in calendar year 1958, a sharp change from the surplus of $1.2 billion in 1957 and of $5.5 billion in the preceding year. Federal expenditures were about $6 billion higher in 1958 than in 1957 and cash receipts nearly $3 billion lower. The decline in revenue, mainly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 19 in corporate and individual income taxes, reflected the impact of recession on corporate profits and personal incomes. Increased Federal spending was concentrated in the second half of the year when outlays rose substantially. About $4 billion of the 1958 increase was in unemployment benefits and other social security payments, but military, highway, and agricultural expenditures also rose. As a result of Treasury borrowing to cover the deficit, outstanding public debt rose $8 billion in 1958, the largest calendar year increase since World War II. A small part of this increase occurred in the first half of 1958, when the Treasury used the proceeds of this borrowing, together with its seasonal cash surplus, to build up its cash balance in anticipation of a larger than seasonal deficit later in the year. In the last half of 1958, the Treasury financed its $12.6 billion cash deficit through net cash borrowing of $7.7 billion and a reduction in the Treasury balance of $4.9 billion. Marketable debt rose $11.4 billion, or $3.4 billion more than total public debt, offsetting a decline of that amount in nonmarketable issues. About two-thirds of the marketable debt increase was in issues maturing in five years or more. A $14.5 billion increase in these issues in the first half of the year, mainly in connection with refunding operations, was offset in part by a $7.2 billion decline in the last half as the passage of time carried some issues into shorter maturity ranges. Net redemptions of savings bonds continued, but were in much smaller volume than in 1957. The volume of special issues to Government funds and other nonmarketable debt also declined in large part because of payments in excess of receipts in the old-age and survivors insurance and unemployment trust funds. State and local governments continued to increase their expenditures, as in previous years. Their needs for long-term funds, primarily to finance schools, highways, and other public works, were increasing, and these governments sold a record volume of bonds to obtain new capital. The volume of financing was heaviest during the first half of the year when State and local governments responded to the lower level of interest rates by accelerating the financing of construction programs, funding shorter term debts, and undertaking some financing deferred in 1957. Despite a record volume of bond sales, amounting to $7.7 billion, the backlog of authorized but unsold bond issues increased during the year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 ANNUAL REPORT OF BOARD OF GOVERNORS INTEREST RATES Per cent H "I J COMMERCIAL PAPER , ' , OPEN MARKET , 1954 1956 1958 NOTE.—Market yields, weekly averages of daily figures. Treasury bills, market yields on 90-day bills. Long-term U. S. Government, yields on bonds maturing or callable in 10 years or more. Commercial paper, rate on prime 4- to 6-month open market paper. Yields on corporate and State and local government bonds, from Moody's Investors Service. Market rates of interest on United States Government and State and local securities declined further in the early months of 1958 following a sharp drop in the fall of 1957. Rates on Treasury bills and intermediate-term issues fell much more than rates on bonds, and the spread between short- and long-term Treasury issues reached a postwar record around midyear. The smaller drop in long-term rates resulted in part from the continuation of a substantial volume Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 21 of bond issues by corporations and State and local governments, as well as by the Federal Government. During the summer, rates rose sharply from their spring lows, reflecting the rapid economic turnaround and the growing realization that the Federal cash deficit would be large, together with a mounting fear of inflation. After early October, rates on Treasury issues were relatively stable despite substantial Federal net cash borrowing. Rates on State and local securities fell off somewhat in late 1958, owing in large part to the small volume of new issues, and at year-end were about one-third of a percentage point below their 1957 peaks. Business. The decline in business investment that began late in 1957 continued through the first three quarters of 1958. Outlays for new plant and equipment fell one-fifth over this period and inventory liquidation was substantial. In the fourth quarter of the year, spending for fixed capital edged upward and liquidation of business inventories ceased. For 1958 as a whole, total business investment was one-fourth smaller than in 1957. Funds available to business corporations from current operations took a sharp drop in the first half of 1958. While depreciation allowances continued to rise, retained earnings fell almost twothirds. In the last half of the year, corporate profits rose sharply and in the fourth quarter the volume of funds available from retained earnings and depreciation allowances reached a new peak. For the year as a whole, these internal funds were only 7 per cent smaller than in 1957. The volume of external financing by business was considerably smaller in 1958 than in any of the previous three years of business expansion although much larger than in the recession year 1954. Growth in outstanding securities of corporations was one-tenth less than in 1957 but more than in any previous year. Business loans at commercial banks, however, declined slightly in contrast with increases of roughly $2 billion in the previous year and $6 billion in 1956 and 1955. The pronounced shift in external financing from banks to securities markets evident in 1957 continued in 1958, induced in part by the somewhat reduced level of long-term interest rates that prevailed in the first half of the year. In the last quarter, following Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 ANNUAL REPORT OF BOARD OF GOVERNORS the onset of vigorous recovery and a sharp rise in interest rates, securities market financing fell off and demands for bank loans strengthened. Most of the decline in new securities financing was in issues of manufacturing and sales finance companies. Capital outlays of manufacturing corporations were at greatly reduced levels, and sales finance companies had less need for new funds in view of the decline in borrowing on automobiles by consumers and dealers. Public utility and communication companies reduced their expenditures for plant and equipment and their securities financing only moderately. A sizable increase in new issues by investment companies reflected in part the establishment of new investment companies. Business loans at commercial banks fell off more than usual during the first seven months of the year, mainly in response to inventory liquidation and the funding of some short-term loans through sale of long-term securities in the capital market. Business loans rose over the remainder of the year, mainly because of seasonal borrowing and renewed borrowing by public utilities, which had reduced bank indebtedness over most of the first three quarters. Outstanding mortgage debt on multi-family and commercial construction, part of which represents borrowing for business purposes, rose more in 1958 than in any other recent year. A large part of this increase, however, was for construction of apartment buildings. With funds from current operations and external financing reduced less than total spending for fixed capital and inventories in 1958, corporations added to their holdings of cash and United States Government securities. Most of the additions were in the last quarter, when a sharp rise in corporate profits brought them close to pre-recession highs. At year-end, corporate liquidity, as measured by the ratio of these liquid assets to total current liabilities, was higher than at any time since the end of 1955. Consumers. The pace of growth in consumer indebtedness slackened in 1958. The increase for the year in residential mortgage and consumer credit totaled $10.7 billion, about the same as in 1954 but much below the $18.9 billion rise in 1955. Almost all the 1958 increase was in residential mortgages, which expanded one-fifth more than in 1957. Outstanding consumer credit for the purchase of goods Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 23 and services changed little in 1958, as liquidation of debt early in the year was about offset by later expansion. Housing starts, which were at a reduced level in the first quarter of 1958, rose at a rapid rate over the remainder of the year, reaching a seasonally adjusted annual rate of 1.4 million in the last quarter. Of the 1.2 million starts for the year, privately financed units totaled more than 1.1 million, 15 per cent more than in 1957 and the largest number since 1955. Apartment units accounted for a larger proportion of the starts in 1958 than in other recent years. Reflecting the large number of sales of existing houses as well as of new houses, mortgage debt outstanding on nonfarm 1- to 4-family houses rose about $10.2 billion to almost $118 billion in 1958 compared with an increase of $8.6 billion in 1957. Nearly three-fourths of the increase was in conventional mortgages and the remainder in FHA-insured mortgages; both types rose much more than in any previous year. VA-guaranteed mortgage debt declined for the first time on record, reflecting for the most part a further drop in volume of new loans to the lowest level since 1949. Yields on home mortgages declined along with other market rates of interest in the first half of 1958. In late 1957, when yields on competitive capital market investments were declining sharply, mortgage yields had shown little change. These mortgages continued to be attractive to investors. The emergency housing legislation enacted in the spring of 1958 provided additional stimulus to home mortgage financing by authorizing the Federal National Mortgage Association to buy $1 billion of FHA-insured and VA-guaranteed mortgages on new low-cost housing, by eliminating discount controls on Government underwritten mortgages, and by raising the interest rate ceiling on VA-guaranteed mortgages from 4^2 to 4% per cent. After midyear, when other market rates of interest rose sharply, mortgage yields rose only moderately. Reflecting these and other developments, seasonally adjusted applications for FHA insurance and requests for VA appraisals on new homes began to mount in April, reached a peak in September, and then fell off. FHA applications for the year were the highest since 1950, and VA appraisal requests were up nearly 50 per cent from the low level of 1957. Outstanding short- and intermediate-term consumer debt changed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

24 ANNUAL REPORT OF BOARD OF GOVERNORS little in 1958, after increasing in every earlier postwar year. A marked decline in instalment debt on automobiles in 1958 was offset by increases in other types of instalment debt and in noninstalment debt. Extensions of credit on sales of new cars were far below the levels of other recent years. Extensions of personal loans and other consumer goods credit, after a downturn early in the year, increased gradually to levels above those prevailing at the end of 1957. Extensions of automobile credit also rose in the last quarter of 1958 but remained below 1957 levels. Repayments of instalment debt were stable throughout the year. Instalment credit terms on some transactions were eased and new credit plans were developed and extended. International capital transactions. The net outflow of United States private capital in all forms was about $300 million less in 1958 than in 1957, but this moderate decline was accompanied by substantial shifts in composition of the flows of investments and loans. The outflow for direct investment in affiliates abroad was about half the 1957 amount, a decline of more than $900 million, reflecting in part the completion of certain large capital expenditure programs. Net new security issues in the United States by foreign and international borrowers, however, reached a postwar record level of $900 million in 1958, twice as much as in 1957. Offerings by Canadian corporations and local governments and by the International Bank for Reconstruction and Development were unusually large, particularly in the first half of the year when interest rates in the United States were relatively low, and the volume of other foreign issues also was at a record level. The net outflow of bank loans and commercial credits was little changed; persistence of foreign credit demands was associated in part with balance-of-payments difficulties in some of the less industrialized countries. These and other capital transactions, together with current transactions between the United States and the rest of the world, enabled foreign monetary authorities to acquire $2.3 billion of gold from the United States while foreign holdings of liquid dollar assets increased by $1 billion. Most of this increase was in time deposits of foreign banks at United States commercial banks. Foreign holdings of Treasury securities showed no net change. They declined during the first half of the year, when bill yields fell below the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 25 time deposit interest rate, but rose in the last half when the trend of interest rates was reversed. CREDIT SUPPLIES The flow of loanable funds rose in 1958 following declines in 1956 and 1957. The bulk of the increase was in commercial bank credit, which expanded in response to increased availability of bank reserves by the postwar record amount of $15 billion. A major component of the growth in loanable funds was a postwar record rise in commercial bank time deposits. Individuals also continued to accumulate savings in other financial forms at a high rate. Activation of idle cash balances, which had occurred in other recent years, when interest rates were rising, apparently did not continue in 1958. BANK LOANS AND INVESTMENTS ALL COMMERCIAL BANKS Billions of dollars 180 TOTAL 160 140 100 LOANS AAJ 1954 1956 1958 NOTE.—Figures are partly estimated. Data exclude interbank loans and are for last Wednesday of month, except for June and December call dates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 ANNUAL REPORT OF BOARD OF GOVERNORS Consumer saving. Saving by consumers in financial form—the increase in their financial assets less the increase in their indebtedness—continued at a high level during 1958 after rising substantially in the previous two years. Consumer accumulation of funds through savings institutions and banks was at record rates, while saving through the acquisition of marketable securities was at a much lower rate than in 1957. Indebtedness of individuals to purchase securities, however, rose sharply in 1958, while that for the purchase of residential real estate and goods and services, discussed earlier in this report, rose by a moderate amount. Deposits in mutual savings banks and shares in savings and loan associations, which had been increasing by relatively stable amounts in the past few years, grew at a more rapid pace in 1958. The total of savings and time deposits at commercial banks also rose more than in other recent years, although growth in the last half of the year was much below the rapid rate of the first half. This change in rate of growth was due in large part to a shift of business and State and local government funds out of Treasury bills and other liquid assets into time deposits in the first half and a reversal of that flow in the second half in response to movements in market rates of interest on these alternative investments. Growth in savings deposits at commercial banks is estimated to have remained above the high 1957 rate over most of the year, though dropping off toward the year-end. Individuals supplied funds to other financial intermediaries, such as life insurance companies and pension funds, at a somewhat higher rate in 1958 than in the previous year. Individuals accumulated securities at a much lower rate in 1958 than in the previous two years. They made smaller net purchases of State and local government securities and corporate bonds, and they also reduced their holdings of United States Government securities. Net redemptions of United States savings bonds were at a much slower pace than in the previous year, but the decline in holdings of other Treasury issues offset the previous year's rise. Consumer net borrowing to purchase securities showed a marked rise of about $1 billion in 1958 in contrast with a decline of about $500 million in the previous year. Most of the increase was in customer debit balances with New York Stock Exchange member Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 27 firms covering the purchase of corporate stocks. There was also considerable borrowing for speculative purchases of United States Government securities in connection with the June Treasury financing, but these loans were rapidly liquidated following the sharp decline in bond prices in midsummer. Institutional lenders. The flow of funds to institutional lenders increased in 1958. Growth in assets of life insurance companies was nearly one-sixth more than in 1957, but savings capital of savings and loan associations rose one-fourth more and deposits at mutual savings banks two-fifths more than in 1957. Reflecting the increased demand for mortgage loans and the relatively high yield on mortgages in relation to other investments over much of 1958, institutions increased their holdings of mortgages substantially more in 1958 than in 1957, while their holdings of business securities rose less. The growth in mortgage holdings of mutual savings banks in 1958 was $670 million larger than in 1957, while the rise in business securities was $200 million less. Savings and loan associations, which invest primarily in mortgages, increased their holdings over $1.3 billion more in 1958 than in 1957. Life insurance companies, whose new investments largely reflect previous forward commitments, increased their commitments for mortgages sharply during the year, but their acquisitions of mortgages did not rise until late in the year. Mortgage portfolios of these companies expanded $400 million less than in 1957. Their holdings of business securities rose about as much as a year earlier, and, for the first time since 1946, their holdings of United States Government securities rose, contrasting with substantial reductions in other recent years. Bank credit. Loans and investments at commercial banks rose $15 billion in 1958, about half again as much as the previous postwar record growth in 1954. In response to a continued policy of credit ease, almost three-fifths of the increase occurred during the first half of the year, a period when bank credit usually declines. About $1.5 billion of the increase in this period was a direct offset to reductions in reserve requirements. In the latter part of the year, as economic recovery gained momentum and reserve availability was restricted, bank credit expanded at little more than the usual seasonal rate. With loan demands generally slack throughout the year, most of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 ANNUAL REPORT OF BOARD OF GOVERNORS the credit growth was in holdings of United States Government securities, which rose by a postwar record amount of $8 billion. Investments in other securities, mainly State and local government issues, also rose by a record $2.5 billion. Loan growth in 1958 totaled only $4.3 billion, slightly more than in 1957 but much less than in most other postwar years. Real estate loans, which rose in record volume in the last half of the year, accounted for about half of the total loan growth. Agricultural loans also showed a large increase. As already indicated, business loans declined a little over the year, although growth in the last quarter was about in line with seasonal expectations. Deposits at commercial banks rose by a postwar record amount DEPOSITS ALL COMMERCIAL BANKS Billions of dollars DEMAND SEASONALLY 60 50 40 1954 1958 NOTE.—Last-Wednesday-of-month figures partly estimated by Federal Reserve, except for time deposits in June and December, which are call report data. Demand deposits exclude collection items, and both series exclude interbank and U. S. Government deposits. Demand deposits are for all banks in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 29 of $12.6 billion, more than twice as much as in 1957. Time deposits accounted for almost three-fifths of this total, with a record growth of $7.0 billion. Demand deposits adjusted, which went down by a small amount in the previous year, also rose substantially. Treasury deposits, however, rose only slightly. The active money supply—demand deposits and currency held by the public—rose about 4 per cent in 1958, the largest increase since 1951. On a seasonally adjusted basis, most of the increase occurred between the end of January and the end of July, when bank credit was expanding at a rapid rate. Turnover of demand deposits declined in the first half of 1958 and rose in the last half to a level approaching the postwar peak reached in the third quarter of 1957. Reserve positions of member banks over the year reflected the course of Federal Reserve policy, easing in the first half and tightening in the last half, but changed little on balance. There were, however, substantial changes in several major factors affecting reserves. Required reserves declined about $500 million, as deposit growth absorbed about $1 billion of the $1.5 billion of funds released through reductions in reserve requirements early in the year. System acquisitions of United States Government securities also supplied about $2.1 billion of reserves. Reserves were absorbed over the year mainly by a $2.2 billion gold outflow and a $500 million increase in currency in circulation. The principal Federal Reserve policy actions during the year are summarized on the following pages, and are described more fully in the records of policy actions of the Board of Governors and of the Federal Open Market Committee appearing elsewhere in this report. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

30 ANNUAL REPORT OF BOARD OF GOVERNORS DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, 1958 Period Action Purpose of action January Limited net reduction in holdings of To ease reserve positions by U. S. Government securities to $900 absorbing only part of the remillion, more than half of which rep- serves made available by resented securities held under repur- seasonal factors affecting chase agreement at end of year. Mem- bank reserve positions. ber bank borrowings declined to an average of $450 million. Tanuary Reduced margin requirements on To recognize that dangers of loans for purchasing or carrying listed excessive use of credit for securities from 70 to 50 per cent of stock market speculation had market value of securities. subsided, since stock prices and the volume of credit in the stock market had declined to levels near or below those prevailing at the time of the previous increase in requirements. January- Reduced discount rates from 3 to 2% February per cent at 11 Reserve Banks. February Reduced reserve requirements on demand deposits from 20 to 19V2 per cent at central reserve city banks; from 18 to 17^2 per cent at reserve city banks; and from 12 to IIV2 per cent To reduce further the cost of at country banks, thus freeing an estiborrowing from the Reserve mated $500 million of reserves. Banks and increase further March Reduced discount rates from 2% to the availability of bank re- 2 lA per cent at 11 Reserve Banks and serves in order to encourage from 3 to 2lA per cent at one Reserve bank credit and monetary Bank. expansion conducive to resumed growth in economic March Reduced reserve requirements on de- activity. mand deposits from 19V2 to 19 per cent at central reserve city banks; from 17% to 17 per cent at reserve city banks; and from 11% to 11 per cent at country banks, thus freeing an additional $500 million of reserves. February- Purchased about $450 million of U. S. To supplement reserve re- Mid-April Government securities. Member bank quirement actions in further borrowings declined further to an increasing the availability of average of about $180 million. bank reserves. April Reduced reserve requirements on demand deposits from 19 to 18 per cent (in two stages) at central reserve city banks and from 17 to I6V2 per cent at reserve city banks, thus freeing a total To supplement previous acof about $450 million of reserves. tions to encourage bank April-May Reduced discount rates from 2lA to credit and monetary expan- 1% Per cent at all Reserve Banks. sion and resumed growth in economic activity and to off- Mid-April-June Purchased outright about $1.7 billion set current gold outflow. net of U. S. Government securities. Member bank borrowings declined further to an average of $100 million at the end of June. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 31 Period Action Purpose of action July- Bought a small volume of U. S. Gov- To correct disorderly condiernment securities other than short- tions in the Government seearly August term issues and a large amount of curities market, to facilitate securities involved in a Treasury re- the Treasury refinancing, financing. Promptly thereafter reduced and then to recapture the Treasury bill holdings substantially. bank reserves created by the earlier securities purchases. August Raised margin requirements on loans To help prevent an excessive for purchasing or carrying listed se- use of credit for purchasing curities from 50 to 70 per cent of or carrying securities. The market value of securities. volume of credit in the stock market and stock prices were advancing sharply and were at or near the highest levels since World War II. August-early Made little change in holdings of Open market action not taken September U. S. Government securities. Mem- to offset drains on reserve ber bank borrowings increased to an funds reflecting bank credit average of more than $400 million and monetary expansion rein early September. sulting from seasonal factors and the sharp upturn in economic activity. August- Raised discount rates from l3/4 to 2 To keep discount rates in an September per cent at all Reserve Banks. appropriate relationship with market rates and to increase the cost of borrowing by individual banks from the Reserve Banks in case of increasing demands for bank credit. October Raised margin requirements on loans To help prevent an excessive for purchasing or carrying listed se- use of credit for purchasing curities from 70 to 90 per cent of mar- or carrying securities. ket value of securities. Late October- Raised discount rates from 2 to 2lh To bring discount rates into early November per cent at all Reserve Banks. closer alignment with open market rates. Mid-November- Increased system holdings of U. S. To meet part of reserve needs December Government securities about $900 associated with seasonal facmillion, including securities held un- tors and a further moderate der repurchase agreement. Member outflow of gold. bank borrowings rose to average of $560 million in December. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 ANNUAL REPORT OF BOARD OF GOVERNORS RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE The record of policy actions of the Federal Open Market Committee is presented in this report pursuant to the requirements of Section 10 of the Federal Reserve Act. That section provides that the Board of Governors of the Federal Reserve System shall keep a complete record of the actions taken by the Board and by the Federal Open Market Committee upon all questions of policy relating to open market operations and shall record therein the votes taken in connection with the determination of open market policies and the reasons underlying the actions of the Board and the Committee in each instance. Section 10 also provides that the Board shall include in its Annual Report to the Congress a full account of the actions taken during the preceding year, both by the Board and by the Federal Open Market Committee, with respect to open market policies and operations and with respect to the policies determined by the Board. The record of policy actions of the Federal Open Market Committee is prepared on the basis of the minutes of the meetings of that Committee, as approved by the Committee, and sets forth the policy decisions reached together with a resume of the reasons therefor. Many policy decisions are by unanimous vote of the Committee members, but the emphasis on specific reasons for preferring a particular line of policy may vary from individual to individual. There are times when individual members of the Committee may concur in a concept of policy action formed by a majority because it moves generally in the direction that they believe to be called for, even though their views may differ considerably from those of other members of the Committee as to the degree of movement that is desirable. When a member records a dissent from an action of the majority of the Committee, the dissent may reflect a variety of factors, such as a fundamental disagreement with the direction of policy action as indicated in the directive, or a fundamental disagreement with the emphasis attached to a particular objective as indicated in the directive. It should be noted that the policy directive adopted at a meeting of the Federal Open Market Committee is usually in general terms Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 33 and that, without changing the wording of the directive, the Committee may from time to time modify considerably the emphasis to be placed on operations designed to implement the general policy. The shadings of opinion that enter into the formation of a policy decision provide the Manager of the System Open Market Account (who attends the meetings of the Committee) with a guide to be used in the conduct of open market operations within the framework of the policy directive adopted at that meeting. * * * The policy directive of the Federal Open Market Committee that was in effect at the beginning of 1958 was the one that had been approved at the meeting on December 17, 1957. This directive called for open market operations with a view, among other things, to cushioning adjustments and mitigating recessionary tendencies in the economy. It was issued to the Federal Reserve Bank of New York as the Bank selected by the Committee to execute transactions for the System Open Market Account and directed that Bank: (1) 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 cushioning adjustments and mitigating recessionary tendencies in the economy, 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; (2) 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. (3) To sell direct to the Treasury from the System Account for gold Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 ANNUAL REPORT OF BOARD OF GOVERNORS 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 Federal Open Market Committee met 31 times during 1958. Of these meetings, 19 were held in Washington and 12 were held by means of telephone conference arrangements in which some members were located outside Washington. In five of the meetings held by telephone conference, policy decisions were reached, while the other seven telephone conference meetings did not involve proposals for new policy actions but were for the purpose of discussing operations being conducted within the limits of policy actions previously taken. The policy actions taken by the Committee during the year are set forth in the following pages by date of meeting. January 7, 1958 Authority to effect transactions in System Account. No change was made in the Committee's policy directive that specified that operations should be with a view, among other things, "to cushioning adjustments and mitigating recessionary tendencies in the economy." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: none. Domestic economic activity continued to be characterized by general cyclical recession, with contraction in output at a pace comparable to that experienced in the 1948-49 and 1953-54 recessions. Gross national product in the fourth quarter of 1957 had decreased about $6 billion, annual rate, largely associated with inventory liquidation, while industrial production for December was estimated at 137, seasonally adjusted, compared with 147 a year earlier and with the narrow range of 143-146 that prevailed during the period from January through September 1957. The market for new automobiles had been disappointing to producers, with sales off sig- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 35 nificantly from a year earlier, while repossessions on instalment sales had reached high ground and still seemed to be edging upward. However, other sales at retail picked up sharply in the latter half of December, after having started the month slowly, and department store sales, seasonally adjusted, reached a new high in that month. Construction activity in December continued at record levels, with increases in residential construction again offsetting declines in the industrial area, but unemployment rose further in that month to around 5 per cent of the total labor force. Wholesale prices showed little change in December, remaining at about the average that had prevailed since midyear, while consumer prices were reflecting advances in services and meat prices. In the financial area, two developments had occurred since the reduction in Federal Reserve Bank discount rates in November. One of these was a sharp decline in interest rates and the other was some seasonal increase in bank loans and investments, which represented a turnaround from the contra-seasonal decreases shown for October and November. The Federal Reserve System had supplied over $1 billion of reserves to the banking system during the six weeks prior to the end of the calendar year, and those reserves had contributed to credit expansion as well as currency expansion a little in excess of seasonal estimates. In brief, recent policies designed to cushion adjustments and mitigate recessionary tendencies in the economy had established the basis for maintaining the privately owned money supply. Analysis of the data on economic activity indicated that the current recession was attributable largely to a decline in business plant and equipment expenditures, aggravated by an inventory cycle. It was not apparent, however, whether those influences were likely to spread to consumer spending and thus produce a cumulative recession. There was uncertainty as to the probable speed of inventory adjustment, particularly by manufacturers, and there was also uncertainty as to the amount and timing of the expected increase in defense spending, although it did not seem probable that this would be a significant factor for several months. In view of the wide range of possible ways in which the recession might develop, it seemed prudent to assume that the next upturn might be a fairly long way off, to be preceded either by a continuing gradual Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 ANNUAL REPORT OF BOARD OF GOVERNORS decline or perhaps by a sideways movement after the current decline had run its course. The shift in System credit policy in the fall of 1957 had made it clear that open market operations were being directed toward assuring an adequate volume of credit for all potential borrowers with economically sound credit needs, but on the other hand System policy had not gone to the point of trying to bring about an excessive volume of free reserves. In concluding that no change should be made in the policy directive, the Committee agreed that a slight easing in the reserve positions of banks would be desirable and that operations in the System Open Market Account should be conducted with sufficient latitude to permit this development to take place within the limits of the directive. January 28, 1958 Authority to effect transactions in System Account. The Committee made no change at this meeting in the wording of the directive to the Federal Reserve Bank of New York, which called for operations in the System Open Market Account directed toward cushioning adjustments and mitigating recessionary tendencies in the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: none. Economic decline had acquired a definite momentum at the time of this meeting, and further decreases in production, employment, and other measures of activity were in prospect. It appeared that the industrial production index for January would show a decline of 2 or 3 percentage points from December, which would put it about 8 per cent below the early 1957 level, and unemployment claims were continuing to increase. The declines in activity during recent months had been traceable primarily to adjustments in the capital goods area, and it was pointed out that readjustments in this particular area might take Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 37 considerable time. Installation of much new capacity during the past few years had eased the supply situation enough so that for some time there had been less incentive for buyers to maintain inventories and, at this time, they were being reduced. While inventory adjustments could occur fairly quickly, the rapidity of adjustment in both the inventory and capital goods areas would partly depend on changes in other demands, including consumer demands, State and local government demands, defense demands, and foreign demands. The free reserve position attained thus far by member banks had been of moderate size, and monetary expansion, which had paused in the latter part of 1957, had not yet been resumed. Demand for bank loans now appeared to be showing a slackening drift, reflecting a larger than seasonal decline in business loans and also liquidation of dealers' positions in Government securities financed with bank credit in December. A large Treasury financing operation was expected shortly, and, although there were prospects that reserve availability would expand in coming weeks owing to further seasonal decline in deposits and to a reduction in Treasury cash balances, it was suggested that it would be desirable to continue through open market operations at least the present degree of reserve availability until indications of monetary expansion appeared. Some members suggested a more aggressive easing immediately, believing that could be done without disturbance to the forthcoming Treasury financing. Such a policy would be consistent with the reduction in discount rates to the 2% per cent level that had been made at several of the Federal Reserve Banks just prior to this meeting. In all the circumstances, the Committee concluded that, even though the level of economic activity was continuing to decline, there should be no change at this meeting in the policy of supplying reserve funds in a manner that would cushion adjustments and mitigate recessionary tendencies in the economy and that, in view of the desirability of having an "even keel" during the period of the Treasury financing, open market operations should be directed toward maintaining approximately the same condition in the money market that had existed immediately prior to this meeting. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 ANNUAL REPORT OF BOARD OF GOVERNORS February 11, 1958 Authority to effect transactions in System Account. The Committee again renewed without change the policy directive that placed emphasis upon operations in the System Account with a view to cushioning adjustments and mitigating recessionary tendencies in the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson, Shepardson, Szymczak, and Williams. Votes against this action: none. Recession in general activity had continued during the month of January and signs of leveling out were not yet at hand. The declines were again general, but they were greatest in durable goods and related industries. The length of the work week had fallen to the lowest level of the postwar period, and by mid-January unemployment had risen close to the postwar peak of 4.7 million that prevailed in February 1950. Manufacturers' new orders for December showed a 2 per cent drop from November and were down I1/} per cent over the year, with new orders for durable goods running a fifth below the previous year. Business inventory liquidation had continued in December, mainly concentrated in durable goods manufacturing, but despite such liquidation the stock-sales ratio rose further to the highest level in a decade. January retail deliveries of new automobiles were some 20 per cent lower than deliveries in the previous month or in January 1957. Preliminary estimates suggested a further decline in gross national product for the first quarter of 1958 of from $4 to $5 billion, annual rate, putting total product back to the level of the first quarter of 1957. Exports in December were down sharply after two months of stability. Favorable factors included total construction activity, which continued at close to record levels in January, and total retail sales including those at department stores. While business loans at city banks were liquidated in a recordbreaking amount during January, the banks had increased their holdings of securities since the end of November. As a result, total loans and investments rose more in December and decreased less after the turn of the year than they did in 1957 or 1956. Time de- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 39 posits at city banks advanced even more sharply in January 1958 than in the same month of the previous year. New security issues by State and local governments were proceeding in record-breaking volume, with some issues which were deferred in 1957 now being brought to the market. Short-term interest rates had declined to the lowest levels since early 1955, while long-term rates had been somewhat firmer during the past two or three weeks. Reserves to cover credit demands had been abundantly supplied through market factors and System operations. Additions to System holdings of Government securities had been much larger in December than usual, while the January decline was smaller than usual. The result was that the reserve position of member banks had shifted from net borrowed reserves of over $300 million during the last week of November to free reserves of over $200 million in the past two weeks. Projections indicated that free reserves might fluctuate around this level during February and increase sharply, though temporarily, in the first half of March unless offset by System operations. It was the view of the Committee that the policy that it had been following had resulted in placing the System in a quite appropriate posture. If later on there were clear indications that the recession was spiraling, more drastic action might be required. Accordingly, for the present it was felt that the Committee should continue to follow an "even keel policy tipped on the side of ease." In these circumstances, no change was made in the existing policy directive. March 4, 1958 1. Review of continuing authorities or statements of policy. This being 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, 1958 had assumed their duties, the Committee reviewed and reaffirmed all continuing statements of policy and authorities for operations. These included the following: 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). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Vardaman. 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, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Vardaman. Vote against this action: Mr. Hayes, Vice Chairman. Mr. Hayes stated that he would vote to approve the statement if the qualifying phrase, "as a general rule," were inserted after "shall" in the second and fourth lines. 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. Votes for this action: Messrs. Martin, Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Vardaman. Vote against this action: Mr. Hayes, Vice Chairman. Mr. Hayes stated that he would vote to approve the action if the word "solely" were deleted from the second line and "primarily" substituted therefor, and if the phrase "as a general rule" were inserted after "shall" in line three. 2. Authority to efEect transactions in System Account. Clause (b) of paragraph (1) of the directive was changed at this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 41 meeting to provide that, among other things, open market transactions would be with a view "to contributing further by monetary ease to resumption of stable growth of the economy/' The Committee also deleted from the directive the paragraph authorizing the sale direct to the Treasury from the System Open Market Account for gold certificates of such amounts of Treasury securities maturing within one year as might be necessary from time to time for the accommodation of the Treasury up to an aggregate amount of $500 million face amount. Votes for these actions: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Vardaman. Votes against these actions: none. During recent weeks, business activity had shown indications of deepening recession. A further decline during February indicated that the Board's index of industrial production for that month would be about 10 per cent under the mid-1957 high. Employment had continued to decline and unemployment to rise. Preliminary data from a survey of plans for plant and equipment expenditures during 1958 pointed to a decrease for the year of 10 per cent, whereas a similar survey made in the fall of 1957 indicated a decline of 7 per cent. Although the housing market appeared to be holding fairly strong, the over-all summary of economic conditions at the time of this meeting was described as one of little cheer. The volume of free reserves had increased during late February, reflecting among other factors a reduction in reserve requirements ordered by the Board of Governors of the Federal Reserve System. At the same time the Committee authorized by telegram the maintenance of a somewhat higher level of free reserves than had been contemplated at the February 11 meeting. In the market, an expansion in the total volume of bank credit had taken place during February. Business borrowing had been sharply reduced in the past 90 days, but the banks, supplied with ample reserves, had expanded holdings of securities and loans on securities, particularly in February, in contrast with the customary seasonal reduction at that time. The Committee's discussion of the situation disclosed considerable Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 ANNUAL REPORT OF BOARD OF GOVERNORS feeling that the policy directive should reflect a more positive approach to recovery than was embodied in the wording calling for "cushioning adjustments and mitigating recessionary tendencies in the economy." Agreement was reached on the change indicated, namely, that during the period following this meeting open market operations should be with a view to "contributing further by monetary ease to resumption of stable growth of the economy." The Committee also discussed whether the discount rates at the Federal Reserve Banks should be reduced further from the prevailing level of 2% per cent, concluding that the matter should take its course at the respective Federal Reserve Banks. Elimination from the directive of the third paragraph authorizing the sale direct to the Treasury from the System Open Market Account for gold certificates of Treasury securities up to an aggregate of $500 million resulted from the belief that under current circumstances, including the action taken by the Congress to increase the national debt limit from $275 to $280 billion, such an authorization was not likely to be used. March 25, 1958 Authority to effect transactions in System Account. The Committee renewed without change the directive approved at the meeting on March 4, 1958, which called for transactions in the System Open Market Account with a view, among other things, to contributing further by monetary ease to resumption of stable growth of the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. Economic information presented to the Committee indicated a likelihood that industrial production during March would fall below the rate for February, which was 130 per cent of the 1947-49 average. The February figure represented a decline from 135 in December 1957 and 145 last August, which meant that in the six months from August to February industrial production had declined a little more rapidly than in the corresponding periods of early recession in 1948- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 43 49 and 1953-54. Employment had continued to decline in both manufacturing and nonmanufacturing lines, with the decrease particularly marked in durable goods industries. Unemployment had risen sharply to 5.2 million in February, the number of workers on part time had increased further, and the number working overtime had continued to decline. Meanwhile, however, both consumer and wholesale prices were appreciably higher in February than in December, reflecting principally higher prices of food products and higher charges for services. Inventory liquidation was proceeding at a rather rapid pace, while business outlays for plant and equipment were continuing downward, with no turning point yet in sight. Although consumer buying had been well sustained, the February figures on retail sales were below the same month last year and it appeared that this trend might be continuing in March. In the securities markets, stock prices had moved up irregularly and high-grade corporate bond prices had declined slightly since late January. A more than seasonal reduction in bank loans to business had accompanied declines in economic activity and business inventories, but the banks had been increasing their investments since late in the fall of 1957 and total bank credit outstanding had increased at a season when a decrease is usual. Corporations had obtained large amounts of new capital, and borrowing by the Treasury and other Government entities had been large. There had been a fair degree of stability in activity abroad. Although the leveling off in activity overseas had had a disproportionate impact on exports from this country, the major part of the downward adjustment in exports appeared to have been completed. Thus far, the recession in the United States had had only a limited impact on the industrialized European countries. The record of free reserves and short-term interest rates since the last Committee meeting suggested that the degree of ease desired by the Committee had been achieved. However, there was at the same time an occasional tendency for a feeling of relative tightness to develop temporarily in the money centers. The commercial banks, generally speaking, seemed to have adequate reserves at their disposal for the expansion of credit, but it appeared that the reduced level of liquidity which came about in the late stages of the 1955-57 boom might still be exerting some dulling effect on their attitudes toward Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 ANNUAL REPORT OF BOARD OF GOVERNORS lending. Accordingly, it was regarded by some as questionable whether the commercial banking system would be an active instrument in fostering recovery until it had attained substantially greater liquidity. In the last 130 days the System had moved on a broad front to establish a condition of credit ease. Aside from open market operations making reserves more readily available, the discount rates of the Federal Reserve Banks had been reduced in several steps from 3^2 per cent to 2% per cent, the latest reduction having been effected in the period since the last meeting of the Committee. In addition, there had been two reductions totaling one percentage point in member bank reserve requirements against demand deposits, the more recent of which became effective for central reserve and reserve city banks on March 20, 1958, and would become effective for other member banks on April 1, 1958. The present posture of Federal Reserve policy was one of ease and it was the view of the Committee that it should continue to be such. Discussion brought out the comment that, although further discount rate reductions might possibly seem logical in view of the level of the Treasury bill and other money market rates, a change on the eve of a Treasury financing might incite undesirable speculation in the Government securities market. While making no change in the existing policy directive, the Committee concluded that operations in the System Account should be directed toward maintaining a slightly larger volume of free reserves and money market conditions slightly easier than had been achieved since the last meeting of the Committee. April 15, 1958 Authority to effect transactions in System Account. This meeting of the Committee resulted in a decision to continue without change the policy directive calling for operations designed to contribute further by monetary ease to resumption of stable growth of the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Robertson, Shepardson, and Szymczak. Votes against this action: none. Data available to the Committee indicated some slowing down in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 45 the pace of decline for total output and employment, some leveling out in trade, and maintenance of construction activity at close to record levels in value terms. In contrast, there were some developments of an expansive character in finance. While the picture domestically therefore appeared as one of more diversity or crosscurrents than earlier in the year, the over-all drift of the economy nevertheless was still plainly downward. Current statistics offered only slight basis for the hope that the saucering-out phase of the recession was at hand. After allowances for seasonal influences, the labor market continued to show further weakening, while surveys of business plans for plant and equipment expenditures reflected a further substantial projected cutback for 1958 as compared with 1957. The industrial production index for March was estimated to have declined two points further to 128, and preliminary April information indicated further output curtailment, much along the lines of the March pattern but with the possibility of some slowing. Retail trade, seasonally adjusted, was estimated to have been off another one per cent in March, manufacturers* sales and orders continued to show declines, with the fall-off much sharper in durable goods than in nondurable goods lines, and business inventory liquidation was believed to have continued in March at quite a sharp rate. At the same time, prices at wholesale and in consumer markets had risen further to late March, putting the indices a full one per cent above the December 1957 level. In the financial area, total credit extended by commercial banks had apparently continued to expand during recent weeks, mostly in the form of short-term liquid assets. Savings of consumers held in financial form seemed to be increasing, while consumer debt had been decreasing. Business loans at banks had increased less than at this time in other recent years but corporate issues for new capital continued at a high level, as did new issues of State and local governments, and the Federal Government had become a net borrower. Deposits at banks had increased, on a seasonally adjusted basis. Shortand medium-term interest rates had shown further declines with wide variations, reflecting changes in liquidity, while long-term rates, under the influence of continued heavy borrowing in capital markets, remained firm. Nearly $1 billion of reserves had been released by reductions in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 ANNUAL REPORT OF BOARD OF GOVERNORS reserve requirements of member banks since February 26 and an additional $250 million had been supplied by System open market operations through April 9. Reserves had been absorbed by an increase in required reserves of about $200 million resulting from growth in deposits, a rise in currency in circulation, foreign operations, consisting principally of gold withdrawals amounting to about $400 million, and changes in float and other factors. Free reserves in the aggregate had averaged somewhat in excess of $500 million. Although country banks appeared to be well supplied with reserves, banks in New York and Chicago, and probably in some other cities, had experienced wide fluctuations in their reserve positions and had borrowed heavily in the Federal funds market. It appeared that a substantial amount of additional reserves might need to be supplied by the Federal Reserve System in the next few weeks in order to maintain a condition of ease conducive to further credit and monetary expansion. Reports at this meeting indicated that the directors of some of the Federal Reserve Banks had been giving serious consideration to the establishment of a discount rate lower than the existing 2*4 per cent rate. With the recent Treasury financing now completed, it appeared that those Reserve Banks might act to establish a lower rate rather quickly. A further reduction in the reserve requirements of member banks was seen as a possible means of providing the additional reserves that would otherwise have to be supplied by open market operations during the next few weeks in order to maintain the present level of free reserves. If the reduction were concentrated at central reserve and reserve city banks, it would also have a tendency to relieve pressure that occasionally developed in the money centers. Taken together, it was suggested that such actions on the discount rate and reserve requirements would clearly confirm the current easing posture of monetary policy and reinforce the policy objective of assisting the recovery of the economy. The Committee was of the view that there was no reason to change its policy directive at this time. Free reserves had averaged slightly higher during the period since the last meeting of the Committee than during the preceding three-week period, and it was agreed that this general level should be maintained. It was noted, however, that if action should be taken in the near future on both the discount Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 47 rate and reserve requirements, the level of free reserves would tend to become relatively incidental, as long as the free reserve position did not decrease to an extent that might make it appear as though the System was reversing policy. May 6, 1958 Authority to effect transactions in System Account. The policy directive calling for operations to contribute further by monetary ease to resumption of stable growth of the economy was again renewed at this meeting. Votes for this action: Messrs. Martin, Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, Vardaman, and Treiber. Votes against this action: none. Although some statistical evidence suggestive of a slowing of economic decline had been accumulating, most of the information available to the Committee at the time of this meeting indicated that the recession was still deepening and that a bottom was yet to be established. Among other things, the index of industrial production was estimated to have dropped another two points to 126 in April, manufacturers' sales and new orders were off again in March to about the same extent as in February, business inventory liquidation in March was found to have amounted to a further $700 or $800 million, seasonally adjusted, and estimates of new construction outlays had recently been revised downward due to lower private expenditures. Unemployment in April decreased less than seasonally, initial claims for unemployment insurance were still running at quite high levels, and the number of continued claims of those unemployed for 15 weeks or more was double that recorded in earlier postwar recessions. At the same time, the average of wholesale prices was holding stable and the average of consumer prices was still rising. Since the preceding meeting of the Committee, there had been a further reduction to 1% per cent in the discount rates of most of the Federal Reserve Banks along with a further reduction of one-half percentage point in reserve requirements against demand deposits at central reserve and reserve city banks, while open market operations had been such as to maintain free reserves generally exceeding $500 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 ANNUAL REPORT OF BOARD OF GOVERNORS million. Financial developments during this period were influenced by the additional availability of bank reserves and by the activities of banks in endeavoring to put their available funds to use. Demands on capital markets continued heavy. In the five weeks ended April 30, banks in leading cities showed a further increase of over $2.5 billion in total loans and investments, and it appeared that during the five months since the end of November, a period in which bank credit usually declines, total loans and investments of all commercial banks may have increased by $7 billion or more. The increase in April reflected almost wholly additions to holdings of United States Government securities, particularly the new Treasury five-year notes. Demand deposits adjusted at city banks increased during the five weeks prior to April 30 by about $1,200 million, compared with a growth of $750 million in the same period of 1957, while time deposits continued to increase at a much faster pace than the previous year. The pattern of economic and financial developments caused the Committee to conclude that the prevailing policy of ease should be continued and that no change should be made in the outstanding policy directive. May 27, 1958 Authority to effect transactions in System Account. The Committee again continued without change the policy directive providing for operations in the System Account with a view to contributing further by monetary ease to resumption of stable growth of the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Fulton, Irons, Leach, Robertson, Shepardson, Szymczak, Vardaman, and Deming. Votes against this action: none. The composite of current economic indicators reported at this meeting suggested that the recession in economic activity had been leveling off and that a bottom to the decline might be in the making. The decline in industrial production, over all, seemed to have been checked in May, and a number of other indicators, including retail sales, personal income, residential building, and new orders received by durable goods manufacturers, likewise appeared to have stopped Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 49 receding or to have risen slightly. While inventory liquidation had probably been continuing in the aggregate, some key material markets suggested a lessening in such liquidation. Also, although initial and continued unemployment compensation claims were still very high, the trend was indicative of a little firmer labor market. March figures for exports had risen from February, while imports continued to be well maintained at the moderately reduced level of the first two months of the year. In agriculture, the income outlook was quite favorable. Capital market activity had been well sustained and banking developments were in the direction of a strengthening of business and individual liquidity positions. As to prices, a degree of flexibility in the area of industrial commodities seemed to be emerging gradually, especially at the wholesale level. The Committee recognized that each of the favorable factors needed qualification and that a number of other factors in the current situation raised questions about the imminence of recovery. Furthermore, there were reports of a substantial speculative interest in the Treasury issues maturing in June, a factor that suggested the need for close attention in view of the forthcoming Treasury refunding operation. On balance, therefore, it seemed prudent to view the forthcoming period as one of gradual testing, with the realization that on the basis of past cyclical patterns the period of testing might last for some time. Short-term interest rates recently had declined to new low levels while long-term rates, after declining somewhat in April, rose slightly in early May. New security financing by corporations and by State and local governments continued in large volume. Recent figures showed that total loans and investments of all commercial banks increased by about $4 billion in April—a larger growth than had previously been estimated—thus bringing the total increase since the end of November 1957 to above $8 billion. Marked increases occurred during April in both loans and investments at country banks and in holdings of investments by city banks, where declines in business loans were offset by increases in loans on securities. In May, the decline in total loans and investments at city banks had been smaller than usual at that time. Demand deposits adjusted and currency outside banks showed a seasonally adjusted increase of $900 million in April following similar increases in February and March, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 ANNUAL REPORT OF BOARD OF GOVERNORS with the result that the total at the end of April was the largest since July 1957 and was equal to the total at the end of April 1957. Time deposits, other than interbank, were about $7 billion larger than at the same time in 1957, while interbank and United States Government deposits had also risen to higher levels than a year earlier. In addition to the growth in the volume of deposits, the rate of turnover of demand deposits had increased in April, contrary to the usual seasonal trend, and was about the same as in April 1957. Free reserves held close to $500 million during May, substantial drains on reserves attributable to the continued gold outflow and to a larger than seasonal increase in currency in circulation having been largely offset by additional reserves supplied through open market operations and other factors. Estimates presented to the Committee indicated that reserve needs would be rather large in June and the first half of July, arising in part from seasonal factors and from a larger than usual increase in Treasury deposits at banks. Therefore, in the absence of System action free reserves might generally average much less than the levels that had prevailed recently. In the light of these estimates and related factors, including the imminent and sizable Treasury financing operation, the Committee considered how best to implement and maintain the current posture of monetary ease without further depressing Treasury bill rates. It was the consensus that no change should be made in the language of the policy directive and that operations in the System Account should be directed toward maintaining an even keel over the ensuing period. In terms of approach, this contemplated that the Account Management would place emphasis on the tone and action of the market and the course of credit developments. June 17, 1958 Authority to effect transactions in System Account. The directive was renewed without change, continuing the policy of contributing further by monetary ease to resumption of stable growth of the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Fulton, Irons, Leach, Mangels, Mills, Robertson, and Szymczak. Votes against this action: none. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 51 Economic information available for this meeting was generally on the encouraging side and was confirmatory of the report at the May 27 meeting that bottoming out of recession was in fact occurring. However, analysis of the data suggested that the haze obscuring the outlook had not suddenly lifted, and that it was the better part of wisdom not to conclude as yet that a recovery pattern had definitely taken form. On the other hand, it could not be denied that there was a possibility that an accelerating recovery movement was now shaping up. High levels of consumer and Government demands seemed to be roughly offsetting recessionary forces generated in the investment area of the economy. Heavy demands on capital markets, including a Treasury bond offering for cash, had been met in part by substantial expansion in bank holdings of securities and loans on securities. Additional reserves had been supplied by System purchases of securities, but on balance free reserves had been somewhat lower than in May. The money market had continued relatively easy until the week of this meeting, but with the mid-June needs for funds for taxes, dividends, and other payments, and with settlement for the recent Treasury offering of securities, it seemed clear that substantial financing needs would have to be met by the banking system during the next two or three weeks which would include the July 4 holiday demand for currency. Despite the encouragement expressed by most Committee members regarding the business outlook, it did not appear that the time had arrived for backing away from the Committee policy of outright monetary ease or for creating a public impression that the Committee might be backing away from it. There was general agreement that over-all Federal Reserve credit policy should not be changed at this time and that, during the next three weeks, the System should stay about where it was. However, a minority suggested that, apart from open market operations, it might be desirable for some of the need for additional reserves during the immediate future to be met by a further reduction in reserve requirements for member banks. Another and contrasting variation from the general view was that reserves had been supplied in over-generous amounts during the past two months and that further injections to maintain the recent level of around Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 ANNUAL REPORT OF BOARD OF GOVERNORS $500 million of free reserves would abet speculation in the Government securities market and create excessive liquidity. Consideration of the foregoing factors resulted in a decision that at this meeting the Committee should make no change in Federal Reserve credit policy and that for the next three weeks no action should be taken to cause the tone of the market to get materially easier or tighter. July 8, 1958 Authority to effect transactions in System Account. No change was made at this meeting in the Committee's directive calling for open market operations with a view, among other things, to contributing further by monetary ease to resumption of stable growth of the economy. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. A summary of the economic data presented at this meeting was that performance of the economy in May and June had been better than had been anticipated. The index of industrial production over those two months had risen two points, and final data might show the rise to be three points. Gross national product for the second quarter was currently estimated to be at least moderately higher than in the first quarter. Whether an abrupt turnabout of activity was taking place or whether the extended improvement merely reflected a temporary rebound of production that had been far below consumption was yet to be determined. However, the odds seemed to favor more than a rebound improvement. An important feature of the recent strengthening was that it represented a composite of small improvements over a wide range of activities, rather than dominant activity in one or two areas. One big uncertainty in the situation was the possibility of cyclical downturn in European business activity and of a new surge in inflationary forces in the Latin American and Far Eastern countries. However, the evidence at this time did not warrant the inference that European recession was likely to become a force affecting adversely United Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 53 States and world trade developments, although it was apparent that developments in those markets would require close observation in the months ahead. On the financial side, the most striking development since the June 17 meeting had been severe pressure on the Treasury bond market. The underlying feature had been the large commitments in Treasury bonds made by temporary holders, many for pure speculation, induced by expectations of further declines in interest rates, and the attempt to close out those commitments at a time when the money market was under adverse pressure because of exceptionally heavy seasonal liquidity demands. This had called for exceptional amounts of Federal Reserve credit, and the increase in required reserves in the five weeks ending July 2 had been one of the largest on record for a period of that length. System open market operations had supplied $1.4 billion of additional reserve funds, and purchases of Government securities for Treasury investment accounts had been made, notwithstanding which interest rates rose. The Treasury bond market had been notably weak under the influence of the closing out of speculative commitments, and yields on such securities had risen sharply. In addition to the present disturbed atmosphere of the Government bond market, it was noted that important Treasury financing operations were in prospect between this and the next meeting of the Committee. While some members of the Committee felt that the likelihood of a rapid upturn in economic activity argued for less ease, the Committee reached the conclusion that, on balance, there should be no change in policy at this time and that the directive should be renewed in its existing form calling for continued monetary ease. July 18, 1958 Authority to effect transactions in System Account. The Federal Open Market Committee authorized the Federal Reserve Bank of New York to purchase for the System Open Market Account in the open market this afternoon $50 million or less of Government securities at the discretion of the Manager of the System Open Market Account on scale wherever the Manager deemed it appropriate in order to steady the market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Shepardson, and Szymczak. Mr. Vardaman, who was not present at the meeting, when informed of the action stated that he concurred. Votes against this action: Messrs. Mills and Robertson. Authority was granted to the Federal Reserve Bank of New York to purchase for the System Open Market Account in the open market, without limitation, Government securities in addition to short-term Government securities. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mills, Robertson, Shepardson and Szymczak. Mr. Vardaman, who was not present at the meeting, when informed of the action stated that he concurred. Votes against this action: none. The action set forth in the first paragraph of this entry was taken at a meeting of the Federal Open Market Committee, held by telephone conference in the early afternoon of July 18, and was based on a report by the Manager of the System Open Market Account that a condition was developing in the Government securities market which, in his judgment, was close to a disorderly condition although it had not yet actually reached that point. His recommendation was that purchases of securities during the afternoon of $50 million or less be authorized for the purpose of steadying the market. After considering the recommendation in the light of the existing conditions in the market and of the Committee's continuing operating policy providing that open market operations shall be "solely to effectuate the objectives of monetary and credit policy (including correction of disorderly markets)," the Committee authorized the purchase of Government securities as indicated. Messrs. Mills and Robertson voted against this authorization on the ground that at this time no one contended the market was disorderly and therefore there was no basis for intervention. In addition, they felt that the proposal to enter the market on a limited basis (as distinguished from action sufficiently massive to do the job) was unwise and would do very little to restore confidence in the market. Furthermore, they felt that if later there should be a disorderly market, the correction of it would have been seriously handicapped by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 55 temporizing and fluttering around the edges of the market with minor purchases at this time. As the System Account was starting to put this authorization into effect, further developments in the market caused the Manager of the Account to report (again by telephone conference) that he would now have to call the market disorderly. After consideration of the Manager's detailed report covering these developments, the Committee approved by unanimous vote the action set forth in the second paragraph of this entry, which authorized the purchase of Government securities in the open market, without limitation. It was understood that the authorization was made for the purpose of correcting a disorderly market and included the purchase of "rights" and when-issued securities, purchase of which was precluded during a period of Treasury financing under one of the Committee's continuing policies, last renewed at the meeting on March 4, 1958. In taking this action, the Committee also authorized the immediate release of an announcement reading as follows: In view of conditions in the United States Government securities market, the Federal Open Market Committee has instructed the Manager of the Open Market Account to purchase Government securities in addition to short-term Government securities. July 23, 1958 Authority to effect transactions in System Account. The Committee authorized the Federal Reserve Bank of New York to engage in a transaction that would include an offsetting purchase and sale of securities in the amount of $30 million for the purpose of altering the maturity pattern of the System's portfolio. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. The purpose of this action, taken during a telephone conference meeting, was to permit the System Account to complete a specific transaction for a foreign account in a manner that would result in adding to the amount of System Account holdings of Treasury bills that would mature on July 31, 1959. Thus, the Committee would be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 ANNUAL REPORT OF BOARD OF GOVERNORS in position to let these bills run off at that time and to help absorb the large volume of reserves that would be released to the market on August 1 because of purchases for System Account on a when-issued basis of new Treasury certificates due to be issued on that date. These purchases had been made under authorization by the Committee on July 18 of purchases for the purpose of correcting a disorderly market. The foregoing action was recognized as a departure from the Committee rule, in effect since December 1953, prohibiting "swap" transactions. It was authorized only because of the unusual circumstances of the past few days and because it was deemed desirable to have as large a runoff of bills as possible within the next few days when large amounts of reserves would be released to the market. July 24, 1958 Authority to effect transactions in System Account. The Committee terminated the authority given to the Federal Reserve Bank of New York on July 18, 1958 to purchase for the System Open Market Account in the open market, without limitation, Government securities in addition to short-term Government securities. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. The Government securities market had steadied in the period since July 18, when, because of disorderly conditions then existing in the market, the Committee had authorized the purchase of Government securities in addition to short-term securities. Accordingly, at this telephone conference meeting, the July 18 authorization was terminated with the understanding that, if conditions in the market should seem to require it, another meeting of the Federal Open Market Committee would be called to consider what, if any, further action should be taken. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 57 July 29, 1958 Authority to effect transactions in System Account. The wording of the Committee's directive was changed at this meeting to delete the clause that had been in effect since March 4, 1958, and which called for operations that would contribute further by monetary ease to resumption of stable growth of the economy, and to replace that clause with an instruction to the Federal Reserve Bank of New York that operations for the System Account were to be with a view, among other things, to recapturing redundant reserves. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, and Vardaman. Votes against this action: none. At this meeting reports of economic developments made it reasonably clear that April had marked the recession trough and May the first month of revival in economic activity. Evidences accumulating for June and July confirmed the broad range of increased industrial output that had been reported at the July 8 meeting of the Committee. In addition to the statistical data, indications of improvement in business sentiment suggested that an uptrend in economic activity might now be under way. The growing evidences of business improvement, together with the possibility that the degree of monetary ease prevailing in recent months might produce a very rapid expansion in bank credit and the money supply, raised the question whether the Committee should consider some modification of the degree of ease that had developed in recent months. During the two weeks preceding this meeting, System operations had been largely concerned with correcting disorderly developments in the Government securities market, rather than with current economic and credit needs. This was in accordance with the authorization given by the Committee at a special meeting on July 18 to purchase Government securities without limitation for the purpose of correcting a disorderly market. In the five-day period from July 18 to July 23, the System Account had purchased $1.2 billion of securities, largely when-issued securities involved in the Treasury financing, but also a small volume of other notes and bonds. These purchases had been made under the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 ANNUAL REPORT OF BOARD OF GOVERNORS specific authorization given on July 18 and within the general framework of the Committee's continuing operating policies that had been in effect since 1953, and which were last reaffirmed on March 4, 1958. Payment for the securities involved in the Treasury financing would result in a substantial rise in the volume of member bank reserves on August 1, over and above the level that had been maintained during the past seven or eight months, and the Committee gave consideration to what would be the effect of such a substantial increase in the availability of reserves. In light of the evidence of improvement in the economic situation, which suggested that the directive that had been in effect since March 4 was no longer appropriate, and in view of the decision of July 24 that the need for action to correct a disorderly condition in the Government securities market had passed, the conclusion was reached that for the next three weeks the problem for the Committee would be one of absorbing the redundant reserves that would be entering the market, in so far as that could be done consistently with an orderly market in Government securities. Thus, the Committee modified its directive in the manner indicated to require that operations be conducted with a view to recapturing redundant reserves that were expected to be released to the market on August 1. August 4, 1959 Authority to effect transactions in System Account. The Committee agreed that for the present, having recaptured redundant reserves, the policy to be followed with respect to operations for the System Open Market Account should be one of keeping from having redundant reserves. Votes for this action: Messrs. Martin, Chairman, Balderston, Irons, Leach, Mangels, Mills, Shepardson, Vardaman, Allen, and Treiber. Votes against this action: none. The recapture of redundant reserves having been effected, pursuant to the policy directive issued at the meeting on July 29, 1958, this action (taken in a meeting held by telephone conference) was for the purpose of giving the Federal Reserve Bank of New York and the Manager of the System Open Market Account an indication as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 59 to general policy to be followed until the next meeting of the Committee. August 19, 1958 Authority to effect transactions in System Account. The policy directive of the Federal Open Market Committee was changed at this meeting by adopting wording for clause (b) of paragraph (l) to provide that, among other things, transactions be with a view "to fostering conditions in the money market conducive to balanced economic recovery." This wording superseded that adopted at the meeting on July 29, which called for operations with a view "to recapturing redundant reserves" and which was supplemented by the action taken on August 4 designed to keep from having redundant reserves return. Votes for this action: Messrs. Martin, Chairman, Balderston, Fulton, Irons, Leach, Mangels, Shepardson, Vardaman, and Treiber. Votes against this action: none. Information presented at this meeting showed that vigorous revival in domestic economic activity was taking place. Similarly, in Canada revival appeared to be under way. In Europe, production trends had been mixed, with contractions, where occurring, apparently associated with inventory adjustment. In the United States the Board's index of industrial production through July had risen at least seven points or 6 per cent, from April, and it seemed possible that late data might raise the amount of advance. Regional reports bore out the national trend, although some important areas of the country were still not experiencing much recovery and the total number of unemployed persons nationally remained disturbingly large. Domestic financial developments since late July included further expansion in bank credit, which had risen by $7 billion in the first seven months of the year. Financial markets had been influenced by the stream of economic data and corporation reports indicating that vigorous recovery was under way; by indications and rumors that Federal Reserve policy might be shifting away from ease (the Board of Governors of the Federal Reserve System had increased margin requirements for purchasing and carrying listed securities from 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

60 ANNUAL REPORT OF BOARD OF GOVERNORS per cent to 70 per cent, effective August 5, 1958); and by a flow of banking, monetary, and Treasury deficit data pointing to a sharp increase in the cash balance position of the economy. In considering policy, the Committee was faced with the fact that the large Federal Government deficit would have to be financed during a period characterized by broadly spread revival of productive activity and incomes and an abnormal expansion in privately held cash balances, and by the emergence of an inflationary psychology in the stock market and other financial markets that could easily spill over into commodity and real estate markets. Notwithstanding the substantial numbers of unemployed persons, the data presented indicated that the rate of expansion in the money supply in the immediate future should be tempered and that operations for the System Open Market Account should move in the direction of lower free reserves without seriously disrupting the Government securities market. The fact that seasonal influences would be working in this direction through the Labor Day week end suggested that, without too much pressure, the System Account might be able to move in the direction of the elimination of free reserves by the time of the next meeting. In terms of the policy directive, the objectives sought by the Federal Open Market Committee were encompassed in the amended wording of clause (b) to provide that operations should be with a view, among other things, "to fostering conditions in the money market conducive to balanced economic recovery." This wording of the directive may be compared with that in effect from the March 4, 1958 meeting until July 29, which called for open market operations "contributing further by monetary ease to resumption of stable growth of the economy/' and which had been temporarily inoperative from July 18 to July 24 in view of the special authority to make purchases for the purpose of correcting a disorderly condition in the Government securities market. In its discussions of the policy directive the Committee also considered the market structure of interest rates, noting that the discount rate of the Federal Reserve Bank of San Francisco had been increased from 1% per cent to 2 per cent effective August 15, 1958. The reasons for this rate increase, which are presented in the section of this report dealing with policy actions of the Board of Governors of the Federal Reserve System, were reviewed at this meeting, and the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 6l rate increase was considered to be consistent with the action taken by the Open Market Committee in deciding to move toward reduced reserve availability. September 9, 1958 Authority to effect transactions in System Account. The directive of the Committee was renewed without change, continuing the policy of fostering conditions in the money market conducive to balanced economic recovery. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, Szymczak, and Vardaman. Votes against this action: none. Since the August 19 meeting of the Committee, reserve availability had declined steadily with a minimum of disturbances in the Government securities market. Despite the reduction in reserve availability, the market had been more calm during the past few days than at any time since June. A better tone also had developed in the market for corporate and municipal bonds. Economic data presented showed that domestic recovery in output, income, and consumption had been vigorous and that it held promise of continuing to be vigorous over the period ahead. The August index of industrial production was estimated to have moved up two points further, with the widespread gains in output extending through durable goods and nondurable goods lines. Financial developments of recent weeks had included those associated with an upward adjustment of interest rates—long-term, medium-term, and short-term. Several Federal Reserve Banks had brought their discount rates up to the 2 per cent level made effective at the Federal Reserve Bank of San Francisco on August 15. It was difficult to judge the extent to which the rise in interest rate levels reflected a basic shift in credit demands relative to supply of savings, and the extent to which they reflected the influence of the recent shift in System policy to less availability of reserves, but each had exerted an influence. The aggregate amount of credit supplied during the year had been large and prospects pointed to an increase in private borrowing along with the heavy Treasury deficit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 ANNUAL REPORT OF BOARD OF GOVERNORS Discussion of recent developments showed differences of views as to the certainty of continued economic recovery and as to the degree to which credit policy should move toward further limitation of reserve availability over the next several weeks. There was general agreement, however, that for the immediate future, during which another Treasury financing operation would occur, operations for the System Account should aim at maintaining substantially the same tone in the money market as prevailed at the time of this meeting. This objective could be sought within the wording of the directive that had been adopted at the meeting on August 19, which called for operations fostering conditions in the money market conducive to balanced economic recovery, and the directive was thus renewed without change. September 30, 1958 Authority to effect transactions in System Account. At this meeting, the directive was again renewed without change, thus continuing the policy adopted on August 19, 1958, of fostering conditions in the money market conducive to balanced economic recovery. Votes for this action: Messrs. Martin, Chairman, Balderston, Fulton, Irons, Mangels, Mills, Robertson, Shepardson, Szymczak, Erickson, and Treiber. Votes against this action: none. Since the preceding meeting of the Committee, discount rates at additional Federal Reserve Banks had been raised to a uniform level of 2 per cent. An even situation had been maintained in the money market, which had been generally firm. At the same time, financial markets appeared to be discounting possible inflationary developments. Thus, with re-emergence of inflationary expectations, stock and bond yields developed a relationship similar to that which prevailed for a brief period in mid-1957, when a psychology of creeping inflation was also dominant in financial markets. At this meeting, the Committee considered in detail the currently developing economic situation, with its rapid expansion in industrial production while unemployment figures remained relatively high. In the face of uncertainties as to whether the recovery would be sustainable, monetary policy was discussed in terms of the recent sharp rise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 63 in interest rates, which some considered to be excessive in view of the basic supply and demand factors in the credit market. Considering the importance of curbing inflationary and speculative developments before they gained headway, attention was focused on the extent to which expansion of the money supply should be limited at this time as a means of carrying out the Federal Reserve's responsibility for maintaining in a growing economy reasonable stability of the value of the dollar as well as in employment. One suggestion was that the appropriate course would be to permit further expansion of credit and the money supply only on terms that would indicate the System's continuing awareness of potential inflationary risks and its determination to prevent them from stimulating speculative excesses in the use of credit. The conclusion reached by the Committee was that operations in the immediate future should try to maintain an even keel in the market and that no change in the policy directive was necessary. This was based on the view that no further increase at this time in the degree of restraint was favored, nor on the other hand was there a desire to ease the market from its present position. October 21, 1958 Authority to effect transactions in System Account. No change was made at this meeting in the Committee's directive that policy should be directed toward fostering conditions in the money market conducive to balanced economic recovery. Votes for this action: Messrs. Balderston, Chairman pro tern, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Treiber. Votes against this action: none. Continuing economic recovery was reported at this meeting. Gross national product for the third quarter was estimated at $440 billion, up $11 billion from the second quarter. Industrial production into October was rising further and broadly, new construction activity in September had been close to record levels, employment was rising and unemployment declining, and personal incomes were rising. Wholesale price averages had been stable for several months with easing of farm product prices offsetting strengthening tendencies in industrial materials and rises in some fabricated items. Latest news from abroad indicated some extension of recession in the principal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 ANNUAL REPORT OF BOARD OF GOVERNORS industrial countries with, however, activity still fairly high in most such areas. Bank credit expansion in recent weeks had been larger than in the corresponding period of 1957 but less than in some other years. In capital markets, a shift from fixed return assets to equities seemed to be continuing. Margin requirements on listed securities had been increased effective October 16, 1958. Slackened monetary expansion along with Treasury deficit financing and general economic recovery had been possible because of previously accumulated liquidity. Further monetary expansion other than seasonal had not been needed to finance economic recovery. However, the total of economic events and the prospective borrowing needs of the Federal Government indicated a likelihood of growing credit demands in the near future. In addition, an outflow of gold was persisting. It was estimated on the basis of customary seasonal currency and deposit growth, and with some allowance for a further gold outflow, that from the time of this meeting to the end of 1958 there would be a need for additional bank reserves totaling about $1.3 billion, a need that could be met mainly through open market operations without varying the degree of restraint on credit expansion. At this meeting, the Committee reviewed in detail the level and structure of interest rates and considered the credit actions that would help keep investment and saving in balance. The discount rates of the Federal Reserve Banks currently were out of line with market rates, and the suggestion was made that an increase in discount rates would be desirable in order to remove the incentive for member banks to obtain reserves by borrowing at the Reserve Banks instead of by selling securities in the market. The conclusion of the Committee was that in present circumstances it would be undesirable to aim toward a greater degree of restraint on reserve availability through open market operations, especially if an increase in discount rates at the Federal Reserve Banks were to be made at the same time. The directive was, accordingly, again renewed with its provision for open market operations that would foster conditions in the money market conducive to balanced economic recovery. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 65 November 10, 1958 Authority to effect transactions in System Account. The Committee again reaffirmed its policy of fostering conditions in the money market conducive to balanced economic recovery. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: none. During the three weeks preceding this meeting, in which seasonal demands for credit were present, the System Open Market Account had been fairly active in supplying reserve funds to the market with a view to achieving the objectives agreed upon by the Committee at the meeting on October 21, namely, the maintenance of about the same degree of restrictive pressure in the market that had existed at the time of that meeting. Free reserves had averaged somewhat less than $100 million, and the money market atmosphere had been generally firm. During this period, the discount rates of all Federal Reserve Banks had been increased from the 2 per cent level to 2^ per cent—a rise that conformed to the prevailing money market rate structure and appeared to have caused no further adjustment in the market. Economic indicators at the time of this meeting were still rising, although there was more diversity than had been shown in late summer and early autumn and the over-all rate of rise seemed to have slowed somewhat. The October industrial production index was estimated to have risen one index point, a smaller rise than had been projected earlier. On the other hand, construction activity had gone up in October to an all-time high, with advances shown in all major categories of private construction as well as public construction. Data for United States exports during September had shown a sharp fall, but imports had risen. Stability to modest recession in activity in Europe was reported, along with a leveling out in Canadian recovery. The unevenness shown by economic indicators in recent weeks was occasioning in various quarters re-appraisals of the outlook, with some toning down of optimistic projections because of inability to foresee forces that would convert recovery into a period of expansionary boom. However, the more moderate rate of rise was believed by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 ANNUAL REPORT OF BOARD OF GOVERNORS some to provide a better basis for expansion than if the rapid autumn rise had continued. Sharp increases that had occurred in productivity during the past three months were being reflected in corporate profits and not in lowered industrial prices, and they thus provided support to demands for wage increases. There appeared to be little prospect for abatement of the persistent upward pressures on industrial prices notwithstanding the existence of unused resources, including considerable plant capacity not being utilized and substantial numbers of unemployed persons. Under these circumstances, a monetary policy on the side of restraint appeared to be appropriate and it did not appear that such restraint would retard sound recovery and growth in the economy. The conclusion of the Committee was that the System Account should seek during the period immediately ahead to maintain conditions in the market about as they were at present, believing that the moderate degree of restraint that had existed for the past several weeks was appropriate under the circumstances and that it could be applied within the terms of the directive to the Federal Reserve Bank of New York that had been in effect since August 19. December 2, 1958 Authority to effect transactions in System Account. The Committee made no change at this meeting in the directive that had been in effect since August 19, 1958, which contemplated a policy directed toward fostering conditions in the money market conducive to balanced economic recovery. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: none. During the three weeks preceding this meeting, the System Account had provided additional reserves to the market and member bank borrowing from the Federal Reserve Banks had risen on some days in the past week to more than $1 billion. These supplies of reserve funds had been sufficient to meet seasonal growth in currency and an increase in required reserves, although free reserves had declined to a nominal level. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 67 Recovery in domestic economic activity was continuing on a broad basis although, as indicated at the November 10 meeting, there recently had been indication of a slowing in the rate of expansion. The weight of statistical evidence continued on the side of fairly well sustained momentum upward. More recently, some indication of improvement in the unemployment situation had been evident, and the number of labor market areas classified as substantial surplus areas had been reduced during November. Over all, it was apparent that the domestic recovery that had shown up during the summer months had now gone far enough to be on the verge of a new expansion period, with the possibility that the rise in activity would carry major indexes of activity into new high ground. Developments in the financial area had shown no particularly striking features during the past month, although gyrations in the stock market had continued. Bond yields had declined somewhat in November, while short-term money rates had continued to rise. Although expansionary forces in the credit area had not been vigorous during recent weeks, the basis for renewed expansion continued to exist in the broadening economic recovery and the continuing Government deficit. The policy discussion by the Committee pointed to some increase in the degree of restraint that should be exerted, with the proviso that due consideration must be given to the financing problems of the Treasury. It was suggested that there was enough flexibility within the Committee's general policy to allow seasonal forces to exert an influence in the direction of some further reduction in reserve availability, perhaps moving in the direction of net borrowed reserves. The Committee's conclusion contemplated letting market developments tend to increase restraint within limits consistent with the policy directive which, as renewed at this meeting, continued to provide for open market operations "fostering conditions in the money market conducive to balanced economic recovery." December 16, 1958 Authority to effect transactions in System Account. The Federal Open Market Committee changed its policy directive at this meeting by adopting wording for clause (b) of paragraph Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 ANNUAL REPORT OF BOARD OF GOVERNORS (l) to provide that, among other things, transactions be with a view "to fostering conditions in the money market conducive to sustainable economic growth and stability." It was the Committee's view that at this time the emphasis should be on preventing expansion at an unsustainable rate. Votes for this action: Messrs. Martin, Chairman, Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: Mr. Hayes, Vice Chairman. Since the recession's low in April 1958, recovery in economic activity had been remarkably good. Gross national product, personal income, retail trade, residential construction activity, manufacturers' new orders, industrial production, freight carloadings, and various other economic indicators had increased about as much in that sevenmonth period as in the corresponding seven-month periods of cyclical recoveries following earlier postwar contractions. The decline had been somewhat deeper during the recent recession than in the preceding two recessions, but it had been briefer and the subsequent recovery more rapid than in other postwar and prewar cycles. Even though peak activity levels had not been re-attained at the time of this meeting, they were sufficiently close at hand to direct attention to the problems to be considered in a period of renewed economic expansion. Money and credit markets had been calm during the month preceding this meeting in the face of the vigorous economic recovery, the rather heavy financing operations of the Treasury, the liquidity demands customary at this season of the year, and a moderate tightening of bank reserve positions. Interest rates had fluctuated moderately, close to the increased levels reached earlier in the autumn. Firming of rates during the two weeks immediately preceding this meeting had not been as great as customary in December. In the first half of 1958, when reserves were freely available, total loans and investments of member banks had expanded sharply. Since midyear, a period in which availability of reserves had been reduced, loans and investments of New York City banks had declined, those of reserve city banks had increased only slightly, and those of country banks had expanded by much larger amounts than in the corresponding period of either of the two preceding years. In total, bank credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 69 since midyear had shown further expansion and by a greater than seasonal amount. Reserves to provide the basis for this credit had been largely supplied through System open market operations since August, when the volume of free reserves had been reduced sharply. The discussion at this meeting of economic and financial developments indicated a consensus favoring a move in open market operations towards somewhat greater restraint, but a very moderate move in that direction. A majority of the Committee also felt that the policy directive that had been adopted at the meeting on August 19, and which had continued in effect since that time without modification, should be changed to delete the word ''recovery" and to put emphasis on preventing expansion at an unsustainable rate. Specifically, it was felt by a majority of the Committee that the instruction to conduct System Account operations "conducive to balanced economic recovery" was somewhat out of date, and there was agreement on a modification in clause (b) of the first paragraph of the directive to provide for operations with a view "to fostering conditions in the money market conducive to sustainable economic growth and stability." Within this wording, it was believed that a move toward somewhat greater restraint on the availability of reserves would be appropriate. In voting against the change in wording of the directive, Mr. Hayes expressed himself as feeling that a move toward further restraint was premature at this stage of the recovery and might suggest to the public a policy of progressive tightening and set off an exaggerated market reaction. Apart from questioning the desirability of further restraint at this time, Mr. Hayes suggested that, if the Committee believed that policy should be more concerned with a developing threat of inflation than with recovery and that it should make a major effort to prevent such inflation by credit restraint, the directive should be made clear on that particular point. The Open Market Committee's directive in effect at the beginning of 1958 called for operations with a view to cushioning adjustments and mitigating recessionary tendencies in the economy. This was changed at the March 4 meeting to provide that transactions should be with a view to contributing further by monetary ease to resump- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 ANNUAL REPORT OF BOARD OF GOVERNORS tion of stable growth of the economy. The next change in the directive was made on July 29, but during the period July 18 to July 24 the terms of the instruction adopted March 4 were temporarily superseded when the Committee gave a special authorization for the System Account to purchase Government securities, without limitation as to amount or maturity, for the purpose of correcting a disorderly condition in the Government securities market. That special authority having been terminated on July 24, the directive was modified at the meeting on July 29 to specify that operations should be with a view to recapturing redundant reserves that were expected to be released to the market August 1. A further instruction adopted on August 4, by which time the redundant reserves had been recaptured, called for keeping from having redundant reserves return. At the August 19 meeting, the directive was changed to provide for operations fostering conditions in the money market conducive to balanced economic recovery. This wording remained unchanged until the meeting on December 16, when it was modified to an instruction that operations be with a view to fostering conditions in the money market conducive to sustainable economic growth and stability. The form in which the directive was in effect at the end of 1958 provided an instruction to the Federal Reserve Bank of New York, until otherwise directed by the Committee; (1) 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 fostering conditions in the money market conducive to sustainable economic growth and stability, 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; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems de- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 71 sirable, 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 ANNUAL REPORT OF BOARD OF GOVERNORS RECORD OF POLICY ACTIONS BOARD OF GOVERNORS January 15, 1958 Reduction in margin requirements. Effective January 16, 1958, the supplements to Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange, were amended to reduce the margin requirements from 70 per cent to 50 per cent, these requirements to be applicable both to purchases of securities and to short sales. Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, and Shepardson. Votes against this action: none. For several months prior to this date common stock prices had been moving within a narrow range at a level approximately onesixth below the peak reached in July 1957, and at this lower range the yields on stocks were restored to a point below those available on high-grade corporate bonds. The price movement was accompanied by a substantial reduction in stock market credit outstanding which, at the end of 1957, was estimated at about $3.6 billion, 10 per cent less than in mid-1957 and 5 per cent less than in April 1955 when the margin requirements were raised to 70 per cent. With the downward trend of general economic developments resulting in a series of rather discouraging business and financial reports, stock market behavior reflected a psychology of caution. Although the historical record suggested the probability of some increase in customer debit balances following a margin reduction, it did not appear that such action at this time would be any great stimulant to stock market activity. Instead, the reaction of investors seemed likely to depend largely on their appraisal of the over-all economic situation. In these circumstances, a 70 per cent margin requirement could no longer be justified on the grounds given when that level was placed in effect, namely, potential excessive speculative activity and potential undue use of credit to finance such activity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 73 January 21, 1958 Reduction in rates on discounts and advances by Federal Reserve Banks. Effective January 22, 1958, the Board approved action by the Board of Directors of the Federal Reserve Bank of Philadelphia establishing a rate of 2% per cent (a reduction from 3 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, Balderston, Mills, and Shepardson. Votes against this action: Messrs. Szymczak and Robertson. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: New York January 24, 1958 Cleveland January 24, 1958 Richmond January 24, 1958 Chicago January 24, 1958 St. Louis January 24, 1958 Kansas City January 24, 1958 Boston January 28, 1958 Atlanta January 28, 1958 Minneapolis February 7, 1958 Dallas Februarv 14, 1958 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 3^4 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. (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. Prior to this date, no changes involving new policy had been made in these rates since those referred to on pages 68-70 of the Board's Annual Report for 1957.) Factual information available to the System by mid-January verified the emergence and progression of recessionary trends. Industrial production and employment continued to decline, while unem- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 ANNUAL REPORT OF BOARD OF GOVERNORS ployment was rising at a disturbing pace. Declining gross national product was associated closely with a reduction in business plant and equipment expenditures aggravated by inventory liquidation, despite which manufacturers' stock-sales ratios were rising significantly. Federal Reserve policy had started to shift in a counter-recessionary direction in late October and early November 1957 when open market operations began to supply reserves more liberally to the banking system. In mid-November the discount rate was reduced from 3^ to 3 per cent. The response of the financial area to the shift in policy was reflected in a sharp decline in interest rates and a substantial increase in bank credit. The interest rate decline, which extended to yields on securities and open market paper but was not yet pronounced in bank loan or mortgage rates, occurred most markedly in yields on securities issues that previously had risen most, particularly medium-term Treasury issues and State and local government issues. With the accumulating evidence of recessionary tendencies, a further decrease in the discount rate was deemed an appropriate step in the execution of System policy designed to encourage credit and monetary expansion. In addition to placing the rate in closer alignment with rates on short-term market instruments, including the Treasury bill, the move had the effect of encouraging member banks to make any temporary reserve adjustments through borrowing rather than through credit liquidation. Governor Szymczak's negative vote reflected administrative rather than economic or financial considerations. With the discount rate reduction in November 1957 having been announced just before the announcement of a Treasury refunding operation, he was apprehensive that a second such occurrence might create the impression of a pattern likely to be followed. Accordingly, he would have preferred to relax through the medium of open market operations for the time being and to defer a discount rate change until after completion of the forthcoming Treasury financing operation. Governor Robertson's negative vote reflected his view that, with the country having passed only recently through a period of strong inflationary pressures which resulted in a substantial increase in wholesale and consumer prices from which there had as yet been Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 75 no general downward readjustment, a move to ease too rapidly might place a floor under existing price levels. As he saw it, a reduction of the discount rate at this time would have no advantage by way of creating more employment or a higher volume of production through the utilization of more bank credit. Instead, it might tend to accentuate fears of a serious recession, or even depression, and thereby actually contribute to bringing about such a situation. While the lower discount rate would affect interest rates, he noted that it would not necessarily make additional reserves available. February 19, 1958 Reduction in reserve requirements of member banks. The supplement to Regulation D, Reserves of Member Banks, was amended to reduce reserve requirements with respect to net demand deposits of member banks of the Federal Reserve System as follows: Effective For Per cent February 27, 1958 Central reserve city banks From 20 to 19^2 February 27, 1958 Reserve city banks From 18 to 171/? March 1, 1958 Banks not in central reserve or reserve cities From 12 to liy 2 Votes for this action: Messrs. Martin, Balderston, Szymczak, Vardaman, Mills, and Shepardson. Votes against this action: none. This action released to member banks about $500 million from required reserves. For central reserve city banks, about $125 million of reserves were released, while for reserve city and country banks the amounts were in the neighborhood of $195 million and $180 million, respectively. At the time this action was under consideration, industrial production, employment, income, and retail sales were continuing on a downward trend, while unemployment, on a seasonally adjusted basis, had risen further. Although total bank loans and investments had increased, this reflected principally larger holdings of Government securities. Business loans had continued to decline. The reduction of reserve requirements was complementary to steps being taken actively by the Federal Reserve System through Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 ANNUAL REPORT OF BOARD OF GOVERNORS the use of other policy instruments to foster conditions of credit ease during a period of deepening recession and thus to increase the willingness and ability of the banking system to expand credit. The freeing of reserves tended in the direction of reducing the cost of financing to borrowers and widened the access of potential borrowers to credit funds. March 6, 1958 Reduction in rates on discounts and advances by Federal Reserve Banks. Effective March 7, 1958, the Board approved action by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, and Chicago establishing a rate of 2^ pe*" cent (a reduction from 2% 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, Balderston, Szymczak, Vardaman, Mills, and Shepardson. Votes against this action: none. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Atlanta March 10, 1958 Boston March 11, 1958 San Francisco March 13, 19581 Cleveland March 14, 1958 Richmond March 14, 1958 St. Louis March 14, 1958 Kansas City March 14, 1958 Dallas March 14, 1958 Minneapolis March 21, 1958 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 2% 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. deduction from 3 per cent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 77 In early March economic activity was continuing to recede. The decline in industrial production had by this time carried to a point 10 per cent below the peak reached in the summer of 1957, inventory liquidation continued to be substantial, particularly in durable goods lines, and retail trade had worsened perceptibly. With substantial cancellations of previously approved appropriations reported, the prospective level of business plant and equipment expenditures for 1958 was around 10 per cent lower than expenditures during 1957. Unemployment on a seasonally adjusted basis was estimated to be running at about 6.7 per cent of the labor force, a rate comparable to that reached in 1949. The composite of available economic information suggested the possibility that the current recession might develop to be less moderate in extent or duration than either the 1948-49 or the 1953-54 recessions. Reflecting to a large extent Federal Reserve policy of providing a generous supply of reserves, member banks had been able not only to get substantially out of debt at the Reserve Banks but also to expand credit contrary to usual seasonal trends. In the face of a net liquidation of business loans, this expansion was being accomplished by placement of funds in securities and in loans on securities. Bank purchases of securities were providing funds directly or indirectly to the United States Treasury to meet the growing deficit incidental to the recession, as well as to State and local governments and corporations borrowing in capital markets and to borrowers on home mortgages. Due to the easier reserve position of banks and the resulting increase in the availability of lendable funds relative to current demands, there was a sharp further decline in short-term interest rates and the rate on Treasury bills had fallen to around per cent. In these circumstances, the action to reduce the discount rate to per cent was not of particular immediate significance from the standpoint of member bank borrowing. However, it brought the discount rate into better alignment with short-term interest rates, reflected the general attitude of System policy at this stage of the recession, and tended toward a position that would afford the System greater flexibility of adjustment to future developments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 ANNUAL REPORT OF BOARD OF GOVERNORS March 18, 1958 Reduction in reserve requirements of member banks. The supplement to Regulation D, Reserves of Member Banks, was amended to reduce reserve requirements with respect to net demand deposits of member banks of the Federal Reserve System as follows: Effective For Per cent March 20, 1958 Central reserve city banks From 19V2 to *9 March 20, 1958 Reserve city banks From 17*/ to 17 2 April 1, 1958 Banks not in central reserve or reserve cities From Hl/2 to 11 Votes for this action: Messrs. Martin, Balderston, Vardaman, Mills, Robertson, and Shepardson. Votes against this action: none. This action released about $490 million from required reserves, with the pattern of distribution approximately as follows: central reserve city banks $125 million; reserve city banks $190 million; and country banks $175 million. This second reduction of reserve requirements, viewed in association with earlier discount rate changes and the provision of reserves through open market operations, reflected furtherance of a System policy designed in its over-all aspects to foster ease in credit markets as the course of recession carried major business indices to lower levels. Taken together, the succeeding steps of Federal Reserve policy enabled member banks further to reduce their discounts at the Reserve Banks, served to offset the reserve drain involved in a continuing outflow of gold from the United States, and offered the means of financing a substantial commercial bank credit expansion. With the release of required reserves, member banks were able not only to meet seasonal loan demands but at the same time to continue adding to their holdings of United States Government securities. April 17, 1958 Reduction in reserve requirements of member banks. The supplement to Regulation D, Reserves of Member Banks, was amended to reduce reserve requirements with respect to net demand deposits of member banks of the Federal Reserve System as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 79 Effective For Per cent April 17, 1958 Central reserve city banks From 19 to 18l/ 2 April 24, 1958 Central reserve city banks From 18y to 18 2 April 24, 1958 Reserve city banks From 17 to l6l/ 2 Votes for this action: Messrs. Martin, Szymczak, Mills, Robertson, and Shepardson. Votes against this action: none. The effect of this action, the third in a series of reductions in reserve requirements, was to release about $450 million from required reserves. For central reserve city banks the reduction which became effective April 17 released about $130 million of reserves, and the reduction effective April 24 released approximately the same amount. For reserve city banks, the effect was to free about $190 million of required reserves. Nearly $1 billion of reserves had been released by the two preceding reductions in reserve requirements, and additional reserves had been supplied by System open market operations during the past several weeks. However, a substantial part of the reserves thus provided had been absorbed by increased requirements resulting from a contra-seasonal growth in bank deposits, a larger than seasonal increase in currency in circulation, foreign operations (principally gold withdrawals), and float and other factors. In addition, free reserves of member banks had increased to a level deemed consistent with Federal Reserve policy objectives at this particular stage and depth of the recession. In view of the likelihood of a further gold drain, a prospective increase in required reserves resulting from payment by banks for a new Treasury issue, and an indicated increase in demand deposits of at least seasonal magnitude, it was estimated that some $300 million additional reserves would have to be supplied within the near future to maintain a condition of ease conducive to further credit and monetary expansion. This action was taken in recognition of the prospective need for additional reserves and to relieve pressures that were appearing on the reserve positions of central reserve and, to a somewhat lesser extent, reserve city banks. Some members felt that the existing situation afforded an opportunity to reduce the level of reserve requirements at a time when such action was consistent with credit policy Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 ANNUAL REPORT OF BOARD OF GOVERNORS and at the same time further to enlarge the area of flexibility for System action should it become necessary at some future date to institute a policy of credit restraint in the light of changed economic conditions. April 17, 1958 Reduction in rates on discounts and advances by Federal Reserve Banks. Effective April 18, 1958, the Board approved actions by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Chicago, St. Louis, and Minneapolis establishing a rate of 1% per cent (a reduction from 2^4 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. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Boston April 22, 1958 Atlanta April 22, 1958 Cleveland April 25, 1958 Richmond April 25, 1958 Kansas City April 25, 1958 San Francisco May 1, 1958 Dallas May 9, 1958 Effective the same dates, the Board approved for the respective Federal Reserve Banks' a rate of 2^ 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. By mid-April, data becoming available to the System suggested some slowing in the pace of decline of output and employment. There were, in fact, developments in certain segments of the economy such as to create the impression of more diversity of trends than had been the case earlier. Nevertheless, the sum of statistical evidence indicated that the general movement continued to be one Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 81 of downward drift. In reflection of a System policy of ease, there had been a rapid expansion of bank credit while short- and mediumterm interest rates had declined further and reached their lowest levels since early 1955. This further action served to narrow the discrepancy between the discount rate and money market rates, including the Treasury bill rate, and provided assurance to member banks of a ready availability of funds at the lower rate in the event of need. The concurrent actions on the discount rate and on reserve requirements placed monetary policy clearly in the posture of doing everything possible to assist in the turnaround and recovery of the economy. August 4, 1958 Increase in margin requirements. Effective August 5, 1958, the supplements to Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange, were amended to increase the margin requirements from 50 per cent to 70 per cent, these requirements to be applicable both to purchases of securities and to short sales. Votes for this action: Messrs. Martin, Balderston, Vardaman, Mills, and Shepardson. Votes against this action: none. By this date there was clear statistical evidence that recovery in economic activity and production had gained considerable momentum and was likely to go forward. The recovery was accompanied by a rise in stock prices sufficient to carry common stock yields below yields on bonds of the same companies, and by a sharp increase in the volume of stock market credit which by July had reached a level some 20 per cent higher than at the beginning of the year. In view of this rapid rise in credit and the re-emergence of an investment psychology favoring the purchase of stocks as a hedge against potential inflation, which would be a particular inducement to borrowing for the purpose, the margin requirements were restored to the 70 per cent level that had prevailed prior to the middle of January. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 ANNUAL REPORT OF BOARD OF GOVERNORS August 14, 1958 Increase in rates on discounts and advances by Federal Reserve Banks. Effective August 15, 1958, the Board approved action by the Board of Directors of the Federal Reserve Bank of San Francisco establishing a rate of 2 per cent (an increase from 1% 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, Balderston, Vardaman, and Shepardson. Votes against this action: none. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Dallas August 22, 1958 Atlanta August 26, 1958 Kansas City August 29, 1958 Chicago September 5, 1958 Minneapolis September 5, 1958 New York September 12, 1958 Cleveland September 12, 1958 Richmond September 12, 1958 St. Louis September 12, 1958 Philadelphia September 19, 1958 Boston September 23, 1958 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 2l/ per cent on advances to member banks under 2 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. Increasing evidence of vigorous economic recovery on a broad front was visible by the early part of August. By July, the seasonally adjusted index of industrial production had risen six points from the low of 128 reached in April, with the improvement in output diffused through durable and nondurable goods industries. Construction activity, already quite strong, increased further in July as private housing starts rose for the fifth successive month and attained a seasonally adjusted rate close to 1.2 million units, almost 15 per cent higher than the rate a year earlier. Personal income in June was back Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 83 nearly to the level of August 1957, and it was estimated to have reached further ahead in July. In the first six months of the year, farm income had attained its highest level since 1953, and on the basis of crop and marketing prospects it seemed likely to rise further in the months ahead. Wholesale prices, advancing since mid-June, had by August exceeded the peak reached in March 1958, and consumer demand was strong. The improved economic outlook and the prospect of a large Federal deficit for the current fiscal year led to a sharpening of expectations with regard to a renewal of inflationary pressures and to a reversal in the trend of interest rates. The yield on Treasury bills rebounded strongly from the low point reached in June and by the first part of August was in the neighborhood of 11/2 per cent. In view of these developments, System open market operations had been modified so as to supply only a portion of the reserves needed to meet rising credit demands and offset the reserve drain of a continued gold outflow. As a result, member banks were obliged to draw down their excess reserves and to begin to increase their borrowings at the Federal Reserve Banks. The discount rate adjustment made such borrowings more costly. October 15, 1958 Increase in margin requirements. Effective October 16, 1958, the supplements to Regulation T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange, were amended to increase the margin requirements from 70 per cent to 90 per cent, these requirements to be applicable to both purchases and short sales. Votes for this action: Messrs. Balderston, Szymczak, Mills, and Shepardson. Votes against this action: Mr. Robertson. Following the increase in margin requirements from 50 per cent to 70 per cent early in August, common stock prices continued their upward climb in a heavy volume of trading activity and had now registered a further advance of about 8 per cent. By October this price movement had carried common stock yields to a level more than half a percentage point below the average yield on high-grade Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 ANNUAL REPORT OF BOARD OF GOVERNORS corporate bonds. After a pause in August, stock market credit likewise resumed its upward thrust and latest estimates placed the volume of total customer credit at above $4.3 billion. In addition, the number of open margin accounts was reported to have increased considerably from June to September. Prevalent psychology, favoring equities, including those of a speculative character, as a medium of investment in preference to fixedincome obligations, appeared to reflect not only growing public confidence in continued business improvement but apprehension as to an intensification of inflationary pressures. In light of the developments in the market, the margin requirements were increased to 90 per cent at this time pursuant to the Board's statutory responsibility for administering those requirements with a view to preventing the excessive use of credit for purchasing or carrying registered stocks. Governor Robertson voted against this action for the following reasons: (1) Under withdrawal and substitution rules in effect at that time, a customer selling securities in a margin account was free to purchase an equal market value of securities or to withdraw the margin currently required on such a purchase. Thus, if he sold $1,000 of securities, he could replace them with a $1,000 purchase of securities, or he could withdraw $700 in cash under a 70 per cent margin requirement or $900 under a 90 per cent margin requirement. Consequently, Governor Robertson felt, the increased margin requirements would apply in practice only to new extensions of credit and not to the turnover of credit already in the market. It would fail, he believed, to reach the most important aspect at that time of the "excessive use of credit" and would therefore be a relatively futile and ineffective action, the psychological effect of which might be the reverse of that intended. (2) Also because of the then existing withdrawal and substitution rules, the increased margin requirements would unjustifiably enlarge the inequity as between customers who could continue to trade on lower margins and new customers subject to higher margins. (3) The higher margin requirements, coupled with the existing withdrawal and substitution rules, would tend to encourage a weakening of margin accounts and create dangers of cumulative forced selling in undermargined accounts if stock prices should fall. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 85 October 23, 1958 Increase in rates on discounts and advances by Federal Reserve Banks. Effective October 24, 1958, the Board approved action by the Boards of Directors of the Federal Reserve Banks of Philadelphia, Richmond, St. Louis, Minneapolis, and Dallas establishing a rate of 2^ per cent (an increase from 2 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. Balderston, Szymczak, Robertson, and Shepardson. Votes against this action: none. Pursuant to the policy established by this action, the Board subsequently approved, effective on the dates indicated, the same rate for the following Federal Reserve Banks: Atlanta October 28, 1958 Cleveland October 30, 1958 Chicago October 31, 1958 Boston November 4, 1958 Kansas City November 4, 1958 San Francisco November 6, 1958 New York November 7, 1958 Effective the same dates, the Board approved for the respective 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 the previous discount rate increase in August, the economy had continued its trend toward recovery, with further advances in industrial production, construction activity, retail sales, and personal income. Although average wholesale prices showed stability, prices of basic industrial materials were moving upward. Currency in circulation, bank credit, and deposits each reflected a seasonal rise. Short-term interest rates, which began to advance rapidly after midyear, continued that trend, reflecting in part substantial cash borrowing on the part of the Treasury in the form of short-term securities and also anticipation of further growth in credit demands. By the middle of October, the yield on three-month Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 ANNUAL REPORT OF BOARD OF GOVERNORS Treasury bills had risen to a level around 2% per cent. Seasonal monetary needs were estimated to require a further growth of over $4 billion in total bank credit by the end of the calendar year, while the Treasury was scheduled to undertake shortly a series of financing operations that would involve, through the end of the year, borrowing additional cash of around $4 billion and refunding some $12 billion of outstanding securities. Other pressures also tending to influence the trend toward a higher structure of interest rates included growing apprehension concerning potential inflationary developments and a continued tendency to shift from fixed-return assets to equities. With the discount rate having fallen substantially out of line with short-term money market rates, and with influences present such as to suggest the probability of a further distortion of the normal relationship, the increase in the rate served to produce a better alignment and at the same time recognized existing trends in the money market and the economy generally. November 12, 1958 Amendment to Regulation K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act. Effective November 12, 1958, Regulation K was amended by deleting Section 10 (c) (2) and the reference thereto contained in Section 3(b). Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, and Shepardson. Votes against this action: none. Section 10 (c) of Regulation K, as revised January 15, 1957, contained a provision that "no Financing Corporation hereafter organized shall have a name which is similar to the name of, or identifies the Corporation with, any bank in the United States with which such Financing Corporation is affiliated." Section 3(b), relating to names of corporations organized under Section 25 (a) of the Federal Reserve Act, contained a reference to the aforementioned provision of Section 10 (c). In the light of experience with the administration of the revised Regulation K, the Board concluded that the provision in question was unduly restrictive and unnecessary in the public interest. Pursuant to Section 3(b), the name of any corporation organized under Section Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 87 25 (a) continued to be subject to the approval of the Board of Governors. Further, the same section also provides that in no case shall the name of such a corporation resemble the name of any other corporation to an extent that might result in misleading or deceiving the public as to the corporation's identity, purpose, connections, or affiliations. In addition, the name of any corporation organized under Section 25 (a) shall, so far as practicable, indicate the nature of the business contemplated and shall include the word "international," "foreign," "overseas," or some similar word. No financing corporation is permitted to have the word "bank" or "banking," or any similar word, as part of its name. December 18, 1958 Actions incident to admission of Alaska to Statehood. Effective upon issuance by the President of the United States of a proclamation admitting Alaska to Statehood, which proclamation subsequently was issued on January 3, 1959, the Board readjusted the Federal Reserve districts so as to include the State of Alaska in the Twelfth District, and within that District included Alaska in the Territory of the Seattle Branch of the Federal Reserve Bank of San Francisco. Effective the same date, certain amendments were made to several regulations of the Board to correct language rendered inappropriate by the admission of Alaska to Statehood. Votes for this action: Messrs. Martin, Szymczak, Mills, and Robertson. Votes against this action: none. Section 2 of the Federal Reserve Act provides that the Federal Reserve districts, as created originally by the Reserve Bank Organization Committee, may be readjusted from time to time by the Board of Governors of the Federal Reserve System, not to exceed 12 in all. Section 19 of the Alaska Statehood Act amended the aforesaid Section 2 to provide that "when the State of Alaska is hereafter admitted to the Union the Federal Reserve districts shall be readjusted by the Board of Governors of the Federal Reserve System in such manner as to include such State/' In anticipation of a Presidential proclamation admitting Alaska to Statehood, the Board therefore took action to include Alaska in the Twelfth Federal Reserve District coincident with the date of the proclamation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 ANNUAL REPORT OF BOARD OF GOVERNORS Regulations relating to branches of Federal Reserve Banks, which are prescribed under the authority of Section 3 of the Federal Reserve Act, provide that no change shall be made by any Federal Reserve Bank in the territory included within the district served by any of its branches except with the prior approval or upon the direction of the Board of Governors. Pursuant to these regulations, the Board provided that the State of Alaska, upon admission to the Union, be included in the territory of the Seattle Branch of the Federal Reserve Bank of San Francisco. Certain technical changes in a number of Board regulations were made, effective the same date, because the admission of Alaska to Statehood rendered the existing language inappropriate. The regulations affected included G, Collection of Noncash Items; H, Membership of State Banking Institutions in the Federal Reserve System; J, Check Clearing and Collection; and U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 89 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. In conjunction with their annual examination of the Federal Reserve Bank of New York, the Board's examiners also made a detailed audit of the accounts and holdings of the System Open Market Account maintained at that Bank, and rendered a report thereon to the Federal Open Market Committee. The techniques and procedures employed by the Board's examiners were surveyed and appraised by a private firm of certified public accountants during the course of the examination of a Federal Reserve Bank of its selection. Examination of member banks. Although authorized to examine all member banks, both State and national, as a matter of practice neither the Federal Reserve Banks nor the Board of Governors examines national banks since the Comptroller of the Currency is directly charged with that responsibility by law. Reports of examinations made by the Comptroller are furnished the respective Federal Reserve Banks and made available to the Board of Governors. Likewise, because all member banks are insured, the Federal Deposit Insurance Corporation is empowered to make special examinations of national banks and State member banks. However, such examinations have been rare and have been made only in anticipation of financial assistance by the Corporation in a rehabilitation program or where a member bank desired to continue as an insured bank after withdrawal from membership in the System. Reports of examination of both national banks and State member banks are made available to the Federal Deposit Insurance Corporation. 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. Here again, 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 au- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 ANNUAL REPORT OF BOARD OF GOVERNORS thorities or alternate examinations are made by agreement with State authorities. The 1958 program for the examination of State member banks was practically completed, since only 9 of the 1,734 banks were not examined during the calendar year. Federal Reserve membership. The 6,312 banks that were members of the Federal Reserve System at the end of 1958 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 accounted for 20 per cent of the number of all State commercial banks and held 66 per cent of the deposits of these banks. The 4,578 national and 1,734 State member banks comprising Federal Reserve membership reflected declines of 42 and 39, respectively, from the previous year-end. This continuing decline was largely due to consolidations and mergers; other reductions include 15 State member banks that withdrew from membership, and one national bank that became a nonmember bank. The decrease was partly offset by 19 newly established national and two newly established State member banks, the admission of seven nonmember banks to membership, and the conversion of three nonmember banks into national banks. The total number of member bank offices increased as a result of both the conversion of merged banks into branches and the establishment of de novo branches. At the end of the year member banks were operating 6,700 branches, 535 more than at the close of 1957. Detailed figures on changes in the banking structure for the year 1958 are shown in Table 18 on page 127. Bank holding companies. During 1958, pursuant to Section 3(a)(l) of the Bank Holding Company Act of 1956, the Board approved one application for prior approval of action to become a bank holding company, and denied three such applications, the latter three being involved in a proposal that would have resulted in one continuing bank holding company. Pursuant to Section 3 (a) (2) of the Act, the Board approved the acquisition by three bank holding companies of voting shares of four banks and denied one application for such acquisition with respect to one bank. Under Section 4(c)(6) of the Act, the Board, after a hearing, denied a request for a determination that certain subsidiaries of a bank holding company were so closely related to the banking activities of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 91 holding company system as to be a proper incident thereto and as to make it unnecessary for the prohibitions of Section 4 to apply in order to carry out the purposes of the Act; one such request was approved. During the year the Board issued four certifications in accordance with the tax provisions of the Act (Internal Revenue Code, Sections 1101 and 1103). To provide necessary current information, annual reports for the year 1957 were obtained from registered bank holding companies. During 1958, pursuant to the Banking Act of 1933, the Board authorized the issuance of five voting permits for general purposes and 13 permits for limited purposes to holding company affiliates of member banks. 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 seven organizations. Trust powers of national banks. During 1958, 42 national banks were granted authority by the Board to exercise one or more trust powers under the provisions of Section 11 (k) of the Federal Reserve Act. This number includes the grant of additional powers to five banks which previously had been granted certain trust powers. One additional national bank acquired trust powers as a result of consolidation. Trust powers of 31 national banks were terminated by voluntary liquidation, consolidation, merger, or conversion. At the end of 1958, there were 1,722 national banks holding permits to exercise trust powers. Acceptance powers of member banks. During the year the Board approved applications of two member banks, pursuant to the provisions of Section 13 of the Federal Reserve Act, for increased acceptance powers. One member bank was granted permission to accept commercial drafts or bills of exchange to an amount not Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 ANNUAL REPORT OF BOARD OF GOVERNORS exceeding at any time, in the aggregate, 100 per cent of its paid-up and unimpaired capital stock and surplus, and the application of one member bank was approved for limited permission to accept drafts or bills of exchange drawn for the purpose of furnishing dollar exchange as required by the usages of trade in Brazil. Foreign branches and foreign banking and financing corporations. Under the provisions of Section 25 of the Federal Reserve Act, the Board approved during 1958 seven 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 Bayamon, Puerto Rico; and another opened branches in Asuncion, Paraguay, and Valencia, Venezuela. The Valencia branch had been authorized by the Board in 1957. One member bank closed one of its branches in London. At the end of 1958, seven member banks had in active operation a total of 119 branches in 27 foreign countries and overseas areas of the United States. Of the 119 branches, three national banks were operating 93 and four State member banks were operating 26. The branches were distributed geographically as follows: Latin America 62 Near East 4 Argentina 10 Egypt 1 Brazil 10 Lebanon 2 Chile 2 Saudi Arabia 1 Colombia 4 Cuba 21 Far East 20 Mexico 3 Hong Kon£ 1 Panama 5 India 2 Paraguay 1 JaPan 10 Peru 1 Philippines 5 Uruguay 1 Singapore 1 Venezuela 4 Thailand 1 Continental Europe 5 United States Overseas Areas. 18 Belgium 1 Canal Zone 4 France 3 Guam 1 Germany 1 Puerto Rico 13 England 10 Total 119 There was no change in 1958 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 93 principally in international or foreign banking. The head offices in New York of the three "agreement" corporations were examined in 1958 by examiners for the Board of Governors. One corporation operates a branch in France; one has an English fiduciary affiliate; and one operates two agencies at the New York International Airport, has a branch in England, owns all the stock of a bank organized under the laws of, and operating in, Liberia, and owns all the stock of a bank organized under the laws of, and operating in, the Union of South Africa. The investment in the latter bank was authorized by the Board and the bank opened in Johannesburg in 1958. During 1958 one corporation was chartered by the Board under the provisions of Section 25 (a) of the Federal Reserve Act to engage in international or foreign financing, making a total of five corporations engaged in international or foreign banking or financing in active operation at the end of the year, two of which are regarded as "Banking Corporations" and three as "Financing Corporations." The home offices of these five corporations are located in New York City, and four were examined during the year by examiners for the Board of Governors. Three corporations have no subsidiaries or foreign branches; one has a branch in France and an English fiduciary affiliate which has a branch in Canada; and one operates branches in France, Germany, Guatemala, Lebanon, and Singapore (with branches in Hong Kong and the Federation of Malaya authorized by the Board in 1958 but not opened by the end of the year)', and owns substantially all of the stock of a bank organized under the laws of, and operating in, Italy. In 1958, examiners for the Board of Governors examined the Singapore, Colony of Singapore, and Beirut, Lebanon, branches of a foreign banking corporation, and the Japanese and Beirut, Lebanon, branches of a State member bank. The London branches of another State member bank were surveyed at the head office of the bank in New York by examiners for the Board of Governors. Inter-Agency Bank Examination School. During 1958, two sessions of the School for Examiners and four sessions of the School for Assistant Examiners were held. The Inter-Agency Bank Examination School is conducted in Washington by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 ANNUAL REPORT OF BOARD OF GOVERNORS Since the Inter-Agency School was established in 1952, the various sessions have been attended by 1,064 men, representing the three Federal bank supervisory agencies, the State Banking Departments of California, Connecticut, Indiana, Louisiana, Maine, Michigan, Mississippi, Montana, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, and Virginia, the Treasury Department of the Commonwealth of Puerto Rico, and one foreign country. LEGISLATION Defense Production Act. The Defense Production Act of 1950, Section 301 of which is the basis for guarantees of loans for defense production, which would have expired June 30, 1958, was amended and continued in force until the close of June 30, I960, by the Act of June 28, 1958. 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, 1958, was extended until June 30, I960, by the Act of June 30, 1958. Alaskan Statehood. The Alaskan Statehood Act of July 7, 1958 amended Section 2 of the Federal Reserve Act to provide that upon admission of Alaska to Statehood the Federal Reserve districts should be readjusted so as to include such State, and to require national banks in any new State to become members of the Federal Reserve System within 90 days after admission of such State into the Union. Pursuant to the requirements of this amendment, the Board subsequently readjusted the Federal Reserve districts so as to include the State of Alaska in the Twelfth Federal Reserve District effective January 3, 1959. Real estate loans by national banks. Section 24 of the Federal Reserve Act was amended by the Act of July 18, 1958 so as to make the limitations and restrictions of that section on real estate loans by national banks inapplicable to loans made to established industrial or commercial businesses in which the Small Business Administration cooperates through agreements to participate on an immediate or deferred basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 95 Small Business Investment Act. Section 13b of the Federal Reserve Act, authorizing working capital loans and commitments by the Federal Reserve Banks for industrial or commercial businesses, was repealed by the Small Business Investment Act of 1958, approved August 21, 1958, to become effective one year after the date of enactment of that Act. The same Act provided for payment by the Federal Reserve Banks to the United States within 60 days after the date of its enactment of amounts previously paid by the Secretary of the Treasury to the Federal Reserve Banks under the provisions of Section 13b of the Federal Reserve Act. In addition, the Act of August 21, 1958 made stock of small business investment companies organized under that Act eligible for purchase by national banks and by other member banks and nonmember insured banks to the extent permitted by State law, subject to certain limitations. Bank Holding Company Act. The Board is required by Section 5(d) of the Bank Holding Company Act of 1956 to include in its annual report to Congress any recommendations for changes in that Act which, in the opinion of the Board, would be desirable. In a special report submitted to Congress on May 7, 1958 the Board recommended a number of amendments to the Bank Holding Company Act which would tend to clarify ambiguities in the law and facilitate its administration. The Board continues to urge favorable consideration of those amendments. 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 ANNUAL REPORT OF BOARD OF GOVERNORS utilized during World War II. In the making of guarantees, the Federal Reserve Banks are authorized to act, on behalf of the guaranteeing agencies, as fiscal agents of the United States, subject to the supervision of the Board of Governors of the Federal Reserve System; and the Board is authorized, after consultation with the guaranteeing agencies, to prescribe rates and fees and forms and procedures. The schedule of rates and fees was reviewed from time to time by the Board and guaranteeing agencies but developments during 1958 did not indicate the need for any changes. During 1958, the guaranteeing agencies authorized the issuance of 40 guarantee agreements amounting to $193 million. On December 31, 1958, guarantee agreements outstanding covered credits totaling $478 million, of which amount $310 million represented actual loans outstanding and $168 million was available to borrowers under guarantee agreements in force. Of the total credit available to borrowers, including loans outstanding, 74 per cent on the average was guaranteed. During the year, approximately $728 million was advanced on V-loans, most of which are revolving credits. From the beginning of the program in September 1950 through December 31, 1958, 1,543 V-loans totaling $3,105 million were authorized by the procurement agencies which may guarantee such loans under the Defense Production Act of 1950. Of the total loans authorized, 56 per cent of the number and 6 per cent of the amount were less than $500,000 and 72 per cent of the number and 12 per cent of the amount were less than $1 million. Forty-two per cent of the number and 7 per cent of the amount of loans authorized were to borrowers having assets of less than $500,000; 57 per cent of the number and 12 per cent of the amount were to borrowers having assets of less than $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 1958, authority for the V-loan program, unless further extended, will terminate on June 30, I960. Volume of operations. Table 5 on page 113 shows the volume of operations in the principal departments of the Federal Reserve Banks for the years 1954-58. Changes from 1957 were mixed, with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 97 some activities decreasing and others increasing. Discounts and advances and currency received and counted declined. On the other hand, checks (other than Government checks and Postal money orders), coin, and transfers of funds increased and reached new peaks; checks handled, however, increased less than in recent years. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1958 are shown in detail in Table 6 on pages 114-15, and a condensed historical statement is shown in Table 7 on pages 116-17. The table below summarizes the earnings and expenses and the distribution of net earnings for 1958 and 1957. EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS, 1958 AND 1957 [In thousands of dollars] Item 1958 1957 Current earnings. 742,068 763,348 Current expenses. 137,722 131,814 Current net earnings. 604,346 631,534 Additions to current net earnings1 454 1,580 330 28,721 Deductions from current net earnings 124 -7,141 Net additions or deductions (—) 604,470 624,393 Net earnings before payments to U. S. Treasury. 524,059 542,708 Paid U. S. Treasury (interest on F. R. notes) 21,197 20,081 Dividends paid 59,214 61,604 Transferred to surplus 1 Includes net profits of $157,000 in 1958 and $167,000 in 1957 on sales of U. S. Government securities. 2 Includes a payment of $8,335,000 to Federal Reserve retirement system representing adjustment for revised benefits. Current earnings of $742 million in 1958 were 3 per cent less than in 1957, largely because lower discount rates coupled with fewer borrowings resulted in a $20 million decrease in earnings from this source. Earnings from United States Government securities were $1 million less than in the year before, reflecting a lower average yield offset in part by a slight increase in average holdings. Current expenses of $138 million were about 4 per cent above 1957. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 ANNUAL REPORT OF BOARD OF GOVERNORS Current net earnings amounted to $604 million, a decrease of 4 per cent from 1957. The effect of profit and loss additions and deductions was minor, leaving net earnings before payments to the United States Treasury at about $604 million, a decrease of 3 per cent from 1957. Statutory dividends to member banks amounted to $21 million, or a rise of about $1 million over 1957, reflecting increases in capital and surplus of member banks with attendant increases in the paid-in capital of the Federal Reserve Banks. Payments to the United States Treasury as interest on Federal Reserve notes amounted to $524 million in 1958. This was 90 per cent of net earnings after dividends and allowance for building up surplus to 100 per cent of subscribed capital where surplus was below that amount. This allowance is consistent with the provisions of the franchise tax when it was in effect; for 1958 the allowance for bringing surplus up to subscribed capital was $986,000 for two Banks and for 1957 the total was $1,303,000 for one Bank. 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 $3,517 million. Net earnings of $59 million remaining after dividends and payments to the United States Treasury were added to surplus account. On September 2, 1958, the Federal Reserve Banks repaid to the Secretary of the Treasury the aggregate of $27,546,310.97 pursuant to the provisions of Section 602 (a) of the Small Business Investment Act of 1958. This resulted in the elimination of Section 13b surplus in the amount of $27,542,653.50; the net difference of $3,657.47 was charged to Section 7 surplus. The amounts repaid had been advanced by the Secretary of the Treasury under the provisions of Section 13b of the Federal Reserve Act. Holdings of loans and securities. Average daily holdings of loans and securities during 1958 amounted to $24,983 million, $761 million more than during 1957; holdings of discounts and advances decreased $555 million and holdings of United States Government securities increased $1,302 million. The average rate of interest earned on discounts and advances declined from 3.15 to 2.28 per cent, reflecting the net effect of three reductions in the discount rate in the first half of the year to a low of 1% per cent, and two subse- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 99 quent increases resulting in a rate of 2^ per cent for the last two months of the year. The average rate on Government securities declined from 3.15 to 2.98 per cent. The accompanying table shows holdings, earnings, and average interest rates on loans and securities held by the Federal Reserve Banks during the past three years. RESERVE BANK EARNINGS ON LOANS AND SECURITIES, 1956-58 [Dollar amounts in thousands] Discounts Indus- Accept- U.S. Item and year Total and trial ances Government advances loans securities Average daily holdings :x 1956 $24,563,390 $833,297 $837 $20,662 $23,708,594 1957 24,222,331 850,097 686 25,142 23,346,406 1958 24,983,185 295,250 415 38,904 24,648,616 Earnings: 1956 595,396 23,025 36 547 571,788 1957 763,041 26,792 30 848 735,371 1958 741,781 6,745 18 806 734,212 Average rate of interest (per cent): 1956 2.42 2.76 4.26 2.65 2.41 1957 3.15 3.15 4.37 3.37 3.15 1958 2.97 2.28 4.45 2.07 2.98 1 Based on holdings at opening of business Foreign and international accounts. Gold and dollar assets held for foreign account at the Federal Reserve Banks increased $2,189 million in 1958, reflecting almost entirely net purchases of gold from the United States by foreign monetary authorities. At the end of the year holdings amounted to $12,115 million, representing $7,668 million of earmarked gold, $3,695 million of United States Government securities (largely Treasury bills), $272 million in dollar deposits, $68 million of bankers' acceptances purchased through Federal Reserve Banks, and $412 million of miscellaneous assets. The latter item includes mainly dollar bonds issued by foreign countries and international institutions. The aggregate gold and dollar assets held for the International Bank for Reconstruction and Development, the International Finance Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

100 ANNUAL REPORT OF BOARD OF GOVERNORS Corporation, and the International Monetary Fund increased $508 million in 1958. Accounts were opened for two central banks in Africa. As in 1957, loans secured by gold collateral were of relatively minor importance. A loan of $5 million outstanding at the beginning of 1958 was repaid in January. New arrangements amounted to a total of $43.3 million, of which $17.9 million was outstanding at the end of the year. Loans on gold are ordinarily made to foreign monetary authorities to assist them in meeting their dollar requirements for temporary needs. The Federal Reserve Bank of New York, as depositary and fiscal agent, continued to perform various services for the international institutions mentioned above. As fiscal agent of the United States, the Bank continued to operate the United States Exchange Stabilization Fund pursuant to authorization and instructions of the Treasury Department. Also on behalf of the Treasury Department it continued the administration of foreign assets control regulations pertaining to assets in the United States of, and transactions with, Communist China and North Korea and their nationals, and, until revocation on May 1, of regulations involving certain assets of the Egyptian Government and the Suez Canal Company. Bank premises. During the year the Board authorized the construction of an addition to and alteration of the Federal Reserve Bank building in Dallas. This program is planned to extend over several years. With the approval of the Board, properties adjacent to the present locations of the Federal Reserve Bank of Kansas City and the Oklahoma City Branch were acquired for future expansion; an annex building was purchased by the Federal Reserve Bank of San Francisco; and a site for a new building was acquired for the New Orleans Branch. The Board also authorized the acquisition of property adjacent to the Little Rock Branch for future expansion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 101 BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1958 were audited by the public accounting firm of Price Waterhouse & Co., whose certificate follows: To the Board of Governors of the Federal Reserve System In our opinion, the accompanying financial statements present fairly the assets, liabilities and fund balances of the operating fund and the property and equipment fund of the Board of Governors of the Federal Reserve System as of December 31, 1958, and the related assessments and expenditures for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Our examination of the financial statements 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. Price Waterhouse & Co. Washington 5, D. C, February 6, 1959. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

102 ANNUAL REPORT OF BOARD OF GOVERNORS ASSETS, LIABILITIES AND FUND BALANCES DECEMBER 31, 1958 ASSETS Cash, exclusive of $173,898 representing withheld taxes $ 630,571 Miscellaneous receivables and travel advances 15,790 Stockroom and cafeteria inventories, at cost 18,623 Total assets of operating fund 664,984 Property and equipment, at cost: Land and improvements 792,852 Building 3,878,710 Furniture and equipment 561,758 Total assets of property and equipment fund 5,233,320 Total assets $5,898,304 LIABILITIES AND FUND BALANCES Accounts payable and accrued expense $ 336,628 Fund balances: Operating fund— Balance December 31, 1957 $ 329,503 Excess of expenditures over assessments for the year .. 1,147 328,356 Property and equipment fund— Balance December 31, 1957 5,149,575 Expenditures for additions 87,961 Excess of cost of assets disposed of over trade-in allowances (4,216) 5,233,320 Total liabilities and fund balances $5,898,304 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 103 ASSESSMENTS AND EXPENDITURES YEAR ENDED DECEMBER 31, 1958 ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS: For Board expenses and additions to property and equipment $ 5,917,200 For expenditures made on behalf of the Federal Reserve Banks 4,769,500 Total assessments $10,686,700 EXPENDITURES: For printing, issue and redemption of Federal Reserve Notes, paid on behalf of the Federal Reserve Banks $ 4,769,500 For expenses of the Board: Salaries $3,937,185 Retirement and insurance contributions 512,961 Traveling expenses 305,691 Professional and contractual services: Economic surveys 294,140 Legal, consultant and audit fees 125,313 Other 17,631 Printing and binding 175,450 Telephone and telegraph 86,319 Postage and expressage 66,191 Equipment and other rentals 66,062 Operation of cafeteria, net 51,119 Heat, light and power 49,776 Stationery and office and other supplies 48,927 Repairs, maintenance and alterations 45,908 Books and subscriptions 16,940 Insurance 7,833 Miscellaneous, net 22,940 5,830,386 For property and equipment 87,961 Total expenditures $10,687,847 EXCESS OF EXPENDITURES OVER ASSESSMENTS FOR THE YEAR $ 1,147 The Board's expenses for 1958 include (1) an expenditure of $107,946 incurred in connection with the continuation of the Small Business Financing Study which was undertaken in 1957 for the information of the Federal Reserve System, the interested committees of the Congress, and the public generally; (2) an expenditure of $15,255 for Consumer Buying Intentions surveys requested by the Bureau of the Budget and the Council of Economic Advisers on November 21, 1957, and (3) an expenditure of $45,122 as a result of the assignment to the Board of certain responsibilities under The National Plan for Civil and Defense Mobilization and Defense Mobilization Order 1-20. 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

106 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 1958 [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 6,924,338 Federal Reserve Agents' Fund 9,273,000 19,012,893 Redemption fund for Federal Reserve notes 937,919 Total gold certificate reserves 19,950,812 Federal Reserve notes of other Federal Reserve Banks 476,993 Other cash: United States notes 30,678 Silver certificates 243,540 Standard silver dollars 7,401 National bank notes and Federal Reserve Bank notes 630 Subsidiary silver, nickels, and cents 54,225 Total other cash 336,474 Discounts and advances secured by U. S. Govt. securities: Discounted for member banks 45,963 Discounted for others 45,963 Other discounts and advances: Discounted for member banks 100 Foreign loans on gold 17,900 18,000 Total discounts and advances 63,963 Industrial loans 336 Acceptances: Bought outright 43,290 Held under repurchase agreement 5,799 U. S. Government securities: Bought outright— Bills 2,250,450 Certificates 18,649,726 Notes 2,867,565 Bonds 2,483,771 Total bought outright 26,251,512 Held under repurchase agreement 95,000 Total U. S. Government securities 26,346,512 Total loans and securities 26,459,900 Due from foreign banks . 15 Uncollected cash items: Transit items 5,320,702 Exchanges for clearing house 201,404 Other cash items 108,578 Total uncollected cash items 5,630,684 Bank premises: Land 22,911 Buildings (including vaults) 92,284 Fixed machinery and equipment 39,428 Total buildings 131,712 Less depreciation allowances 60,987 70,725 Total bank premises 93,636 Other assets: Miscellaneous assets acquired account industrial loans.. 25 Less valuation allowances 25 Net Reimbursable expenses and other items receivable. 2,941 Interest accrued 136,756 Premium on securities 1,656 Deferred charges 1,726 Real estate acquired for banking house purposes.. . 2,297 Suspense account 625 All other 640 Total other assets 146,641 Total assets 53,095,155 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 107 NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) —Continued LIABILITIES Federal Reserve notes: Outstanding (issued to Federal Reserve Banks) 29,057,573 Less: Held by issuing Federal Reserve Banks 1,011,229 Forwarded for redemption 174,321 1,185,550 Federal Reserve notes, net (includes notes held by U. S. Treasury and by Federal Reserve Banks other than issuing Bank) 27,872,023 Deposits: Member bank reserves 18,503,991 U. S. Treasurer—general account 358,364 Foreign 272,485 Other deposits: Nonmember bank—clearing accounts 71,457 Officers' and certified checks 8,839 Federal Reserve exchange drafts 280 Reserves of corporations doing foreign banking or financing 16,503 International organizations1 43,424 Allother 250,348 Total other deposits 390,851 Total deposits 19,525,691 Deferred availability cash items 4,335,126 Other liabilities: Accrued dividends unpaid Unearned discount 123 Discount on securities 17,301 Sundry items payable 4,012 Suspense account 79 All other 168 Total other liabilities 21,683 Total liabilities 51,754,523 CAPITAL ACCOUNTS Capital paid in 363,098 Surplus* 868,410 Other capital accounts: Reserves for contingencies: Reserves for registered mail losses 11,124 Allother 98,000 Total other capital accounts8 109,124 Total liabilities and capital accounts 53,095,155 Contingent liability on acceptances purchased for foreign correspondents 67,799 Industrial loan commitments 975 1 Includes International Bank for Reconstruction and Development, International Monetary Fund, and International Finance Corporation. 3 Surplus (Sec. 13b) eliminated Sept. 2, 1958; see text, p. 98. 8 During the year this item includes the net of earnings, expenses, profits, etc., which are closed out on December 31; see Table 6, pp. 114-115. 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 1958 AND 1957 [In thousands of dollars] Total Boston New York Philadelphia Cleveland Richmond Item 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 ASSETS Gold certificate account 19,012,89321,215,392 888,156 1,010,595 5,277,367 5,522,2981,037,847 1,182,7301,443,593 1,943,736 1,033,4591,347,887 Redemption fund for Federal Reserve notes 937,919 869,249 55,671 56,043 198,412 182,497 60,195 60,901 87,750 79,558 85,803 73,569 Total gold certificate reserves. . . 19,950,81222,084,641 943,8271,066,638 5,475,779 5,704,795 1,098,042 1,243,631 1,531,343 2,023,2941,119,262 1,421,456 Federal Reserve notes of other Banks. . 476,993 443,288 41,061 31,701 83,865 95,949 47,991 38,556 29,107 28,480 57,452 45,902 Other cash 336,474 338,622 19,758 19,863 60,901 66,417 16,950 15,056 28,071 22,701 22,112 25,618 i«i Discounts and advances: O Secured by U.S. Govt. securities... 45,963 50,364 200 450 6,520 3,290 5,485 5,140 2,775 3,750 1,575 4,010 00 Other 18,000 5,000 1,020 290 5,048 1,405 1,235 350 1,593 450 913 255 Industrial loans 336 482 327 285 173 Acceptances: Bought outright 43,290 42,337 43,290 42,337 Held under repurchase agreement. . 5,799 23,351 5,799 23,351 U.S. Government securities: Bought outright 26,251,51223,718,935 1,429,3421,293,773 6,619,791 5,931,655 1,509,042 1,384,545 2,323,915 2,083,4241,708,764 1,515,474 Held under repurchase agreement. . 95,000 519,350 95,000 519,350 Total loans and securities 26,459,900 24,359,819 1,430,8891,294,798 6,775,448 6,521,388 1,515,762 1,390,208 2,328,283 2,087,624 1,711,2521,519,739 Due from foreign banks 15 15 14 14 1 Uncollected cash items 5,630,684 5,494,735 405,506 467,096 1,215,353 1,173,568 332,939 345,425 543,121 490,271 433,573 421,538 Bank premises 93,636 83,763 4,705 5,010 10,313 10,664 4,245 4,514 9,432 9,678; 6,654 6,996 Other assets 146,641 223,584 7,884 11,971 36,477 55,349 8,181 12,740 12,768 19,340 9,479 14,058 Total assets 53,095,15553,028,467 2,853,6312,897,07813,658,140 13,628,134 3,024,1113,050,1314,482,126 4,681,3893,359,7853,455,308 1 After deducting $11,000 participations of other Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 27,872,02327,534,791 1,630,4251,638,156 6,512,632 6,500,863 1,751,3911,738,756 2,571,6382,624,6532,135,7572,188,221 Deposits: Member bank reserves , 18,503,99119,033,795 771,057 777,422 5,570,787 5,716,993 863,417 874,7411,344,0451,486,691 764,580 801,083 U.S. Treasurer—general account.. 358,364 480,810 21,009 38,077 35,306 68,734 22,996 30,221 4,656 45,778 29,422 47,161 Foreign 272,485 356,342 13,395 19,778 2 103,755 2 111,163 16,215 23,870 20,915 30,690 11,985 17,391 Other , 390,851 246,284 2,202 3,106 307,036 150,963 4,013 12,954 5,054 5,483 4,635 5,156 Total deposits 19,525,69120,117,231 807,663 838,383 6,016,884 6,047,853 906,641 941,786 1 374,670 1,568,642 810,622 870,791 Deferred availability cash items. 4,335,126 4,070,844 338,324 344,347 755,659 717,766 275,287 279,334 413,145 371,626 343,293 327,773 Other liabilities 21,683 14,948 1,069 549 5,376 5,367 1,253 623 1,853 1,484 1,130 587 Total liabilities 51,754,523 51,737,814 2,777,4812,821,435 13,290,55113,271,849 2,934,572 2,960,499 4,361,306 4,566,405 3,290,802 3,387,372 CAPITAL ACCOUNTS Capital paid in 363,098 345,106 18,121 17,742 105,850 102,215 21,894 21,192 34,246 32,514 16,439 15,695 Surplus (Sec. 7) 868,410 809,198 50,116 47,013 238,902 223,963 59,607 55,923 76,643 71,550 44,846 41,236 Surplus (Sec. 13b)s 27,543 3,011 7,319 4,489 1,006 3,349 Other capital accounts.. 109,124 108,806 7,913 7,877 22,837 22,788 "8*, 038 8,028 9,931 9,914 7,698 7,656 Total liabilities and capital accounts 53,095,155 53,028,467 2,853,6312,897,07813,658,14013,628,134 3,024,1113,050,1314,482,126 4,681,389 3,359,785 3,455,308 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 42.1% 46.3% 38.7% 43.1% 43.7% 45.5% 41.3% 46.4% 38.8% 48.3% 38.0% 46.5% Contingent liability on acceptances purchased for foreign correspondents. 67,799 76,114 3,864 4,414 419,119 421,398 4,678 5,327 6,034 6,849 3,458 3,881 Industrial loan commitments 975 1,109 26 35 77 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 29,057,573 28,643,286 1,703,4551,702,333 6,827,935 6,795,9451,815,1561,800,7912,645,549 2,700,128 2,223,439 2,266,546 Less held by issuing Bank, and forwarded for redemption 1,185,550 1,108,495 73,030 64,177 315,303 295,082 63,765 62,035 73,911 75,475 87,682 78,325 Federal Reserve notes, net5 27,872,023 27,534,791 1,630,4251,638,156 6,512,632 6,500,8631,751,3911,738,756 2,571,6382,624,653 2,135,757 2,188,221 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 11,073,000 12,273,000 650,000 700,000 2,920,000 3,270,000 640,000 640,000 920,000 1,130,000 725,000 945,000 Eligible paper 25,393 12,299 5,285 5,140 U.S. Government securities 18,615,000 17,165,000 1,150,000 1,150,000 4,000,000 3,600,000 1,200,000 1,200,000 1,750,000 1,600,0001,530,000 1,350,000 Total collateral. 29,713,393 29,450,299 1,800,000 1,850,000 6,920,000 6,870,000 1,845,2851,845,140 2,670,000 2,730,000 2,255,000 2,295,000 2 After deducting $168,730,000 participations of other Federal Reserve Banks on Dec. 31, 1958, and $245,179,000 on Dec. 31, 1957. 8 Eliminated Sept. 2, 1958; see text, p. 98. 4 After deducting $48,680,000 participations of other Federal Reserve Banks on Dec. 31, 1958, and $54,716,000 on Dec. 31, 1957. 6 Includes Federal Reserve notes held by 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 1958 AND 1957—Continued [In thousands of dollars] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Item 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 ASSETS Gold certificate account 864,742 830,9213,326,227 3,805,144 753,490 908,740 458,383 390,876 748,339 843,470 721,519 808,0012,459,7712,620,994 Redemption fund for Federal Reserve notes 57,037 48,919 167,634 157,090 44,661 43,349 22,463 22,171 43,533 41,597 29,845 28,495 84,915 75,060 Total gold certificate reserves. 921,779 879,840 3,493,8613,962,234 798,151 952,089 480,846 413,047 791,872 885,067 751,364 836,496 2,544,686 2,696,054 Federal Reserve notes of other Banks. 53,143 56,404 40,267 37,731 23,287 17,588 17,588 23,008 11,317 10,162 28,333 21,148 43,582 36,659 Other cash 26,560 24,744 58,734 56,959 26,513 25,649 8,664 8,359 14,662 12,492 14,687 12,829 38,862 47,935 Discounts and advances: Secured by U.S. Govt. securities. 4,765 3,050 3,885 8,750 1,600 250 18,408 6,909 750 14,565 200 Other 805 225 2,560 710 662 185 430 120 798 190 931 260 2,005 560 Industrial loans 9 24 Acceptances: Bought outright Held under repurchase agreement U.S. Government securities: Bought outright 1,335,7561,228,570 4,585,614 4,140,1641,070,904 980,896 552,253 511,8551,120,493 1,018,3251,028,298 929,5212,967,340 2,700,733 Held under repurchase agreement Total loans and securities.... 1,341,3261,231,845 4,592,059 4,149,6241,073,166 981,331 552,692 511,9991,139,699 1,025,424 1,029,979 944,346 2,969,345 2,701,493 Due from foreign banks. 1 2 2 1 1 () (6) 1 1 1 Uncollected cash items.. 453,214 466,237 902,999 887,537 232,399 188,651 145,320 136,191 254,995 238,904 242,747 223,368 468,518 455,949 Bank premises 9,294 6,497 11,824 6,823 6,862 6,138 5,193 5,307 4,799 4,903 7,786 6,260 12,529 10,973 Other assets 8,470 11,657 24,838 40,656 5,917 9,041 3,076 4,779 7,130 9,493 5,917 9,345 16,504 25,155 Total assets. 2,813,7872,677,225 9,124,584 9,141,566 2,166,296 2,180,4881,213,379 1,102,6902,224,4752,186,446 2,080,8142,053,793 6,094,0275,974,219 6 Less than $500. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 1,476,020 1,305,420 5,302,6815,334,2431,238,269 1,226,564 598,279 494,826 1,101,0811,077,385 798,613 748,184 2,755,2372,657,520 Deposits: Member bank reserves 846,398 851,8812,809,518 2,905,986 669,057 699,440 419,895 433,491 817,730 804,111 969,769 996,2232,657,738 2,685,733 U.S. Treasurer—general account 32,479 41,231 48,619 62,021 19,283 25,982 24,459 18,515 38,271 41,690 30,630 30,868 51,234 30,532 Foreign 10,575 15,345 33,605 48,422 8,695 12,617 5,640 8,184 9,165 12,958 12,220 17,732 26,320 38,192 Other 2,347 3,974 8,404 10,423 3,141 2,560 961 1,336 3,279 3,436 2,778 2,167 47,001 44,726 Total deposits 891,799 912,4312,900,146 3,026,852 700,176 740,599 450,955 461,526 868,445 862,1951,015,3971,046,990 2,782,293 2,799,183 Deferred availability cash items 380,576 398,917 721,508 594,080 174,787 163,043 129,777 113,263 200,590 195,229 196,451 190,958 405,729 374,508 Other liabilities 1,080 492 3,967 2,475 792 439 933 628 480 710 572 2,672 1,252 Total liabilities 2,749,475 2,617,260 8,928,3028,957,650 2,114,024 2,130,6451,179,944 1,070,243 2,170,964 2,135,2892,011,171 1,986,7045,945,9315,832,463 CAPITAL ACCOUNTS Capital paid in 18,371 16,562 49,665 46,570 12,348 11,577 8,387 7,426 14,848 13,781 20,684 19,405 42,245 40,427 Surplus (Sec. 7) 39,474 36,192 132,159 121,504 33,746 31,586 20,785 19,697 32,935 30,533 43,436 40,871 95,761 89,130 Surplus (Sec. 13b)8 762 1,429 521 1,073 1,137 1,307 2,140 Other capital accounts.. 6,467 6,449 ' '14,458 14,413 ' *6,i78 6,159 " 4,263 4,251 5,728 5,706 5,523 5,506 10,090 10,059 Total liabilities and capital accounts 2,813,7872,677,225 9,124,584 9,141,566 2,166,296 2,180,4881,213,3791,102,690 2,224,475 2,186,446 2,080,814 2,053,793 6,094,027 5,974,219 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 38.9% 39.7% 42.6% 47.4% 41.2% 48.4% 45.8% 43.2% 40.2% 45.6% 41.4% 46.6% 46.0% 49.4% Contingent liability on acceptances purchased for foreign correspondents 3,051 3,425 9,695 10,806 2,509 2,816 1,627 1,826 2,644 2,892 3,526 3,957 7,594 8,523 Industrial loan commitments 66 940 940 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 1,556,710 1,374,708 5,474,313 5,472,9191,296,8381,280,689 614,338 534,419 1,137,6621,109,605 849,075 792,868 2,913,103 2,812,335 Less held by issuing Bank, and forwarded for redemption 80,690 69,288 171,632 138,676 58,569 54,125 16,059 39,593 36,581 32,220 50,462 44,684 157,866 154,815 Federal Reserve notes, net5... 1,476,020 1,305,420 5,302,6815,334,2431,238,2691,226,564 598,279 494,826 1,101,0811,077,385 798,613 748,184 2,755,237 2,657,520 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 475,000 425,000 2,200,000 2,500,000 430,000 450,000 200,000 130,000 300,000 300,000 313,000 283,000 1,300,000 1,500,000 Eligible paper. 1,600 250 18,508 6,909 U.S. Government securities 1,100,000 1,000,000 3,400,000 3,100,000 935,000 895,000 425,000 425,000 850,000 820,000 575,000 525,0001,700,000 1,500,000 Total collateral. 1,575,000 1,425,000 5,600,000 5,600,000 1,366,600 1,345,250 625,000 555,000 1,168,508 1,126,909 888,000 808,000 3,000,000 3,000,000 8 Eliminated Sept. 2, 1958; see text, p. 98. 6 Includes Federal Reserve notes held by 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. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, END OF DECEMBER 1956, 1957, AND 1958 [In thousands of dollars] Rate of December 31 Change during Type of issue interest (per cent) 1958 1957 1956 1958 1957 Treasury bonds: 1956-58 2V2 12,493 12,493 -12,493 1958 June 2% 1 1 9 9 5 5 7 8 D 59 ec 2 2 % V2 339,096 339,096 -339,096 1956-59 2M 21,690 21,690 -21,690 1960 Nov 2Vs 1961 Sept 2% 1961 Nov 2H 1959-62 June 2M 319,849 319,849 319,849 1959-62 Dec 693,765 693,765 693,765 1963 Aug 1964 Feb 3 2 1 1 9 96 6 5 0 - F 65 eb 1 2 2 V % 8 20,300 +20,300 1966 Aug 7,000 +7,000 1962 67 2XA 56,610 56,610 56,610 1963-68 2XA 122,585 122,585 122,585 1964-69 June 2Y2 203,890 203,890 203,890 1964-69 Dec 2XA 266,999 266,999 266,999 1965-70 2~A 521,490 521,490 521,490 1966-71 2Y2 132,707 132,707 132,707 1967-72 June 2% 49,266 49,266 49,266 1967-72 Sept 2XA 2,552 2,552 2,552 1967-72 Dec 58,758 58,758 58,758 1969 Oct 2Y2 1974 Nov 4 1978-83 3 3% M 1985 May 3K 5,200 +5,200 1 1 9 9 9 9 0 5 F F e e b b 3 3 V2 22,800 +22,800 Total Treasury bonds. 2,483,771 2,801,750 2,801,750 -317,979 Treasury notes: Mar. 15, 1957-A 2% Apr. 1, 1957-EA.... 500,000 -500,000 May 15, 1957-B Aug. 1, 1957-D 2M 7,940,065 -7,940,065 Aug. 15, 1957-C Oct. 1, 1957-EO.... 13^ 713,848 -713,848 Apr. 1, 1958-EA.... June 1, 1958-A Oct. 1, 1958-EO.... 1H Feb. 15, 1959-A i y& Apr. 1, 1959-EA.... \y 2 Oct. 1, 1959-EO.... \y Nov. 15, 1959-B 2 A M p a r y . 1 1 5 , , 1 1 9 9 6 6 0 0 - - A EA 3y2 Oct. 1, 1960-EO.... 33J Apr. 1, 1961-EA May 15, 1961-B 3% 2,857,565 +2,857,565 Aug. 1, 1961-A 4 Oct. 1, 1961-EO.... Feb. 15, 1962-A 3% Apr. 1, 1962-EA.... Aug. 15, 1962-B Oct. 1, 1962-EO.... ip Nov. 15, 1962-C Feb. 15, 1963-A 10,000 +10,000 Apr. 1, 1963-EA... 2V8 Oct. 1, 1963-EO... Total Treasury notes. 2,867,565 9,153,913 +2,867,565 -9,153,913 Certificates: Feb. 15, 1957 2% 5,012,000 -5,012,000 Oct. 1, 1957 5,920,699 -5,920,699 Feb. 14, 1958 5,494,500 -5,494,500 +5,494,500 Aug. 1,1958 4 8 6,581,547 -6,581,547 +6,581,547 Dec. 1, 1958 3% 7,857,565 -7,857,565 +7,857,565 A Fe u b g . . 14 1 , , 1 1 9 9 5 5 9 9 i 1 y 52 A * 8 5, , 5 1 0 4 6 2 * , , 7 9 3 9 3 3 + + 5 8 , , 5 1 0 4 6 2 , , 9 7 9 3 3 3 Nov. 15, 1959 3Vs 5,000,000 +5,000,000 Total certificates.. .. 18,649,726 19,933,612 10,932,69 -1,283,88 +9,000,913 Treasury bills 2,250,450 983,573 1,721,27 +1,266,87 -737,697 Repurchase agreements 95,000 519,350 305,10 -424,35 +214,250 Total holdings 26,346,51224,238,28524,914,73 +2,108,22 -676,447 * Partly tax-exempt. Digitized for FRASER 112 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 4—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-581 [IrI millionsof dollars] Date Amount Date Amount Date Amount Date Amount 1953-Mar. 18 110 1953—June 9 491 1953—June 22 908 1954—Jan. *24 283 19 104 10 451 23 608 25 203 20 189 11 358 24 296 26 3 21 189 12 506 1954—Jan. 14 22 Mar. 15 134 *22 189 13 506 15 169 16 190 23 333 *14 506 16 169 24 186 15 999 *17 169 1955) 25 63 16 1,172 18 323 1956 >• no transactions 26 49 17 823 19 424 1957 ) June 5 196 18 364 20 323 6 196 19 992 21 306 1958—Mar. 17 143 *7 196 20 992 22 283 18 207 8 374 *21 992 23 283 * 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 M per cent through Dec. 3, 1957, and M per cent below prevailing discount rate of Federal Reserve Bank of New York thereafter. Actual rate for 1958 purchases, 2 per cent. For data for prior years beginning with 1942, see previous Annual Reports. No holdings on dates not shown. NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1954-58 [Number in thousands; amounts in thousands of dollars] 1958 1957 1956 1955 1954 NUMBER OF PIECES HANDLED1 Discounts and advances:2 Notes discounted and advances made 14 25 23 21 10 Currency received and counted 4,547,668 4,631,676 4,466,739 4,282,562 4,384,270 Coin received and counted... 9,574,474 9,089,460 8,610,821 8,430,796 8,382,024 Checks handled: U. S. Govt. checks 388,541 469,158 539,359 503,516 481,408 Postal money orders 295,350 324,161 342,313 347,351 354,368 All other3 3,085,185 2,974,940 2,822,589 2,643,549 2,512,985 Collection items handled: U. S. Govt. coupons paid... 13,564 12,546 11,997 12,301 12,753 All other 20,429 19,308 17,813 16,368 15,443 Issues, redemptions, and exchanges of U. S. Govt. securities 193,665 207,246 198,519 191,922 191,112 Transfers of funds 2,426 2,302 2,123 1,960 1,808 AMOUNTS HANDLED Discounts and advances2. . . . 41,306,072 114,469,820 109,665,475 88,436,422 22,871,449 Currency received and counted 29,596,570 29,926,319 29,104,496 27,461,048 28,482,428 Coin received and counted... 956,235 922,742 887,418 862,022 810,278 Checks handled: U. S. Govt. checks 99,942,372 102,062,972 114,173,132 123,215,681 141,037,495 Postal money orders 5,297,341 5,796,279 5,941,097 5,814,754 5,943,178 Allother3 1,044,984,066 1,044,553,457 1,003,202,371 927,648,399 845,365,275 Collection items handled: U. S. Govt. coupons paid.. 3,695,458 3,032,805 2,563,075 2,595,305 2,209,045 Allother 5,663,684 5,758,976 5,495,317 5,354,604 5,085,695 Issues, redemptions, and exchanges of U. S. Govt. securities 526,037,271 493,391,267 421,612,394 429,701,960 469,247,400 Transfers of funds 1,643,532,0691,345,185,0371,233,509,550 1,091,608,8911,038,100,606 1 Two or more checks, coupons, etc., handled as a single item are counted as one "piece." 2 Exclusive of industrial loans. 8 Exclusive of checks drawn on the Federal Reserve Banks. 113 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1958 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.... $6,744,474 $340,549 $1,592,055 $321,990 $840,189 $365,807 $667,053 $1,219,562 $243,498 $159,214 $607,852 $168,847 $217,859 Industrial loans and commitments 21,843 14,696 3,002 630 79 813 2,621 Acceptances 805,781 805,781 U.S. Government securities. 734,211,830 39,932,739185,595,28142,316,962 64,755,386 47,475,124 37,483,117128,023,207 30,016,564 15,530,096 31,338,90528,717,892 83,026,558 All other 284,220 15,700 66,135 16,303 21,390 14,559 23,327 41,191 9,131 10,036 25,014 15,807 25,630 Total current earnings. . 742,068,150 40,303,684188,059,252 42,658,257 65,617,595 47,855,490 38,173,496 129,284,039 30,269,193 15,700,159 31,974,392 28,902,546 83,270,047 CURRENT EXPENSES Salaries: Officers , 6,269,242 354,203 1,135,974 379,282 543,267 494,312 510,557 659,698 440,238 330,209 472,159 422,235 527,108 Employees 80,500,913 4,952,887 17,965,149 4,364,639 7,196,012 5,256,306 5,081,209 12,466,159 4,613,400 2,491,036 4,140,157 3,754,226 8,219,733 Directors' and other fees .. , 489,666 24,148 62,537 24,545 51,540 24,926 72,949 30,022 33,163 32,465 49,647 37,367 46,357 Retirement contributions.. 9,627,916 581,072 2,025,616 524,928 864,509 649,205 633,757 1,493,184 554,998 296,937 532,199 486,395 985,116 Traveling expenses 1,682,279 105,415 280,614 73,401 146,435 137,221 134,922 212,915 108,412 87,636 103,345 113,151 178,812 Postage and expressage 16,401,104 1,347,593 2,375,805 853,702 1,346,178 1,597,083 1,425,438 2,205,310 883,894 584,007 972,052 852,477 1,957,565 Telephone and telegraph.. 1,291,235 69,514 270,122 60,385 109,238 98,228 131,088 147,066 74,673 46,452 73,336 85,715 125,418 Printing, stationery, and supplies 6,264,484 479,923 1,190,373 316,444 489,153 423,161 463,688 1,003,803 422,898 177,629 365,583 310,981 620,848 Insurance 1,295,512 86,092 224,187 53,043 123,603 100,133 78,903 179,040 95,264 57,861 92,540 75,547 129,299 Taxes on real estate 3,778,905 599,850 739,798 141,126 338,953 173,644 170,448 470,956 130,163 281,752 162,514 154,479 415,222 Depreciation (building) 4,032,079 414,858 419,598 268,149 561,243 480,855 163,835 355,415 170,854 175,378 142,854 237,786 641,254 Light, heat, power, and water 1,531,275 111,950 257,727 99,360 170,087 146,178 80,449 173,838 109,331 78,162 110,883 80,714 112,596 Repairs and alterations , 1,281,246 36,121 184,370 68,935 430,291 41,373 34,137 36,707 63,461 200,523 88,787 11,361 85,180 Rent , 218,223 5,663 6,062 7,186 17,603 2,506 14,707 95,497 2,285 202 177 54,394 11,941 Furniture and equipment: Purchases , 3,171,942 90,716 710,565 71,372 252,288 135,984 541,278 202,657 392,354 208,842 215,608 116,050 234,228 Rentals 5,578,023 458,911 755,162 360,508 445,216 399,243 394,271 891,557 307,431 191,669 316,595 310,481 746,979 All other 1,915,955 99,195 358,882 91,776 367,904 100,702 127,446 238,773 85,297 91,513 122,232 109,513 122,722 Interbank expenses 38,486 -452,014 46,112 60,898 -9,352 33,844 97,191 26,581 16,626 28,320 36,429 76,880 Subtotal 145,330,000 9,856,597 28,510,527 7,804,89313,514,41810,251,70810,092,926 20,959,788 8,514,697 5,348,899 7,988,988 7,249,30115,237,258 Federal Reserve currency.. . 5,973,240 374,512 1,237,367 209,817 454,982 580,121 369,309 1,412,956 303,608 92,861 170,769 207,187 559,751 Assessment for expenses of Board of Governors 5,917,200 338,400 1,667,300 408,000 526,100 301,300 269,200 851,000 218,800 142,400 228,100 308,700 657,900 Total. 157,220,440 10,569,509 31,415,194 8,422,71014,495,500 11,133,129 10,731,435 23,223,744 9,037,105 5,584,160 8,387,857 7,765,18816,454,909 Less reimbursement for certain fiscal agency and other expenses 19,498,784 1,044,022 3,276,185 994,319 1,879,716 1,083,025 1,456,523 3,266,108 1,218,556 604,932 1,395,922 1,137,382 2,142,094 Net expenses. 137,721,655 9,525,487 28,139,009 7,428,39112,615,78410,050,104 9,274,911 19,957,636 7,818,549 4,979,227 6,991,936 6,627,80614,312,815 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PROFIT AND LOSS Current net earnings 604,346,495 30,778,197 159,920,243 35,229,866 53,001,81137,805,386 28,898,585109,326,403 22,450,64410,720,932 24,982,456 22,274,740 68,957,232 Additions to current net earnings: Profits on sales of U.S. Government securities (net) 156,596 9,137 38,538 9,524 13,848 9,795 8,448 26,380 6,933 3,949 6,664 6,490 16,890 All other 297,047 291 12,063 218 18,656 1,719 27,739 26,960 139,600 401 810 63,295 5,297 Total additions 453,643 9,428 50,601 9,742 32,503 11,513 36,187 53,340 146,533 4,350 7,474 69,785 22,186 Deductions from current net earnings: Reserves for contingencies 316,526 35,312 49,260 9,551 17,393 42,636 18,506 44,771 18,436 11,816 21,479 16,870 30,497 All other 12,941 1,280 523 1,449 558 2,080 2,328 622 671 1,230 35 855 1,311 Total deductions 329,467 36,591 49,783 11,000 17,951 44,716 20,834 45,392 19,107 13,046 21,514 17,725 31,808 Net additions 124,176 -27,164 819 -1,258 14,553 -33,203 15,353 7,948 127,425 -8,696 — 14,040 52,060 -9,621 Net earnings before payments to U.S. Treasury. . 604,470,670 30,751,033159,921,062 35,228,608 53,016,364 37,772,18328,913,937109,334,35122,578,070 10,712,236 24,968,416 22,326,80068,947,610 Paid U.S. Treasury (interest on F. R. notes) 524,058,650 26,710,224138,349,233 30,540,793 45,9185,55133,129,77224,584,472 95,789,04819,675,908 9,212,206 21,696,02018,620,110 59,832,314 Dividends paid 21,197,452 1,073,009 6,199,722 1,294,403 1,995,760 961,325 1,052,929 2,902,076 715,956 476,455 861,731 1,196,810 2,467,275 Transferred to surplus (Sec. 59,214,569 2,967,800 15,372,107 3,393,412 5,102,053 3,681,086 3,276,536 10,643,227 2,186,206 1,023,576 2,410,665 2,509,879 6,648,022 Surplus (Sec. 7) Jan. 1.'.' .''. '.809,197,680 47,012,677223,963,199 55,922,77271,550,35341,236,41136,192,075121,503,625 31,586,344 19,696,549 30,532,90140,871,083 89,129,690 Transferred from surplus (Sec. 13b) -3,657 135,411 -433,413 290,661 -9,906 -71,517 5,491 11,682 -26,515 64,874 -8,674 55,337 -17,089 Surplus (Sec. 7) Dec. 31 868,408,591 50,115,888 238,901,893 59,606,846 76,642,500 44,845,980 39,474,103132,158,534 33,746,03520,785,000 32,934,892 43,436,29995,760,623 NOTE.—Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-58 Net earnings Franchise tax Paid to U. S. Paid to U. S. Transferred Transferred Current Current before pay- Dividends paid to U. S. Treasury Treasury to surplus to surplus Bank and period earnings expenses U. S m . e T n r t e s a t s o ury1 paid Treasury (Sec. 13b) F (i . n R te . r e n s o t t e o s n ) (Sec. 13b) (Sec. 7) All Federal Reserve Banks, by years: 1914-15 $ 2,173,252 $ 2,320,586 $ -141,459 $ 217,463 1916 5,217,998 2,273,999 2,750,998 1,742,774 1917 16,128,339 5,159,727 9,582,067 6,804,186 $ 1,134,234 $ 1,134,234 1918 67,584,417 10,959,533 52,716,310 5,540,684 48 334 341 1919 102,380,583 19,339,633 78,367,504 5,011,832 2,703,894 70 651 778 1920 181,296,711 28,258,030 149,294,774 5,654,018 60,724,742 82 916 014 1921 122,865,866 34,463,845 82,087,225 6,119,673 59,974,466 15 993 086 1922 50,498,699 29,559,049 16,497,736 6,307,035 10,850,605 —659 904 1923 50,708,566 29,764,173 12,711,286 6,552,717 3,613,056 2 545 513 1924 38,340,449 28,431,126 3,718,180 6,682,496 113,646 —3 077 962 1925 41,800,706 27,528,163 9,449,066 6,915,958 59,300 2 473 808 1926 47,599,595 27,350,182 16,611,745 7,329,169 818,150 8 464 426 1927 43,024,484 27,518,443 13,048,249 7,754,539 249,591 5 044 119 1928 64,052,860 26,904,810 32,122,021 8,458,463 2,584,659 21 078 899 1929 70,955,496 29,691,113 36,402,741 9,583,913 4,283,231 22,535 597 1930 36,424,044 28,342,726 7,988,182 10,268 598 17,308 —2 297 724 1931 29,701,279 27,040,664 2,972,066 10,029,760 —7 057 694 1932 50,018,817 26,291,381 22,314,244 9,282,244 2,011,418 11 020 582 1933 49,487,318 29,222,837 7,957,407 8,874,262 —916 855 1934 48,902,813 29,241,396 15,231,409 8,781 661 $ _60 323 6 510 071 1935 42,751,959 31,577,443 9,437,758 8,504,974 $ 297,667 27,695 607,422 1 19 9 3 3 7 6 3 4 7 1 , , 9 2 0 3 0 3 , , 6 1 3 3 9 5 2 28 9 , , 8 8 0 7 0 4 , , 6 0 1 2 4 3 1 8 0 , , 5 8 1 0 2 1 ,2 4 4 3 7 3 7 7, 9 8 4 2 0 9 , 9 5 6 8 6 1 2 1 2 7 7 6 ,6 4 2 4 5 8 1 6 02 7 ,3 8 0 8 4 0 2,6 3 1 5 6 2 ,3 5 5 2 2 4 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 104,391,829 49,175,921 58,437,788 9,500,126 326 717 201 150 48 409 795 1945 142,209,546 48,717,271 92,662,268 10,182,851 247 659 262 133 81 969 625 1946 150,385,033 57,235,107 92,523,935 10,962,160 67,054 27 708 81 467 013 1947 158,655,566 65,392,975 95,235,592 11,523,047 35,605 $ 75,223,818 86,772 8,366,350 1948 304,160,818 72,710,188 197,132,683 11,919,809 166 690 356 18 522 518 1949 316,536,930 77,477,676 226,936,980 12,329,373 193,145,837 21,461,770 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 1957 763,347,530 131,814,003 624,392,613 20,080,527 542,708,405 61,603,682 1958 742,068,150 137,721,655 604,470,670 21,197,452 524,058,650 59,214,569 Total 1914-58... 7,290,667,465 2,137,240,408 5,096,306,434 430,484,212 149,138,300 2,188,893 3,517,417,892 B-3,657 2997,O8O,793 Aggregate for each Federal Reserve Bank, 1914-58: Boston 451,967,149 152,423,577 296,775,403 27,237,886 7,111,395 280,843 201,799,152 B+135,411 60,210,713 New York 1,864,727,623 478,460,584 1,381,677,841 141,938,107 68,006,262 369,116 895,639,303 -433,413 276,158,464 Philadelphia 481,030,355 143,402,176 336,825,931 34,963,745 5,558,901 722,406 221,353,150 +290,661 73,937,068 Cleveland 658,534,350 197,099,010 454,540,038 42,423,567 4,842,447 82,930 317,324,708 B—9,906 89,876,293 Richmond 437,868,817 140,092,135 293,740,235 18,550,484 6,200,189 172,493 218,162,797 B-71,517 50,725,788 Atlanta 375,948,311 118,543,553 251,612,569 16,810,537 8,950,561 79,264 181,026,072 +5,491 44,740,643 Chicago 1,140,290,111 299,672,903 829,293,388 52,729,477 25,313,526 151,045 603,600,369 B+11,682 147,487,288 St. Louis 334,241,001 117,440,862 211,215,314 14,862,779 2,755,629 7,464 154,750,293 B-26,515 38,865,663 Minneapolis 201,789,760 72,211,504 127,580,626 10,088,105 5,202,900 55,615 87,506,923 B+64,874 24,662,213 Kansas City 332,667,298 115,323,102 213,462,848 15,279,567 6,939,100 64,213 154,113,800 -8,674 37,074,842 Dallas. . 294,935,811 97,073,850 194,268,704 16,991,022 560,049 102,083 128,846,435 B+55,337 47,713,777 San Francisco 716,666,880 205,497,152 505,313,536 38,608,934 7,697,341 101,421 353,294,890 B-17,089 105,628,040 Total 7,290,667,465 2,137,240,408 5,096,306,434 430,484,212 149,138,300 2,188,893 3,517,417,892 B-3,657 997,080,793 B Revised. 1 Current earnings less current expenses, plus and minus profit and loss additions and deductions. 2 The $997,080,793 transferred to surplus was reduced by direct charges of $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation, $500,000 for charge-off on bank premises and $3,657 net upon elimination of surplus (Sec. 13b), and was increased by $11,131,013 transferred from reserves for contingencies, leaving a balance of $868,408,591 on Dec. 31, 1958. NOTE.—Details may not add to totals because of rounding. 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 1918-58 AND END OF MONTH 1958 [In millions of dollars] Reserve Bank credit outstanding Deposits, other than member bank reserves, Member bank with F. R. Banks reserves U.S. Government Treas- Other securities ury Cur- Treas- Fed- End of Dis- Gold cur- rency ury eral year or Held counts All stock2 rency in cash Remonth under and Float other* Total out- circu- hold- Treas- For- serve Bought repur- ad- stand- lation ings4 ury eign Other ac- Total Re- Ex- Total out- chase vances ing8 deposits deposits deposits counts5 quired6 cess8 right agreement 1918.. . 239 239 1,766 199 294 2,498 2,873 1,795 4,951 288 51 96 25 118 L.636 1,585 51 1919... 300 300 2,215 201 575 3,292 2,707 1,707 5,091 385 31 73 28 208 L,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 I-* 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 L,898 1,884 14 00 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 L.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 11,096 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 3,606 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 1,027 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 I5,724 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 11L,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 Vt,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 6 471 14 6,679 22,726 3,648 15,410 2,193 799 793 485 256 i:5,117 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 i:',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 Ut,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. . .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 1957. . .24,238 23,719 519 55 1,424 66 25,784 22,781 5,146 31,834 761 481 356 246 998 19,034 19,091 -57 1958— Jan.. 23,331 23,331 217 763 24,352 22,784 ,158 30,576 771 469 249 279 990 18,958 18,543 415 Feb. ,23,240 23,240 122 924 24,330 22,686 ,169 30,554 695 516 265 336 ,151 18,667 18,186 481 Mar., 23,628 23,628 137 765 24,570 22,394 ,183 30,666 722 474 266 378 ,108 18,532 17,857 675 Apr. 23,681 23,681 156 797 24,672 21,996 ,196 30,565 734 594 257 411 ,050 18,254 17,686 568 May, 24,162 24,162 144 965 25,313 21,594 ,201 30,994 703 382 234 624 994 18,176 17,543 633 June 25,438 25,438 41 758 26,283 21,356 ,203 31,172 692 410 269 420 ,096 18,784 18,158 626 July. 24,480 24,480 94 868 25,477 21,210 ,207 31,171 685 617 288 329 ,039 17,764 17,801 -37 Aug., 25,346 25,346 555 805 26,739 21,011 5,211 31,371 684 540 313 332 ,184 18,538 17,860 678 Sep.. 24,986 24,986 255 860 26,130 20,874 5,219 31,245 684 371 258 395 ,122 18,147 17,785 362 Oct.. 25,443 25,373 70 407 788 26,675 20,690 5,222 31,386 674 363 288 335 ,079 18,462 18,009 453 Nov., 26,229 26,069 160 717 1,026 28,006 20,609 5,228 32,036 694 424 226 430 ,038 18,994 18,217 777 Dec., 26,347 26,252 95 64 1,296 27,755 20,534 5,234 32,193 683 358 272 391 ,122 18,504 18,574 -70 1 Comprises acceptances and industrial loans. 2 Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation. 8 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. 4 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. 8 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES DECEMBER 31, 1958 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 $2,977,084 $10,534,385 $4,704,692 New York 5,215,656 12,183,528 4,886,521 22,285,705 4,951,992 Annex , 592,679 1,661,680 562,181 2,816,540 1,018,051 Buffalo , 401,864 2,519,310 1,559,393 4,480,567 4,343,016 Philadelphia 1,884,357 4,839,506 2,130,561 8,854,424 4,245,333 Cleveland 1,295,490 6,566,360 2,990,665 10,852,515 2,633,805 Cincinnati 400,891 1,573,005 999,107 2,973,003 1,628,337 Pittsburgh 1,189,941 4,954,701 689,889 6,834,531 5,170,002 Richmond , 469,944 4,269,441 2,094,952 6,834,337 2,896,937 Baltimore 250,487 2,009,381 1,062,747 3,322,615 2,298,981 Charlotte 117,479 1,065,485 607,294 1,790,258 1,458,549 Atlanta 633,387 1,722,115 362,731 2,718,233 1,145,991 Annex 93,931 137,100 103,867 334,898 311,989 Birmingham 328,997 2,715,054 70,511 3,114,562 2,698,473 Jacksonville.. . 164,004 1,686,250 694,291 2,544,545 1,935,304 Nashville 422,577 2,384,089 2,806,666 2,806,666 New Orleans. . 277,078 762,456 265,700 1,305,234 395,318 Chicago 6,019,757 9,983,797 2,743,155 18,746,709 8,264,886 Detroit 1,147,734 2,837,712 1,214,162 5,199,608 3,558,749 St. Louis 1,675,780 3,225,466 1,994,738 6,895,984 2,095,991 Little Rock 85,007 264,604 194,115 543,726 180,911 Louisville 523,353 2,859,819 1,003,708 4,386,880 4,314,491 Memphis 128,542 287,469 152,627 568,638 270,813 Minneapolis.. . 600,521 4,579,206 2,404,514 7,584,241 5,107,518 Helena 15,709 126,401 62,977 205,087 85,373 Kansas City... 545,764 3,521,181 1,316,319 5,383,264 1,363,967 Denver 592,271 523,041 86,910 1,202,222 765,516 Oklahoma City 65,021 421,252 97,588 583,861 166,294 Omaha 445,663 1,491,117 718,041 2,654,821 2,503,399 Dallas 686,243 2,019,797 466,692 3,172,732 1,373,037 El Paso 262,477 787,728 393,301 1,443,506 1,388,422 Houston 629,768 2,218,557 2,848,325 2,775,083 San Antonio... 448,596 1,400,390 570,847 2,419,833 2,249,906 San Francisco. 476,768 3,783,530 1,458,028 5,718,326 1,370,460 Annex 247,201 124,000 30,000 401,201 401,201 Los Angeles. .. 736,867 4,074,380 1,491,100 6,302,347 4,304,320 Portland 207,380 1,678,512 630,920 2,516,812 1,775,735 Salt Lake City. 555,723 2,428,860 84,814 3,069,397 2,684,807 Seattle 274,772 1,891,564 642,240 2,808,576 1,992,134 Total.. . 31,737,811 107,507,013 39,814,290 179,059,114 93,636,449 OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Buffalo 255,000 465,707 720,707 333,431 Richmond 146,550 146,550 146,550 New Orleans 2751,O5O 751,050 751,050 Kansas City 2396,219 396,219 396,219 Oklahoma City 2497,850 497,850 497,850 Houston 78,812 317,336 112,111 508,259 101,416 Los Angeles 40,747 29,464 70,211 70,211 Total 2,166,228 812,507 112,111 3,090,846 2,296,727 1 Includes expenditures incident to construction programs carried in unallocated accounts pending completion of programs and subsequent allocation of costs to appropriate accounts. 2 Includes cost of building on property. 120 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, 1958] President Other officers Employees1 Total Federal Reserve Bank (including branches) Annual salary Number Annual salaries Number Annual salaries Number Annual salaries Boston $35,000 23 $323,500 1,284 $4,917,528 1,308 $5,276,028 New York 60,000 61 1,091,750 3,774 17,210,537 3,836 18,362,287 Philadelphia. . . 30,000 25 333,000 1,002 4,232,403 1,028 4,595,403 Cleveland 35,000 37 509,056 1,598 6,777,823 1,636 7,321,879 Richmond 35,000 35 459,400 1,350 5,132,649 1,386 5,627,049 Atlanta . ... 35,000 37 473,400 1,382 5,004,215 1,420 5,512,615 Chicago 50,000 41 592,950 2,792 11,962,093 2,834 12,605,043 St. Louis 35,000 32 413,900 1,106 4,357,352 1,139 4,806,252 Minneapolis 35,000 22 283,750 631 2,413,878 654 2,732,628 Kansas City. . .... ... 35,000 33 439,400 1,043 4,025,473 1,077 4,499,873 Dallas 35,000 29 368,900 987 3,729,064 1,017 4,132,964 San Francisco 35,000 39 482,000 1,932 7,909,486 1,972 8,426,486 Total . . $455,000 414 $5,771,006 18,881 $77,672,501 19,307 $83,898,507 1 Includes 697 part-time employees. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES In effect December 31, 1958. For changes during the year, see "Record of Policy Actions of Board of Governors.'* [Per cent per annum] New Phila- Cleve- Rich- St. Minne- Kansas San Type of transaction Boston York delphia land mond Atlanta Chicago Louis apolis City Dallas Francisco Discounts for and advances to member banks: Advances secured by Government obligations and discounts of and advances secured by eligible paper (Sees. 13 and 13a of the Federal Reserve Act) 2Y2 2Y2 2Y2 2Y2 2Y2 2Y2 2Y2 2Y2 2Y2 2Y2 Other secured advances (Sec. 10(b) of the Federal Reserve Act) 3 3 3 3 3 3 3 3 3 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) 3Y2 3 Loans to industrial or commercial businesses under Sec. 13b of the Federal Reserve Act, direct or in participation with financing institutions 3V2-6 4-6 4-6 4-6 3^-5^ 2%-SM 4-6 4r-6 4-6 Discounts for and purchases from financing institutions under Sec. 13b of the Federal Reserve Act: On portion for which institution is obligated 0 0) 0) }4 4-6 0) (*) 0) On remaining portion (3) (3) 3Y2-6 4 4 - - 6 6 (3) (8) (8) Commitments to make loans under Sec. 13b of the Federal Reserve Act: To industrial or commercial businesses Y2-IY2 4-1} 4-1} 4-1} 4-1} Y2-1Y2 Y2-1Y2 To financing institutions Y2-W2 Y2-1} 4-1} 4-1} Y2-1Y2 Y2-1Y2 4n 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. 3 Rate charged borrower. 4 Twenty-five per cent of loan rate on disbursed portion; }4 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

NO. 12—MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits1 Time deposits Effective date of change Central Central Reserve Country reserve and Country reserve city banks banks reserve city banks city banks banks 1917—June 21 13 10 7 3 3 1 1 9 9 3 3 6 7 — — A M u a g r . . 1 1 6 2 1 2 93 M ^ 1 1 5 7^ i 1 o 2 y M 2 4 5 ^ M ±y2 May 1 26 20 14 6 6 1938—Apr. 16 22M 173^ 12 5 5 1941—Nov. 1 26 20 14 6 6 1942—Aug. 20 24 Sept. 14 22 Oct. 3 20 1948—Feb. 27 22 June 11 24 Sept. 16, 24* 26 22 16 7^ 7H 1949—May 1,5* 24 21 15 June 30, July 1* 20 14 6 6 A A u u g g . . 16 1 , , 1 1 8 1 * * ""23 2 y 32"" 1 19 9K 1 1 3 2 5 5 A Se u p g t . . 25 1 2 2 2 2y2 1 1 8 8 3^ 1951—Jan. 11. 16* 23 19 13 6 6 Jan. 25, Feb. 1* 24 20 14 1953—July 1,9* 22 19 13 1954—June 16, 24* 21 5 5 July 29, Aug. 1* 20 18 12 1958—Feb. 27, Mar. 1* 19^ 113^ Mar. 20, Apr. 1* 19 11 Apr. 17 183^ Apr. 24 18 ioy 2 In effect Jan. 1, 1959 18 11 5 5 Present legal requirements: Minimum 13 10 7 3 3 Maximum 26 20 14 6 6 1 Demand dee*p.osits subject to reserve requirements which, beginning Aug. 23, 1935, have been total ddeemmaanndd ddeeppoossiitts 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). * First-of-month or midmonth dates are changes at country banks, and other dates (usually Thurs.) are at central reserve or reserve city banks. NO. 13—MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS1 [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 23^ Postal savings deposits. Other time deposits payable: In 6 months or more In 90 days to 6 months. In less than 90 days.... i 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. 123 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 14—MARGIN REQUIREMENTS* Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Per cent of market value] Jan. 17, Feb. 20, Jan. 4, Apr. 23, Jan. 16, Aug. 5, Effec- 1951- 1953- 1955- 1955- 1958- 1958- tive Feb. 20, Jan. 4, Apr. 22, Jan. 15, Aug. 4, Oct. 15, Oct. 16, 1953 1955 1955 1958 1958 1958 1958 Regulation T: For extension of credit by brokers and dealers on listed securities 75 50 60 70 50 70 90 For short sales 75 50 60 70 50 70 90 Regulation U: For loans by banks on stocks 75 50 60 70 50 70 90 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, and for 1953, p. 76. NO. 15—FEES AND RATES ESTABLISHED UNDER REGULATION V ON LOANS GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950 [In effect December 31, 1958] Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan Guarantee fee Percentage of (percentage of any commitment Percentage of loan guaranteed interest payable fee charged by borrower) borrower 70 or less... 10 10 75 15 15 80 20 20 85 25 25 90 30 30 95 35 35 Over 95.. . 40-50 40-50 Maximum Rates Financing Institution May Charge Borrower [Per cent per annum] Interest rate Commitment rate. 124 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 CLASSES, DECEMBER 31, 1958 AND 19571 [In millions of dollars] Commercial banks Mutual savings banks All Item banks Member banks Total2 Insured Non- Nonnonmember insured Total Insured insured Total National State December 31, 1958 Loans and investments, total . 221,485 185,165 154,865 99,277 55,588 28,759 1,568 36,320 28,980 7,341 121,571 98,214 84,061 52,627 31,435 13,682 484 23,357 19,180 4,177 Investments 99,914 86,951 70,804 46,650 24,153 15,077 1,084 12,963 9,800 3,163 U. S. Govt. obligations . . 73,641 66,376 54,299 35,714 18,585 11,381 707 7,265 5,215 2,050 Other securities . .. 26,273 20,575 16,504 10,936 5,568 3,696 377 5,698 4,585 1,113 Cash assets 49,911 48,990 43,188 26,781 16,407 5,504 301 921 752 169 Deposits, total 250,057 216,017 182,816 116,714 66,102 31,696 1,532 34,040 27,277 6,763 18,174 18,171 17,414 9,802 7,612 448 309 3 2 Other demand 134,385 134,353 114,270 72,100 42,170 19,185 898 32 31 1 Other time 97,498 63,493 51,132 34,812 16,320 12,063 325 34,006 27,243 6,762 Total capital accounts 21,705 18,486 15,460 9,643 5,817 2,696 332 3,219 2,473 746 Number of banks.. ... 14,020 13,501 6,312 4,578 1,734 6,793 399 519 241 278 December 31, 1957 Loans and investments, total.. 203,849 170,068 142,353 91,201 51,152 26,268 1,473 33,782 26,535 7,246 Loans ... 115,115 93,899 80,950 50,350 30,600 12,493 468 21,216 17,194 4,022 Investments 88,734 76,169 61,403 40,851 20,552 13,775 1,004 12,565 9,341 3,224 U. S. Govt. obligations.. . 65,792 58,239 47,079 31,234 15,846 10,512 660 7,552 5,404 2,148 Other securities 22,943 17,930 14,324 9,617 4,707 3,264 345 5,013 3,937 1,076 Cash assets 49,318 48,428 42,746 26,786 15,960 5,383 301 890 719 171 Deposits, total 233,020 201,326 170,637 109,091 61,545 29,266 1,449 31,695 25,022 6,672 Interbank. 17,022 17,021 16,328 9,475 6,853 425 268 2 2 Other demand... . .... 127,895 127,865 109,018 68,712 40,306 17,968 879 31 29 1 Other time 88,102 56,440 45,290 30,904 14,386 10,873 303 31,662 24,991 6,671 Total capital accounts 20,428 17,368 14,554 9,070 5,483 2,500 317 3,059 2,309 751 Number of banks 14,090 13,568 6,393 4,620 1,773 6,753 425 522 239 283 1 All banks in the United States, and one in Alaska and one in the Virgin Islands that became national members in 1954 and 1957 respectively. 2 Total for commercial banks excludes three member mutual savings banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 17—MEMBER BANK EARNINGS, BY CLASS OF BANK, 1958 AND 1957 [Dollar amounts in millions] Central reserve city banks Total Reserve Country city banks banks Item New York Chicago 1958 1957 1958 1957 1958 1957 1958 1957 1958 1957 Earnings $7,127$6,771 $1,164$1,136 $272 $274$2,835$2,664$2,856$2,697 On U. S. Govt. securities 1,266 1,168 170 137 58 46 478 426 560 558 On other securities 411 339 61 47 17 15 151 128 183 149 On loans 4,326 4,208 699 727 157 172 1,759 1,694 1,712 1,615 All other 1,123 1,056 234 225 40 41 447 415 401 374 Expenses 4,617 4,222 636 592 142 136 1,823 1,666 2,016 1,827 Salaries and wages 1,981 1,877 300 293 68 65 777 731 836 788 Interest on deposits.... 1,123 927 110 80 25 23 474 398 515 427 All other 1,512 1,418 227 220 49 49 572 537 664 613 Net current earnings before income taxes. . 2,510 2,549 528 544 130 137 1,012 998 840 870 Recoveries and profits1. .. 754 160 112 24 55 11 325 61 262 64 Losses and charge-offs2. . . 315 468 25 97 21 25 113 166 157 180 Net addition to valuation reserves 342 177 39 29 25 30 171 43 108 75 Profits before income taxes 2 606 2,063 576 442 140 93 1 053 849 837 679 Taxes on net income. . . 1,148 895 276 209 69 41 490 385 313 260 Net profits 1,457 1,169 300 233 71 53 563 464 524 419 Gash dividends declared3 646 604 160 152 26 24 258 242 202 186 (Per cent) Ratios: Net current earnings before income taxes to- Average total capital accounts 16.6 18.1 16.4 18.2 18.4 20.6 18.1 19.2 15.0 16.5 Average total assets.. 1.32 1.42 1.55 1.70 1.51 1.65 1.35 1.42 1.16 1.26 Net profits to— Average total capital accounts 9.7 8.3 9.3 7.8 9.9 7.9 10 1 8.9 9 4 8 0 Average total assets.. .77 .65 .88 .73 .82 .64 .75 .66 .72 .61 Average return on U. S. Govt. securities 2.45 2.53 2.39 2.46 2.37 2.36 2.45 2.53 2.49 2.57 Average return on loans. . 5.35 5.32 4.40 4.54 4.47 4.56 5.39 5.30 5.94 5.91 1 Includes recoveries credited to valuation reserves. 2 Includes losses charged to valuation reserves. 8 Includes interest on capital notes and debentures. 126 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 19581 Commercial and stock savings banks and nondeposit trust companies Mutual savings banks All Member Nonmember banks banks banks Total Na- State In- Non- In- Nontional 1 mem- sured in- sured 2 inber 2 sured 2 sured Number of banks, Dec. 31,1957R 14,090 13,568 4,620 1,773 6,753 425 239 283 Changes during 1958 New banks' +97 +97 +19 +2 +63 +13 Suspensions -8 -8 -1 2 Consolidations and absorptions: Banks converted into branches. -129 -126 -56 -25 -43 -2 -3 Other -25 -25 -9 -5 -10 -1 Liquidations:4 Voluntary -4 -4 —3 -i Other -1 -1 -1 Conversions: National into State . ... — 1 +1 State into national +6 -3 -3 Federal Reserve Membership:5 Admissions of State banks +7 -6 -1 Withdrawals of State banks -15 +15 Federal Deposit insurance:6 Admissions of State banks +28 -28 +5 c Net increase or decrease -70 -67 -42 -39 +40 -26 +2 -5 Number of banks, Dec. 31,1958 14,020 13,501 4,578 1,734 6,793 399 241 278 Number of branches and additional offices, Dec. 31,1957 7.. 8,373 7,968 3,993 2,173 1,765 37 296 109 Changes during 1958 De novo branches +567 +540 +306 +113 +120 +1 +14 +13 Banks converted into branches.. . +129 +126 +66 +39 +20 +1 +3 D In i t s e c r o c n la ti s n s u c e h d anges—net ^ -31 - + 30 9 -1 -8 6 + -1 4 2 7 -3 -2 0 y -2 Net increase +665 +645 +348 + 187 +108 + 11 +9 Number of branches and additional offices, Dec. 31,19587 .. 9,038 8,613 4,341 2,360 1,873 39 120 305 Number of banking facilities, Dec. 31, 19579 236 236 185 27 24 Changes during 1958 Established + 15 + 15 +11 +2 +2 Discontinued -3 -3 -3 Interclass change +1 -1 Net increase ... +12 +12 +8 +3 +1 Number of banking facilities, Dec 31 19589 248 248 193 30 25 R Revised. 1 Excludes banks and branches in United States territories and possessions except one national bank in Alaska with no branches, and one in the Virgin Islands with one branch. 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. 4 Exclusive of liquidations incident to the succession, conversion, and absorption of banks. 5 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 1959. 9 Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department. 127 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, DECEMBER 31, 19581 On par list Total2 Not on par list Federal (nonmember) Reserve Dis- Total Member Nonmember trict, State, or other area Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches & offices & offices & offices & offices & offices DISTRICT Boston 422 659 422 659 286 532 136 127 New York2.. . 630 1,674 630 1,674 530 1,463 100 211 Philadelphia.. 672 568 672 568 513 466 159 102 Cleveland.... 964 823 964 823 589 718 375 105 Richmond.... 963 1,042 806 892 455 583 351 309 157 150 Atlanta 1,323 445 757 399 401 330 356 69 566 46 Chicago 2,473 986 2,473 986 1,018 586 1,455 400 St. Louis 1,467 280 1,174 206 489 133 685 73 293 74 Minneapolis. . 1,293 129 694 85 476 39 218 46 599 44 Kansas City.. 1,763 64 1,757 64 749 45 1,008 19 6 Dallas 1,097 125 1,014 113 631 82 383 31 83 12 San Francisco2 374 2,247 359 2,240 169 1,960 190 280 15 7 Total 13,441 9,042 11,722 8,709 6,306 6,937 5,416 1,772 1,719 333 STATE Alabama .... 239 62 149 61 93 59 56 2 90 1 7 138 7 138 4 116 3 22 Arkansas 237 35 128 15 75 12 53 3 i()9 20 California.... 119 1,462 119 1,462 71 1,318 48 144 Colorado 158 6 158 6 94 5 64 1 Connecticut. . 75 160 75 160 41 126 34 34 Delaware 27 44 27 44 9 19 18 25 Dist of Col... 13 60 13 60 9 49 4 11 Florida .... 271 13 227 12 115 10 112 2 44 1 Georgia 410 76 134 74 65 64 69 10 276 2 28 81 28 81 17 75 11 6 Illinois 943 4 942 4 524 4 418 1 458 248 458 248 232 165 226 83 Iowa, • • 669 163 669 163 168 5 501 158 593 14 591 14 212 10 379 4 2 Kentucky.... 360 116 360 116 108 79 252 37 Louisiana. . . . 186 156 79 129 52 104 27 25 107 27 Ivlaine 54 118 54 118 35 79 19 39 Maryland. .. . 142 208 142 208 65 126 77 82 169 323 169 323 129 273 40 50 Michigan 393 493 393 493 225 409 168 84 Minnesota 685 6 285 6 209 6 76 400 Mississippi. . . 194 124 53 59 35 33 18 26 141 65 Missouri . . . 609 4 555 4 172 4 383 54 Montana 114 1 114 1 85 1 29 Nebraska.... 417 2 417 2 140 2 277 Nevada 6 33 6 33 5 29 1 4 N. Hampshire 74 3 74 3 52 2 22 1 New Jersey. 259 367 259 367 222 333 37 34 New Mexico.. 53 43 53 43 35 21 18 22 New York . 430 1,230 430 1,230 375 1,163 55 67 N. Carolina... 193 412 106 268 47 150 59 118 87 144 N. Dakota. . . 155 27 57 8 40 2 17 6 98 19 Ohio 606 551 606 551 385 484 221 67 Oklahoma 386 15 380 15 224 13 156 2 6 Oregon 54 165 54 165 17 147 37 18 Pennsylvania. 737 671 737 671 563 582 174 89 Rhode Island. 9 85 9 85 5 66 4 19 S. Carolina.. . 144 128 76 122 31 93 45 29 68 6 S. Dakota.... 172 54 71 29 60 24 11 5 101 25 Tennessee. .. . 296 183 214 167 83 123 131 44 82 16 Texas 969 23 933 23 575 23 358 36 Utah 49 68 49 68 20 59 29 9 Vermont 57 30 57 30 33 20 24 10 Virginia 312 234 311 234 202 165 109 69 1 Washington. . 89 253 89 253 35 246 54 7 West Virginia. 183 182 112 70 1 Wisconsin. .. . 551 152 551 152 160 24 391 128 Wyoming. . . . 52 1 52 1 39 1 13 Alaska2 18 18 3 11 1 2 11 15 7 Hawaii2 5 67 5 67 5 67 Puerto Rico 2. 10 108 10 108 13 10 95 V I 2 2 4 2 4 1 1 1 3 1 Comprises all commercial banking offices on which checks are drawn, including 248 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, Hawaii, Puerto Rico, and the Virgin Islands. 2 Alaska and Hawaii, assigned to the San Francisco District for check clearing and collection purposes; Puerto Rico and the Virgin Islands assigned to the New York District. Digitized for FRASER http://fraser.stlouisfed.org/ 128 Federal Reserve Bank of St. Louis

NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1958 [In millions of dollars] Net change in U. S. Government Bankers' holdings securities acceptances U.S. Outright Repurchase Month Govern- U.S. transactions agreements ment Govern- Net Net securities ment out- repurand securities Gross Gross Cash Gross right chases accept- market market redemp- pur- Gross ances purchases sales tions chases sales January -932 -908 100 317 171 989 1,509 -1 -23 February.... -89 -91 185 86 190 370 370 +2 March +385 +388 472 60 24 265 265 April +51 +53 204 26 125 308 308 -2 May +485 +481 627 147 +4 June +1,280 +1,276 1,276 312 312 July -969 -958 300 502 756 August +865 +866 1,534 668 67 67 September.. . -364 -360 167 512 14 A October +464 +456 584 54 144 305 234 +8 November. .. +784 +786 996 289 11 514 424 December +133 +118 309 119 7 500 565 +9 +6 Total, 1958 +2,092 +2,108 6,754 2,633 1,590 3,630 4,054 +1 -18 NOTE.—Details may not add to totals because of rounding. 129 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

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1958] Term Expires 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 A. L. MILLS, JR., of Oregon January 31, 1972 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 JEROME W. SHAY, Legislative Counsel CHARLES MOLONY, Special Assistant to the Board MERRITT SHERMAN, Secretary KENNETH A. KENYON, Assistant Secretary CLARKE L. FAUVER, Assistant Secretary HOWARD H. HACKLEY, General Counsel FREDERIC SOLOMON, Assistant General Counsel DAVID B. HEXTER, Assistant General Counsel G. HOWLAND CHASE, 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 SUSAN S. BURR, Associate Adviser, Division of Research and Statistics ALBERT R. KOCH, Associate Adviser, Division of Research and Statistics KENNETH B. WILLIAMS, Associate Adviser, Division of Research and Statistics LEWIS N. DEMBITZ, Research Associate, Division of Research and Statistics ARTHUR W. MARGET, Director, Division of International Finance J. HERBERT FURTH, Associate Adviser, Division of International Finance A. B. HERSEY, Associate Adviser, Division of International Finance ROBERT L. SAMMONS, Associate Adviser, Division of International Finance ROBERT F. LEONARD, Director, Division of Bank Operations JOHN R. FARRELL, Associate Director, Division of Bank Operations GERALD M. CONKLING, Assistant Director, Division of Bank Operations M. B. DANIELS, Assistant Director, Division of Bank Operations ROBERT C. MASTERS, Director, Division of Examinations C. C. HOSTRUP, Assistant Director, Division of Examinations FRED A. NELSON, Assistant Director, Division of Examinations GLENN M. GOODMAN, Assistant Director, Division of Examinations HENRY BENNER, Assistant Director, Division of Examinations JAMES C. SMITH, Assistant Director, Division of Examinations LLOYD M. SCHAEFFER, Chief Federal Reserve Examiner, Division of Examinations EDWIN J. JOHNSON, Director, Division of Personnel Administration H. FRANKLIN SPRECHER, JR., Assistant Director, Division of Personnel Administration JOSEPH E. KELLEHER, Director, Division of Administrative Services GARDNER L. BOOTHE, II, Administrator, Office of Defense Loans J. J. CONNELL, Controller, Office of the Controller SAMPSON H. BASS, Assistant Controller, Office of the Controller INNIS D. HARRIS, Coordinator, Office of Defense Planning Digitized for FRASER http://fraser.stlouisfed.org/ 132 Federal Reserve Bank of St. Louis

FEDERAL OPEN MARKET COMMITTEE [December 31, 1958} MEMBERS WM. MCC. MARTIN, JR., Chamnan (Board of Governors) ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New York) C. CANBY BALDERSTON (Board of Governors) W. D. FULTON (Elected by Federal Reserve Banks of Cleveland and Chicago) W. H. IRONS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) HUGH LEACH (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) H. N. MANGELS (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) A. L. MILLS, JR. (Board of Governors) J. L. ROBERTSON (Board of Governors) CHAS. N. SHEPARDSON (Board of Governors) M. S. SZYMCZAK (Board of Governors) OFFICERS WINFIELD W. RIEFLER, Secretary J. DEWEY DAANE, Associate Economist ELLIOTT THURSTON, Assistant Secretary L. MERLE HOSTETLER, Associate Economist MERRITT SHERMAN, Assistant Secretary ARTHUR W. MARGET, Associate Economist HOWARD H. HACKLEY, General Counsel H. V. ROELSE, Associate Economist FREDERIC SOLOMON, Assistant General CHARLS E. WALKER, Associate Economist Counsel OLIVER P. WHEELER, 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 During 1958 the Federal Open Market Committee met at least every three weeks, as indicated in the Record of Policy Actions taken by the Committee (see pages 32-71 of this report). Digitized for FRASER 133 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1958] MEMBERS District No. 1—LLOYD D. BRACE, President, The First National Bank of Boston, Boston, Massachusetts. District No. 2—ADRIAN M. MASSIE, Chairman of the Board, The New York Trust Company, New York, New York. District No. 3—CASIMIR A. SIENKIEWICZ, President, Central-Penn National Bank of Philadelphia, Philadelphia, Pennsylvania. District No. 4—FRANK R. DENTON, Vice Chairman of the Board, Mellon National Bank and Trust Company, Pittsburgh, Pennsylvania. District No. 5—JOHN S. ALFRIEND, Chairman of the Board and President, National Bank of Commerce, Norfolk, Virginia. District No. 6—JOHN A. SIBLEY, Chairman of the Board, Trust Company of Georgia, Atlanta, Georgia. District No. 7—HOMER J. LIVINGSTON, President, The First National Bank of Chicago, Chicago, Illinois. District No. 8—WILLIAM A. MCDONNELL, Chairman of the Board, First National Bank in St. Louis, St. Louis, Missouri. District No. 9—GORDON MURRAY, President, First National Bank of Minneapolis, Minneapolis, 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—WALTER B. JACOBS, President, The First National Bank of Shreveport, Shreveport, Louisiana. District No. 12—FRANK L. KING, President, California Bank, Los Angeles, California. EXECUTIVE COMMITTEE FRANK R. DENTON, ex officio HOMER J. LIVINGSTON, ex officio LLOYD D. BRACE ADRIAN M. MASSIE CASIMIR A. SIENKIEWICZ OFFICERS President, FRANK R. DENTON Vice President, HOMER J. LIVINGSTON Secretary, HERBERT V. PROCHNOW Assistant Secretary, WILLIAM J. KORSVIK Meetings of the Federal Advisory Council were held on February 17-18, May 19-20, September 15-16, and November 17-18, 1958. The Board of Governors met with the Council on February 18, May 20, September 16, and November 18. 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 134 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS AND BRANCHES [December 31, 1958] CHAIRMEN AND DEPUTY CHAIRMEN OP BOARDS OF DIRECTORS Chairman and Federal Reserve Bank of— Deputy Chairman Federal Reserve Agent Boston Robert C. Sprague Harvey P. Hood New York John E. Bierwirth Forrest F. Hill Philadelphia Henderson Supplee, Jr Lester V. Chandler Cleveland Arthur B. Van Buskirk Joseph H. Thompson Richmond John B. Woodward, Jr.. . . Alonzo G. Decker, Jr. Atlanta Walter M. Mitchell Harllee Branch, Jr. Chicago Bert R. Prall J. Stuart Russell St. Louis Pierre B. McBride J. H. Longwell 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 and advise the Board of Governors. A meeting of the Conference of Chairmen was held on December 4-5, 1958, and was attended by members of the Board of Governors, and also by the Deputy Chairmen of the Federal Reserve Banks. Mr. Hall, Chairman of the Federal Reserve Bank of Kansas City, was elected Chairman of the Conference and of the Executive Committee in December 1957. Mr. Smith, Chairman of the Federal Reserve Bank of Dallas, and Mr. Mitchell, Chairman of the Federal Reserve Bank of Atlanta, served with Mr. Hall as members of the Executive Committee, Mr. Smith also serving as Vice Chairman of the Conference. At the meeting held in December 1958, Mr. Smith was elected Chairman of the Conference and of the Executive Committee. Mr. Mitchell was elected Vice Chairman and a member of the Executive Committee, and Mr. Perrin, Chairman of the Federal Reserve Bank of Minneapolis, was elected as the other member of the Executive Committee. 135 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

136 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—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 matter of practice, are active officers of member banks. The Class B directors may not, under the law, be officers, directors, or employees of banks. At the time of their election they must be actively engaged in their district in commerce, agriculture, or some other industrial pursuit. The Class C directors may not, under the law, be officers, directors, employees, or stockholders of banks. They are appointed by the Board of Governors as representatives not of any particular group or interest, but of the public interest as a whole. Federal Reserve Bank branches have either five or seven directors, of whom a majority are appointed by the Board of Directors of the parent Federal Reserve Bank and the others are appointed by the Board of Governors of the Federal Reserve System. District 1—Boston Term Expires DIRECTORS Dec. 31 Class A: Oliver B. Ellsworth President, Riverside Trust Company, Hartford, Conn 1958 William D. Ireland President, Second Bank-State Street Trust Company, Boston, Mass 1959 Arthur F. Maxwell President, The First National Bank of Biddeford, Biddeford, Maine I960 Class B.- Harry E. Umphrey President, Aroostook Potato Growers, Inc., Presque Isle, Maine 1958 Milton P. Higgins President, Norton Company, Worcester, Mass. 1959 Stanley M. Cooper Chairman of the Board, The Fafnir Bearing Company, New Britain, Conn I960 Class C: Harvey P. Hood President, H. P. Hood & Sons, Inc., Boston, Mass 1958 Nils Y. Wessell President, Tufts University, Medford, Mass.. . 1959 Robert C. Sprague Chairman and Treasurer, Sprague Electric Company, North Adams, Mass I960 District 2—New York Class A: Howard C. Sheperd Chairman of the Board, The First National City Bank of New York, New York, N. Y. 1958 Charles W. Bitzer President, City Trust Company, Bridgeport, Conn 1959 Cyrus M. Higley President and Trust Officer, The Chenango County National Bank and Trust Company of Norwich, Norwich, N. Y I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 137 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec.31 Class B: Clarence Francis Director, General Foods Corporation, New York, N. Y 1958 Lansing P. Shield President, The Grand Union Company, East Paterson, N. J 1959 Augustus C. Long Chairman of the Board, The Texas Company, New York, N. Y I960 Class C: Franz Schneider Consultant to Newmont Mining Corporation, New York, N. Y 1958 John E. Bierwirth Chairman, National Distillers and Chemical Corporation, New York, N. Y 1959 Forrest F. Hill Vice President, The Ford Foundation, New York, N. Y I960 Buffalo Branch Appointed by Federal Reserve Bank: 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 Vernon Alexander President, The National Bank of Geneva, Geneva, N. Y 1959 E. Perry Spink President, Liberty Bank of Buffalo, Buffalo, N. Y 1960 Appointed by Board of Governors: Ralph F. Peo Chairman and President, Houdaille Industries, Inc., Buffalo, N. Y 1958 Raymond E. Olson President, Taylor Instrument Companies, Rochester, N. Y 1959 Daniel M. Dalrymple Partner and Manager, Pomona Fruit Farms, Appleton, N. Y I960 District 3—Philadelphia Class A: Lindley S. Hurff President and Trust Officer, The First National Bank of Milton, Milton, Pa 1958 Geoffrey S. Smith President, Girard Trust Corn Exchange Bank, Philadelphia, Pa 1959 William B. Brosius President, National Bank of Chester County and Trust Company, West Chester, Pa I960 Class B: Charles E. Oakes Chairman of the Board, Pennsylvania Power and Light Company, Allentown, Pa 1958 R. Russell Pippin Treasurer, E. I. du Pont de Nemours & Company, Wilmington, Del 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 139 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Anthony Haswell President, The Dayton Malleable Iron Company, Dayton, Ohio 1959 W. Bay Irvine President, Marietta College, Marietta, Ohio.. I960 Pittsburgh Branch Appointed by Federal Reserve Bank: Sumner E. Nichols President, Security-Peoples Trust Company, Erie, Pa 1958 Frank C. Irvine President, First National Bank in Tarentum, Tarentum, Pa 1959 Lawrence O. Hotchkiss President, The First National Bank of Mercer, Mercer, Pa I960 Irving W. Wilson Chairman of the Board, Aluminum Company of America, Pittsburgh, Pa I960 Appointed by Board of Governors: Douglas M. Moorhead Farmer, North East, Pa 1958 John T. Ryan, Jr President, Mine Safety Appliances Company, Pittsburgh, Pa 1959 John C. Warner President, Carnegie Institute of Technology, Pittsburgh, Pa I960 District 5—Richmond Class A: (Vacancy) 1958 Robert Gage President, The Commercial Bank, Chester, S. C 1959 Denver L. Morgan Executive Vice President and Cashier, The Charleston National Bank, Charleston, W. Va I960 Class B: L. Vinton Hershey President, Hagerstown Shoe Company, Hagerstown, Md 1958 Wm. A. L. Sibley Vice President and Treasurer, Monarch Mills, Union, S. C 1959 Robert O. Huffman President, Drexel Furniture Company, Drexel, N. C I960 Class C: John B. Woodward, Jr Chairman of the Board, Newport News Shipbuilding & Dry Dock Company, Newport News, Va 1958 Alonzo G. Decker, Jr Executive Vice President, The Black & Decker Manufacturing Company, Towson, Md 1959 D. W. Colvard Dean of Agriculture, North Carolina State College of Agriculture and Engineering, Raleigh, N. C I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

138 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Bayard L. England President, Atlantic City Electric Company, Atlantic City, N. J 1960 Class C: Henderson Supplee, Jr President, The Atlantic Refining Company, Philadelphia, Pa 1958 Lester V. Chandler Professor of Economics, Princeton University, Princeton, N. J 1959 Walter E. Hoadley, Jr Treasurer, Armstrong Cork Company, Lancaster, Pa I960 District 4—Cleveland Class A: King E. Fauver Director, The Savings Deposit Bank and Trust Company, Elyria, Ohio 1958 John A. Byerly President, Fidelity Trust Company, Pittsburgh, Pa 1959 Paul A. Warner President, The Oberlin Savings Bank Company, Oberlin, Ohio I960 Class B: Charles Z. Hardwick Executive Vice President, The Ohio Oil Company, Findlay, Ohio 1958 George P. MacNichol, Jr President, Libbey • Owens • Ford Glass Company, Toledo, Ohio 1959 Joseph B. Hall President, The Kroger Co., Cincinnati, Ohio I960 Class C: Arthur B. Van Buskirk Vice President and Governor, T. Mellon and Sons, Pittsburgh, Pa 1958 Joseph H. Thompson President, The M. A. Hanna Company, Cleveland, Ohio 1959 Aubrey J. Brown Professor of Agricultural Marketing and Head of Department of Agricultural Economics, University of Kentucky, Lexington, Ky I960 Cincinnati Branch Appointed by Federal Reserve Bank: William A. Mitchell President, The Central Trust Company, Cincinnati, Ohio 1958 Franklin A. McCracken Executive Vice President and Trust Officer, The Newport National Bank, Newport, Ky. 1959 Roger Drackett President, The Drackett Company, Cincinnati, Ohio 1960 Thomas M. Wolfe President, The Athens National Bank, Athens, Ohio 1960 Appointed by Board of Governors: Ivan Jett Farmer, Georgetown, Ky 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

140 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Baltimore Branch Appointed by Federal Reserve Bank: Stanley B. Trott President, Maryland Trust Company, Baltimore, Md 1958 John W. Stout President, The Parkersburg National Bank, Parkersburg, W. Va 1958 James W. McElroy President, First National Bank of Baltimore, Baltimore, Md 1959 J. N. Shumate President, The Farmers National Bank of Annapolis, Annapolis, Md I960 Appointed by Board of Governors: Wm. Purnell Hall President, Maryland Shipbuilding and Drydock Company, Inc., Baltimore, Md 1958 Gordon M. Cairns Dean of Agriculture, University of Maryland, College Park, Md 1959 Clarence R. Zarfoss Vice President, Western Maryland Railway Company, Baltimore, Md I960 Charlotte Branch Appointed by Federal Reserve Bank: I. W. Stewart Chairman of the Board, American Commercial Bank, Charlotte, N. C 1958 G. G. Watts President, The Merchants & Planters National Bank, Gaffney, S. C 1958 Charles D. Parker Vice Chairman of the Board and First Executive Vice President, First Union National Bank of North Carolina, Charlotte, N. C. . 1959 Ernest Patton Chairman of the Board, The Peoples National Bank of Greenville, Greenville, S. C I960 Appointed by Board of Governors: T. Henry Wilson President and Treasurer, Henredon Furniture Industries, Inc., Morganton, N. C 1958 William H. Grier Executive Vice President, Rock Hill Printing & Finishing Company, Rock Hill, S. C 1959 George H. Aull Agricultural Economist, Clemson College, Clemson, S. C I960 District 6-Atlanta Class A: William C. Carter Chairman and President, Gulf National Bank, Gulfport, Miss 1958 Roland L. Adams President, Bank of York, York, Ala.. 1959 W. C. Bowman Chairman of the Board, The First National Bank of Montgomery, Montgomery, Ala... I960 Class B.- Donald Comer Chairman of the Board, Avondale Mills, Birmingham, Ala 1958 Joseph T. Lykes Chairman and Director, Lykes Bros. Steamship Company, Inc., Tampa, Fla 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM l4l FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec, 51 Pollard Turman President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga I960 Class C: Walter M. Mitchell Vice President, The Draper Corporation, Atlanta, Ga 1958 Harllee Branch, Jr President, The Southern Company, Atlanta, Ga 1959 Henry G. Chalkley, Jr President, The Sweet Lake Land & Oil Company, Lake Charles, La I960 Birmingham Branch Appointed by Federal Reserve Bank: Robert M. Cleckler President, First National Bank of Childersburg, Childersburg, Ala 1958 E. W. McLeod Chairman, First National Bank of Decatur, Decatur, Ala 1958 R. J. Murphy Vice President, Citizens-Farmers & Merchants Bank, Brewton, Ala 1959 John C. Persons Chairman of the Board, The First National Bank of Birmingham, Birmingham, Ala.... I960 Appointed by Board of Governors: John E. Urquhart Chairman, Woodward Iron Company, Woodward, Ala 1958 Adolph Weil, Sr President, Weil Brothers-Cotton, Inc., Montgomery, Ala 1959 Selden Sheffield Cattleman, Greensboro, Ala I960 Jacksonville Branch Appointed by Federal Reserve Bank: 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 James G. Garner President and Chairman, Little River Bank and Trust Company, Miami, Fla 1959 C. B. McLeod President, Bank of Crestview, Crestview, Fla. I960 Appointed by Board of Governors: Harry M. Smith President and Manager, Winter Garden Ornamental Nursery, Inc., Winter Garden, Fla. 1958 McGregor Smith Chairman of the Board, Florida Power and Light Company, Miami, Fla 1959 J. Wayne Reitz President, University of Florida, Gainesville, Fla I960 Nashville Branch Appointed by Federal Reserve Bank: Stewart Campbell President, The Harpeth National Bank of Franklin, Franklin, Tenn 1958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

142 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 C. L. Wilson Chairman and President, The Cleveland National Bank, Cleveland, Tenn 1958 Jo H. Anderson President, Park National Bank of Knoxville, Knoxville, Tenn 1959 P. D. Houston, Jr President, First American National Bank, Nashville, Tenn I960 Appointed by Board of Governors: V. S. Johnson, Jr Chairman of the Board and President, Aladdin Industries, Inc., Nashville, Tenn 1958 Frank B. Ward Dean, College of Business Administration, University of Tennessee, Knoxville, Tenn. 1959 W. N. Krauth President and General Manager, Colonial Baking Company of Nashville, Nashville, Tenn. I960 New Orleans Branch Appointed by Federal Reserve Bank: H. A. Pharr President, The First National Bank of Mobile, Mobile, Ala 1958 (Vacancy) 1958 J. Spencer Jones President, The Citizens National Bank in Hammond, Hammond, La 1959 D. U. Maddox President, The Commercial National Bank and Trust Company of Laurel, Laurel, Miss I960 Appointed by Board of Governors: G. H. King, Jr President, King Lumber Industries, Canton, Miss 1958 E. E. Wild Rice grower, Midland, La 1959 Frank A. Godchaux, III Vice President, Louisiana State Rice Milling Company, Inc., Abbeville, La I960 District 7—Chicago Class A: Nugent R. Oberwortmann President, The North Shore National Bank of Chicago, Chicago, 111 1958 Vivian W. Johnson President, First National Bank, Cedar Falls, Iowa 1959 Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 1960 Class B: William J. Grede President, Grede Foundries, Inc., Milwaukee, Wis 1958 William A. Hanley Director, Eli Lilly and Company, Indianapolis, Ind 1959 G. F. Langenohl Treasurer and Assistant Secretary, Allis- Chalmers Manufacturing Company, Milwaukee, Wis I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 143 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Class C.- Robert P. Briggs Executive Vice President, Consumers Power Company, Jackson, Mich 1958 J. Stuart Russell Farm Editor, The Des Moines Register & Tribune, Des Moines, Iowa 1959 Bert R. Prall Winnetka, 111 I960 Detroit Branch Appointed by Federal Reserve Bank: Raymond T. Perring President, The Detroit Bank and Trust Company, Detroit, Mich 1958 Ira A. Moore General Vice President, Old Kent Bank and Trust Company, Grand Rapids, Mich 1959 William A. Mayberry President, Manufacturers National Bank of Detroit, Detroit, Mich I960 Ernest W. Potter President, Citizens Commercial & Savings Bank, Flint, Mich I960 Appointed by Board of Governors: C. V. Patterson Executive Vice President, The Upjohn Company, Kalamazoo, Mich 1958 J. Thomas Smith President, Detroit Harvester Company, Detroit, Mich 1959 John A. Hannah President, Michigan State University, East Lansing, Mich I960 District 8—St. Louis Class A: J. E. Etherton President, The Carbondale National Bank, Carbondale, 111 1958 Kenton R. Cravens President, Mercantile Trust Company, St. Louis, Mo 1959 H. Lee Cooper President, Ohio Valley National Bank of Henderson, Henderson, Ky I960 Class B: S. J. Beauchamp, Jr President, Terminal Warehouse Co., Little Rock, Ark 1958 Harold O. McCutchan Executive Vice President, Mead Johnson & Company, Evansville, Ind 1959 Leo J. Wieck Vice President and Treasurer, The May Department Stores Co., St. Louis, Mo I960 Class C: J. H. Longwell Director, Division of Agricultural Sciences, University of Missouri, Columbia, Mo 1958 Pierre B. McBride President, Porcelain Metals Corporation, Louisville, Ky 1959 Jesse D. Wooten Executive Vice President, Mid-South Chemical Corporation, Memphis, Tenn I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

144 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Little Rock Branch Appointed by Federal Reserve Bank: J. V. Satterfield, Jr Chairman of the Board, The First National Bank in Little Rock, Little Rock, Ark 1958 Donald Barger President, Peoples Exchange Bank, Russellville, Ark 1959 J. W. Bellamy, Jr President, National Bank of Commerce of Pine Bluff, Pine Bluff, Ark I960 E. C. Benton President, Fordyce Bank and Trust Company, Fordyce, Ark I960 Appointed by Board of Governors: Waldo E. Tiller President, Tiller Tie and Lumber Company, Inc., Little Rock, Ark 1958 T. Winfred Bell President, Bush-Caldwell Company, Little Rock, Ark 1959 Robert H. Alexander Owner-operator, Land's End Plantation, Scott, Ark I960 Louisville Branch Appointed by Federal Reserve Bank: Magnus J. Kreisle President, The Tell City National Bank, Tell City, Ind 1958 Merle E. Robertson Chairman of the Board and President, Liberty National Bank and Trust Company of Louisville, Louisville, Ky 1959 W. Scott Mclntosh President, State Bank of Hardinsburg, Hardinsburg, Ind I960 John G. Russell President, The Peoples First National Bank & Trust Company of Paducah, Paducah, Ky.. . I960 Appointed by Board of Governors: J. D. Monin, Jr Farmer, Oakland, Ky 1958 David F. Cocks Vice President and Treasurer, Standard Oil Company (Kentucky), Louisville, Ky 1959 Philip Davidson President, University of Louisville, Louisville, Ky I960 Memphis Branch Appointed by Federal Reserve Bank: J. H. Harris President, The First National Bank of Wynne, Wynne, Ark 1958 John K. Wilson President, The First National Bank of West Point, West Point, Miss 1959 John E. Brown President, Union Planters National Bank of Memphis, Memphis, Tenn I960 Simpson Russell President, The National Bank of Commerce of Jackson, Jackson, Tenn I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 145 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Frank Lee Wesson President, Wesson Farms, Inc., Victoria, Ark. 1958 John D. Williams Chancellor, The University of Mississippi, University, Miss 1959 S. L. Kopald, Jr Executive Vice President, HumKo Division, National Dairy Products Corporation, Memphis, Tenn I960 District 9—Minneapolis Class A: John A. Moorhead President, Northwestern National Bank of Minneapolis, Minneapolis, Minn 1958 Harold N. Thomson Vice President, Farmers & Merchants Bank, Presho, S. D 1959 Harold C. Refling Cashier, First National Bank in Bottineau, Bottineau, N. D I960 Class B: T. G. Harrison Chairman of the Board, Super Valu Stores, Inc., Hopkins, Minn 1958 J. E. Corette President and General Manager, Montana Power Company, Butte, Mont 1959 Ray C. Lange President, Chippewa Canning Company, Inc., Chippewa Falls, Wis I960 Class C: John H. Warden President, Upper Peninsula Power Company, Houghton, Mich 1958 Leslie N. Perrin Director, General Mills, Inc., Minneapolis, Minn 1959 O. B. Jesness Agricultural Economist, St. Paul, Minn I960 Helena Branch Appointed by Federal Reserve Bank: J. Willard Johnson Financial Vice President and Treasurer, Western Life Insurance Company, Helena, Mont 1958 Geo. N. Lund Chairman of the Board and President, The First National Bank of Reserve, Reserve, Mont 1958 O. M. Jorgenson Chairman, Security Trust and Savings Bank, Billings, Mont 1959 Appointed by Board of Governors: Carl McFarland Missoula, Mont 1958 John M. Otten Farmer and rancher, Lewistown, Mont 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

146 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 District 10—Kansas City Class A: W. S. Kennedy President and Chairman of the Board, The First National Bank of Junction City, Junction City, Kans 1958 W. L. Bunten President, Goodland State Bank, Goodland, Kans 1959 Harold Kountze Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo I960 Class B: E. M. Dodds Chairman of the Board, United States Cold Storage Corporation, Kansas City, Mo 1958 K. S. Adams Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla 1959 Max A. Miller Livestock rancher, Omaha, Neb I960 Class C: Raymond W. Hall Counsel, Gage, Hillix, Moore & Park, Attorneys, Kansas City, Mo 1958 Oliver S. Willham President, Oklahoma State University, Stillwater, Okla 1959 Joe W. Seacrest President, State Journal Company, Lincoln, Neb 1960 Denver Branch Appointed by Federal Reserve Bank: Ralph S. Newcomer Executive Vice President, First National Bank in Boulder, Boulder, Colo 1958 Arthur Johnson President, First National Bank in Raton, Raton, N. Mex 1958 Stewart Cosgriff President, The Denver National Bank, Denver, Colo 1959 Appointed by Board of Governors: Ray Reynolds Cattle feeder and farmer, Longmont, Colo 1958 Aksel Nielsen President, The Title Guaranty Company, Denver, Colo 1959 Oklahoma City Branch Appointed by Federal Reserve Bank: R. Otis McClintock Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Okla 1958 C. L. Priddy President, The National Bank of McAlester, McAlester, Okla 1958 C. P. Stuart President, The Fidelity National Bank & Trust Company, Oklahoma City, Okla 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 147 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Phil H. Lowery Owner, Lowery Hereford Ranch, Loco, Okla... 1958 Davis D. Bovaird President, The Bovaird Supply Company, Tulsa, Okla 1959 Omaha Branch Appointed by Federal Reserve Bank: William N. Mitten Chairman of the Board, First National Bank of Fremont, Fremont, Neb 1958 George J. Forbes Chairman of the Board and President, Bank of Laramie, Laramie, Wyo 1959 C. Wheaton Battey President, The Continental National Bank of Lincoln, Lincoln, Neb 1959 Appointed by Board of Governors: Manville Kendrick Rancher, Sheridan, Wyo 1958 James L. Paxton, Jr President, Paxton-Mitchell Company, Omaha, Neb 1959 District 11—Dallas Class A: J. Edd McLaughlin President, Security State Bank & Trust Company, Rails, Tex 1958 John M. Griffith President, The City National Bank of Taylor, Taylor, Tex 1959 Sam D. Young President, El Paso National Bank, El Paso, Tex. I960 Class B: J. B. Thomas President and General Manager and Director, Texas Electric Service Company, Fort Worth, Tex 1958 John R. Alford Industrialist and farmer, Henderson, Tex 1959 D. A. Hulcy Chairman of the Board, Lone Star Gas Company, Dallas, Tex I960 Class C: Lamar Fleming, Jr Chairman of the Board, Anderson, Clayton & Co., Inc., Houston, Tex 1958 Hal Bogle Rancher and feeder, Dexter, N. Mex 1959 Robert J. Smith President, Pioneer Hydrotex Industries, Inc., Dallas, Tex I960 El Paso Branch Appointed by Federal Reserve Bank: Thomas C. Patterson Vice President, El Paso National Bank, El Paso, Tex 1958 F. W. Barton President, The Marfa National Bank, Marfa, Tex 1959 John P. Butler President, The First National Bank of Midland, Midland, Tex I960 Floyd Childress Vice President, The First National Bank of Roswell, Roswell, N. Mex I960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: E. J. Workman President, and Director of Research and Development Division, New Mexico Institute of Mining and Technology, Socorro, N. Mex.. . 1958 D. F. Stahmann Chairman of the Board and Treasurer, Stahmann Farms, Inc., Las Cruces, N. Mex 1959 William R. Mathews Editor and Publisher, The Arizona Daily Star, Tucson, Ariz I960 Houston Branch Appointed by Federal Reserve Bank: S. Marcus Greer Vice Chairman of the Board, First City National Bank of Houston, Houston, Tex 1958 I. F. Betts President, The American National Bank of Beaumont, Beaumont, Tex 1959 W. B. Callan President, The Victoria National Bank, Victoria, Tex I960 L. R. Bryan, Jr Vice Chairman of the Board and Chairman of the Executive Committee, Bank of the Southwest National Association, Houston, Houston, Tex I960 Appointed by Board of Governors: Tyrus R. Timm Head, Department of Agricultural Economics and Sociology, A. & M. College of Texas, College Station, Tex 1958 A. E. Cudlipp Vice President and Director, Lufkin Foundry and Machine Company, Lufkin, Tex 1959 John C. Flanagan Vice President and General Manager, Texas Distribution Division, United Gas Corporation, Houston, Tex I960 San Antonio Branch Appointed by Federal Reserve Bank: Burton Dunn Chairman of the Executive Committee, Corpus Christi State National Bank, Corpus Christi, Tex 1958 E. C. Breedlove President, The First National Bank of Harlingen, Harlingen, Tex 1959 J. W. Beretta President, First National Bank of San Antonio, San Antonio, Tex I960 Donald D. James Vice President, The Austin National Bank, Austin, Tex 1960 Appointed by Board of Governors: Harold Vagtborg President, Southwest Research Institute, San Antonio, Tex 1958 Clarence E. Ayres Professor of Economics, The University of Texas, Austin, Tex 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 149 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec.31 Alex R. Thomas Vice President, Geo. C. Vaugban & Sons, San Antonio, Tex I960 District 12—San Francisco Class A: John A. Schoonover President, The Idaho First National Bank, Boise, Idaho 1958 M. Vilas Hubbard President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif 1959 Carroll F. Byrd Chairman of the Board and President, The First National Bank of Willows, Willows, Calif. I960 Class B: Walter S. Johnson Chairman of the Board, American Forest Products Corporation, San Francisco, Calif 1958 N. Loyall McLaren Partner, Haskins & Sells, San Francisco, Calif. 1959 Reese H. Taylor Chairman of the Board, Union Oil Company of California, Los Angeles, Calif I960 Class C: Y. Frank Freeman Vice President, Paramount Pictures Corporation, Hollywood, Calif 1958 A. H. Brawner Chairman of the Board, W. P. Fuller & Co., San Francisco, Calif 1959 Philip I. Welk Vice President, Centennial Mills, Inc., Portland, Ore 1960 Los Angeles Branch Appointed by Federal Reserve Bank: Anderson Borthwick President, The First National Trust and Savings Bank of San Diego, San Diego, Calif... 1958 James E. Shelton Chairman, Security-First National Bank of Los Angeles, Los Angeles, Calif 1958 Joe D. Paxton Chairman of the Board, County National Bank and Trust Company of Santa Barbara, Santa Barbara, Calif 1959 Appointed by Board of Governors: Leonard K. Firestone President, Firestone Tire and Rubber Company of California, Los Angeles, Calif 1958 Robert J. Cannon President, Cannon Electric Company, Los Angeles, Calif 1959 Portland Branch Appointed by Federal Reserve Bank: John B. Rogers President, The First National Bank of Baker, Baker, Ore 1958 J. H. McNally President, The First National Bank of Bonners Ferry, Bonners Ferry, Idaho 1958 C. B. Stephenson President, The First National Bank of Oregon, Portland, Portland, Ore 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: William H. Steiwer, Sr Livestock and farming, Fossil, Ore 1958 Warren W. Braley Partner, Braley and Graham Buick, Portland, Ore 1959 Salt Lake City Branch Appointed by Federal Reserve Bank: Russell S. Hanson Executive Vice President, The First National Bank of Logan, Logan, Utah 1958 George S. Eccles President, First Security Bank of Utah, National Association, Salt Lake City, Utah 1958 Oscar Hiller President, Butte County Bank, Arco, Idaho 1959 Appointed by Board of Governors: Geo. W. Watkins President, Snake River Equipment Company, Idaho Falls, Idaho 1958 Joseph Rosenblatt President, The Eimco Corporation, Salt Lake City, Utah 1959 Seattle Branch Appointed by Federal Reserve Bank: S. B. Lafromboise President, The First National Bank of Enumclaw, Enumclaw, Wash 1958 James Brennan President, First National Bank in Spokane, Spokane, Wash 1958 Joshua Green, Jr President, Peoples National Bank of Washington, Seattle, Wash 1959 Appointed by Board of Governors: Lyman J. Bunting President, Rainier Fruit Company, Yakima, Wash 1958 Henry N. Anderson President, Twin Harbors Lumber Company, Aberdeen, Wash 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 151 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. PRESIDENTS AND VICE PRESIDENTS Federal Reserve President Vice Presidents Bank of— First Vice President Boston J. A. Erickson D. H. Angney Benjamin F. Groot E. O. Latham Ansgar R. Berge Dana D. Sawyer George H. Ellis O. A. Schlaikjer New York Alfred Hayes H. A. Bilby Robert G. Rouse William F. Treiber John Exter Walter H.Rozell Jr. M. A. Harris T. G. Tiebout H. H. Kimball V. Willis H. V. Roelse R. B. Wiltse Robert V. Roosa Philadelphia ... Karl R. Bopp Joseph R. Campbell P. M. Poorman Robert N. Hilkert W. M. Catanach J. V. Vergari David P. Eastburn Richard G. Wilgus Murdoch K. Goodwin Cleveland W. D. Fulton Dwight L. Allen Martin Morrison Donald S. Thompson Roger R. Clouse H. E. J. Smith C. Harrell Paul C. Stetzelberget L. Merle Hostetler Richmond Hugh Leach N. L. Armistead J. M. Nowlan Edw. A. Wayne J. Dewey Daane James M. Slay Aubrey N. Heflin Thomas I. Storrs Upton S. Martin C. B. Strathy Atlanta Malcolm Bryan J. E. Denmark L. B. Raisty Lewis M. Clark John L. Liles, Jr. Earle L. Rauber J. E. McCorvey S. P. Schuessler Harold T. Patterson Chicago Carl E. Allen Neil B. Dawes C. T. Laibly E. C. Harris W. R. Diercks George W. Mitchell A. M. Gustavson H. J. Newman H. J. Helmer A. L. Olson Paul C. Hodge St. Louis Delos C. Johns Homer Jones H. H. Weigel Guy S. Freutel Geo. E. Kroner J. C. Wotawa Dale M. Lewis Minneapolis ... Frederick L. Deming C. W. Groth H. G. McConnell A. W. Mills M. B. Holmgren M. H. Strothman, Jr. A. W. Johnson Kansas City .... H. G. Leedy John T. Boysen E. U. Sherman Henry O. Koppang George H. Clay Clarence W. Tow Joseph S. Handford D. W. Woolley Dallas Watrous H. Irons T. A. Hardin Morgan H. Rice W. D. Gentry G. R. Murff Harry A. Shuf ord T. W. Plant C. E. Walker L. G. Pondrom San Francisco .. H. N. Mangels A. B. Merritt John A. O'Kane Eliot J. Swan E. R. Millard O. P. Wheeler R. H. Morrill Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

152 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont. VICE PRESIDENTS IN CHARGE OP 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 Donald L. Henry 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. Mr. Leedy, President of the Federal Reserve Bank of Kansas City, and Mr. Erickson, President of the Federal Reserve Bank of Boston, who were elected Chairman of the Conference and Vice Chairman, respectively, in January 1956, were re-elected as such in March 1957 and continued to serve until the meeting in February 1958. At this meeting Mr. Erickson was elected Chairman of the Conference and Mr. Johns, President of the Federal Reserve Bank of St. Louis, was elected Vice Chairman. Mr. John T. Boysen, Vice President and Cashier of the Federal Reserve Bank of Kansas City, served as Secretary of the Conference from May 1956 to February 1958. Mr. Loring C. Nye, Assistant Cashier of the Federal Reserve Bank of Boston, was appointed as Secretary of the Conference at the meeting in February 1958. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES == 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 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 later 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

Page Acceptance powers granted member banks 91 Acceptances, bankers': Federal Reserve Bank holdings 99, 106, 108, 110 Open market transactions during 1958 129 Alaska Statehood Act: Actions by Board of Governors incident to 87 Federal Reserve districts, readjustment to include Alaska 87, 94 National banks, membership in Federal Reserve System 94 Assets and liabilities: Banks, by classes 125 Board of Governors 102 Federal Reserve Banks 106-111 Balance of international payments 13 Bank credit, supplies of 25, 27 Bank holding companies 90 Bank Holding Company Act of 1956, report to Congress under 95 Bank premises, Federal Reserve Banks and branches 100, 106, 108, 110, 120 Bank supervision by Federal Reserve System 89 Banking offices: Changes in number 127 On, and not on, Par List, number 128 Board of Governors: Accounts audited 101 Bank Holding Company Act of 1956, report to Congress under. ... 95 Income and expenses 101-103 Members and officers 132 Policy actions 72-88 Regulations (See Regulations) Branch banks: Domestic, changes in number 127 Federal Reserve (See Federal Reserve Banks) Foreign 92 Business finance 21 Capital accounts: Banks, by classes 125 Federal Reserve Banks 107, 109, 111 Chairmen of Federal Reserve Banks 135 Charts: Bank loans and investments 25 Deposits of commercial banks 28 Economic indicators, selected 2 Gross national product 5 Interest rates 20 Reserves and borrowings, member banks 9 U. S. balance of payments 12 Commercial banks: Assets and liabilities 125 Banking offices, changes in number 127 Digitized for FRASER 154 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 155 Page Commercial banks—Continued Deposits 28, 125 Loans and investments 27, 125 Number, by classes 125 Condition statement of Federal Reserve Banks 106-111 Consumer finance 22, 26 Credit demands and supplies 18, 25 Defense Production Act of 1950, amendment of 94 Defense production loans 95, 124 Deposits: Banks, by classes 125 Commercial banks 28, 125 Federal Reserve Banks 107, 109, 111, 118 Savings and other time deposits, maximum rates 123 Deputy Chairmen of Federal Reserve Banks 135 Directors, Federal Reserve Banks and branches 136 Discount rates at Federal Reserve Banks: Increases in 9, 82, 85 Reductions in 3, 73, 76, 80 Table of 122 Discounts and advances by Federal Reserve Banks 99, 106, 108, 110, 113, 114, 118 Dividends: Federal Reserve Banks 97, 98, 115, 116 Member banks 126 Dollar exchange, permission granted member bank to accept drafts or bills drawn for purpose of furnishing 92 Earnings: Federal Reserve Banks 97, 114, 116 Member banks 126 Economic review 1-11 Examinations: Federal Reserve Banks 89 Foreign banking and financing corporations 93 Holding company affiliates 91 Member banks 89 State member banks and foreign branches 89, 93 Expenses: Board of Governors 101-103 Federal Reserve Banks 97, 114, 116 Member banks 126 Federal Advisory Council: Meetings 134 Members and officers 134 Federal Open Market Committee: Meetings 34, 133 Members and officers 133 Policy actions 32-71 Review of continuing authorities or statements of policy 39 Special actions incident to disorderly market in Government securities 7, 53 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 INDEX Page Federal Reserve Act: Section 2, amendment relating to readjustment of Federal Reserve districts to include Alaska 94 Section 13b, repeal of, and return of surplus to Treasury 95, 98 Section I4(b), amendment extending authority of Federal Reserve Banks to purchase and sell Government obligations directly from or to the U. S 94 Section 24, amendment relating to national bank loans participated in by Small Business Administration 94 Federal Reserve Banks: Assessments for expenses of Board of Governors 103, 114 Authority to purchase and sell Government obligations directly from or to the U. S., extension of 94 Bank premises 100, 106, 108, 110, 120 Branches: Bank premises 100, 120 Directors 136 Vice Presidents in charge of 152 Capital accounts 107, 109, 111 Chairmen and Deputy Chairmen 135 Condition statement 106-111 Directors 136 Discount rates: Increases in 9, 82, 85 Reductions in 3, 73, 76, 80 Table of 122 Dividends 97, 98, 115, 116 Earnings and expenses 97, 114, 116 Examination of 89 Foreign and international accounts 99 Officers and employees, number and salaries 114, 121 Presidents and other officers 151 Profit and loss 115 Section 13b loan authority, repeal of, and return of surplus to Treasury 95, 98 Special certificates purchased direct from Treasury, holdings of. ... 113 U. S. Government securities: Holdings of 98, 106, 108, 110, 112, 113, 118 Open market transactions during 1958 129 Volume of operations 96, 113 Federal Reserve districts: Readjustment to include Alaska 87, 94 Twelfth District, readjustment to include Alaska in territory of Seattle Branch 87 Federal Reserve notes: Condition statement data 106-111 Cost of printing, issue, and redemption 103 Interest paid to Treasury 97, 98, 115, 116 Federal Reserve policy: Actions to combat recession 3 Digest of principal policy actions 30 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 157 Page Federal Reserve policy—Continued Gold movements and Federal Reserve policy 16 Record of policy actions: Board of Governors 72-88 Federal Open Market Committee 32-71 Federal Reserve System: Bank supervision by 89 Map of 153 Membership: Changes in 90 National banks in Alaska 94 Foreign banking and financing corporations: Examination of 93 Operations of 92 Titles of foreign financing corporations, amendment of Regulation K 86 Foreign branches 92 Gold certificate reserves of Federal Reserve Banks 106, 108, 110 Gold movements in 1958, relation to balance of international payments and U. S. monetary system 11 Government finance 18 Government securities (See U. S. Government securities) Holding company affiliates 91 Industrial loans by Federal Reserve Banks: Condition statement data 106, 108, 110 Earnings on 99, 114 Rates on 122 Section 13b loan authority, repeal of, and return of surplus to Treasury 95, 98 Insured commercial banks 125, 127 Inter-Agency Bank Examination School 93 Interest rates: Discount rates at Federal Reserve Banks: Increases in 9, 82, 85 Reductions in 3, 73, 76, 80 Table of 122 Federal Reserve rates, table of 122 Regulation V loans 124 Savings and other time deposits, maximum rates 123 International capital transactions 24 Investments (See also specific types of investments) : Banks, by classes 125 Commercial banks 27, 125 Federal Reserve Banks 106, 108, 110 Member banks 125 Legislation: Alaska Statehood Act 94 Bank Holding Company Act of 1956, report to Congress under.... 95 Defense Production Act of 1950, amendment of 94 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 INDEX Page Legislation—Continued Federal Reserve Act: Section 2, amendment relating to readjustment of Federal Reserve districts to include Alaska 94 Section 13b, repeal of 95 Section 14(b), amendment extending authority of Federal Reserve Banks to purchase and sell Government obligations directly from or to the U. S 94 Section 24, amendment relating to national bank real estate loans participated in by Small Business Administration 94 Small Business Investment Act of 1958. 95, 98 Loans (See also specific types of loans) : Banks, by classes 125 Commercial banks 27, 125 Federal Reserve Banks 98, 106, 108, 110, 118, 122 Member banks 125 National bank real estate loans participated in by Small Business Administration, amendment of Section 24 of Federal Reserve Act 94 Margin requirements: Increases in 10, 81, 83 Reduction in 10, 72 Table of 124 Meetings: Chairmen of Federal Reserve Banks 135 Federal Advisory Council 134 Federal Open Market Committee 34, 133 Presidents of Federal Reserve Banks 152 Member banks: Acceptance powers 91 Assets, liabilities, and capital accounts 125 Banking offices, changes in number 127 Earnings, expenses, and dividends 126 Examination of 89 Foreign branches, number in operation 92 Number 90, 125 Reserve requirements: Reductions in 3, 75, 78 Table of 123 Reserves and related items 118 Membership in Federal Reserve System: Changes in 90 National banks in Alaska 94 Mutual savings banks 125, 127 National banks: Alaskan banks, membership in Federal Reserve System 9A Assets and liabilities 125 Banking offices, changes in number 127 Foreign branches, number in operation 92 Number 90, 125 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 159 Page National banks—Continued Real estate loans participated in by Small Business Administration, amendment of Section 24 of Federal Reserve Act 94 Trust powers 91 Nonmember banks 125, 127, 128 Open Market operations 32-71, 129 Par List, banking offices on, and not on, number 128 Policy actions, Board of Governors: Alaskan Statehood, actions incident to 87 Discount rates at Federal Reserve Banks: Increases in 82, 85 Reductions in 73, 76, 80 Margin requirements: Increases in 81, 83 Reduction in 72 Regulation K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act, amendment of Sections 3(b) and 10(c) (2) 86 Reserve requirements of member banks, reductions in 75, 78 Policy actions, Federal Open Market Committee: Authority to effect transactions in System Account 32-71 Review of continuing authorities or statements of policy 39 Special actions incident to disorderly market in Government securities 53 Presidents of Federal Reserve Banks: Conference of 152 List of 151 Meetings 152 Salaries 121 Real estate loans: National bank loans participated in by Small Business Administration, amendment of Section 24 of Federal Reserve Act.... 94 Recession and recovery 1 Regulations, Board of Governors: Amendments incident to admission of Alaska to Statehood 87 D, Reserves of Member Banks: Reserve requirements, reductions in 3, 75, 78 K, Corporations Doing Foreign Banking or Other Foreign Financing under the Federal Reserve Act: Amendment of Sections 3(b) and 10(c) (2) 86 T, Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges: Margin requirements: Increases in 10, 81, 83 Reduction in 10, 72 U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange: Margin requirements: Increases in 10, 81, 83 Reduction in 10, 72 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

160 INDEX Page Regulations, Board of Governors—Continued V, Loan Guarantees for Defense Production 95, 124 Repurchase agreements: Bankers' acceptances 106, 108, 110, 129 U. S. Government securities 106, 108, 110, 118, 129 Reserve requirements, member banks: Reductions in 3, 75, 78 Table of 123 Reserves: Federal Reserve Banks 106-111 Member banks 118 Salaries: Board of Governors 103 Federal Reserve Banks 114, 121 Savings 26 Savings deposits (See Deposits) Small Business Administration: Real estate loans participated in by, amendment of Section 24 of Federal Reserve Act 94 Small business financing study 103 Small Business Investment Act of 1958 95, 98 State member banks: Assets and liabilities 125 Banking offices, changes in number 127 Examination of, and foreign branches 89, 93 Foreign branches, number in operation 92 Number 90, 125 System Open Market Account: Audit of 89 Authority to effect transactions in 32-71 Territory of Federal Reserve Banks and branches: Seattle Branch territory, inclusion of Alaska in 87 Time deposits (See Deposits) Treasury finance 18 Trust powers of national banks 91 U. S. Government securities: Authority of Federal Reserve Banks to purchase and sell directly from or to the U. S., extension of 94 Bank holdings, by class of bank 125 Commercial bank holdings 28, 125 Federal Reserve Bank holdings 98, 106, 108, 110, 112, 113, 118 Open market operations 32-71, 129 Special certificates purchased direct from Treasury 113 V-loans 95, 124 Voting permits issued to holding company affiliates 91 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis