Annual Report of the Federal Reserve Board, 1959

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

LETTER OF TRANSMITTAL BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Washington, March 7, 1960. 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-sixth Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1959. 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 Federal Reserve Action 2 Open market operations and the gold outflow 3 Discount operations 4 Reserve requirements 5 Margin requirements 6 Interest Rates, Economic Activity, and Saving 6 Historical perspective 7 Saving-investment process 10 Supply and demand for lendable saving 12 Role of credit availability 16 Factors in interest rate trends of the 1950's 17 Credit demands 18 Financial saving of consumers 20 Inflationary expectations 21 Monetary policy and interest rates 22 Economic growth, interest rates, and saving 24 Reserves and Reserve Requirements 25 Amendment of Board authority 26 Change in Board regulation 28 Digest of Principal Federal Reserve Policy Actions, 1959 30 Record of Policy Actions—Federal Open Market Committee 31 Record of Policy Actions—Board of Governors 66 Bank Supervision by the Federal Reserve System 86 Examination of Federal Reserve Banks 86 Examination of member banks 86 Federal Reserve membership 87 Bank holding companies 88 Trust powers of national banks 89 Acceptance powers of member banks 89 Foreign branches of member banks 90 Foreign banking and financing corporations 91 Inter-Agency Bank Examination School 92 Legislation 92 Reserves of member banks 92 iii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page Member banks dealing in obligations of Tennessee Valley Authority and Inter-American Development Bank 93 Federal Reserve Banks as fiscal agents for Inter-American Development Bank 93 Amendments to eliminate ambiguities and repeal obsolete provisions 93 Statehood of Alaska and Hawaii 93 Bank Holding Company Act 94 Litigation and Hearings 94 Reserve Bank Operations 95 Loan guarantees for defense production 95 Volume of operations 95 Earnings and expenses 96 Holdings of loans and securities 99 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, 1959 106 2. Statement of Condition of Each Federal Reserve Bank at End of 1959 and 1958 108 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1959, 1958, and 1957 112 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1953-59 113 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1955-59 113 6. Earnings and Expenses of Federal Reserve Banks during 1959.. 114 7. Earnings and Expenses of Federal Reserve Banks, 1914-59 116 8. Member Bank Reserves, Reserve Bank Credit, and Related Items, End of Year 1918-59 and End of Month 1959 118 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1959 120 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1959 121 11. Federal Reserve Bank Discount Rates (in effect Dec. 31,1959).. 121 12. Member Bank Reserve Requirements 122 13. Maximum Interest Rates Payable on Time Deposits 122 14. Margin Requirements 123 iv Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950 (in effect Dec. 31, 1959) 123 16. Principal Assets and Liabilities, and Number of All Banks, by Classes, Dec. 31, 1959 and 1958 124 17. Member Bank Earnings, by Class of Bank, 1959 and 1958 125 18. Analysis of Changes in Number of Banking Offices in the United States during 1959 126 19. Number of Banking Offices on Federal Reserve Par List and Not on Par List, Dec. 31, 1959 127 20. Open Market Transactions of the Federal Reserve System during 1959 128 FEDERAL RESERVE DIRECTORIES AND MEETINGS Board of Governors of the Federal Reserve System 130 Federal Open Market Committee 131 Federal Advisory Council 132 Federal Reserve Banks and Branches 133 Map of Federal Reserve Districts 151 Index 152 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

OF THE FEDERAL RESERVE SYSTEM During 1959 total credit in the economy expanded by about $60 billion in all—one-third more than the previous peacetime record. Mortgage debt, most of it for housing, increased by a peak $19 billion. Consumer credit outstanding rose about $6.5 billion, equaling the previous high of 1955. New borrowing by State and local governments continued in near-record volume, and new Federal borrowing exceeded that in all earlier peacetime years. The increase in commercial bank loan portfolios over the year was large and equaled the previous peak of 1955. The banks financed a substantial part of this lending activity by selling U. S. Government securities to nonbank investors through the market. As a result, total loans and investments of banks increased only moderately. A main service performed by the commercial banks for the economy last year was acting as an intermediary between borrowers and savers. Banks, in effect, drew out of the market funds provided through security purchases by individuals and corporations to meet the specialized credit demands of various types of borrowers, including many whose credit demands could not be met as readily by nonbank sources. This flow of funds from savers to banks to borrowers enabled a large credit demand to be accommodated with little increase in the money supply. Over the year, consumers and businesses increased their spending of existing cash balances as well as their spending of newly borrowed funds. This contributed to a more active use of money, reflected in an increase in the turnover or rate of use of the money supply. Cash balances were also used to invest in securities, particularly those of the Federal Government and of State and local governments. Consumer spending was a prime generative force in the 1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 ANNUAL REPORT OF BOARD OF GOVERNORS economic expansion last year as it had been in 1955. State and local government expenditures were large, and prior to the steel strike business outlays to build up inventories were substantial. Partly as an aftermath of the 1957-58 recession, Federal Government expenditures exceeded revenues by a substantial amount. Employment rose more slowly than output, and so output per worker increased somewhat. Consumer prices rose, but the general level of wholesale prices changed little. Prices of industrial materials and products increased, however, while agricultural prices declined. Wage rates continued to increase, although at a slower average rate than in other recent years. Abroad, rapid expansion of industrial activity was resumed early in 1959 and continued during the year. The flow of saving into financial assets increased markedly during the year but was inadequate to meet all demands for credit at prevailing levels of interest rates. As a result, money market rates and bond yields rose further, and by the end of the year were above their previous peaks in late 1957. Stock prices, which had advanced sharply in 1958, continued to rise into early August 1959. For a period thereafter they declined, but later in the year they rose again. Although dividends increased, yields on stocks declined to new postwar lows during the year. Yields on high-grade corporate bonds exceeded stock yields by more than a percentage point over much of the year. FEDERAL RESERVE ACTION The credit and monetary policies pursued by the Federal Reserve System have the broad purpose of providing a financial climate favorable to sustainable growth of the economy without inflation. With demands for financing in 1959 continuously strong, higher interest rates were needed to equate these demands with the available supply of saving and bank credit. Higher rates also induced a more economical use of cash balances and a larger flow of current financial saving. The money supply, which increased substantially in 1958 and early 1959, was limited to little further growth after Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 3 last spring. The public's holdings of other liquid assets, however, expanded sharply throughout the year. The principal Federal Reserve policy actions during the year are summarized in the sections that follow. Later in this report they are listed in tabular form and are described more fully in the records of specific policy actions of the Board of Governors and of the Federal Open Market Committee. OPEN MARKET OPERATIONS AND THE GOLD OUTFLOW Federal Reserve purchases or sales of U. S. Government securities in the market are commonly known as open market operations. Such operations are used to provide reserves to the commercial banking system that enable it to meet the economy's growing needs for financing and also to offset the possible disturbing effects of a variety of seasonal and other market factors that recurringly create or absorb bank reserves. Over the year 1959, the most important market factor absorbing bank reserves was the further outflow of gold from the country. Foreign operations drained $800 million from bank reserves in 1959 as net gold acquisitions from the United States by foreign monetary authorities and international institutions totaling $1.1 billion were offset in part by Treasury transactions. Other factors tending to reduce the reserves available to banks included an increase of about $400 million in the amount of currency in circulation. Unless replenished, the reduction in bank reserves due to these developments would have led to an undesirable degree of credit stringency. The largest single source of reserves to offset this was the net open market purchases of the Federal Reserve System. The over-all deficit in this country's international payments was somewhat less than $4 billion, exclusive of a subscription to the International Monetary Fund. In the second half of the year, however, exports rose in response to increasing foreign demand, imports leveled off, and the balance-of-payments deficit tended to diminish, although continuing large. Apart from the gold transfers, settlement Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS CHANGES IN MEMBER BANK RESERVES [Based on averages of daily figures for December; in billions of dollars] Item 1959 1958 Member bank reserves Total reserves. 0) -0.5 Reserves held with Federal Reserve Banks. -0.3 -0.5 Reserves allowable in cash +0.3 Required reserves +0.1 -0.5 Effect of: Reduction in reserve requirement percentages. -1.5 Change in deposits +0.1 +1.0 Excess reserves C1) -0.1 Principal factors affecting reserves (sign indicates effect on reserves) Federal Reserve credit: Discounts and advances to member banks +0.3 -0.2 Federal Reserve holdings of U.S. Govt. securities and acceptances +0,7 +2.3 Float -0.1 +0.1 Currency in circulation -0.4 -0.4 Gold stock and foreign accounts. 2-1,2 -2.1 Other factors 2+0.3 -0.2 1 Less than $50 million. 2 Changes in gold stock and Treasury cash (included in other factors) include the effect of a payment of $344 million in gold from Treasury cash holdings to the International Monetary Fund in connection with the increase in the U.S. subscription to the Fund; these changes were offsetting and had no effect on total reserves. NOTE.—Figures may not add to totals because of rounding. of the deficit involved large foreign acquisitions of Treasury bills and other U. S. Government securities. DISCOUNT OPERATIONS A part of the reserve funds to support growth of bank credit and money last year was obtained by member banks borrowing at the discount windows of their respective Federal Reserve Banks. Reserve Bank advances to or discounts for member banks, which had increased in the latter part of 1958, averaged around $700 million over the first half of 1959, although by June they reached a level exceeding $900 million. Throughout the remainder of the year, borrowings fluctuated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 5 around this higher level. Member banks obtaining Reserve Bank advances typically did so to meet drains of reserve funds to other banks as checks were cleared; such individual borrowings were soon repaid. The number of member banks accommodated by the Reserve Banks during the year was fairly large, 1,967, or almost one-third of all member banks. To discourage bank borrowing of reserves in a situation of vigorous demand for bank credit and rising market interest rates, discount rates at the various Reserve Banks were increased three times in 1959. These changes occurred in early March, in late May and early June, and in early September. Rate increases occurred after market rates had risen to levels above prevailing discount rates. Each set of increases amounted to one-half of one per cent, and together they raised the level of rates at all Federal Reserve Banks from 2x/2 per cent at the beginning of the year to 4 per cent at the end. RESERVE REQUIREMENTS In early December 1959 the Board of Governors modified its reserve requirement regulation. This modification permitted member banks to count their vault cash in excess of specified percentages of their deposits as part of their required reserves. The action was taken under the authority of legislation enacted by the Congress in July 1959 and was designed in part to remedy inequities that had arisen because many banks, particularly smaller country banks, had found it necessary to hold relatively larger amounts of vault cash than other banks did for operating purposes. No change in the over-all credit and monetary policy of the Federal Reserve was involved in this action. It had the effect of supplying some $300 million of reserves to the banking system at a time of the year when the Federal Reserve usually makes available to the banks a sizable volume of reserves for seasonal purposes. It correspondingly reduced the need for open market operations to meet these temporary demands. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 ANNUAL REPORT OF BOARD OF GOVERNORS MARGIN REQUIREMENTS The Federal Reserve at midyear strengthened somewhat its restraints over the amount of credit used for the purchasing or carrying of stock market securities by adopting certain technical amendments to its margin regulations. Margin requirements for this type of credit, which had been raised to 90 per cent by the Board of Governors in mid-October 1958, were continued at this level throughout 1959. The most important of the amendments had the effect of reducing the amount of cash which can be withdrawn from the proceeds of sales of securities held on margins below those currently required. The substitution of one security for another in such a situation can still be made without providing additional margin if it is done during the same day. Another amendment had the effect of limiting the number of cases in which bank loans secured by stock exchange collateral can be regarded as loans for purposes other than buying or carrying stocks and hence not subject to margin requirements. INTEREST RATES, ECONOMIC ACTIVITY, AND SAVING Recent years have witnessed increasing discussion and public awareness of long-debated questions about interest rates—their function in the economic system, their relation to inflationary pressures and to economic growth, and their suitability or limitation as a focus for governmental economic policy. In this country, much of the discussion has been prompted by the upward trend as well as the fluctuations in interest rates during the 1950's. In each successive period of expansion in activity, yields on private and government obligations rose to new postwar peaks; in the second half of 1959 short- and long-term rates generally reached new highs. A specific problem in 1959 was the inability of the Federal Government, in meeting its large financing needs, to issue new long-term bonds in view of the statutory ceiling of 414 per cent on the coupon rate for such bonds. In foreign countries whose financial markets had been substantially restored to flexible functioning by the early Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM LONG - TERM INTEREST RATES Per cent 8 GERMANY fafr - FRANCE y/ A\ / H ^/ 6 s *J LA C UNITED *S\f^\ ^ ( ^^ / \f\l NETHERLANDS^^KINGDO/V^\KT ^ \ / 4 -^ ^^^"^iJNITED STATES 2 .«. 1 1 1 1 1 1 1 1 1 1 1 1 ,. 1947 '49 '51 '53 '55 '57 1959 NOTE.—Average monthly yields on long-term government bonds for all countries except Germany. For Germany, yield on issues of public authorities; monthly series not available prior to August 1956. 1950's—for example, Canada, Germany, and the United Kingdom—interest rates likewise fluctuated in response to variations in economic activity. Continued improvement in world trade and the strengthening of foreign balance-ofpayments positions fostered progress towards a more general currency convertibility. As a consequence, loanable funds during recent years have moved with increasing freedom among markets in different countries in response to emerging interest rate differentials; and interest rates, both short- and long-term, have become more reflective of world-wide developments than at any time during the past 30 years. HISTORICAL PERSPECTIVE After small advances early in the postwar period, interest rates in the United States showed an upward sweep through Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 ANNUAL REPORT OF BOARD OF GOVERNORS the 1950's. Over the preceding 20 years, the general level of rates had been exceptionally low. The low level prevailing under depression conditions of the 1930's was maintained in the ensuing decade by policies of war and postwar finance. These policies, which were justified at the time by conditions of, or transition from, national emergency, placed major emphasis upon low, stable interest rates, even though such LONG- AND SHORT-TERM INTEREST RATES Per cent 10 "1 < COMMERCIAL PAPER 8 - T\ 6 — w ' \ V /fr 4 i — CORPORATE BONDS 2 ^> 0 II 1 1 1 1 1 1 1 !1 1II1 1I 11111111M i M111 1 1 1 II 1 M 1 1 1 1 1 1 1 1 1 M 1880 1900 1920 1940 1960 NOTE.—Corporate bond yield is average of high-grade railroad bonds until 1932 and of corporate Aaa bonds thereafter. Commercial paper is rate on 4- to 6-month open market paper. emphasis contributed to an unregulated and very large wartime expansion of the money supply, and a postwar situation in which the money supply was without effective regulation. Price advances were held down during the war by direct controls over spending and prices, but were very sharp in early postwar years when controls were removed. Against this background, the outbreak of hostilities in Korea in 1950 and the accompanying inflationary pressures prompted public discussion of monetary policy aimed at stability of interest rates at low levels, because such a policy in effect was leaving the money supply unregulated. En- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM deavors to meet this problem and to allay public anxiety about the future value of the dollar led to the Treasury- Federal Reserve accord in March 1951, which, after a transition period, discontinued further official pegging of interest rates. Monetary policy thus became free to resume regulation of bank credit and money in order to combat not only deflationary but also inflationary tendencies in the SELECTED INTEREST RATES Per cent 6 - CORPORATE Aaa 4 U. S. GOVERNMENT L/ LONG-TERM A* \ ^^yOs - <&$ 2 / K- •>-'* / *\ x-i,kJ TREASURY - BILLS /„' w-^" COMMERCIAL K J / PAPER V | | 1 1 1 1 1 1 I 1 1 1 0 1947 '49 '51 '53 55 '57 1959 economy, and market rates of interest again reflected the influence of underlying supply and demand forces. Changes in interest rates have both responded to and reflected cyclical movements of the economy. The upward trend of interest rates during the 1950's was interrupted by declines during the recessions of 1953-54 and 1957-58. The most recent cyclical rise began around mid-1958, as recovery in economic activity from the 1957-58 recession quickened. As is usual, the largest increases occurred in yields on shortterm instruments, such as Treasury bills, commercial pa- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 ANNUAL REPORT OF BOARD OF GOVERNORS per, and bankers' acceptances, which are generally more volatile and which had fallen sharply following the onset of recession and the easing of credit conditions that began in the fall of 1957. Yields on corporate and State and local government bonds and on U.S. Government long-term securities also rose substantially after mid-1958 to levels above their previous postwar peaks. During 1959, corporate yields moved to levels well in excess of yields on common stocks, thus reversing the historical relationship between bond and stock yields. Even at recent advanced levels, interest rates were generally low relative to earlier periods, although some rates were near their averages in the 1920's, which was also a period of intensive utilization of economic resources and strong credit demands. Moreover, since the 1920's the level of market interest rates on U. S. Government securities has risen relative to those on other obligations, reflecting in part the much larger volume of Federal debt relative to other debt and the elimination of tax exemption on Treasury bonds. Historical comparisons of interest rates encounter various problems. Limited statistical records are one handicap. Also, broad economic and social changes—for example, the development of financial institutions, changes in the tax structure, and the enlarged role of governments—affect the interpretation of differing interest rate levels over time. SAVING-INVESTMENT PROCESS There are a number of theories of interest rate determination. Some emphasize the saving-investment process; others look mainly to the cash and liquidity demands of the public; and still others stress the supply and demand for loanable funds. The different theories center on different, though not necessarily mutually exclusive, aspects of the process through which interest rates are set. No one theory, however, comprehends the full complexity of this process. Observed interest rate movements reflect elements of all theories in varying degree, depending on circumstances of time and place as well as on institutional characteristics of the economy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 11 From the point of view of the economy's use of its resources, the rate of interest is a price that translates present saving into future command over resources. For example, at a 5 per cent interest rate, $1.00 of present income saved will exchange for $1.05 to be received after a year. In the meanwhile, since the saver has refrained from current consumption, his saving permits resources to be used to an equivalent amount in the nation's investment in plant and equipment, durable goods, and housing, or in net foreign investment. This investment increases the economy's capacity to produce future income in terms of goods and services, and thus provides the additional real income that makes it possible for the borrower to pay the interest earned by the saver. Since interest is both an earning of savers and a cost of investment, movements of interest rates can be said to reflect the balancing of saving and investment tendencies at given levels of income and of prices. Imbalances between the willingness to save and investment demand, however, affect real income (that is, income in terms of constant prices) and market prices as well as interest rates. The extent of influence on each depends on the economic and institutional structure, the phase of the economic cycle, and general economic conditions. At times when productive capacity is underutilized, for example, greater investment demand is likely to lead to the financing of a larger volume of real investment, and thus to increased output and rising incomes. The rise in real income will tend to be accompanied by an increase in saving, and the balancing of saving and investment may be achieved with little advance in interest rates and prices. At times when investment demand exceeds available saving under conditions of high capacity utilization, there will be greater pressure on interest rates and prices since the extent to which saving might be increased by a rise in real income is limited; pressures on interest rates and prices will be intensified when inflationary expectations are widely prevalent. It is under such circumstances that excessive expansion of bank credit and money results mainly in rising prices and merely enlarges the monetary value of both saving and investment, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 ANNUAL REPORT OF BOARD OF GOVERNORS without relieving a shortage of real resources and even without checking, except perhaps temporarily, a pronounced tendency for interest rates to rise. SUPPLY AND DEMAND FOR LENDABLE SAVING The saving-investment process in financial markets is reflected in the balancing of supplies and demands for loanable funds, as funds move into and out of financial assets of varying types in response to borrowing demands. The composition of flows in financial markets represents the combination of supplies and demands originating in the various sectors of the economy. The saving of an individual sector—consumer, business, or government—represents the extent to which its current receipts (after taxes) are not spent on current consumption. This saving flows into investments, and on the investment side is equal to purchases of capital goods plus a financial component which is the sector's net saving in financial form. More specifically, a sector's saving in financial form is equal to its net acquisitions of financial assets less net incurrence of debt. Within a sector, however, some individual units or groups may be predominantly savers and acquire financial or tangible assets without incurring much debt, while others may be mainly borrowers. The nation's saving, in contrast with the saving of any sector, is equal only to the value of investment in tangible assets plus net foreign investment. The nation's saving does not include, in measurement, investment in financial claims other than net claims on foreigners. What anyone owes within the economy is owned by another; thus, in aggregating the wealth of the nation, assets representing financial claims cancel out against liabilities. Nevertheless, the flow of saving by individuals or sectors into financial claims is a significant element in the determination of the nation's investment. The forms in which people save and the state of financial markets through which these savings flow both reflect and affect decisions to purchase capital goods. Consumers as a group provide enough saving—either directly or through financial intermediaries, such as savings Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 13 institutions, life insurance companies, and pension funds— to cover the aggregate borrowing of the consumer sector and also to help finance demand for loanable funds from other sectors. While businesses finance themselves to a large extent out of internal saving, as a group they are usually net borrowers from the rest of the economy, as shown in the accompanying chart. In recent years governments as a group have generally been heavy net borrowers of the nation's saving; a governmental net surplus, of course, is a net addition to the nation's saving. The supply and demand for financial saving, as well as shifting portfolio preferences of individuals, businesses, and financial institutions, come together and are balanced in financial markets, as is illustrated in the table on page 14. SAYING IN FINANCIAL FORM Billions of dollars +, net funds made availiable 20 CONSUMERS 10 ^^ GOVERNMENTS / 10 NONFINANCIAL BUSINESSES —, net funds obtained 20 1 1 1 1950 '51 '53 '55 '57 1959 NOTE.—Federal Reserve flow-of-funds data. Consumers include nonprofit organizations. Saving in financial form of a sector is equal to the net increase in its financial assets less the net increase in its liabilities. When positive, it represents the net amount of saving made available to other sectors; when negative the net amount obtained. Rest-ofworld sector not shown. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 ANNUAL REPORT OF BOARD OF GOVERNORS In financial or monetary terms, changes in interest rates reflect this market process. Changes in the supply of money in the economy, effected through the market for bank credit, are an important marginal element affecting interest rates. FINANCIAL QUANTITIES REFLECTIVE OF SUPPLY AND DEMAND FOR SAVING [In billions of dollars] 1958 1959* Supply quantities Flows into financial assets, total 76.7 84.0 Credit market instruments, total1 45,4 60.2 Purchased by: Consumers 3.6 14.2 Nonfinancial businesses 1.4 7.6 Financial institutions 36.8 28.9 Governments 3.6 6.4 Claims on financial institutions, total1 30.4 17.1 Acquired by: Consumers 24 A 16.8 6.3 A Others 1.0 6.7 Other assets3 Demand quantities 76.7 85.1 Increase in liabilities, total 45.2 60.4 Credit market instruments, total1 Borrowed by: 12.0 20.7 Consumers 14.1 18.5 Nonfinancial businesses 1.5 4.7 Financial institutions 15.2 15.8 Governments Liabilities of financial institutions2 29.9 16.9 Other liabilities3 1.6 7.7 P Preliminary estimates. 1 Consists of marketable Federal, State, and local government securities, corporate bonds and stocks, mortgages, consumer credit, security credit, and bank and other loans. Rest of world included in total but not shown separately. 2 Consists of currency and demand deposits, savings deposits and shares, and saving through private life insurance and pension funds. Excludes claims on financial institutions through purchase of credit market instruments. 3 Consists of consumer-held U.S. savings bonds, trade credit, proprietors' net investment in noncorporate business, saving through government life insurance and pension funds, and miscellaneous other types of financial flows. NOTE.—-Based on Federal Reserve flow-of-funds data. Flows into financial assets and increase in liabilities are on a net basis. Differences between total financial assets and liabilities and between paired subtotals of financial assets and liabilities reflect statistical discrepancies. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 15 Interest rate movements not only reflect a changing supply and demand situation but also in turn have some effect on the flow of loanable funds through financial markets. Flows into savings institutions or commercial banks in the form of time and savings deposits, into U.S. savings bonds, and into instruments bought and sold in credit markets respond to differential interest rate movements. Moreover, when interest rates are very low—generally periods of reduced economic activity and business uncertainty—savers are likely to hold more of their funds in cash, that is, demand deposits in commercial banks and currency. On the other hand, when the economy is expanding and interest rates are at higher levels, there is a tendency for the public to economize on cash balances and invest in other financial assets. Some flows into financial institutions—especially the bulk of those going into life insurance companies and pension funds—are contractual in nature and vary only gradually, if at all, with interest rate changes. Similarly, some inflows of funds into credit markets to repay debt are fixed by previous commitments and in general do not vary with interest rate movements in a current period. On the other hand, some debts of businesses and others contain contract provisions that permit accelerated repayment, and interest rate changes may affect the timing of such repayments. On the demand side, changes in interest rates—for example, a rise—have varying effects, depending on the relation of interest cost to total cost of the project being financed and on expectations as to the future course of interest rates. For many outlays, the relative interest cost may be small, although in individual cases it may be of sufficient size to encourage efforts to economize as rates rise. For longer lived investments, such as housing, public service facilities, and many types of commercial and industrial construction, the relative interest cost is higher and is an important consideration in making long-term commitments. Business decisions as to inventory holdings also have to take account of interest rate variations. Thus, in many areas of the economy the incurrence of debt is influenced by changes in the level of interest rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 ANNUAL REPORT OF BOARD OF GOVERNORS The restrictive impact of rising rates on borrowers may be temporarily moderated if further advances are expected; indeed, as in the case of other costs that are expected to rise, expectations may temporarily accelerate the demand for funds. This transitory effect on demand is reversed when rates reach a level that the market believes will not be sustained. Under these conditions, restrictive monetary action has a role to play in changing market expectations. ROLE OF CREDIT AVAILABILITY When credit demands are strong, limitations on credit availability together with higher interest rates restrict the extent to which borrowers can obtain needed funds. And, conversely, when credit demands are slack, increased availability of lendable funds reinforces incentives given by lower interest rates, and facilitates satisfaction of credit demands. The direct impact of credit availability on the ability of borrowers to satisfy their demands is readily observable in market segments where changes in interest charges and in lenders' returns are not commensurate with changes in the level of market interest rates. Whatever the source of this rate inflexibility—whether unique features of lender competition, of borrower demand, or of some program of governmental underwriting of borrower default risk—lenders in such market segments experience a relative decline in interest yields when market interest rates rise elsewhere; or, if some of their funds are in turn borrowed from the market, lenders experience an actual decline in their net returns. Willingness to lend in these specialized markets is thus reduced. When credit demand presses actively against the supply of lendable saving and interest rates rise, lenders generally tend to screen the creditworthiness of loan applicants more carefully. Under such conditions, lenders tend to adhere to stricter lending standards, to set more stringent borrowing terms, and to allocate their lendable funds on a nonprice basis as between borrowers. Where this situation develops, many borrowers are obliged to shop more intensively in order to find lenders whose loan standards and terms they can meet, and some borrowers fail to find accommodation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 17 at current interest rates. Successful borrowers are likely to include customers of long standing or with established credit lines, borrowers offering debt instruments not subject to statutory interest rate limitations, borrowers prepared to adjust to more stringent prepayment conditions, and those offering types of loans or instruments with relatively low servicing costs. Federal Reserve actions initially influence only the availability of loan and investment funds at banks, but changes in the availability of bank credit are reflected in the general availability of loan funds in other credit markets. Banks can to a degree avoid restriction of credit availability to their own customers by selling securities. Their sales of securities, however, tend to absorb funds of other investors and lenders. This process limits the availability of credit from these other sources except to the extent that saving increases or the public tends to substitute other financial assets for cash. Many observers of financial processes assign great importance to changes in credit availability in restricting or accelerating the volume of current borrowing; indeed, some assign a more decisive role to availability than to changes in interest cost. The Federal Reserve, in discussing and evaluating the market impact of its policy actions, has continuously stressed the importance of changes in the availability of funds in affecting satisfaction of demands. FACTORS IN INTEREST RATE TRENDS OF THE 1950'S During the past decade, private and governmental demands for credit, together with factors affecting the supply of saving, exerted strong upward pressures on interest rates in financial markets. The economy was generally characterized by rapid population growth and, apart from two brief recessionary periods, by well sustained utilization of plant and equipment and widespread demand pressures on prices. Attempts on the part of the Federal Reserve to keep interest rates from rising in recent periods of economic buoyancy would have had effects adverse to the public interest. Expansion of bank credit and money to hold down interest rates would have run the danger of stimulating speculative de- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 ANNUAL REPORT OF BOARD OF GOVERNORS mands for resources and credit, would have restrained interest rate rises only temporarily, and would have led to sharply adverse repercussions later. Credit demands. All major sectors of the economy increased their demands for credit in the 1950's. Growth of business credit demand was accompanied by continuously expanding credit demands from consumers and governments. In fact, the indebtedness of consumers and of State and local governments increased at a more rapid rate than business indebtedness. PERCENTAGE INCREASE IN OUTSTANDING DEBT 1949 TO 1959, BY SECTOR 0 100 200 300 CONSUMER STATE AND LOCAL GOVERNMENT BUSINESS FEDERAL GOVERNMENT 100 200 300 N .—Based on end-of-year data from Federal Reserve flow-of-funds accounts. 0TE Debt consists of credit market instruments other than corporate stocks (i.e., Federal, State, and local obligations, corporate bonds, mortgages, consumer credit, security credit, and bank and other loans) together with trade credit. Consumer demands on credit markets rose along with expanding incomes and wants, and with the development and broadening of credit facilities to finance purchases of homes, durable goods, and other goods and services. Low Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 19 down-payments and the lengthening of maturities on home mortgage financing—in part in response to Federal aids— together with ready availability of short- and intermediateterm consumer credit brought increasing proportions of the population into the credit market. A large share of expenditures on homes and durable goods was financed on credit terms, and both mortgage debt and consumer credit expanded greatly. Growth of the population and its spread to the suburbs during the past decade enlarged demands for education, transport, sewage, and other services of State and local governments, and required expansion of existing facilities to provide them. Many of these services are provided with long-lived physical facilities which are financed mainly through long-term borrowing. Increased credit demand of businesses in the 1950's reflected the expected high profitability of business investment and innovation during a period when, for much of the time, demand for goods and services pressed against the capacity of existing plant, and when rapidly changing wants and needs of the population, as well as striking improvements in technology, tended to accelerate obsolescence of the existing facilities. Another important factor, particularly in recent years, was the rapid advance in industrial wages and the incentive this gave to labor-saving investment. At times Federal budget deficits contributed to expanded over-all credit demand. In six years of the period beginning with 1950, when defense outlays were stepped up following hostilities in Korea, the Federal Government's receipts fell short of its spending. In these deficit years, the Federal Government competed with other sectors for part of the nation's supply of private saving, and its absorption of saving tended to reduce the availability of credit to other sectors. Expansion of credit demands would not entail rising interest rates if it were accompanied by a commensurate increase in the public's willingness to make saving available in lendable form. The tendency for lendable saving to fall behind borrowing demand, notwithstanding a substantial growth in national income, may be attributed to many Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 ANNUAL REPORT OF BOARD OF GOVERNORS factors. No explanation, however, can ignore the widespread belief during the latter part of the 1950's that prices would continue upward indefinitely. Financial saving of consumers. Consumers provide the bulk— about three-fifths—of the economy's gross saving, as shown in the accompanying table. Fluctuation in the consumer share during the past decade was relatively limited. The amount that consumers were willing to make available at pre-existing rates, however, usually fell short of the demand for saving. The lag in lendable saving from this major source contributed to the upward pressure on interest rates. GROSS NATIONAL SAVING, BY SECTOR [In billions of dollars] Sector 1958 1959* Consumer1 67.2 73.2 Nonfinancial business 36.1 46 9 Financial institution 3.4 5 0 Gross private saving 106.6 125.0 Government saving2 -12.8 -9.6 Gross national saving 93.8 115.4 p Preliminary estimates. 1 Includes nonprofit organizations. 2 Coverage of Government saying is not comparable with that of private saving. Because of conceptual and statistical problems, governmental outlays on capital goods are treated as current expenditures. Saving and spending for current consumption are, of course, alternative uses of income, and the flow of saving depends on the many factors that affect the desire to spend out of current income. A part of consumer gross saving goes directly into purchases of durable goods and homes. Another part—that is, consumer net saving in financial form—is available to meet the financing needs of the rest of the economy. Changes in the flow of consumer financial saving influence interest rate variations, and in turn are influenced to an extent by such variations. At times during the past decade, relatively large amounts of consumer net saving in financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 21 form were associated with comparatively high interest rates. During 1951-53, consumer saving in financial form was markedly higher than in 1948-50, and interest rates were also higher. Also, after falling in 1955 in reflection of the boom in spending on consumer durable goods during that year, financial saving rose in 1956-57, when interest rates were relatively high. At other times, such as in 1959, an advance in interest rates was accompanied by greater consumer acquisitions of financial assets, but these greater acquisitions were offset, for the sector as a whole, by even greater expansion of consumer debts; as a consequence, net saving in financial form of the sector declined. The rise in interest rates last year brought forth greater consumer acquisitions of securities, particularly U. S. Government obligations, and this helped to finance credit demands of the Government. By buying securities from banks offering them, consumers also indirectly helped to finance increased borrowing by other consumers. A somewhat similar pattern of consumer response occurred in the 1954-55 cyclical upswing of economic activity, as can be observed in data available in the Board's new quarterly flow-of-funds and saving accounts. Inflationary expectations. The willingness of savers to supply funds to meet credit demands has been adversely affected when rising average prices for goods and services engendered expectations of continued advances. Such conditions were evident from early 1956 to late summer 1957, and also for a time after mid-1958. Under the influence of inflationary expectations, savers became less willing to make funds available under fixedinterest contracts and tended to prefer assets, such as equities and land, which appeared to provide a hedge against possible erosion of the real value of saving through future price rises. Funds that might otherwise have financed new credit demands were committed to speculation in the stock market or in real estate—and eventually may have leaked into consumption expenditures based on capital gains. Both the resultant rise in interest rates and the decline in yields on equities were in part manifestations of moves by lenders Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 ANNUAL REPORT OF BOARD OF GOVERNORS intended to maintain the real value of their funds in the face of expected price rises. Inflationary anticipations work to increase borrowing demands even in the face of rising interest rates. Inflationary expectations make it appear to be less expensive to borrow in the present than in the future. Moreover, the cost of borrowing may seem small relative to possible speculative profits. These financial incentives tend to accelerate investment, especially in inventories or in plant and equipment, whose value may be expected to rise or which may help to produce goods and services which will rise in price. Inflationary expectations, reflected in rising stock market activity and stock prices, may also lead to some substitution of equity for debt financing by corporate borrowers. As yields on bonds rise relative to yields on equities, it may become possible to satisfy current business demands for funds at relatively low cost by shifting to equities, and thus to strengthen the corporation's equity position for future borrowing, including that undertaken in response to inflation incentives. Such shifts apparently occurred to some extent in 1959. Corporate issues of stocks were larger than the year before, while sales of bonds were smaller. MONETARY POLICY AND INTEREST RATES Monetary policy in the public interest seeks to facilitate sustained high levels of employment, relative stability of average prices, and balanced economic growth. Over the long run, these objectives are likely to be best served by moderate expansion of the quantity of cash balances held by the public. In the short run, monetary policy focuses on the volume and availability of bank reserves in relation to the credit demands being generated by current economic forces, and assesses whether the volume of such demands, given the share being satisfied by bank credit and monetary expansion, is making for inflationary or deflationary tendencies. On the average, the share that is satisfied by bank credit growth is relatively small. Monetary actions affect market interest rates in a variety of ways. The main impact comes from the increase or decrease in the supply of funds in the market resulting from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 23 forces of multiple expansion or contraction of bank credit based on fractional reserve requirements. With present reserve requirements, the member banks may expand or must contract demand deposits in a multiple of about $7 to $1 of reserves supplied or withdrawn. The Federal Reserve can initiate a change in bank reserves through its open market operations or, when appropriate and feasible, it can vary the reserve requirement percentages. Federal Reserve purchases and sales of Government securities in the open market have some immediate, direct impact on interest rates, but this impact is least when System open market operations are conducted in short-term securities. In any event the initial, direct effect of any particular Federal Reserve operation is minor relative to the secondary multiple effects that develop out of the resulting changes in bank reserves. A relationship between monetary action and market interest rates sometimes emphasized in public discussions is that associated with changes in the discount rates of the Federal Reserve Banks. The discount rate is not a market rate, but a rate charged by a Federal Reserve Bank on loans to member banks, the only institutions having regular access to Reserve Bank credit. When the Reserve Banks change their discount rates, their purpose is to influence the willingness or unwillingness of member banks to borrow from them, and thus to affect the over-all availability of bank reserves and bank credit. Borrowing is most advantageous to member banks, in adjusting their reserve positions, when market yields of secondary reserve assets exceed the Reserve Bank discount rates. For a combination of reasons—traditional, operational, and regulatory—member bank borrowing from the Reserve Banks is typically very short-term and hence is resorted to mainly in financing temporary adjustments in member bank reserve positions. By keeping the discount rate in close alignment with market rates on short-term liquid paper, the Reserve Banks regulate the amount of member bank borrowing. While the Federal Reserve discount rate is related to and interacts with short-term market rates, the composite of supply and demand forces in the various sectors of the market is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

24 ANNUAL REPORT OF BOARD OF GOVERNORS more fundamental than the discount rate in determining the level and structure of interest rates. Because of expectational or other psychological factors in the market, Federal Reserve actions may have some effects on interest rates in addition to, and even prior to, those resulting from changes in bank reserve positions. Such effects, however, are not likely to be long sustained unless accompanied by changes in basic supply and demand conditions. While market professionals strive to assess the effects of possible System actions on bank reserves, and through their own market transactions try to anticipate changes in interest rates, their judgments are likely to be based primarily on underlying economic developments that shape the demand for and supply of saving—that is, on many of the same developments that influence Federal Reserve policy decisions and actions. In summary, while the course of interest rates is necessarily influenced by monetary actions, the monetary policy decisions themselves are based primarily on judgments as to the appropriate flow of bank credit and money, and not on judgments as to an appropriate level or pattern of interest rates. To the greatest degree possible, the determination of interest rates is left to freely functioning markets. ECONOMIC GROWTH, INTEREST RATES, AND SAVING The rate of growth of the economy depends in large part on the extent to which resources are devoted to the production of capital goods that will increase output or services in the future, rather than to the production of goods and services for current consumption. In our free society, choice in the use of resources is partly made through public decisions as to governmental taxation and spending, but it more largely depends on decisions of a multitude of individuals and businesses effected through competitive bidding in the market. The nation's willingness to save represents the degree to which it is willing to refrain from current consumption, and its willingness to invest represents the extent to which it desires to use available resources to increase future output. Monetary policy aids society in its choice as to use Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 25 of economic resources by exerting an influence toward minimizing cyclical fluctuations that interrupt the growth process and by encouraging relative stability in average prices. Under long-run conditions of generally high capacity utilization and high investment demand, growth and stability are consistent with relatively low interest rates as long as the economy's willingness to save is great. In a society with high and rising consumption standards, however, rapid rates of economic growth generate tendencies toward price inflation and high interest rates. The encouragement of saving under such conditions helps to release resources to meet investment demand, to lessen upward pressures on prices and interest rates, and to facilitate the growth process. RESERVES AND RESERVE REQUIREMENTS In July 1959, the Congress amended the Federal Reserve Act in several respects concerning reserve requirements of member banks and the powers of the Board of Governors in this field. The amendments relate primarily to assets that can be counted as reserves and to the classification of banks for reserve purposes. They do not alter in any fundamental way the established mechanism of reserve requirements or their use for effectuating monetary policies, although they do change some important features of the mechanism. When the Federal Reserve System was founded in 1913, many students of banking considered that the main purpose of reserve requirements was to assure liquidity of bank deposits. They regarded limitation on the banking system's capability for expanding credit and money as an incidental result of such requirements. Banking experience under the Federal Reserve Act has made it clear that required bank reserves in themselves do not assure liquidity of bank deposits. For such liquidity, banks must place main reliance on the liquid market assets that they hold, often called "secondary reserves," with supplementary and ultimate reliance on the discount facilities of the Reserve Banks. Experience has also demonstrated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 ANNUAL REPORT OF BOARD OF GOVERNORS that the principal function of the reserve requirement is to serve, along with control over the volume of reserves, as a base for regulating the volume of bank credit and money. It can be said, accordingly, that the present-day monetary function of a required reserve percentage is to provide the fulcrum for the quantitative regulation of bank credit and money. How large a volume of bank deposits may be generated by a given amount of reserves, in other words, will be determined by the expansion multiple derived from the reserve requirements. Given a percentage of deposits that commercial banks are required to hold as reserves, the supply of reserve funds available to the banking system sets an over-all limit to bank credit and monetary expansion. If reserve funds available to the banking system exceed the required reserves by more than a customary margin, expansion in bank loans and investments may occur. On the other hand, if the reserve funds available fall short of required reserves, expansion in bank loan and investment assets must come to a halt, and contraction of such assets may occur. Because of these effects, monetary administration in the present-day setting must constantly pay close attention to the relation between the volume and sources of bank reserves and the amount of reserves that banks are required to hold, and to the balance of forces working to change these relationships. AMENDMENT OF BOARD AUTHORITY The legislation approved July 28, 1959 changed Section 19 of the Federal Reserve Act, which contains the provisions on reserve requirements, in the following separate but related respects: (1) The Board was authorized to permit member banks to count their holdings of currency and coin as part of the reserves that they are required to hold under the Federal Reserve Act. Previously, only balances on deposit at a Federal Reserve Bank could be counted for this purpose. The scope and timing of any permission for the banks to count such cash in their vaults was left to the Board's discretion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 27 (2) By no later than July 28, 1962, the category of "central reserve city banks" is to be abolished. For reserve computation purposes thereafter, member banks will be divided into only two classes, reserve city banks and other banks (usually referred to as "country banks"), instead of three. (3) Effective immediately, the statutory range within which the Board can set the reserve requirements on demand deposits is changed to 10-22 per cent for both central reserve city and reserve city banks. The range for country banks is kept at 7-14 per cent, and that for time deposits for all member banks at 3-6 per cent. (4) The Board's power to permit individual banks in reserve or central reserve cities to carry lower reserves than the full requirements for those cities, which had been limited to banks situated in outlying districts of cities, was broadened to allow such exceptions to be based on the character of business of banks, wherever the bank may be located. At the end of 1959, central reserve city banks consisted of 30 member banks in New York and Chicago, including the principal money market banks in those cities, which held altogether about $38 billion of deposits. The reserve cities were those cities having Federal Reserve Banks or branches and 15 other cities which had been so designated, mainly on the basis of their importance as places where interbank deposits were held. The 265 banks designated as reserve city banks, which included some banks in outlying districts of central reserve cities, had about $72 billion of deposits. The remaining 5,938 country banks had about $71 billion of deposits. In addition to reserve requirements, member banks by practice or necessity hold in their vaults varying amounts of currency and coin, which serve the same function as reserves in limiting the ability to expand credit. Thus the average differentials between classes are not those indicated by the reserve requirement percentages alone. Since cash holdings vary somewhat among individual banks, the effective combined reserve and cash needs differ for banks within the same class. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 ANNUAL REPORT OF BOARD OF GOVERNORS MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Statutory range of requirements Type of deposit Requirements and class of bank in effect Before 1959 1959 during 1959 legislation legislation1 Against net demand deposits: Central reserve city banks 13 to 26 10 to 22 18 Reserve city banks 10 to 20 10 to 22 I6I/2 Country banks 7 to 14 7 to 14 11 Against time deposits: All member banks 3 to 6 3 to 6 5 i Act approved July 28, 1959. CHANGE IN BOARD REGULATION The Board of Governors amended Regulation D to permit country banks, effective December 1, 1959, to count any vault cash that they hold in excess of 4 per cent of their net demand deposits, along with balances at a Federal Reserve Bank, toward meeting their reserve requirements; and effective December 3, 1959, to permit reserve city and central reserve city banks similarly to count any vault cash, in excess of 2 per cent. In amending its regulation to permit this counting of vault cash, the main purpose of the Board, in keeping with a principal purpose of the 1959 legislation, was to reduce the inequity that had existed because some banks found it necessary for operating purposes to hold much larger amounts of vault cash, relative to deposits, than were held by other banks in the same reserve classification. With permission to count as reserves holdings of vault cash in excess of 4 per cent of net demand deposits, the maximum combined reserve and cash needs for a country bank are fixed at 15 per cent of such deposits. Similarly, with permission to count as reserves any cash holdings in excess of 2 per cent of net demand deposits, the maximum needs of a reserve city bank are fixed at 18.5 per cent and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 29 those of a central reserve city bank at 20 per cent. The new provision has the effect of limiting potential variation in combined reserve and cash needs between banks in the same class to less than 4 percentage points for country banks and 2 points for reserve city and central reserve city banks. The differential between the requirement against net demand deposits for a country bank and that for a reserve city bank, in effect during 1959, was 5l/i percentage points, and between a country bank and a central reserve city bank, 7 points. These figures, however, overstate the differences between country banks and others in their total needs for cash and reserve balances, because country banks typically keep in their vaults proportionately larger amounts of currency and coin. Their total holdings of vault cash have recently averaged around 3.5 per cent of their net demand deposits, compared with 1.7 per cent at reserve city banks and 0.6 per cent at central reserve city banks. The average effective requirement for banks in each class continues to depend in part on the amounts of vault cash actually held. Since for country banks cash holdings up to 4 per cent of net demand deposits are not counted as reserves and since about half of the country banks hold varying amounts less than 4 per cent, the total cash not counted equals about 3 per cent of net demand deposits of all country banks. Added to 11 per cent for required reserves, this makes the average effective requirement for all country banks about 14 per cent. The average amount of cash not counted at reserve city banks is about 1.5 per cent, making the average effective requirement for these banks 18 per cent. That for central reserve city banks, few of which reach the maximum, is about 18.6 per cent. Computed on the basis of the average effective requirements, the differential between country banks and reserve city banks is about 4 percentage points, or about the same as before the authorization to count some cash as reserves. If a country bank and a reserve city bank hold enough cash to bring them up to the maximum combined requirement percentages of 15 and 18.5 per cent, respectively, the differential between them would be 3.5 percentage points. 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, 1959 Period Action Purpose of action January- Reduced holdings of U.S. Govern- To offset the seasonal inflow February ment securities in January by about of reserve funds resulting $1 billion. Member bank borrowings mainly from the post-holiat the Federal Reserve Banks con- day return flow of currency tinued at an average of $500 million from circulation and thus or more. maintain restraint on credit expansion. March- Increased System holdings of U.S. To offset partially the ab- Mid-July Government securities by about $1.1 sorption of reserves due billion. Member bank borrowings mainly to a decline of $780 rose further to an average of $1.0 million in gold stock and an billion in mid-July. increase of about $1 billion in currency in circulation and to keep credit expansion under restraint. March Raised discount rates from 2Vi to 3 To keep discount rates in per cent at all Reserve Banks. an appropriate relationship with the rise in market rates May-June Raised discount rates from 3 to 3Vi resulting from vigorous per cent at all Reserve Banks. credit demands and to restrain undue credit expansion. Mid-July- Bought and subsequently sold small To supply special reserve October amounts of U.S. Government securi- needs for only limited perities around periods of Treasury fi- ods in recognition of presnancing and the 3rd quarter tax date. sures in money, credit, and Member bank borrowings averaged capital markets resulting about $900 million with temporary from vigorous public and increases above $1 billion around private demand for credit. Treasury financing and tax payment dates. September Raised discount rates from 3% to 4 To keep discount rates in an per cent at all Reserve Banks. appropriate relationship with the rise in market rates resulting from vigorous credit demands and to restrain undue credit expansion. November- Increased System holdings of U.S. To meet part of the tem- December Government securities by about $800 porary end-of-year needs of million through mid-December and banks for reserve funds but then reduced holdings somewhat. at the same time to keep Authorized member banks to count bank reserve positions unabout $300 million of their vault der pressure. cash as required reserves through amendment to Regulation D, effective December 1, under new legislation. Average borrowings rose to about $1 billion in the last half of December. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 31 RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE The record of policy actions of the Federal Open Market Committee is presented in the Annual Report of the Board of Governors pursuant to the requirements of Section 10 of the Federal Reserve Act. That section provides that the Board 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, that it 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, and that it shall include in its Annual Report to the Congress a full account of such actions. In the pages that follow, there is an entry with respect to the policy approved by the Committee at each of the 18 meetings held during the calendar year 1959, which record includes the votes on the policy decisions as well as a resume of the basis for the decisions, as reflected by the minutes of the Committee's meetings. In some cases policy decisions were by unanimous vote, while in others a dissent was recorded. As this record shows, the fact that a decision for a general policy was by large majority or even by unanimous vote does not necessarily indicate that all members of the Committee were equally agreed as to the reasons for a particular decision or as to the precise operations in the open market that were called for to implement the general policy. These shades of opinion, fully expressed at meetings, serve to provide the Manager of the System Open Market Account (who attends the meetings of the Committee) with guides to be used in the conduct of open market operations within the framework of the policy directive adopted. Set forth below is the policy directive of the Federal Open Market Committee that was in effect at the beginning of 1959, the directive having been approved in this form at the meeting on December 16, 1958. This directive was issued to the Federal Reserve Bank of New York as the Bank selected by the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 ANNUAL REPORT OF BOARD OF GOVERNORS Committee to execute transactions for the System Open Market Account. It 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 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 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. January 6, 1959 Authority to effect transactions in System Account. The Federal Open Market Committee's directive was approved in the same form that had been adopted at the last meeting of the Committee in 1958 (December 16), calling for a policy of fostering conditions in the money market conducive to sustainable economic growth and stability. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mills, Robertson, Szymczak, and Deming. Votes against this action: None. Presentation and consideration of a detailed review of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 33 regional and national economic and financial situation preceded the Committee's decision to renew the existing policy directive. There was general agreement that the Committee should attempt to maintain about the same degree of restraint on credit expansion during the immediate future that had applied in the recent past. However, there was a considerable body of sentiment that favored resolving doubts in the operation of the System Open Market Account on the side of restricting, rather than easing, the reserve positions of banks. This policy decision was made against an economic backdrop of maturing recovery with output back or nearly back to prerecession levels, meaning that problems of sustainable growth had now replaced problems of recession. The failure of commodity prices to decline significantly during the recession, the speed and generality of the economic recovery, the persistent rise in common stock prices, the pace of monetary expansion early in 1958, and the size of the current Federal deficit suggested the likelihood of the development of speculative or otherwise unsustainable elements in the further expansion of activity. This posed a key question for Federal Reserve policy as to what rate of monetary expansion would contribute best to the sustainability, without inflation, of prospective economic expansion. It was noted that the money market had functioned more smoothly in the closing weeks of 1958 than in other year-end periods. Treasury bill rates had reached a peak on December 16 but since then had moved downward. As for bank credit, recent statistics had shown greater expansion than had been apparent a month or two earlier. This was true particularly with respect to a larger than expected growth in loans and investments at country banks, bringing the increase in loans and investments of all commercial banks to around $13 billion for the first eleven months of 1958. Other factors to which the Committee paid close attention in reaching its decision as to the policy directive included the forthcoming cash and refunding operations of the Treasury, the need for the System to absorb the seasonal return flow of currency into the banking system to prevent the expansion in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 ANNUAL REPORT OF BOARD OF GOVERNORS the reserve base that otherwise would occur, and the continued evidence of speculative fever in the stock market. At the same time, concern was expressed over the persistence of relatively large unemployment. The conclusion of the Committee that the degree of restraint on credit expansion in the near future should be about the same as in the immediate past, but that any deviation should be on the side of restraint, reflected the foregoing considerations. January 27, 1959 Authority to effect transactions in System Account. No change was made at this meeting in the Open Market Committee's directive, thus continuing the policy of conducting operations in the System Open Market Account with a view, among other things, to fostering conditions in the money market conducive to sustainable economic growth and stability. 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. In reaching its decision as to policy, the Committee gave particular attention to the fact that the monetary basis for continued economic expansion had already largely been established and that forces mostly outside the area of bank credit were likely to determine whether demands for consumption and investment would be of such magnitude and nature as to reduce the volume of unemployment, whether there would be sustainable growth, whether persistent pressures on prices would produce creeping inflation, or whether speculative commitments would create a bubble on a boom that would burst at an early stage. Analysis of current economic trends led to the conclusion that further recovery to reasonably full utilization of resources and then continued growth at a sustainable rate would depend Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 35 upon individual decisions with respect to pricing and buying and investment and saving. It appeared that additional stimulants through fiscal or credit policies were not now needed. In fact, the forces already at work might induce commitments of a speculative nature, or lead to pricing policies that would first contribute to inflation but ultimately discourage buying. Consequently, it was the view of the Committee that the current degree of restraint on bank reserves was appropriate under existing circumstances and should be continued, especially in the light of the forthcoming Treasury refunding which indicated the desirability of no change in the general state of the money market until a reasonable time following completion of this Treasury financing. The Committee members and the other Reserve Bank presidents in attendance at this meeting also discussed the level of the discount rate at the Reserve Banks, then 2x/i per cent. Although they recognized that that rate was fixed by the directors of the Federal Reserve Banks subject to review and determination by the Board of Governors, there was a fairly unanimous opinion that no action to change the rate would be desirable prior to completion of the Treasury's February refunding. February 10, 1959 Authority to effect transactions in System Account. The Committee again renewed without change its directive that set forth a policy of fostering conditions in the money market conducive to sustainable economic growth and stability. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels, Robertson, Shepardson, and Szymczak. Votes against this action: None. Careful consideration by the Committee of business and financial developments preceded its decision to renew its existing policy directive. Widespread but small further increases in industrial production were reported, and prices for some stra- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 ANNUAL REPORT OF BOARD OF GOVERNORS tegic industrial materials had risen further. On the whole, business recovery appeared to be continuing at a moderate pace, although unemployment had risen about seasonally during January. In reaching its decision to make no change in policy and to maintain the same degree of pressure on bank reserve positions that had been exerted recently, the Committee took particular account of the fact that the large and almost continuous schedule of Treasury borrowings, together with potentially large private credit demands, showed every likelihood of bringing the capital markets increasingly under pressure, thus tightening credit conditions even without any aggressive System effort at restraint. The Committee also considered the prospect that the upward trend of interest rates caused by such borrowing might be sharper than would be appropriate for the general state of business activity. Nevertheless, the view was expressed by a few members that any doubts in arranging transactions for the Open Market Account, pursuant to the terms of the directive issued at this meeting, should be resolved on the side of restraint rather than of ease. There was further discussion at this meeting of the Reserve Bank discount rate level in relation to the open market policy being followed and to prevailing market rates. Several of those present expressed the opinion that action by the Reserve Bank directors to increase the discount rate level soon after the Treasury's large February refunding operation had been completed would be appropriate and consistent with current open market policy. March 3, 1959 1. Review of continuing authorities or statements of policy. This being the first meeting of the Federal Open Market Committee following election of new members by the Federal Reserve Banks for the year beginning March 1, 1959, and assumption by them of their duties, the Committee reviewed and reaffirmed all continuing statements of policy and authorities for operations. These included the following: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 37 a. It is not now the policy of the Committee to support any pattern of prices and yields in the Government securities market, and intervention in the Government securities market is solely to effectuate the objectives of monetary and credit policy (including correction of disorderly markets). Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, and Bryan. 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, Allen, Balderston, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, and Bryan. Vote against this action: Mr. Hayes, Vice Chairman. Mr. Hayes stated that he continued to have the same reservations as a year ago about the wording of this statement, which he would vote to approve 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, Allen, Balderston, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, and Bryan. Vote against this action: Mr. Hayes, Vice Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 ANNUAL REPORT OF BOARD OF GOVERNORS Mr. Hayes said that he would vote to approve this 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 effect transactions in System Account. No change was made at this meeting in the directive of the Committee, thus continuing the policy of fostering conditions in the money market conducive to sustainable economic growth and stability. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, and Bryan. Votes against this action: None. The state of economic activity appeared to be one of budding inflationary boom. The economy had now about attained the preceding cyclical high in industrial production, and it was exceeding the high in terms of aggregate output of goods and services. Business demands for fixed capital and for stock were expected to gain strength as expansion continued. The response of industrial prices to increasing demands had been at least as prompt and as strong thus far during 1959 as in the two preceding postwar expansions, with increases fairly widespread and encompassing finished products as well as materials. Although this was the general picture, unemployment was still sizable at 6 per cent of the labor force. Further, the sharp rise that had taken place in the operating rate in the steel industry was believed to reflect to some extent precautionary buying against a possible strike, rather than a corresponding increase in final demands for steel products. The financial situation suggested that there was adequate liquidity to finance further expansion and that under the circumstances further growth in the money supply might not be necessary for some time—at least not until there was evidence that unfulfilled monetary needs might be unduly retarding growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 39 The foregoing considerations led the Committee to conclude that the policy directive should be continued without change, with the understanding as expressed by a majority of the Committee that about the same level of restraint should be maintained on bank reserves as at present and that any doubts on the part of the Account Management regarding transactions to be effected should be resolved on the side of restraint. However, a minority view was that any greater pressure than presently evidenced was unnecessary and might be unwise, and in fact that the occasional appearance of free reserves (excess reserves in excess of member bank borrowings from the Reserve Banks) could be psychologically desirable. The members of the Open Market Committee and the other Federal Reserve Bank presidents who were in attendance at this meeting also discussed the level of the discount rate at the Federal Reserve Banks. A majority indicated the belief that the IVz per cent rate was clearly out of line and that early adoption of a 3 per cent rate would be more appropriate. March 24, 1959 Authority to effect transactions in System Account. The Open Market Committee renewed without change its directive to the Federal Reserve Bank of New York, which specified that operations should be with a view, among other things, to fostering conditions in the money market conducive to sustainable economic growth and stability. Votes for this action: Messrs. Balderston, Chairman pro tern, Allen, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, Bryan, and Treiber. Votes against this action: None. The Committee's decision to continue the policy directive in its existing form followed a review of national and regional business and credit conditions from which it appeared that economic activity was continuing its upward swing, with further gains noted in a number of the leading indices, including Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 ANNUAL REPORT OF BOARD OF GOVERNORS the index of industrial production. Prices of industrial materials had risen somewhat further, while prices of agricultural commodities had declined, and the average of all wholesale prices was fairly stable. The most recent statistics, for February, indicated that both employment and unemployment were little changed. Since the March 3 meeting of the Committee, financial markets had absorbed with remarkably little disturbance the effects of an increase in Federal Reserve Bank discount rates from 2Vi per cent to 3 per cent earlier this month, some tightening of bank reserve positions, the demands of the corporate tax and dividend payment period, and the announcement of a Treasury cash financing operation totalling $4 billion. The explanation of this relative calmness in money markets during a period of special pressures seemed to lie partly in the moderateness of current credit demands, but more largely in the general state of liquidity of the economy. The consensus favored maintaining about the degree of restraint that had prevailed during the preceding three weeks, with the impending Treasury financing operation one factor that suggested no change in open market policy. During the discussion, one view was expressed that doubts arising in the conduct of open market operations should be resolved on the side of ease and that near-term System policy should be directed toward maintaining only sufficient pressure on reserves to aid the redistribution of the Treasury's new security offerings out of the underwriting commercial banks into permanent hands. However, most members of the Committee concluded that recent policy had been appropriate and should be continued. April 14, 1959 Authority to effect transactions in System Account. The policy directive calling for operations in the System Account with a view to fostering conditions in the money market conducive to sustainable economic growth and stability was again renewed, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 41 Votes for this action: Messrs. Hayes, Vice Chairman, Balderston, Deming, Erickson, Mills, Robertson, Shepardson, Szymczak, Bryan, and Fulton. Votes against this action: None. Mr. King did not vote on this action. A consideration of importance to the Committee in the determination of policy at this juncture was the situation of the Treasury. From the $4 billion cash financing operation that had been completed on April 1, there remained for the banks and dealers the task of distributing a large portion of their acquisitions to the investing public. In the offing were the Treasury's large May refunding and another cash financing operation, while holders of the 4 per cent notes of August 1961 had until the end of this month the option of deciding whether to turn in those notes by August 1, 1959, in lieu of holding them to maturity. In the Government securities market, a slow but steady deterioration of atmosphere had developed since the first of April, with nonbank demand for securities off substantially and buyers for commercial bank offerings of the Treasury's latest issues more difficult to locate. Reflecting the heavy schedule of Treasury financing ahead and continued improvement in the business situation, there appeared to be a growing belief in the market that interest rates were likely to move higher. As to the business situation, recent data provided a record of general economic advance, with available statistics for March indicating advances in industrial production, housing starts, and personal income, along with continued accumulation of business inventories. A greater than seasonal rise in employment was reported, and creeping advance in average prices of industrial commodities was noted. The consensus at this meeting in terms of policy for the three-week period ahead called for maintenance of about the same degree of restraint as had existed during the past three weeks. However, the mixture of views contributing to the consensus covered a rather wide spectrum of opinion. There were those who felt that the Treasury problem was a reason for moving cautiously and that a certain degree of caution might in any case be warranted by the lack of definite evi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 ANNUAL REPORT OF BOARD OF GOVERNORS dence of inflationary threats at the present time. There were also those who believed that the economy was reaching toward boom proportions and who concluded with only the greatest reluctance that the System should refrain from further restrictive measures because of the Treasury's financing program, while a small minority would have favored some probing in the market toward increased restraint. It was out of this mixture of views that there came agreement that the existing policy directive should be renewed without change and that operations in the immediate future should continue as nearly as practicable the existing degree of pressure against credit expansion. May 5, 1959 Authority to effect transactions in System Account. The decision of the Committee at this meeting was to renew without change the policy directive that called for operations with a view to fostering conditions in the money market conducive to sustainable economic growth and stability. Votes for this action: Messrs. Balderston, Chairman pro tern, Deming, Erickson, King, Mills, Robertson, Shepardson, Szymczak, Bryan, Fulton, and Treiber. Votes against this action: None. The Treasury being in the midst of a large refunding and cash financing operation, with the new securities to be issued the next week, the consensus at this meeting of the Federal Open Market Committee favored continuing the existing degree of restraint for an appropriate period following the Treasury financing. However, upon review of current business and financial data, it was the majority view that it would be desirable to move toward greater restraint as soon as feasible after the Treasury financing and that revision of the policy directive might be indicated at the next meeting of the Committee. The economic report was one of strongly expanding de- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 43 mand, rising productive activity, advancing prices at wholesale, and strongly optimistic business and financial expectations. Labor market data pointed to further strengthening of demands for manpower, and altogether the domestic expansion in process was suggestive of developing inflationary boom. Internationally, a pick-up of activity in key industrial countries and improvement in the balance-of-payments positions of material-supplying areas indicated that a general upturn in world output and trade was under way. Pressures on financial markets had increased during April, apparently reflecting expanding monetary and credit demands incident to the continuing advance of business activity rather than limitations on the supply of credit. Demands on longterm capital markets had been moderate, but bank loans (particularly consumer instalment credit) had increased more than seasonally and banks also had been endeavoring to distribute Government securities taken on in the April 1 financing. Mortgage demands continued large and real estate loans at banks had increased more than at any time since 1955. The stock market had risen to new high levels and stock market credit continued to increase. Interest rates had continued to rise further. Reflecting these factors, member bank borrowings from Federal Reserve Banks had risen in recent weeks to an average of around $700 million. Although the majority of the Committee agreed that it would be desirable to move towards greater restraint on credit expansion as soon as feasible after the current Treasury financing was completed, a minority point of view cautioned against a monetary policy that might defeat and finally counteract what could prove to be only normal economic growth by touching off a spiral of contractive credit forces. A specific danger cited was that undue restraint on the growth of the money supply could result in harmful consequences to the Government securities market if commercial banks were forced to liquidate unduly large amounts of securities in order to fulfill lending obligations to their customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 ANNUAL REPORT OF BOARD OF GOVERNORS May 26, 1959 Authority to effect transactions in System Account. Clause (b) of the first paragraph of the Committee's policy directive was revised at this meeting so as to provide for increased restraint on credit expansion. This was indicated by adoption of wording specifying that open market operations should be conducted with a view "to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities." This replaced the clause of the directive that had been in effect since December 16, 1958 calling for operations with a view "to fostering conditions in the money market conducive to sustainable economic growth and stability." Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, King, Robertson, Shepardson, Szymczak, and Bryan. Vote against this action: Mr. Mills. Productive activity was spurting ahead and the economic climate had become distinctly more inflationary, according to reports at this meeting. Industrial production in April, which carried the Board's index up two points in a month for the third consecutive month, reflected principally gains in output of durable goods industries, including both producer and consumer lines. Data available for May suggested another twopoint advance in the index for that month. Personal income had been climbing for several months at an annual rate of more than $3 billion a month, principally because of higher wage and salary payments. Reflecting this improvement in personal income, retail sales (seasonally adjusted) in April carried beyond the large March volume and were about 12 per cent higher than the cyclical low point of March 1958. A robust expansion of consumer instalment credit, which had been in process since late 1958, supported rising sales of automobiles and household durables. Housing starts in April, seasonally adjusted, were at the annual rate of 1.4 million, and the total of starts in the first Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 45 four months of 1959 was the highest on record for a comparable period. Total construction contract awards in April had reached the highest level on record, 31 per cent above a year earlier. Marked improvement in the employment situation also had occurred in April, and the unemployment problem appeared to be diminishing in scope to certain pockets of structural unemployment. Industrial prices rose further in April and an additional advance was taking place in May; at mid-May, the level was up 2.5 per cent from a year earlier and stood 2 per cent above the prerecession high reached in 1957. Consumer prices advanced slightly in April, with a further modest rise indicated for May. In financial markets, the month of May was characterized by unseasonably large credit demands and further increases in interest rates to the highest levels for some years. Nearly all interest rates rose except yields on three-month Treasury bills, which continued in the 23A to 3 per cent range that had prevailed generally since late February. Yields on long-term Treasury bonds and on both new and seasoned corporate issues had now risen to the highest levels since the 1920's. On May 15, large city banks announced an increase from 4 to AV2 per cent in their lending rate on prime customers' loans. Following an exceptionally large increase in bank loans at all commercial banks in April, city banks showed a further loan expansion in the first three weeks of May. The increase had been particularly large in business loans, but real estate and consumer loans also showed marked increases. The ratio of total loans to total loans and investments of banks now stood close to the high level reached in 1957. The aggregate money supply, after adjustment for seasonal variations, showed an advance in recent months at an annual rate of 4 per cent or more, and in addition the turnover of bank deposits had been increasing in recent months. The large May refunding and cash operations of the Treasury were now completed, and it appeared likely that no additional borrowing would be necessary until early July. Nevertheless, the expansion in credit demands during April and May had brought increased pressure on the reserve posi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 ANNUAL REPORT OF BOARD OF GOVERNORS tions of banks, as indicated by the rise in borrowings at the Federal Reserve Banks and the accompanying increase in the level of net borrowed reserves. Upon review and analysis of the over-all situation, including the continuing United States balance-of-payments deficit, the Open Market Committee reached the conclusion that the current level of restraint imposed by monetary and credit policy was not sufficiently restrictive and that an intensification of restraint was required. Reports presented by the Reserve Bank presidents at this meeting indicated the possibility that the directors of the respective Federal Reserve Banks would move soon to fix the discount rate at a level higher than the prevailing 3 per cent—probably 3V2 per cent. On the assumption of a rate increase of no larger proportions, the Committee favored conducting open market operations with a view to exerting additional pressure as rapidly as that could be done without creating an untenable condition in the market for Government securities. Although the firmer tone desired by the Committee was not expressed in terms of a specific target of net borrowed reserves (an excess of member bank borrowings at the Reserve Banks over their excess reserves), it was noted that additional restraint could be brought about in the next few weeks by letting natural factors take their course. On the basis of projections before the Committee as to factors affecting the supply of and need for reserves in the weeks ahead, it appeared that under such a procedure net borrowed reserves, which recently had been running in the neighborhood of $250 million, would move upward toward the $500 million level. In the current circumstances, the policy directive to the Federal Reserve Bank of New York was deemed to be in need of revision. Accordingly, after consideration of several suggestions, it was decided that clause (b) of the first paragraph of the directive, which since December 1958 had provided for operations with a view "to fostering conditions in the money market conducive to sustainable economic growth and stability," should be changed to provide for operations with a view "to restraining inflationary credit expansion in order to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 47 foster sustainable economic growth and expanding employment opportunities." Mr. Mills, who voted against approval of the revised policy directive, indicated that apprehensions he previously had expressed had not diminished with respect to the delayed and violent financial and economic reactions that he sensed to be in the offing when the cumulative pressures inherent in present monetary and credit policy took their full effect. He cautioned against undue alarm concerning anticipated events that had not yet come into clear perspective. June 16, 1959 Authority to effect transactions in System Account. Since the previous Open Market Committee meeting (May 26), the discount rate at each of the Federal Reserve Banks had been increased from 3 per cent to Wi per cent. While prices of Treasury notes and bonds remained virtually unchanged following this increase, rates on bills of longer maturities moved up slightly and those on 91-day bills advanced fairly sharply. As envisaged by the consensus at the May 26 Committee meeting, natural market factors had been allowed to have their effect since that time in order to bring about an increase in the degree of restraint. Net borrowed reserves, for example, rose from slightly over $300 million in the week ended May 27 to more than $500 million in the following week and continued around that level. In addition to seasonal demands that would require additions to reserves during the latter part of June, it was noted that, within the three-week period following this meeting of the Committee, the Treasury was to conduct another cash financing operation in which it was anticipated that around $3.5 to $4.5 billion of new money would have to be raised, presumably again in the short-term area. In considering the course of System policy, the Committee had before it reports indicating further economic expansion on a broad front to new high levels. Production, sales, in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 ANNUAL REPORT OF BOARD OF GOVERNORS come, and employment showed increases, while unemployment in May fell below 5 per cent of the labor force for the first time since the end of 1957. Businesses were adding to their inventories at an unusually high rate and had revised upward their plans for new plant and equipment expenditures. Total bank credit expansion, including that of the Federal Reserve Banks, appeared to have been adequate to meet the persistent gold outflow and provide for further expansion of the money supply. Abroad, general economic expansion seemed clearly in process, with principal foreign countries continuing to show a strong balance-of-payments situation and to accumulate gold and dollar reserves. On the basis of business and credit conditions and in view of the forthcoming Treasury financing, the consensus favored continuance of the present open market policy of restraint on inflationary credit expansion. While a number of Committee members expressed the hope that the Account Management would be able to avoid any development of less restraint against credit expansion, others urged caution against operations that might result in excessive tightness. With no change in policy indicated by the consensus at the meeting, the Committee continued without change the directive, adopted at the May 26 meeting, which was stated in terms of restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Votes for this action: Messrs. Hayes, Vice Chairman, Allen, Deming, Erickson, Johns, King, Robertson, Shepardson, and Szymczak. Votes against this action: None. July 7, 1959 Authority to effect transactions in System Account. It appeared to the Committee that a number of major expansive influences that had been operating in the economy, including residential construction, inventory accumulation, and gains in industrial productivity, might now have passed their maximum rates of growth and that some slowdown in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 49 rapid pace of advance could be expected during the next few months. A major industrial uncertainty was the possibility of a strike in the steel industry. However, for the period up to the time of this meeting, the data reflected continuation of a vigorous expansion in economic activity. Industrial production apparently had increased further in June, while estimates placed gross national product for the second quarter up $10 billion from the first quarter of the year in terms of both current and constant dollars. Expanding consumer demand was being supported by a rapid growth of consumer instalment credit, which increased in the April-May period at an annual rate in excess of $5 billion. During June, money markets were under pressure from continued strong credit demands. The restricted availability of bank reserves made it necessary for banks to reduce their holdings of securities by large amounts in order to meet these demands, and a high level of borrowings at the Federal Reserve Banks also kept the banks under restraint. It now appeared that growth in the money supply during the first six months of 1959 had been at an annual rate of about 2 per cent but that only a small increase had taken place in May and none in June. At the time of this meeting, interest in the Government securities market focused on the new Treasury financing, which involved the offering of a total of $5 billion of bills at auctions on July 1 and July 8 in addition to the regular weekly bill auctions. There had been pronounced increases in interest rates in recent weeks, and in the regular Treasury bill auction on the day preceding this meeting demand for both long- and short- bills was light, resulting in an average rate of 3.26 per cent for the 91-day bills and 3.96 for the 182-day bills. Awards to dealers had totalled $587 million, and the result of that auction indicated another upward adjustment in bill rates. For the period immediately ahead, it was the consensus that there should be no change in open market policy. However, in view of the difficult Treasury financing situation, the instruction to the Manager of the System Open Market Account was tempered with the proviso that, in carrying on operations Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 ANNUAL REPORT OF BOARD OF GOVERNORS for the Account, doubts should be resolved on the side of ease during the period of Treasury financing. In view of the decision of the Committee to make no change in policy, and with the indicated understanding as to resolving doubts on the side of ease, the directive calling for restraint on inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities was again renewed without change. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Johns, King, Mills, Shepardson, Szymczak, and Bopp. Votes against this action: None. July 28, 1959 Authority to effect transactions in System Account. At this meeting the Open Market Committee continued without change the policy directive providing for restraint on inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Johns, Mills, Robertson, and Shepardson. Votes against this action: None. Financial developments during July had been dominated by the massive Treasury operations, which included not only the raising of $5 billion of new cash through two bill offerings but the subsequent refunding of $14 billion of issues maturing on the first of August. Difficulties and uncertainties connected with the earlier Treasury operations resulted in a sharp rise in rates to the level of 434 per cent for a one-year issue, but this rate attracted funds from widespread sources. The refunding offer at 4% per cent on both a 122/i month issue and a 4-year, 9-month issue was successful, with unusually low attrition. As a consequence, the tone of the Government securities market had improved somewhat, and the amount of prospective new Treasury financing in mid-August was reduced. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 51 (On July 16, 1959, the Open Market Committee, by poll of the available members, authorized exchange of as much as one-half of System Open Market Account holdings of $8,143 million of Treasury certificates of indebtedness maturing August 1, 1959, into 43A per cent notes maturing May 15, 1964, the remainder to go into 4% per cent notes maturing August 15, 1960. Only $2.6 billion of the Account's certificate holdings actually were exchanged into the 1964 notes. The purpose of this authorization was to assist the Treasury in evening out the maturity schedule.) Almost all recent economic data continued to reflect rapid growth. Expansion in the second quarter of 1959 proved to have been more vigorous than earlier figures had indicated, with gross national product rising at an annual rate of $13 billion above the previous quarter. The increase over the quarter in physical volume amounted to about $10 billion, so that there was $3 billion of inflationary price rise, i.e., an annual rate of a billion dollars a month. Consumer spending advanced by the near-record rate of $7.5 billion during the quarter. Demand for producer durable goods was strong, reflecting both increased consumer spending and rising business investment, and construction activity continued at close to peak levels in June. Although wholesale prices of industrial commodities marked time, the consumer price index showed an abrupt rise of .4 per cent in June. A major uncertainty was introduced into the economic situation by the steel strike that began July 15 after extensive negotiations failed to produce a settlement. Another matter of concern accompanying the expansion in business was the balance-of-payments situation; it now appeared that the total accumulation of gold and dollar assets by foreign accounts in 1959 might be over $4 billion, compared with $3.4 billion in 1958. The generally strong business picture, the strength of credit demands, the need to keep the Treasury's seasonal deficit financing in the next few months from swelling the money supply unduly, prospective wage and price developments, and the failure of the balance of payments to show improvement appeared clearly to justify continued monetary restraint. On the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 ANNUAL REPORT OF BOARD OF GOVERNORS other hand, the steel strike had injected a major element of uncertainty into the outlook, and the situation in the Government securities market remained delicate in spite of the successful Treasury refunding. Thus, although an opinion was expressed that such inflationary pressures as now existed would be adequately contained by a more moderate degree of restraint, the consensus favored aiming as far as practicable at the same degree of restraint on credit expansion as currently prevailed. Accordingly, the directive was renewed without change. August 18, 1959 Authority to effect transactions in System Account. The conclusion reached by the Open Market Committee was to aim toward maintenance of the status quo, that is, continuation of the existing degree of restraint, during the period immediately ahead, with no change at this time in the policy providing for System open market operations with a view to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Accordingly, the directive was renewed in the form that had been in effect since May 26. Votes for this action: Messrs. Martin, Chairman, Allen, Balderston, Deming, Erickson, Johns, King, Mills, Szymczak, and Treiber. Votes against this action: None. In discussion leading to this conclusion relative to the course of open market policy, the Committee gave consideration to whether the present economic situation and prospective developments justified moving in the direction of additional restraint during the two-week period before its next meeting, scheduled for September 1, 1959, or, on the other hand, whether the tendency should be in the direction of leaning slightly on the side of ease. The business and financial position was characterized by strong and broadly-based demands despite the month-old steel strike, and general optimism was reported to prevail with re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 53 spect to the business and employment outlook over the next few months. There continued to be reports of strong demand for bank credit, widely distributed among different types of borrowers. The index of industrial production dropped 2 points in July, but this was accounted for by the steel strike along with adjustments from the abnormal levels of activity in some sectors of the economy that had been attained in the past few months in anticipation of the strike. However, approximately 5 per cent of the labor force (exclusive of those on strike) was unemployed, and some excess production facilities were still available. Although the volume of commercial bank loans had expanded, this expansion was accompanied by substantial divestment of Government securities by the banks. This trend, together with the continued high level of member bank borrowing at the Federal Reserve Banks, suggested to some the possibility that monetary and credit policy may have been more restrictive than appeared from surface indications. The consensus that emerged from consideration of these and other factors favored continuing the present degree of restrictiveness at least until the next Committee meeting. September 1, 1959 Authority to effect transactions in System Account. The two-week period since the previous meeting of the Open Market Committee was marked by a further steep increase in Treasury bill rates. The rate on three-month bills, which was at the 3 per cent level in late July and moved up to 3.40 per cent by mid-August, had now increased to a point where the average rate in the auction on the day prior to this meeting was 3.89 per cent. In the same auction the average rate on six-month bills was 4.47 per cent, almost 75 basis points above the average rate in the auction on August 17. This rise in rates reflected continued sales of short-term securities by banks in order to meet an exceptionally strong loan demand, reduced demand for Treasury bills on the part of nonbank buyers as seasonal increases in cash needs approached, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 ANNUAL REPORT OF BOARD OF GOVERNORS and further additions to the supply of bills. The current rate level caused attention in the market to focus on the Reserve Bank discount rate ( 3^ per cent) and the commercial bank prime rate (AV2 per cent); uncertainties with respect to the latter rate were resolved when an increase to 5 per cent was announced on the morning of this meeting. Aside from the influence of work stoppages attributable directly or indirectly to the steel strike, the economic picture presented at this meeting appeared to be one of widespread strength. Construction activity, although showing moderate decline from the all-time record level of April and May, was at a rate one-third higher than a year earlier. New orders and sales figures for durable goods manufacturers reflected marked strength in most lines, retail sales continued vigorous, and consumers continued to seek and incur instalment and mortgage debt at a near-record pace. After rising in June, United States exports reached a seasonally adjusted rate in July one-fifth above the level earlier in the year. While prices of industrial commodities showed relative stability, the consumer price average rose in four consecutive months through July, with a broad range of price increases. Discussion at this meeting revealed cross currents of thinking with respect to the appropriate posture of System policy at this juncture. Among other things, it was pointed out that the level and trend of Treasury bill and other short-term market rates, together with the increase in the commercial bank prime rate, raised a substantial question as to the practicability of indefinite continuation of the existing Reserve Bank discount rate. With respect to the appropriateness of the current degree of credit restraint, some sentiment was expressed to the effect that it would be a mistake to await settlement of the steel strike before moving to a more restrictive position. This point of view suggested that there should be some reluctance on the part of the System in meeting seasonal reserve needs and some increase in the level of net borrowed reserves. A different point of view expressed by one member of the Committee held that recent developments indicated that current System policy Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 55 was unduly restrictive and that its continuation might not be consistent with the System's objective of fostering longer-run economic growth and stability. This opinion suggested that System policy traditionally had sought to meet seasonal credit needs and that there should be no doubt about doing so at this time. The majority of the Committee favored maintenance of the existing degree of pressure on reserve positions of banks in the period immediately ahead, but no intensification, which would mean supplying reserves to meet the usual seasonal increase in money and credit needs during the next few weeks. Factors influencing the thinking of the majority included the uncertainties attendant upon the steel strike and the further complications that might be created in the Government securities market by the exertion of additional restraint at this time. Some consideration also was given to the possibility of a revision of the Committee's directive to the Federal Reserve Bank of New York. However, in view of the consensus that there should be no move at this point toward either more or less restrictiveness on reserves, the Committee made no change in the existing directive, providing for open market operations with a view to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Votes for this action: Messrs. Martin, Chairman, Allen, Balderston, Deming, Erickson, King, Mills, Robertson, Shepardson, Szymczak, Bryan, and Treiber. Votes against this action: None. September 22, 1959 Authority to effect transactions in System Account. The directive to the Federal Reserve Bank of New York was renewed without change, continuing the Open Market Committee's policy of restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Johns, King, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: None. The Committee's decision to renew the existing policy directive was made after presentation and consideration of a detailed review of the national and regional economic and financial situation. Although no change was made in the directive that provided for restraint on inflationary credit expansion, the Committee qualified its instruction to the New York Reserve Bank with an understanding that to whatever extent operations in the open market for the System Account might result in deviations from the existing degree of restraint on the reserve positions of banks, such deviations preferably should be on the side of reducing restraint. The large majority of Committee members favored this understanding, but the opposite view was put forward, namely, that any such deviations from the existing degree of pressure be on the side of greater restraint. This policy decision was made against the background of information showing that, despite the spreading effects of the steel and other strikes, economic activity and credit demands were continuing at a high level. The discount rates of all Federal Reserve Banks had been increased from 3Vi per cent to 4 per cent since the September 1 meeting, and rates on the longest outstanding Treasury bills had been bid at above 5 per cent. Some uncertainties were expressed as to the near-term future, depending on the settlement of the steel strike, but with demand for credit continuing strong, bank reserve positions remained under pressure. The banks continued to dispose of Government securities to help in meeting loan demands, and the Government securities market had weakened around mid- September as nonbank holders liquidated securities to meet quarterly tax and dividend payments. Investor demand was low, the market supply of Treasury securities was large, and it was noted that a new short-term Treasury financing expected in October would add further to the supply of securities on the market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 57 Some concern was expressed about the difficulties that the Treasury might expect in its imminent cash financing operation. The point also was made that the anti-inflationary policy that had been followed for some months was contributing to a tempering of business and investor exuberance in forward expectations and planning. Another factor noted was that the seasonal increase in demand for credit during the fall of the year would tend automatically to increase pressure on banks, even though additional amounts of reserve funds were supplied to the market by the Federal Reserve in accordance with projections of aggregate needs of the banking system. The conclusion of the Committee that the degree of restraint to be maintained in the market during the next few weeks should be about the same as in the recent past, but that any deviations preferably should be on the side of less restraint, was a reflection of such considerations as the foregoing, even though there was recognition of factors to suggest a rapid recovery in economic activity, perhaps developing boom characteristics, after production of steel was renewed. October 13, 1959 Authority to effect transactions in System Account. At its preceding meeting (September 22, 1959), the Open Market Committee made no change in the existing policy directive calling for restraint on inflationary credit expansion, with the instruction to the Federal Reserve Bank of New York qualified by the understanding that, to whatever extent System Open Market Account operations might result in deviations from the existing degree of restraint, such deviations preferably should be on the side of reducing the degree of restraint. At the time of this meeting (October 13), the business and financial outlook was obscured by the cumulative impact of the steel strike. Important economic developments since late spring suggested a possibility that the danger of inflationary boom might have been overcome, although a positive judgment in this respect awaited settlement of the steel strike and the results flowing from such a settlement. The Committee's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 ANNUAL REPORT OF BOARD OF GOVERNORS analysis of the domestic situation gave little reason for either increasing restraints or providing additional stimulants to the economy, and in these circumstances the consensus favored watchful waiting and marking time in the period immediately ahead. One member of the Committee, Mr. Mills, in whose opinion a moderating of the policy of credit restraint had long been in order, dissented from the policy indicated by the consensus, although only mildly at this particular juncture. Mr. Mills felt that a gradual shift in policy toward relaxation of restraint was called for and that a cautious approach in shaping the supply of reserves and expanding the availability of credit was required in order to avoid provoking an artificial distortion in the structure of interest rates. While certain other members of the Committee also favored a mild backing away from the present degree of restraint, in those cases the shades of difference involved were not sufficient to cause them to record disagreement with the policy indicated by the consensus. Mr. Mills, although dissenting to the extent indicated from a policy of watchful waiting and marking time, joined in the unanimous vote to continue the existing directive to the Federal Reserve Bank of New York, which provided for restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Votes for this action: Messrs. Martin, Chairman, Allen, Balderston, Deming, Erickson, King, Mills, Robertson, Shepardson, Szymczak, and Treiber. Votes against this action: None. November 4, 1959 Authority to effect transactions in System Account. The Open Market Committee again renewed without change its directive to the Federal Reserve Bank of New York calling for operations with a view to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 59 Votes for this action: Messrs. Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Johns, King, Robertson, Shepardson, and Szymczak. Vote against this action: Mr. Mills. Renewal of the directive reflected the conclusion of the Committee, after analysis of business and financial developments, that there should be no change in basic policy at this time and that in implementing the policy decision, operations for the Open Market Account should aim at maintaining a feeling of stability in monetary and credit conditions and assuring the availability of funds for seasonal credit needs. In reaching its decision as to policy, the Committee gave careful consideration to the continuing lull in economic activity and in monetary and credit demands. This lull, which had been evident at the October 13 meeting and which led to the suggestion that current developments pointed less in the direction of inflationary boom than was earlier considered likely, was associated largely with the steel strike and its cumulative impact on various segments of the economy. Despite the strike, demand, particularly at the consumer level, remained strong, and an upward tilt was visible in prices for consumer goods and most basic industrial materials. Nevertheless, following a year of heavy pressures in the over-all demand for funds, some moderation of expansive pressures had appeared in late September and continued to characterize the financial markets. At this stage, however, it was questionable whether this moderating of pressures reflected a change in trend or simply a passing phase. In voting against continuing the existing directive, Mr, Mills proposed revising clause (b) so that it would provide for "fostering sustainable economic growth and expanding employment opportunities while guarding against inflationary credit expansion." This suggestion reflected his judgment that uncertainties as to the future were strong enough to argue for a monetary and credit policy that would lessen the degree of restraint on credit expansion. Certain other Committee members expressed themselves as leaning toward a slight easing of restraint, but only to the extent that this might be accom- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

60 ANNUAL REPORT OF BOARD OF GOVERNORS plished within the framework of the existing policy directive. None expressed the view that there should be an intentional increase in the degree of restraint at this time. November 24, 1959 Authority to effect transactions in System Account* The policy directive providing for restraint on inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities was again renewed by the Open Market Committee. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Deming, Erickson, Johns, King, Robertson, Shepardson, and Szymczak. Vote against this action: Mr. Mills. The consensus of this meeting favored maintaining the same degree of restraint. In reaching this conclusion as to the objective that should guide open market operations in the ensuing three-week period, the Committee had in mind that the period of heaviest pre-Christmas drain on reserves was now beginning and that the financial markets would be subject to the usual special pressures of the season. In addition, the $2 billion Treasury cash financing operation for which subscriptions were being received the day of this meeting suggested no change in the degree of restraint. Activity in the steel industry had been resumed for approximately two weeks, after a four-month interruption, under a Taft-Hartley Act injunction. Steel production had climbed to about 80 per cent of capacity in the week before this meeting, and a 90 per cent rate was estimated for the current week. Nevertheless, the outlook as to the rate of economic advance remained uncertain, particularly since it was not yet known when and how the steel and other major labor disputes might ultimately be settled and what would be the continuing and indirect effects of shortages that had accumulated during the work stoppage. Evidence of the underlying strength in the business situa- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 61 tion that had prevailed despite the strike led to expression of the view by some members of the Committee that settlement of the steel dispute might result in a sharp upsurge marked by unsustainable elements of expansion and strong pressures for price increases. Those expressing this view urged that the trends be watched carefully, although they did not propose that the current degree of credit restraint should be intensified at this point. The view also was presented that the System should be ready to move in the direction of lessening restraint if a pattern of reduced pace of economic expansion should emerge. It was noted, among other things, that stability of the money supply and money velocity had prevailed over recent months and that the seasonal growth of bank credit this fall had been somewhat below normal, reflecting at least in part a slackening in economic activity and monetary needs related to the steel stoppage. At the same time, the public's holdings of liquid assets in the form of short-term Government securities had continued to increase. Under all these circumstances, the consensus was that the current open market position was not unduly restrictive or stimulating and should be continued. Mr. Mills, who voted against continuing the existing policy directive, renewed the suggestion he had made at the meeting on November 4 that clause (b) be amended to provide for "fostering sustainable economic growth and expanding employment opportunities while guarding against inflationary credit expansion." This suggestion reflected his view that the availability of credit had been brought to a point where the commercial banking system was restricted in making its normal contribution creditwise to growth and stability. December 15, 1959 Authority to effect transactions in System Account. The Open Market Committee continued the policy directive calling for restraint on inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Deming, Erickson, Johns, King, Robertson, Shepardson, and Szymczak. Vote against this action: Mr. Mills. At the time of this Committee meeting, the last held during calendar year 1959, a substantial recovery of industrial production from the setback due to the steel strike was under way. With full-scale output restored in the steel and to a large extent in the steel-dependent industries, it was anticipated that the Board's index of industrial production, placed at 147 for October and estimated at 148 for November, would advance further in December by five or more index points. Retail sales showed widespread gains in November in lines other than automobiles, and early December figures indicated some additional advance. Employment rose moderately in November, the gain being concentrated mainly in durable goods industries, while wholesale price averages were marked by relative stability and consumer prices continued to veer upward. Buying at the consumer level was supported by a further strong growth of instalment credit. Recent data confirmed that the balance-of-payments position of the United States had not deteriorated further and probably had strengthened somewhat. Abroad, the expansion of economic activity in industrial nations continued to be vigorous. Domestically, prospects seemed weighted toward resumption of an expansionary movement. Although the trend in housing construction was downward from a very high level and a similar trend prevailed with respect to agricultural commodity prices, most general business indicators appeared likely to reach or exceed previous records in the near future. As yet, however, evidence of a general scramble for inventories was lacking, and latest estimates of plant and equipment expenditures suggested somewhat less of an upward trend than had been expected earlier. With the injunction period under the Taft-Hartley Act due to expire in January and labor-management negotiations apparently making little progress, the ultimate outcome of the wage dispute in the steel industry remained in doubt. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 63 Largely in response to usual seasonal liquidity needs, and perhaps to some increase in credit demands as a result of the resumption of steel operations, interest rates rose in the latter part of November and early December. System open market transactions supplied nearly half a billion dollars of reserves to the market during the three-week period preceding this meeting, and in addition some reserves were released by action to permit member banks with relatively large holdings of vault cash to count part as required reserves, effective at the beginning of December. Treasury bill rates reached new record highs in the first part of December, but on the other hand there were occasions when the money market showed signs of easing. Among the cross currents in the market was an element of uncertainty concerning the trend of interest rates in early 1960. Although a decline in rates usually follows the end-of-year rise, there was some feeling that a resumption of expansion in credit demands following settlement of the steel strike might contribute to rate firmness. Also, substantial Treasury financing operations were in prospect, including the raising of possibly as much as %2Vi billion of new money in January, the refunding of a $2 billion issue of special bills maturing January 15, and the refunding of a large February certificate maturity. Analysis of business and financial developments and prospects resulted in a consensus favoring maintenance of the degree of restraint on credit expansion that had been agreed upon by the Committee at its meeting on November 24, 1959. Noting that the economy was still operating below capacity, that the growth of the quantitative money supply had been quite small during the past year, and that the liquidity of the banking system had diminished, some Committee members concluded that the cumulative effects of monetary policy may have become sufficient for a time and that a cautious approach should be followed in order to prevent undue tightness. Within this group, a few felt that the tendency of System policy might well be toward a slight relaxation of restraint, or at least that doubts arising in the conduct of open market operations should be resolved on the side of ease. However, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 ANNUAL REPORT OF BOARD OF GOVERNORS in view of the prospects for an advancing level of economic activity, with vigorous monetary and credit demands, in the months ahead, other members felt that the greater danger lay in too little rather than too much restraint. The prevailing opinion was that any lessening of restraint at this time would be unwise. Mr. Mills, who voted against renewal of the existing policy directive, proposed the alternative wording for clause (b) that he had also suggested at the two previous Committee meetings. He believed that Federal Reserve monetary and credit policy should aim at moderate restraint over the expansion of bank credit, as contrasted with what he considered to be a policy of relatively severe restriction. The policy directive of the Open Market Committee in effect at the beginning of 1959 was aimed at fostering conditions in the money market conducive to sustainable economic growth and stability. Within the framework of this directive, however, there was room for an increase in pressure on member bank reserve positions during the spring, as recovery in the economy had given way to expansion. On May 26, the directive was revised to provide that transactions should be undertaken with a view to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities. Although this was the only change during the year in the language of the directive, there were occasions, as indicated in the entries for the individual meetings, when the directive was issued with the understanding that in the conduct of open market operations there would be a leaning on the side of restraint or of ease. The directive at the end of 1959 instructed 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 65 economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities, 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 ANNUAL REPORT OF BOARD OF GOVERNORS RECORD OF POLICY ACTIONS BOARD OF GOVERNORS January 9, 1959 Amendment to Regulation P, Holding Company Affiliates—Voting Permits. Effective immediately, subsection (d) of Section 1 of Regulation P was amended by deleting clause (3) and appropriately renumbering clauses (4) and (5). Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, and Robertson. Votes against this action: None. As previously in effect, the definition of "affiliated/5 in subsection l(d), technically covered situations where control of one corporation was held, directly or indirectly, by shareholders of another corporation who also owned or controlled a majority of the shares of the latter corporation or more than 50 per cent of the number of shares voted at the last election of directors of that corporation. The amendment eliminated this technical coverage as being unnecessary to carry out the purposes of the law. March 5, 1959 Increase in rates on discounts and advances by Federal Reserve Banks. Effective March 6, 1959, the Board approved action by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Chicago, and Dallas establishing a rate of 3 per cent (an increase from 2l/z 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, 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 March 10, 1959 San Francisco March 12, 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 67 Cleveland March 13, 1959 Richmond March 13, 1959 St. Louis March 13, 1959 Kansas City March 13, 1959 Atlanta March 16, 1959 Minneapolis March 16, 1959 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 3Vi 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. (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 for 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 had been made in these rates since those referred to on pages 85-86 of the Board's Annual Report for 1958.) The period since October 1958, when the discount rates of the Federal Reserve Banks were increased to 2l/i per cent, had been marked by further expansion of economic activity. Industrial production had reached a level only slightly below the record high of February 1957, and other measures such as gross national product, construction, and retail sales were sharply higher on a seasonally adjusted basis than in the last quarter of 1958 or in the first quarter a year ago. Industrial prices also were continuing to move upward, and the average of wholesale prices was held stable only by virtue of declining prices of farm products. Successive surveys of consumer and business expectations reflected mounting optimism. The year 1959 thus far had been characterized by relatively light credit demands from business but large demands from governments—Federal, State, and local. Borrowing by individuals against mortgages continued large, and consumer credit, after increasing more than seasonally in late 1958, showed substantially less than the usual seasonal contraction in the early part of 1959. The total prospective demand for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 ANNUAL REPORT OF BOARD OF GOVERNORS credit during the next few months included large borrowing needs of the Treasury to cover the current deficit. Despite the over-all liquidity of the economy, pressures upon money markets and the banking system appeared likely to strengthen when the public found it necessary to draw upon time deposits, to liquidate securities, or to borrow at banks in order to obtain additional funds to support further expansion. The impact of the Treasury's financing program would be an additional factor causing upward pressures on short-term interest rates during the coming months. The increase in the discount rate meant that, if contemplated pressures upon the money markets and the banks developed and if a restrictive open market policy made it necessary for member banks to borrow additional reserves, the policy of restraint upon credit expansion would be reinforced by a discount rate close enough to market rates to help to deter such borrowing. May 1, 1959 Amendmends to Regulation T, Credit by Brokers, Dealers, and Members of National Securities Exchanges (formerly entitled Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges). Effective June 15, 1959, Section 3(b)(2) of Regulation T and the Supplement to that Regulation were amended in order further to restrict withdrawals of cash or securities from so-called "restricted" accounts (that is, accounts in which more credit is outstanding on the securities in the account than would be permitted in a new purchase of those securities under current margin requirements). Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, Shepardson, and King. Votes against this action: None. Regulation T is issued by the Board pursuant to the Securities Exchange Act of 1934, particularly Sections 7 and 8(a) thereof. It applies to every member of a national securities exchange and to every broker or dealer who transacts a business in securities through the medium of any such member. In announcing the amendments to the Regulation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 69 that were made effective June 15, 1959, the Board issued the following explanatory statement: Accounts can become "restricted" by declines in market value of the securities held in the account or by increases in margin requirements. (The margin requirement of a stock is the difference between its prescribed maximum loan value and its current market value.) Securities can be withdrawn from these "restricted" accounts through sale or otherwise, if there is a specified reduction in the debt owing in the account. Under the previous regulation, when a security was withdrawn from a "restricted" account, the amount by which the debt in the account had to be reduced worked out to be the same as the maximum loan value of the security at the time. This percentage automatically changed with each change in margin requirements. The amendment to Section 3(b)(2) provides for a new method of limiting withdrawals from "restricted" accounts. The amendment provides for a separate figure which represents the "retention requirement" of a registered nonexempted security (i.e., in the case of a withdrawal of securities, the percentage of market value that must be deposited in the account; or, in the case of a sale, the percentage of sale proceeds that must be left in the account). In a new paragraph (c) of the Supplement of Regulation T the "retention requirement" is set at 50 per cent of the market value of the securities involved. This "retention requirement" may be changed by the Board from time to time. The amendment does not alter existing provisions that allow a purchase of registered nonexempted securities to be made in a "restricted" account without additional margin if the purchase is made on the same day that an equal or greater market value of such securities is sold in the account and the proceeds applied to the purchase. The purpose of amending Regulation T in the manner described was to limit more effectively the excessive use of credit for the purpose of purchasing or carrying securities. On May 6, 1959, the following conforming amendments to Regulation T were approved, effective June 15, 1959, with the understanding that they would be issued in conjunction with the amendments approved on May 1, 1959: Section 3(g) was amended to make it clear that a transaction used to permit one offsetting transaction—for example, a deposit of securities used to permit a withdrawal of cash—would be to that extent unavailable to permit another offsetting transaction. Section 3(g) was also amended Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 ANNUAL REPORT OF BOARD OF GOVERNORS to stipulate that a sale of a security held in a margin account must, for the purposes of Regulation T, be treated as a "long" rather than a "short" sale. Section 3(e) was amended to change the amount of liquidation required when a customer fails to supply the margin that Regulation T requires the broker to obtain within four days on additional purchases in margin accounts. May 1, 1959 Amendments to Regulation U Loans by Banks for the Purpose of Purchasing 9 or Carrying Registered Stocks (formerly entitled Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange). Effective June 15, 1959, (1) the third paragraph of Section 1 of Regulation U and the Supplement to that Regulation were amended in order further to restrict withdrawals of collateral against so-called "restricted" loans (that is, stock-collateralled loans which are larger than would be permitted in the case of a new loan to purchase registered stocks under current margin requirements); (2) Section 3(a) was amended to strengthen the provisions regarding statements accepted by a bank as to the purpose of a loan; (3) Section 3(b)(l) was amended to broaden the provision relating to "carrying"; (4) Section 3(j) was amended to provide for reports from certain nonbank lenders; (5) Section 3(n) was amended to prohibit the weakening of collateral behind a "purpose" loan which occurs when that same collateral is also used as the basis of a "nonpurpose" loan; (6) a new Section 3(q) was added to require that bank loans to borrowers importantly engaged in relending for stock market purposes shall comply with Regulation U even though the bank loans are not secured by any stock; (7) a new Section 3(r) was added to require loans originally for the purchase of convertible securities to be brought into conformity with the margin requirements within 30 days after conversion into a registered stock takes place; and (8) conforming changes were made at several places in the Regulation. Votes for this action: Messrs. Martin, Szymczak, Mills, Robertson, and Shepardson. Mr. Balderston voted for all of the amendments except the amendment of Section 3(n), on which he voted "no". Mr. King voted for all of the amendments except the amendment of Section 3(a), on which he refrained from voting. There were no other negative votes on any parts of the action. Regulation U is issued by the Board pursuant to the Securities Exchange Act of 1934, particularly Section 7 thereof. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 71 In announcing the amendments that became effective June 15, 1959, the Board issued the following explanatory statement: Withdrawals of collateral.—Loans can become "restricted" by declines in market value of the stocks securing the loan or by increases in margin requirements. (The margin requirement of a stock is the difference between its prescribed maximum loan value and its current market value.) Stock securing a "restricted" loan can be withdrawn through sale or otherwise if there is a specified reduction in the loan. Under the former rule, if a stock securing a "restricted" loan was withdrawn, the amount by which the loan had to be reduced worked out to be the same as the maximum loan value of the stock at the time. This percentage automatically changed with each change in margin requirements. The amendment to the third paragraph of Section 1 provides for a new method of limiting withdrawals of collateral securing "restricted" loans. The amendment provides for a separate figure which represents the "retention requirement" of a stock (i.e., in the case of a sale or other withdrawal of collateral, the amount, stated as a percentage of the market value of the collateral, by which the loan must be reduced). In a new paragraph (b) of the Supplement to the Regulation the "retention requirement" is set at 50 per cent of the market value of the stocks involved. This "retention requirement" may be changed by the Board from time to time. Statement of purpose of loan.—The former Section 3(a) provided that a bank could rely upon a statement signed by an officer of the bank or by the borrower as to the purpose of a loan, if the statement was accepted by the bank in good faith. Under that section, a bank could accept a statement that a loan was not for the purpose of purchasing or carrying a registered stock without ascertaining affirmatively the purpose for which the loan was to be used. The amendment requires that the statement be signed by both borrower and lending officer. If the statement merely states what is not the purpose of the loan, the lending officer must provide a memorandum or notation describing the purpose of the loan. The amendment also emphasizes the alertness and diligence required of the bank before a statement can be said to be accepted in good faith. "Carrying" of registered stocks.—The former Section 3(b)(l) excluded from loans for the purpose of "carrying" registered stocks all loans except a limited group specified in that section, principally loans to enable the borrower to reduce or retire indebtedness originally incurred to purchase such stock. The net effect was to exclude from regulation a large number of loans which were closely related to the financing of positions in stocks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 ANNUAL REPORT OF BOARD OF GOVERNORS The amendment strikes this earlier, narrower approach and instead describes affirmatively certain situations in which a loan will not be deemed to be for the purpose of "carrying" registered stocks. Reports from unregulated lenders.—The former Section 3(j) required banks to make such reports as the Board of Governors may require. The amendment expands this requirement to include, in addition, "every person engaged in the business of extending credit who, in the ordinary course of business, extends credit for the purpose of purchasing or carrying" registered stocks. Loans relying on collateral which has served to permit a purpose loan. —Regulation U allows a bank to lend a specified portion, currently 10 per cent, of the market value of a stock used as collateral where the loan is to purchase or carry registered stocks. However, after the bank made such a loan, unless the borrower was a broker or dealer, the Regulation previously allowed the bank to lend as much more as it pleased on the same collateral for any other purpose. The former Section 3(n) forbade such double use of collateral when the borrower was a broker or dealer. The amendment expands this prohibition to forbid such double use in the case of loans to all borrowers under Regulation U, just as it is already forbidden in all cases under Regulation T. The amendment does not, however, require the bank to forego or to waive any lien, nor does it apply to loans to meet emergency expenses not reasonably foreseeable provided the circumstances are suitably documented. Exemption discontinued for certain unsecured loans.—The Regulation previously exempted all loans that were not secured, directly or indirectly, by at least some stock. The new Section 3(q) discontinues this exemption as to loans made to companies engaged principally, or as one of the company's important activities, in making loans on an exempt basis to finance the purchase of registered stocks. Loans to purchase convertible securities.—The Regulation previously did not apply to loans for purchasing or carrying convertible bonds. The new Section 3(r) requires the entire transaction to be brought into conformity with margin requirements prevailing at the time when conversion into a registered stock occurs, allowing, however, 30 days for this to be done. The purpose of these amendments was to make the Regulation more effective in its objective of preventing the excessive use of credit for purchasing or carrying securities. Governor Balderston voted against the amendment of Section 3(n), relating to prohibiting the double use of col- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 73 lateral for both "purpose" and "nonpurpose" loans, because he felt that the amendment went beyond the proper scope of the Board's responsibility under the statutes. May 28, 1959 Increase in rates on discounts and advances by Federal Reserve Banks. Effective May 29, 1959, the Board approved action by the Boards of Directors of the Federal Reserve Banks of New York, Chicago, St. Louis, Minneapolis, and Dallas establishing a rate of 3*/2 per cent (an increase 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, Szymczak, Mills, Robertson, Shepardson, and King. 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 June 2, 1959 Atlanta June 2, 1959 Philadelphia June 5, 1959 Kansas City June 5, 1959 San Francisco June 11, 1959 Cleveland June 12, 1959 Richmond June 12, 1959 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 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. Since early March, when the discount rates of the Federal Reserve Banks were increased to 3 per cent, productive activity had surged ahead vigorously and expectations were now optimistic in virtually every sector of the economy. The Board's index of industrial production for April attained a level four points higher than the prerecession peak in Febru- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 ANNUAL REPORT OF BOARD OF GOVERNORS ary 1957, and weekly output data for May indicated the possibility (later confirmed) of a further gain in that month. Activity in durable goods industries advanced to a new high, while production of nondurable goods, which had surpassed the earlier highs of 1957 by mid-1958, continued to expand to a level one-tenth above those highs. Principally because of higher wage and salary payments, personal income continued to climb at a rate in excess of $3 billion a month, a rate of increase that equaled or surpassed the comparable months of the 1955-57 period of expansion. Retail sales for April exceeded the large March volume and in May were about 10 per cent above a year earlier. In early May, new automobile sales were running nearly 50 per cent higher than a year earlier and 15 per cent higher than in the similar period in 1957, while used car sales continued active at prices some 15 per cent higher than a year earlier. A strong expansion in consumer instalment credit, in evidence since the latter part of 1958, was supporting sales of automobiles and household durables; the first quarter increase in automobile credit was the largest since the first quarter of 1956, and the credit rise for diversified consumer durables was the largest since the last quarter of 1956. Marked improvement in the employment situation had occurred in the past several weeks, with the gains, which were widespread in the durable goods manufacturing industries, carrying total employment to around 52 million, approximately one million above a year earlier. At the same time, unemployment declined considerably more than seasonally to 5.3 per cent of the civilian labor force in April, with a further decline indicated in May. Thus, although unemployment remained somewhat higher than at a similar stage in other postwar recovery periods, the recent trend suggested that aside from certain pockets of "structural" unemployment, the problem would continue to diminish in importance. Average wholesale prices were relatively stable, but consumer prices were edging upward and increased price pressures seemed likely. In financial markets, the period was marked by heavy credit demands. An exceptionally large increase in bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 75 loans in April was followed by further expansion in May, the demand extending to virtually all loan categories, including particularly business loans. In the face of this demand, the banks liquidated Government securities, resulting in a rise in the ratio of loans to loans and investments to a point close to the high level reached in 1957. Along with an increase in the aggregate money supply in recent months, the turnover of bank deposits increased, which meant that economic activity was expanding faster than the volume of money. On May 15, large city banks announced an increase from 4 to 4y per cent in the lending rate on prime customers' loans. 2 Nearly all interest rates had risen except yields on threemonth Treasury bills, which continued to move in the lower part of the 2% to 3 per cent range that had prevailed generally since late February, reflecting a desire on the part of investors to maintain liquidity positions in view of the possibility of further interest rate increases. Yields on sixmonth Treasury bills had risen to around the 3l/s per cent level, and yields on longer bills had been as high as 4 per cent. Stock prices had again risen to peak levels, accompanied by a further increase in stock market credit. With the conclusion of May operations, it appeared that the Treasury might have no need for additional borrowing until early in July, but additional refunding and new cash offerings would be in process from late July until mid-August, to be followed by large borrowing needs in the fourth quarter of the year. The over-all deficit in the United States balance of payments continued at about the same rate as in 1958, when it amounted to $3.4 billion, although a smaller proportion was taking the form of gold outflow. To bring the international accounts of the United States into balance, the problem of maintaining costs and prices on a competitive basis with those of other leading industrial countries loomed as vital. In view of the strength of credit demands, and with System credit policy limiting additions to the open market portfolio to amounts sufficient only to offset drains from factors such as the contraseasonal rise of currency in circulation and the gold outflow, member banks were resorting to the discount Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 ANNUAL REPORT OF BOARD OF GOVERNORS facilities of the Federal Reserve Banks in increasing volume. The added restraint of a discount rate increase seemed appropriate, particularly in view of the recent further rise in market interest rates. July 31, 1959 Actions incident to admission of Hawaii to Statehood. Effective upon issuance by the President of the United States of a proclamation admitting Hawaii to Statehood, which proclamation subsequently was issued on August 21, 1959, the Board readjusted the Federal Reserve districts so as to include the State of Hawaii in the Twelfth District, as a part of the territory served by the head office. Effective the same date, certain amendments were made to several regulations of the Board to correct language rendered inappropriate by the admission of Hawaii to Statehood. Votes for this action: Messrs. Martin, Balderston, Robertson, and Shepardson. 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, the districts not to exceed 12 in all. Section 17 of the Hawaii Statehood Act amended the aforesaid Section 2 to provide that when the State of Hawaii "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 Hawaii to Statehood, the Board took action to include Hawaii in the Twelfth Federal Reserve District coincident with the date of proclamation, with the understanding that Hawaii would be a part of the territory served by the head office 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 Hawaii to Statehood rendered the existing language inappropriate. The regulations affected included: E, Pur- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 77 chase of Warrants; G, Collection of Noncash Items; H, Membership of State Banking Institutions in the Federal Reserve System; I, Increase or Decrease of Capital Stock of Federal Reserve Banks and Cancellation of Old and Issue of New Stock Certificates; J, Check Clearing and Collection; L, Interlocking Bank Directorates under the Clayton Act; and U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks. August 10, 1959 Termination of Regulation S, Industrial Loans by Federal Reserve Banks. Effective at the close of business August 21, 1959, Regulation S was terminated. Votes for this action: Messrs. Martin, Balderston, Robertson, and King. Votes against this action: None. Section 13b of the Federal Reserve Act was repealed, effective August 21, 1959, by the Small Business Investment Act of 1958, approved August 21, 1958. Accordingly, since the Federal Reserve Banks would no longer be authorized to make loans and commitments for commercial and industrial purposes pursuant to Section 13b, the Board of Governors terminated Regulation S as of the close of business August 21, 1959. August 27, 1959 Amendment of Regulation Q, Payment of Interest on Deposits. Effective October 1,1959, Section 3(d) of Regulation Q was amended to permit member banks of the Federal Reserve System to pay interest at the maximum rate permitted under the Regulation calculated from the first day of the month on savings deposits received during the first ten calendar days of such month, in lieu of permitting interest to be paid at such rate from the first day of the month only on savings deposits received during the first ten business days of any calendar month commencing a quarterly or semiannual interest period and during the first five business days of any other calendar month. Votes for this action: Messrs. Mills, Robertson, Shepardson, and King. Votes against this action: None. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 ANNUAL REPORT OF BOARD OF GOVERNORS The purpose of this amendment was to reduce misunderstandings in connection with so-called "grace periods" in computing interest on savings deposits, to make possible uniform advertising, to create better customer relationships, and to enable banks that compute interest on a cycle basis to facilitate computation of interest on savings accounts and eliminate difficulties being encountered. The amendment was the subject of a notice of proposed rule making, published in the Federal Register, and was adopted after consideration of all relevant views and arguments received from interested persons. Also effective October 1, 1959, the Federal Deposit Insurance Corporation adopted a similar amendment to its regulations relating to insured nonmember banks. September 10, 1959 Increase in rates on discounts and advances by Federal Reserve Banks. Effective September 11, 1959, the Board approved action by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Chicago, St. Louis, Kansas City, Dallas, and San Francisco establishing a rate of 4 per cent (an increase from 3*/i per cent) on discounts for and advances to member banks under Sections 13 and 13a ot the Federal Reserve Act. Votes for this action: Messrs. Balderston, Szymczak, Robertson, Shepardson, and King. 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 September 14, 1959 Atlanta September 14, 1959 Minneapolis September 14, 1959 Philadelphia September 18, 1959 Effective the same dates, the Board approved for the respective Federal Reserve Banks a rate of 4% per cent on advances to member banks under Section 10(b) of the Federal Reserve Act and a rate of 5 per cent on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 79 In early September the economic picture reflected both the direct influence of the steel strike, which began in mid-July, and its spreading secondary effects. Work stoppages had developed in other basic metal industries, and new model changeovers had reduced assemblies of automobiles. The Board's index of industrial production was estimated to be eight points below the peak reached in June. However, aside from the work stoppage influence, the economy continued to show widespread strength. Retail sales in August remained close to the high levels of the previous three months and were 7 per cent above a year earlier, while the total value of construction put in place in August was close to the peak rate reached in the spring. Prices of basic materials, which had been relatively stable, began to rise after early August; the index of consumer prices had been edging upward for some time and in July was .8 per cent above a year earlier. As the result of strike effects, employment declined about one-half million to 52 million by mid-August, while unemployment decreased somewhat less than the usual seasonal amount. Demand for credit was heavy and increasing. Bank loans expanded rapidly through July and August, with bank holdings of Government securities reduced in the latter month. Borrowings by member banks at the Federal Reserve Banks were averaging close to $1 billion. The month preceding this action on the discount rate was marked by a sharp increase in short-term interest rates. Market yields on three-month Treasury bills, which were at a level around 3 per cent at the beginning of August, climbed sharply thereafter to approximately 4 per cent in early September. Yields on six-month bills rose in similar fashion, to a level around 4y per cent, and the same trend was evident 2 in rates on longer-term Treasury issues as well as corporate and municipal securities. At the beginning of September, large city banks increased their rate on prime customers' loans from 4y to 5 per cent. These developments appeared 2 to reflect expectations of higher interest rates in view of the general strength of the economy notwithstanding the steel Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 ANNUAL REPORT OF BOARD OF GOVERNORS strike and other work stoppages, the vigor of present and prospective credit demands, Treasury borrowings in prospect, and the further economic expansion that seemed likely following settlement of the strike. The increase in the discount rate brought it to a level that produced a better alignment with short-term money market rates and also recognized existing trends in the money market and underlying trends in the economy generally. Governor Mills, who was not present on September 10, 1959, abstained from voting when the discount rates established by the directors of the Federal Reserve Banks of Boston, Philadelphia, Atlanta, and Minneapolis came before the Board for approval on subsequent dates. As he regarded the situation, technical conditions in the money market justified an increase in the discount rate to 4 per cent. However, it was his judgment that System monetary and credit policy, about which he had strong reservations, had been instrumental in creating the market conditions that stood in favor of such an increase. October 23, 1959 Amendment to Regulation R, Relationships with Dealers in Securities under Section 32 of the Banking Act of 1933. Effective immediately, Section 2 of Regulation R was amended by striking out the words "debentures issued by Federal Intermediate Credit Banks, bonds issued by Federal Land Banks," and substituting therefor "obligations of Federal Intermediate Credit Banks, Federal Land Banks, Central Bank for Cooperatives, Federal Home Loan Banks, and the Federal National Mortgage Association." Votes for this action: Messrs. Balderston, Szymczak, Mills, Shepardson, and King. Vote against this action: Mr. Robertson. Section 32 of the Banking Act of 1933, as amended by Section 307 of the Banking Act of 1935, provides that no officer, director, or employee of any corporation or unincorporated association, no partner or employer of any partnership, and no individual, primarily engaged in the issue, flotation, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 81 underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation, of stocks, bonds, or other similar securities, shall serve at the same time as an officer, director, or employee of any member bank of the Federal Reserve System except in limited classes of cases in which the Board of Governors of the Federal Reserve System may allow such service by general regulations when in the judgment of the Board it would not unduly influence the investment policies of such member bank or the advice it gives its customers regarding investments. Prior to the amendment adopted effective October 23, 1959, Section 2 of Regulation R exempted from the general prohibition of Section 32 of the Banking Act of 1933 relationships of officers, directors, or employees of member banks with firms dealing in direct obligations of the United States, obligations fully guaranteed both as to principal and interest by the United States, debentures issued by Federal Intermediate Credit Banks, bonds issued by Federal Land Banks, and general obligations of territories, dependencies, and insular possessions of the United States. Adoption of the amendment broadening the exceptions contained in Section 2 of the Regulation to include obligations of the Central Bank for Cooperatives, the Federal Home Loan Banks, and the Federal National Mortgage Association reflected the Board's conclusion that such action would not increase the likelihood of activities of an undesirable character such as were sought to be guarded against by the language of Section 32 of the Banking Act of 1933. Governor Robertson voted against this amendment because in his view a sufficiently strong case had not been made for broadening the exemption further. November 30, 1959 Amendments to Regulation D, Reserves of Member Banks. The Supplement to Regulation D was amended to permit member banks not classified as central reserve or reserve city banks to count currency and coin in excess of 4 per cent of net demand deposits as part of their required reserves, effective December 1, 1959, and to permit central reserve and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 ANNUAL REPORT OF BOARD OF GOVERNORS reserve city banks similarly to count currency and coin in excess of 2 per cent of their net demand deposits, effective December 3, 1959. Also, effective December 1, 1959, Regulation D was amended to define currency and coin as including currency and coin in transit to or from a Federal Reserve Bank; to require currency and coin to be counted as of the beginning of the business day; to exclude drafts or authorizations on a member bank's reserve account from the definition of gross demand deposits; and to permit member banks at their option to include nonbusiness days at the end of a reserve computation period in the next succeeding period. Effective December 31, 1959, Regulation D was amended to change the reserve computation period for banks not classified as central reserve or reserve city banks from semimonthly to biweekly. Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, Shepardson, and King. Votes against this action: None. In announcing this action, which would permit many member banks to count a portion of their vault cash in meeting reserve requirements, the Board stated: On the basis of average vault cash holdings for the past 12 months, it appears that almost half of the 6,250 member banks will be in a position to count a part of their vault cash in meeting their required reserves. As a result, total member bank reserve balances at the Federal Reserve Banks may be lower than would otherwise be required by as much as $230 million, of which $160 million would be at country banks and $70 million at reserve city banks. Total vault cash held by member banks has averaged about $2.2 billion. This Federal Reserve action was taken under the terms of an Act of Congress in 1959 designed in part to remedy inequities that have arisen because many banks, particularly small country banks, find it necessary for operating purposes to hold relatively larger amounts of vault cash than other banks do. No change in the System's general monetary or credit policy is involved. The beginning of December is a logical time for this action inasmuch as the Federal Reserve System needs to make additional reserves available to the banking system each year at this season in order to meet the seasonal requirements for the economy. The remaining amendments to Regulation D, as described above, were of a technical nature. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 83 December 18, 1959 Actions with respect to capital accounts of the Federal Reserve Banks. Effective December 31, 1959, and until further action by the Board, the Board determined that the surplus of the Federal Reserve Banks be maintained at a level equal to 100 per cent of the subscribed capital of the respective banks. Votes for this action: Messrs. Martin, Balderston, Szymczak, Shepardson, and King. Vote against this action: Mr. Mills. Mr. Robertson dissented from the action to the extent that he did not favor reducing the existing surplus of any Federal Reserve Bank in order to bring it down to a level of 100 per cent of subscribed capital, but he approved the principle that hereafter no additions would be made to surplus of any Bank beyond 100 per cent of subscribed capital. The Board also directed that, by December 31, 1959, the reserves for contingencies of the respective Reserve Banks be discontinued and the amounts therein transferred to profit and loss, except that the reserve for registered mail losses would not be discontinued until after appropriate amendment of the Loss Sharing Agreeement of the Federal Reserve Banks. Votes for this action: Messrs. Martin, Balderston, Szymczak, Mills, Robertson, Shepardson, and King. Votes against this action: None. Prior to 1933, the Federal Reserve Act included a provision under which each Federal Reserve Bank was required to pay a franchise tax to the Government equal to 90 per cent of its earnings, after the Bank had accumulated a surplus equal to its subscribed capital. The Banking Act of 1933 required each Federal Reserve Bank to pay an amount equal to one-half of its surplus on January 1, 1933, for capital stock of the Federal Deposit Insurance Corporation. These payments amounted to $139 million and reduced the surplus of the Federal Reserve Banks to an equivalent figure, or considerably less than one-half of their subscribed capital. Congress, therefore, eliminated the franchise tax in order to permit the Federal Reserve Banks to rebuild their surplus accounts from future earnings. By the end of 1946, the combined surplus of the Federal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 ANNUAL REPORT OF BOARD OF GOVERNORS Reserve Banks totaled $440 million, as compared with subscribed capital of $374 million. In the circumstances, the Board on April 23, 1947, concluded that it would be appropriate to accomplish the same results as were accomplished earlier through payment of the franchise tax by establishing, under the authority of the fourth paragraph of Section 16 of the Federal Reserve Act, such rates of interest on outstanding Federal Reserve notes not covered by gold certificate collateral as would make it possible to transfer to the Treasury approximately 90 per cent of the earnings of each Federal Reserve Bank after payment of necessary expenses and statutory dividends, and after such provisions as might be necessary to restore surplus of each Bank to 100 per cent of subscribed capital if it fell below that figure. The procedure thus established by the Board in 1947 was followed through the year 1958. At the end of 1959, combined subscribed capital of the Federal Reserve Banks stood at $777 million, while combined surplus amounted to $868 million. After a review of the situation, which included consultation with the Federal Reserve Banks, the Board concluded that the maintenance of surplus at a level equal to 100 per cent of subscribed capital would be sufficient to meet any foreseeable needs of the Banks. It was therefore decided to change the practice of adding approximately 10 per cent of the annual net earnings of the Federal Reserve Banks to the surplus accounts, and to pay to the Treasury the amounts by which the surplus accounts exceeded subscribed capital. Pursuant to this decision, the 1959 payments to the Treasury as interest on Federal Reserve notes, totaling $911 million, consisted of all net earnings after dividends and after provision for building up surplus to 100 per cent of subscribed capital at those Reserve Banks where surplus was below that amount. In addition, there was paid to the Treasury the amounts by which surplus at the other Banks exceeded subscribed capital (which is twice the amount of paid-in capital). In dissenting from the decision to maintain surplus at no more than 100 per cent of subscribed capital after Decem- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 85 ber 31, 1959, Governor Mills took the position that there were good reasons to continue to make reasonable additions to surplus and that any decision to pay over to the Treasury a larger share of Federal Reserve Bank earnings than paid under the formula in effect from 1947 through 1958 should be reached in accordance with some newly prescribed formula that had found acceptance by the Congress. Governor Robertson agreed with the principle of paying 100 per cent of current net earnings of the respective Federal Reserve Banks to the Treasury, after carrying to surplus any amounts needed to bring surplus to a figure equal to 100 per cent of subscribed capital, but he disagreed with that part of the Board's action pursuant to which there would be paid to the Treasury the amounts by which surplus at certain Banks currently exceeded subscribed capital. He would have preferred to leave surplus accounts at their existing levels and let subscribed capital build up to them over a period of time. The Board also acted to discontinue certain reserves for contingencies of the Federal Reserve Banks and to cause the respective Banks to transfer such reserves to profit and loss by December 31, 1959. The transfers from reserves for contingencies at all Reserve Banks pursuant to this action amounted to $98 million. Similar action was taken to discontinue the reserve for registered mail losses, effective after the boards of directors of the Federal Reserve Banks had acted to amend the Loss Sharing Agreement of the Federal Reserve Banks and the Board of Governors had approved the revised Agreement. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 ANNUAL REPORT OF BOARD OF GOVERNORS BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM Examination of Federal Reserve Banks. The Board's Division of Examinations examined the 12 Federal Reserve Banks and their 24 branches during the year as required by Section 21 of the Federal Reserve Act. 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 one of the Federal Reserve Banks. The public accountants made their own choice of the examination that was the basis for their study. As supplement to its own examinations, and continuing a longstanding practice, the Division of Examinations received and reviewed the reports of audits made periodically during the year by the internal auditing staffs of the respective Federal Reserve Banks. 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 whenever such special examination is necessary to determine the condition of any such bank for insurance purposes. However, such examinations have been infrequent 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 mem- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 87 ber banks are made available to the Federal Deposit Insurance Corporation, and the Corporation in turn makes its reports available to the Comptroller of the Currency and the Board of Governors. At the request of the Comptroller of the Currency, the Board makes recommendations to his office concerning applications which he receives for charters of national banks. State member banks are subject to examinations made by direction of the Board of Governors or of the Federal Reserve Banks by examiners selected or approved by the Board of Governors. The established policy is to conduct at least one regular examination of each State member bank, including its trust department, during each calendar year, by examiners for the Reserve Bank of the district in which the bank is situated, with additional examinations if considered desirable. 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 authorities or alternate examinations are made by agreement with State authorities. The 1959 program for examining State member banks was practically completed, since only four of the 1,691 banks were not examined during the calendar year. In its supervision of State member banks, the Board passes upon applications to establish branches, including original offices and offices to be acquired through merger or consolidation, and also upon investments in bank premises that will exceed 100 per cent of the capital stock of the member bank. The Board does not pass upon mergers or consolidations involving State member banks unless the resulting institution will be a State member bank with less capital stock or surplus than the aggregate capital stock or aggregate surplus, respectively, of all the merging or consolidating banks. Federal Reserve membership. At the end of 1959 member banks accounted for 46 per cent of the number, and held approximately 85 per cent of the deposits, of all commercial banks in the United States. State member banks accounted for 19 per cent of the number, 31 per cent of the banking offices, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 ANNUAL REPORT OF BOARD OF GOVERNORS about 65 per cent of the deposits of all State commercial banks. The 6,233 member banks of the Federal Reserve System at the end of 1959 included 4,542 national and 1,691 State member banks. There were net declines of 36 and 43, respectively, in these two categories during the year. The decline in the total, continuing the trend of recent years, was due largely to consolidations and mergers. Reductions from other causes included 15 State banks that withdrew from membership and two national banks that converted into nonmember banks. The membership losses were offset in part by newly established banks, of which 23 were national banks and four were State members, by the admission to membership of six nonmember banks in Alaska, one in Hawaii, and five in other States, and by the conversion of one nonmember bank into a national bank. The total number of member bank offices increased, however, 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 7,259 branches, 558 more than at the close of 1958. Detailed figures on changes in banking structure during 1959 are shown in Table 18 on page 126. Bank holding companies. During 1959, 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. Pursuant to Section 3(a) (2) of the Act, the Board approved the acquisition by nine bank holding companies of voting shares of seven banks; with respect to two of the banks, applications were filed by two related bank holding companies, one of which controlled the other. Under Section 4(c) (6) of the Act, the Board, after hearings, denied requests by two holding companies for orders determining that one subsidiary of each was so closely related to the banking activities of its respective 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; such requests as to 15 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 89 subsidiaries, by six holding companies, were approved. During the year the Board issued 12 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 1958 were obtained from registered bank holding companies. During 1959, pursuant to the Banking Act of 1933, the Board authorized the issuance of seven voting permits for general purposes and 13 permits for limited purposes to holding company affiliates of member banks. In accordance with established practice, examiners for the Federal Reserve Banks examined a number of affiliates of holding companies the principal offices of which are located in their districts. 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 nine organizations. Trust powers of national banks. During 1959, 45 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 four banks that had previously been granted certain trust powers. Trust powers of 29 national banks were terminated, 27 by consolidation or merger and two by voluntary surrender. At the end of 1959, there were 1,734 national banks holding permits to exercise trust powers. Acceptance powers of member banks. During the year the Board approved applications of three 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 exceeding at any time, in the aggregate, 100 per cent of its paid-up and unimpaired capital stock and surplus; and one member bank was granted full permission, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 ANNUAL REPORT OF BOARD OF GOVERNORS another 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 such countries, dependencies, or insular possessions of the United States as may have been designated by the Board of Governors. Foreign branches of member banks. Under the provisions of Section 25 of the Federal Reserve Act, the Board approved during 1959 eighteen applications made by member banks for permission to establish branches in foreign countries and overseas areas of the United States. One member bank opened four branches in the Virgin Islands and a branch in Panama, Republic of Panama. Another member bank opened branches in Buenos Aires and Cordoba, Argentina; Nassau, Bahamas; Belo Horizonte and Curitiba, Brazil; Kuala Lumpur, Malaya; Singapore, Colony of Singapore; and Montevideo, Uruguay. Six of these branches had been authorized by the Board prior to 1959. At the end of 1959, seven member banks had in active operation a total of 132 branches in 30 foreign countries and overseas areas of the United States. Three national banks were operating 101 of these branches, and four State member banks were operating 31. The branches were distributed geographically as follows: Latin America 69 Near East 4 Argentina 12 Egypt 1 Bahamas 1 Lebanon 2 Brazil 12 Saudi Arabia 1 2 22 Far East Colombia * Hong Kong 1 £uba 21 India 2 Mexico 3 j 10 Panama 6 j Mal Paraguay 1 Philippines 5 f eru I Singapore 2 T Uruguay 2 Thailand 1 Venezuela 4 United States Overseas Areas . . 22 Continental Europe 5 Canal Zone 4 Belgium 1 Guam 1 France 3 Puerto Rico 13 Germany 1 Virgin Islands 4 England 10 Total 132 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 91 In 1959, examiners for the Board of Governors surveyed the overseas branches of three State member banks at their respective head offices in New York. Foreign banking and financing corporations. In 1959, one corporation was organized under State law and opened for business to operate under agreement with the Board pursuant to Section 25 of the Federal Reserve Act relating to investment by member banks in the stock of corporations engaged principally in international or foreign banking. Another "agreement" corporation ceased operations as a result of its merger into a State member bank. The head offices in New York of the three "agreement" corporations now in operation were examined in 1959 by examiners for the Board of Governors. One corporation operates two agencies at the New York International Airport, has a branch in England, and owns the stock of two banks organized under the laws of, and operating in, Liberia and the Union of South Africa, respectively. Another corporation owns 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 in 1958 and the bank opened in Johannesburg in 1959. During 1959 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 banking. At the end of the year there were six corporations in active operation under that section; three of these are regarded as "banking corporations" and three as "financing corporations." The home offices of these six corporations are located in New York City, and all 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 that has a branch in Canada; one has a subsidiary organized under the laws of Panama; and one operates branches in France, Germany, Guatemala, Hong Kong, Lebanon, Malaya, and Singapore, and also has an agency in Guatemala and owns substantially all of the stock of a bank organized under the laws of, and operating in, Italy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 ANNUAL REPORT OF BOARD OF GOVERNORS In 1959, examiners for the Board of Governors surveyed the branches of one foreign banking corporation at its home office in New York. Inter-Agency Bank Examination School. Two sessions of the School for Examiners and four sessions of the School for Assistant Examiners were held in 1959. 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. Since the establishment of the School in 1952, the various sessions have been attended by 1,273 men, representing the three Federal bank supervisory agencies, one other Federal agency, the State Banking Departments of California, Connecticut, Indiana, Louisiana, Maine, Michigan, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, and Virginia, the Treasury Department of the Commonwealth of Puerto Rico, and one foreign country. LEGISLATION Reserves of member banks. The Act of Congress approved July 28, 1959 (Public Law 86-114) amended certain provisions of the Federal Reserve Act and related laws with respect to reserves against deposits required to be maintained by member banks of the Federal Reserve System. The Act (1) authorizes the Board of Governors to permit member banks to treat vault cash as reserves; (2) reduces from 13 per cent to 10 per cent the minimum reserves against demand deposits that member banks in central reserve cities must maintain; (3) reduces from 26 per cent to 22 per cent the maximum reserves against demand deposits that member banks in central reserve cities may be required to maintain; (4) increases from 20 per cent to 22 per cent the maximum reserves against demand deposits that member banks in reserve cities may be required to maintain; (5) authorizes the Board of Governors to permit a member bank located in a central reserve or reserve city to carry lower reserves than other banks in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 93 same city, based upon the nature of the bank's business rather than upon its geographical location, as heretofore; and (6) provides for the termination of the classification "central reserve cities" on July 28, 1962. The law also authorizes the Board to designate which holding company affiliate, where there is more than one with respect to the same bank or a group of banks, may establish and maintain the reserves of readily marketable assets required by law. Member banks dealing in obligations of Tennessee Valley Authority and Inter-American Development Bank. By Acts of Congress approved August 6, 1959 (Public Law 86-137), August 7, 1959 (Public Law 86-147), and September 16, 1959 (Public Law 86-278), paragraph "Seventh" of Section 5136 of the Revised Statutes of the United States was amended so as to permit national banks to deal in or to underwrite obligations issued by the Tennessee Valley Authority or by the Inter- American Development Bank. Such transactions remain subject to the limitation of 10 per cent of the national bank's capital and surplus. Subject, of course, to any applicable provision of State law, the permission also extends to all State member banks of the Federal Reserve System, as Section 9 of the Federal Reserve Act makes this paragraph of Section 5136 applicable to State member banks. Federal Reserve Banks as fiscal agents for Inter-American Development Bank. The Act of Congress approved August 7, 1959 (Public Law 86-147) also authorized any Federal Reserve Bank to act as depository and fiscal agent for the Inter- American Development Bank. Amendments to eliminate ambiguities and repeal obsolete provisions. The Acts of Congress approved September 8 and 9, 1959 (Public Laws 86-230 and 86-251, respectively) amended the national bank laws and certain other statutes so as to clarify or eliminate ambiguities and repeal certain laws which had become obsolete and also amended the lending and borrowing provisions applicable to national banks. Statehood of Alaska and Hawaii. The Acts of Congress approved March 18, 1959, and June 25, 1959 (Public Laws 86-3 and 86-70, respectively) made certain technical amend- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 ANNUAL REPORT OF BOARD OF GOVERNORS ments to the Federal Reserve Act occasioned by the admission of Alaska and Hawaii to Statehood. 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. LITIGATION AND HEARINGS On August 1, 1958, a suit for declaratory judgment was filed against the Members of the Board of Governors of the Federal Reserve System by Old Kent Bank and Trust Company, Grand Rapids, Michigan, in the United States District Court for the District of Columbia, challenging, among other things, the statutory authority of the Board to approve or disapprove the operation of branches acquired by a State member bank as a result of a merger and the authority of the Board to consider competitive effects in passing upon the operation of such branches. On April 22, 1959, the District Court granted a motion for summary judgment in favor of the Board and denied a cross-motion for summary judgment filed by plaintiff. On April 30, an order to this effect was signed and filed. The case is now pending in the United States Court of Appeals for the District of Columbia. On January 7, 1959, a suit raising substantially the same question was filed by Wachovia Bank and Trust Company, Winston-Salem, North Carolina, and the parties have stipulated that the answer of the Board of Governors need not be filed until final disposition of the Kent Bank case. On September 18, 1959, a petition was filed in the United States Court of Appeals for the Eighth Circuit to review an order of the Board of Governors denying an application of First Bank Stock Corporation under Section 4(c)(6) of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 95 Bank Holding Company Act of 1956. The time within which the Department of Justice may file its brief on behalf of the Board has been extended to March 8, 1960. Following a hearing held in connection with an administrative proceeding regarding capital adequacy instituted by the Board with respect to The Continental Bank and Trust Company, Salt Lake City, Utah, the trial examiner on March 16, 1959, submitted his Report and Recommended Decision in which he recommended that the proceeding be dismissed. Oral argument was presented to the Board on July 22, 1959; and the matter is now pending before the Board for its determination. RESERVE BANK OPERATIONS Loan guarantees for defense production. Incident to the Defense Production Act of 1950, the Departments of the Army, Navy, Air Force, Commerce, Interior, and Agriculture, the General Services Administration, the National Aeronautics and Space Administration, and the Atomic Energy Commission are authorized to guarantee loans made by commercial banks and other private financing institutions in connection with defense contracts. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies under Regulation V. During 1959 the guaranteeing agencies authorized the issuance of 20 guarantee agreements covering loans amounting to $84 million. On December 31, 1959, guarantee agreements in force authorized credit totaling $438 million, of which $340 million represented actual loans outstanding and $98 million represented additional credit available to borrowers. Of the total loans outstanding, 75 per cent on the average was guaranteed. During the year approximately $1,147 million was advanced on V loans, most of which are revolving credits. Authority for the V-loan program, unless further extended, will terminate on June 30,1960. 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 1955-59. Volume was larger in 1959 than in 1958 in all activities except postal money orders, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 ANNUAL REPORT OF BOARD OF GOVERNORS which continued a downward trend. The number of discounts and advances increased sharply over 1958, but the amount involved was somewhat lower than in 1957, a peak year. Upward trends continued in coin, checks (other than Government and postal money orders), and transfers of funds. The amount of currency received and counted was the largest ever recorded. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1959 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 1959 and 1958. EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS, 1959 AND 1958 [In thousands of dollars] Item 1959 1958 Current earnings 886,226 742,068 Current expenses 144,703 137,722 Current net earnings 741,523 604,346 Net additions to current net earnings1 98,248 124 Net earnings before payments to U.S. Treasury 839,771 604,470 Dividends paid 22,722 21,197 Paid U.S. Treasury (interest on F. R. notes)... 910,650 524,059 Transferred to surplus -93,601 59,214 i Includes net profits on sales of U.S. Government securities of $190,000 in 1959 and $157,000 in 1958; and, in 1959, $98 million transferred from reserves for contingencies. Current earnings of $886 million in 1959 were 19 per cent more than in 1958, largely because of an increase of $123 million in earnings on U.S. Government securities. The increase in the earnings on such securities reflected the combined effect of increases in average yields and average holdings, as is shown in the table on page 99. A growth of $21 million in earnings from discounts and advances reflected higher discount rates and larger holdings. Current expenses of $145 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 97 million were about 5 per cent more than in 1958. Current net earnings amounted to $742 million, an increase of 23 per cent from 1958. After allowing for net additions of $98 million to current net earnings, resulting almost entirely from the discontinuance of certain reserves for contingencies, net earnings before dividends and before payments to the U.S. Treasury amounted to $840 million. Statutory dividends to member banks amounted to $23 million, about $2 million more than in 1958. This expansion reflected an increase in the capital and surplus of member banks and a consequent increase in the paid-in capital of the Federal Reserve Banks. Payments to the U.S. Treasury as interest on Federal Reserve notes amounted to $911 million in 1959. These payments consisted of (a) all net earnings ($815 million) after the dividends of $23 million and after provision of $2 million for raising surplus to the level of subscribed capital at the two Banks where surplus was below that amount, and (b) the amount (totaling $96 million) by which the surplus at the other 10 Banks exceeded subscribed capital. The 1959 payments to the Treasury reflect a conclusion reached by the Board, after consultation with the Federal Reserve Banks, that the maintenance of surplus at the level of subscribed capital (which is twice paid-in capital) would be appropriate in the light of present circumstances. The surplus accounts of the Federal Reserve Banks had been building up over the years and at a number of Banks exceeded subscribed capital by substantial amounts. It was therefore decided to discontinue the practice followed in the years 1947-58 of adding 10 per cent of the annual net earnings of the Federal Reserve Banks to the surplus accounts, and to pay to the Treasury the amounts by which the surplus accounts exceeded the level of subscribed capital. These decisions, along with the decision to discontinue certain reserves for contingencies, which had been set up largely out of earnings in 1948 and 1949, increased the 1959 payment to the Treasury by $266 million. Of this increase, $72 million Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 ANNUAL REPORT OF BOARD OF GOVERNORS represented the difference between 90 and 100 per cent of net earnings, $96 million the surplus reductions, and $98 million the discontinued reserves for contingencies. The amounts resulting from the surplus reductions and from the discontinued contingency reserves are nonrecurring items. The decision to pay to the Treasury all net earnings after dividends and surplus allowances, rather than 90 per cent of such earnings, will have a continuing effect on the Treasury's income, although the amount will depend upon the financial experience of the Reserve Banks. The practice of paying part of the earnings of the Federal Reserve Banks to the Treasury had its origin in the original Federal Reserve Act. The extent of the payments, however, has changed from time to time during the intervening years. Prior to 1933 the Federal Reserve Act included a provision under which each Federal Reserve Bank was required to pay a franchise tax to the Government equal to 90 per cent of its net earnings after it had accumulated a surplus equal to its subscribed capital. The Banking Act of 1933 required each Federal Reserve Bank to pay an amount equal to one-half of its surplus on January 1, 1933, for capital stock of the Federal Deposit Insurance Corporation. These payments amounted to $139 million and reduced the surplus of the Federal Reserve Banks to an equivalent figure, which was considerably less than one-half of their subscribed capital at that time. Congress, therefore, eliminated the franchise tax in order to permit the Federal Reserve Banks to rebuild their surplus accounts from future earnings. By the end of 1946 the surplus of each Federal Reserve Bank was at least equal to its subscribed capital and their combined surplus totaled $440 million. Under those circumstances the Board concluded that it would be appropriate to accomplish the purpose of the earlier franchise tax by establishing such rates of interest on outstanding Federal Reserve notes not covered by gold certificate collateral as would make it possible to transmit to the Treasury approximately 90 per cent of the net earnings of each Federal Reserve Bank after dividends and after such provisions as might be necessary to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 99 bring surplus up to subscribed capital. This procedure began in 1947 and continued through 1958. Holdings of loans and securities. Average daily holdings of loans and securities, excluding industrial loans, amounted to $27,036 million during 1959, $2,053 million more than during 1958. Holdings of discounts and advances increased $516 million, and holdings of U.S. Government securities increased $1,544 million. The average rate of interest earned on discounts and advances rose from 2.28 to 3.42 per cent, reflecting increases in the discount rate, and the average rate on Government securities rose from 2.98 to 3.27 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, 1957-59 [Dollar amounts in thousands] Discounts U.S. Item and year Total* and Acceptances Government advances securities Average daily holdings:2 1957 $24,221,645 $850,097 $25,142 $23,346,406 1958 24,982,770 295,250 38,904 24,648,616 1959 27,035,989 810,981 32,246 26,192,762 Earnings: 1957 763,011 26,792 848 735,371 1958 741,763 6,745 806 734,212 1959 885,831 27,728 1,075 857,028 Average rate of interest (per cent): 1957 3.15 3.15 3.37 3.15 1958 2.97 2.28 2.07 2.98 1959 3.28 3.42 3.34 3.27 1 Excludes industrial loans, the authority for which expired Aug. 21,1959. 2 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 $1,309 million in 1959. At the end of the year holdings amounted to $13,424 million, representing $8,032 million of earmarked gold, $4,477 million of U.S. Government secu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

100 ANNUAL REPORT OF BOARD OF GOVERNORS rities (largely Treasury bills), $345 million in dollar deposits, $82 million of bankers' acceptances purchased through Federal Reserve Banks, and $488 million of miscellaneous assets. The latter item includes mainly dollar bonds issued by foreign countries and international institutions. In 1959 the aggregate gold and dollar assets held for the International Bank for Reconstruction and Development, the International Finance Corporation, and the International Monetary Fund increased $2,772 million, reflecting principally the United States payment of its increased subscription ($1,375 million) to the Monetary Fund and payments by other member countries of the gold portions of their increased subscriptions. During the year new accounts were opened for the European Investment Bank, the Italian Foreign Exchange Office, the Bank of Taiwan, and the recently organized Central Banks of Malaya and Tunisia. As in the past several years loans secured by gold collateral were of relatively minor importance. Loans of $17.9 million outstanding at the beginning of 1959 were repaid. New arrangements, including a stand-by commitment, amounted to a total of $41.1 million, of which $5 million was outstanding at the end of the year. Loans on gold are ordinarily made to foreign monetary authorities to help them meet dollar requirements of a clearly temporary nature. 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. Bank premises. During the year the Board authorized the construction of an addition to, and alteration of, the Federal Reserve Bank building in Atlanta. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 101 With the approval of the Board, property adjoining the Federal Reserve Branch in Pittsburgh was acquired to avoid street parking of armored trucks awaiting entrance to the building. BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1959 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 at December 31, 1959, 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 financials tatements 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, D.C., February 4, 1960. 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, 1959 ASSETS Cash, exclusive of $177,845 representing withheld taxes $ 824,969 Miscellaneous receivables and travel advances 20,394 Stockroom and cafeteria inventories, at cost 20,239 Total assets of operating fund 865,602 Property and equipment, at cost: Land and improvements 792,852 Building 3,940,050 Furniture and equipment 606,719 Total assets of property and equipment fund 5,339,621 Total assets $6,205,223 LIABILITIES AND FUND BALANCES Accounts payable and accrued expense $ 269,691 Fund balances: Operating fund— Balance December 31, 1958 $ 328,356 Excess of assessments over expenditures for the year 267,555 595,911 Property and equipment fund— Balance December 31, 1958 5,233,320 Expenditures for additions 139,430 Excess of cost of assets disposed of over trade-in allowances (33,129) 5,339,621 Total liabilities and fund balances $6,205,223 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 103 ASSESSMENTS AND EXPENDITURES YEAR ENDED DECEMBER 31, 1959 ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS: For Board expenses and additions to property and equipment $ 6,470,600 For expenditures made on behalf of the Federal Reserve Banks 4,943,223 Total assessments $11,413,823 EXPENDITURES: For printing, issue and redemption of Federal Reserve Notes, paid on behalf of the Federal Reserve Banks $ 4,943,223 For expenses of the Board: Salaries $4,045,223 Retirement and insurance contributions 539,927 Traveling expenses 274,627 Professional and contractual services: Economic surveys 281,244 Legal, consultant and audit fees 92,573 Other 30,770 Printing and binding 250,083 Telephone and telegraph 90,626 Postage and expressage 78,180 Equipment and other rentals 142,200 Operation of cafeteria, net 52,656 Heat, light and power 52,064 Stationery and office and other supplies 54,094 Repairs, maintenance and alterations 30,541 Books and subscriptions 19,708 Insurance 4,866 Miscellaneous, net 24,233 6,063,615 For property and equipment 139,430 Total expenditures $11,146,268 EXCESS OF ASSESSMENTS OVER EXPENDITURES FOR THE YEAR $ 267,555 The Board's expenses for 1959 include the following special items: (1) an expenditure of $45,468 incurred in connection with the continuation of the Small Business Financing Study initiated in 1957; (2) an expenditure of $129,745 for Quarterly Consumer Buying Intentions Surveys; and (3) an expenditure of $87,905 incident to Civil and Defense Mobilization. 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 (EN DETAIL) DECEMBER 31, 1959 [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollarsl 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 6,520,087 Federal Reserve Agents' Fund 8,850,000 18,185,642 Redemption fund for Federal Reserve notes 978,083 Total gold certificate reserves 19,163,725 Federal Reserve notes of other Federal Reserve Banks 524,450 Other cash: United States notes 29,305 Silver certificates 270,566 Standard silver dollars 7,932 National bank notes and Federal Reserve Bank notes 1,013 Subsidiary silver, nickels, and cents 50,580 Total other cash 35936 Discounts and advances secured by U.S. Govt. securities: Discounted for member banks 452,417 Discounted for others 452,417 Other discounts and advances: Discounted for member banks 309 Foreign loans on gold 5,000 5,309 Total discounts and advances 457,726 Acceptances: Bought outright 44,168 Held under repurchase agreement 31,173 U.S. Government securities: Bought outright: Bills 2,605,765 Certificates 10,506,993 Notes 11,010,298 Bonds 2,483,771 Total bought outright 26,606,827 Held under repurchase agreement 41,500 Total U.S. Government securities 26,648,327 Total loans and securities 27,181,394 Due from foreign banks 15 Cash items in process of collection: Transit items 6,036,323 Exchanges for clearing house 202,263 Other cash items 198,720 Total cash items in process of collection 6,437,306 Bank premises: Land 23,678 Buildings (including vaults) 95,985 Fixed machinery and equipment 44,963 Total buildings 140,948 Less depreciation allowances 65,051 75,897 Total bank premises 99,575 Other assets: Miscellaneous assets acquired account industrial loans 25 Less valuation allowances 25 Net Reimbursable expenses and other items receivable 3,525 Interest accrued 251,892 Premium on securities 775 Deferred charges 2,268 Real estate acquired for banking house purposes 1,970 Suspense account 617 All other 693 Total other assets 261,740 Total assets 54,027,601 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) 29,447,692 Less: Held by issuing Federal Reserve Banks 1,053,370 Forwarded for redemption 132,355 1,185,725 Federal Reserve notes, net (includes notes held by U.S. Treasury and by Federal Reserve Banks other than issuing Bank) 28,261,967 Deposits: Member bank reserves 18,173,970 U.S. Treasurer—general account 503,778 Foreign 344,788 Other deposits: Nonmember bank—clearing accounts 79,233 Officers* and certified checks 8,991 Federal Reserve exchange drafts Reserves of corporations doing foreign banking or financing 18,923 International organizations1 74,223 All other 512,365 Total other deposits 693,735 Total deposits 19,716,271 Deferred availability cash items 4,847,216 Other liabilities: Accrued dividends unpaid Unearned discount 538 Discount on securities 23,437 Sundry items payable 4,446 Suspense account 153 All other 46 Tota Jother liabilities 28,620 Total liabilities 52,854,074 CAPITAL ACCOUNTS Capital paid in 387,404 Surplus 774,808 Other capital accounts: Reserves for registered mail losses 11,316 Total other capital accounts2 11,316 Total liabilities and capital accounts 54,027,601 Contingent liability on acceptances purchased for foreign correspondents 82,006 1 Includes International Bank for Reconstruction and Development, International Monetary Fund, and International Finance Corporation. * During the year this item includes the net of earnings, expenses, profits, etc., which are closed out on December 31; see Table 6, pp. 114-15. 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 1959 AND 1958 [In thousands of dollars] Total Boston New York Philadelphia Cleveland Richmond Item 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 ASSETS 18,185,642 19,012,893 889,340 888,156 4,685,959 5,277,367 1,050,113 1,037,847 1,634,684 1,443,593 1,067,069 1,033,459 Redemption fund for Federal Reserve notes.. 978,083 937,919 59,652 55,671 213,325 198,412 60,965 60,195 87,708 87,750 79,240 85,803 Total gold certificate reserves 19,163,725 19,950,812 948,992 943,827 4,899,284 5,475,779 1,111,078 1,098,042 1,722,392 1,531,343 1,146,309 1,119,262 Federal Reserve notes of other Banks 524,450 476,993 40,058 41,061 90,056 83,865 43,544 47,991 34,133 29,107 69,408 57,452 Other cash 359,396 336,474 20,849 19,758 54,975 60,901 18,085 16,950 32,180 28,071 25,494 22,112 *-* Discounts and advances: O Secured by U.S. Govt. securities 452,417 45,963 700 200 201,380 6,520 42,725 5,485 300 2,775 5,050 1,575 00 Other 5,309 18,000 385 1,020 1,400 5,048 330 1,235 450 1,593 250 913 336 327 Acceptances: Boiieht outricht 44,168 43,290 44,168 43,290 Held under repurchase agreement 31,173 5,799 31,173 5,799 U.S. Government securities: 26,606,827 26,251,512 1,442,489 1,429,342 6,695,661 6,619,791 1,517,281 1,509,042 2,303,566 2,323,915 1,705,178 1,708,764 Held under repurchase agreement 41,500 95,000 41,500 95,000 Total loans and securities 27,181,394 26,459,900 1,443,574 1,430,889 7,015,282 6,775,448 1,560,336 1,515,762 2,304,316 2,328,283 1,710,478 1,711,252 Diie from foreisn banks .. 15 15 1 1 14 14 1 1 1 1 1 1 Cash items in process of collection 6,437,306 5,630,684 467,341 405,506 1,280,699 1,215,353 394,830 332,939 565,404 543,121 502,789 433,573 99,575 93,636 4,328 4,705 9,858 10,313 4,036 4,245 9,315 9,432 6,651 6,654 261,740 146,641 13,956 7,884 65,069 36,477 14,639 8,181 22,452 12,768 16,639 9,479 Total assets. 54,027,601 53,095,155 2,939,099 2,853,631 13,415,227 13,658,140 3,146,549 3,024,111 4,690,193 4,482,126 3,477,769 3,359,785 i 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 28,261,967 27,872,023 1,614,203 1,630,425 6,646,973 6,512,632 1,807,990 1,751,391 2,570,372 2,571,638 2,131,600 2,135,757 Deposits: Member bank reserves 18,173,970 18,503,991 800,636 771,057 5,092,824 5,570,787 892,994 863,417 1,460,303 1,344,045 789,451 764,580 U.S. Treasurer—general account 503,778 358,364 28,362 21,009 65,278 35,306 37,645 22,996 32,804 4,656 56,937 29,422 Foreign 344,788 272,485 19,140 13,395 2 94,228 2 103,755 22,968 16,215 31,320 20,915 17,400 11,985 Other 693,735 390,851 26,422 2,202 367,074 307,036 32,548 4,013 26,294 5,054 28,317 4,635 Total deposits 19,716,271 19,525,691 874,560 807,663 5,619,404 6,016,884 986,155 906,641 1,550,721 1,374,670 892,105 810,622 Deferred availability cash items 4,847,216 4,335,126 390,252 338,324 808,203 755,659 281,609 275,287 457,026 413,145 399,444 343,293 Other liabilities 28,620 21,683 1,474 1,069 7,453 5,376 1,513 1,253 2,439 1,853 1,592 1,130 Total liabilities 52,854,074 51,754,523 2,880,489 2,777,481 13,082,033 13,290,551 3,077,267 2,934,572 4,580,558 4,361,306 3,424,741 3,290,802 CAPITAL ACCOUNTS Capital paid in 387,404 363,098 19,166 18,121 110,452 105,850 22,819 21,894 36,265 34,246 17,283 16,439 Surplus 774,808 868,410 38,332 50,116 220,905 238,902 45,638 59,607 72,530 76,643 34,566 44,846 11,316 109,124 1,112 7,913 1,837 22,837 825 8,038 840 9,931 1,179 7,698 Total liabilities and capital accounts.... 54,027,601 53,095,155 2,939,099 2,853,631 13,415,227 13,658,140 3,146,549 3,024,111 4,690,193 4,482,126 3,477,769 3,359,785 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 39.9% 42.1% 38.1% 38.7% 39.9% 43.7% 39.8% 41.3% 41.8% 38.8% 37.9% 38.0% Contingent liability on acceptances purchased 82,006 67,799 4,526 3,864 3 22,750 3 19,119 5,432 4,678 7,407 6,034 4,115 3,458 Industrial loan commitments. 975 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and out- 29,447,692 29,057,573 1,703,036 1,703,455 6,945,921 6,827,935 1,867,380 1,815,156 2,645,846 2,645,549 2,222,859 2,223,439 Less held by issuing Bank, and forwarded for redemption 1,185,725 1,185,550 88,833 73,030 298,948 315,303 59,390 63,765 75,474 73,911 91,259 87 682 Federal Reserve notes, net4 28,261,967 27,872,023 1,614,203 1,630,425 6,646,973 6,512,632 1,807,990 1,751,391 2,570,372 2,571,638 2,131,600 2,135,757 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 10,650,000 11,073,000 530,000 650,000 2,900,000 2,920,000 700,000 640,000 920,000 920,000 700,000 725,000 Eligible paper 99,778 25,393 42,725 5,285 U.S. Government securities. • 19,530,000 18,615,000 1,250,000 1,150,000 4,200,000 4,000,000 1,200,000 1,200,000 1,750,000 1,750,000 1,550,000 1,530,000 Total collateral 30,279,778 29,713,393 1,780,000 1,800,000 7,100,000 6,920,000 1,942,725 1,845,285 2,670,000 2,670,000 2,250,000 2,255,000 3 After deducting $250,560,000 participations of other Federal Reserve Banks on Dec. 31, 1959, and $168,730,000 on Dec. 31, 1958. 8 After deducting $59,256,000 participations of other Federal Reserve Banks on Dec. 31, 1959, and $48,680,000 on Dec. 31, 1958. 4 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 1959 AND 1958—Continued [In thousands of dollars] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas SanfFrancisco Item 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 ASSETS Gold certificate account 899,380 864,7423,000,4603,326,227 723,963 753,490 358,239 458,383 707,873 748,339 713,196 721,5192,455,3662 459 771 Redemption fund for Federal Reserve notes 64,628 57,037 182,357 167,634 46,241 44,661 23,410 22,463 45,167 43,533 31,037 29,845 84,353 84,915 Total gold certificate reserves 964,008 921,7793,182,8173,493,861 770,204 798,151 381,649 480,846 753,040 791,872 744,233 751,3642,539,7192,544,686 Federal Reserve notes of other Banks 62,570 53,143 39,909 40,267 20,751 23,287 23,009 17,588 24,273 11,317 33,442 28,333 43,297 43,582 28,685 26,560 65,447 58,734 23,922 26,513 11,722 8,664 15,272 14,662 16,519 14,687 46,246 38,862 Discounts and advances: Secured by U.S. Govt. securities 45,300 4,765 43,470 3,885 14,600 1,600 17,589 42,453 18,408 8,650 750 30,200 Other 235 805 939 2,560 185 662 120 430 195 798 260 931 560 2,005 9 Acceptances: U.S. Government securities: 1,402,2861,335,7564,604,3654,585,6141,082,1001,070,904 606,024 552,2531,146,8871,120,4931,061,9851,028,2983,039,0052,967,340 Total loans and securities 1,447,8211,341,3264,648,7744,592,0591,096,8851,073,166 623,733 552,6921,189,5351,139,6991,070,8951,029,9793,069,7652,969,345 1 1 2 2 1 1 1 1 1 1 1 1 Cash items in process of collection 514,749 453,2141,036,246 902,999 270,271 232,399 163,981 145,320 309,923 254,995 294,454 242,747 636,619 468,518 9,542 9,294 15,597 11,824 7,036 6,862 5,059 5,193 4,636 4,799 11,339 7,786 12,178 12,529 Other assets 14,899 8,470 44,898 24,838 10,528 5,917 5,938 3,076 12,157 7,130 10,599 5,917 29,966 16,504 Total assets 3,042,2752,813,7879,033,6909,124,5842,199,5982,166,2961,215,0911,213,3792,308,8372,224,4752,181,4822,080,8146,377,7916,094,027 3 Less than $500. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 1,604,4411,476,020 5,324,442 5,302,6811,245,1641,238,269 608,162 598,279 1,117,824 1,101,081 815,895 798,6132,774,9012,755,237 Deposits: Member bank reserves 875,240 846,398 2,637,889 2,809,518 620,895 669,057 404,178 419,895 840,994 817,730 973,362 969,769 2,785,2042,657,738 U.S. Treasurer—general account 26,581 32,479 39,321 48,619 41,412 19,283 23,771 24,459 44,445 38,271 44,231 30,630 62,991 51,234 Foreign 16,356 10,575 51,504 33,605 12,876 8,695 8,352 5,640 13,572 9,165 18,096 12,220 38,976 26,320 Other 13,693 2,347 65,504 8,404 20,532 3,141 10,390 961 14,654 3,279 11,903 2,778 76,404 47,001 Total deposits 931,870 891,799 2,794,218 2,900,146 695,715 700,176 446,691 450,955 913,665 868,4451,047,5921,015,397 2,963,575 2,782,293 Deferred availability cash items. 443,145 380,576 747,318 721,508 218,371 174,787 132,062 129,777 228,113 200,590 249,555 196,451 492,118 405,729 Other liabilities 1,473 1,080 5,236 3,967 1,085 792 1,512 933 1,141 848 959 710 2,743 2,672 Total liabilities. 2,980,929 2,749,475 8,871,214 8,928,302 2,160,335 2,114,024 1,188,427 1,179,944 2,260,743 2,170,964 2,114,0012,011,1716,233,337 5,945,931 CAPITAL ACCOUNTS Capital paid in 20,153 18,371 53,667 49,665 12,931 12,348 8,790 8,387 15,860 14,848 22,322 20,684 47,695 42,245 Surplus 40,306 39,474 107,334 132,159 25,862 33,746 17,580 20,785 31,720 32,935 44,645 43,436 95,390 95,761 Other capital accounts. 887 6,467 1,475 14,458 470 6,178 294 4,263 514 5,728 514 5,523 1,369 10,090 Total liabilities and capital counts 3,042,275 2,813,787 9,033,690 9,124,584 2,199,598 2,166,219,6215,0911,213,379 2,308,837 2,224,475 2,181,482 2,080,814 6,377,7961,094,027 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined 38.0% 38.9% 39.2% 42.6% 39.7% 41.2% 36.2% 45.8% 37.1% 40.2% 39.9% 41.4% 44.3% 46.0% Contingent liability on acceptances purchased for foreign correspondents , 3,868 3,051 12,180 9,695 3,045 2,509 1,975 1,627 3,210 2,644 4,280 3,526 9,218 7,594 Industrial loan commitments , 940 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding , 1,684,882 1,556,710 5,483,344 5,474,3113,307,0001,296,838 622,690 614,3381,155,2481,137,662 869,505 849,0752,939,9812,913,103 Less held by issuing Bank, and forwarded for redemption 80,441 80,690 158,902 171,632 61,836 58,569 14,528 16,059 37,424 36,581 53,610 50,462 165,080 157,866 Federal Reserve notes, net4. 1,604,4411,476,020 5,324,442 5,302,6811,245,1641,238,269 608,162 598,2791,117,824 1,101,081 815,895 798,6132,774,9012,755,237 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 500,000 475,000 1,900,000 2,200,000430,000 430,000 180,000 200,000 300,000 300,000 290,000 313,0001,300,0001,300,000 Eligible paper 14,600 1,600 42,453 18,508 U.S. Government securities 1,200,000 1,100,000 3,700,000 3,400,000935,000 935,000 450,666 425,666 870,000 850,000 '625,666 '575,666i, 800,6661,7*00,666 Total collateral. 1,700,000 1,575,000 5,600,000 5,600,0010,379,6001,366,600 630,000 625,0001,212,4531,168,508 915,000 888,0003,100,0003,000,000 4 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 1959, 1958, AND 1957 [In thousands of dollars] Rate of December 31 Change during Type of issue interest (per cent) 1959 1958 1957 1959 1958 Treasury bonds: 1956-58 12,493 -12,493 1957-59 339,096 -339,096 1956-59 21,690 -21,690 1959-62 June.. 319,849 319,849 319,849 1959-62 Dec.., 693,765 693,765 693,765 1965 Feb 20,300 20,300 +20,300 1966Aug 7,000 7,000 +7,000 1962-67 56,610 56,610 56,610 1963-68 122,585 122,585 122,585 1964-69 June., 203,890 203,890 203,890 1964-69 Dec.. 266,999 266,999 266,999 1965-70 521,490 521,490 521,490 1966-71 132,707 132,707 132,707 1967-72 June., 49,266 49,266 49,266 1967-72 Sept.., 2,552 2,552 2,552 1967-72 Dec.., 58,758 58,758 58,758 1985 May 5,200 5,200 +5,200 1990 Feb 22,800 22,800 +22,800 Total Treasury bonds. 2,483,771 2,483,771 2,801,750 -317,979 Treasury notes: Aug. 15, 1960-C. 5,500,000 +5,500,000 May 15, 1961-B. 2,857,565 2,857,565 +2,857,565* Feb. 15, 1963-A. 10,000 10,000 + 10,000 May 15, 1964-A. 2,642,733 +2,642,733 Total Treasury notes. 11,010,298 2,867,565 +8,142,733 +2,867,565 Certificates: Feb. 14, 1958.. 5,494,500 -5,494,500 Aug. 1,1958.. 6,581,547 -6,581,547 Dec. 1,1958.. 7,857,565 -7,857,565 Feb. 14,1959., 5,506,993' -5,506,993 +5,506,993 Aug. 1, 1959., 8,142,733 -8,142,733 +8,142,733 Nov. 15, 1959., 5,000,000 -5,000,000 +5,000,000 Feb. 15,1960., 5,506,993 +5,506,993 Nov. 15, I960., 5,000,000 +5,000,000 Total certificates. 10,506,993 18,649,726 19,933,612 -8,142,733 -1,283,886 Treasury bills: Tax anticipation 47,000 +47,000 Other: Due within 3 mos.. 2,162,000 2,233,950 983,573 -71,950 + 1,250,377 Due 3-6 mos 380,365 16,500 + 363,865 + 16,500 Due over 6 mos... 16,400 + 16,400 Total Treasury bills.., 2,605,765 2,250,450 983,573 +355,315 + 1,266,877 Repurchase agreements. 41,500 95,000 519,350 -53,500 -424,350 Total holdings. 26,648,327 26,346,512 24,238,285 +301,815 +2,108,227 112 Digitized for FRASER 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, 1953-591 [In millions of dollars] Date Amount Date Amount Date Amount Date Amount 1953—Mar. 18 110 1953—June 11 358 1954__jan. 14 22 1954—Mar. 15 134 19 104 12 506 15 169 16 190 20 189 13 506 16 169 21 189 •14 506 •17 169 •22 189 15 999 18 323 1955 ) 23 333 16 1,172 19 424 1956 > no transactions 24 186 17 823 20 323 1957 ) 25 63 18 364 21 306 26 49 19 992 22 283 June 5 196 20 992 23 283 1958—Mar. 17 143 6 196 *21 992 •24 283 18 207 •7 196 22 908 25 203 8 374 23 608 26 3 9 491 24 296 10 451 1959—no transactions • Sunday or holiday. 1 Under authority of Section 14(b) of the Federal Reserve Act. On Nov. 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 14 per cent through Dec. 3, 1957, and lA per cent below prevailing discount rate of Federal Reserve Bank of New York thereafter. Rate on purchases in 1958 was 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, 1955-59 [Number in thousands; amounts in thousands of dollars] Operation 1959 1958 1957 1956 1955 NUMBER OF PIECES HANDLED1 Discounts and advances2 .., 26 14 25 23 21 Currency received and counted 4,631,081 4,547,668 4,631,676 4,466,739 4,282,562 Coin received and counted . 9,929,912 9,574,474 9,089,460 8,610,821 8,430,796 Checks handled: U.S. Govt. checks , 393,860 388,541 469,158 539,359 503,516 Postal money orders 279,939 295,350 324,161 342,313 347,351 All other^ 3,257,839 3,085,185 2,974,940 2,822,589 2,643,549 Collection items handled: U.S. Govt. coupons paid., 13,915 13,564 12,546 11,997 12,301 All other 20,853 20,429 19,308 17,813 16,368 Issues, redemptions, and exchanges of U.S. Govt. securities 196,063 193,665 207,246 198,519 191,922 Transfers of funds 2,695 2,426 2,302 2,123 1,960 AMOUNTS HANDLED Discounts and advances2... 105,058,505 41,306,072 114,469,820 109,665,475 88,436,422 Currency received and counted 30,730,461 29,596,570 29,926,319 29,104,496 27,461,048 Coin received and counted . 1,022,660 956,235 922,742 887,418 862,022 Checks handled: U.S. Govt. checks , 106,724,118 99,942,372 102,062,972 114,173,132 123,215,681 Postal money orders 5,078,641 5,297,341 5,796,279 5,941,097 5,814,754 Allother3 , 1,130,235,860 1,044,984,066 1,044,553,457 ,003,202,371 927,648,399 Collection items handled: U.S. Govt. coupons paid.. 3,866,402 3,695,458 3,032,805 2,563,075 2,595,305 All other , 5,838,199 5,663,684 5,758,976 5,495,317 5,354,604 Issues, redemptions, and exchanges of U.S. Govt. securities , 545,489,154 526,037,271 493,391,267 421,612,394 429,701,960 Transfers of funds 1,882,069,626 1,643,532,069 1,345,185,037 1,233,509,550 1,091,608,891 1 Two or more checks, coupons, etc.* handled as a single item are counted as one piece. 2 Exclusive of industrial loans. 3 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 1959 Phila- Minne- Kansas San Item Total Boston New York delphia Cleveland Richmond Atlanta Chicago St. Louis apolis City Dallas Francisco CURRENT EARNINGS Discounts and advances $27,727,975 $1,100,020 $6,123,532 $1,492,831 $2,051,006 $1,559,502 $3,154,478 $4,913,984 $759,478 $1,105,828 $2,893,655 $1,281,935 $1,291,725 Acceptances 1,075,451 1,075,451 U.S. Govt. securities... 857,027,803 '46,405,883 217,110,107 48,848,408 74,376,718 54,981,403 44,762,291 148,276,884 34,803,214 19,181,826 36,792,290 34,008,358 97,480,423 All other 394,887 22,316 62,675 17,098 28,230 18,329 75,653 49,873 14,996 27,908 33,821 16,252 27,734 Total current earnings 886,226,116 47,528,219 224,371,765 50,358,337 76,455,954 56,559,234 47,992,422 153,240,741 35,577,689 20,315,562 39,719,766 35,306,545 98,799,882 CURRENT EXPENSES Salaries: Officers 6,330,587 371,085 1,134,763 386,549 544,501 526,231 506,975 622,651 472,544 334,250 487,394 406,721 536,923 Employees 82,700,989 5,075,485 18,751,092 4,329,373 7,251,732 5,419,367 5,277,927 12,483,214 4,644,333 2,635,708 4,321,201 3,817,818 8,693,739 Directors' & other fees. 525,206 22,763 62,463 29,218 47,972 35,151 64,841 43,624 31,969 35,770 67,661 37,289 46,485 Retirement contrib 10,242,106 613,936 2,209,005 540,891 901,131 694,178 684,691 1,534,729 585,563 323,909 575,648 511,683 1,066,742 Traveling expenses.... 1,813,271 102,753 300,278 85,908 165,067 154,440 139,747 210,654 104,753 96,025 116,835 113,608 223,203 Postage and expressage. 18,254,889 1,536,002 2,671,911 929,962 1,408,547 1,798,195 1,561,536 2,481,289 984,791 640,432 1,102,283 935,756 2,204,185 Telephone & telegraph. 1,471,241 76,753 310,298 66,759 116,077 108,311 156,744 170,240 83,578 54,272 86,083 96,883 145,243 Printing, stationery, and supplies 6,604,851 493,523 1,291,090 334,887 474,184 432,893 522,662 1,015,098 425,109 202,972 400,429 335,274 676,730 Insurance 1,593,582 96,418 267,948 72,525 146,556 140,174 137,431 200,260 108,963 78,646 105,534 82,337 156,790 Taxes on real estate... 4,219,629 652,740 775,780 141,126 352,257 181,477 243,506 587,764 168,300 298,277 192,684 166,493 459,225 Depreciation (building) 5,453,240 414,858 478,325 268,149 894,687 527,338 390,920 623,994 342,624 324,352 168,473 265,706 753,814 Light, heat, power, and water 1,672,307 108,070 245,112 100,183 173,708 157,401 111,962 219,148 126,470 86,614 129,828 89,118 124,693 Repairs and alterations. 1,107,327 72,314 213,903 59,124 129,178 151,418 51,826 40,007 123,717 105,750 61,463 20,723 77,904 Rent 194,081 5,516 7,059 5,361 16,376 2,506 2,384 95,302 1,594 111 78 55,853 1,941 Furniture & equipment: Purchases 1,840,005 138,137 231,784 142,323 158,706 103,932 289,568 125,393 133,861 174,625 73,036 72,702 195,938 Rentals 5,932,257 458,897 772,941 360,634 431,785 401,127 425,796 1,035,771 318,938 198,425 388,681 319,902 819,360 All other 1,861,954 88,242 352,839 68,931 369,736 89,598 117,796 274,230 82,261 86,285 108,314 98,689 125,033 Interbank expenses.. 41,844 -512,116 49,853 69,063 -8,880 39,430 112,997 29,761 18,767 31,721 40,921 86,639 Subtotal 151,817,523 10,369,335 29,564,476 7,971,756 13,651,262 10,914,85810,725,742 21,876,365 8,769,130 5,695,191 8,417,345 7,467,476 16,394,587 F. R. currency 6,384,083 406,681 1,034,845 342,799 385,901 500,821 678,761 1,341,334 325,944 191,963 277,935 325,910 571,190 Assessment for expenses of Board of Governors 6 470,600 357,900 1,809,000 427,100 583,000 321,400 304,800 955,200 241,500 153,000 251,100 337,600 729,000 Total. 164,672,206 11,133,916 32,408,320 8,741,656 14,620,162 11,737,079 11,709,302 24,172,900 9,336,573 6,040,154 8,946,380 8,130,986 17,694,777 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Less reimbursement for certain fiscal agency and other expenses. 19,969,500 1,051,471 3,400,581 965,663 1,873,578 1,092,912 1,486,985 3,457,458 1,230,950 630,258 1,500,846 1,130,417 2,148,381 144,702,706 10,082,446 29,007,740 7,775,992 12,746,585 10,644,16710,222,318 20,715,442 8,105,623 5,409,896 7,445,534 7,000,569 15,546,396 PROFIT AND LOSS Current net earnings... 741,523,410 37,445,773 195,364,026 42,582,344 63,709,370 45,915,067 37,770,104 132,525,299 27,472,066 14,905,666 32,274,232 28,305,976 83,253,486 Additions to current net earnings: Profits on sales of U.S. Govt. securities (net) 189,930 10,414 47,981 11,277 16,502 11,746 9,766 33,137 7,864 4,325 8,191 7,509 21,216 Transferred from reserves for contingencies (net).. 97,658,503 6,786,590 20,968,889 7,207,970 9,083,117 6,500,112 5,573,662 12,966,576 5,691,670 3,964,289 5,206,431 5,002,666 8,706,533 All other 851,294 3,063 953 3,008 4,506 266 1,289 27,654 3,044 1,071 2,946 857 802,638 Total additions. 98,699,727 6,800,067 21,017,823 7,222,255 9,104,125 6,512,123 5,584,717 13,027,366 5,702,578 3,969,685 5,217,568 5,011,032 9,530,388 Deductions from current net earnings... 452,473 113,088 288,283 2,677 178 1,385 416 449 989 1,420 38,589 4,409 592 Net additions 98,247,253 6,686,980 20,729,540 7,219,578 9,103,947 6,510,738 5,584,301 13,026,917 5,701,588 3,968,264 5,178,979 5,006,624 9,529,796 Net earnings before payments to U.S. Treasury 839,770,663 44,132,753 216,093,566 49,801,923 72,813,317 52,425,805 43,354,406 145,552,216 33,173,654 18,873,930 37,453,21133,312,599 92,783,282 Dividends paid 22,721,687 1,121,379 6,546,841 1,349,401 2,150,830 1,016,950 1,163,437 3,110,883 760,610 518,245 928,427 1,307,562 2,747,120 Paid U.S. Treasury (interest on F. R. notes) 910,649,768 54,795,062 227,544,018 62,421,267 74,774,987 61,688,735 41,359,271 167,266,066 40,296,779 21,560,985 37,739,576 30,796,437 90,406,584 Transferred to surplus. -93,600,791 -11,783,688 -17,997,293 -13,968,746 -4,112,500 -10,279,880 831,697-24,824,734 -7,883,735 -3,205,300-1,214,792 1,208,601 -370,423 Surplus, January 1.... 868,408,591 50,115,888 238,901,893 59,606,846 76,642,500 44,845,980 39,474,103 132,158,534 33,746,035 20,785,000 32,934,892 43,436,299 95,760,623 Surplus, December 31.. 774,807,800 38,332,200 220,904,600 45,638,100 72,530,000 34,566,100 40,305,800 107,333,800 25,862,300 17,579,700 31,720,100 44,644,900 95,390,200 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, 1914-59 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 Period or Bank earnings expenses ments to paid Treasury (Sec. 13b) (interest on (Sec. 13b) (Sec. 7) U.S. Treasury1 F. R. notes) 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 £T 1928 64,052,860 26,904,810 32,122,021 8,458,463 2,584,659 21,078,899 °^ 1929 70,955,496 29,691,113 36,402,741 9,583.913 4,283,231 22,535,597 1930 36,424,044 28,342,726 7,988,182 10,268,598 17,308 -2,297,724 1931 29,701,279 27,040,664 2,972,066 10,029,760 -7,057,694 1932 . ... 50,018,817 26,291,381 22,314,244 9,282,244 2,011,418 11,020,582 1933 49,487,318 29,222,837 7,957,407 8,874,262 -916,855 1934 48,902,813 29,241,396 15,231,409 8,781,661 $ -60,323 6,510,071 1935 42,751,959 31,577,443 9,437,758 8,504,974 $ 297,667 27,695 607,422 1936 37,900,639 29,874,023 8,512,433 7,829,581 227,448 102,880 352,524 1937 41,233,135 28,800,614 10,801,247 7,940,966 176,625 67,304 2,616,352 1938 36,261,428 28,911,608 9,581,954 8,019,137 119,524 -419,140 1,862,433 1939 38,500,665 28,646,855 12,243,365 8,110,462 24,579 -425,653 4,533,977 1940 43,537,805 29,165,477 25,860,025 8,214,971 82,152 -54,456 17,617,358 1941 41,380,095 32,963,150 9,137,581 8,429,936 141,465 -4,333 570,513 1942 52,662,704 38,624,044 12,470,451 8,669,076 197,672 49,602 3,554,101 1943 69,305,715 43,545,564 49,528,433 8,911.342 244,726 135,003 40,237,362 1944 104,391,829 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 1959... 886,226,116 144,702,706 839,770,663 22,721,687 910,649,768 -93,600,791 Total 1914-59 8,176,893,581 2,281,943,114 5,936,077,097 453,205,899 149,138,300 2,188,893 4,428,067,660 -3,657 2 903,480,002 Aggregate for each Federal Reserve Bank, 1914-59: Boston 499,495,368 162,506,023 340,908,156 28,359,265 7,111,395 280,843 256,594,214 135,411 48,427,025 New York 2,089,099,388 507,468,324 1,597,771,407 148,484,948 68,006,262 369,116 1,123,183,321 -433,413 258,161,171 Philadelphia 531,388,692 151,178,168 386,627,854 36,313,146 5,558,901 722,406 283,774,417 290,661 59,968,322 Cleveland 734,990,304 209,845,595 527,353,355 44,574,397 4,842,447 82,930 392,099,695 -9,906 85,763,793 Richmond 494,428,051 150,736,302 346,166,040 19,567,434 6,200,189 172,493 279,851,532 -71,517 40,445,908 Atlanta 423,940,733 128,765,871 294,966,975 17,973,974 8,950,561 79,264 222,385,343 5,491 45,572,340 Chicago 1,293,530,852 320,388,345 974,845,604 55,840,360 25,313,526 151,045 770,866,435 11,682 122,662,554 St. Louis 369,818,690 125,546,485 244,388,968 15,623,389 2,755,629 7,464 195,047,072 -26,515 30,981,928 Minneapolis 222,105,322 77,621,400 146,454,556 10,606,350 5,202,900 55,615 109,067,908 64,874 21,456,913 Kansas City 372,387,064 122,768,636 250,916,059 16,207,994 6,939,100 64,213 191,853,376 -8,674 35,860,050 Dallas 330,242,356 104,074,419 227,581,303 18,298,584 560,049 102,083 159,642,872 55,337 48,922,378 San Francisco 815,466,762 221,043,548 598,096,818 41,356,054 7,697,341 101,421 443,701,474 -17,089 105,257,617 Total 8,176,893,581 2,281,943,114 5,936,077,097 453,205,899 149,138,300 2,188,893 4,428,067,660 -3,657 903,480,002 1 Current earnings less current expenses, plus and minus profit and loss additions and deductions. 2 The $903,480,002 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 $774,807,800 on Dec. 31, 1959. 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 1918-59 AND END OF MONTH 1959 [In millions of dollars] Reserve Bank credit outstanding Deposits, other than member bank reserves, Member bank with F. R. Banks reserves U.S. Government i 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 other1 Total out- circu- hold- Treas- For- serve Bought repur- ad- stand- lation ings4 ury eign Other ac- Total Re- Ex- Total out- chase vances ing3 deposits deposits deposits counts5 quired6 cess6 right agreement 1918 239 239 1,766 199 294 2,498 2,873 1,795 4,951 288 51 96 25 118 1,636 1,585 51 1919 300 300 2,215 201 575 3,292 2,707 1,707 5,091 385 31 73 28 208 1,890 1,822 68 1920 287 287 2,687 119 262 3,355 2,639 1,709 5,325 218 57 5 18 298 1,781 1921 234 234 1,144 40 146 1,563 3,373 1,842 4,403 214 96 12 15 285 1,753 1,654 99 _ 1922 436 436 618 78 273 1,405 3,642 1,958 4,530 225 11 3 26 276 1,934 ^ 1923 134 80 54 723 27 355 1,238 3,957 2,009 4,757 213 38 4 19 275 1,898 1,884 14 £ 1924 540 536 4 320 52 390 1,302 4,212 2,025 4,760 211 51 19 20 258 2,220 2,161 59 375 367 8 643 63 378 1,459 4,112 1,977 4,817 203 16 8 21 272 2,212 2,256 -44 1925 315 312 3 637 45 384 1,381 4,205 1,991 4,808 201 17 46 19 293 2,194 2,250 -56 1926 617 560 57 582 63 393 1,655 4,092 2,006 4,716 208 18 5 21 301 2,487 2,424 63 1927 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 1 19 9 2 2 9 8 511 488 23 632 34 405 1,583 3,997 2,022 4,578 216 29 6 24 393 2,355 2,428 -73 1930 729 686 43 251 21 372 1,373 4,306 2,027 4,603 211 19 6 22 375 2,471 2,375 96 1931 817 775 42 638 20 378 1,853 4,173 2,035 5,360 222 54 79 31 354 1,961 1,994 -33 1932 1,855 1,851 4 235 14 41 2,145 4,226 2,204 5,388 272 8 19 24 355 2,509 1,933 576 1933 2,437 2,435 2 98 15 137 2,688 4,036 2,303 5,519 284 3 4 128 360 2,729 1,870 859 1934 2,430 2,430 7 5 21 2,463 8,238 2,511 5,536 3,029 121 20 169 241 4,096 2,282 1,814 1935 2,431 2,430 I 5 12 38 2,486 10,125 2,476 5,882 2,566 544 29 226 253 5,587 2,743 2,844 1936 2,430 2,430 3 39 28 2,500 11,258 2,532 6,543 2,376 244 99 160 261 6,606 4,622 1,984 1937 2,564 2,564 10 19 19 2,612 12,760 2,637 6,550 3,619 142 172 235 263 7,027 5,815 1,212 1938 2,564 2,564 4 17 16 2,601 14,512 2,798 6,856 2,706 923 199 242 260 8,724 5,519 3,205 1939 2,484 2,484 7 91 11 2,593 17,644 2,963 7,598 2,409 634 397 256 251 11,653 6,444 5,209 1940 2,184 2,184 3 80 8 2,274 21,995 3,087 8,732 2,213 368 1,133 599 284 14,026 7,411 6,615 1941 2,254 2,254 3 94 10 2,361 22,737 3,247 11,160 2,215 867 774 586 291 12,450 9,365 3,085 1942 6,189 6,189 6 471 14 6,679 22,726 3,648 15,410 2,193 799 793 485 256 13,117 11,129 1,988 1943 11,543 11,543 5 681 10 12,239 21,938 4,094 20,449 2,303 579 1,360 356 339 12,886 11,650 1,236 1944 18,846 18,846 80 815 4 19,745 20,619 4,131 25,307 2,375 440 1,204 394 402 14,373 12,748 1,625 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1945... 24,262 24,262 249 578 2 25,091 20,065 4,339 28,515 2,287 977 862 446 495 15,915 14,457 1,458 1946... 23,350 23,350 163 580 1 24,093 20,529 4,562 28,952 2,272 393 508 314 607 16,139 15,577 562 1947... 22,559 22,559 85 535 1 23,181 22,754 4,562 28,868 1,336 870 392 569 563 17,899 16,400 1,499 1948... 23,333 23,333 223 541 1 24,097 24,244 4,589 28,224 1,325 1,123 642 547 590 20,479 19,277 1,202 1949... 18,885 18,885 78 534 2 19,499 24,427 4,598 27,600 1,312 821 767 750 706 16,568 15,550 1,018 1950... 20,778 20,725 53 67 1,368 3 22,216 22,706 4,636 27,741 1,293 668 895 565 714 17,681 16,509 1,172 1951... 23,801 23,605 196 19 1,184 5 25,009 22,695 4,709 29,206 1,270 247 526 363 746 20,056 19,667 389 1952... 24,697 24,034 663 156 967 4 25,825 23,187 4,812 30,433 1,270 389 550 455 777 19,950 20,520 -570 1953... 25,916 25,318 598 28 935 2 26,880 22,030 4,894 30,781 761 346 423 493 839 20,160 19,397 763 1954... 24,932 24,888 44 143 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... 26,347 26,252 95 64 1,296 49 27,755 20,534 5,234 32,193 683 358 272 391 1,122 18,504 18,574 -70 1959— Jan.. 25,715 25,611 104 462 979 41 27,197 20,476 5,235 31,125 721 447 274 345 1,118 18,878 18,355 523 Feb.. 25,350 25,295 55 632 999 39 27,020 20,479 5,241 31,129 718 492 310 334 1,215 18,540 17,972 568 Mar. 25,497 25,497 327 862 30 26,716 20,442 5,247 31,250 689 398 308 388 1,180 18,192 17,815 377 25,703 25,623 80 500 943 30 27,176 20,305 5,257 31,349 711 539 266 341 1,136 18,396 18,201 195 May*. 25,905 25,905 984 860 28 27,777 20,188 5,273 31,638 694 567 291 369 1,219 18,459 17,975 484 June. 26,044 26,025 19 421 846 26 27,337 19,705 5,279 31,914 394 535 294 363 1,181 17,640 18,054 -414 July. 26,543 26,408 135 1,229 772 25 28,569 19,626 5,280 31,898 397 522 278 337 1,138 18,905 18,308 597 Aug. 26,690 26,650 40 692 779 21 28,181 19,524 5,283 31,973 392 537 252 329 1,260 18,245 18,140 105 Sept. 26,563 26,563 330 951 20 27,865 19,491 5,289 31,848 377 704 312 448 1,196 17,760 18,175 -415 vo Oct.. 26,631 26,537 94 877 933 28 28,469 19,585 5,298 31,905 396 488 284 335 1,127 18,818 18,305 513 Nov. 26,922 26,894 28 833 1,158 34 28,946 19,566 5,307 32,489 401 582 332 358 1,242 18,415 18,050 365 Dec. 26,648 26,607 41 458 1,590 75 28,771 19,456 5,311 32,591 391 504 345 694 841 7 18,484 18,629 -145 1 Principally acceptances and industrial loans; authority for industrial loans expired Aug. 21, 1959. 2 Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation. 3 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. 6 These figures are estimated. Prior to 1929 available only on call dates (in 1920 and 1922, the call dates were December 29). 7 Beginning with December 1959, includes cash allowed as reserves. 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, 1959 Cost Federal Reserve Bank or Net branch Buildings Fixed ma- book value Land (including chinery and Total vaults)! equipment Boston $1,628,132 $5,929,169 $2,977,084 $10,534,385 $4,327,764 New York. 5,215,656 12,183,528 4,886,521 22,285,705 4,760,865 Annex... 592,679 1,451,569 665,908 2,710,156 923,092 Buffalo 406,049 2,550,437 1,562,577 4,519,063 4,174,423 Philadelphia. 1,884,357 4,839,506 2,154,452 8,878,315 4,036,175 Cleveland. 1,295,490 6,683,492 3,104,307 11,083,289 2,464,048 Cincinnati. 400,891 1,164,915 1,418,983 2,984,789 1,535,720 Pittsburgh. 1,619,870 2,953,531 2,427,377 7,000,778 5,315,499 Richmond. 469,944 4,164,663 2,431,502 7,066,109 3,110,959 Baltimore. 250,487 2,009,381 1,062,747 3,322,615 2,152,519 Charlotte.. 117,479 1,069,026 607,294 1,793,799 1,387,436 Atlanta 633,387 1,722,115 362,731 2,718,233 1,116,135 Annex 93,931 137,100 103,867 334,898 298,860 Birmingham.. 331,284 3,082,345 70,511 3,484,140 2,965,278 Jacksonville.. 164,004 1,686,250 694,291 2,544,545 1,832,150 Nashville 592,104 1,474,678 1,009,863 3,076,645 2,946,165 New Orleans. 277,078 762,456 265,700 1,305,234 383,791 Chicago. 6,019,757 14,298,893 2,799,699 23,118,349 12,202,173 Detroit.. 1,147,734 2,837,712 1,214,162 5,199,608 3,394,464 St. Louis... 1,675,780 3,171,719 2,152,202 6,999,701 2,182,620 Little Rock. 241,105 391,611 198,365 831,081 446,102 Louisville.. 523,353 2,859,819 1,003,708 4,386,880 4,156,924 Memphis... 128,542 287,469 152,627 568,638 250,267 Minneapolis. 600,521 4,545,592 2,581,567 7,727,680 4,981,678 Helena 15,709 126,401 62,977 205,087 77,750 Kansas City 545,764 3,521,181 1,316,319 5,383,264 1,310,087 Denver 592,271 523,041 86,910 1,202,222 758,026 Oklahoma City. 65,021 421,252 97,588 583,861 159,449 Omaha 445,663 1,491,117 723,843 2,660,623 2,408,942 Dallas 686,243 5,841,096 466,692 6,994,031 5,171,454 El Paso 262,477 787,728 393,301 1,443,506 1,333,337 Houston.... 695,615 1,408,574 744,758 2,848,947 2,669,314 San Antonio. 448,596 1,400,390 570,847 2,419,833 2,164,813 San Francisco.. 476,768 3,783,530 1,458,028 5,718,326 1,163,612 Annex 247,201 124,000 30,000 401,201 395,721 Los Angeles... 736,867 4,074,380 1,491,100 6,302,347 4,073,723 Portland 207,380 1,678,512 649,432 2,535,324 1,696,582 Salt Lake City. 480,222 1,878,238 707,575 3,066,035 2,957,712 Seattle 274,772 1,891,564 642,239 2,808,575 1,890,079 Total. 32,490,183 111,207,980 45,349,654 189,047,817 99,575,708 OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Richmond 146,550 146,550 146,550 757,491 757,491 757,491 Kansas Citv.. 2 396,219 396,219 396,219 Oklahoma City.... 2 498,005 498,005 498,005 78,812 317,336 112,111 508,259 101,416 Los Angeles 40,747 29,464 70,211 70,211 Total 1,917,824 346,800 112,111 2,376,735 1,969,892 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, 1959] President Other officers Employees1 Total Federal Reserve Bank (including branches) Annual Num- Annual Num- Annual Num- Annual salary ber salaries ber salaries ber salaries Boston $35,000 22 $317,800 1,358 $5,144,392 1,381 $5,497,192 New York 60,000 57 1,041,500 3,798 18,868,763 3,856 19,970,263 Philadelphia 35,000 25 351,500 992 4,182,518 1,018 4,569,018 Cleveland 35,000 35 498,250 1,543 7,137,130 1,579 7,670,380 Richmond 35,000 36 487,500 1,356 5,236,272 1,393 5,758,772 Atlanta 35,000 36 453,742 1,379 5,127,240 1,416 5,615,982 Chicago 50,000 39 544,226 2,838 12,132,040 2,878 12,726,266 St. Louis 35,000 33 446,700 1,106 4,396,143 1,140 4,877,843 Minneapolis 35,000 22 299,250 661 2,607,771 684 2,942,021 Kansas City 35,000 33 447,500 1,055 4,179,929 1,089 4,662,429 Dallas 35,000 31 384,800 969 3,733,686 1,001 4,153,486 San Francisco 35,000 40 504,000 2,024 8,407,378 2,065 8,946,378 Total $460,000 409 $5,776,768 19,079 $81,153,262 19,500 $87,390,030 1 Includes 871 part-time employees. NO. 11—FEDERAL RESERVE BANK DISCOUNT RATES In effect December 31, 1959 1 [Per cent per annum] Discounts for and advances to member banks Advances to individuals, partnerships, or corpora- Federal Reserve Advances secured by tions other than member Bank Government obligations banks secured by direct and discounts of and Other secured advances obligations of the U.S. advances secured by [Sec. 10(b)] (last par. Sec. 13) eligible paper (Sees. 13 and 13a)2 Boston New York.... Philadelphia.. Cleveland.... Richmond.... Atlanta Chicago St. Louis Minneapolis.. Kansas City.. Dallas San Francisco 1 For changes during year, see record of policy actions of the Board of Governors. 2 Rates shown also apply to advances secured by obligations of Federal intermediate credit banks maturing within 6 months. 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. 121 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 h 1917—June 21 10 7 3 1936—Aug. 16 15 10% 4% f 1937—Mar. 1 17% May 1 20 8* 6 4 1938—Apr. 16 17% 5 2234 1941_Nov. 1 26 20 12 6 6 1942— S A e u p g t . . 2 1 0 4 2 2 4 2 14 Oct. 3 20 1948—Feb. 27 22 June 11 24 Sept. 16,24* 26 22 16 1949—May 1,5* 24 21 15 June 30, July 1* 20 14 6 6 Aug. 1,11* 19% 13 5 Aug. 16, 18* 19 12 5 Aug. 25 18% Sept. 1 18 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* 8* Mar. 20, Apr. 1* Apr. 17 ii* Apr. 24 16% In effect Jan. 1, 1960 18 16% 11 5 5 Present legal requirements: 2 10 10 7 3 3 Maximum 2 22 2 22 14 6 6 • First-of-month or midmonth dates are changes at country banks, and other dates (usually Thursday) are at central reserve or reserve city banks. * Demand deposits subject to reserve requirements which, beginning with Aug. 23, 1935, have been total demand deposits minus cash items in process of collection and demand balances due from domestic banks (also minus war loan and Series E bond accounts during the period Apr. 13, 1943-June 30, 1947). 2 Prior to July 28,1959, the minimum and maximum legal requirements against net demand deposits of central reserve city banks were 13 and 26 per cent, respectively, and the maximum for reserve city banks was 20 per cent. NO. 13 —MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS [Per cent per annum] Nov. 1, 1933— Feb. 1, 1935— Jan. 1, 1936— Effective Type of deposit Jan. 31, 1935 Dec. 31, 1935 Dec. 31, 1956 Jan. 1, 1957 Savings deposits 3 2% 2% 3 Postal savings deposits 3 2% 2% 3 Other time deposits payable: In 6 months or more 3 2m% 3 In 90 days to 6 months.... 3 2% In less than 90 days 3 1 NOTE.—Maximum rates that may be paid by member banks as established by the Board of Governors under provisions of Regulation Q. Under this Regulation the rate payable by a member bank may not in any event exceed the maximum rate payable by State banks or trust companies on like deposits under the laws of the State in which the member bank is located. Effective Feb. 1, 1936, maximum rates that may be paid by insured nonmember commercial banks, as established by the F.D.I.C., have been the same as those in effect for member banks. 122 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 i 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 Reports for 1948, p. 77, and 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, 1959] 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 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. 123 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, 1959 AND 1958 i [In millions of dollars] Commercial banks Mutual savings banks All Item banks Member banks Totaiz Insured Non- Nonnonmember insured Total Insured insured Total National State December 31, 1959 3 Loans and investments, total 228,620 190,980 158,780 102.770 56,010 30,650 1,570 37,640 30,570 7,070 Loans 137,170 112,000 95,850 60,580 35,270 15,610 550 25,170 20,970 4,200 Investments 91,450 78,980 62,930 42,190 20,740 15,040 1,020 12,470 9,600 2,870 U.S. Govt. obligations 65,470 58,600 46,680 31,370 15,310 11,290 640 6,870 4,980 1,890 Other securities 25,980 20,380 16,250 10,820 5,430 3,750 380 5,600 4,620 980 Cash assets 48,820 47,990 42,330 26,880 15,450 5,360 300 830 670 160 Deposits, total.... . 252,660 217,670 183,030 118,610 64,420 33,150 1,520 34,990 28,460 6,530 16,830 16,830 16,100 9,300 6,800 460 270 Other demand 135,220 135,190 114,330 73,120 41,210 19,960 900 30 30 to To O ta t l h e c r a p t i i t m al e accounts 1 2 0 3 0 , , 0 6 9 1 0 0 6 1 5 9 , , 6 7 5 0 0 0 5 1 2 6 , , 6 3 0 7 0 0 3 1 6 0 , , 1 38 9 0 0 1 5 6 , , 9 4 9 10 0 1 2 2 , , 9 7 8 3 0 0 3 3 6 5 0 0 34 3 , , 9 3 6 9 0 0 28 2 , , 4 6 3 7 0 0 6,5 7 3 20 0 4 13,991 13,474 6,233 4,542 1,691 6,878 366 517 268 249 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 49,911 48,990 43,188 26,781 16,407 5,504 301 921 752 169 250,057 216,017 182,816 116,714 66,102 31,696 1,532 34,040 27,277 6,763 Interbank •• 18,174 18,171 17,414 9,802 7,612 448 309 3 2 134,385 134,353 114,270 72,100 42,170 19,185 898 32 31 1 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 14,020 13,501 6,312 4,578 1,734 6,793 399 519 241 278 1 All banks in the United States. Figures for Dec. 31, 1959, include data for 17 commercial banks in Alaska (including six national members) and 11 commercial banks in Hawaii (including one national member); previously only one national bank in Alaska and one in the Virgin Islands that became members in 1954 and 1957, respectively, had been included. 2 Total for commercial banks excludes three member.mutual savings banks. 3 Partly estimated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 17 — MEMBER BANK EARNINGS, BY CLASS OF BANK, 1959 AND 1958 i Central reserve city banks Total Reserve Country city banks banks Item New York Chicago 1959 1958 1959 1958 1959 1958 1959 1958 1959 1958 In millions of dollars Earnings 8,061 7,127 1,306 1,164 308 272 3,190 2,835 3,257 2,856 On U.S. Govt. securities... 1,394 1,266 182 170 60 58 505 478 647 560 On other securities 411 61 17 151 183 On loans 5,008 4,326 814 699 182 157 2,049 1,759 1,964 1,712 Allother 1,123 234 40 447 401 Exp 5,131 4,617 699 636 158 142 2,031 1,823 2,244 2,016 Salaries and wages 1,981 300 68 777 836 Interest on deposits 1,123 110 25 474 515 Allother 1,512 227 49 572 664 Net current earnings before income taxes 2,930 2,510 607 528 150 130 1,160 1,012 1,013 840 Recoveries and profits2 754 112 325 262 Losses and charge-offs3... 315 25 113 157 Net addition to valuation reserves 342 39 25 171 108 Profits before income taxes... 2,031 2,606 411 576 140 822 1,053 707 837 Taxes on net income 780 1,148 171 276 69 315 490 258 313 Net profits 1,252 1,457 240 300 507 563 448 524 Cash dividends declared4 705 646 166 160 292 258 218 202 In per cent Ratios: Net current earnings before income taxes to— Average total capital accounts 18.4 16.6 18.4 16.4 20.2 18.4 19.5 18.1 17.2 15.0 Average total assets 1.48 1.32 1.77 1.55 1.73 1.51 1.48 1.35 1.33 1.16 Net profits to- Average total capital accounts 7.9 9.7 7.2 9.3 7.6 9.9 8.5 10.1 7.6 9.4 Average total assets .63 .77 .70 .88 .65 .82 .65 .75 .59 .72 Average return on U.S. Govt. securities 2.78 2.45 2.84 2.39 2.64 2.37 2.73 2.45 2.82 2.49 Average return on loans 5.63 5.35 4.82 4.40 4.86 4.47 5.63 5.39 6.15 5.94 1 Data for 1959 are preliminary; final figures will be published later in the Federal Reserve Bulletin, 2 Includes recoveries credited to valuation reserves. 3 Includes losses charged to valuation reserves. 4 Includes interest on capital notes and debentures. 125 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES IN THE UNITED STATES DURING 1959 1 Commercial and stock savings banks and nondeposit trust companies Mutual savings banks Type of office and All Member Nonmember type of change banks banks banks Total Na- State In- Non- In- Nontional1 mem- sured in- sured2 inber2 sured2 sured Number of banks, Dec. 31,1958... 14,020 13,501 4,578 1,734 6,793 399 241 278 Changes during 1959 + 1_I7 +12l +23 +4 +75 + 15 Consolidations and absorptions: Banks converted into branches.. -148 -148 -64 -27 -56 -1 Other -20 -18 -7 -3 -5 -3 i j Voluntary liquidations4 -3 -3 -1 —2 Conversions: National into State — 2 +2 +7 -6 Federal Reserve membership ;5 Admissions of national banks +6 +6 +6 Admission of national bank in Hawaii + 1 + 1 + 1 +5 -3 -2 Withdrawals of State banks.. . -15 + 15 Federal Deposit insurance:6 Admissions of State banks +50 -50 +28 -28 Other* Alaska + 11 + 11 it +5 Hawaii . . . . .. + 10 Net increase or decrease -29 -36 -43 -•y +27 -29 Number of banks, Dec. 31,1959... 13,991 13,474 4,542 1,691 +85 366 268 249 Number of branches and additional 6,878 offices, Dec. 31,1958 ? 9,038 8,613 4,341 2,360 1,873 39 305 120 Changes during 1959 +4 De novo branches +617 + 584 +297 + 141 ++ 1i42 + 14 + 19 Banks converted into branches.... + 148 + 148 +75 ? ±\ -59 -48 -26 -11 +42 -39 + 10 -10 +18 + 18 + 15 -2 Hawaii • +73 +73 +25 + 1 +797 +775 +428 + 130 +3 + 13 +9 +214 Number of branches and additional offices, Dec. 31,1959 7 9,835 9,388 4,769 2,490 2,087 42 318 129 Number of banking facilities, Dec 31 1958 9 248 248 193 30 25 Changes during 1959 Established . + 14 + 10 +4 -9 -2 Interclass change -1 + 1 Other* Alaska . ... +6 +6 +6 Net inc H re a a w se a i o i r decrease +d •itt -1 it + Number of banking facilities, Dec 31 1959 9 264 264 204 29 31 1 One national member bank in Alaska with no branches and one in the Virgin Islands with one branch have been included in this series since 1954 and 1957, respectively. Other banks in territories and possessions are excluded. 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. 3 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, and vice versa. 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, for February 1960, p. 222 9 Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department. 126 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, 19591 On par list Total2 Not on par list Federal (nonmember) Reserve Total Member Nonmember district, State, or other area BanksBranches BanksBranches BanksBranches BanksBranches BanksBranches & offices & offices & offices & offices & offices DISTRICT Boston 415 714 415 714 276 570 139 144 New York2 602 1 786 602 1,786 507 1,558 95 228 Philadelphia 651 635 651 635 499 511 152 124 Cleveland 938 897 938 897 572 777 366 120 Richmond . 948 1,131 797 975 447 631 350 344 151 156 Atlanta 1,337 492 780 446 403 368 377 78 557 46 Chicago 2,464 1,060 2,464 1,060 1,005 639 1,459 421 St Louis . . . 1,474 306 1,184 230 488 152 696 78 290 76 Minneapolis 1,298 129 701 87 477 39 224 48 597 42 1 774 78 1,768 78 755 57 1,013 21 6 Dallas 1,117 136 1,036 125 633 91 403 34 81 11 San Francisco... 367 2,393 359 2,392 165 2,116 194 276 8 1 Total 13,385 9,757 11,695 9,425 6,227 7,509 5,468 1,916 1,690 332 STATE 237 78 153 77 92 73 61 4 84 1 18 23 10 22 7 21 3 1 8 1 Arizona 8 146 8 146 4 121 4 25 Arkansas 236 41 129 21 75 17 54 4 107 20 110 1 552 110 1,552 60 1,391 50 161 Colorado 161 7 161 7 95 6 66 1 Connecticut 68 185 68 185 34 144 34 41 Delaware 20 53 20 53 5 24 15 29 Dist of Col 12 64 12 64 9 58 3 6 Florida 284 14 241 13 117 11 124 2 43 Georgia 413 87 136 85 65 71 71 14 277 2 Hawaii 6 77 6 77 1 26 5 51 Idaho 32 81 32 81 18 75 14 6 Illinois. .... 952 4 951 4 524 4 427 1 Indiana 449 276 449 276 226 185 223 91 Iowa 671 172 671 172 169 11 502 161 Kansas 593 18 591 18 215 13 376 5 2 Kentucky 358 132 358 132 108 91 250 41 Louisiana 187 162 79 134 53 106 26 28 108 28 Maine 53 121 53 121 34 83 19 38 140 226 140 226 63 134 77 92 Massachusetts.. 167 354 167 354 124 295 43 59 Michigan 383 533 383 533 219 438 164 95 Minnesota 686 6 288 6 209 6 79 398 Mississippi 193 132 54 64 35 38 19 26 139 68 619 9 564 9 174 7 390 2 55 Montana 115 1 115 1 86 1 29 Nebraska 420 2 420 2 140 2 280 Nevada 7 36 7 36 5 32 2 4 New Hampshire. 74 3 74 3 52 2 22 1 New Jersey 255 398 255 398 217 357 38 41 New Mexico.... 52 49 52 49 35 27 17 22 New York 412 1,297 412 1,297 361 1,229 51 68 North Carolina.. 183 452 102 303 43 164 59 139 81 149 North Dakota... 156 27 58 8 40 2 18 6 98 19 Ohio 588 598 588 598 373 519 215 79 Oklahoma 387 18 381 18 223 16 158 2 6 52 179 52 179 17 158 35 21 Pennsylvania.... 716 740 716 740 548 636 168 104 Rhode Island.... 9 90 9 90 5 68 4 22 South Carolina.. 145 134 77 127 31 96 46 31 68 7 South Dakota... 173 54 72 31 60 24 12 7 101 23 Tennessee 295 196 217 183 83 137 134 46 78 13 Texas 988 28 954 28 577 28 377 34 Utah 49 70 49 70 20 61 29 9 Vermont 56 33 56 33 32 18 24 15 Virginia 309 255 308 255 200 179 108 76 1 Washington 87 268 87 268 34 261 53 7 West Vireinia 183 182 112 70 554 152 554 152 158 24 396 i28 Wyoming 53 1 53 1 39 1 14 Puerto Rico2.... 10 118 10 118 13 10 105 Virgin Islands2... 1 5 1 5 1 5 i Virgin Islands. 2 Puerto Rico and the Virgin Islands assigned to the New York District for check clearing and collection purposes. Member branches in Puerto Rico and all except one in the Virgin Islands are branches of New York banks. Digitized for FRASER 127 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1959 [In millions of dollars] Net change in Bankers* holdings U.S. Government 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- Gross ances purchases sales tions chases sales January -640 -632 260 474 427 402 393 -3 -6 -367 -365 36 309 43 64 113 -4 +2 March + 139 + 147 236 33 404 459 1 April +206 +206 247 19 102 604 524 I] May + 199 +202 354 73 289 369 J A O S u e u c l p y t g o t u b e s e m t r ber.... + + + - + 1 4 1 1 2 7 9 4 3 7 6 8 2 7 + + + - + 1 4 1 1 2 6 9 3 4 6 8 9 9 7 3 3 1 1 2 4 8 4 7 2 6 3 6 9 1 1 4 0 3 1 1 4 9 8 6 6 8 8 7 5 3 3 3 1 5 0 3 4 1 1 6 2 4 3 4 4 2 3 9 3 0 3 8 4 5 2 8 3 - - - C 2 1 5 1) + + 2 1 November +297 +291 386 28 328 395 December.... -232 -273 272 373 186 203 189 +11 +lo Total +328 +302 2,866 1,610 901 3,939 3,993 +1 +25 i Less than $500,000. NOTE.—Details may not add to totals because of rounding. 128 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, 1959] 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 G. H. KING, JR., of Mississippi January 31, 1960 WINFIELD W. RIEFLER, Assistant to the Chairman WOODLIEF THOMAS, Economic Adviser to the Board JEROME W. SHAY, Legislative Counsel CHARLES MOLONY, Assistant to the Board CLARKE L. FAUVER, Assistant to the Board MERRITT SHERMAN, Secretary KENNETH A. KENYON, Assistant Secretary ELIZABETH L. CARMICHAEL, Assistant Secretary HOWARD H. HACKLEY, 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 JOHN R. FARRELL, Director, Division of Bank Operations GERALD M. CONKLING, Assistant Director, Division of Bank Operations M. B. DANIELS, Assistant Director, Division of Bank Operations JOHN N. KILEY, JR., Assistant Director, Division of Bank Operations FREDERIC SOLOMON, Director, Division of Examinations ROBERT C. MASTERS, Associate Director, Division of Examinations C. C. HOSTRUP, Assistant Director, Division of Examinations FRED A. NELSON, Assistant Director, Division of Examinations 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 HARRY E. KERN, Assistant Director, Division of Administrative Services J. J. CONNELL, Controller, Office of the Controller Digitized for FRASSAEMRP SON H. BASS, Assistant Controller, Office of the Controller http://fraser.IsNtNloIuSi sDfe.d H.oArgR/R IS, Coordinator, Office of Defense Planning Federal Reserve Bank of St. Louis >•> r\

FEDERAL OPEN MARKET COMMITTEE [December 31, 1959] MEMBERS WM. MCC. MARTIN, JR., Chairman (Board of Governors) ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New York) CARL E. ALLEN (Elected by Federal Reserve Banks of Cleveland and Chicago) C. CANBY BALDERSTON (Board of Governors) FREDERICK L. DEMING (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) J. A. ERICKSON (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) DELOS C. JOHNS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) G. H. KING, JR. (Board of Governors) 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 ARTHUR W. MARGET, Associate Economist MERRITT SHERMAN, Assistant Secretary GEORGE W. MITCHELL, Associate Economist KENNETH A. KENYON, Assistant Secretary FRANKLIN L. PARSONS, Associate Economist HOWARD H. HACKLEY, General Counsel ROBERT V. ROOSA, Associate Economist WOODLIEF THOMAS, Economist PARKER B. WILLIS, Associate Economist HOMER JONES, Associate Economist RALPH A. YOUNG, Associate Economist AGENT FEDERAL RESERVE BANK OF NEW YORK ROBERT G. ROUSE, Manager of System Open Market Account During 1959 the Federal Open Market Committee met at least every three weeks, as indicated in the Record of Policy Actions taken by the Committee (see pp. 31-65 of this Report). Digitized for FRASER http://fraser.stlouisfed.org/ 131 Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1959] MEMBERS District No. 1—LLOYD D. BRACE, Chairman of the Board, The First National Bank of Boston, Boston, Massachusetts. District No. 2—JOHN J. MCCLOY, Chairman of the Board, The Chase Manhattan Bank, New York, New York. District No. 3—CASIMIR A. SIENKIEWICZ, President, Central-Penn National Bank of Philadelphia, Philadelphia, Pennsylvania. District No. 4—REUBEN B. HAYS, Chairman of the Board, The First National Bank of Cincinnati, Cincinnati, Ohio. District No. 5—JOHN S. ALFRIEND, Chairman of the Board, National Bank of Commerce, Norfolk, Virginia. District No. 6—JOHN A. SIBLEY, Chairman of the Executive Committee, 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. OTIS MCCLINTOCK, Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Oklahoma. District No. 11—WALTER B. JACOBS, Chairman of the Board, The First National Bank of Shreveport, Shreveport, Louisiana. District No. 12—CHARLES F. FRANKLAND, President, The Pacific National Bank of Seattle, Seattle, Washington. EXECUTIVE COMMITTEE HOMER J. LIVINGSTON, ex officio LLOYD D. BRACE, ex officio JOHN J. MCCLOY CASIMIR A. SIENKIEWICZ GORDON MURRAY OFFICERS President, HOMER J. LIVINGSTON Vice President, LLOYD D. BRACE Secretary, HERBERT V. PROCHNOW Assistant Secretary, WILLIAM J. KORSVIK Meetings of the Federal Advisory Council were held on February 16-17, April 27-28, September 14-15, and November 16-17, 1959. The Board of Governors met with the Council on February 17, April 28, September 15, and November 17. 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 http://fraser.stlouisfed.org/ 132 Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS AND BRANCHES [December 31, 1959] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Chairman and Federal Reserve Bank of— Deputy Chairman Federal Reserve Agent Boston Robert C. Sprague Nils Y. Wessell New York John E. Bierwirth Forrest F. Hill Philadelphia Henderson Supplee, Jr.... Lester V. Chandler Cleveland Arthur B. Van Buskirk... Joseph H. Thompson Richmond Alonzo G. Decker, Jr D. W. Colvard 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 that 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 3-4, 1959, and was attended by members of the Board of Governors and also by the Deputy Chairmen of the Federal Reserve Banks. Mr. Smith, Chairman of the Federal Reserve Bank of Dallas, was elected Chairman of the Conference and of the Executive Committee in December 1958. Mr. Mitchell, Chairman of the Federal Reserve Bank of Atlanta, and Mr. Perrin, Chairman of the Federal Reserve Bank of Minneapolis, served with Mr. Smith as members of the Executive Committee, Mr. Mitchell also serving as Vice Chairman of the Conference. At the meeting held in December 1959, Mr. Mitchell was elected Chairman of the Conference and of the Executive Committee. Mr. Van Buskirk, Chairman of the Federal Reserve Bank of Cleveland, was elected Vice Chairman and a member of the Executive Committee, and Mr. McBride, Chairman of the Federal Reserve Bank of St. Louis, was elected as the other member of the Executive Committee. Digitized for FRASER http://fraser.stlouisfed.org/ 133 Federal Reserve Bank of St. Louis

134 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—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: 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 1960 William M. Lockwood President, The Howard National Bank and Trust Company, Burlington, Vt.. 1961 Class B: Milton P. Higgins President, Norton Company, Worcester, Mass. 1959 Stanley M. Cooper Chairman of the Board, The Fafnir Bearing Company, New Britain, Conn 1960 Eugene B. Whittemore President and Treasurer, The Morley Company, Portsmouth, N. H 1961 Class C: Nils Y. Wessell President, Tufts University, Medford, Mass... 1959 Robert C. Sprague Chairman and Treasurer, Sprague Electric Company, North Adams, Mass 1960 Erwin D. Canham Editor, The Christian Science Monitor, Boston, Mass 1961 District 2—New York Class A: Charles W. Bitzer Chairman, 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 1960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 135 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Henry C. Alexander Chairman of the Board, Morgan Guaranty Trust Company of New York, New York, N. Y 1961 Class B: Lansing P. Shield President, The Grand Union Company, East Paterson, N. J 1959 Augustus C. Long Chairman of the Board, Texaco Inc., New York, N. Y 1960 Philip D. Reed Formerly Chairman of the Board, General Electric Company, New York, N. Y 1961 Class C: 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 1960 James DeCamp Wise Chairman of the Board, Bigelow-Sanford Carpet Company, Inc., New York, N. Y 1961 Buffalo Branch Appointed by Federal Reserve Bank: Vernon Alexander President, The National Bank of Geneva, Geneva, N. Y 1959 E. Perry Spink President, Liberty Bank of Buffalo, Buffalo, N. Y 1960 John W. Remington President, Lincoln Rochester Trust Company, Rochester, N. Y 1961 Denton A. Fuller President, The Citizens National Bank of Wellsville, Wellsville, N. Y 1961 Appointed by Board of Governors: Raymond E. Olson President, Taylor Instrument Companies, Rochester, N. Y 1959 Thomas E. Lamont Farmer, Albion, N. Y 1960 Whitworth Ferguson President, Ferguson Electric Construction Co., Inc., Buffalo, N. Y 1961 District 3—Philadelphia Class A: 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 1960 O. Albert Johnson President, The First National Bank of Eldred, Eldred, Pa 1961 Class B: 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

136 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Bayard L. England Chairman, Atlantic City Electric Company, Atlantic City, N. J 1960 Frank R. Palmer Chairman, The Carpenter Steel Company, Reading, Pa 1961 Class C.- Lester V. Chandler Professor of Economics, Princeton University, Princeton, N. J 1959 Walter E. Hoadley, Jr Treasurer, Armstrong Cork Company, Lancaster, Pa 1960 Henderson Supplee, Jr President, The Atlantic Refining Company, Philadelphia, Pa 1961 District 4—Cleveland Class A: John A. Byerly President, Fidelity Trust Company, Pittsburgh, Pa 1959 Paul A. Warner President, The Oberlin Savings Bank Company, Oberlin, Ohio 1960 Ray H. Adkins President, The National Bank of Dover, Dover, Ohio 1961 Class B: George P. MacNichol, Jr President, Libbey Owens Ford Glass Company, Toledo, Ohio 1959 Joseph B. Hall President, The Kroger Co., Cincinnati, Ohio.. 1960 Charles Z. Hardwick Executive Vice President, The Ohio Oil Company, Findlay, Ohio 1961 Class C.- 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 1960 Arthur B. Van Buskirk Vice President and Governor, T. Mellon and Sons, Pittsburgh, Pa 1961 Cincinnati Branch Appointed by Federal Reserve Bank: Franklin A. McCracken Executive Vice President and TrustfOfficer, 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 Frank J. Van Lahr President, The Provident Savings Bank and Trust Company, Cincinnati, Ohio 1961 Appointed by Board of Governors: H. E. Whitaker Chairman, Mead Corporation, Dayton, Ohio.. 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 137 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 W. Bay Irvine President, Marietta College, Marietta, Ohio... 1960 Ivan Jett Farmer, Georgetown, Ky. 1961 Pittsburgh Branch Appointed by Federal Reserve Bank: Frank C. Irvine Vice President, The Union National Bank of Pittsburgh, Tarentum Office, Tarentum, Pa.. 1959 Lawrence O. Hotchkiss President, The First National Bank of Mercer, Mercer, Pa. 1960 Irving W. Wilson Chairman of the Board, Aluminum Company of America, Pittsburgh, Pa 1960 A. B. Bowden Vice President, Mellon National Bank and Trust Company, Pittsburgh, Pa 1961 Appointed by Board of Governors: John T. Ryan, Jr President, Mine Safety Appliances Company, Pittsburgh, Pa 1959 John C. Warner President, Carnegie Institute of Technology, Pittsburgh, Pa 1960 William A. Steele President, Wheeling Steel Corporation, Wheeling, W. Va 1961 District 5—Richmond Class A: Robert Gage President, The Commercial Bank, Chester, S. C 1959 Denver L. Morgan Executive Vice President, The Charleston National Bank, Charleston, W. Va 1960 A. Scott Offutt President, Anacostia National Bank of Washington, Washington, D. C 1961 Class B: Wm. A. L. Sibley Vice President and Treasurer, Monarch Mills, Union, S. C 1959 Robert O. Huffman President, Drexel Furniture Company, Drexel, N.C 1960 L. Vinton Hershey. President, Hagerstown Shoe Company, Hagerstown, Md 1961 Ciass C: 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 1960 Edwin Hyde President, Miller & Rhoads, Inc., Richmond, Va 1961 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Baltimore Branch Appointed by Federal Reserve Bank: James W. McElroy President, First National Bank of Baltimore, Baltimore, Md 1959 J. N. Shumate President, The Farmers National Bank of Annapolis, Annapolis, Md. 1960 Harvey E. Emmart Senior Vice President and Cashier, Fidelity- Baltimore National Bank, Baltimore, Md... 1961 John W. Stout President, The Parkersburg National Bank, Parkersburg, W. Va 1961 Appointed by Board of Governors: Gordon M. Cairns Dean of Agriculture, University of Maryland, College Park, Md 1959 Clarence R. Zarfoss Vice President, Western Maryland Railway Company, Baltimore, Md 1960 J. T. Menzies, Jr President, The Crosse & Blackwell Company, Baltimore, Md 1961 Charlotte Branch Appointed by Federal Reserve Bank: 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 1960 I. W. Stewart Chairman of the Board, American Commercial Bank, Charlotte, N. C 1961 G. G. Watts President, The Merchants & Planters National Bank, Gaffney, S. C 1961 Appointed by Board of Governors: William H. Grier President, Rock Hill Printing & Finishing Company, Rock Hill, S. C 1959 George H. Aull Agricultural Economist, Clemson College, Clemson, S. C 1960 Clarence P. Street Secretary and General Manager, McDevitt & Street Company, Charlotte, N. C 1961 District 6—Atlanta Class A: 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... 1960 William C. Carter Chairman and President, Gulf National Bank, Gulfport, Miss 1961 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 139 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Class B: McGregor Smith Chairman of the Board, Florida Power & Light Company, Miami, Fla 1959 Pollard Turman President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga 1960 Donald Comer Chairman of the Board, Avondale Mills, Birmingham, Ala 1961 Class C: Harllee Branch, Jr President, The Southern Company, Atlanta, Ga 1959 Henry G. Chalkley, Jr President, The Sweet Lake Land & Oil Company, Lake Charles, La 1960 Walter M. Mitchell Vice President, The Draper Corporation, Atlanta, Ga 1961 Birmingham Branch Appointed by Federal Reserve Bank: R. J. Murphy Executive Vice President, Citizens-Farmers & Merchants Bank, Brewton, Ala 1959 John C. Persons Chairman of the Board, The First National Bank of Birmingham, Birmingham, Ala 1960 George W. Hulme Senior Vice President, First National Bank, Alexander City, Ala 1961 Marshall Dugger Vice President and Cashier, First National Bank, Tuscumbia, Ala 1961 Appointed by Board of Governors: Adolph Weil, Sr President, Weil Brothers-Cotton, Inc., Montgomery, Ala 1959 Selden Sheffield Cattleman, Greensboro, Ala 1960 John E. Urquhart Chairman, Woodward Iron Company, Woodward, Ala 1961 Jacksonville Branch Appointed by Federal Reserve Bank: James G. Garner President and Chairman, Little River Bank and Trust Company, Miami, Fla 1959 C. B. McLeod President, Bank of Crestview, Crestview, Fla... 1960 Roger L. Main Chairman and President, Florida National Bank of Jacksonville, Jacksonville, Fla 1961 A. L. Ellis Chairman of the Board, First National Bank in Tarpon Springs, Tarpon Springs, Fla 1961 Appointed by Board of Governors: Claude J. Yates Vice President and General Manager, Southern Bell Telephone and Telegraph Company, Jacksonville, Fla 1959 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 J. Wayne Reitz President, University of Florida, Gainesville, Fla 1960 John M. Fox President, Minute Maid Corporation, Orlando, Ha 1961 Nashville Branch Appointed by Federal Reserve Bank: Jo H. Anderson President, Park National Bank of Knoxville, Knoxville, Tenn 1959 P. D. Houston, Jr President, First American National Bank, Nashville, Tenn 1960 C. A. Whelchel President, First Farmers and Merchants National Bank of Columbia, Columbia, Tenn... 1961 W. E. Newell President, The First National Bank, Kingsport, Tenn 1961 Appointed by Board of Governors: 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 1960 V. S. Johnson, Jr Chairman of the Board and President, Aladdin Industries, Inc., Nashville, Tenn 1961 New Orleans Branch Appointed by Federal Reserve Bank: 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 1960 W. P. McMullan Chairman of the Board, Deposit Guaranty Bank and Trust Company, Jackson, Miss... 1961 Wallace M. Davis President, The Hibernia National Bank in New Orleans, New Orleans, La 1961 Appointed by Board of Governors: E. E. Wild Rice grower, Midland, La 1959 Frank A. Godchaux, III Vice President, Louisiana State Rice Milling Company, Inc., Abbeville, La 1960 Gerald L. Andrus President, New Orleans Public Service, Inc., New Orleans, La 1961 District 7—Chicago Class A: Vivian W. Johnson President, First National Bank, Cedar Falls, Iowa 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 141 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Walter J. Cummings Chairman of the Executive Committee, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 1960 John H. Crocker Chairman of the Board and President, The Citizens National Bank of Decatur, Decatur, 111 1961 Class B: William A. Hanley Director, Eli Lilly and Company, Indianapolis, Ind 1959 G. F. Langenohl Treasurer and Assistant Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis 1960 William J. Grede President, Grede Foundries, Inc., Milwaukee, Wis 1961 Class C: J. Stuart Russell Farm Editor, The Des Moines Register & Tribune, Des Moines, Iowa 1959 Bert R. Prall Winnetka, 111 1960 Robert P. Briggs Executive Vice President, Consumers Power Company, Jackson, Mich 1961 Detroit Branch Appointed by Federal Reserve Bank: Ira A. Moore General Vice President, Old Kent Bank and Trust Company, Grand Rapids, Mich 1959 William A. Mayberry Chairman of the Board, Manufacturers National Bank of Detroit, Detroit, Mich 1960 Ernest W. Potter President, Citizens Commercial & Savings Bank, Hint, Mich 1960 Donald F. Valley Chairman of the Board, National Bank of Detroit, Detroit, Mich 1961 Appointed by Board of Governors: J. Thomas Smith President, Dura Corporation, Oak Park, Mich.. 1959 John A. Hannah President, Michigan State University, East Lansing, Mich 1960 C. V. Patterson Executive Vice President, The Upjohn Company, Kalamazoo, Mich 1961 District 8—St. Louis Class A: Kenton R. Cravens President, Mercantile Trust Company, St. Louis, Mo 1959 H. Lee Cooper President, Ohio Valley National Bank of Henderson, Henderson, Ky 1960 Arthur Werre, Jr Executive Vice President, First National Bank of SteeleviUe, Steeleville, 111 1961 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Class B: 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 1960 S. J. Beauchamp, Jr President, Terminal Warehouse Co., Little Rock, Ark 1961 Class C.- Pierre B. McBride President, Porcelain Metals Corporation, Louisville, Ky 1959 Jesse D. Wooten Executive Vice President, Mid-South Chemical Corporation, Memphis, Tenn 1960 J. H. Longwell Director, Division of Agricultural Sciences, University of Missouri, Columbia, Mo 1961 Little Rock Branch Appointed by Federal Reserve Bank: Donald Barger President, Peoples Exchange Bank, Russellville, Ark 1959 J. W. Bellamy, Jr President, National Bank of Commerce of Pine Bluff, Pine Bluff, Ark 1960 E. C. Benton President, Fordyce Bank and Trust Company, Fordyce, Ark 1960 J. V. Satterfleld, Jr Chairman of the Board, The First National Bank in Little Rock, Little Rock, Ark 1961 Appointed by Board of Governors: T. Winfred Bell President, Bush-Caldwell Company, Little Rock, Ark 1959 (Vacancy) 1960 Waldo E. Tiller President, Tiller Tie and Lumber Company, Inc., Little Rock, Ark 1961 Louisville Branch Appointed by Federal Reserve Bank: 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 1960 John G. Russell President, The Peoples First National Bank & Trust Company of Paducah, Paducah, Ky... 1960 John R. Stroud Executive Vice President, The First National Bank of Mitchell, Mitchell, Ind 1961 Appointed by Board of Governors: David F. Cocks Vice President and Treasurer, Standard Oil Company (Kentucky), Louisville, Ky 1959 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 143 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Philip Davidson President, University of Louisville, Louisville, Ky 1960 J. D. Monin, Jr Farmer, Oakland, Ky 1961 Memphis Branch Appointed by Federal Reserve Bank: 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 1960 Simpson Russell President, The National Bank of Commerce of Jackson, Jackson, Tenn 1960 J. H. Harris President, The First National Bank of Wynne, Wynne, Ark 1961 Appointed by Board of Governors: 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 1960 Frank Lee Wesson President, Wesson Farms, Inc., Victoria, Ark.. 1961 District 9—Minneapolis Class A: Harold N. Thomson Vice President, Farmers & Merchants Bank, Presho, S. D 1959 Harold C. Refling Cashier, First National Bank in Bottineau, Bottineau, N. D 1960 John A. Moorhead President, Northwestern National Bank of Minneapolis, Minneapolis, Minn 1961 Class B: J. E. Corette President and General Manager, Montana Power Company, Butte, Mont 1959 Ray C. Lange President, Chippewa Canning Company, Inc., Chippewa Falls, Wis 1960 T. G. Harrison Chairman of the Board, Super Valu Stores, Inc., Hopkins, Minn 1961 Class C.- Leslie N. Perrin Director, General Mills, Inc., Minneapolis, Minn 1959 O. B. Jesness Agricultural Economist, St. Paul, Minn 1960 John H. Warden President, Upper Peninsula Power Company, Houghton, Mich 1961 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Helena Branch Appointed by Federal Reserve Bank: O. M. Jorgenson Chairman, Security Trust and Savings Bank, Billings, Mont 1959 Roy G. Monroe President, The First State Bank of Malta, Malta, Mont 1960 Harald E. Olsson President, Ronan State Bank, Ronan, Mont... 1960 Appointed by Board of Governors: John M. Otten Farmer and rancher, Lewistown, Mont 1959 John D. Stephenson Partner, Jardine, Stephenson, Blewett, & Weaver, Attorneys, Great Falls, Mont 1960 District 10—Kansas City Class A: W. L. Bunten Director, Goodland State Bank, Goodland, Kans 1959 Harold Kountze Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo 1960 W. S. Kennedy President and Chairman of the Board, The First National Bank of Junction City, Junction City, Kans 1961 Class B: K. S. Adams Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla 1959 Max A. Miller Livestock rancher, Omaha, Neb 1960 E. M. Dodds Refrigeration consultant, Kansas City, Mo 1961 Class C.- Oliver S. Willham President, Oklahoma State University, Stillwater, Okla 1959 Joe W. Seacrest President, State Journal Company, Lincoln, Neb 1960 Raymond W. Hall .Hillix, Hall, Hasburgh, Brown & Hoffhaus, Attorneys, Kansas City, Mo 1961 Denver Branch Appointed by Federal Reserve Bank: Stewart Cosgriff Chairman of the Board, Denver United^States National Bank, Denver, Colo 1959 J. H. Bloedorn President, The Farmers State Bank of Fort Morgan, Colorado, Fort Morgan, Colo 1960 Cale W. Carson President, First National Bank in Albuquerque, Albuquerque, N. Mex 1960 Appointed by Board of Governors: Aksel Nielsen. President, The Title Guaranty Company, Denver, Colo 1959 Ray Reynolds Cattle feeder and farmer, Longmont, Colo... 1960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 145 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Oklahoma City Branch Appointed by Federal Reserve Bank: C. P. Stuart Chairman of the Board and President, The Fidelity National Bank & Trust Company, Oklahoma City, Okla 1959 R. L. Kelsay Chairman of the Board and President, The First National Bank in Hobart, Hobart, Okla 1960 C. L. Priddy President, The National Bank of McAlester, McAlester, Okla 1960 Appointed by Board of Governors: Davis D. Bovaird President, The Bovaird Supply Company, Tulsa, Okla 1959 Don H. Dennis Rancher, Grady, Okla 1960 Omaha Branch Appointed by Federal Reserve Bank: 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 John F. Davis President, First National Bank, Omaha, Neb... 1960 Appointed by Board of Governors: James L. Paxton, Jr President, Paxton-Mitchell Company, Omaha, Neb 1959 Homer A. Scott Vice President and District Manager, Peter Kiewit Sons' Company, Sheridan, Wyo 1960 District 11—Dallas Class A: John M. Griffith President, The City National Bank of Taylor, Taylor, Tex 1959 Sam D. Young President, El Paso National Bank, El Paso, Tex. 1960 J. Edd McLaughlin President, Security State Bank & Trust Company, Rails, Tex 1961 Class B: John R. Alford Industrialist and farmer, Henderson, Tex 1959 D. A. Hulcy Chairman of the Board, Lone Star Gas Company, Dallas, Tex 1960 H. B. Zachry President, H. B. Zachry Co., San Antonio, Tex. 1961 Class C.- Hal Bogle Rancher and feeder, Dexter, N. Mex 1959 Robert J. Smith President, Pioneer Hydrotex Industries, Inc., Dallas, Tex 1960 Lamar Fleming, Jr Chairman of the Board, Anderson, Clayton & Co., Inc., Houston, Tex 1961 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 El Paso Branch Appointed by Federal Reserve Bank: F. W. Barton President, The Marfa National Bank, Marfa, Tex 1959 John P. Butler President, The First National Bank of Midland, Midland, Tex 1960 Floyd Childress Vice President, The First National Bank of Roswell, Roswell, N. Mex 1960 Joseph F. Irvin President, Southwest National Bank of El Paso, El Paso, Tex 1961 Appointed by Board of Governors: 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 1960 Dysart E. Holcomb Director of Research, El Paso Natural Gas Company, El Paso, Tex 1961 Houston Branch Appointed by Federal Reserve Bank: I. F. Betts President, The American National Bank of Beaumont, Beaumont, Tex 1959 W. B. Callan President, The Victoria National Bank, Victoria, Tex 1960 Marvin K. Collie President, The National Bank of Commerce of Houston, Houston, Tex 1960 J. W. McLean President, Texas National Bank of Houston, Houston, Tex 1961 Appointed by Board of Governors: 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 1960 Tyrus R. Timm Head, Department of Agricultural Economics and Sociology, A. & M. College of Texas, College Station, Tex 1961 San Antonio Branch Appointed by Federal Reserve Bank: E. C. Breedlove President, The First National Bank of Harlingen, Harlingen, Tex 1959 J. W. Beretta Director, First National Bank of San Antonio, San Antonio, Tex 1960 Donald D. James Vice President, The Austin National Bank, Austin, Tex 1960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 147 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Burton Dunn Chairman of the Executive Committee, Corpus Christi State National Bank, Corpus Christi, Tex 1961 Appointed by Board of Governors: Clarence E. Ayres Professor of Economics, The University of Texas, Austin, Tex 1959 Alex R. Thomas Vice President, Geo. C. Vaughan & Sons, San Antonio, Tex 1960 Harold Vagtborg Chairman of the Board, Southwest Research Center, San Antonio, Tex 1961 District 12—San Francisco Class A: M. Vilas Hubbard President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif. 1959 Carroll F. Byrd Chairman of the Board and President, The First National Bank of Willows, Willows, Calif. 1960 John A. Schoonover President, The Idaho First National Bank, Boise, Idaho. 1961 Class B: N. Loyall McLaren Partner, Haskins & Sells, San Francisco, Calif.. 1959 Joseph Rosenblatt President, The Eimco Corporation, Salt Lake City, Utah 1960 Walter S. Johnson Chairman of the Board, American Forest Products Corporation, San Francisco, Calif.. 1961 Class C: 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 Y. Frank Freeman Vice President, Paramount Pictures Corporation, Hollywood, Calif. 1961 Los Angeles Branch Appointed by Federal Reserve Bank: Joe D. Paxton Chairman of the Advisory Board, Santa Barbara Main Office, Crocker-Anglo National Bank, Santa Barbara, Calif. 1959 Robert S. Beasley President, The Beverly Hills National Bank & Trust Company, Beverly Hills, Calif. 1960 Roy A. Britt President, Citizens National Bank, Los Angeles, Calif. 1960 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, 1959—Cont. Term expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Robert J. Cannon . .President, Cannon Electric Company, Los Angeles, Calif. 1959 John D. Fredericks President and Chief Executive Officer, Pacific Clay Products, Los Angeles, Calif. 1960 Portland Branch Appointed by Federal Reserve Bank: C. B. Stephenson President, The First National Bank of Oregon, Portland, Portland, Ore 1959 D. S. Baker President, The Baker-Boyer National Bank, Walla Walla, Wash 1960 J. H. McNally President, The First National Bank of Bonners Ferry, Bonners Ferry, Idaho 1960 Appointed by Board of Governors: Warren W. Braley Partner, Braley and Graham Buick, Portland, Ore 1959 Raymond R. Reter Reter Fruit Company, Medford, Ore. 1960 Salt Lake City Branch Appointed by Federal Reserve Bank: Oscar Hiller President, Butte County Bank, Arco, Idaho... 1959 Russell S. Hanson Executive Vice President, The First National Bank of Logan, Logan, Utah 1960 Reed E. Holt President, Walker Bank & Trust Company, Salt Lake City, Utah 1960 Appointed by Board of Governors: Howard W. Price Executive Vice President and General Manager, The Salt Lake Hardware Co., Salt Lake City, Utah 1959 Thomas B. Rowland Rowland Bros. Dairy, Pocatello, Idaho 1960 Seattle Branch Appointed by Federal Reserve Bank: Joshua Green, Jr President, Peoples National Bank of Washington, Seattle, Wash 1959 S. B. Lafromboise President, The First National Bank of Enumclaw, Enumclaw, Wash 1960 James Brennan President, First National Bank in Spokane, Spokane, Wash 1960 Appointed by Board of Governors: Henry N. Anderson President, Twin Harbors Lumber Company, Aberdeen, Wash 1959 Lyman J. Bunting President, Rainier Fruit Company, Yakima, Wash 1960 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 149 FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1959—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. 0. 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 Charles A. Coombs Walter H. Rozell, Jr. M. A. Harris H. L. Sanford H. H. Kimball T. G. Tiebout Robert V. Roosa R. B. Wiltse 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 L. Merle Hostetler Donald S. Thompson Roger R. Clouse Martin Morrison E. A. Fink Paul C. Stetzelberger C. Harrell Richmond Hugh Leach N. L. Armistead Upton S. Martin Edw. A. Wayne J. Dewey Daane J. M. Nowlan Aubrey N. Heflin James M. Slay 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 E. T. Baughman Robert C. Holland C. J. Scanlon W. R. Diercks C. T. Laibly A. M. Gustavson George W. Mitchell H. J. Helmer H. J. Newman Paul C. Hodge Harry S. Schultz St. Louis Delos C. Johns Homer Jones H. H. Weigel Darryl R. Francis 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 James L. Cauthen T. W. Plant Harry A. Shuford T. A. Hardin L. G. Pondrom G. R. Murff Morgan H. Rice San Francisco.. H. N. Mangels J. L. Barbonchielli R. H. Morrill Eliot J. Swan H. E. Hemmings John A. O'Kane A. B. Merritt O. P. Wheeler E. R. Millard 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, 1959—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES Federal Reserve Bank of— Branch Chief Officer New York... Buffalo I. B. Smith Cleveland Cincinnati R. G. Johnson Pittsburgh J. W. Kossin Richmond.... Baltimore D. F. Hagner Charlotte T. I. Storrs 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 E. Francis DeVos 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 Carl H. Moore 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 that meets from time to time to consider matters of common interest and to consult with and advise the Board of Governors. Mr. Erickson, President of the Federal Reserve Bank of Boston, and Mr. Johns, President of the Federal Reserve Bank of St. Louis, who were elected Chairman of the Conference and Vice Chairman, respectively, in February 1958, were re-elected as such in March 1959, and continued to serve until the meeting in June 1959. At that meeting Mr. Johns was elected Chairman of the Conference and Mr. Bryan, President of the Federal Reserve Bank of Atlanta, was elected Vice Chairman. Mr. Loring C. Nye, Assistant Cashier of the Federal Reserve Bank of Boston, served as Secretary of the Conference from February 1958 to June 1959. Mr. Gerald T. Dunne, Counsel and Assistant Secretary of the Federal Reserve Bank of St. Louis, was appointed Secretary of the Conference in July 1959. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES Aug. 2h 1959 at (o THE FEDERAL RESERVE SYSTEM g) Legend •"•"—• 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.—Alaska and Hawaii were added to the Twelfth Federal Reserve District in 1959, as of January 3 and August 21, respectively. Alaska became part of the Seattle Branch Territory and Hawaii part of the Head"Office Territory of that District. 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. 151 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Acceptance powers granted member banks 89 Acceptances, bankers': Federal Reserve Bank holdings 99, 106, 108 Open market transactions during 1959 128 Alaskan Statehood 93 Assets and liabilities: Banks, by classes 124 Board of Governors 102 Federal Reserve Banks 106-11 Bank holding companies: Board actions with respect to 88 Litigation 94 Bank Holding Company Act of 1956, proposed amendments 94 Bank premises, Federal Reserve Banks and branches 100, 106, 108, 110, 120 Bank supervision by Federal Reserve System 86 Banking offices: Changes in number 126 On, and not on, Par List, number 127 Board of Governors: Audit of accounts of 101 Income and expenses 101-03 Litigation and hearings 94 Members and officers 130 Policy actions 66-85 Regulations (See Regulations) Branch banks: Domestic: Board's branch authority, litigation regarding 94 Changes in number 126 Federal Reserve (See Federal Reserve Banks) Foreign 90 Capital accounts: Banks, by classes 124 Federal Reserve Banks: Actions by Board of Governors with respect to 83, 97 Condition statement 107, 109, 111 Central reserve city classification, provision for termination of 27, 93 Chairmen of Federal Reserve Banks 133 Charts: Debt outstanding 18 Interest rates 7, 8, 9 Saving in financial form 13 Commercial banks: Assets and liabilities 124 Banking offices, changes in number 126 Number, by classes 124 Condition statement of Federal Reserve Banks 106-11 Consumer financial saving 20 Continental Bank and Trust Company, Salt Lake City, Utah, administrative proceeding involving 95 Digitized for FRASER 152 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 153 Page Defense production loans 95, 123 Deposits: Banks, by classes 124 Federal Reserve Banks 107, 109, 111, 118 Savings deposits, grace periods for, amendment of Section 3(d) of Regulation Q 77 Savings and other time deposits, maximum rates 122 Deputy Chairmen of Federal Reserve Banks 133 Directors, Federal Reserve Banks and branches 134 Discount rates at Federal Reserve Banks: Increases in 5, 66, 73, 78 Table of 121 Discounts and advances by Federal Reserve Banks 4, 99, 106, 108, 110, 118 Dividends: Federal Reserve Banks 96, 97, 115, 116 Member banks 125 Dollar exchange, permission granted member banks to accept drafts or bills drawn for purpose of furnishing 89 Earnings: Federal Reserve Banks 96, 99, 114, 116 Member banks 125 Economic activity, interest rates, and saving 6-25 Examinations: Federal Reserve Banks 86 Foreign banking and financing corporations 91 Holding company affiliates 89 Member banks 86 State member banks 87 Expenses: Board of Governors 101-03 Federal Reserve Banks .96, 114, 116 Member banks 125 Federal Advisory Council 132 Federal Open Market Committee: Meetings 31, 131 Members and officers 131 Policy actions 31-65 Review of continuing authorities or statements of policy 36 Federal Reserve Act: Industrial loan authority under Section 13b, termination of 77 Reserves of member banks, amendments with respect to 25, 92 Statehood of Alaska and Hawaii 76, 93 Federal Reserve Banks: Assessment for expenses of Board of Governors 103, 114 Bank premises 100, 106, 108, 110, 120 Branches: Bank premises 101, 120 Directors 134 Vice Presidents in charge of 150 Capital accounts: Actions by Board of Governors with respect to.. 83, 97 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 INDEX Page Federal Reserve Banks—Continued Chairmen and Deputy Chairmen 133 Condition statement 106-11 Directors 134 Discount rates: Increases in 5, 66, 73, 78 Table of 121 Dividends 96, 97, 115, 116 Earnings and expenses 96, 99, 114, 116 Examination of 86 Fiscal agents for Inter-American Development Bank 93 Foreign and international accounts 99 Officers and employees, number and salaries 114, 121 Presidents and other officers 149 Profit and loss 83, 115 Reserve for contingencies, discontinuance of 83, 97 Reserve for registered mail losses, discontinuance of 83 Section 13b loan authority, termination of 77 Special certificates purchased direct from Treasury 113 Surplus accounts, actions by Board of Governors with respect to.. 83, 97 U.S. Government securities: Holdings of 99, 106, 108, 110, 112, 113, 118 Open market transactions during 1959 128 Volume of operations 95, 113 Federal Reserve districts: Twelfth District, readjustment to include Hawaii 76 Federal Reserve notes: Condition statement data 106-11 Cost of issue, printing, and redemption 103 Interest paid to Treasury 84, 96, 97, 115, 116 Federal Reserve policy: Digest of principal policy actions 30 Interest rates and monetary policy 22 Record of policy actions: Board of Governors 66-85 Federal Open Market Committee 31-65 Summary of principal policy actions 2-6 Federal Reserve System: Bank supervision by 86 Map of 151 Membership, changes in 87 First Bank Stock Corporation, litigation under Bank Holding Company Act 94 Foreign banking and financing corporations 91 Foreign branches of member banks 90 Gold certificate reserves of Federal Reserve Banks 106, 108, 110 Gold outflow 3 Government securities (See U.S. Government securities) Hawaiian Statehood: Actions by Board of Governors incident to 76 Amendments to Federal Reserve Act 76, 93 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 155 Page Hawaiian Statehood—Continued Twelfth District, inclusion of Hawaii in 76 Holding company affiliates: Examination of 89 Regulation P, amendment of Section l(d) 66 Reserves of readily marketable assets 93 Voting permits and Section 301 determinations 89 Industrial loans by Federal Reserve Banks: Condition statement data 108, 110 Termination of authority 77 Insured commercial banks 124, 126 Inter-Agency Bank Examination School 92 Interest rates: Discount rates at Federal Reserve Banks: Increases in 5, 66, 73, 78 Table of 121 Economic activity, saving, and interest rates 6-25 Regulation V loans 123 Savings and other time deposits, maximum rates 122 Investments (See also specific types of investments): Banks, by classes 124 Federal Reserve Banks 106, 108, 110 Legislation: Bank Holding Company Act of 1956, proposed amendments 94 Federal Reserve Banks as fiscal agents for Inter-American Development Bank 93 Member banks dealing in obligations of T.V.A. and Inter- American Development Bank 93 National banks, amendments to laws affecting 93 Reserves of member banks, Public Law 86-114 25, 92 Statehood of Alaska and Hawaii 93 Litigation and hearings 94 Loans (See also specific types of loans): Banks, by classes 124 Federal Reserve Banks 99, 106, 108, 110, 118 Margin requirements: Regulations T and U, amendments to 6, 68, 70 Table of 123 Member banks: Acceptance powers 89 Assets, liabilities, and capital accounts 124 Banking offices, changes in number 126 Earnings, expenses, and dividends 125 Examination of 86 Foreign branches, number in operation 90 Number 88, 124, 126 Obligations of T.V.A. and Inter-American Development Bank, transactions in 93 Reserve requirements: Amendments made by Public Law 86-114 25, 92 Regulation D, amendments to 28, 81 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 INDEX Page Member banks—Continued Reserve requirements—Continued Statutory range of 27, 28 Table of 122 Vault cash 5, 26, 28, 81, 92 Reserves: Regulation D, amendments to 28, 81 Total, required and excess 118 Membership in Federal Reserve System, changes in 87 Mutual savings banks 124, 126 National banks: Assets and liabilities 124 Banking offices, changes in number 126 Foreign branches, number in operation 90 Laws affecting, amendments to 93 Number 88, 124, 126 Trust powers 89 Nonmember banks 124, 126, 127 Old Kent Bank and Trust Company, Grand Rapids, Mich., litigation involving 94 Open market operations 3, 31-65, 128 Par List, banking offices on, and not on, number 127 Policy actions, Board of Governors: Capital accounts of Federal Reserve Banks, actions with respect to 83 Discount rates at Federal Reserve Banks: Increases in 66, 73, 78 Hawaiian Statehood, actions incident to 76 Regulation D, Reserves of Member Banks: Amendments related to use of vault cash in meeting reserve requirements 81 Regulation P, Holding Company Affiliates—Voting Permits: Amendment of Section l(d) 66 Regulation Q, Payment of Interest on Deposits: Amendment of Section 3(d) 77 Regulation R, Relationships with Dealers in Securities: Amendment of Section 2 80 Regulation S, Industrial Loans by Federal Reserve Banks: Termination of 77 Regulation T, Credit by Brokers, Dealers, and Members of National Securities Exchanges, amendments to 68 Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks, amendments to 70 Policy actions, Federal Open Market Committee: Authority to effect transactions in System Account 31-36, 38-65 Review of continuing authorities or statements of policy 36 Presidents of Federal Reserve Banks: Conference of, and meetings 150 List of 149 Salaries 121 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX 157 Page Profit and loss, Federal Reserve Banks: Statement of 115 Transfer of reserve for contingencies to 83 Record of policy actions {See Policy actions) Regulations, Board of Governors: Amendments incident to admission of Hawaii to Statehood 76 D, Reserves of Member Banks: Amendments related to use of vault cash in meeting reserve requirements 5, 28, 81 P, Holding Company Affiliates—Voting Permits: Amendment of Section l(d) 66 Q, Payment of Interest on Deposits: Amendment of Section 3(d) 77 R, Relationships with Dealers in Securities: Amendment of Section 2 80 S, Industrial Loans by Federal Reserve Banks: Termination of 77 T, Credit by Brokers, Dealers, and Members of National Securities Exchanges: Amendments to 6, 68 U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks: Amendments to 6, 70 Repurchase agreements: Bankers' acceptances 106, 108, 128 U.S. Government securities 106, 108, 112, 118, 128 Reserve requirements, member banks: Amendments made by Public Law 86-114 25, 92 Regulation D, amendments to 28, 81 Statutory range of 27, 28 Table of 122 Vault cash 5, 26, 28, 81, 92 Reserves: Federal Reserve Banks: Condition statement data 106-11 Reserve for contingencies, discontinuance of 83, 97 Reserve for registered mail losses, discontinuance of 83 Member banks: Regulation D, amendments to 28, 81 Total, required and excess 118 Salaries: Board of Governors 103 Federal Reserve Banks 114, 121 Saving, interest rates, and economic activity 6-25 Savings deposits {See also Deposits): Grace periods, amendment of Section 3(d) of Regulation Q 77 Securities companies, interlocking directorates with member banks, amendment of Section 2 of Regulation R 80 State member banks: Assets and liabilities 124 Banking offices, changes in number 126 Examination of 87 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 INDEX Page State member banks—Continued Foreign branches, number in operation 90 Litigation regarding Board's branch authority 94 Number 88, 124, 126 Proceeding regarding capital adequacy of State member bank.... 95 Surplus accounts of Federal Reserve Banks: Actions by Board of Governors with respect to 83, 97 Statistical data 107, 109, 111, 115, 116 System Open Market Account: Audit of 86 Authority to effect transactions in 31-36, 38-65 Territory of Federal Reserve Banks and branches: Twelfth District, inclusion of Hawaii in 76 Time deposits (See Deposits) Trust powers of national banks 89 U.S. Government securities: Bank holdings, by class of bank 124 Federal Reserve Bank holdings 99, 106, 108, 110, 112, 113, 118 Member bank holdings 124 Open market operations 31-65, 128 Special certificates purchased direct from Treasury 113 V-loans 95, 123 Vault cash of member banks, authority to permit use in meeting reserve requirements 5, 26, 28, 81, 92 Voting permits issued to holding company affiliates 89 Wachovia Bank and Trust Company, Winston-Salem, N.C., litigation involving 94 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis