Annual Report of the Federal Reserve Board, 1961

FORTY-EIGHTH Annual Report OF THE BOARD OF GOVERNORS of the Federal Reserve System COVERING OPERATIONS FOR THE YEAR I96I 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 8, 1962. 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-eighth Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1961. Yours respectfully, WM. MCC. MARTIN, JR., Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Contents • Page DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, 1961 4 MONETARY POLICY 5 Policy actions 5 Market impacts 7 FINANCIAL MARKET DEVELOPMENTS 10 Demand for funds 11 Federal Government 12 State and local governments 13 Businesses 14 Consumers 15 Supply of funds and liquidity 16 Consumers 17 Businesses 19 Savings institutions 20 Commercial banks 21 Interest rates 23 BALANCE OF PAYMENTS 26 Current account and long-term capital transactions in 1961 26 Gold and foreign holdings of dollars 28 Capital movements 30 RECORD OF POLICY ACTIONS—FEDERAL OPEN MARKET COMMITTEE 33 RECORD OF POLICY ACTIONS—BOARD OF GOVERNORS 100 BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM 106 Examination of Federal Reserve Banks 106 Examination of member banks 106 Federal Reserve membership 108 Bank holding companies 108 Trust powers of national banks 109 Foreign branches of member banks 109 Acceptance powers of member banks 111 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM—Cont. Foreign banking and financing corporations 111 Inter-Agency Bank Examination School 112 LEGISLATION ENACTED 112 National bank real estate loans 112 Old Series Currency Adjustment Act 113 Federal Farm Mortgage Corporation bonds 113 PROPOSED AMENDMENTS TO THE BANK HOLDING COMPANY ACT 113 LITIGATION 114 RESERVE BANK OPERATIONS 115 Loan guarantees for defense production 115 Volume of operations 115 Earnings and expenses 116 Holdings of loans and securities 117 Foreign and international accounts 118 Bank premises 119 BOARD OF GOVERNORS—INCOME AND EXPENSES 119 ORGANIZATION AND PROCEDURE 122 TABLES: 1. Statement of Condition of All Federal Reserve Banks Combined (in detail), Dec. 31, 1961 124 2. Statement of Condition of Each Federal Reserve Bank, Dec. 31, 1961 and 1960 126 3. Holdings of U.S. Government Securities by Federal Reserve Banks, Dec. 31, 1961, 1960, and 1959 130 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1953-61 131 5. Open Market Transactions of the Federal Reserve System during 1961 132 6. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1961 133 7. Earnings and Expenses of Federal Reserve Banks during 1961 134 vi Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page TABLES—Cont. 8. Earnings and Expenses of Federal Reserve Banks, 1914-61 136 9. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1961 138 10. Volume of Operations in Principal Departments of Federal Reserve Banks, 1958-61 138 11. Federal Reserve Bank Discount Rates, Dec. 31, 1961 139 12. Maximum Interest Rates Payable on Time and Savings Deposits 139 13. Margin Requirements 140 14. Fees and Rates under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950, Dec. 31, 1961 140 15. Member Bank Reserve Requirements 141 16. Member Bank Reserves, Reserve Bank Credit, and Related Items, End of Year 1918-61 and End of Month 1961 142 17. Principal Assets and Liabilities, and Number of All Banks, by Classes, Dec. 31, 1961 and 1960 144 18. Member Bank Income, Expenses, and Dividends, by Class of Bank, 1961 and 1960 145 19. Analysis of Changes in Number of Banking Offices in the United States during 1961 146 20. Number of Banking Offices on Federal Reserve Par List and not on Par List, Dec. 31, 1961 147 21. Description of Each Merger, Consolidation, Acquisition of Assets or Assumption of Liabilities Approved by the Board of Governors during 1961 149 FEDERAL RESERVE DIRECTORIES AND MEETINGS: Board of Governors of the Federal Reserve System 184 Federal Open Market Committee 186 Federal Advisory Council 187 Federal Reserve Banks and Branches 188 MAP OF FEDERAL RESERVE DISTRICTS 210 INDEX 211 vii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Annual Report of The Board of Governors of The Federal Reserve System • T]CONOMIC ACTIVITY expanded vigorously in 1961 as the •C United States recovered from a short and moderate recession. At the year-end both gross national product and industrial production were at record levels, significantly above the highs of the preceding cycle. Several factors contributed to the shortness and mildness of the recession. Among them were the following: PERSONAL INCOME declined little. Increases in unemployment compensation and in similar types of payments benefits nearly offset the decline in labor income. CONSUMER SPENDING also declined little. Although people bought fewer houses, cars, and other durable goods, they maintained their buying of nondurable goods and continued to increase their outlays for services. BUSINESS OUTLAYS did not decline sharply. Spending for inventories showed a substantial decline, but outlays for fixed capital were curtailed only moderately. EXPORTS of goods and services rose further, while imports declined. INCREASED PURCHASES by all levels of government provided a significant offset to reduced spending in the private sector. Recovery in economic activity began in the early part of 1961, with nonfarm employment and industrial production turning up in March. The recovery was sharp through summer, but the rate of expansion slackened somewhat after that. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS As the year progressed, it became evident that the recovery had a broad base, for consumers, businesses, and governments were all increasing their purchases: BUSINESSES STOPPED REDUCING their inventories by early spring and thereafter increased them moderately. AROUND MIDYEAR, businesses began to increase their outlays for plant and equipment; this was earlier than usual in a recovery period. CONSUMERS ALSO INCREASED their buying, with purchases of goods up appreciably in the final quarter. A BIGGER DEFENSE PROGRAM led to increased Federal Government purchases. State and local government purchases continued to rise, as they have almost without interruption since World War II. FOREIGN DEMANDS for U.S. goods continued fairly strong throughout 1961. As economic activity expanded here, however, imports rose from their reduced recession level. The trade surplus in the second half of the year was smaller than in the first half, and the deficit in the U.S. balance of payments again increased. With the increase in demand during 1961, nonfarm employment at the year-end was up considerably from its cyclical low. In December the civilian labor force was little changed from a year earlier, although in the early months of 1961 it had shown unusually large year-over-year increases. The unemployment rate continued high until late in 1961, when it declined. Recovery in output was not accompanied by higher prices. The total index for wholesale prices declined slightly, and so did prices of industrial commodities. Consumer prices rose a little, but the rise was smaller than in 1959 or 1960. Upward price pressures were minimal as gains in output per manhour were large and as substantial amounts of unutilized industrial capacity and manpower were available to meet: expanding demands. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM A large increase in the volume of funds flowing through credit and capital markets and substantial growth in liquid assets held by the public facilitated the rise in economic activity to new records in 1961: DOMINATING THE DEMAND SIDE were the need of the Federal Government for funds for increased expenditures and the large private demand for longterm financing. DEMANDS for mortgage money and for credit by State and local governments were substantial. Foreign borrowing from U.S. banks was larger than in 1960. ON THE SUPPLY SIDE, commercial banks provided a larger volume of credit than in most recent years. To make this possible, the Federal Reserve continued to follow a policy of making an abundant supply of reserves available to banks. CONSUMER SAVING in financial form increased. Most of these savings flowed into the capital markets through financial institutions. Increases in time deposits at banks and in savings and loan shares were large. Additions to demand deposits were moderate during the year as a whole but accelerated greatly in the later months. With funds in ample supply, enlarged credit demands were satisfied without much change in interest rates. Rates moved within a relatively narrow range, well above the low levels reached in 1958 and below the highs of late 1959: LONG-TERM RATES, after declining early in the year, increased only moderately in the subsequent recovery. SHORT-TERM RATES fluctuated without showing sustained upward or downward tendencies throughout most of the year. Toward the year-end they rose somewhat. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS DIGEST OF PRINCIPAL FEDERAL RESERVE POLICY ACTIONS, 1961 Period Action Purpose of action January Limited net sales of U.S. To encourage bank credit Government securities from and monetary expansion by Federal Reserve portfolio to absorbing only part of seaabout $500 million. Member sonal inflow of reserve funds bank borrowing at Reserve not otherwise offset by a Banks averaged only $50 large gold outflow. million. February- Bought substantial amounts To encourage bank credit August of U.S. Government securi- and monetary expansion ties with maturities over 1 while avoiding direct downyear, following February 20 ward pressure on short-term announcement that System interest rates, thereby modopen market operations erating pressures on the U.S. would include securities out- balance of payments from side the short-term area. outflow of short-term capital These purchases were partly attracted by higher interest offset by net sales of short- rates abroad. term securities. Total System holdings of Governments increased about $700 million. Member bank borrowings averaged $75 million. September- Bought or sold at different To continue to encourage December times varying amounts of bank credit and monetary U.S. Government securities, expansion while allowing for including securities with changing reserve needs due longer maturities. Total Sys- to seasonal and other factors, tem holdings of Government including a large gold outsecurities increased about flow, and while continuing to $1.6 billion. Member bank give consideration to the borrowings at Reserve Banks balance of payments probremained generally low. lem. December Raised, effective Jan. 1,1962, To enable banks to compete maximum interest rates pay- more effectively for savings able by member banks on and other time deposits, inany savings deposit from 3 to cluding foreign time depos- 3*/i per cent, and to 4 per its, thus moderating prescent on those left in the bank sures on the U.S. balance of for 1 year or more; also payments, and, over the long raised maximum rates on run, to offer additional incentime deposits with a maturity tive for the accumulation of of 6 months to 1 year from 3 savings required for financto 3Vi per cent, and to 4 per ing future economic growth. cent on those deposits with a maturity of a year or longer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM MONETARY POLICY The Federal Reserve continued through 1961 to follow a policy of supplying reserves to permit substantial bank credit and monetary expansion. It did this to encourage recovery from recession and to facilitate economic growth in a period characterized by an absence of inflationary price pressures, by underutilization of manpower and other resources, and by negligible use of bank credit for speculative purposes. While taking steps to encourage domestic expansion, the Federal Reserve also took into account the unsatisfactory state of the international balance of payments. Policy actions. During 1961 the total required reserves of Federal Reserve member banks increased about $1 billion, or 5 per cent. The System supplied reserves through purchases of U.S. Government securities, holdings of which were $1.5 billion larger at the end of 1961 than a year earlier. These purchases, along with other factors supplying reserves, offset the effects on reserves of a gold outflow and of an increase in currency in circulation outside banks and the Treasury, amounting to about $850 million each between the two year-end dates. With reserve funds readily available from these sources, member banks had little need to borrow at the Reserve Banks. The rates charged by Federal Reserve Banks for such borrowing remained at 3 per cent. The Federal funds rate—the interest rate on excess reserve balances lent by member banks—generally remained appreciably below the discount rate. The rate on Treasury bills, which banks also use to adjust reserve positions and which they acquired in large amounts in 1961, moved generally within the range of 2.25 to 2.65 per cent for 3-month bills, with the higher level reached late in the year. Margin requirements on credit used for purchasing or carrying stock market securities were maintained during 1961 at the 70 per cent level to which they were lowered in July 1960. Stock market credit outstanding increased $1.2 billion to $5.6 billion during the year. Most of this occurred in the first 5 months, but there were renewed increases toward the year-end. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS During 1961 the Federal Reserve continued to supply bank reserves for credit and monetary expansion in such a way as to minimize downward pressures on short-term interest rates. This was done to help prevent development of a wider differential between short-term rates in domestic and foreign money markets. MiMtiK SAN* RESERVES increase lit 1961 - t^+o •*N****w TOTAL RESERVES, _ ADJUSTED ~y X... V • -+r REQUIRED RESERVES, ADJUSTED v^ f 1 •— ••., rsy and BORROWINGS stay near minimum levels BORROWINGS NOTE.—Monthly averages of daily figures. Required reserves adjusted are reserves supporting private deposits derived by applying current reserve requirement ratios to seasonally adjusted figures for member bank demand deposits adjusted, net interbank demand deposits, and time deposits. Total reserves adjusted equal adjusted required reserves plus actual excess reserves. Reserves required against U. S. Government deposits are excluded. Borrowings are member bank borrowings at Federal Reserve Banks. A wider margin could have led to greater outflows of short-term capital and so worsened the balance of payments position. The balance of payments problem had become acute in the latter part of 1960, when outflows of capital and gold rose sharply. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM In the fall of 1960 the System had extended the area of its open market operations in Government securities to include issues in the 9-15 month maturity range in order to avoid direct pressure on shorter-term bill rates. In February 1961 the System extended operations to longer-term Government securities. Operating procedures of the Federal Open Market Committee were modified accordingly, as shown serially in the policy record entries of the Committee that are set out in detail in this volume on pages 33-99. The principal entries relating to operating procedures are those for February 7, March 7 and 28, and December 19. Over the year the Federal Reserve purchased, on balance, $2.6 billion of U.S. Government securities maturing in more than a year. More than half of these had maturities of 2 to 6 years. In addition, the Treasury purchased $900 million of longer-term securities, mostly with maturities of more than 10 years, for its agency and trust accounts. Both the Federal Reserve and the Treasury made most of their purchases of these longer-term Government securities during the early months of recovery. For 1961 as a whole the Federal Reserve carried out most of its open market transactions in the short-term area, in response to continuing large seasonal and other temporary variations in bank reserves. On balance, it sold or presented for redemption more short-term securities than it bought. However, owing to the approach to maturity of outstanding issues, its holdings of securities maturing within 1 year increased. Market impacts. Monetary actions by the Federal Reserve and a concentration of new cash borrowing by the Treasury in the short-term area, which increased the supply of such securities, helped to keep fluctuations in short-term interest rates within a narrow compass during 1961. These factors, which tended to raise interest rates on such securities, offset the effect of increased demand for them—particularly by commercial banks—which tended to lower rates. The moderateness of the variation in long-term interest rates Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS during the year reflected a continuing high level of demand for capital, as well as market expectations of a still larger future demand, balanced against a growing volume of private financial saving and purchases of longer-term U.S. Government securities for Treasury trust fund and Federal Reserve open market accounts. Also, actions to minimize downward pressures on shortterm rates tended to keep longer-term rates from declining much further in the early months of the year, as investors—particularly BANKS EMPHASIZE short-term Governments In large < red it expansion i« 1961 15 1961 I 1960 1958 U • IOTAI TtRM An tOANS i. $. COVT. SECURITIES tNVESTMENTS '* I NOTE.—Based on data for December 31 except for 1961, which are for December 27. Interbank loans excluded. Short-term U, S. Government securities are those maturing within 1 year. commercial banks—confined demands largely to the short end of the market. But the ease that did develop in long-term markets, partly as a result of Federal Reserve and Treasury activities, facilitated a record volume of new security financing by business corporations in the spring and early summer. Continuation of monetary ease through 1961 meant that bank credit—and, in a less direct way, other types of credit 8 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM and capital—continued to be readily available. Bank credit was available during the recovery at interest rates little changed from those during the recession. These rates were moderately lower than at the last cyclical peak. For 1961 as a whole commercial banks added about $14.6 billion, or about 7 per cent, to their total loans and investments. Demand for loans was sluggish in the first half of the year, but it picked up later. With loan demands limited, a large part of the increase in total bank credit in 1961 was in holdings of securities. Banks invested heavily in short-term U.S. Government issues and reduced their holdings of longer-term U.S. Government securities. As a result their liquid assets, measured by holdings of short-term Government securities and free reserves (excess reserves less borrowings at Reserve Banks), rose enough to make their ratio to demand deposits the highest since 1954. Loan-todeposit ratios, on the other hand, remained relatively unchanged at levels somewhat below their mid-1960 peak. Demand deposits expanded moderately in 1961, but time and savings deposits rose almost $10 billion, or 13 per cent. The rise in total deposits exceeded the previous peacetime record for an annual rise set in 1958. Most of this increase was in savings accounts of individuals, but part represented the growth of negotiable time certificates of deposit issued mainly to business corporations. The larger city banks began to issue these certificates in large quantities in 1961. Late in the year the Board of Governors of the Federal Reserve System and the directors of the Federal Deposit Insurance Corporation authorized an increase, effective January 1, 1962, in the maximum permissible rates of interest payable by member banks of the System and other insured banks on savings deposits and on time deposits and certificates in the longer maturity ranges. The purpose of this action was to permit commercial banks to compete more effectively for savings and other time deposits, including foreign time deposits, and, over the long run, to offer additional incentive for the accumulation of savings required for financing future economic growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS The public's holdings of liquid assets rose by about 6.5 per cent from the fourth quarter of 1960 to the fourth quarter of 1961, almost as much as the 7.5 per cent rise in gross national product over that period. The active money supply—that is, demand deposit and currency holdings of the public—increased 3.5 per cent over the year. The public increased its liquidity more through acquisitions of other assets such as time and savings deposits and shares in savings and loan associations. At prevailing interest rates these assets were more attractive than cash. The nonbank public's holdings of short-term Government securities increased only slightly over the year. With economic activity rising and with the public preferring other liquid assets to cash, the turnover rate of money rose to the highest level of the postwar period. To sum up, in framing monetary policy in 1961, the Federal Reserve had to take into account many economic and financial considerations, both domestic and international. To encourage higher levels of employment and greater utilization of resources at home, it provided reserves for expansion of bank credit and money and encouraged easier borrowing conditions and greater liquidity. To contribute to a better balance of international payments, it conducted open market operations in such a way as to minimize downward pressures on short-term interest rates. FINANCIAL MARKET DEVELOPMENTS Credit markets had ample funds to meet the enlarged demand for credit as economic activity expanded during 1961. A large expansion in bank credit, encouraged by monetary ease, fortified the buoyant effect that the public's increased readiness to save through financial assets had on the supply of funds. Under these conditions, growth in credit demand produced no sharp or sustained rise of interest rates. Long-term rates, after declining in 1960 and early 1961, rose moderately during the spring and summer, but leveled off afterwards. Short-term rates varied within a narrow range, and rose some during the late weeks of the year, partly in reflection of seasonal influences. 10 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Demand for funds. An estimated total of $50 billion was raised in credit and equity markets in 1961. Credit demands, after allowing for seasonal influences, were quite light in the first quarter of 1961, but increased sharply in the second quarter and expanded further in the second half. The total amount of funds raised during the year was about 25 per cent more than MORE FUNDS RAISED in credit markets during economic upswing in 1961 f-^>'V^\V'V'V' NOTE.—Flow-of-funds data. Figures for 1961 are preliminary. in 1960, when the decline in economic activity and the emergence of a Federal cash surplus held down demands. It was also somewhat larger than in 1958, but considerably less than the record total for 1959. Funds raised by governments at all levels were comparatively large during 1961. Businesses raised more funds than in 1960. Meanwhile, consumer demands were generally moderate. The net outflow of private U.S. capital to the rest of the world, which was about as large as in 1960, is discussed later. 11 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Federal Government. After running a cash surplus of about $3.6 billion in calendar year 1960, the Federal Government had a cash deficit of $6.8 billion in 1961. Increased expenditures were largely responsible for the turnaround. There were large increases in social security and unemployment compensation and in defense outlays. Spending in these areas helped to cushion the decline in business activity and in personal income and to stimulate the ensuing economic recovery. The deficit was financed largely through expansion in the public debt. Most of the net increase in 1961 was in marketable Federal CASH BUDGET moves from surplus in I960 to deficit in 1961 and ILS Government + MARKETABLE Kill rises sharply NOTE.—Treasury Department data. 12 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM debt, as is usual. For the first time in many years, however, the amount of U.S. savings bonds outstanding increased. The yield on Series E and H bonds was increased in September 1959, and the modest pick-up in sales that began when market rates were at reduced levels in 1960 continued during 1961. The Treasury undertook extensive financing operations in credit markets during 1961. Some were to meet needs arising from the cash deficit, and some to finance the $49 billion of maturing debt, other than regular bills. In addition, it refunded almost $ 10 billion of debt in advance of maturity. New borrowing in the short-term sector of the market helped to increase liquidity in the economy at a time when it was necessary to encourage economic recovery. Marketable obligations maturing within a year rose about $10.5 billion in 1961, as compared with a decline of about $4.5 billion in 1960, while debt maturing in from 1 to 5 years declined after rising sharply in 1960. The larger supply of short-term securities also helped to minimize downward pressures on short-term interest rates and thus to alleviate strains on the balance of payments. In addition to steps that shortened the maturity of the debt, the Treasury at times took advantage of favorable market conditions to lengthen maturities, particularly through advance refunding operations. Outstanding debt maturing in more than 5 years increased moderately in 1961, as compared with a decline the year before. On balance, the average maturity of the total marketable debt changed little during 1961, but the maturity of that portion held outside the Federal Reserve and Treasury trust accounts shortened somewhat. State and local governments. With construction outlays rising and market conditions generally favorable, State and local governments offered a record volume of long-term securities in capital markets during 1961. But a rising level of retirements kept the net increase in debt below the record increase in 1958. That year, like 1961, was one of economic recovery and expansion from a cyclical trough early in the year. New offerings in 1961 were for a wide range of public purposes. School bonds 13 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS were issued in record volume, and utility and highway projects absorbed more funds than in 1960. Businesses. Corporate demands upon capital markets also increased in 1961. They were particularly large in the spring and early summer, when new flotations were at a record level. Heavy flotations were scheduled as the upturn in business activity became apparent but before sizable increases occurred in capital spending for long-term purposes. The size of the offerings reflected in part a widespread expectation at that time that interest rates would rise quickly as the recovery progressed. The sharp rise in new offerings during the year was partly offset by increased retirements. These were very large in the fourth quarter. Manufacturing and communications companies accounted for most of the increased financing. Issues by gas and electric utilities, which regularly account for a large portion of capital flotations, remained at moderate levels. Finance companies, which had borrowed large amounts in security markets in 1960, relied much less on long-term sources of funds in 1961. With consumer demands for credit at reduced levels, these companies also reduced their short-term open market financing. The pattern of finance company borrowing in 1961 was similar to that in the 1958 recovery. While businesses raised substantial amounts in capital markets during 1961, they sought comparatively small amounts from banks, particularly in the first half of the year. Outstanding bank loans to nonfinancial businesses declined by $400 million during the January-June period, in contrast with increases of about $1.7 billion in the same periods of 1959 and 1960. But they declined less than in the first half of 1958, when business also was beginning to recover from recession. During the second half of 1961 business loans outstanding increased by an estimated $1.6 billion, somewhat more than they had in the last half of 1960, when loan demand was fairly large for a recession period. The increase was also larger than in the second half of 1958 but was less than in other recent years of economic expansion. 14 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Conditions in capital markets in 1961 influenced business borrowing at banks to some degree. Some borrowers, particularly public utilities, used the proceeds of capital market issues to repay longer-term bank loans. For others, capital market financing reduced the need to borrow from banks. Growth in funds available from retained earnings and capital consumption allowances, while capital expenditures remained moderate, also tempered borrowing from banks. Outlays on plant and equipment rose during the year, but for the year as a whole were slightly less than in 1960. Increases in inventories were also less than in 1960. Inventories declined sharply in the early months of the year, and then expanded. Accompanying these developments, outstanding bank loans to manufacturers of metals and metal products declined during the year, after rising during the previous 2 years, while loans to all other manufacturers as a group, excluding food processors, increased by somewhat less than they had in the earlier years. Consumers. The outstanding indebtedness of consumers rose less in 1961 than it had in 1960, although its two major components showed diverse tendencies. The increase in short- and intermediate-term credit was only $1.4 billion—about equally divided between instalment and noninstalment credit—compared with $4.4 billion in 1960. Net mortgage borrowing, on the other hand, was larger than it was in 1960. The comparatively small net increase in short- and intermediate-term credit reflected the lower level of outlays by consumers for durable goods, particularly automobiles. Automobile credit, seasonally adjusted, decreased in the first three quarters of 1961, then increased, along with other types of instalment credit, as sales of new automobiles rose sharply in the fourth quarter. Extensions of instalment credit, which had declined from the second quarter of 1960, began to increase in the spring of 1961 and reached a new high in the fourth quarter. Total extensions for the year, however, were approximately 3 per cent smaller than in 1960. Repayments increased gradually and were about 4 per cent higher than in 1960. 15 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Consumer purchases of new homes turned up during 1961, but the total for the year was less than in 1960. Mortgage extensions, as well as net mortgage borrowing, increased faster than home purchases, however, as consumers took advantage of easier credit conditions to trade existing houses more actively as well as to purchase new ones. While both Government-underwritten and conventional lending turned up during 1961, lending on conventional mortgages led the rise for the first time in a postwar recovery. Supply of funds and liquidity. An increased flow of consumer funds into financial assets accompanied the comparative ease in credit market conditions in 1961. Meanwhile, as noted above, dissaving by consumers through debt expansion was moderate. As a result, net saving in financial form (net acquisitions of financial assets less net incurrence of debt) rose to about 4 per cent of disposable personal income from 1.5 per cent in 1960. To a small extent consumers purchased credit market instruments directly, but for the most part they acquired more liquid assets and channeled their saving through financial institutions. As a result, funds advanced to credit markets directly by nonbank financial institutions were larger in 1961 than in 1960. And a substantially expanded volume of credit was available from commercial banks, as reserve funds were in ample supply. With the continued flow of saving to financial institutions, together with the expansion of the money supply and also of short-term Government securities, the public's holdings of liquid assets rose. On the average, the ratio of liquid assets to gross national product was higher in 1961 than in 1960. But as recovery progressed, the ratio declined, as it normally does in such periods. The further increase in foreign liquid funds in the United States, as a counterpart of this country's international payments deficit, took the form mainly of a rise in deposits. Foreign holdings of short-term U.S. Government securities declined slightly. 16 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Consumers. As during the 1957-58 period of recession and recovery, the flow of consumer saving into financial assets was well maintained during the recent recession, and the flow increased along with incomes in the recovery. Consumers acquired about one-third more financial assets in 1961 than in 1960. The most recent data indicate that consumers bought directly around $500 million (net) of securities in 1961, compared with GROWTH IN LIQUID ASSETS large ft* 1961 - $00 but Ratio of these assets to declines in economic upswing 1955 195/ 1959 mi ' '1 NOTE.—Total liquid assets are seasonally adjusted monthly data for holdings by the nonbank public on an end-of-period basis. Liquid assets include currency; demand deposits; time and savings deposits in commercial banks, mutual savings banks, and the Postal Savings System; shares in savings and loan associations; U. S. savings bonds; and U. S. Government securities maturing within 1 year. GNP data are quarterly. Ratios of liquid assets to GNP are quarterly averages, with liquid assets component of the ratio an average of each month of the current quarter and the last month of the preceding quarter. 17 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS $2.5 billion in 1960 and a record $15.5 billion in 1959. During 1959 interest rates were high and rising, and consumers purchased some $10 billion of Federal obligations alone in a period when the Federal debt was rising rapidly and banks were large net sellers. They purchased fewer securities in 1960, when total credit demands had decreased. Small net purchases in 1961 reflected net sales in the first half, seasonally adjusted, followed by somewhat larger net purchases in the second. In the recent recession and recovery consumers stressed savings deposits and savings and loan shares rather than securities as outlets for saving to an even more marked degree than in 1957-58. During the first half of 1961, with consumer expenditures not keeping pace with the sharp rise in their income, and with yields on savings accounts maintained, the flow of consumer funds into savings deposits and shares was at an annual rate, seasonally adjusted, of almost $20 billion, one-third above the NOTE.—Flow-of-funds data. Money and fixed-value claims include currency and demand deposits, time and savings deposits in banks, savings and loan and credit union shares, deposits in Postal Savings System, and U. S. savings bonds. Credit and equity market instruments comprise net purchases of bonds, stocks, and mortgages. 18 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM peak rate in mid-1958. During the second half of the year, these flows were maintained at near the first-half pace. Consumer holdings of currency and demand deposits began to rise in mid-1960 and then increased by an estimated $2 billion during 1961. The increase in these holdings did not keep pace with the rise in consumer income, as has generally been the case in periods of economic expansion since World War II. However, the over-all liquid asset position of consumers—including not only cash, which represents a small part of the total, but also savings deposits, savings and loan shares, and U.S. savings bonds—improved substantially in recession and was maintained during recovery. Other flows of consumer saving through financial institutions—that is, saving in the form of life insurance reserves and pension fund equities—generally show little sensitivity to cyclical developments. The flow of saving to noninsured pension funds continued to increase at the moderate pace of the preceding 3 years. The flow of saving to life insurance companies, which had increased in 1960 after several years of stability, also rose somewhat further in 1961. Businesses. Rising internal cash flows of business, as profits recovered in the spring of the year, contributed to some easing of supply conditions in credit markets. During the 12 months ending September 1961, the decline in corporate holdings of U.S. Government securities was only about one-third as much as in the preceding 12 months. Meanwhile, corporate holdings of cash and deposits rose almost $2 billion during the 12 months ending September 1961, after declining somewhat in the earlier period. Until the last quarter of 1961 businesses invested substantial sums in negotiable time certificates of deposits issued by commercial banks. Although interest rates paid on these certificates rose, they were relatively less attractive toward the end of the year because of the rise in yields of short-term U.S. Government securities. Corporate liquidity, as measured by the ratio of cash and U.S. Government securities to total current liabilities, changed little during the year from the low level to which it had fallen 19 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS ! CORPORATE LIQUIDITY changes little in 1961 TOTAL CURRENT LIABILITIES CASH AND U. S. GOVT. SECURITIES 40 ' 1961 NOTE.—Securities and Exchange Commission estimates. in 1960. It remained low because corporations used a substantial portion of their rising internal funds to finance customer purchases of their products, as has been the tendency for several years. Since bills payable by corporations are included in current liabilities, while customers' receivables are not counted as liquid assets, this tendency has been accompanied by a fairly steady decline in corporate liquidity ratios since 1954. Savings institutions. In addition to the large increase in savings and other time deposits at commercial banks, discussed earlier, much larger amounts of funds were available to savings institutions, other than commercial banks, in 1961 than in previous years. Both shares in savings and loan associations and deposits at mutual savings banks increased more than in 1960, 20 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM and this contributed to an easing of conditions in capital markets, particularly in the mortgage market. The increase in savings and loan shares, which has continued throughout the postwar period, began to accelerate in the latter part of 1960, and in 1961 these shares increased by a record amount. Augmenting this inflow with borrowed funds, savings and loan associations increased their mortgage lending by almost one-fourth and also added to their holdings of U.S. Government securities and cash. Though remaining below previous highs, the net inflow of saving to mutual savings banks in 1961 was above the levels of 1959-60. With the additional funds, these institutions also increased their mortgage acquisitions. Meanwhile, they reduced their holdings of U.S. Government securities by considerably less than in 1960. The continued growth in saving through life insurance companies and pension funds in 1961 provided funds for purchases of corporate and other securities. Life insurance companies, for example, purchased about one-fourth more corporate securities than they had in 1960. Commercial banks. The ready availability of reserves to commercial banks, coupled with the public's preference for putting more new funds into time as compared with demand deposits, produced a $14.6 billion expansion in commercial bank credit in 1961, the bulk occurring in the second half of the year as usual. The increase for the year was only slightly less than in 1958, when expansion was at a postwar record rate, and was well above the $9 billion total for 1960. Expansion in 1961 was accompanied by an increase in time deposits three times greater than that in demand deposits. Loans accounted for $6 billion, or about 40 per cent, of the growth in total bank credit in 1961. They rose by more than in 1958, but by less than in 1960. As compared with the latter year, there were contrasting movements among loan categories. Business loans grew very little after showing a modest rise in 1960. The net increase in farm and consumer loans was also 21 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS smaller than in 1960. On the other hand, banks became more active in real estate and security loans. The net increase in real estate loans was about two and a half times as much as in 1960. Outstanding security loans increased by more than in other recent years. There was an unusually small net decline in such loans during the first half of 1961, and a large increase in December, when corporations sold U.S. Government securities to obtain funds for meeting tax payments. Expansion in total loans in 1961 was about in line with the growth in deposits. The ratio of loans to deposits changed little, therefore, remaining about 2.5 percentage points below the peak of 57 per cent in mid-1960. With reserve funds increasingly available as a result of Federal Reserve actions and with strong loan demands absent, banks made net purchases of $5.5 billion of U.S. Government securities, more than two and a half times as much as in 1960. In addition, they added a record $3 billion to holdings of other securities, particularly State and local government issues, which have a relatively high after-tax yield. Banks invested heavily in short-term U.S. Government securities during the year. Holdings of securities maturing within a year increased by $7.0 billion, while holdings of longer-term U.S. Government securities declined by $1.5 billion. There were a number of reasons for this emphasis on shortterm investments. One was memory of earlier experiences. During the 1957-58 recession, for example, banks had invested heavily in longer-term issues. When they had to sell these securities to meet renewed loan demand, they were confronted with higher rates and lower prices, in part a result of speculative activity in the market around mid-1958. Another reason was the continued attractiveness of short-term securities in 1961, as their yield relative to longer-term securities remained fairly high on the average in comparison with other years of recession and recovery. As bank credit expanded, there was at first only a moderate growth in the active money supply (currency and demand de- 22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM posits held by the nonbank public). The daily average series on the money supply, which had declined in late 1959 and the first part of 1960, began to rise after mid-1960 and rose 3.5 per cent during 1961. From the second half of August to the second half of December, the money supply expanded at an annual rate of about 8 per cent. Time deposits grew rapidly during the year. The average rate of increase was 13 per cent, although the rate slowed down somewhat in the second half. With its continued strong preference for time deposits and similar assets—such as savings and loan shares—the public used the money supply more intensively in 1961. Turnover of demand deposits during most of the year was higher than in 1960, and in the last quarter of the year was about 4 per cent more than a year earlier. There has been a persistent upward movement in turnover since 1946, following a downward trend during the depression of the 1930's and the war years. Interest rates. The balancing in credit markets during 1961 of demands for and supplies of funds was accompanied by remarkably little tendency for the price of credit—that is, interest rates —to rise or fall in any sustained way. In general, neither short- nor long-term interest rates fell as far in the recent recession as in the previous one. Short-term rates fluctuated in a narrow range from mid-1960 through 1961, after having declined rapidly in the first 6 months of 1960. The narrowness of the range reflected at times the efforts of monetary, and also debt management, authorities to minimize downward pressures on market yields of short-term U.S. Government securities, in view of the balance of payments position. During the last half of 1961, as recovery gained momentum without signs of inflationary pressures, the continued availability of bank reserves, combined with moderate demands for shortterm funds, contributed to maintenance of short-term rates near their recession lows for the most part. During the last few weeks of the year short-term rates rose by somewhat more than is usual for that season, as demands became more active. The market yield on 3-month Treasury bills at the end of December was 23 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS somewhat higher than at any time since the early summer of 1960. Long-term rates declined some in 1960 and early 1961 but remained well above the low levels reached in the 1958 recession. They rose somewhat in the spring and summer of 1961, but increases were much less than the sharp rises that occurred at the time of the 1958 economic upturn. Downward and upward rate movements in 1958 had been accentuated by speculative activity. The average yield on long-term U.S. Government securities reached its low for the year in May, as purchases for the Federal Reserve open market account and Treasury trust accounts contributed to the moderate easing of capital market conditions. With long-term rates on not only U.S. Government but also corporate issues at somewhat reduced levels in the early months of the year, heavy corporate flotations were scheduled and were marketed in large quantity during the spring and early summer. Rates on high-grade corporate issues rose in that period but leveled off and then declined somewhat as the volume of new issues was reduced. Mortgage market conditions eased throughout 1960 and the first part of 1961, and then changed little. In 1960, funds available to mortgage lenders increased—largely as a result of the growth and changing pattern of consumer saving—while the demand for such funds declined. In 1961, as already indicated, consumers channeled larger amounts of their funds into savings and loan associations and into other institutions that were interested in mortgage investments. This resulted in a further easing of mortgage market conditions during much of the year, even in the face of renewed demand for such credit. During the second half of the year, the Federal National Mortgage Association helped to keep market conditions from tightening by making net acquisitions of mortgages. During the first half of 1961 the allowable interest rate on FHA-insured mortgages was reduced in two steps from 53A per cent, which had prevailed since the autumn of 1959, to SlA per cent in late May. Secondary market yields on those 24 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM ; SHORT-TERM RATES show little cyclical I variability is H61 - T - 5 PRIrME RATE L /f \A - 4 . r i < / I 1 1 / M * - -7 3 I A VV'V''> FINANCE /W^* V V COMPANY /7 - 2 > TREASURY \ PAPER / I BILLS - 1 V » t .... 1 „„!, , i and LONG-TERM SATIS are more stable FHA MORTGAGES $ 1 BONDS: CORPORATE Aaa /""\ / ^ *>^ ii%^J>... ' 'J NOTE.—Monthly averages. Finance company paper, based on rates published by finance companies for varying maturities in the 90-179 day range. Treasury bills, market yields on 3-month bills. Corporate and State and local government bonds, from Moody's Investors Service. U. S. Government bonds, issues maturing or callable in 10 years or more. Prime rate, rate charged by large banks on short-term loans to business borrowers of the highest credit standing. FHA mortgage rate, derived by Federal Reserve from a weighted average of opinions of FHA field offices on bid prices in their market areas (dashed lines indicate periods of adjustment to changes in the contractual interest rate). 25 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS mortgages continued to decline until July, but not to levels as low as the ceiling rates, and new mortgages continued to sell at discounts. Interest rates on conventional mortgatges apparently changed little during most of the year, but other terms on both conventional and insured mortgages were relaxed further. BALANCE OF PAYMENTS The unsatisfactory state of the country's international balance of payments continued to be a matter of concern in 1961. Outflows of volatile capital, which had been exceptionally large during the latter part of 1960, diminished early in 1961 after the U.S. Government made clear its continued determination to defend the international value of the dollar. The underlying competitive position of the United States in world markets for goods was probably somewhat stronger in 1961 than in the 2 preceding years. Nevertheless, forces making for improvement in the balance of payments were obscured, as the year progressed, by the effects on imports of rising business activity and the effects on capital movements of the ample liquidity of banks and of the nonbank public. Absence of increase in commodity prices in the United States, if it continues, can be counted on to help in the restoration of payments equilibrium. Average wholesale prices of goods other than farm products and foods were slightly lower at the end of 1961 than at the end of 1959. Prices for certain categories of products of key importance for the country's competitive position, such as metals and machinery, after rising substantially from 1954 through 1959 have changed relatively little since then. Further improvement of the U.S. competitive position in international trade is vital for the defense of the dollar. Attention must also be paid to factors that influence long-term and shortterm capital movements. Among these are the liquidity of the domestic economy and the availability of bank credit. Current account and long-term capital transactions in 1961. Demand for imports was relatively low in the early months of the year, while exports continued close to the high level reached in the 26 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM latter half of 1960. Thus the merchandise export surplus for the first half of 1961 was large. But as domestic production and incomes recovered, and as inventory decumulation gave place to accumulation at a moderate rate, imports rose and the export surplus fell. Expansion of exports since 1959 has in some degree been the counterpart of expanding Government economic loans and grants to other countries. Exports other than those financed directly by Government payments rose very sharply up to mid-1960 but fell off a little during the first 9 months of 1961. One factor responsible for this slackening was an easing of pressures on economic resources in Europe. European demand for capital TRADE SURPLUS declines as imports recover lit the summer of H&! \9$$ 1957 NOTE.—Three-month weighted moving averages of Bureau of the Census seasonally adjusted data. Exports exclude shipments under military aid programs. 27 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS goods and other final products remained strong, but accumulation of inventories of materials and semifinished goods was less than in 1960. The merchandise export surplus in the second half of 1961 was at a seasonally adjusted annual rate of nearly $5 billion. The surplus on all goods, services, and donations, other than military transactions and economic aid outlays, was at a rate of about $6 billion. But with net nonmilitary Government loans and grants taken into account, the balance of receipts in the second half of 1961 was only about $2 billion per year. This was far too little to cover net military expenditures abroad of $2.5 billion a year and the net outflow of long-term private capital, which in this period exceeded $2 billion per year. Thus the adverse payments balance on current and long-term capital accounts (including also short-term U.S. Government capital) was running at an annual rate close to $3 billion during the second half of 1961. In the first half of the year there had been substantial net receipts in these accounts, including $650 million of prepayments of debts to the United States, mainly by Germany. Even without these prepayments, there had been a small surplus on the current and long-term capital accounts. This contrasted sharply with the deficits of nearly $2 billion in 1960 and more than $4 billion in 1959. The substantial surplus of the first half of 1961 made the deficit for the full year on these accounts a good deal less than $1 billion. The re-emergence of a large deficit on current and long-term capital accounts in the second half of 1961 reflected primarily the recovery in merchandise imports and the absence of extraordinary debt prepayments. At the same time exports rose somewhat, but the increase in receipts from this source was more than offset by the rise in Government aid payments. Gold and foreign holdings of dollars. U.S. gold reserves decreased about $850 million in 1961, only half as much as in 1960. Foreign central bank and other official short-term dollar assets increased about $600 million. This movement too was much 28 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM smaller than in I960, when such holdings rose $1.2 billion. At the end of 1961 the U.S. gold stock was $16.9 billion, while short-term liabilities to foreign official holders of dollars, in such forms as deposits and Treasury bills, were $11.0 billion. And also at the end of 1961 the Exchange Stabilization Fund held about $100 million of convertible foreign currencies; it had acquired nearly $200 million from March to June and reduced its holdings in later months. Part of the excess of U.S. international payments over receipts in 1961 was financed by an increase in private foreign holdings of dollars. In the second half of 1960, when money market rates had been relatively high in Great Britain and Germany and uneasiness about the U.S. dollar had developed in international markets, private foreign holdings of dollars had been reduced by $500 million. But in 1961 short-term dollar liabilities to foreign banks other than official institutions increased by $600 million, bringing them to a total of $5.3 billion at the year-end. Short-term dollar liabilities to other private holders rose $100 million, to $2.4 billion. Besides large increases in the dollar holdings of some of the European countries, there was a substantial increase in the holdings of Canada. In part this represented the investment at short term by Canadian banks of funds placed on deposit with them by U.S. residents. Dollar holdings of international organizations increased somewhat in 1961, if their holdings of U.S. Government bonds and notes are included. In the aggregate, official and private foreign holders and international organizations increased their liquid assets in the United States, including Government bonds and notes and certain other types of assets, by $1.7 billion. The rise in these holdings, together with the net decline in U.S. gold reserves and official holdings of convertible foreign currencies, indicated a $2.4 billion excess of U.S. payments over U.S. receipts from international transactions. This was considerably less than the deficits of nearly $4 billion each in 1959 and 1960. However, 29 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS the rate of deficit in the second half of 1961 was comparable with those earlier deficits. Capital movements. The net outflow of private capital from the United States approached $4 billion in 1961. The outflow was not quite so large as in 1960 but was much larger than in 1959, and it constituted an important element: in the over-all excess of payments financed by gold sales and additions to foreign holdings of liquid dollar assets. About $2 billion of this net capital outflow was classed as long-term and is counted in the deficit on current and long-term capital accounts described above. More than $1 billion was identified as net outflow of short-term capital, and there was at least $500 million of additional outflow the nature of which was not identifiable. Of the $2 billion of recorded net outflow of long-term capital in 1961, direct investment by U.S. corporations in subsidiaries and branches in Europe, Canada, and other areas made up much the largest part; incomplete data suggest total movements not much below the 1960 total of $1.7 billion. These movements, though classified as long-term, include changes in intercompany accounts that are sometimes of a short-term character. New foreign issues of securities in the United States, less redemptions, accounted for $400 million of capital outflow, and transactions in outstanding foreign securities for nearly $300 million more. Foreign acquisitions of U.S. corporate securities and direct investments in the United States approached $400 million net, offsetting to that extent the outflow of U.S. capital. The recorded net outflow of short-term capital—which includes the outflows of various types of U.S. capital and a small inflow of foreign commercial credits—was almost as large in 1961 as in 1960. Much of the outflow was in bank loans and acceptance credits, a large part of which went to Japan. There was also a sizable movement of U.S. nonbank funds to Canada, partly in deposits repayable in U.S. dollars. Recorded movements of U.S. funds into foreign currency assets other than Canadian were small in 1961. 30 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Differences between short-term interest rates in the United States and Europe in 1961 were only one of many influences on the outflow of U.S. private short-term capital to Europe and other areas or on the movements of foreign privately owned liquid dollar assets. Although money market rates were markedly higher in the United Kingdom than in the United anutommm in m\ mxti in NOTE.—Department of Commerce data. Long- and short-term capital outflows are net of recorded inflows of foreign private capital other than into liquid assets in the United States. Data for 1961 are partly estimated by Federal Reserve. States—especially after rates in London were raised in July as part of a program to check capital outflows from Great Britain and to improve its underlying balance of payments—the discount on forward sterling largely offset the rate differential for those investors who wished to cover their exchange risks. And although there was no large differential in money market rates between Germany and the United States, German commercial banks were encouraged, by special inducements offered them by the German central bank, to put substantial amounts of funds 31 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS into liquid dollar assets—either in the United States or as dollar deposits in other financial centers. Federal Reserve policies and operations affecting the availability of credit in 1961 were designed to encourage domestic economic expansion while avoiding encouragement of outflows of liquid short-term funds. The maintenance of U.S. money market rates during the early part of the year at higher levels than in some earlier recession periods, such as the first half of 1958, helped to keep outflows of liquid funds smaller than they would otherwise have been. But the general state of credit and capital markets here and abroad in 1961, including the ready availability of bank credit in this country throughout the year, was conducive to outflows of bank credit and of long-term capital. To reduce these outflows significantly would have required greater restraint on the availability of bank credit and expansion of liquidity than was appropriate for the domestic economy in 1961. 32 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 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 on 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 each such action, 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 actions taken at each of the 18 meetings of the Federal Open Market Committee during the calendar year 1961, including 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. It will be noted that in some cases the policy decisions were by unanimous vote, and that in other cases dissents were recorded. Further, as this record indicates, the fact that a decision in favor of a general policy was by a large majority, or even that it was by unanimous vote, does not necessarily mean that all members of the Committee were equally agreed as to the reasons for the particular decision or as to the precise operations in the open market that were called for to implement the general policy. The Manager of the System Open Market Account attends the meetings of the Committee, and the shades of opinion expressed at those meetings provide him with guides to be used in the conduct of open market operations, within the framework of the policy directive adopted by the Committee. The policy directives of the Federal Open Market Committee are issued to the Federal Reserve Bank of New York as the Bank selected by the Committee to execute transactions for the 33 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS System Open Market Account. The directive that was in effect at the beginning of 1961 instructed the New York 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 encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments, 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 10, 1961 Authority to effect transactions in System Account. The Federal Open Market Committee continued without change the directive to the Federal Reserve Bank: of New York, most recently renewed at the meeting on December 13, 1960, calling for operations with a view to encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. Votes for this action: Messrs. Martin, Balderston, Bopp, Bryan, Fulton, King, Leedy, Mills, Robertson, Shepardson, Szymczak, and Treiber. Votes against this action: none. 34 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM The downward drift that had characterized economic developments since the summer of 1960 continued in December. While there were no signs of accelerating downward momentum, neither was there evidence of a revival near at hand, and a further contraction of modest proportions seemed to be the most likely prospect for the near future. Preliminary estimates indicated that gross national product had held about even in the fourth quarter of 1960, but that industrial production was off 1 or 2 points in December from the November level, bringing the decline from July to around 6 per cent. Unemployment rose, with indications that further increases were likely, while prices of sensitive materials continued to decline and the average of all wholesale prices also drifted down a little. Total retail sales, seasonally adjusted, had also fallen off in December, reflecting primarily a softening of automobile sales. However, the downdrift that the economy had been experiencing was milder than during comparable recession phases of other postwar cycles, and it appeared possible that manufacturers of most products had about completed their inventory adjustments, particularly as to raw materials and goods in process. There was continuous ease in the money market during the 4 weeks preceding this meeting, as evidenced by a Federal funds rate averaging substantially below the discount rate and a further decline in borrowing at the Federal Reserve Banks. Bank credit in December showed a strong rise, with much of the strength attributable to borrowing by financial institutions and business concerns around the mid-December tax and dividend payment dates. The money supply, defined to include currency in circulation and privately held demand deposits, showed a modest increase in December; most of the deposit increase recently had been in the time category. Prospects were that the sizable amounts of reserves released in late December and early January by seasonal decreases in required reserves and currency in circulation would be partly offset by declines in float and a continued gold outflow. During the first week in January, gold outflow was at the rate of $130 million. 35 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Although available reports suggested that the U. S. balance of trade was showing some improvement, the over-all balance of payments continued to pose a serious problem for the international strength of the dollar. Taking all of these factors into consideration, it was the consensus of the Committee that in view of the state of the domestic economy the System should seek to maintain approximately the same amount of ease in the market as it had since the preceding meeting, at the same time paying close attention to developments in the international area. There was a minority view favoring greater ease in order to do what was possible to reverse the trend of the economy in this country. There were, on the other hand, some who believed that the System should "mop up" more of the ease that had prevailed, it being argued that the System had injected sufficient credit into the market and should concern itself more at this point with endeavoring to assure a short-term interest rate level conducive to checking the outflow of funds and possibly reversing it. January 24, 1961 Authority to effect transactions in System Account. The Federal Open Market Committee directed the Federal Reserve Bank of New York to continue to conduct open market operations with a view toward encouragement of monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. Votes for this action: Messrs. Martin, Hayes, Balderston, Bopp, Bryan, Fulton, King, Leedy, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: none. The decline in economic activity was continuing, with no discernible signs of a bottom having been reached. There was evidence of a continued rise in seasonally adjusted unemployment figures, and declines in employment and in industrial production were rather general. A further weakening in personal income and retail sales, along with a sharp drop in housing 36 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM starts during December, had also contributed to the decline. However, some encouraging developments were beginning to appear in the economic picture, including a continued large export surplus, signs of greater availability of mortgage money, though this had not yet led to noticeably lower interest charges or to expansion in residential construction, and slight signs of pick-up in steel production and orders. There was ample evidence of continuing money market ease. However, after taking into account the usual seasonal patterns, bank credit developments during the first part of January were somewhat mixed. Bank loan-deposit ratios, while still relatively high by historic standards, had declined somewhat. Also, while there had been only a modest gain in the money supply proper during the second half of 1960, total nonbank liquid assets had risen at a rate almost equal to the average for the last 10 years. A delicate situation existed in international financial markets, stemming mainly from the continued U. S. balance of payments deficit, and this created something of a dilemma for monetary policy. The problem was one of providing sufficient reserves to the banking system to encourage growth of the domestic economy, which was operating at a relatively low level, while endeavoring to prevent short-term rates from declining to levels that might aggravate the already sizable payments deficit of the United States. The consensus as to policy for the period immediately ahead was that there should be no change in the existing degree of monetary ease and that in operating the Open Market Account the Management should continue to give close attention to the level of short-term rates in view of the current international financial situation. However, at least one member of the Committee (Mr. Robertson) favored a moderately greater degree of ease, in view of the level of domestic economic activity. February 7, 1961 1. Authority to effect transactions in System Account. The Committee's directive to the Federal Reserve Bank of New York, calling for the encouragement of monetary expan- 37 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVEELNORS sion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments, was continued without change. Votes for this action: Messrs. Martin, Hayes, Balderston, Bopp, Fulton, King, Leedy, Mills, Robertson, Shepardson, Szymczak, and Irons. Votes against this action: none. There appeared to have been little or no improvement in the levels of output, employment, and trade since the preceding meeting. Although steel mill operations were up slightly from the depressed December levels, automobile assemblies had slipped further, and it seemed likely that the industrial production index would show a further decline of 1 point for January. Long-term unemployment continued to increase, and there was no significant change in the seasonally adjusted rate of total unemployment. Lagging automobile sales and department store sales, reflecting in part severe weather conditions in many areas, had pulled down total retail trade. While there were some signs of a leveling off or bottoming out in a few economic sectors, none of them seemed poised for a rapid upward surge. Nevertheless, there appeared to be a continued optimistic sentiment in business and financial markets. Total loans and investments of banks appeared to have declined less than seasonally in January, largely a reflection of banks continuing to add to their holdings of U. S. Government securities. The bulk of these additions were in shorter-term issues, mainly Treasury bills, and this growth, together with other factors, had improved the liquidity of the banking system. The seasonally adjusted money supply increased substantially in the latter part of January after dipping somewhat in the first half, and preliminary data indicated that by the beginning of February the money supply was above the year-earlier level. Demand deposits, which ordinarily fall in January, fell less than usual for the month, and time deposits continued to show sizable gains. Member bank reserve positions continued relatively easy on average during January, although they showed wide week-to- 38 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM week fluctuations. In general, indications were that the reserves supplied in recent months had permitted or perhaps encouraged monetary expansion relative to the usual seasonal pattern without having depressive effects on the Treasury bill rate. The gold outflow had declined in January from the December and November 1960 levels. While the rate was still high, it was felt that short-term balance of payments forces were working toward some reduction in the rate of outflow. The consensus of the Committee favored no change in open market policy, with the Treasury bill rate to be watched closely in conjunction with market needs for reserves. However, within the framework of the directive, which was broad enough to encompass his own position, one member (Mr. Robertson) felt that open market policy should be aimed toward providing a more ample supply of reserves in order to enable the banking system to make what contribution it could toward reversing the downward economic trend. This member suggested that, as the economy began to move upward, interest rates would rise and the current outflow of capital, to the extent that it was based on interest rate differentials, would be reversed. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Open Market Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the policy directive issued at this meeting, to acquire for the System Open Market Account intermediate- and/or longer-term U. S. Government securities having maturities up to 10 years, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Bopp, Fulton, Leedy, Mills, Shepardson, Szymczak, and Irons. Vote against this action: Mr. Robertson. The Committee's decision to authorize transactions in intermediate- and longer-term securities reflected a conclusion that 39 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS under prevailing circumstances such transactions might facilitate the implementation of current monetary policy. This policy called for providing reserves to the banking system to meet the needs of the current business situation and also for avoiding direct downward pressure on short-term interest rates or not resisting any tendency for them to rise, in view of the relationship of short-term rates to the balance of payments problem. While maintenance of the Treasury bill rate could possibly be accomplished by reducing the availability of reserves to the banking system, this would be inconsistent with one of the current objectives of monetary policy. On the other hand, the purchasing of securities in the intermediate- and longer-term areas, as contrasted with the short-term area, offered the possibility of supplying reserves without creating direct pressure on short-term rates. Also, such purchases, by having a moderating influence on long-term interest rates relative to short-term rates, might have the effect of facilitating the flow of funds through the capital and mortgage markets, thereby encouraging the progress of recovery. Accordingly, the combination of domestic and international circumstances confronting the Committee seemed to call for a high degree of flexibility in open market operations. While some members of the Committee were uncertain as to the feasibility of attaining the aforementioned policy objectives through the increased flexibility provided by operating in intermediate- and longer-term securities as well as short-term securities, the Committee believed that a determined effort was warranted. However, it was understood that it would not be the objective to seek a given fixed rate for Government securities of any maturity. Also, there had been a great deal of controversy in recent years as to the efficacy of the System's policy of operating exclusively in the short-term area of the market. Inherent in this controversy was an apparent feeling that the System was maintaining an unduly rigid attitude in the position it allegedly took toward its own operating procedures and policies. The entire 40 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM issue of the proper techniques for conducting System open market operations had become one of conceptual contention. It was felt by the Committee that the conduct of operations outside the short-term sector of the Government securities market might contribute to determining whether the criticisms of the System's policy of confining its open market operations to short-term securities, except in the correction of disorderly markets, was warranted. Likewise, it was envisaged that the procedure might throw some light on the possibility of influencing longer-term rates while maintaining the short-term rate level. The initial entry into the market under the program agreed upon by the Committee contemplated moderate purchases in the 1- to 5Vi-year maturity range. Then, after the market had become accustomed to the change in System open market procedures, it was contemplated that the Manager of the System Open Market Account would undertake operations in the 'SVito 10-year maturity range. However, all open market operations under the special authorization were to be consistent with the monetary policy set forth in the Committee's current policy directive. (At this particular time the directive called for encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments.) The amount by which the Account's holdings of intermediate- and longerterm securities could be changed between this date and the next meeting of the Committee, i.e., $500 million, was part of the $1 billion limitation contained in the policy directive. The Committee's action represented a departure from certain policies set forth in its operating policy statements, which were last reaffirmed on March 22, 1960, not only because it authorized operations in intermediate- and longer-term securities but also because it permitted "offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System portfolio." Within the terms of the policy directive it was possible, for example, that short-term interest rate considerations might suggest the sale of short-term securities at a time 41 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS when the System did not want to absorb reserves. In such a circumstance, it might be expedient to buy longer-term securities simultaneously with the sale of shorter-term securities or to make offsetting transactions within an interval of a few days. Mr. Robertson, in dissenting from this action, expressed the opinion: (1) that the established operating procedures and policies of the Committee were, in fact, the product of careful empirical and analytical study; (2) that they had proved in practice to be sound, both in terms of monetary policy and in terms of fair dealing with the market; (3) that in deviating from its established policies the Federal Open Market Committee was in effect asserting, without reason, that it had made a critically incorrect judgment 8 years ago and had pursued incorrect operating practices since; and (4) that critics of present methods of operating in the market were relying on the simplest theories of determination of market interest rates and making allegations on postulates having little if any basis in empirical fact. In his opinion this departure from established operating techniques would not constructively influence market rates, and he gathered from the discussion that not many (if any) at the table were confident of such a result. What he was confident of, however, was that the Committee was running serious risk (a) of undermining domestic and foreign confidence in the System's integrity and judgment and the reliability of the new Administration's assertions of an intent to maintain the stability of the dollar, (b) of impairing the market for Government securities by placing dealers and investors in the position of having to guess which area of the market the Federal Reserve was going to enter and hence affect prices, and (c) of impeding Government financing by making it extremely difficult for the Treasury to determine objectively appropriate market rates for future intermediateand long-term financing. It was his view that these risks were too large to run. In addition, Mr. Robertson believed it to be inadvisable for the Committee virtually to abdicate its authority and responsibility by giving practically unlimited authority to the Manager 42 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM of the Open Market Account (1) to buy and sell securities in any area of the market up to 10 years, as he saw fit, for the stated purpose of affecting rates as distinguished from providing or withdrawing reserves from the banking system, and (2) to engage in "swap" transactions—i.e., buying securities in one maturity area and selling in another—to effect changes in rates and hence marshal the System's portfolio of Government securities against market forces. Note: On February 20, 1961, the date of initial operations in the longer-term Government securities market, the Account Manager, at the direction of the Chairman of the Open Market Committee, issued the following press statement: The System Open Market Account is purchasing in the open market U. S. Government notes and bonds of varying maturities, some of which will exceed 5 years. Price quotations and offerings are being requested of all primary dealers in U. S. Government securities. Determination as to which offerings to purchase is being governed by the prices that appear most advantageous, i.e., the lowest prices. Net amounts of all transactions for System Account will be shown as usual in the condition statements issued every Thursday. During recent years transactions for the System Account, except in correction of disorderly markets, have been made in short-term U. S. Government securities. Authority for transactions in securities of longer maturity has been granted by the Open Market Committee of the Federal Reserve System in the light of conditions that have developed in the domestic economy and in the U.S. balance of payments with other countries. March 7, 1961 1. Authority to effect transactions in System Account. The Federal Reserve Bank of New York was directed by the Committee to continue to conduct open market operations with a view toward encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. 43 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, Szymczak, and Wayne. Votes against this action: none. A review of national and regional economic developments indicated that the recession seemed to have lost momentum. Among the more favorable economic signs was an indication that gross national product would be down only moderately in the first quarter of the year—possibly by less than 1 per cent. Industrial production had apparently leveled off in February, and it appeared unlikely that there would be a decline in March; inventory liquidation also seemed to have leveled off. According to recent surveys, plans for business capital expenditures indicated a small rise from the first half of the year to the second, and the total of planned expenditures, when compared with 1960, was down only about 3 per cent. Consumer expenditures and buying intentions also were interpreted as generally optimistic, despite some continued weakness in expressed intentions to buy houses and household durables. As against these indications of a possible turnaround in economic activity, the continuing lag in automobile sales and the persistence of a high level of unemployment and unutilized resources were of concern. Statistics on bank credit and bank reserves were considered encouraging. Total loans and investments at weekly reporting member banks recorded a sizable gain in February, total reserves of all member banks on a seasonally adjusted basis rose substantially in February to surpass the 1960 high set in November, and required reserves, adjusted, reached a record high in February. It was anticipated that around mid-March, when large tax payments were due, there would be substantial liquidity needs, with the result that reserves of member banks would be under considerable pressure. Therefore, if the existing money market ease was to be maintained, the System might have to supply additional reserves, reabsorbing them possibly in the latter part of the month. Preliminary statistics indicated that there had been a virtual cessation of the outward flow of short-term capital in January 44 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM and February. However, an atmosphere of uncertainty had arisen in international money markets following the German and Netherlands currency revaluations, and there was the possibility that the improved situation could reverse itself quickly. The consensus of the Committee was that the existing monetary policy of ease should be followed until the next meeting. Considering the problem of unemployment and the continued uncertainties in the business situation, it was felt that the System should encourage credit expansion as a means of fostering economic recovery. On the other hand, since the balance of payments situation had not been fundamentally corrected, it was also felt that consideration should continue to be given to shortterm interest rates in the conduct of open market operations. There were some variations in opinion within the Committee concerning whether the current degree of ease was sufficient to stimulate the economy and concerning the degree of emphasis that should be placed on the desirability of counteracting influences tending to depress short-term interest rates. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities having maturities up to 10 years, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mills, Shepardson, Swan, Szymczak, and Wayne. Votes against this action: Messrs. Allen and Robertson. This special authorization, first given at the Committee meeting on February 7, 1961, was extended subject to the original understanding that all operations under it were to be consistent 45 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS with the general monetary policy expressed in the Committee's directive. Mr. Allen voted against this action for the reasons he had given at the meeting of the Federal Open Market Committee held on February 7, 1961. (At that time Mr. Allen was not a member of the Committee, but as an alternate member he was asked to express his opinion on the proposed extension of operations. He had opposed the extension, saying that after reviewing a quantity of material on the subject—including the report of an Ad Hoc Subcommittee of the Federal Open Market Committee dated November 12,1952, testimony by Chairman Martin before various congressional committees, and a number of treatises written by professional economists—and considering it also in the light of his own experience, he did not favor the proposed extension of operations.) Mr. Allen indicated that he was in substantial agreement with the reasons for opposing the action that were stated by Mr. Robertson at the meeting on February 7, 1961. Mr. Robertson dissented from this action for the reasons that he had stated at the meeting on February 7, 1961, when the special authorization was first given. 3. Review of continuing authorities and statements of policy. This being the first meeting of the Federal Open Market Committee following the election of new members from the Federal Reserve Banks for the year beginning March 1, 1961, the Committee had scheduled for review the statements of continuing operating policies that had been in effect since 1953 and were last reviewed and reaffirmed on March 22, I960, as follows: 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). 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 46 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 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. 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. At the meeting on January 10, 1961, an Ad Hoc Subcommittee of the Open Market Committee had been named for the purpose of pursuing certain studies of the Committee's operating procedures, along lines to be indicated by Chairman Martin. One subject to which that Subcommittee had devoted considerable attention was a possible revision of the statements of operating policies. However, after discussion at this meeting the Committee decided, pursuant to the recommendation of the Subcommittee, to table consideration of possible changes in the operating policy statements pending further study in the light of the authorization given at the meeting on February 7, 1961, and reaffirmed at this meeting, covering operations in intermediateand longer-term securities. Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, Szymczak, and Wayne. Votes against this action: none. At this meeting the Committee also reviewed and reaffirmed all of its continuing authorities for operations, including those referred to in the two succeeding policy record entries. 4. Repurchase agreements covering U.S. Government securities. The Committee reaffirmed the existing authorization to the Federal Reserve Bank of New York to enter into repurchase 47 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS agreements with nonbank dealers in U. S. Government securities —an authorization that had been reaffirmed by the Committee each year since it was first granted in this form on August 2, 1955. The authorization, which continued to be subject to the understanding that repurchase agreements at rates below the discount rate would be used only sparingly, specified the following conditions: 1. Such agreements (a) In no event shall be at a rate below whichever is the lower of (1) the discount rate of the Federal Reserve Bank on eligible commercial paper, or (2) the average issuing rate on the most recent issue of 3-month Treasury bills; (b) Shall be for periods of not to exceed 15 calendar days; (c) Shall cover only Government securities maturing within 15 months; and (d) Shall be used as a means of providing the money market with sufficient Federal Reserve funds to avoid undue strain on a day-to-day basis. 2. Reports of such transactions shall be included in the weekly report of open market operations which is sent to the members of the Federal Open Market Committee. 3. In the event Government securities covered by any such agreement are not repurchased by the dealer pursuant to the agreement or a renewal thereof, the securities thus acquired by the Federal Reserve Bank of New York shall be sold in the market or transferred to the System Open Market Account. Votes for this action: Messrs. Martin, Hajres, Allen, Balderston, Irons, King, Mills, Shepardson, Swan, Szymczak, and Wayne. Vote against this action: Mr. Robertson. In dissenting from this action, Mr. Robertson reiterated the opinion that repurchase agreements were in fact not purchases of securities in the open market, such as the Reserve Banks were authorized by law to enter into, but instead were loans to dealers at fixed interest rates that were not related to the yield on the securities. Therefore, they should be used only as a last resort to finance dealers who were unable to obtain loans at reasonable 48 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM rates from others in order to aid them in maintaining an adequate market for Government securities. Furthermore, he was of the opinion, for reasons he had stated many times during the past 8 years, that nonbank dealers should not be given preferential treatment by being furnished loans from the Federal Reserve Bank of New York at lower rates than member banks were obliged to pay for loans from the same Reserve Bank. The majority of the members of the Committee continued to feel that the repurchase agreement was an appropriate instrument that had proved of significant value to the Federal Reserve System in carrying out monetary policy. Therefore, they concluded that its use should not be restricted and that the authorization should not be changed to preclude the opportunity, if and when that was provided for under the authorization and appeared desirable, of using a rate lower than the discount rate. 5. Purchases of bankers' acceptances, and repurchase agreements based thereon. The Committee reaffirmed the existing authorization to the Federal Reserve Bank of New York to purchase bankers' acceptances and to enter into repurchase agreements therefor—an authorization that, with minor changes, had been reaffirmed by the Committee each year since it was first granted in 1955. The authorization read as follows: The Federal Open Market Committee hereby authorizes the Federal Reserve Bank of New York for its own account to buy from and sell to acceptance dealers and foreign accounts maintained at the Federal Reserve Bank of New York, at market rates of discount, prime bankers' acceptances of the kinds designated in the regulations of the Federal Open Market Committee, at such times and in such amounts as may be advisable and consistent with the general credit policies and instructions of the Federal Open Market Committee, provided that the aggregate amount of such bankers' acceptances held at any one time by the Federal Reserve Bank of New York shall not exceed $75 million, and provided further that such holdings shall not be more than 10 per cent of the total of bankers' acceptances outstanding as shown in the most recent acceptance survey conducted by the Federal Reserve Bank of New York. 49 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS The Federal Open Market Committee further authorizes the Federal Reserve Bank of New York to enter into repurchase agreements with nonbank dealers in bankers' acceptances covering prime bankers' acceptances of the kinds designated in the regulations of the Federal Open Market Committee, subject to the same conditions on which the Federal Reserve Bank of New York is now or may hereafter be authorized from time to time by the Federal Open Market Committee to eater into repurchase agreements covering U.S. Government securities, except that the maturities of such bankers' acceptances at the: time of entering into such repurchase agreements shall not exceed 6 months, and except that in the event of the failure of the seller to repurchase, such acceptances shall continue to be held by the Federal Reserve Bank or shall be sold in the open market. Such repurchase agreements shall be at the same rate as that applicable, at the time of entering into such agreements, to repurchase agreements covering U.S. Government securities. Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, Irons, King, Mills, Shepardson, Swan,, Szymczak, and Wayne. Vote against this action: Mr. Robertson. In voting against the continuation of the authority, Mr. Robertson stated that he felt the Federal Reserve System should encourage the utmost freedom of market forces and therefore should withdraw from active participation in the acceptance market in the absence of clear indication that such participation would yield specific public interest benefits. He was not aware of evidence that such benefits had been realized since the authorization was given to the Federal Reserve Bank of New York in 1955. He opposed the use of repurchase agreements covering bankers' acceptances not only for these reasons but also for the reasons he had expressed in opposing the use of repurchase agreements covering Government securities. In support of the majority position favoring reaffirmation of the authorization, it was stated that the Federal Reserve System had taken an active interest in promoting and assisting the acceptance market since the inception of that market, that the System had a legitimate interest in doing its part to make that market as broad and as sound as possible, and that acceptances were inherently a desirable medium for operations by a central bank. 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM March 28, 1961 1. Authority to effect transactions in System Account. The Federal Open Market Committee directed the Federal Reserve Bank of New York to continue to conduct open market operations with a view to encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, Szymczak, and Wayne. Votes against this action: none. Additional information on economic developments in February that had become available since the previous Committee meeting tended generally to confirm the estimates presented at that time. While the prevailing tone of growing business optimism might be considered somewhat premature, nevertheless there were further indications that the economy was at least close to a bottoming out of the recession. Several key economic series that previously had been falling for some time had now either leveled off or turned upward. These included such items as new orders for durable goods, manufacturers' sales of durable goods, industrial production, and retail sales. In addition, the relatively small prospective decline from 1960 in business plant and equipment expenditures was encouraging; and housing starts, at a seasonally adjusted annual rate, had risen from the December low, although they still remained below the year-earlier level. While employment had risen in February to a level above a year earlier, the rate of unemployment increased slightly and the actual number of unemployed attained a postwar peak. The money market had been generally easy in the past 3 weeks, a period when more tightness might ordinarily have been expected in view of the midmonth tax date. Total loans and investments at city banks declined during the first part of March. Although business loans increased about as much as usual, loans to finance companies showed a contraseasonal decline, and loans 51 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS to dealers in Government securities also declined by a sizable amount. City bank holdings of Treasury bills and of Government securities maturing after 1 year fell, while holdings of other securities increased. The money supply, which increased sharply in January, had shown little further growth since the early part of February, and the daily average for the first half of March was only slightly larger than a year earlier. Data now available indicated that, whereas an improvement in the over-all balance of payments occurred in January, with a $100 million surplus for that month, in February there may have been a deficit of some $200 million. There was also some evidence that this adverse trend had continued in March, in part as a result of repercussions from the German currency revaluation. Therefore, since the atmosphere in international financial markets remained delicate, the short-term interest rate continued to be an important factor in the formulation of System open market policy. After consideration of the range of economic and financial information that had been accumulated, it was the consensus, from which Messrs. Balderston, Robertson, and Swan dissented, that until the next meeting of the Committee the policy directive should be implemented by open market operations seeking to maintain about the existing degree of ease. Mr. Balderston dissented because he felt that with the gold outflow stopped, at least for the moment, the Committee should experiment with an increased availability of reserves until the money supply responded more vigorously. The extent to which additional reserves would be needed for that purpose could be determined only by probing operations, which in his view should be started. While this probing was under way, he recognized that the short-term rate might decline despite the support available from factors such as the increased supply of bills being offered by the Treasury. Since he did not wish to see the bill rate decline significantly in view of the continuing balance of payments problem, he felt that the Committee should continue to employ whatever devices were available to avoid undue pressure on that 52 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM rate. However, it seemed to him that the time had arrived to risk some decline in short-term rates in view of the importance he attached to stimulating the growth of the money supply. If the cyclical bottom had been reached, he pointed out, the economy should be prepared to put additional reserves to constructive use. Mr. Robertson dissented from the decision to maintain, until the next meeting, the existing degree of ease. At the past several meetings, as at this one, he had voted to approve the policy directive on the ground that it correctly specified that open market operations should be conducted with the aim of encouraging monetary expansion. However, in the last few months the degree of ease which he thought appropriate to achieve the aim of the directive, and which he thought had been sought by the Committee, was not reached principally, in his opinion, because too much emphasis had been attached to seeking to prevent a reduction in the interest rate (i.e., yield) on short-term Government bills. Consequently, in his view monetary policy had been precluded from making its full contribution to a reversal of the economic downtrend. Now that the gold outflow had abated. Mr. Robertson believed there was even less reason than heretofore to gear open market action to the maintenance of a particular bill rate rather than to the provision of what he would think were sufficient bank reserves to stimulate business activity and economic growth, and thus contribute to the solution of the serious economic problems that arise from failure to utilize fully our human and material resources. Believing as he did that the supply of bank reserves should be increased to encourage monetary expansion and thereby to promote economic recovery, at a time when there was little danger of reviving inflationary pressures by such further ease as he sought, he deemed the proposed policy decision inadequate to meet the needs of the time. Mr. Swan dissented from the decision on implementation of the directive because it did not contemplate probing toward the higher level of reserves mentioned by Mr. Balderston. In view of current developments, he felt that the System might be in a position to increase the availability of reserves somewhat with- 53 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS out undue downward pressure being exerted on the short-term rate. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mills, Shepardson, Swan, Szymczak, and Wayne. Votes against this action: Messrs. Allen and Robertson. This action amended the special authorization first given at the meeting on February 7, 1961, by removing the restriction that had limited transactions to securities with a maturity of not more than 10 years, this removal having been recommended by the Ad Hoc Subcommittee that had been named at the meeting on January 10, 1961, to study and make recommendations with respect to the Committee's operating procedures. It was felt that the removal of the restriction on maturities would, by increasing the flexibility of Account operations, facilitate the evaluation of the feasibility and effect of System operations in other than the short-term market. The Ad Hoc Subcommittee also recommended, and the Committee agreed, that it would be desirable to take more time, during which the experience in operating in all maturities could be studied, before deciding on any possible revision of the Committee's operating policy statements. Mr. Allen voted against continuing the special authorization on the same basis that he had previously dissented at the March 7 meeting. However, inasmuch as the authorization to operate in longer-term securities was being continued by majority vote, he did not object to the removal of the restriction against operating in maturities beyond 10 years. 54 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Mr. Robertson had expressed at the February 7 meeting his reasons for dissenting from the proposals to carry on open market operations in other than short-term Government securities. He now dissented from the action to expand the original proposal not only on the basis of his conviction that the whole operation was unwise—the risks being too great to be offset or counterbalanced by the alleged potential benefits—but also because this proposal represented a further delegation of authority by the Committee to the Manager of the System Open Market Account without any plan or program to guide him in his operations. He did not believe that the Manager could be expected to carry out the Committee's unspecified objectives—whatever they were—solely on the basis of his own intuitions. April 18, 1961 1. Authority to effect transactions in System Account. At this meeting clause (b) of the first paragraph of the Committee's policy directive to the Federal Reserve Bank of New York was changed to provide that open market operations should be conducted with a view "to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery that appear to be developing in the economy, while giving consideration to international factors." The preceding directive, which had been in effect since October 25, 1960, called for operations with a view to encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. Votes for this action: Messrs. Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, and Wayne. Votes against this action: none. For some time open market policy had aimed at making a contribution toward arresting recessionary influences in the domestic economy, at the same time giving due regard to the level of short-term interest rates in view of problems related to the 55 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS continuing deficit in the U. S. balance of payments. However, confirmation of a bottoming out of the recessionary phase of the business cycle had been gradually emerging. Statistical information suggested increasingly that the low point had been passed and that an upturn was in the making, although evidence of the prospective strength of the expansion was as yet lacking. Data before the Committee showed that economic gains in March were moderate and that activity in some sectors had, in fact, continued to drift downward. Nevertheless, a number of key indicators showed significant improvement, after allowing for the usual seasonal influences. Among other things, personal income increased at an annual rate of $3.5 billion, housing starts were up for the third consecutive month, automobile sales strengthened, and exports appeared to be holding at unusually high levels. Although the level of unemployment continued to present a serious problem, particularly in certain areas, initial unemployment compensation claims recently had declined more than seasonally, and there were other signs of improvement in the labor market. On the financial side, no significant changes in either the level or structure of interest rates had occurred since mid-March, most rates having remained a little above the lowest levels and well below the highest levels of the current calendar year. Total bank loans and investments had declined since the middle of March, perhaps more than seasonally. However, the money supply, defined in terms of demand deposits and currency, increased in the latter part of March and had since been maintained at the higher level then reached. In addition, holdings by the public of time deposits and comparable liquid assets continued to expand. The schedule of new corporate capital issues for April was heavy, and State and local government offerings continued reasonably large. Common stock prices had risen to record levels, with heavy trading, and stock market credit had expanded significantly. The relatively high levels of unutilized humam and physical resources continued to be of concern and suggested that there 56 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM was little prospect of serious inflationary pressures. The country's international financial position remained in moderate deficit, although gold movements in and out of U. S. monetary stocks had recently been negligible. The change in the Committee's policy directive was deemed appropriate in recognition of the new phase of the business cycle into which the nation's economy appeared to have entered, even though the configuration of the recovery could not as yet be forecast. As to monetary policy, the pattern that the Committee had been following in the past few months still appeared suitable, and revision of the directive carried with it no intent to modify open market policy in any significant respect at this stage. For the period until the next meeting, it was the consensus that the directive should be implemented by open market operations aimed at maintaining approximately the same degree of ease that had prevailed for the past several weeks. In the majority view, such a degree of ease would serve to promote the objective, as stated in the directive, of encouraging the expansion of bank credit and the money supply. Because of the continuing uncertainties in regard to the balance of payments, the consensus also contemplated that attention would continue to be paid to the general level of short-term interest rates. Three members of the Committee, Messrs. Balderston, Robertson, and Swan, dissented from the majority view on implementation of the directive. Mr. Balderston, who 3 weeks earlier had suggested probing toward a somewhat greater availability of reserves in order to encourage further expansion of the money supply, felt that despite the gain since mid-March a longer period was required to permit a conclusion that the money supply was rising fast enough to provide adequate liquidity. Thus, being uncertain whether the current level of reserves was sufficient to induce a satisfactory expansion in the money supply, he continued to favor moving the level of reserves somewhat higher. Mr. Swan also continued to feel that it would be desirable in current circumstances to follow a slightly easier reserve policy whenever market opportunities arose. Mr. Robertson felt that to 57 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS continue to supply reserves only in the amounts that had been available in recent weeks would not be adequate to encourage or support credit and monetary expansion conducive to an early return to fuller utilization of human and material resources. He believed the risk that additional reserves might cause a decline in short-term rates and encourage a movement of funds from this country, with an accompanying loss of gold, was likely to be much less than it had been in the past. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Hayes, Balderston, Irons, King, Mills, Shepardson, Swan, and Wayne. Votes against this action: Messrs. Allen and Robertson. Renewal of this special authorization, first granted on February 7, 1961, and amended on March 28 to permit operations in U. S. Government securities of all maturities, reflected the conclusion of the Committee that further operations outside the short-term market in pursuance of the objectives stated when the authorization was granted would be desirable. Messrs. Allen and Robertson dissented for reasons they had previously expressed. May 9, 1961 1. Authority to effect transactions in System Account. The Federal Open Market Committee made no change at this meeting in its policy directive providing that open market operations should be conducted with a view to encouraging expansion of bank credit and the money supply so as to contribute to 58 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM strengthening of the forces of recovery that appeared to be developing in the economy, while giving consideration to international factors. Votes for this action: Messrs. Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, and Wayne. Votes against this action: none. From data presented at this meeting, economic recovery appeared to be proceeding more rapidly than had generally been anticipated, and at least as fast as the more optimistic forecasts had predicted it would. All available evidence pointed toward an increase in gross national product during the second quarter of the year. Preliminary data indicated that the Board's industrial production index for April would be up 3 points from the first quarter low of 102. In addition, schedules for steel and automobile production seemed virtually to assure some further rise in the index during May—perhaps enough to erase at least half of the 8-point decline from 110 in July 1960. Retail sales during April had been demonstrating strength, including sales of domestically produced automobiles, which had risen sharply in March from the depressed midwinter level. Dealer stocks of automobiles, which had been brought down somewhat in March from the relatively high levels that prevailed during the past year, had fallen further, and used car stocks were down sharply from a year earlier. Latest information regarding plant and equipment expenditure plans for 1961 indicated a decline of only 1 per cent from 1960, an improvement over indications of similar surveys made earlier in this year and in the fall of 1960. In the price area, consumer and wholesale prices generally had been stable, while sensitive commodities had moved up. On the other hand, in spite of the apparently growing strength of the economy, seasonally adjusted unemployment in April remained at about the midwinter high. In the financial area, short-term interest rates declined somewhat in April and early May, while intermediate- and long-term rates showed marked declines except in the corporate market, where there had been an unusually large volume of new financ- 59 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS ing. Credit expansion continued during April and early May, but at only a moderate pace. The privately held money supply— defined as demand deposits and currency—increased moderately, the expansion seemingly stemming from an exceptionally large decrease in Treasury deposits. Owing to special factors, reserves were available to banks in somewhat larger volume during April than in March, despite a sizable reduction in the System portfolio, resulting in a somewhat easier tone in the money market than had been contemplated at the April 18 meeting of the Committee. Early in May, market factors absorbed some of these reserves. The outflow of gold from the United States had virtually ceased during the past 2Vi months, but private short-term capital movements outward had continued high during the first quarter of the year, and there was still an over-all deficit in the balance of payments, as conventionally measured, of about $1.5 billion (annual rate). The outflow of short-term capital continued despite a reduction in the differential between short-term rates in the United States and the higher rates available in most other important money markets. In considering what policy should be followed until its next meeting, the Committee noted that, as mentioned previously, the tone of the money market during most of the period since the April 18 meeting was somewhat easier than had been contemplated at that meeting, largely because of unusual factors that included a high level of float. There was general recognition of the appropriateness of a policy of ease, but a majority felt that the ease had gone further than was desirable. As to interest rates, it was the majority view that it would be undesirable for the short-term rate to go lower, because of international considerations. Thus, the Committee renewed the existing directive without change, and the consensus was that operations for the System Account should be directed toward maintaining the same degree of ease that had prevailed in recent weeks, apart from the unusual ease that had developed during a portion of the period since the April 18 meeting. 60 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Although all members voted to approve the Committee's directive without change, Messrs. Robertson and Swan dissented from the decision to implement the directive with operations aimed at the same degree of ease that had existed prior to the April 18 meeting rather than the greater degree of ease that had existed during most of the period since that date. In dissenting, Mr. Robertson stated that it was his belief that the recent ease had promoted a turnaround in the money supply and brought about an increase in bank credit without unduly depressing yields on Government securities. The downswing in yields that had occurred was attributable more to the West German discount rate reduction and comments by persons outside the Federal Reserve System than to System open market operations. With the gold outflow apparently halted for the time being, and with inflationary pressures seemingly less dangerous just now than at any time in recent years, he believed that in order for the System to do its full part in stimulating recovery to more nearly satisfactory levels of production and employment, the degree of ease achieved during the past 3 weeks should not be diminished (and if anything, should be increased slightly) during the 4 weeks until the next meeting of the Committee. Mr. Swan said that he dissented from the implementation of the directive with much more reluctance than at the previous two meetings. However, he saw no particular basis for change in the degree of ease actually achieved during the past 3 weeks and would continue a program of supplying reserves moderately in excess of seasonal needs to contribute to the expansion of bank credit and the money supply. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. 61 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Votes for this action: Messrs. Hayes, Balderston, Irons, King, Mills, Shepardson, Swan, and Wayne. Votes against this action: Messrs. Allen and Robertson. The Committee in renewing this special authorization, first granted on February 7, 1961, and amended on March 28 to permit operations in U. S. Government securities of all maturities, concluded that further operations outside the short-term market in pursuing the objectives set forth in the directive would be desirable. Messrs. Allen and Robertson dissented for the same reasons they had stated previously. June 6, 1961 1. Authority to effect transactions in System Account. At this meeting, the Federal Open Market Committee, in directing that open market operations be with a view "to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery, while giving consideration to international factors," modified the wording of the preceding policy directive by deleting the phrase "that appear to be developing in the economy," qualifying words that had followed "the forces of recovery" in the directive that had been in effect since April 18, 1961. Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, Irons, King, Mills, Robertson, Shepardson, Swan, and Wayne. Votes against this action: none. From data presented by the Committee members and the staff, it was apparent that the turning point of the recession had been reached quite some time earlier and that recovery had begun, although there was still doubt about the rate and probable duration of the business expansion. The few measures of economic activity available for May suggested that the pace of recovery had been maintained. Fragmentary data suggested that the Board's index of industrial production for May would be up 2 points from the preceding month, that retail trade figures would show a level well above first-quarter activity, and that employment measures would improve about seasonally for that 62 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM month. In the area of prices, broad measures of wholesale quotations had shown little change as scattered reductions offset increases in sensitive materials, and the consumer price index was unchanged from March to April, with the further likelihood that there would be little or no change from April to May. The Committee observed that thus far the stimulus to the economy this year had come almost entirely from the reversal of inventory liquidation, the rise in Government expenditures, and the well maintained growth of consumption expenditures on nondurable goods and services. Neither trade reports nor surveys of buying intentions yet showed much evidence of a strong resurgence of demand for consumer durable goods or for housing, which had played such important roles in other postwar recoveries—a factor that caused misgivings in some quarters as to whether this recovery would carry forward after the initial stimulus of the inventory reversal disappeared. Total loans and investments of banks increased substantially more than usual in May, reflecting largely bank participation in new Treasury financing. This bank credit expansion did not result in an increase in the seasonally adjusted private money supply, defined as demand deposits and currency outside of banks; but there were large increases in time deposits and U. S. Treasury deposits. Interest rates, which early in May had declined to the lowest levels since 1958, had since risen close to, and in some cases above, the highs that had been reached at times during the past 10 months. Short-term rates in particular had been influenced lately by a less marked degree of ease than prevailed shortly before the May 9 meeting, by prospective Treasury financing in the short-term area, and by the approach of the mid-June tax date, which date generally is preceded by reduced nonbank demand for Treasury bills. In addition, the demand on capital markets had been large and seemed likely to continue fairly heavy. While the U. S. balance of payments position had shown considerable improvement compared with the fourth quarter of 1960, the current close balance in U. S. accounts was considered 63 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS by no means secure as short-term funds continued to flow out. Accordingly, the Committee felt that there continued to be a need to pay close attention to developments in international markets. In view of impending U. S. Treasury financing, the usual midyear demand for funds, and a desire to encourage the expansion of bank credit and the money supply, the Committee concluded that in the period until the next meeting it would be desirable to maintain approximately the same degree of ease as had prevailed recently, resolving any doubts on the side of ease and clearly avoiding any lessening of the availability of reserves. At the same time, the Committee decided to change the wording of the policy directive to make clear that there was no doubt that forces of recovery were developing; thus, it deleted the words that indicated such forces only "appeared" to be developing. This modification did not indicate a change in the policy of ease that had been pursued for some months; as noted earlier, it was the consensus that any doubts as to the availability of reserves should be resolved on the side of ease and that there should be no tightening in the market. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mills, Shepardson, Swan, and Wayne. Votes against this action: Messrs. Allen and Robertson. Before renewing this authorization, the Committee gave consideration to the question of the possible desirability of withdrawing from operations in intermediate- and longer-term securities as rapidly as feasible without impairing the structure 64 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM of the Government securities market. It was the consensus, howsver, that such operations should continue to be authorized in terms of the objectives of current policy, with decisions as to actual operations left to the discretion of the Manager of the System Open Market Account. Mr. Allen, in dissenting from the continuation of the special authorization, said that at its inception he felt the operation was ill-advised and misguided and that the operations had, as he saw it, confirmed that judgment. Mr. Robertson, also dissenting, said that in his view this would be a good time to terminate the operation. June 20, 1961 1. Authority to effect transactions in System Account. The Federal Open Market Committee directed the Federal Reserve Bank of New York to continue to conduct open market operations with a view to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery, while giving consideration to international factors. Votes for this action: Messrs. Martin, Allen, Balderston, Mills, Robertson, Shepardson, Swan, Wayne, Johns, and Treiber. Votes against this action: none. Data that had become available in the 2-week interval since the preceding meeting of the Committee indicated that economic recovery was continuing in a satisfactory manner. During May industrial production was at 108 per cent of the 1957 average, up 6 points from the February low, and a further rise seemed likely in June. On the basis of these figures and other preliminary data it was estimated that in the second quarter of the year gross national product would be at an annual rate of at least $512 billion, about $12 billion above the first-quarter rate. However, there still remained questions as to the future strength and pattern of the upswing. Although inventory liquidation had apparently terminated, no significant accumulation was as yet evident. Further, approximately 5 million persons were still un- 65 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS employed and the rate of unemployment remained close to the midwinter level, just under 7 per cent of the laibor force on a seasonally adjusted basis. While retail sales were being maintained, there was not yet evidence of a real push in terms of increased consumer buying. The moderate level of demand and the availability of unused resources had been accompanied by generally stable prices. In the financial area, recent bank credit developments had been about in line with expected movements for the current phase of the business cycle. There had been a large volume of financing in the capital markets, with a steady flow of investment funds into new issues. Bank liquidity had shown improvement in recent weeks, particularly at money market banks, and the demand for bank credit continued to be moderate. For a considerable time, the rate on 3-month Treasury bills had been within the range of 2Vs to 2% per cent, most of the time between 2Vx and 2Vi per cent. International financial developments, especially the developing pressure on the British pound sterling and the continuing moderate deficit in the U. S. balance of payments, caused a number of Committee members to feel that it would be desirable if short-term interest rates could be maintained within the recently prevailing range. In view of the current levels of liquidity and of resource utilization, and in the absence of inflationary price pressures, it was considered appropriate, during the forthcoming period, to continue to encourage expansion in bank credit and the money supply. Consequently, the consensus of the Committee was that open market policy should be directed toward maintaining substantially the same degree of reserve availability as had prevailed recently, with the understanding that any doubts arising in the operation of the System Open Market Account would continue to be resolved on the side of ease. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Balderston, Mills, Shepardson, Swan, Wayne, Johns, and Treiber. Votes against this action: Messrs. Allen and Robertson. In renewing this special authorization, the Committee noted that there had been no occasion to operate in longer-term issues during the past 2 weeks. However, it was concluded that it would be advisable to continue to have the authority available, for use in the judgment of the Account Manager as circumstances might arise. Messrs. Allen and Robertson dissented from continuing this special authorization for reasons similar to those they had expressed at earlier meetings. July 11, 1961 1. Authority to effect transactions in System Account. The Committee's directive to the Federal Reserve Bank of New York was renewed without change. It thus directed that open market operations be conducted with a view to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery, while giving consideration to international factors. Votes for this action: Messrs. Martin, Hayes, Allen, Balderston, King, Mills, Robertson, Shepardson, Swan, Wayne, and Johns. Votes against this action: none. In June the prerecession highs of mid-1960 had been reattained, or even surpassed, in a number of the major over-all measures of economic activity. Gross national product, expressed in current dollars, had risen from a seasonally adjusted annual rate of about $500 billion in the first quarter of the 67 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS current year to a currently estimated $513 billion in the second quarter, about $8 billion above the previous peak reached in the second quarter of 1960. The quarter-to-quarter increase reflected a turnaround from substantial inventory liquidation to moderate inventory accumulation, as well as an increase in consumer spending for goods and services. Exports remained high, although no longer providing stimulus to the economy. Government spending—including Federal, State, and local—was rising further, but at a somewhat slower pace than earlier. As to industrial production, preliminary data suggested that the June index had reached 110 per cent of the 1957 average, compared with a low of 102 in February 1961 and a prerecession level of 110 in mid-1960. At the same time, the general average of wholesale prices had continued to drift down and the consumer price index had shown almost no change since October 1960. Both employment and unemployment increased in June, in line with the typical pattern for that time of year, but the rise in employment was considerably sharper than usual. Seasonally adjusted, the unemployment rate continued at 6.8 per cent, the level around which it had fluctuated for several months. Despite the favorable record of economic recovery, questions remained as to the probable speed and extent of expansion, relating mainly to the vigor and strength of future consumer demand and to the unemployment rate. Thus far, the recovery had been quite broadly based and not dependent on sharp growth in limited sectors of the economy. Private demand deposits, seasonally adjusted., showed no net increase from the second half of May to the second half of June and had shown no increase on balance since the latter half of March. Accordingly, the money supply, narrowly defined to include currency in circulation and privately held demand deposits, was one indicator that had not returned to its peak. Time deposits, however, continued to expand; combined with increased Treasury deposits, this had brought total deposits to a new high level. 68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM As in May, the June increase in bank assets reflected to a considerable extent the acquisition by banks of U. S. Government securities at the time of Treasury cash offerings. Loans did not increase as much as is usually the case in the month of June. Short-term interest rates continued to fluctuate within the relatively narrow range that had prevailed since the latter part of 1960. Long- and medium-term rates, on the other hand, rose further in June and were near or above the highest levels of the past year, evidently reflecting the continued substantial volume of borrowing by corporations and by State and local governments. The terms of substantial Treasury operations to refund August maturities and to obtain new cash were due to be announced shortly. The U. S. balance of payments (disregarding a West German debt repayment of nearly $600 million) appeared to have turned more adverse again in the second quarter, but without any large increase in the over-all deficit. The main factors in the change included a moderately reduced trade balance and a continuing net outflow on capital account. As indicated by the renewal of the existing directive to the New York Bank, there was agreement within the Committee that, in the present circumstances, monetary policy should continue to encourage further expansion in bank credit and the money supply in order to provide additional stimulus to the forces of economic recovery. For the forthcoming period, it was the consensus that open market operations should be designed to maintain approximately the same degree of ease that had recently prevailed, associated with a free reserve level of around $5004600 million. While concurring in general with the consensus, Mr. Mills called attention to the inflationary potential that in his opinion was inherent in a policy that fostered constant high levels of free reserves and failed to give sufficient weight to the existence of time deposits as a coordinate of the conventionally defined money supply and a force for injecting excessive liquidity into the com- 69 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS mercial banking system by way of creating additional nearmoney substitutes. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, King, Mills, Shepardson, Swan, Wayne, and Johns. Votes against this action: Messrs. Allen and Robertson. After extensive discussion of the pattern of operations in intermediate- and longer-term securities since this authorization was first given by the Committee on February 7, 1961, it was the consensus that the original criteria for such operations, as indicated in the policy record entry of that date, should not be broadened at this time, considering among other things the inconclusiveness of the evidence concerning the effect of the operations. On the other hand, it was felt by the majority that an interpretation that the System was disengaging from operations in the intermediate- and longer-term areas should be avoided. One member of the Committee, Mr. Mills, voted for renewal of the authorization subject to the qualification that for the present the Management of the Open Market Account should abstain from operations outside the bill market. Messrs. Allen and Robertson voted against renewal of the authorization for the reasons that they had expressed on previous occasions. In addition, Mr. Robertson felt a diminution of private participation in market pricing and distribution was beginning to be apparent and could become worse if the trend of official purchases of intermediate- and long-term Government securities were continued. 70 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM August 1, 1961 1. Authority to effect transactions in System Account. The Committee renewed the directive to the Federal Reserve Bank of New York calling for open market operations with a view to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery, while giving consideration to international factors. Votes for this action: Messrs. Martin, Allen, Balderston, King, Mills, Shepardson, Swan, Wayne, Johns, and Treiber. Votes against this action: none. Although it appeared that the rate of economic expansion in June and July had not been as rapid as in preceding months, the economy was still moving toward higher levels of activity. Employment, income, sales, industrial production, and construction all continued to move upward. At the same time, prices continued stable. There remained a substantial underutilization of plant capacity, along with a high level of unemployment. Total bank credit had increased substantially further due to the acquisition of Government securities by banks as a result of the Treasury's recent financing program, and the bank loan picture was somewhat stronger in July than it had been in June. The money market had been quite easy. Developments since the July 11 meeting having special significance from the standpoint of the formulation of monetary policy included a request by the President of the United States for substantial additional defense expenditures, giving rise to the prospect of an increased Federal deficit. The prospective stimulus of greater deficit spending upon the domestic economy suggested a need for alertness to lessen the degree of monetary ease in case speculative or inflationary tendencies should develop. The second significant development since the preceding meeting was the raising of the Bank of England's bank rate (discount rate) to 7 per cent, in line with a general governmental program designed to limit expansion of domestic demand in order to cope 71 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS with an unfavorable external payments position. It was recognized that the resulting differential between British and U. S. short-term interest rates and credit availability, to the extent that it induced a flow of funds from this country to the United Kingdom, would be a force working to limit further decline in shortterm rates domestically and perhaps exerting some upward pressure on them. Another possible effect would be some worsening of the over-all deficit in the U. S. balance of payments, particularly in view of the adverse tendencies indicated by secondquarter developments of the current year. Balancing the considerations pertinent to the formulation of monetary policy under current conditions, the Committee concluded that although alertness to developing factors, both domestic and international, was in order, a policy of continued ease, while at the same time avoiding a decline in short-term interest rates, would be appropriate for the period immediately ahead in order to help foster domestic economic recovery at a reasonable pace. Therefore, the consensus favored continuation of approximately the same degree of ease that had been maintained recently. Mr. Mills was of the opinion that both domestic considerations related to inflationary potentials inherent in too broad a reserve base and international considerations calling for a closer alignment between U. S. Treasury bill and foreign bill rates required a reduction in the supply of reserves, which would serve to bring some upward pressure on short-term interest rates. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. 72 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Votes for this action: Messrs. Martin, Balderston, King, Mills, Shepardson, Swan, Wayne, Johns, and Treiber. Vote against this action: Mr. Allen. Developments since the preceding meeting, including those focusing attention upon the relationship of U. S. short-term rates to rates in other countries, had resulted in substantial purchases of securities other than bills by the Open Market Account in order to provide needed reserves but not contribute directly to a further decline in Treasury bill rates. The renewal, with one dissent, of the authorization for operations in longer-term securities was given without restriction on the discretion of the Management of the Open Market Account to take such actions as seemed appropriate in the light of market developments and the effectuation of over-all monetary policy. However, there was some opinion within the Committee that, if feasible, a lesser volume of System purchases of securities in the longer maturity range, or even a reduction of Account holdings, would be advisable. August 22, 1961 1. Authority to effect transactions in System Account. Clause (b) of the directive to the Federal Reserve Bank of New York was changed to provide for open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors. The previous directive, which had been in effect since June 6, 1961, provided for operations with a view to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery, while giving consideration to international factors. Votes for this action: Messrs. Martin, Allen, Balderston, Irons, King, Mills, Robertson, Swan, Wayne, and Treiber. Votes against this action: none. Although industrial production increased to a record rate in July, it remained well below capacity levels. The consumer and 73 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS wholesale price indexes remained generally steady, and sensitive industrial prices had leveled off after a rise earlier in the recovery period. Sales of durable goods, although rising, continued to lag behind manufacturers' new orders. While employment had been expanding rapidly, the level of unemployment remained near the recession high. Total retail trade was down slightly in July, reflecting principally lower automobile sales, this decline apparently being related to the earlier than usual model changeover period. While consumer spending had increased as the recovery progressed, it had shown less than a typical upsurge for this stage of the business cycle, and buying intentions, according to recent surveys, appeared to be relatively weak. Evidence suggested that consumers had been willing thus far to devote a large part of their increased incomes to saving, rather than increasing their consumption of consumer goods or accumulating physical assets. While business improvement continued to be strong and broadly based throughout the economy, this expansion had had little counterpart in accelerated demands upon the financial system. Loan demand at banks lacked the vigor usually associated with the current stage of cyclical expansion, and bank asset expansion had reflected chiefly purchases of Federal and municipal securities. Net deposit expansion was continuing to represent largely an increase in time deposits. An upward interest rate movement appeared to reflect in the main expectations—based on the improved economic outlook, higher defense expenditures, and prospective higher levels of Treasury borrowing—rather than any change in the current need for and supply of funds. The upward rate movements were reinforced, particularly in the short-term area, by a reduced level of free reserves of the banking system in the first part of August, partly due to added required reserves against deposits created by Treasury cash financing and partly due to large market drains of unforeseen dimensions. As to the balance of payments, preliminary data on gold and dollar transfers to foreigners for July suggested a July payments deficit about twice the monthly rate of deficit for the second 74 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM quarter of the year. While the July situation reflected in part temporary and seasonal influences, over-all payments tendencies suggested deterioration of the deficit position, particularly in terms of the trade balance. There was general agreement within the Committee that economic and financial developments, both domestic and international, should continue to be watched closely. However, for the ensuing 3-week period the consensus favored continuing about the same degree of ease that had prevailed, except during the period in early August when a confluence of market factors contrived to produce more firmness than had otherwise been the case. The change in the language of the directive therefore did not signify an intent to effect any immediate change in System policy. Instead, it reflected the view of the Committee that the amended wording was more appropriate at a time when the domestic economy was progressing from the stage of recovery into an expansionary phase. Although concurring in general with the consensus, Mr. Mills was of the opinion that natural demand forces should be relied upon to foster an expansion of bank loans, and that forcing reserves on the commercial banking system could only lead to future inflationary and speculative problems as well as cause foreign observers to question the suitability of monetary policy in the United States as related to balance of payments and inflationary considerations. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Balderston, Irons, King, Mills, Swan, Wayne, and Treiber. Votes against this action: Messrs. Allen and Robertson. 75 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS The Committee renewed the authorization, with two dissents, on a basis that continued to vest in the Management of the Open Market Account discretion, within the scope of current Committee policy objectives, for determining the extent to which the authority should be utilized in the light of market developments. One member of the Committee, Mr. King, favored continuing the authorization in effect, but disengaging from operations under it for the time being, while another member, Mr. Mills, voted for continuation of the authority with the recommendation that it be used, when practicable, for reduction of the Open Market Account's portfolio of securities other than Treasury bills. Mr. Robertson, one of the two members who dissented from renewal of the authorization, cited the shrinkage in private retail buying interest in the long-term Government securities market which had accompanied the continuation of official purchases of such securities, and the lack of any apparent major benefits from such purchases. Although he believed that cessation of operations in longer-term securities would be the wisest course, he suggested that the Committee begin by returning to the initial standard, set on February 7, 1961, of barring operations in securities maturing beyond 10 years. This, he felt, would lay the foundation for progressively further limitations later as, in the Committee's view, conditions might make such action appropriate. September 12, 1961 1. Authority to effect transactions in System Account. The Committee renewed without change the directive to the Federal Reserve Bank of New York calling for open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors. Votes for this action: Messrs. Martin, Allen, Balderston, Irons, King, Mitchell, Robertson, Shepardson, Swan, Wayne, and Treiber. Votes against this action: none. Available economic data, mostly relating to the month of August, indicated the continuation of a recovery movement in 76 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM which almost all economic indicators had risen above their earlier peaks, but without evidence, however, of an attitude of excessive exuberance on the part of the business community. Some stimulation from additional defense expenditures appeared to be about offset by a lower level of consumer spending than might ordinarily be expected at the current stage of the business cycle. Consumer credit outstanding, which declined in July, appeared to have declined further in August. While the recovery movement appeared to be dependent to a considerable extent on the stimulus provided by the public sector of the economy, there was no suggestion that the stimulus from that sector would be withdrawn. On the other hand, while the vastly increased liquidity of the economy, especially in the hands of consumers, constituted a reservoir of potential spending, there was no present evidence of a significant increase in consumer spending. Commercial bank loans and investments declined somewhat in August following the large increase in July, which had been due mainly to Treasury financing operations. Business borrowing from banks had thus far shown a rise of no more than usual seasonal proportions. The money supply, narrowly defined to include only currency and demand deposits, changed little in August for the fifth successive month, while the rise in time and savings deposits at commercial banks slackened slightly after having maintained a sharp rate of increase, seasonally adjusted, earlier in the summer. As to the balance of payments, it appeared that the large transfer of gold and dollars from the United States to foreigners in July could be accounted for mainly by temporary factors, including a large outward capital movement, a reduced trade surplus reflecting a contraseasonal rise in imports, and a seasonal increase in tourist expenditures. Preliminary indications suggested that the deficit may have been reduced in August. Nevertheless, even if the July deficit reflected temporary factors, the gravity of any tendency toward deterioration of the U. S. international payments position was apparent, particularly when viewed 77 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS in the light of the accumulated deficit over a period of years and the resulting diminution in the margin of monetary reserve protection. Views on monetary policy for the ensuing 3-week period were influenced by the fact that throughout this period the Treasury would be in the market with large and complex new cash and refinancing operations. This circumstance suggested the desirability of a steady money market. Even apart from this factor, however, the consensus was favorable to continuation of essentially the same degree of ease that had prevailed, although there was general agreement that the Committee should continue to be particularly alert to the emergence of developments that might call for some shift of policy. A minority of Committee members, while agreeing generally with the consensus as to operations during the forthcoming period, suggested that such questions as might arise in the conduct of operations be resolved on the side of less ease, particularly since the risk of a faltering of domestic economic expansion seemed to have receded while the risk of further deterioration in the international financial position of the United States appeared to have increased. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Balderston, Irons, King, Mitchell, Shepardson, Swan, Wayne, and Treiber. Votes against this action: Messrs. Allen and Robertson. The comments on the renewal of this authority did not reveal any significant change in the views of the Committee members, 78 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM as previously expressed, regarding the desirability or utilization of the authority. October 3, 1961 1. Authority to effect transactions In System Account. The directive to the Federal Reserve Bank of New York, calling for open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors, was renewed without change. Votes for this action: Messrs, Balderston, Allen, Irons, King, Mills, Mitchell, Robertson, Shepardson, Swan, Wayne, and Treiber. Votes against this action: none. There was no evidence of substantial change in the economic and financial picture since the preceding meeting of the Committee, although the pace of expansion appeared to have moderated somewhat. The demand for bank loans had been roughly in line with business developments, with no indication of exceptional borrowing in expectation of higher interest rates or inventory needs. Prices continued to exhibit stability, and there remained an underutilization of plant capacity and a high rate of unemployment. In these circumstances, and in view of current Treasury financing operations, the consensus favored continuation during the period immediately ahead of approximately the same degree of ease that had prevailed during recent weeks, in the belief that a need for some additional credit and monetary expansion existed in order to achieve higher levels of resource utilization. A minority of the Committee suggested, however, that doubts arising in the conduct of open market operations be resolved on the side of less ease, principally in the thought that a gradual move in such direction would place the System in a more advantageous position if and when forces should accumulate that would call for a positive shift towards a less stimulative monetary policy. 79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS One member of the Committee, Mr. Mills, voted against the implementation of policy in the manner indicated by the consensus, believing that policy should now move more positively toward a lesser degree of ease. While he would contemplate a reserve base ample to support the credit needs of the economy, in his judgment more than enough reserves were available to satisfy such needs. Mr. Mills felt that the Committee must move back from the present degree of ease cautiously and experimentally. However, he was apprehensive about the degree of liquidity of the commercial banking system and felt that a start should be made toward limiting further expansion in, or perhaps absorbing some of, that liquidity to the end that a resulting firming in the interest rate structure, besides paving the way toward a possible increase in the discount rate of the Federal Reserve Banks to 3Vi per cent, would reduce the disparity between short-term interest rates in the United States and Great Britain and in that way give visible evidence of a determination to use monetary policy as one means of keeping balance of payments problems and inherent inflationary tendencies under control. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Balderston, Irons, King, Mills, Mitchell, Shepardson, Swan, Wayne, and Treiber. Votes against this action: Messrs. Allen and Robertson. The recording of votes on the authorization reflected no changes from previously expressed attitudes except in one case. Mr. Mills stated that he continued to oppose purchases of longerterm securities for the System Open Market Account and to 80 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM favor reduction of the volume of such securities held in the portfolio. He now felt, however, that further experience had justified operations in short-term Government securities other than bills as being in the interest of a flexible conduct of monetary policy. The advantages of policy flexibility that had been gained through these dealings would be enhanced, in his opinion, if more emphasis were placed on sales of such securities when withdrawing reserves as compared with the weight that had been given to purchases for the purpose of supplying reserves. October 24, 1961 1. Authority to effect transactions in System Account. The New York Reserve Bank was again directed to administer open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors. Votes for this action: Messrs. Hayes, Allen, Balderston, Irons, King, Mills, Mitchell, Robertson, Shepardson, Swan, and Ellis. Votes against this action: none. The latest available statistical data, mostly for the month of September, reflected some hesitation in the pace of business expansion, as attested by a faltering in the industrial production index. However, there had been certain transitory factors at work, including abnormal weather conditions in parts of the country and a strike in the automotive industry, and it was difficult to determine how much of the deceleration of economic advance was attributable to such factors. Unemployment had not been reduced significantly, and retail sales figures failed to suggest buoyancy. Also, the rate of increase of personal income had slowed somewhat in August and September. Wholesale prices remained below the level that had prevailed in March of this year. On the other hand, gross national product was estimated to have advanced significantly from the second to the third quarter, and scattered evidence indicated that October trends were such as to support a more optimistic appraisal of the business outlook than the September statistics might suggest. 81 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Total bank credit expanded significantly in September and in the third quarter as a whole, the conventionally defined money supply showed in September the first substantial increase in several months, and time deposits at commercial banks continued their rapid growth. These developments were aided by substantial new cash offerings of Treasury securities, which had been acquired in large part by the banks. Treasury bills had been relatively firm, with 3-month bill rates moving generally within the 2.25 - 2.35 per cent range in which they had fluctuated since late August. Within about a week, the Treasury was expected to announce the terms of a large November refunding. In the third quarter, transfers to foreigners of gold, convertible foreign currencies, and dollars were at a seasonally adjusted annual rate of more than $3 billion, as compared with an annual rate of less than $2 billion in the second quarter, after eliminating the influence of special debt repayments. Within the third quarter, moreover, September appeared to have been the weakest month, and such October figures as were available suggested little, if any, improvement. Whereas in the second quarter basic U. S. payments were approximately in balance, the third-quarter figures reflected a deficit. The main reasons for the deterioration were that imports had increased faster than expected and the net capital outflow had failed to diminish. Consideration of these diverse factors resulted in a consensus that a continuation of the monetary policy the Committee had been following would be appropriate from the standpoint of domestic conditions, though with a tendency to resolve any doubts arising in the conduct of open market operations on the side of less ease. It was agreed that the System should meet seasonal needs for reserves and also that it should endeavor, in accordance with its practice of long standing, to maintain steady money market conditions in view of the Treasury's refinancing program. Because of international factors, however, the consensus favored giving more than usual attention to short-term rates. Mr. Mills dissented from the implementation of policy in the 82 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM manner indicated by the consensus because, as he had indicated at the October 3 meeting, he felt that Federal Reserve policy aimed at encouraging the expansion of bank credit had resulted in an increase in banking, industrial, and commercial liquidity that was approaching an inflationary status and had already tended to damage the fabric of the money market. In the circumstances, including the ramifications of the international situation, he believed that a start should be made toward implementing a moderately restraining monetary and credit policy. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Hayes, Balderston, Irons, King, Mills, Mitchell, Shepardson, Swan, and Ellis. Votes against this action: Messrs. Allen and Robertson. No changes were indicated in previously expressed positions of members of the Committee concerning the authorization and operations thereunder. November 14, 1961 1. Authority to effect transactions in System Account. The Committee renewed without change the directive to the Federal Reserve Bank of New York providing for open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors. Votes for this action: Messrs. Martin, Hayes, Allen, Irons, King, Mills, Mitchell, Robertson, Swan, and Wayne. Votes against this action: none. 83 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS On the basis of preliminary data, the Board's industrial production index appeared to have recovered in October the 1-point September decline, and possibly to have exceeded the August high. With the model changeover completed and the strike settled, automobile production had increased sharply in October, with a further substantial rise in November indicated by industry schedules. New orders for machinery were up in October, along with heavy engineering contracts, employment showed moderate improvement, and total retail sales had broken out of the narrow range within which they had fluctuated since midyear. The unemployment rate continued, however, at approximately the level that had persisted for almost a year. Some decline was noted in a few sensitive commodity prices, and third-quarter corporate profits were below earlier expectations. A recent private survey of business plans for spending on new plant and equipment in 1962 suggested only a modest rise above the level of expenditures for the current year. On the other hand, consumer spending showed signs of considerably improved strength in October. Despite the October showing with regard to increased consumer spending, questions still remained concerning the underlying strength of consumer demand. For example, consumer savings and liquid asset holdings were still continuing at a high level, and consumers were not yet resorting actively to the use of their available borrowing power. The latest samplings of buying intentions for durable goods, moreover, afforded little evidence that consumer demand might become a strong independent factor in furthering economic expansion in the months immediately ahead. In the financial area there had been a further sizable expansion in the money supply, accompanied by only a moderate increase in bank loans. The short-term Treasury bill rate had risen recently, following a downdrift in interest rates, particularly in the long-term sector. System open market operations during this period were large, but insufficient to meet the drain on reserves from market factors, and free reserves had declined somewhat, with modest tightening in the money market. While this 84 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM tightening had resulted from the play of market forces, circumstances such as the lower average free reserve figure for one of the statement weeks and the concurrent upward movement of Treasury bill rates had led to speculation regarding a shift in Federal Reserve policy. Data on the U.S. balance of payments showed that for the third quarter of 1961 the deficit, on a seasonally adjusted basis, was at an annual rate somewhat above $3 billion, representing a substantial deterioration from the first half of the year. The largest single contributory factor to the increased deficit was a rise in imports. As to October, preliminary incomplete data afforded little basis for belief that the deficit had been reduced from the high September figure. The consensus that evolved from the discussion at this meeting favored continuation for the period just ahead of a monetary policy calculated to produce approximately the same degree of ease that had prevailed for some time, except for the part of the preceding 3-week period in which a tendency toward a somewhat tighter money market had developed. It was the view of a majority of the Committee that, although economic developments should be watched closely in order to determine whether a shift in policy toward a less stimulative monetary posture would be appropriate, at this particular juncture various factors such as the persistence of a relatively high volume of unused resources, the absence of inflationary pressures, and the still unresolved question of the pace of consumer spending presented strong arguments against any significant lessening of monetary ease. Two members of the Committee, Messrs. Hayes and Mills, dissented from the implementation of policy in the manner indicated by the consensus. Mr. Hayes felt that it would be desirable for the Treasury bill rate to move into a moderately higher range, as a contribution in a minor way toward recognition of the serious U. S. international payments problem, and he was prepared to accept a somewhat lower level of free reserves should that prove necessary to sustain the bill rate. However, he would not favor any noticeable shift in System policy at this time. Also, 85 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS if the Treasury should decide to undertake an advance refunding in the near future, then he would feel that no change in existing monetary policy would be appropriate. Mr. Mills dissented because of his belief that implementation of policy according to the consensus would fail to take the initiative that the Federal Reserve System should properly take at this juncture. In his view the monetary and credit situation to which he had addressed himself at the two previous meetings of the Committee had since worsened. It continued to be imperative, in his opinion, to restrict the supply of reserves to such extent that the expansion of bank credit would be contained largely within the bounds of the resources already at the banks' disposal, at the same time that a firmer structure of interest rates would serve to discourage the transfer of gold and dollars abroad. In combination, the effect of these actions should, he thought, give public evidence of a determination to follow orthodox principles in defending the international exchange value of the dollar. 2. Authority to effect transactions in intermediate- and longer-term securities. The Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Irons, King, Mills, Mitchell, Swan, and Wayne. Votes against this action: Messrs. Allen and Robertson. The renewal of the authorization was without indication of change in the views stated regarding it when the authority was previously renewed. December 5, 1961 1. Authority to effect transactions in System Account. The policy directive to the Federal Reserve Bank of New York calling for open market operations with a view to encouraging 86 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors, was renewed at this meeting without change. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mills, Mitchell, Robertson, Shepardson, Swan, Wayne, and Fulton. Votes against this action: none. On the basis of more complete data for October than had been available at the preceding Committee meeting, together with preliminary data for November, it appeared that after a period of hesitation in August and September a strong growth trend in the economy had resumed, although without indication of excesses or undue exuberance. December production schedules, particularly in steel and automobiles, suggested a further upward movement in industrial production by year-end, and the tone of business sentiment, as reflected in district reports, was generally on the optimistic side. Additional improvement was noted in retail sales, as well as in manufacturers' sales and orders. Also, although there continued to be a substantial amount of unutilized manpower, preliminary unemployment statistics for November indicated a significant percentage reduction, for the first time in a year. Prices continued to show general stability. Despite recent improvement, there remained a degree of uncertainty regarding the probable future pace of consumer outlays, and there was likewise little evidence of an upward surge in plans for plant and equipment expenditures. Despite the apparently accelerated pace of economic expansion in November, the rate of bank credit and deposit expansion seemed to have slackened, following the pronounced increase in September and October. Nevertheless, money markets were relatively firm in November until the end of the month, and interest rates generally rose somewhat. Treasury bill yields rose in the latter part of the month to or slightly above the peaks reached at various times of seasonal pressure during the past 15 months. There was no evidence of improvement in the international 87 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS payments position of the United States, perhaps some further deterioration. Preliminary reports on the balance of payments for November suggested that the deficit was about equal in size to the October and September deficits. The Open Market Committee, in considering the appropriate course of monetary policy for the period ahead, observed that the recent tendency toward a firming of money market conditions reflected pressures generated within the market itself rather than positive action on the part of the System. The fact that market forces had resulted in increasing somewhat the Treasury bill rate level was regarded as fortunate, in view of the balance of payments problem, and it was not felt that System operations to offset the effect of the prevailing market forces would be warranted. In fact, a minority of the Committee believed that the expansionary trend and current strength of the domestic business situation would justify some lessening in the volume of reserves placed at the disposal of the banking system as a basis for further expansion of credit. However, due to the absence of stresses and strains in the economy at the present time and in light of the several remaining points of uncertainty that tended to cast some doubt on the pattern of future economic developments, the consensus favored maintaining for the immediate future approximately the same policy in respect to the supplying of reserves that the Committee had been pursuing for some time. 2. Authority to effect transactions in intermediate- and longer-term securities. The Federal Reserve Bank of New York was authorized, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate- and longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mitchell, Shepardson, Swan, Wayne, and Fulton. Vote against this action: Mr. Robertson., 88 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM No change was indicated in positions previously expressed with respect to this authorization. December 19, 1961 1. Authority to effect transactions in System Account. The following current economic policy directive was issued to the Federal Reserve Bank of New York: It is the current policy of the Committee to permit further bank credit and monetary expansion so as to promote fuller utilization of the economy's resources, together with money market conditions consistent with the needs of both an expanding domestic economy and this country's international balance of payments problem. To implement this policy, operations for the System Open Market Account shall be conducted with a view to providing reserves for bank credit and monetary expansion (with allowance for the wide seasonal movements customary at this time of the year), but with a somewhat slower rate of increase in total reserves than during recent months. Operations shall place emphasis on continuance of the 3-month Treasury bill rate at close to the top of the range recently prevailing. No overt action shall be taken to reduce unduly the supply of reserves or to bring about a rise in interest rates. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, Shepardson, Swan, Wayne, and Fulton. Votes against this action: Messrs. King, Mills, Mitchell, and Robertson. (This directive was the first issued by the Committee under new procedures instituted at this meeting—explained in a subsequent entry of this date—under which the substance of the Committee's previous directive was to be divided between a "current economic policy directive" and a "continuing authority directive.") Data for November available to the Committee at this meeting indicated continued expansion in economic activity on many fronts and a substantial rise in consumer outlays, an area with respect to which there had earlier been some uncertainty. Final figures for November industrial production indicated a rise of 1 point in the Board's index, with prospects for another 1- or 2point increase in December. New orders for durable goods were 89 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS up moderately, and unfilled orders had risen further. The November decline in the unemployment rate on a seasonally adjusted basis, which had been suggested by preliminary figures available at the previous meeting, was confirmed in the final calculations. Preliminary estimates for gross national product in the fourth quarter indicated that despite strikes and other temporary setbacks the economy had performed up to the more optimistic of the earlier expectations. Evidence was lacking of inflationary pressures associated with the continued upward movements in production and spending. The final price indexes for November showed no significant change on the average, with increases in some lines offset by decreases in others. Scattered figures available for December suggested that the stability was continuing. While business optimism had picked up considerably in recent weeks, figures on plant and equipment expenditure plans for the first quarter of 1962 indicated only a moderate rate of growth over the fourth quarter of 1961. Partial data on bank credit for the first half of December indicated relatively small changes in recent weeks in loans to businesses, although there had been an increase in the seasonally adjusted money supply. The recent advance in interest rates, which was concentrated largely in the short-term area of the market, continued in the first half of December, with yields on some issues rising to new highs for the year. These advances appeared to be attributable to cyclical developments in the economy, as well as to usual seasonal factors. In contrast to the encouraging domestic picture, data on the balance of payments for November indicated an adverse basic balance as large as, if not larger than, in October, and fragmentary data for the first half of December indicated a continuation of the November trend. It was the judgment of the Committee majority that improvements in the domestic economic situation coupled with the continuing balance of payments problem warranted a policy trending toward slightly less easy monetary conditions, with short-term interest rates near the high end of their recent range. 90 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM However, in view of the facts that the unemployment rate, while reduced from earlier levels, was still relatively high and that there were no symptoms of inflationary pressures, the majority felt that no substantial change from recent policies was called for. Accordingly, the Committee issued the directive quoted above. While Mr. Robertson's analysis of the economic situation and the proper direction of policy was the same in its essentials as that of the majority, he voted against adoption of this directive on the grounds that it was undesirable to tie monetary policy to the bill rate. Mr. Mills' dissent was on the grounds that circumstances called for a greater degree of restraint than was indicated in the directive. In his opinion the Committee had been dilatory in acting firmly to combat the balance of payments problem through monetary policy, and despite a situation where an over-generous provision of reserves had continuously allowed the commercial banking system ample leeway for expanding bank loans within the total of its available resources. Messrs. King and Mitchell, on the other hand, thought the time had not yet arrived for any modification of policy in the direction of less ease. 2. Modification of form of directive to Federal Reserve Bank of New York. As indicated in the preceding entry, the Federal Open Market Committee voted at this meeting to replace the single directive of the type it had issued to the Federal Reserve Bank of New York in the course of its meetings in the past with a "current economic policy directive" and a "continuing authority directive." In accordance with this revision of procedure the Committee adopted the following continuing authority directive: 1. The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York, to the extent necessary to carry out the current economic policy directive adopted at the most recent meeting of the Committee: (a) To buy or sell U.S. Government securities in the open market for the System Open Market Account at market prices and, for such Account, to exchange maturing U.S. Government securities with the Treasury or allow them to mature without replacement; provided that the aggregate amount of such securities held in such Account (in- 91 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS eluding forward commitments, but not including such special shortterm certificates of indebtedness as may be purchased from the Treasury under paragraph 2 hereof) shall not be increased or decreased by more than $1 billion during any period between meetings of the Committee; (b) To buy or sell prime bankers' acceptances in the open market for the account of the Federal Reserve Bank of New York at market discount rates; provided that the aggregate amount of bankers' acceptances held at any one time shall not exceed $75 million or 10 per cent of the total of bankers' acceptances outstanding as shown in the most recent acceptance survey conducted by the Federal Reserve Bank of New York; (c) To buy U.S. Government securities with maturities of 24 months or less at the time of purchase, and prime bankers' acceptances, from nonbank dealers for the account of the Federal Reserve Bank of New York under agreements for repurchase of such securities or acceptances in 15 calendar days or less, at rates not less than (a) the discount rate of the Federal Reserve Bank of New York at the time such agreement is entered into, or (b) the average issuing rate on the most recent issue of 3-month Treasury bills, whichever is the lower. 2. The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York to purchase directly 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 shortterm 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 $500 million. Votes for this action: Messrs. Martin, Hayes, Balderston, Irons, King, Mitchell, Shepardson, Swan, Wayne, and Fulton. Votes against this action: Messrs. Mills and Robertson. (The current economic policy directive adopted at this meeting is quoted in the first policy record entry for this date.) In the view of the majority, separation of the continuing authorizations from the current directive would permit the Committee to frame its current economic policy instructions to the Federal Reserve Bank of New York in a more effective fashion. Previously the formal economic policy instructions had been 92 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM compressed into a single clause—clause (b) of the first paragraph in directives of the former type—of a longer statement also including instruction on other matters which were subject to relatively infrequent change. The new continuing authority directive was intended to encompass the substance of the previous single directive, except for clause (b), and of certain other authorizations and directives relating to repurchase agreements and bankers' acceptances that previously had been adopted independently of the directive. No action was taken to discontinue previous authorizations on repurchase agreements and bankers' acceptances. The language in the new continuing authority directive was rephrased from that of earlier instruments for the sake of greater clarity, but with one exception the Committee made no substantive changes in its authorizations and directions to the Account Management. The exception related to the maturity limit of securities acquired from nonbank dealers under repurchase agreements, which was 15 months under the previous authority and was set at 24 months in the new continuing directive. Mr. Mills dissented from the action to adopt the continuing directive because, in his view, directives of the previous type that were tied to "ground rules" set out in specifically stated operating policies more clearly reflected the judgments of the Committee, and in a manner to which the interested public had become accustomed. He was concerned that in the new type of current policy directives, a tendency toward the use of amorphous statements and generalities in describing policy intentions would in the future prevent fixing responsibility for previous actions that had come under criticism. Mr. Robertson's dissent was on two grounds. First, he objected to the inclusion of the authority to buy Government securities from nonbank dealers under repurchase agreements at rates that could be lower, in certain circumstances, than the discount rate of the Federal Reserve Bank of New York. Second, he objected to the fact that the directive did not include certain rules within which, in his view, the Account Management should 93 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS operate on behalf of the Committee. Specifically, the document did not include any directive to the effect that open market operations were to be conducted primarily to supply or absorb bank reserves; it did not limit open market operations to short-term securities; it contained no restriction against conducting operations for the purpose of supporting any pattern of prices or yields in the Government securities market; it contained no language specifying that during periods of Treasury financing open market operations were to be conducted in such a manner as to change as little as possible prevailing money market conditions; and it contained no prohibition against "swap" transactions (i.e., offsetting purchases and sales of securities). 3. Statements of continuing operating policies and authority to effect transactions in intermediate- and longer-term securities. The Federal Open Market Committee discontinued the three statements of operating policies that had been in effect since 1953 and were last reaffirmed by the Committee on March 22, 1960. This action was taken with the understanding that it would make unnecessary the special authorization permitting transactions in longer-term securities, adopted in February 1961 and renewed at each subsequent meeting, and this authorization was therefore not again renewed. The three discontinued operating policy statements read as follows: 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). 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. 94 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 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, Hayes, Balderston, Irons, Mitchell, Shepardson, Swan, and Fulton. Votes against this action: Messrs. King, Mills, Robertson, and Wayne. The operating policy statements had been reviewed at the meeting of March 7, 1961, in accordance with the customary practice of reviewing all continuing authorities and statements of policy at the first meeting each year following the election of new members from the Federal Reserve Banks. At that time, pursuant to the recommendation of a Subcommittee, the Committee tabled consideration of possible changes pending a more comprehensive review of the appropriate form for such statements under present circumstances, including those associated with the operations recently begun in intermediate- and longerterm securities. Subsequently, Committee members gave extended consideration to alternative possible formulations of the statements and to the advantages and disadvantages of continuing them in some form. Further deliberations at this meeting culminated in the decision to discontinue the statements. The language of the statements had reflected the Committee's expectation that departures from various of the individual policies described would be needed from time to time, and the Committee had in fact made such departures on several occasions. The most recent was the special authorization for transactions in longer-term Government securities first made in February 1961 and renewed at each subsequent meeting until December 19, 1961. In voting to discontinue the three statements of operating policies, it was the belief of the majority of the Committee that in the future greater latitude might be needed for adapting System operating techniques to changing circumstances than had 95 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS been required over most of the period since 1953, especially in view of the change in this country's international payments position. The decision also reflected the belief of a Comitnittee majority that some of the advantages seen earlier in having statements of operating policies were now considerably reduced in importance. The main purpose of the statements, when they were originally adopted in 1953 and reaffirmed in subsequent years, was to clarify the role of the Federal Reserve with respect to the Government securities market. During World War II and the postwar period up to the Treasury-Federal Reserve accord of March 1951, the System maintained the prices and yields of outstanding Government securities on a relatively fixed schedule, and in the 18 months following the accord the System continued actively to support Treasury financings. A majority of the Committee had believed the statements of operating policies served a major role in defining more clearly the System's operations in the Government securities market and in facilitating the transition from a supported to an unsupported market. But the transition had long since been successfully accomplished and a majority now felt that this purpose no longer provided a compelling reason for continuing formal statements of operating policies. Another of the original purposes of the statements was to provide guidelines for open market operations undertaken on the Committee's behalf. At the time the statements were adopted in 1953 the Federal Open Market Committee met relatively infrequently—a minimum of four times a year, with occasional additional meetings—and in the relatively long intervals between meetings responsibility for effectuating policy lay with the executive committee. Along with other types of instructions, the operating policy statements were considered to serve a useful function in providing guides for the executive committee and the Account Management. Since mid-1955, however, when the executive committee was discontinued, the full Committee had been meeting regularly at short intervals—usually every 3 weeks 96 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM —and it had been able to maintain close direction over the conduct of operations. In these circumstances the majority felt that the importance of the operating policy statements as guides for operations was also considerably reduced. The decision to discontinue the statements of operating policies related solely to the desirability of continuing to have such statements; it was not a decision to change the basic position of the System in relation to the Treasury or the market. The action was taken with the recognition that the bulk of open market operations would, in the nature of the case, continue to be in short-term securities; with the understanding that decisions about operations in securities of all maturities would continue to be made by the Committee in light of prevailing circumstances; and with the understanding that the Committee had no intention of pegging Government security prices, or of creating artificial market conditions at times of new security offerings by the Treasury. Those voting against the action to discontinue the statements felt that the balance of advantages and disadvantages still favored the retention of statements in some form. It was pointed out that whether or not the Committee affirmed formal statements of operating policies, it would in effect still be acting in terms of certain rules, and there were some advantages in having these formalized even if the language admitted to a considerable degree of flexibility. The possibility that a complete elimination of the statements would have an adverse effect on the Government securities market was suggested. Mr. Robertson's dissent was predicated on his beliefs that there should be Committee rules with respect to matters such as "swap" transactions, pegging operations, and the conduct of open market operations during periods of Treasury financing and that they should be formally set out. He also felt that the Committee should return to its previous policy of confining operations to short-term securities. In his view: (1) the operation that the Committee had launched in February 1961, including transactions in longer-term securities under the special authoriza- 97 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS tion, had not been successful in raising short-term and lowering long-term rates; (2) had the operation been pushed to the point necessary to achieve what he understood to be these twin goals, its defects would now be obvious; and (3) the deleterious effects of such operations on the market for long-term securities will become more apparent when the Treasury seeks—as it sometime must—to extend the maturity structure of the Federal debt by attempting to sell long-term securities for cash or in exchange for maturing securities. Furthermore, he believed that while it was possible for the Federal Reserve to acquire longer-term securities without impeding Treasury operations in a period such as 1961, when Treasury financing was chiefly short-term, the sale of such securities would present real problems. In his view such selling action would not only absorb long-term funds from the limited supply but would also aggravate the uncertainties which already plagued the long-term market, weakening its supporting structure and attenuating its appeal to investors. He could not foresee any time, when monetary policy called for absorbing reserves, that the Federal Reserve could sell longer-term securities from its holdings without impairing the ability of the Treasury to lengthen the debt. This, he thought, would be unfortunate, in view of the real need for the Treasury to achieve a more manageable maturity distribution of the public debt. Accordingly, he believed that operations in securities beyond the short-term area should be terminated immediately. Mr. Mills, in dissenting, stated that it was his disposition to retain the operating policy statements in their present form, and to continue the special authorization for transactions in longerterm securities, but to modify the terms of the latter to allow continued operations in Government securities with maturities up to 2 years. It was his judgment that operations in securities in this maturity range may have had some limited success in holding up the short-term rate structure—a desirable end for balance of payment reasons—and while the apparent benefits may have been illusory to some extent, it was reasonable to attempt further experimentation. He believed that: transactions in 98 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM longer-term securities had been harmful in that the market had come to regard them as patent efforts to support the market rather than as a means of influencing interest rates and that such transactions had set the stage for a full-fledged pegging operation. In his view, operations in any Government securities other than Treasury bills had the disadvantage of impairing the usefulness of the market as a sounding board for recording economic and financial movements. * * * * * As indicated by the foregoing record, the policy directive of the Federal Open Market Committee in effect at the beginning of 1961 was aimed at encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, while taking into consideration current international developments. During the course of the year the directive was changed four times. The first change occurred on April 18, when a directive was adopted that provided for operations with a view to encouraging expansion of bank credit and the money supply so as to contribute to strengthening of the forces of recovery that appeared to be developing in the economy, while giving consideration to international factors. On June 6, the qualifying words "that appear to be developing in the economy" were dropped from the directive. The next change was on August 22, when a directive was adopted that called for open market operations with a view to encouraging credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors. This directive was renewed at subsequent meetings until December 19, when the Open Market Committee decided to institute a procedure of issuing both a current economic policy directive and a continuing authority directive. The text of each of the two directives issued on December 19 is quoted in full in the policy record entries for that date. 99 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS RECORD OF POLICY ACTIONS BOARD OF GOVERNORS May 18, 1961 Amendment to Regulation F, Trust Powers of National Banks Effective immediately, Section 12 of Regulation F was amended to permit national banks exercising trust powers to earmark trust securities and investments for vault custody purposes as an alternate method of identifying the securities of separate trusts. Votes for this action: Messrs. Martin, Mills, Robertson, Shepardson, and King. Votes against this action: none. Section 12 of Regulation F specified that the securities and investments of each trust must be kept separate from those of the bank and of all other trusts, and this language had been construed to require physical separation of the securities of individual trusts. Upon review, however, it appeared that with proper safeguards the purpose of the requirement, which was to prevent unauthorized commingling of the property of a trust with that of the trustee or of another trust in such manner that the identity of fiduciary ownership might be obscured, would be met by permitting national banks, at their option, to earmark trust securities and investments for vault custody purposes as a method of identifying the securities of separate trusts. The amendment to Regulation F was designed to specify the permissibility of such a procedure. June 29, 1961 Amendments to Regulation T, Credit by Brokers, Dealers, and Members of National Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks Effective August 7, 1961, Regulations T and U were amended to provide more explicit standards with respect to arbitrage transactions and to clarify the applicability of the Regulations to transfers of margin accounts. Votes for this action: Messrs. Balderston, Mills, Robertson, and Shepardson. Votes against this action: none. 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Prior to this action, Regulation U had exempted from margin requirements loans to members of a national securities exchange for the purpose of "bona fide arbitrage transactions," without defining the term "arbitrage." Regulation T contained a similar exemption for all arbitrage loans and defined arbitrage to include "a purchase of a security . .. convertible within a reasonable time into a second security together with an offsetting sale ... of such second security." The lack of a more specific definition had resulted in a number of questions being raised, and it appeared that more explicit standards would be desirable. This was accomplished by substituting the phrase "90 calendar days" for "a reasonable time" in Regulation T and by including a corresponding definition in Regulation U. The other amendments, relating to the transfer of general accounts between customers under Regulation T and the transfer of loans between borrowers under Regulation U, were also of a clarifying nature, their purpose being to eliminate possible ambiguities and to make clearer the applicability of the Regulations to transactions of the kind in question. The foregoing amendments had been the subject of notices of proposed rule making, published in the Federal Register, and were adopted by the Board after consideration of relevant views and arguments received from interested persons. December 1, 1961 Amendment to Regulation Q, Payment of Interest on Deposits Effective January 1, 1962, the Board prescribed the following maximum permissible rates of interest payable by member banks of the Federal Reserve System on time and savings deposits: Maximum rate of 4 per cent: On that portion of any savings deposit that has remained on deposit for not less than 12 months; on any time deposit having a maturity date 12 months or more after the date of deposit, or payable upon written notice of 12 months or more; and on that portion of any postal savings deposit which constitutes a time deposit that has remained on deposit for not less than 12 months. 101 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Maximum rate of 3^ per cent: On any savings deposit, except as otherwise provided; on any time deposit having a maturity date less than 12 months and not less than 6 months after the date of deposit, or payable upon written notice of less than 12 months and not less than 6 months; and on any postal savings deposit which constitutes a time deposit, except as otherwise provided. (For all such deposits, the previous maximum rate had been 3 per cent, beginning January 1, 1957.) No change was made in the maximum permissible rates for time deposits having a maturity date of less than 6 months. The maximum continued to be 2Vi per cent for time deposits having a maturity date from 90 days to 6 months, and 1 per cent for time deposits having a maturity date of less than 90 days. Votes for this action: Messrs. Martin, Balderston, Mills, Robertson, Shepardson, and Mitchell. Vote against this action: Mr. King. Section 19 of the Federal Reserve Act, as amended by the Banking Act of 1933 and the Banking Act of 1935, requires the Board of Governors to establish by regulation the maximum rates of interest that may be paid on time and savings deposits by member banks of the Federal Reserve System, while the Federal Deposit Insurance Act requires that the Federal Deposit Insurance Corporation prescribe maximum rates payable on such deposits by insured nonmember banks. For some time prior to this action, a number of commercial banks had contended that a 3 per cent maximum rate restricted them in their efforts to compete for savings and time deposits. The action taken by the Board had the effect of increasing freedom of competition and enabling each member bank to determine the rates of interest it would pay in light of the economic conditions prevailing in its area, the type of competition it must meet, and its ability to pay. The action also had the effect of enabling member banks to compete more vigorously for foreign deposits that might otherwise move abroad in search of higher returns, thereby intensifying an outflow of capital or gold to other countries. Thus, the action was in line with other steps pre- 102 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM viously taken to moderate pressures on this country's balance of international payments. Further, it was contemplated that the action would give member banks the latitude that might be needed, for a considerable period ahead, to provide an added incentive for accumulation of the savings necessary to finance the future economic growth that would be essential to the expansion of job opportunities for a growing population. By permitting higher rates to be paid on deposits held for longer periods, the new limits would make it possible for banks to attract long-term savings, in contrast to volatile liquid funds, and thereby give banks greater assurance that they could invest a larger portion of their time deposits in longer-term assets. Effective the same date, the Federal Deposit Insurance Corporation made similar changes in its regulation prescribing the maximum interest rates permitted to be paid on time and savings deposits by insured nonmember banks. Governor Mills' vote in favor of this action was on the grounds that the higher rates of interest offered the public by other types of savings institutions and the international balance of payments situation were conclusive factors that called for an increase in the ceiling rate of interest permitted to be paid by commercial banks on savings and time deposits. However, he questioned going above a 3V2 per cent maximum, which would retain the usual rate differential between commercial banks and competing savings institutions that serves as a safeguard against uncontrolled competition for savings business. In his opinion, there was also the possibility that a 4 per cent permissible maximum rate, in being misread as notice of a change in Federal Reserve System credit policy, would adversely affect the market for U.S. Government securities and, likewise, that the higher operating costs resulting from its adoption might force offering commercial banks into lower quality, higher yielding loans and investments and discourage their maintenance of appropriate liquidity positions. Governor Robertson's vote in favor of this action was on the basis that it was a step in the right direction. He had long urged 103 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS permitting even higher maximum rates of interest—rates higher than most banks would be prepared to pay—in order to place on each bank real responsibility to determine the rates it would pay. Such a high permissive ceiling would encourage freedom of competition and compel each member bank to determine its rates of interest in the light of economic conditions in its area, the competition it must meet, and its ability to pay. In his view, lifting the ceiling to the extent here proposed, while a step in the direction he favored, might carry the unfortunate implication that the maximum permissible rate was the rate which the Federal Reserve System thought banks could afford to pay and therefore might lead some banks to pay higher rates than would be appropriate and sound in their particular situations. Governor King dissented because he felt that total savings were adequate at the present for economic expansion. He believed the rate competition which would result from increasing the maximum permissible rates would have serious adverse effects on a large number of commercial banks. He doubted that this action would make a significant contribution to solution of the U.S. balance of payments deficit. December 12, 1961 Amendments to Regulation Q, Payment of Interest on Deposits, and Regulation D, Reserves of Member Banks Effective January 15, 1962, paragraph (e) of section 217.1 of Regulation Q, relating to the definition of savings deposits, was amended in several respects in order to strengthen the distinction between savings and demand deposits and to effect certain changes of a clarifying or technical nature. Conforming amendments were made in paragraph (e) of section 204.1 of Regulation D. Votes for this action: Messrs. Martin, Balderston, Mills, Robertson, Shepardson, King, and Mitchell. Votes against this action: none. The purpose of this action was to prevent practices that would facilitate the use of a savings deposit as a regular means of draw- 104 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM ing checks on a depository bank. At the same time, certain liberalizing provisions were incorporated to permit payment of a savings deposit to anyone holding title to the deposit in a fiduciary capacity or pursuant to court order, or as security for credit extended to the depositor. The amendments had been the subject of a notice of proposed rule making, published in the Federal Register, and were adopted by the Board after consideration of all relevant views and arguments received from interested persons. Effective the same date, the Federal Deposit Insurance Corporation made similar changes in its regulation applicable to insured nonmember banks. 105 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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. 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 because the Comptroller of the Currency is directly charged with that responsibility by law. The Comptroller furnishes reports of examinations to the respective Federal Reserve Banks and also makes them available to the Board of Governors in Washington. Likewise, because all member banks are insured, the Federal Deposit Insurance Corporation is empowered to make examinations of both national and State member banks in special cases. Such examinations have been infrequent. The Comptroller of the Currency and the Board of Governors make available to the Federal Deposit Insurance Corporation their reports of examination of national and State member banks, respectively, and the Corporation in turn makes its reports available to them. At the request of the Comptroller of the Currency, the Board makes recommendations to his office concerning applications that 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. 106 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM 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. Wherever practicable, joint examinations are made in cooperation with the State banking authorities or alternate independent examinations are made by agreement with State authorities. The 1961 program for examining State member banks was practically completed, since only 31 of the 1600 banks were not examined during the year. In its supervision of State member banks, the Board passes upon applications to establish branches and upon investments in bank premises that will exceed 100 per cent of the capital stock of the member bank. Also, under Section 18 (c) of the Federal Deposit Insurance Act, the Board must pass upon each merger, consolidation, acquisition of assets, or assumption of liabilities in which the acquiring, assuming, or resulting bank is to be a State member bank. Unless the Board finds that it must act immediately to prevent the probable failure of one of the participating banks, it must request reports from the Attorney General, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation on the competitive factors involved in each transaction. The Board in turn responds to requests by the Comptroller or the Corporation for reports on the competitive factors involved when the acquiring, assuming, or resulting bank is to be a national bank or an insured State nonmember bank. During 1961 the Board approved 32 and disapproved 5 mergers, consolidations, acquisitions of assets, or assumptions of liabilities. As required by Section 18(c) of the Federal Deposit Insurance Act, a description of each of the 32 cases approved by the Board, together with other pertinent information, is shown in Table 21 on pages 149-83. A Board action in approving an application does not necessarily mean that all members of the Board concurred in the decision or in the basis for approval stated in the table. 107 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS Federal Reserve membership. At the end of 1961, member banks accounted for 46 per cent of the number and held approximately 84 per cent of the deposits of all commercial banks in the United States. State member banks accounted for 18 per cent of the number, 31 per cent of the banking offices, and about 65 per cent of the deposits of all State commercial banks. The 6,113 member banks of the Federal Reserve System at the end of 1961 included 4,513 national and 1,600 State member banks. There were net declines of 17 and 44, respectively, in these two classes of banks during the year. These declines, continuing the trend of recent years, were due largely to consolidations and mergers. Reductions from other causes included 17 State banks that withdrew from membership and 1 national bank that converted into a nonmember bank. The membership losses were partly offset by 26 newly established national and 2 newly established State member banks, the admission of 5 nonmember banks to membership, and the conversion of 5 nonmember banks into national banks. At the end of the year member banks were operating 8,653 branches, 758 more than at the close of 1960. This increase reflected mainly the establishment of 607 de novo branches and the conversion of 100 merged banks into branches. Detailed figures on changes in the banking structure for 1961 are shown in Table 19, page 146. Bank holding companies. During 1961, pursuant to Section 3 (a) (1) of the Bank Holding Company Act of 1956, the Board approved 2 applications for prior approval to become a bank holding company. Pursuant to Section 3 (a) (2) of the Act, the Board approved the acquisition by 8 bank holding companies of voting shares of 9 banks (2 related bank holding companies, 1 of which controlled the other, filed applications to acquire shares of 1 of the banks), and denied applications by 2 holding companies with respect to 3 banks. Under Section 4(c) (6) of the Act, the Board, after hearings, granted requests by 3 holding companies for determinations that the activities of 7 subsidiaries were so closely related to the banking activities of their respective 108 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM holding company systems as to be proper incidents 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. As required by the tax-relief provisions of the Act, during 1961 the Board issued 1 certification regarding a distribution of assets. To provide necessary current information, annual reports for the year 1960 were obtained from all registered bank holding companies. During 1961, pursuant to the Banking Act of 1933, the Board authorized the issuance to holding company affiliates of member banks of 1 voting permit for general purposes and 7 permits for limited purposes. In accordance with established practice, a number of holding company affiliates were examined by examiners for the Federal Reserve Banks in whose districts the principal offices of the holding companies are located. Section 301 of the Banking Act of 1935 provides that the term "holding company affiliate" shall not include, except for purposes of Section 23A of the Federal Reserve Act, any organization that 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 16 organizations. Trust powers of national banks. During 1961 the Board granted to 60 national banks authority to exercise one or more trust powers under the provisions of Section ll(k) of the Federal Reserve Act. This number includes the grant of additional powers to 10 banks that previously had been granted certain trust powers. One national bank acquired additional trust powers as a result of consolidation. Trust powers of 23 national banks were terminated, 18 by consolidation or merger, 4 by voluntary liquidation, and 1 by voluntary surrender. At the end of 1961, 1,763 national banks held permits to exercise trust powers. Foreign branches of member banks. At the end of 1961, 8 member banks had in active operation a total of 135 branches in 35 foreign countries and overseas areas of the United States: 109 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS 3 national banks were operating 102 of these branches, and 5 State member banks were operating 33. The branches were located as follows: Latin America 62 Near East 3 Argentina 15 Lebanon 2 Bahamas 2 Saudi Arabia 1 Brazil 15 Chile 2 Far East 25 Colombia 4 Hong Kong 1 Ecuador 1 India 2 Jamaica 1 Japan 10 Mexico 4 Malaya 1 Panama 9 Okinawa 1 Paraguay 2 Pakistan 2 Peru 1 Philippines 5 Uruguay 2 Singapore 2 Venezuela 4 Thailand 1 Continental Europe. 6 U. S. Overseas Areas and Belgium 1 Trust Territories 23 France 3 Canal Zone 2 Germany 2 Guam 1 England 13 Puerto Rico 15 Truk Islands 1 Africa 3 Virgin Islands 4 Liberia 1 Nigeria 2 Total 135 Under the provisions of Section 25 of the Federal Reserve Act, the Board during 1961 approved 5 applications made by member banks for permission to establish branches in foreign countries and overseas areas of the United States. During the year 1 member bank opened branches in Karachi, Pakistan, and on the Island of Moen, Truk Islands. Another opened branches in Monrovia, Liberia; Lagos, Nigeria; and Chitre, Panama. A third opened 2 branches in San Juan, Puerto Rico, and branches in Brasilia and Campinas, Brazil; Mexico, D.F., Mexico; Colon and Panama City, Panama; Asuncion, Paraguay; and Karachi, Pakistan. The Board had authorized 11 of these branches before 1961. Two branches in 110 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Cristobal, Canal Zone, and a branch in Cairo, Egypt, were discontinued during 1961. Acceptance powers of member banks. Under the provisions of Section 13 of the Federal Reserve Act, the Board approved during the year applications of 4 member banks for 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 banking and financing corporations. At the end of 1961 there were 5 corporations operating under agreements with the Board pursuant to Section 25 of the Federal Reserve Act relating to investment by member banks in the stock of corporations engaged principally in international or foreign banking. A national member bank in the Virgin Islands, which is owned by a State member bank in Philadelphia and which operates as an "agreement" corporation, established branches in Frederiksted, St. Croix, Virgin Islands (United States), and Road Town, Tortola, British Virgin Islands, in 1961. During the year examiners for the Board examined the 4 "agreement" corporations with head offices in New York. Two of these each has an English fiduciary affiliate. Another has a branch in England, and owns the stock of 2 banks organized under the laws of, and operating in, Liberia and the Republic of South Africa and a trust company organized under the laws of the Bahamas. The fourth owns the stock of a bank organized under the laws of, and operating in, the Republic of South Africa and a trust company organized under the laws of the Bahamas. During 1961, under the provisions of Section 25 (a) of the Federal Reserve Act, the Board issued final permits to 4 corporations to engage in international or foreign banking or other international or foreign financial operations, and 1 new foreign banking corporation commenced operations. At the end of 1961 there were 11 corporations in active operation under Section 25(a); 5 are "banking corporations" and 6 are "financing corporations." Of these corporations, 9 have home offices in New 111 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS York City, 1 in Boston, and 1 in Philadelphia. Examiners for the Board of Governors examined all of the corporations during the year. Seven of these corporations have no subsidiaries or foreign branches. One has a Canadian subsidiary, a branch in France, and an English fiduciary affiliate that has a branch in Canada. Another operates branches in France, Germany, Guatemala, Hong Kong, Lebanon, Malaya, and Singapore; it also has an agency in Guatemala, and it owns substantially all of the stock of a bank organized under the laws of, and operating in, Italy. One has a subsidiary organized under the laws of Panama with headquarters in Bermuda. Another has an Argentine finance company subsidiary. Inter-Agency Bank Examination School. In 1961 the School for Examiners held 2 sessions and the School for Assistant Examiners held 4 sessions. 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 1952,1,726 men have attended the various sessions. This number includes representatives of the three Federal bank supervisory agencies; another 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, Virginia, and Washington; the Treasury Department of the Commonwealth of Puerto Rico; and two foreign countries. LEGISLATION ENACTED National bank real estate loans. The Housing Act of 1961, approved June 30, 1961 (Public Law 87-70), amended the third sentence of the first paragraph of Section 24 of the Federal Reserve Act so as to make certain limitations and restrictions on the making of real estate loans by national banks inapplicable 112 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM to farm housing loans that are insured under the provisions of Title V of the Housing Act of 1949. The Act also amended the fourth paragraph of Section 24, in order to assure authority of national banks to make FHAinsured home improvement loans under a new home improvement and rehabilitation loan program provided by that Act, notwithstanding the fact that the loans may not be secured by a first mortgage. Old Series Currency Adjustment Act. The Act of Congress approved June 30, 1961 (Public Law 87-66), cited as the "Old Series Currency Adjustment Act," authorized the Board of Governors, with the approval of the Secretary of the Treasury, to require the Federal Reserve Banks to pay to the Treasury a sum equal to the amount of old large-size Federal Reserve notes still outstanding. In accordance with the provisions of this legislation, and at the direction of the Board, the Federal Reserve Banks paid $36,419,050 to the Treasury on July 28, 1961, and reduced their liability for Federal Reserve notes by a corresponding amount. Federal Farm Mortgage Corporation bonds. The Act of Congress, approved October 4, 1961 (Public Law 87-353), which abolished the Federal Farm Mortgage Corporation, amended Sections 13 and 14 (b) of the Federal Reserve Act so as to eliminate reference to bonds of the Federal Farm Mortgage Corporation. PROPOSED AMENDMENTS TO THE BANK HOLDING COMPANY ACT The Board is required by Section 5(d) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) to include in its AN- NUAL REPORT to Congress any recommendations for changes in that Act that the Board thinks would be desirable. In a special report submitted to Congress on May 7, 1958 (published in the Federal Reserve Bulletin for July 1958), the Board recommended a number of amendments to the Bank Holding Company Act designed to improve its effectiveness, facilitate its administration, and clarify ambiguities. The Board believes that 113 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS the suggested amendments (with the exception of Recommendation 15, which was withdrawn in the Board's ANNUAL REPORT for 1960) merit early congressional consideration and legislative action. LITIGATION On June 27, 1961, the U.S. District Court for the District of Columbia granted the Board's motion to dismiss a suit brought by The Continental Bank and Trust Company, Salt Lake City, Utah (ANNUAL REPORT for 1960, pages 100-101), wherein the bank challenged the Board's statutory authority to require a member bank to maintain adequate capital. On June 28, 1961, the Board ordered a hearing to be held commencing September 6 at which the bank would be required to show cause why its membership in the System should not be forfeited for failure to comply with a Board order of July 18, 1960, requiring the bank to increase its capital in a stated amount within 6 months from the date of the Board's order. On July 6, 1961, the bank moved the District Court to alter or amend the judgment dismissing the bank's complaint, to vacate the judgment and order dismissing the complaint, and to allow the filing of an amended and supplemental complaint. This motion was denied in its entirety on August 5, 1961. On August 16 the bank noted an appeal in the U.S. Court of Appeals for the District of Columbia Circuit from the District Court's orders of June 27 and August 5. The Board has continued its show-cause hearing until 30 days after the Court of Appeals decision. Arguments on the appeal are expected early in 1962. In November 1961 oral arguments were held before the U.S. Court of Appeals for the Eighth Circuit on an appeal brought by Northwest Bancorporation, a registered bank holding company, from an order of the Board denying the Corporation's application under Section 3(a)(2) of the Bank Holding Company Act for Board approval to acquire 80 per cent or more of the outstanding shares of the First National Bank of Pipestone, 114 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Pipestone, Minnesota. No decision has been rendered in this case. A similar petition for appeal was filed in the U.S. Court of Appeals for the Seventh Circuit by The Marine Corporation, Milwaukee, Wisconsin, from a denial by the Board of the Corporation's application for approval of its acquisition of 80 per cent or more of the outstanding shares of Wisconsin State Bank of Milwaukee. Subsequent to the filing of the petition for court review, the Board, at the request of the Corporation, reconsidered its order of denial and subsequently approved the application. On October 24, 1961, pursuant to a motion filed in the Court of Appeals by the Corporation, the Court dismissed the petition for review. RESERVE BANK OPERATIONS Loan guarantees for defense production. Under 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 have been authorized to guarantee loans for defense production made by commercial banks and other private financing institutions. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies under the Board's Regulation V. During 1961 the agencies authorized the issuance of 13 guarantee agreements covering loans totaling $103 million. Loan authorizations outstanding on December 31, 1961, totaled $202 million, of which $157 million represented outstanding loans and $45 million additional credit available to borrowers. Of total loans outstanding, 74 per cent on the average was guaranteed. During the year approximately $103 million was disbursed on guaranteed loans, most of which are revolving credits. Authority for the V-loan program, unless extended, will terminate on June 30, 1962. Volume of operations. Table 10 on page 138 shows the volume of operations in the principal departments of the Federal Reserve Banks for 1958-61. Again in 1961 the volume of checks handled 115 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS passed the record peak of the previous year. Progress was made in the program for processing checks more efficiently on highspeed electronic equipment. By the end of the year six Federal Reserve Banks were using electronic equipment to process some of the check volume. The number of coins received and counted increased; on the other hand, fewer pieces of currency were handled during 1961 than in 1960. The volume of discounts and advances decreased substantially. As fiscal agents of the United States, in June 1961 the Reserve Banks began redeeming food stamps issued by the Department of Agriculture under its program for making food available to needy families. By the end of 1961, a total of 19 million food stamps had been redeemed. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1961 are shown in detail in Table 7 on pages 134-35, and a condensed historical statement is shown in Table 8 on pages 136-37. The table below summarizes the earnings and expenses and the distribution of net earnings for 1961 and 1960. EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS OF FEDERAL RESERVE BANKS, 1961 AND 1960 [In thousands of dollars] Item 1961 1960 Current earnings 941,648 1,103,385 161,275 153,882 Current expenses 780,373 949,503 Current net earnings 3 482 13,875 Net additions to current net earnings1 J( 783 855 963,378 :> Net earnings before payments to U.S. Treasury 25,570 23,949 Dividends paid 687,393 896,816 Paid U.S. Treasury (interest on F. R. notes)... 70,892 42,613 Transferred to surplus 1 Includes net profits on sales of U.S. Government securities of $3,466,000 in 1961 and $2,429,000 in 1960. 116 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM Current earnings of $942 million in 1961 were 15 per cent less than 1960, largely because earnings from U.S. Government securities were $147 million less than in the year before. The decline in these earnings reflected a lower average yield offset in part by an increase in average holdings. A lower discount rate in 1961 coupled with a decline in borrowings resulted in a $14 million decrease in earnings from discounts and advances. Current expenses of $161 million were about 5 per cent higher than in 1960. Current net earnings amounted to $780 million, a decrease of 18 per cent from 1960. After allowance for profit and loss additions and deductions from current net earnings, net earnings before dividends and payments to the U.S. Treasury amounted to $784 million, a decrease of 19 per cent from 1960. Statutory dividends to member banks amounted to $26 million, about $2 million more than in 1960. This rise 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 $687 million. The remaining $71 million of net earnings was added to Reserve Bank surplus accounts in order to bring them up to the level of subscribed capital. Expenses of the Federal Reserve Banks include costs of $626 for two regional meetings in connection with the Treasury Department Savings Bond program. Holdings of loans and securities. Average daily holdings of loans and securities during 1961 amounted to $27,517 million, $670 million more than during 1960. Average holdings of discounts and advances were considerably less in 1961 than in 1960; holdings of U.S. Government securities increased $1,022 million. Mainly because the 3 per cent discount rate established in August-September 1960 was continued throughout 1961, the average interest rate on discounts and advances was only 3.01 per cent in 1961 compared with 3.80 per cent in 1960. The average rate of interest earned on Government securities declined 117 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS substantially, from 4.11 to 3.42 per cent. The table below shows holdings, earnings, and average interest rates on loans and securities held by the Federal Reserve Banks during the past 3 years. RESERVE BANK EARNINGS ON LOANS AND SECURITIES, 1959-61 Discounts Accept- U.S. Item and year Total and ances Government advances securities In millions of dollars Average daily holdings:1 1959 27,036 811 32 26,193 I960 26,847 438 39 26,371 1961 27,517 83 41 27,393 Earnings: 1959 886 28 1.1 857 I960 1,103 17 1.4 1,085 1961 941 3 1.2 938 In per cent Average rate of interest: 1959 3.28 3.42 3.34 3.27 I960 4.11 3.80 3.60 4.11 1961 3.42 3.01 2.83 3.42 1 Based on holdings at opening of business. Foreign and international accounts. In 1961 gold and dollar assets held for foreign account at the Federal Reserve Banks increased $496 million. At the end of the year holdings amounted to $17,169 million, consisting of $10,215 million of earmarked gold, $6,006 million of U.S. Government securities (largely Treasury bills), $279 million in dollar deposits, $126 million of bankers' acceptances purchased through Federal Reserve Banks, and $543 million of miscellaneous assets. The latter item includes mainly dollar bonds issued by foreign countries and international organizations. Gold and dollar assets held for international organizations rose $9 million to $7,048 million. 118 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM New accounts were opened in 1961 for the monetary authorities of Kuwait, Liberia, and Saudi Arabia. Gold collateral loans of $8 million outstanding at the beginning of the year were repaid. New arrangements, including a stand-by commitment, amounted to $42 million, of which $15 million was outstanding at the end of the year. Loans on gold are made to foreign monetary authorities to help them meet dollar requirements of a clearly temporary nature. The Federal Reserve Bank of New York continued to act as depositary and fiscal agent for international organizations. As fiscal agent of the United States, the Bank continued to operate the Exchange Stabilization Fund pursuant to authorization and instructions of the Secretary of the Treasury. Also on behalf of the Treasury Department it continued to administer foreign assets control regulations pertaining to assets in the United States of Communist China and North Korea and their nationals, and transactions with those countries and their nationals. Bank premises. With the approval of the Board, property adjoining the Federal Reserve Branch in Louisville was acquired for future expansion. BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1961 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, 1961, and the related assessments and expenditures for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Our examination of the financial statements was made in accord- 119 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS ance 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 6, D. C. January 29, 1962 ASSETS, LIABILITIES AND FUND BALANCES—DECEMBER 31, 1961 ASSETS Cash, exclusive of $197,817 representing withheld taxes $ 544,048 Miscellaneous receivables and travel advances 10,445 Stockroom and cafeteria inventories, at cost 16,841 Total assets of operating fund 571,334 Property and equipment, at cost: Land and improvements 792,852 Building 3,966,501 Furniture and equipment 651,794 Total assets of property and equipment fund 5,411,147 Total assets 5,982,481 LIABILITIES AND FUND BALANCES Accounts payable and accrued expenses $ 234,624 Fund balances: Operating fund — Balance December 31, 1960 $ 603,271 Excess of expenditures over assessments for the year. 266,561 336,710 571,334 Property and equipment fund — Balance December 31, 1960 5,391,637 Expenditures for additions 39,307 Cost of assets disposed of less trade-in allowances... (19,797) 5,411,147 Total liabilities and fund balances 5,982,481 120 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM ASSESSMENTS AND EXPENDITURES YEAR ENDED DECEMBER 31, 1961 ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS: For Board expenses and additions to property and equipment $ 6,265,100 For expenditures made on behalf of the Federal Reserve Banks 5,684,984 Total assessments 11,950,084 EXPENDITURES: For printing, issue and redemption of Federal Reserve Notes, paid on behalf of the Federal Reserve Banks 5,684,984 For expenses of the Board: Salaries $4,325,164 Retirement and insurance contributions 718,848 Traveling expenses 321,463 Professional and contractual services: Economic surveys 185,791 Legal, consultant and audit fees 78,389 Other 49,037 Printing and binding, net 217,298 Telephone and telegraph 98,734 Postage and expressage 87,391 Equipment and other rentals 163,099 Operation of cafeteria, net 52,628 Heat, light and power 52,625 Stationery and office and other supplies 56,207 Repairs, maintenance and alterations 30,120 Books and subscriptions 19,907 Insurance 9,237 Miscellaneous, net 26,416 6,492,354 For property and equipment 39,307 Total expenditures 12,216,645 EXCESS OF EXPENDITURES OVER ASSESSMENTS FOR THE YEAR 266,561 The Board's expenses for 1961 include the following special items: (1) an expenditure of $132,000 for Quarterly Surveys of Consumer Buying Intentions; and (2) an expenditure of $52,196 incident to Civil and Defense Mobilization. 121 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS ORGANIZATION AND PROCEDURE Effective November 1, 1961, the Board of Governors amended its Rules of Procedure to add new provisions regarding procedures followed by the Board with respect to bank holding company and bank merger applications. Effective December 15, 1961, the Board's Rules of Organization and Rules of Procedure, first adopted in 1946 pursuant to the Administrative Procedure Act, were revised to make them more clear and specific. Effective January 12, 1962, the Rules of Procedure were amended in a minor respect. 122 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1. DETAILED STATEMENT OF CONDITION OF ALL FEDERAL RESERVE BANKS COMBINED, DECEMBER 31, 1961 [In thousands of dollars; amounts in boldface type are those shown in the Board's weekly statement in millions of dollars] ASSETS Gold certificates on hand: Held by Federal Reserve Banks 1,016,055 Held by Federal Reserve Agents 1,800,000 Gold certificates due from U.S. Treasury: Interdistrict Settlement Fund 6,053,588 Federal Reserve Agents' Fund 6,575,000 15,444,643 Redemption fund for Federal Reserve notes 1,170,495 Total gold certificate reserves 16,615,138 Federal Reserve notes of other Federal Reserve Banks. 503,117 Other cash: United States notes 28,167 Silver certificates 247,210 Standard silver dollars 11,041 National bank notes and Federal Reserve Bank notes. 698 Subsidiary silver, nickels, and cents 33,950 Total other cash 321,066 Discounts and advances secured by U.S. Govt. securities: Discounted for member banks 113,639 Discounted for others 113,639 Other discounts and advances: Discounted for member banks. 295 Foreign loans on gold 15,000 15,295 Total discounts and advances 128,934 Acceptances: Bought outright 48,515 Held under repurchase agreement 3,008 U.S. Government securities: Bought outright: Bills 3,193,086 Certificates 1,699,500 Notes 19,983,842 Bonds 3,845,721 Total bought outright 28,722,149 Held under repurchase agreement 159,000 Total U.S. Government securities 28,881,149 Total loans and securities.. 29,061,606 Cash items in process of collection: Transit items 6,681,682 Exchanges for clearing house... 354,978 Other cash items 445,359 Total cash items in process of collection. 7,482,019 Bank premises: Land 24,720 Buildings (including vaults) 103,998 Fixed machinery and equipment 55,140 Total buildings 159,138 Less depreciation allowances. 74,686 84,452 Total bank premises 109,172 Other assets: Due from foreign banks 14 Assets acquired—industrial loans. 25 Less valuation allowances... 25 Net. Reimbursable expenses and other items receivable. 3,085 Interest accrued 205,307 Premium on securities 26,147 Deferred charges 1,869 Real estate acquired for banking house purposes... 1,498 Suspense account 533 All other 875 Total other assets 239,328 Total assets 54,331,446 124 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1. DETAILED STATEMENT OF CONDITION OF ALL FEDERAL RESERVE BANKS COMBINED, DECEMBER 31, 1961 — Continued LIABILITIES Federal Reserve notes: Outstanding (issued to Federal Reserve Banks) 30,593,408 Less: Held by issuing Federal Reserve Banks 1,177,609 Forwarded for redemption 110,594 1,288,203 Federal Reserve notes, net (includes notes held by U.S. Treasury and by Federal Reserve Banks other than issuing Bank) 29,305,205 Deposits: Member bank reserves 17,387,089 U.S. Treasurer—general account 465,390 Foreign 278,859 Other deposits: Nonmember bank—clearing accounts 55,344 Officers' and certified checks 10,982 Reserves of corporations doing foreign banking or financing 24,577 International organizations 1 62,042 All other 166,965 Total other deposits 319,910 Total deposits 18,451,248 Deferred availability cash items 5,180,848 Other liabilities: Accrued dividends unpaid Unearned discount 168 Discount on securities 55,358 Sundry items payable 5,803 Suspense account 339 All other 7 Total other liabilities 61,675 Total liabilities 52,998,976 CAPITAL ACCOUNTS Capital paid in 444,157 Surplus 888,313 Other capital accounts 2 Total liabilities and capital accounts 54,331,446 Contingent liability on acceptances purchased for foreign correspondents 126,004 1 Includes Inter-American Development Bank, International Bank for Reconstruction and Development, International Finance Corporation, International Monetary Fund, etc. 2 During the year this item includes the net of earnings, expenses, profits, etc., which are closed out on December 31; see Table 7, pp. 134-135. 125 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2. STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK, DECEMBER 31, 1961 AND 1960 Ha millions of dollars unless otherwise indicated] Total Boston New York Philadelphia Cleveland Richmond Item 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 ASSETS Gold certificate account 15,445 16,413 936 833 3,479 3,819 907 1,056 1,306 1,357 1,088 1,035 1,170 1,066 70 62 279 255 71 66 105 92 95 81 Total gold certificate reserves 16,615 17,479 1,006 895 3,758 4,074 978 1,122 1,411 1,449 1,183 1,116 ON Federal Reserve notes of other Banks 503 525 35 53 108 118 44 43 35 31 AX 43 Other cash 320 363 20 25 55 59 12 11 26 33 21 22 Discounts and advances: Secured by U.S. Govt. securities 115 25 °l C1) 102 °l 1 4 1 Other 15 8 4 1 0) 1 1 Acceptances: Bought outright . 48 54 48 54 Held under repurchase agreement 3 20 3 20 U.S. Government securities: Bought outright 28,722 26,984 1,351 1,450 7,103 6,731 1,659 1,545 2,435 2,318 1,862 1,708 Held under repurchase agreement 159 400 159 400 29,062 27,491 1,352 1,451 7,419 7,207 1,661 1,549 2,437 2,319 1,863 1,709 Cash items in process of collection 7,481 6,809 569 483 1,644 1,457 439 412 581 556 514 482 111 108 4 4 9 9 4 4 8 9 6 6 Other assets 2 237 209 11 11 57 52 14 12 21 18 15 13 Total assets .... 54,329 52,984 2,997 2,922 13,050 12,976 3,152 3,153 4,519 4,415 3,643 3,391 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes . 29,305 28,449 1,704 1,625 6,751 6,663 1,890 1,867 2,625 2,575 2,380 2,185 Deposits: Member bank reserves 17,387 17,080 789 778 4,517 4,582 829 832 1,301 1,254 760 727 U.S. Treasurer—general account 465 485 16 36 129 72 11 27 37 38 50 24 Foreign 279 217 13 11 3 88 3 64 16 12 25 20 12 10 Other 320 554 3 4 229 397 3 6 6 6 6 Total deposits 18,451 18,336 821 829 4,963 5,115 859 877 1,367 1,318 828 767 Deferred availability cash items 5,181 4,941 406 406 956 844 323 335 398 406 371 381 Other liabilities 59 32 3 2 16 10 3 2 4 3 4 2 Total liabilities 52,996 51,758 2,934 2,862 12,686 12,632 3,075 3,081 4,394 4,302 3,583 3,335 CAPITAL ACCOUNTS 445 409 21 20 121 115 26 24 42 38 20 19 Surplus 888 817 42 40 243 229 51 48 83 75 40 37 Other capital accounts Total liabilities and capital accounts 54,329 52,984 2,997 2,922 13,050 12,976 3,152 3,153 4,519 4,415 3,643 3,391 Ratio of gold certificate reserves to deposit and F R» note liabilities combined • 34.8% 37.4% 39.8% 36.5% 32.1% 34.6% 35.6% 40.9% 35.3% 37.2% 36.9% 37.8% to Contingent liability on acceptances purchased for foreign correspondents 126 230 6 11 4 36 4 64 7 14 12 22 6 10 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 30,593 29,730 1,768 1,692 7,046 6,993 1,962 1,937 2,789 2,722 2,460 2,269 Less held by issuing Bank, and forwarded for redemption 1,288 1,281 64 67 295 330 72 70 164 147 80 84 Federal Reserve notes, net 5 29,305 28,449 1,704 1,625 6,751 6,663 1,890 1,867 2,625 2,575 2,380 2,185 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 8,375 9,385 585 500 1,600 2,000 570 650 770 920 755 700 10 19 1 4 U.S. Government securities 22,925 21,065 1,235 1,250 5,600 5,100 1,500 1,325 2,050 1,830 1,715 1,590 Total collateral 31,310 30,469 1,820 1,750 7,200 7,100 2,071 1,979 2,820 2,750 2,470 2,290 1 Less than $500,000. 2 Includes amounts due from foreign banks, in which all Reserve Banks participate: $13,652 on Dec. 31, 1961, and $14,074 on Dec. 31, 1960. 3 After deducting $191 million participations of other Federal Reserve Banks on Dec. 31, 1961, and $153 million on Dec. 31, 1960. 4 After deducting $90 million participations of other Federal Reserve Banks on Dec. 31, 1961, and $166 million on Dec. 31, 1960. 5 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

2. STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK, DECEMBER 31, 1961 AND 1960 — Continued [In millions of dollars unless otherwise indicated] Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Item 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 ASSETS Gold certificate account 863 918 2,565 2,790 631 675 346 344 665 776 587 731 2,072 2,079 Redemption fund for Federal Reserve notes.. 70 64 212 189 48 47 27 26 51 49 35 33 107 102 to Total gold certificate reserves 933 982 2,777 2,979 679 722 373 370 716 825 622 764 2,179 2,181 00 Federal Reserve notes of other Banks 57 60 39 40 22 22 18 20 17 20 29 24 58 51 26 28 58 64 18 23 9 8 11 16 15 16 49 58 Discounts and advances: Secured by U.S. Govt. securities 1 2 2 2 7 2 7 8 8 Other 1 C1) 2 1 C1) 0) 0) 0) 1 1 1 2 1 Acceptances: U.S. Government securities: 1,579 1,480 4,907 4,618 1,166 1,091 616 626 1,316 1,158 1,167 1,088 3,561 3,171 Total loans and securities 1,581 1,482 4,910 4,621 1,168 1,098 616 628 1,324 1,167 1,168 1,088 3,563 3,172 Cash items in process of collection 531 517 1,239 1,112 306 329 200 181 342 329 296 259 820 692 Bank premises 14 11 24 22 7 7 5 5 6 5 13 14 11 12 Other assets 2 14 12 40 35 10 8 5 5 11 9 10 9 29 25 Total assets 3,156 3,092 9,087 ! 8,873 2,210 2,209 1,226 1,217 2,427 2,371 2,153 2,174 6,709 6,191 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LIABILITIES Federal Reserve notes 1,717 1,641 5,362 5,302 1,269 1,232 579 595 1,193 1,153 869 836 2,966 2,775 Deposits: Member bank, reserves. 892 906 2,540 2,495 628 651 443 419 872 863 932 971 2,884 2,602 12 32 66 63 18 27 16 23 37 30 23 54 50 59 Foreign 14 11 37 30 9 7 6 5 12 9 15 12 32 26 Other 5 4 13 13 2 47 1 2 5 4 3 3 46 62 923 953 2,656 2,601 657 732 466 449 926 906 973 1,040 3,012 2,749 Deferred availability cash items 442 431 874 791 235 203 148 144 250 259 234 227 544 514 Other liabilities 3 1 9 5 3 1 3 1 2 1 2 1 7 3 Total liabilities 3,085 3,026 8,901 8,699 2,164 2,168 1,196 1,189 2,371 2,319 2,078 2,104 6,529 6,041 CAPITAL ACCOUNTS Capital paid in 24 22 62 58 15 14 10 9 19 17 25 23 60 50 Surplus.. .... . .. 47 44 124 116 31 27 20 19 37 35 50 47 120 100 Total liabilities and capital accounts. 3,156 3,092 9,087 8,873 2,210 2,209 1,226 1,217 2,427 2,371 2,153 2,174 6,709 6,191 Ratio of gold certificate reserves to deposit to fv and F.R. note liabilities combined 35.3% 37.9% 34.6% 37.7% 35.3% 36.8% 35.7% 35.5% 33.8% 40.1% 33.8% 40.7% 36.5% 39.5% Contingent liability on acceptances pur- VO chased for foreign correspondents 7 12 18 32 4 8 3 5 5 10 7 13 15 29 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding.. 1,792 1,718 5,522 5,452 1,333 1,279 659 674 1,227 1,185 918 882 3,117 2,927 Less held by issuing Bank, and forwarded for redemption . 75 77 160 150 64 47 80 79 34 32 49 46 151 152 Federal Reserve notes, net 3 1,717 1,641 5,362 5,302 1,269 1,232 579 595 1,193 1,153 869 836 2,966 2,775.4 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificate account 475 550 1,500 1,800 400 410 160 180 325 300 235 275 1,000 1,100 2 7 7 8 U.S. Government securities 1,400 1,200 4,100 3,800 960 935 510 510 950 900 705 625 2,200 2,000 Total collateral 1,875 1,750 5,600 5,600 1,362 1,352 670 690 I 1,282 1,208 940 900 3,200 3,100 1 Less than $500,000. 2 Includes amounts due from foreign banks, in which all Reserve Banks participate: $13,652 on Dec. 31, 1961, and $14,074 on Dec. 31, 1960. 3 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

HOLDINGS OF U.S. GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, DECEMBER 31, 1961, 1960, AND 1959 [In thousands of dollars] Increase or decrease (—) Rate of December 31 during: Type of issue interest and date (per cent) 1961 1960 1959 1961 1960 Treasury bonds: 1959-62 June. 395,849 319,849 319,849 76,000 1959-62 Dec.. 375,765 693,765 693,765 -318,000 1961 Sept.... 16,500 -16,500 16,500 1961 Nov 42,800 -42,800 42,800 1962-67 81,110 56,610 56,610 24,500 1963 Aug.... 16,500 16,500 1963-68 143,085 122,585 '122,585 20,500 1964 Feb 88,250 88,250 1964-69 June. 261,340 203,890 203,890 57,450 1964-69 Dec.. 315,199 266,999 266,999 48,200 1965 Feb 234,600 20,300 20,300 214,300 1965-70 561,540 521,490 521,490 40,050 1966-71 140,007 132,707 132,707 7,300 1966 May.... 113,500 113,500 1966 Aug.... 17,850 7,000 7,000 10,850 1966 Nov 109,600 109,600 1967-72 June. 52,766 49,266 49,266 3,500 1967-72 Sept.. 20,052 2,552 2,552 17,500 1967 Nov.... 496,450 496,450 1967-72 Dec.. 76,958 58,758 58,758 18,200 1968 May.... 210,200 210,200 1969 Oct 18,450 18,450 1974 Nov 31,400 31,400 1975-85 4,250 4,250 1978-83 500 500 1980 Feb 7,600 7,600 1980 Nov 14,900 14,900 1985 May 8,800 5,200 5,200 3,600 1990 Feb 41,450 22,800 22,800 18,650 1998 Nov 7,750 7,750 Total. 3,845,721 2,543,071 2,483,771 1,302,650 59,300 Treasury notes: Aug. 15, 1960—C. 5,500,000 -5,500,000 May 15, 1961—B. 2,815,565 2,857,565 -2,815,565 -42,000 Aug. 1, 1961—A.. 15,000 -15,000 15,000 Oct. 1, 1961—EO. 5,000 -5,000 5,000 Feb. 15, 1962—A. 13,000 13,000 Feb. 15, 1962—D. 11,500 11,500 Feb. 15, 1962—F. 4,756,982 4,993,000 -236,018 4,993,000 Apr. 1, 1962—EA. 25,000 25,000 May 15, 1962—E. a 139,300 139,300 Aug. 15, 1962—G. 3,641,493 3,641,493 Nov. 15, 1962—C. 10,600 10,600 N Fe o b. v . 1 1 5 5 , , 1 1 9 9 6 6 3 2 — — A H . 2 W 5 A /s 3, 1 2 4 2 2 8 , ,9 5 5 0 0 0 10,000 10,000 3, 1 2 3 2 2 8 , ,9 5 5 0 0 0 Feb. 15, 1963—E. 43,500 43,500 May 15, 1963—B. 4 4 30,500 30,500 May 15, 1963—D. 314 743,600 743,600 Nov. 15, 1963—C. 4% 15,584 15,584 May 15, 1964—A. 4% 2,777,383 2,642,733 2,642,733 134,650 A M u a g y . 1 1 5 5 , , 1 1 9 9 6 6 4 4 — — D B. . iy4 20 9 1 1 , , 5 5 0 5 0 0 20 9 1 1 , , 5 5 0 5 0 0 Aug. 15, 1964—E. 3M 1,700,900 1,700,900 Nov. 15, 1964—C. 4% 2,266,400 2,000,000 266,400 2,000,000 May 15, 1965—A. 143,600 143,600 Total 19,983,842 12,481,298 I 11,010,298 7,502,544 1,471,000 130 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

HOLDINGS OF U.S. GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, DECEMBER 31, 1961, 1960, AND 1959 — Continued [In thousands of dollars] Increase or decrease (—) Rate of December 31 during: Type of issue interest and date (per cent) 1961 1960 1959 1961 1960 Certificates: Feb. 15, 1960 334 5,506,993 -5,506,993 Nov. 15, 1960 4*4 5,000,000 -5,000,000 Feb. 15, 1961 4% "3,58*2,993* -3,'582,993* 3,582,993 May 15, 1961 4% 34,500 -34,500 34,500 Aug. 1, 1961 5,442,250 -5,442,250 5,442,250 May 15, 1962 3 8 1,699,500 1 699 500 Total 1,699,500 9,059,743 10,506,993 -7,360,243 -1,447,250 Treasury bills: Tax anticipation.... 174,500 65,623 47,000 108,877 18,623 Other, due: Within 3 mos . . 2,158,281 2,035,400 2,162,000 122,881 -126,600 3-6 mos 692,305 652,350 380,365 39,955 271,985 168,000 146,800 16,400 21,200 130,400 Total 3,193,086 2,900,173 2,605,765 292,913 294,408 Repurchase agreements. 159,000 400,000 41,500 -241,000 358,500 Total holdings 28,881,149 27,384,285 26,648,327 1,496,864 735,958 Maturing: Within 90 days 7,196,763 6,069,016 7,728,493 1,127,747 -1,659,477 10,453,262 9,185,765 10,925,765 1,267,497 -1,740,000 Over 1 year to 5 years. 8,737,317 10,679,647 6,523,912 -1,942,330 4,155,735 Over 5 yrs. to 10 yrs. , 2,227,381 1,178,574 677,384 1,048,807 501,190 Over 10 years 266,426 271,283 792,773 -4,857 -521,490 4. FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-61 * [Irl millions of dollars] Date Amount Date Amount Date Amount Date Amount 1953—Mar. 18 110 1953—June 11 358 1954—Jan. 14 22 1955 ) 19 104 12 506 15 169 1956 >• no transactions 20 189 13 506 16 169 1957 ) 21 189 14* 506 17* 169 22* 189 15 999 18 323 23 333 16 1,172 19 424 24 186 17 823 20 323 25 63 18 364 21 306 1958—Mar. 17 143 26 49 19 992 22 283 18 207 June 5 196 20 992 23 283 6 196 21* 992 24* 283 7* 196 22 908 25 203 8 374 23 608 26 3 1959 ) 9 491 24 296 Mar. 15 134 1960 >• no transactions 10 451 16 190 1961 ) • 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 *4 per cent through Dec. 3, 1957, and V4 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. 131 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

5. OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM DURING 1961 [In millions of dollars] Outright transactions in U.S. Government securities by maturity Total Treasury bills Others within 1 year Month Exch., Gross Gross Gross maturity pur- Gross Redemp- pur- Gross Redemp- pur- Gross shift, or chases sales tions chases sales tions chases sales redemp. January.... 7 421 7 383 32 February... 284 187 166 94 13 83 1,415 March 447 360 67 71 274 67 3 86 April 1,283 1,149 50 842 637 50 512 May 814 395 305 345 166 10 229 -947 June 772 405 563 374 52 31 320 July 771 505 330 223 505 330 123 August 1,247 634 104 1,001 465 104 40 170 -1,179 September.. 1,147 788 268 986 418 268 66 300 October 929 276 173 700 244 173 100 32 November.. 1,150 194 13 697 184 13 169 3,234 December.. 254 742 193 742 35 376 Total.... 9,105 6,057 1,310 5,794 4,486 1,015 600 1,474 3,218 1-5 years 5-10 years Over 10 years Exch. Exch. Exch. Gross Gross or Gross Gross or Gross Gross or pur- sales maturity pur- sales maturity pur- sales maturity chases shifts chases shifts chases shifts January 7 February... 95 10 -1,415 10 March 312 -350 61 483 -133 April 298 130 13 May 210 657 259 — 5 June 118 -320 25 15 July 306 77 42 August 146 1,193 48 -14 12 September.. 64 70 22 10 October 108 13 9 November.. 244 11 -3,159 12 -75 29 December.. 22 -376 4 Total.... 1,923 97 —3,769 660 389 128 -133 Repurchase agreements (U.S. Govt. securities) Bankers' acceptances | Net change Net change in U.S. in U.S. Govt. Gross Gross Govt. Net Net securities and purchases sales securities outright repurchases acceptances January.... 161 561 -814 -8 -20 -842 February... 1,246 1,246 97 97 March 97 97 21 21 April 285 285 84 83 May 314 313 115 -8 107 June 130 131 366 9 364 July 301 67 169 -3 165 August 404 637 275 1 in S N D O e e c o p t c v o t e e e b m m m er b b b e e e r r r . . . . . . 4 7 3 1 2 8 5 1 9 0 8 6 4 7 1 1 4 8 0 9 0 0 5 9 -3 4 9 1 2 6 4 0 9 9 3 2 6 5 3 1 3 -3 4 9 1 2 7 4 0 1 2 7 3 Total.... 4,620 4,861 1,497 g -17 1,475 NOTE.—Sales, redemptions, and negative figures reduce System holdings; all other figures increase such holdings. Details may not add to totals because of rounding. 132 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES, DECEMBER 31, 1961 [In dollars] Cost Federal Reserve Bank Net or branch Buildings Fixed ma- book value Land (including chinery and Total vaults) i equipment Boston 1,628,132 5,929,169 2,966,116 10,523,417 3,554,801 New York 5,215,656 12,183,528 4,886,521 22,285,705 4,378,612 Annex 592,679 1,451,569 673,458 2,717,706 752,253 Buffalo 406,069 2,555,197 1,565,400 4,526,666 3,767,100 Philadelphia 1,884,357 4,839,506 2,154,452 8,878,315 3,520,682 Cleveland 1,295,490 6,605,285 3,341,853 11,242,628 1,964,529 Cincinnati 400,891 1,288,700 1,437,194 3,126,785 1,296,885 Pittsburgh 1,656,418 2,954,916 2,431,261 7,042,595 4,752,922 Richmond 469,944 4,164,663 2,428,966 7,063,573 2,483,613 Baltimore 250,487 2,009,381 1,068,445 3,328,313 1,865,245 Charlotte 117,479 1,069,026 625,121 1,811,626 1,241,043 Atlanta 633,387 6,401,861 379,315 7,414,563 5,748,666 Annex 93,931 137,100 103,867 334,898 272,602 Birmingham..., 338,917 1,982,184 948,236 3,269,337 2,739,919 Jacksonville.... 164,004 1,712,909 694,291 2,571,204 1,652,500 Nashville 592,342 1,474,678 1,016,213 3,083,233 2,691,423 New Orleans... 277,078 762,456 265,700 1,305,234 360,737 Chicago 6,275,467 17,984,278 8,424,105 32,683,850 21,185,677 Detroit 1,147,734 2,844,847 1,226,576 5,219,157 3,064,279 St. Louis 1,675,780 3,171,719 2,154,782 7,002,281 1,884,227 Little Rock 241,105 391,611 206,575 839,291 432,246 Louisville 700,075 2,859,819 1,003,708 4,563,602 4,018,512 Memphis 128,542 287,469 167,755 583,766 227,793 Minneapolis 600,521 4,689,718 2,688,921 7,979,160 4,561,791 Helena 15,709 126,401 62,977 205,087 67,951 Kansas City 545,764 3,521,181 1,316,319 5,383,264 1,202,327 Denver 592,271 523,041 86,910 1,202,222 743,046 Oklahoma City 2 563,025 1,893,920 97,589 2,554,534 2,116,432 Omaha , 445,663 1,491,117 723,843 2,660,623 2,207,666 Dallas 713,302 4,639,660 3,570,804 8,923,766 7,590,696 El Paso 262,477 787,728 393,301 1,443,506 1,223,168 Houston 695,615 1,408,574 744,758 2,848,947 2,464,020 San Antonio.. 448,596 1,400,390 570,847 2,419,833 1,994,628 San Francisco.. 476,768 3,783,530 1,458,028 5,718,326 996,311 Annex 247,201 124,000 30,000 401,201 363,761 Los Angeles... 777,614 4,103,844 1,592,708 6,474,166 3,765,129 Portland 207,380 1,678,512 649,432 2,535,324 1,527,810 Salt Lake City. 480,222 1,878,238 707,575 3,066,035 2,741,068 Seattle 274,772 1,891,564 661,987 2,828,323 1,750,195 Total... 33,532,864 119,003,289 55,525,909 208,062,062 109,172,265 OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES Richmond . 157,953 157,953 157,953 New Orleans 842,829 842,829 842,829 Kansas City 3 396,219 396,219 396,219 Houston 78,812 317,336 112,111 508,259 101,416 Total 1,475,813 317,336 112,111 1,905,260 1,498,417 1 May include expenditures in construction account pending allocation to appropriate accounts. 2 Includes cost of building on site of addition. 3 Includes cost of building on property. 133 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

7. EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1961 [In dollars] New Phila- Cleve- Rich- Minne- Kansas San Item Total Boston York delphia land mond Atlanta Chicago St. Louis apolis City Dallas Francisco CURRENT EARNINGS Discounts and advances 2,501,911 119,549 541,164 155,499 167,325 152,703i 181,830 608,563 110,934 51,9121 259,677 62,759 89,996 Acceptances 1,158,715 1,158,715 U.S. Govt. securities... 937,615,388 49,919,319 233,462,107 53,954,44179,646,880 59,258,665 51,437,412;160,030,217 37,728,445 21,648,273 40,664,794 37,950,208111,914,627 All other 372,156 20,532 80,349 24,012 32,568 17,151 28,831 46,602 13,140 10,893 43,007 19,095 35,976 Total 941,648,170 50,059,400 235,242,335 54,133,952 79,846,773 59,428,519 51,648,073 160,685,382 37,852,519 21,711,078 40,967,478 38,032,062 112,040,599 CURRENT EXPENSES Salaries: Officers 6,770,735 385,419 1,260,376 473,974 580,607 545,206 518,148 610,759 556,902 369,711 501,305 433,354 534,974 Employees 90,399,810 5,550,114 21,032,410 4,729,101 7,630,557 5,867,073 5,444,152 13,441,879 4,976,857 2,975,110 4,732,344 3,941,885 10,078,328 Fees—Directors and others 581,918 22,575 96,432 27,780 48,787 53,440 76,721 44,761 29,926 26,772 67,464 38,702 48,558 Retirement contributions 11,528,404 694,447 2,539,754 614,910 975,650 774,239 737,652 1,699,893 654,728 384,392 647,005 548,008 1,257,726 Traveling expenses 2,013,258 123,328 330,530 96,560 185,617 143,174 160,791 234,931 124,705 101,236 124,258 122,764 265,364 Postage and expressage 19,091,805 1,659,060 2,654,200 944,001 1,528,235 1,747,008 1,642,814 2,628,666 1,009,214 693,614 1,216,365 956,680 2,411,948 Telephone and telegraph , 1,637,677 86,986 350,389 75,789 124,206 114,641 171,246 189,648 90,811 58,220 99,657 114,037 162,047 Printing, stationery, and supplies, 7,215,682 540,717 1,398,485 415,575 506,146 497,895 522,134 1,168,938 448,656 236,608 453,208 346,393 680,927 Insurance 2,120,408 125,391 413,268 85,854 183,885 180,347 155,610 293,998 129,770 95,214 143,290 102,790 210,991 Taxes on real estate 4,670,609 648,870 832,771 153,968 400,731 195,188 259,113 736,081 176,031 323,879 194,978 265,621 483,378 Depreciation (building) , 6,303,861 413,761 488,050 270,538 920,652 544,024 425,171 1,257,636 239,226 344,193 168,853 692,698 539,059 Light, heat, power, and water.., 1,814,544 118,057 256,131 101,466 169,349 157,116 110,599 290,517 136,099 87,923 130,535 123,131 133,621 Repairs and alterations , 1,404,673 37,124 147,422 56,629 144,798 204,608 55,223 322,733 58,174 40,184 71,866 162,425 103,487 Rent 124,713 4,330 6,954 18,323 27,998 2,744 3,038 48,377 1,557 163 3,926 2,120 5,183 Furniture and equipment: Purchases 2,816,139 129,767 709,805 354,072 135,857 132,834 200,116 551,512 97,281 122,053 85,233 115,102 182,507 Rentals 7,162,138 579,686 847,909 505,192 514,642 445,756 473,693 1,273,963 370,426 224,840 468,261 341,159 1,116,611 All other 2,307,012 91,764 496,116 71,584 378,686 92,262 110,127 438,566 77,778 92,845 121,425 169,321 166,538 Inter-Bank expenses 45,411 -623,148 53,369 86,098 -11,677 52,884 130,906 33,369 21,902 42,098 54,779 114,010 Subtotal 167,963,38711,256,807 33,237,854 9,048,685 14,542,50111,685,87811,119,232 25,363,764 9,211,510 6,198,859 9,272,071 8,530,969 18,495,257 F.R. currency 6,755,756 309,893 1,121,829 623,455 631,211 697,279 781,383 1,040,334 321,713 108,016 216,028 412,767 491,848 Assessment for expenses of Board of Governors 6,265,100 308,300 1,749,500 364,300 579,200 287,400 336,100 886,200 210,900 144,000 266,500 359,200 773,500 Total. 180,984,243 11,875,000 36,109,18310,036,44015,752,91212,670,55712,236,715 27,290,298 9,744,123 6,450,875 9,754,599|9,302,936 19,760,605 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Less reimbursement for certain fiscal agency and other expenses 19,709,668 1,089,896 3,333,099 929,849 1,920,194 1,104,336 1,392,877 3,726,826 1,230,975 655,147 1,470,632 935,083 1,920,754 161,274,575 10,785,104 32,776,084 9,106,591 13,832,71811,566,22110,843,838 23,563,472 8,513,148 5,795,728 8,283,967 8,367,853 17,839,851 PROFIT AND LOSS Current net earnings 780,373,596 39,274,296 202,466,251 45,027,360 66,014,056 47,862,298 40,804,234 137,121,910 29,339,37215,915,350 32,683,51129,664,209 94,200,748 Additions to current net earnings: Profits on sales of U.S. Govt. securities (net) 3,465,859 184,956 859,086 199,723 294,917 219,354 190,421 592,468 139,634 80,994 150,470 140,482 413,354 All other 56,738 842 10,733 566 1,157 515 83 40,031 1,026 175 1,076 94 440 Total additions. 3,522,598 185,798 869,819 200,289 296,075 219,869 190,504 632,499 140,659 81,169 151,547 140,576 413,794 Deductions from current net earnings 40,969 2,835 3,827 727 4,355 3,595 929 2,851 3,283 1,921 1,047 1,979 13,620 >mA Net additions. 3,481,627 182,963 865,992 199,562 291,720 216,274 189,575 629,648 137,376 79,248 150,499 138,597 400,173 Net earnings before payments to U.S. Treasury 783,855,223 39,457,259 203,332,243 45,226,922 66,305,776 48,078,572 40,993,809137,751,558 29,476,74815,994,598 32,834,010 29,802,806 94,600,921 Dividends paid 25,569,541 1,236,205 7,043,136 1,472,374 2,360,707 1,168,329 1,392,341 3,613,523 862,261 582,284 1,081,952 1,454,690 3,301,738 Paid U.S. Treasury (interest on F.R. notes) 687,393,382 36,439,253182,395,607 40,136,348 56,273,169 44,327,343 35,824,668126,275,435 25,741,88814,005,314 29,207,957 25,547,016 71,219,383 Transferred to surplus. 70,892,300 1,781,800 13,893,500 3,618,200 7,671,900 2,582,900 3,776,800 7,862,600 2,872,600 1,407,000 2,544,100 2,801,100 20,079,800 Surplus, January 1.... 817,420,900 40,330,200 229,102,600 47,663,400 75,600,000 37,558,500 43,676,800115,652,600 27,530,800 18,825,500 34,839,800 47,007,800 99,632,900 Surplus, December 31. 888,313,20042,112,000 242,996,100 51,281,600 83,271,900 40,141,400 47,453,600123,515,200 30,403,400 20,232,500 37,383,900 49,808,900 119,712,700 NOTE.—Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8. EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-61 [In dollars] 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. Treasury 1 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 ON 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 1960 1,103,385,257 153,882,275 963,377,684 23,948,225 896,816,359 42,613,100 1961 941,648,170 161,274,575 783,855,223 25,569,541 687,393,382 70,892,300 Total 1914-61.. 10,221,927,008 2,597,099,964 7,683,310,004 502,723,665 149,138,300 2,188,893 6,012,277,401 -3,657 21,016,985,402 Aggregate for each Federal Reserve Bank, 1914-61: Boston 608,370,143 183,571,083 430,143,686 30,778,538 7,111,395 280,843 339,630,670 135,411 52,206,825 New York 2,601,434,856 570,996,338 2,049,910,093 162,330,383 68,006,262 369,116 1,539,385,073 -433,413 280,252,671 Philadelphia 648,244,393 168,953,713 486,864,340 39,184,363 5,558,901 722,406 375,496,186 290,661 65,611,822 Cleveland 908,736,724 237,056,661 675,230,169 49,154,258 4,842,447 82,930 524,654,747 -9,906 96,505,693 Richmond 623,362,263 173,341,913 454,039,429 21,819,192 6,200,189 172,493 379,897,863 -71,517 46,021,208 Atlanta 536,329,933 150,316,076 387,013,778 20,631,254 8,950,561 79,264 304,627,066 5,491 52,720,140 Chicago 1,643,978,923 365,698,075 1,282,632,279 62,787,515 25,313,526 151,045 1,055,524,556 11,682 138,843,954 St. Louis 452,145,790 142,694,892 310,272,232 17,287,476 2,755,629 7,464 254,725,151 -26,515 35,523,028 Minneapolis 269,943,171 89,198,204 183,137,193 11,739,315 5,202,900 55,615 141,964,780 64,874 24,109,713 Kansas City 461,683,984 139,082,216 324,668,173 18,293,416 6,939,100 64,213 257,856,267 -8,674 41,523,850 Dallas 413,007,238 120,222,819 294,946,582 21,133,927 560,049 102,083 219,008,808 55,337 54,086,378 San Francisco.... 1,054,689,591 255,967,976 804,452,045 47,584,023 7,697,341 101,421 619,506,233 -17,089 129,580,117 Total 10,221,927,008 2,597,099,964 7,683,310,004 502,723,665 149,138,300 2,188,893 6,012,277,401 -3,657 1,016,985,402 * Current earnings less current expenses, plus and minus profit and loss additions $500,000 for charge-off on bank premises, and $3,657 net upon elimination of surplus and deductions. (Sec. 13b), and was increased by $11,131,013 transferred from reserves for contin- 2 The $1,016,985,402 transferred to surplus was reduced by direct charges of gencies, leaving a balance of $888,313,200 on Dec. 31, 1961. $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation, NOTE.—Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS, DECEMBER 31, 1961 President Other officers Employees 1 Total Federal Reserve Bank (including branches) Annual Num- Annual Num- Annual Num- Annual salary ber salaries ber salaries ber salaries Boston $30,000 24 $ 350,500 1,361 $ 5,539,265 1,386 $ 5,919,765 New York 60,000 65 1,193,500 3,992 21,206,210 4,058 22,459,710 Philadelphia 35,000 29 422,500 1,003 4,509,226 1,033 4,966,726 Cleveland 35,000 35 518,000 1,507 7,520,344 1,543 8,073,344 Richmond 35,000 34 487,000 1,367 5,986,820 1,402 6,508,820 Atlanta 35,000 37 483,100 1,323 5,324,495 1,361 5,842,595 Chicago 50,000 39 567,000 2,947 13,058,168 2,987 13,675,168 St. Louis 35,000 35 513,200 1,121 4,759,667 1,157 5,307,867 Minneapolis 35,000 23 329,750 684 2,865,933 708 3,230,683 Kansas City 30,000 34 467,700 1,106 4,604,110 1,141 5,101,810 Dallas 35,000 28 382,600 956 3,931,786 985 4,349,386 San Francisco.... 30,000 39 496,000 2,222 9,547,632 2,262 10,073,632 Total $445,000 422 $6,210,850 19,589 $88,853,656 20,023 $95,509,506 1 Includes 940 part-time employees. 10. VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1958-61 [Number in thousands; amounts in thousands of dollars] Operation 1961 1960 1959 1958 NUMBER OF PIECES HANDLED i Discounts and advances 7 19 26 14 Currency received and counted.... 4,618,346 4,746,665 4,631,081 4,547,668 Coin received and counted 10,276,927 9,767,544 9,929,912 9,574,474 Checks handled: U.S. Govt. checks 430,829 407,333 393,860 388,541 Postal money orders 259,209 270,307 279,939 295,350 All other 2 3,630,936 3,419,093 3,257,839 3,085,185 Collection items handled: 16,431 16,357 13,915 13,564 All other 23,144 21,513 20,853 20,429 Issues, redemptions, and exchanges of U.S. Govt. securities 192,366 197,825 196,063 193,665 Transfers of funds 3,038 2,918 2,695 2,426 AMOUNTS HANDLED Discounts and advances 14,657,545 58,057,685 105,058,505 41,306,072 Currency received and counted.... 30,670,620 31,553,482 30,730,461 29,596,570 Coin received and counted 1,133,470 1,095,870 1,02:2,660 956,235 Checks handled: U.S. Govt. checks 115,009,063 105,212,842 106,724,118 99,942,372 Postal money orders 4,860,182 5,029,890 5,078,641 5,297,341 All other 2 1,198,461,186 1,154,120,907 1,130,235,860 1,044,984,066 Collection items handled: U.S. Govt. coupons paid 4,717,259 4,798,446 3,866,402 3,695,458 All other 6,553,424 5,793,218 5,838,199 5,663,684 Issues, redemptions, and exchanges of U.S. Govt. securities 560,263,435 527,444,784 545,489,154 526,037,271 Transfers of funds 2,706,716,007 2,428,083,100 1,882,069,626 1,643,532,069 1 Packaged items handled as a single item are counted as one piece. 2 Exclusive of checks drawn on the Federal Reserve Banks. 138 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

11. FEDERAL RESERVE BANK DISCOUNT RATES, DECEMBER 31, 1961 [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)i Boston New York.... Philadelphia.. Cleveland Richmond.... 4 Atlanta 4% Chicago 4* St. Louis Minneapolis.. 4 Kansas City.. Dallas San Francisco 1 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. 12. MAXIMUM INTEREST RATES PAYABLE ON TIME AND SAVINGS DEPOSITS [Per cent per annum] Nov. 1, 1933— Feb. 1, 1935— Jan. 1, 1936— Jan. 1, 1957— Type of deposit Jan. 31, 1935 Dec. 31, 1935 Dec. 31, 1956 Dec. 31, 1961 1 Savings deposits 3 2Vi 21/i 3 3 2*/i 2*/i 3 Other time deposits payable: t I I n n 9 6 0 m d o a n y t s h s to o 6 r m m o o r n e ths.... 3 3 2j/2 In less than 90 days 3 1 For maximum rates beginning with 1962, see p. 101. 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 FDIC, have been the same as those in effect for member banks. 139 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

13. MARGIN REQUIREMENTS Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Effective date of change; percentagerequirement] Nov. 1, Feb. 5, July 5, Jan. 21, Feb. 1, Mar. 30, Jan. 17, 1937 1945 1945 1946 1947 1949 1951 Regulation T: For extension of credit by brokers and dealers on 40 50 75 100 75 50 75 50 50 75 100 75 50 75 Regulation U: For loans by banks on stocks.. 40 50 75 100 75 50 75 Feb. 20, Jan. 4, Apr. 23, Jan. 16, Aug. 5, Oct. 16, July 28 1953 1955 1955 1958 1958 1958 1960 Regulation T: For extension of credit by brokers and dealers on listed securities 50 60 70 50 70 90 70 50 60 70 50 70 90 70 Regulation U: For loans by banks on stocks. 50 60 70 50 70 90 70 NOTE.—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. For earlier data, see Banking and Monetary Statistics, Table 145, p. 504. 14. FEES AND RATES UNDER REGULATION V ON LOANS GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950, DECEMBER 31, 1961 Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan Guarantee fee Percentage of (percentage of any commitment Percentage of loan guaranteed interest payable fee charged by borrower) borrower 70 or less 10 10 75 15 15 80 20 20 85 25 25 90 30 30 95 35 35 Over 95 40-50 40-50 Maximum Rates Financing Institution ]May Charge Borrower 6 per cent per annum Commitment rate. lA per cent per annum 140 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

15. MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits l Time deposits Effective date of change Central Central Reserve Country reserve and Country reserve city banks banks reserve city banks city banks banks 1917—June 21 13 10 7 3 1936—Aug. 16 19i/i 15 10% 4i/i f 1937_Mar. 1 2234 2* 1214 V May 1 26 14 1938_Apr. 16 22?4 171/2 12 1941_Nov. 1 26 20 14 6 6 1942—Aug. 20 24 Sept. 14 22 Oct. 3 20 1948—Feb. 27 22 June 11 24 Sept. 16 16 71/2 24 26 22 71/2 1949_May 1 15 7 5 24 21 7 June 30 20 6 July 1 14 6 Aue 1 13 8 1 1 6 1.:::::::::..: 23i/2 191/2 12 5 5 2 1 5 8. 2 2 3 2i/2 1 \ 9 fA Sept. 1 22 1951_jan. n 23 19 6 16 13 6 25 24 20 Feb 1 14 1953 July 1 13 9 22 19 1954 jUne 16 5 24 21 5 July 29 20 18 12 1958—Feb. 27 19i/i 17!/i Mar. 1 H!4 20 19 17 Apr. 1 11 p n::::::::::::: 11* I61/2 24 1960— N Se o p v t . . 24 1 17i/2 12 Dec. 1 I6V2 In effect Jan. 1, 1962 1614 16i/2 12 5 5 Present legal requirements: Minimum 2 10 10 7 3 3 Maximum 2 22 2 22 14 6 6 1 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 From Aug. 23, 1935, 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. NOTE.—All required reserves were held on deposit with Federal Reserve Banks, June 21, 1917, until late 1959. Since then, member banks have also been allowed to count vault cash as reserves, as follows: Country banks—in excess of 4 and 2lA per cent of net demand deposits effective Dec. 1, 1959, and Aug. 25, 1960, respectively. Central reserve city and reserve city banks—in excess of 2 and 2% per cent effective Dec. 3, 1959, and Sept. 1, 1960, respectively. Effective Nov. 24, 1960, all vault cash. 141 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16. MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS —END OF YEAR 1918-61 AND END OF MONTH 1961 {In millions of dollars] Reserve Bank credit outstanding Deposits, other than member Treas- bank reserves, Member bank reserves U.S. Government ury Cur- Treas- with F.R. Banks securities cur- rency ury Other End of Dis- Gold rency cash F.R. year or Held counts All stock 2 out- circu- hold- acmonth under and Float other i Total stand- lation ings4 counts 5 With Cur- Bought repur- ad- ing3 Treas- For- Oth- F.R. rency Re- Ex- Total out- chase vances ury eign Banks and quired 7 right agree- coin6 ment 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 80 723 27 355 1,238 3,957 2,009 4,757 213 38 4 19 275 1,898 1,884 14 1924. 540 536 320 52 390 1,302 4,212 2,025 4,760 211 51 19 20 258 2,220 2,161 59 1925. 375 367 643 63 378 1,459 4,112 1,977 4,817 203 16 8 21 272 2,212 2,256 -44 1926. 315 312 3 637 45 384 1,381 4,205 1,991 4,808 201 17 46 19 293 2,194 2,250 -56 1927. 617 560 57 582 63 393 1,655 4,092 2,006 4,716 208 18 5 21 301 2,487 2,424 63 1928. 228 197 31 1,056 24 500 1,809 3,854 2,012 4,686 202 23 6 21 348 2,389 2,430 -41 1929. 511 488 23 632 34 405 1,583 3,997 2,022 4,578 216 29 6 24 393 2,355 2,428 -73 1930. 729 686 43 251 21 372 1,373 4,306 2,027 4,603 211 19 6 22 375 2,471 2,375 96 1931. 817 775 42 638 20 378 1,853 4,173 2,035 5,360 222 54 79 31 354 1,961 1,994 -33 1932. 1,855 1,851 4 235 14 41 2,145 4,226 2,204 5,388 272 8 19 24 355 2,509 1,933 576 1933. 2.437 2,435 2 98 15 137 2,688 4,036 2,303 5,519 284 3 4 128 360 2,729 1,870 859 1934. 2J430 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 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 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 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 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 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 80 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 94 2,361 22,737 3,247 11,160 2,215 867 774 586 291 12,450 9,365 3,085 1942. 6,189 6,189 471 6,679 22,726 3,648 15,410 2,193 799 793 485 256 13,117 11,129 1,988 1943. 11,543 11,543 681 12,239 21,938 4,094 20,449 2,303 579 1,360 356 339 12,886 11,650 1,236 1944. 18,846 18,846 815 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 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 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 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 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 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 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 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 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 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 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 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 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 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 27,755 20,534 5,234 32,193 683 358 272 391 1,122 18,504 18,574 -70 1959... 26,648 26,607 41 458 1,590 28,771 19,456 5,311 32,591 391 504 345 694 841 18,174 310 '18,619 r—135 1960... 27,384 26,984 400 33 1,847 29,338 17,767 5,398 32,869 377 485 217 8 533 941 17,081 * 2,544 '18,988 '637 1961— Jan... 26,570 26,570 60 884 46 27,560 17,441 5,401 31,776 418 588 238 376 940 16,066 2,742 18,410 398 Feb.. 26,667 26,667 53 1,100 46 27,866 17,373 5,403 31,770 424 467 207 404 1,092 16,277 2,745 18,366 656 Mar.. 26,688 26,688 115 938 46 27,787 17,388 5,410 31,891 392 443 271 401 1,028 16,158 2,483 18,166 475 Apr.. 26,772 26,772 67 1,066 45 27,950 17,390 5,419 31,830 399 633 230 280 964 16,419 2,164 18,307 276 May. 26,887 26,886 111 771 37 27,806 17,403 5,431 32,197 408 372 210 277 1,071 16,107 2,743 18,226 624 June. 27,253 27,253 36 1,171 36 28,496 17,550 5,437 32,405 379 408 220 350 1,004 16,716 2,798 18,582 932 July.. 27,422 27,188 234 59 1,115 32 28,628 17,527 5,540 32,477 465 415 226 303 951 16,856 2,369 18,734 491 A Se u p g t . . . . 2 27 7 , , 7 6 9 9 9 7 2 2 7 7 , , 7 6 8 9 8 7 "ii 4 2 7 8 1 1, , 3 0 5 5 1 7 3 3 4 5 2 2 9 8 , , 2 8 1 3 3 5 1 1 7 7 , , 3 4 7 5 6 1 5 5 , , 5 5 5 6 1 3 3 3 2 2 , , 6 6 5 0 8 9 4 3 0 9 0 4 5 3 4 4 3 8 2 3 7 1 0 2 2 29 7 1 3 1 1 , , 1 0 1 5 1 7 1 17 6 , , 1 6 0 2 5 0 P 2 2 , , 8 3 9 38 9 P1 1 9 8 , , 1 58 16 0 P 9 3 3 2 9 7 Oct... 28,268 28,268 59 1,178 38 29,543 17,300 5,577 32,836 407 502 249 550 988 16,888 P2,835 P 19,227 P496 Nov.. 29,210 29,210 39 1,364 43 30,656 16,975 5,585 33,538 398 489 198 249 1,144 17,200 P 3,092 p 19,234 1,058 Dec.. 28,881 28,722 159 130 2,300 51 31,362 16,889 5,585 33,918 422 465 279 320 1,044 17,387 P2,864 P20,113 P138 P Preliminary. ' Revised. coin, United States notes, Federal Reserve notes, Federal Reserve Bank notes, and na- 1 Principally acceptances and industrial loans; authority for industrial loans tional bank notes. expired Aug. 21, 1959. 5 The total of Federal Reserve Bank capital paid in, surplus, other capital accounts, 2 Before Jan. 30, 1934, included gold held by Federal Reserve Banks and in circu- and other liabilities and accrued dividends, less the sum of bank premises and other lation. assets. 3 The stock of currency, other than gold, for which the Treasury is primarily 6 Part allowed fractionally as reserves Dec. 1, 1959-Nov. 23, 1960; all allowed responsible -— silver bullion at monetary value and standard silver dollars, subsidiary thereafter. silver and minor coin, and United States notes; also, Federal Reserve Bank notes and 7 These figures are estimated through 1958. Before 1929 available only on call dates national bank notes for the retirement of which lawful money has been deposited with (in 1920 and 1922, the call dates were December 29). the Treasurer of the United States. Includes currency of these kinds held in the Treasury 8 Excludes $21 million due to other F.R. Banks—collected funds; minor change and the Federal Reserve Banks as well as that in circulation. in concept beginning with 1960. 4 Gold other than that held against gold certificates and gold certificate credits, NOTE.—For description of figures and discussion of their significance, see Banking including the reserve against United States notes and Treasury notes of 1890, monetary and Monetary Statistics, Section 10, pp. 360-66; and "Member Bank Reserves and silver other than that held against silver certificates and Treasury notes of 1890, and Related Items," Section 10 of Supplement to Banking and Monetary Statistics, January the following coin and paper currency held in the Treasury: subsidiary silver and minor 1962. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

17. PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF ALL BANKS, BY CLASSES, DECEMBER 31, 1961 AND 19601 [In millions of dollars] Commercial banks Mutual savings banks All Item banks Member banks Total 2 Insured Non- Nonnonmember insured Total Insured insured Total National State December 31, 19613 Loans and investments, total 254,810 213,610 178,100 115,490 62,610 33,940 1,590 41,200 35,530 5,670 Loans . • 152,550 123,230 104,550 66,570 37,980 18,110 580 29,320 25,800 3,520 102,260 90,380 73,550 48,920 24,630 15,830 1,010 11,880 9,730 2,150 U.S. Govt. obligations 72,630 66,480 54,180 35,920 18,260 11,740 570 6,150 4,630 1,520 Other securities 29,630 23,900 19,370 13,000 6,370 4,090 440 5,730 5,100 630 Cash assets 58,300 57,330 50,990 32,530 18,460 6,040 300 970 900 70 285,530 247,100 208,770 135,790 72,980 36,850 1,500 38,430 33,020 5,410 Interbank •• 18,170 18,170 17,330 10,550 6,780 490 350 Other demand 147,030 146,970 124,590 80,180 44,410 21,550 830 60 60 Other time 120,330 81,960 66,850 45,060 21,790 14,810 320 38,370 32,960 5,410 Total capital accounts 25,970 22,220 18,410 11,720 6,690 3,430 380 3,750 3,200 550 13,946 13,432 6,113 4,513 1,600 6,997 323 514 330 184 December 31, 1960 Loans and investments, total 238,623 199,509 165,619 107,546 58,073 32,411 1,498 39,114 33,794 5,320 144,764 117,642 99,933 63,694 36,240 17,169 550 27,122 23,852 3,270 93,859 81,867 65,685 43,852 21,833 15,242 949 11,992 9,942 2,050 U.S. Govt. obligations 67,242 61,003 49,106 32,712 16,394 11,368 535 6,239 4,787 1,453 Other securities 26,617 20,864 16,579 11,140 5,439 3,874 413 5,752 5,155 597 53,022 52,150 45,756 28,675 17,081 6,082 314 872 766 107 266,196 229,843 193,029 124,911 68,118 35,391 1,443 36,353 31,502 4,850 18,880 18,878 18,076 10,439 7,636 512 291 2 2 139,357 139,324 117,681 74,926 42,755 20,785 859 33 32 107,959 71,641 57,272 39,546 17,727 14,095 293 36,318 31,468 4,850 Total capital accounts 24,539 20,986 17,398 11,098 6,299 3,232 358 3,553 2,998 555 13,986 13,472 6,174 4,530 1,644 6,948 352 514 325 189 1 All banks in the United States. 2 Excludes 2 member mutual savings banks in 1960 and 1 in 1961. 3 Estimated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18. MEMBER BANK INCOME, EXPENSES, AND DIVIDENDS, BY CLASS OF BANK, 1961 AND 19601 Central reserve city banks Total ci R ty e s b e a rv n e ks C b o a u n n k t s ry Item New York Chicago 1961 1960 1961 1960 1961 1960 1961 1960 1961 1960 In millions of dollars Revenue 9,213 8,928 1,492 1,474 354 353 3,587 3,471 3,780 3,630 On U.S. Govt. securities 1,533 1,414 215 187 60 56 551 477 706 695 On other securities... 510 467 81 70 23 20 169 154 237 223 On loans........... 5,866 5,730 918 941 221 225 2,369 2,329 2,358 2,235 All other 1,303 1,316 278 276 50 52 498 511 478 477 Expenses 6,062 5,655 848 774 188 181 2,338 2,180 2,688 2,519 Salaries and wages 2,371 2,289 360 345 75 75 925 891 1,011 978 Interest on deposits... 1,716 1,434 188 131 49 39 681 559 798 705 All other 1,975 1,932 300 298 64 67 732 730 879 836 Net current earnings before income taxes.... 3,151 3,273 643 700 166 172 1,249 1,291 1,092 1,111 Recoveries and profits 2.. 460 86 19 181 174 Losses and charge-offs 3.. 593 128 33 223 208 Net increase (or decrease, +) in valuation 212 21 7 87 97 reserves Net income before related taxes 2,966 2,929 593 637 155 150 1,204 1,162 1,014 980 Taxes on net income 1,253 1,241 257 293 76 65 534 530 386 352 Net income 1,713 1,689 336 344 79 84 670 633 628 628 Cash dividends declared 4. 790 735 182 175 31 29 322 297 254 234 In per cent Ratios: Net current earnings before income taxes to- Average total capital accounts 17.5 19.5 17.7 20.3 19.7 22.1 18.7 20.7 16.0 17.5 Average total assets.. 1.46 1.62 1.66 1.99 1.80 1.97 1.50 1.65 1.29 1.39 Net income to— Average total capital accounts 9.5 10.0 9.3 10.0 9.4 10.9 10.0 10.1 9.2 9.9 Average total assets.. .80 .84 .87 .98 .86 .97 .81 .81 .74 .79 Average return on U.S. Govt. securities 2.99 3.10 2.87 3.31 2.92 3.06 2.99 2.98 3.02 3.14 Average return on loans. 5.82 5.93 5.04 5.30 5.09 5.29 5.87 5.96 6.23 6.28 1 Data for 1961 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. Digitized for FRASER 145 http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

19. ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES IN THE UNITED STATES DURING 19611 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 ti N on a a - l i State 2 su In re - d N i o n n - - su I r n e - d 2 N i o n n - sured 2 sured Number of banks, Dec. 31,1960.13,986 13,472 4,530 1,644 6,948 352 325 189 Changes during 1961 New banks 3 + 112 +26 +2 + 1 Reopening + 1 + 1 Consolidations and absorptions: Banks converted into branches -127 -126 -44 -27 -53 -2 -1 Other -13 -13 -2 -5 -1 -5 -5 -5 Conversions: National into State -1 + 1 State into national +9 -4 Federal Reserve membership: 5 Admissions of State banks.. +5 -4 -1 Withdrawals of State banks. -17 + 16 Federal Deposit Insurance: 6 Admissions of State banks.. +30 -30 +1 -4 Net increase or decrease -40 -40 -17 -44 +49 -29 -5 Number of banks, Dec. 31,1961.13,946 13,432 4,513 1,600 6,997 323 330 184 Number of branches and additional offices, except banking facilities Dec. 31,1960 7.. 10,702 10,216 5,298 2,597 2,274 47 381 105 Changes during 1961 De novo branches +846 +788 +431 + 176 + 181 +46 Banks converted into branches. +!?? +71 +29 -32 -10 2 Interclass changes—net 8 +59 + 34 -90 -3 -2 Net increase or decrease +918 +861 +529 +229 + 106 -3 + 11 Number of branches and additional offices, except banking facilities, Dec. 31,1961 7. 11,620 11,077 5,827 2,826 2,380 44 427 116 Number of banking facilities, Dec. 31,1960 i 267 267 211 27 29 Changes during 1961 Established + 14 + 11 +2 + 1 Interclass changes: -1 + 1 Nonmember to national.. •. + 1 Net increase +9 +9 +2 + 1 +6 Number of banking facilities, Dec. 31,1961 7 276 276 217 29 30 1 Includes a national bank in the Virgin Islands with 2 branches; other banks in possessions are excluded. 2 State member bank and insured mutual savings bank figures for December 31, 1960 both include 2 member mutual savings banks not included in the total for commercial banks; and subsequent figures reflect the withdrawal of 1 from membership in 1961. State member bank figures also include 1 noninsured trust company without deposits. 3 Exclusive of new banks organized to succeed operating banks; includes 8 existing noninsured nonmember banks added to the count. 4 Exclusive of liquidations incident to the succession, conversion, and absorption of banks. 5 Exclusive of conversions of State member banks into national banks. 6 Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve membership, and vice versa. 7 Banking facilities (other than branches) that are provided at military and other Government establishments through arrangements made by the Treasury Department. 8 For details of interclass branch changes see Federal Reserve Bulletin for February 1962, p. 236. 146 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20. NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, DECEMBER 31, 19611 On par list Total 2 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 398 814 398 814 260 650 138 164 New York 2. 570 2,045 570 2,045 475 1,793 95 252 Philadelphia. 616 748 616 748 474 598 142 150 Cleveland... 909 1,051 909 1,051 551 914 358 137 Richmond... 909 1,371 778 1,233 428 792 350 441 131 138 Atlanta 1,382 599 836 547 420 447 416 100 546 52 Chicago 2,479 1,212 2,479 1,212 1,002 747 1,477 465 St. Louis 1,472 399 1,192 324 478 218 714 106 280 75 Minneapolis. 1,309 147 711 102 476 53 235 49 598 45 Kansas City. 1,779 141 1,775 141 756 105 1,019 36 4 Dallas 1,149 174 1,074 162 630 115 444 47 75 12 San Francisco 373 2,764 371 2,764 160 2,485 211 279 2 Total. .. 13,345 11,465 11,709 11,143 6,110 8,917 5,599 2,226 1,636 322 STATE Alabama.... 238 98 156 97 93 90 63 7 82 1 Alaska 14 35 12 35 7 33 5 2 Arizona 11 190 11 190 4 154 7 36 Arkansas.... 237 56 132 37 78 33 54 4 105 19 California... 117 1,787 117 1,787 59 1,657 58 130 Colorado.... 166 7 166 7 97 6 69 1 Connecticut.. 63 219 63 219 30 171 33 48 Delaware.... 20 54 20 54 5 25 15 29 District of Columbia.. 11 69 11 69 8 63 3 6 Florida 315 15 275 14 131 12 144 2 40 1 Georgia.... 420 126 143 123 68 103 75 20 277 3 Hawaii 7 90 7 90 2 32 5 58 Idaho 32 88 32 88 18 81 14 7 Illinois 973 4 972 4 525 4 447 1 Indiana 441 340 441 340 225 233 216 107 Iowa 673 190 673 190 164 20 509 170 Kansas.. . 590 32 590 32 213 23 377 9 Kentucky... 351 165 351 165 101 113 250 52 Louisiana... 192 189 88 157 53 124 35 33 104 32 Maine 46 138 46 138 29 96 17 42 Maryland... 132 266 132 266 60 159 72 107 M^assachusetts 166 409 166 409 118 342 48 67 Michigan.... 373 617 373 617 213 501 160 116 Minnesota 688 6 291 6 209 6 82 397 Mississippi. . 193 149 56 78 34 48 22 30 137 71 Missouri 622 37 569 37 170 24 399 13 53 Montana 122 1 122 1 88 1 34 Nebraska.... 420 17 420 17 138 15 282 2 Nevada 7 41 7 41 5 35 2 6 New Hampshire 73 3 73 3 52 2 21 1 New Jersey.. 244 471 244 471 210 420 34 51 New Mexico. 57 64 57 64 37 38 20 26 New York 388 1,482 388 1,482 335 1,409 53 73 North Carolina.. 163 550 96 421 34 228 62 193 67 129 North Dakota... 156 31 58 10 40 4 18 6 98 21 147 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20. NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, DECEMBER 31, 1961 i — Continued On par list Total 2 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 STATE— Cont. Ohio 576 696 576 696 365 604 211 92 Oklahoma... 387 32 382 32 226 28 156 4 5 Oregon..... 48 206 48 206 13 177 35 29 Pennsylvania. 671 874 671 874 515 745 156 129 Rhode Island 9 91 9 91 5 69 4 22 South Carolina.. 144 166 81 157 31 114 50 43 63 9 SouthDakota 174 62 71 38 59 30 12 8 103 24 Tennessee... 294 236 222 224 82 161 140 63 72 12 Texas 1,017 32 988 32 572 28 416 4 29 Utah 50 77 50 77 20 66 30 11 Vermont.... 52 37 52 37 30 19 22 18 Virginia . 302 320 301 320 196 228 105 92 1 Washington.. 89 305 89 305 33 292 56 13 West Virginia... 181 181 110 71 Wisconsin... 564 159 564 159 159 29 405 iio Wyoming. . . 55 1 55 1 40 15 OTHER AREA Puerto Rico 2 10 129 10 129 15 10 114 Virgin Islands*2... 1 6 1 6 1 6 1 Comprises all commercial banking offices on which checks are drawn, including 276 banking facilities. Number of banks and branches differs from Table 19 because this table includes banks in Puerto Rico and the Virgin Islands but excludes banks and trust companies on which no checks are drawn and 1 mutual savings member bank. 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 2 in the Virgin Islands are branches of New York banks. 148 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611 Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated No. 1—The Oregon Bank, Portland, Oreg. 34.6 6 to merge with Rogue Valley State Bank, 6.4 2 Medford, Oreg. SUMMARY REPORT BY ATTORNEY GENERAL (12-8-60) The Oregon Bank, Portland, Oreg., and the Rogue Valley State Bank, Medford, Oreg., operate in areas which are 285 miles apart and therefore do not appear to be in competition with each other. Apparently the merging banks' only competitors are the two largest banks in Oregon. As a result of the merger the acquiring bank will become a competitor, although still a relatively small competitor, to Oregon's two large banking systems in an additional banking area. It is our conclusion that the proposed merger will not adversely affect competition. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-5-61) Portland and Medford, Oreg., are 285 miles apart, and competition between The Oregon Bank, Portland, Oreg., and Rogue Valley State Bank, Medford, Oreg., is nonexistent. The proposed merger of these two banks would have virtually no impact on competition in the Portland area. It would, however, provide customers of Rogue Valley Bank with expanded banking services and a larger source of credit and would also increase competition in Medford where the two largest Oregon banks have offices. No. 2—Long Island Trust Company, 107.5 12 Garden City, N.Y. 13 to merge with The Lindenhurst Bank, Lindenhurst, N.Y. 11.6 SUMMARY REPORT BY ATTORNEY GENERAL (12-22-60) The merging bank was founded in 1929. It has never applied for a branch. The charter bank has 11 branches in Nassau County, one in Suffolk County, and one application pending. Nine of its branches were established de novo and two by merger. The application shows the merging bank to have deposits of $10,608,000 and loans and discounts of $3,282,000; and the charter bank to have deposits of $92,056,000 and loans and discounts of $53,265,000. In addition to the merging bank, the Franklin National Bank, the Security National Bank of Long Island, and the Bank of Babylon each has branches in its service area. The charter bank has no branch in the area. Although it is a large institution, it is much smaller than either the Franklin National Bank, For notes see p. 183. 149 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. with 28 branches in Nassau and seven branches in Suffolk County, or the Security National Bank of Long Island, with seven branches in Nassau and eight branches in Suffolk County. Substituting the Long Island Trust Company for the Lindenhurst Bank will still leave branches of the two much larger banks; in the primary service area of the merging bank and a local bank, the Bank of Babylon, in the secondary service area as well as branches of the larger banks in such area. It does not appear, therefore, that the proposed merger will have an adverse effect on competition in the service area of the merging bank nor does it appear that it will result in a tendency toward monopoly. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-12-61) Lindenhurst Bank, located within the metropolitan area of New York City and about 15 miles from the Long Island Trust Company, has been operated in an ultraconservative manner by an elderly management and has not provided the services required by an area that is experiencing rapid growth. The merger of Lindenhurst Bank and Long Island Trust Company would make available to the Lindenhurst area needed additional resources, skills, and banking services. Competition with the larger institutions serving the area would be increased. No. 3—California Bank, Los Angeles, Calif. 1,296.7 70 to merge with 3 118 First Western Bank and Trust Company, 1,124.5 113 San Francisco, Calif., and change its title to United California Bank. SUMMARY REPORT BY ATTORNEY GENERAL (12-21-60) First Western Bank and Trust Company, San Francisco, Calif., proposes to merge into California Bank, Los Angeles, Calif., under the charter of the latter and with the title of United California Bank. A majority of the outstanding stock of both banks is held by Firstamerica Corporation, a registered bank holding company. Firstamerica's stock interest in California Bank was acquired, effective April 1, 1959. Prior to the merger, a new bank, headquartered in Los Angeles, will be organized which will acquire, at the time of merger, the name First Western Bank and Trust Company. At the consummation of the merger there will be transferred to this new bank all right, title, and interest in 65 banking offices operated by the present First Western and all rights held by the present First Western under certain applications to establish ten additional offices. New Bank's assets will be about $500 million. After a For notes see p. 183. 150 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. period of two years, Firstamerica is to endeavor to dispose of its interest in New Bank so that it will then be an independent competitor in banking in California. If Firstamerica should be unsuccessful in its efforts to divest itself of the stock or assets of New Bank within six years after approval of the merger by the appropriate regulatory agencies and Firstamerica's acquisition of the stock of New Bank, it will then distribute the stock of New Bank to Firstamerica's stockholders. All 70 of the banking offices of California Bank are located in what may be described as the metropolitan Los Angeles area. Thirty-one of Firstamerica's offices are located in the same area, the balance being located in other areas within the State of California. Thus, the principal area of competition between the two banks, prior to the acquisition of California Bank by Firstamerica, was in the metropolitan Los Angeles area. This serious anticompetitive effect will be removed by the transfer of First Western's 31 banking offices in the metropolitan Los Angeles area to New Bank which is to be created and later separated from Firstamerica. And since there will remain a number of large banks in the metropolitan Los Angeles area, including the first and second largest banks in California, it is not believed that United California Bank will have a substantial competitive advantage (in addition to the advantages now held by California Bank) over small competitors in this area. Bank of America, the nation's largest bank, and by far the largest bank in California, operates throughout the State. It has more than 600 offices in 380 communities in every one of the State's 58 counties. The only other so-called statewide bank is the present and much smaller First Western. Thus, the transfer by Firstamerica of 65 offices located in various areas of California, to New Bank and the transfer of the remaining offices of First Western to United California Bank will result in three so-called statewide banking systems instead of two such systems. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (1-19-61) The proposed merger of California Bank and First Western Bank and Trust Company is part of a compromise of litigation between Firstamerica Corporation and the United States Department of Justice regarding the acquisition of California Bank by Firstamerica. Prior to the merger of these two banks a new bank, headquartered in Los Angeles, will be organized, and at the time this merger is consummated the new bank will acquire 65 offices now operated by First Western Bank and Trust Company. The 65 offices, scattered throughout the State, to be acquired by the new bank have been carefully selected so that the limited amount of competition presently existing between the merging banks will be retained. Within six years after approval of the merger, Firstamerica Corporation is to dispose of the new bank. Competition by a new bank operating on a statewide basis will introduce a new competitive factor into California For notes see p. 183. 151 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. banking. Both California Bank (name to be changed to United California Bank) and the proposed new bank will have broad geographic bases of operations and will be competitive with each other and Bank of America NT & SA on a statewide basis. The proposed transactions, of which this merger is a part, probably will tend to enhance competition in the State. No. 4—Linden Trust Company, Linden, NJ. 36.9 to merge with 10 Union County Trust Company, Elizabeth, 90.4 N.J., under the charter of Linden Trust Company and title Union County Trust Company. SUMMARY REPORT BY ATTORNEY GENERAL (12-30-60) Because of the control exercised by Union County Trust over Linden Trust since 1926, it may well be that competition between the two banks has been eliminated since Linden Trust's inception. On the other hand, Linden Trust holds itself out as a separate competing bank, appears to conduct its business considerably separate from the Elizabeth bank, and may in fact compete, at least to a degree, in the Elizabeth-Linden-Cranford local banking area. If such be the case, the merger would reduce substantial competition between the two banks, eliminate a formidable competitor in the local banking area, and increase substantially Union County Trust's size among other banks in the county. Such increase would create in Union County Trust a substantial competitive strength and advantage over the remaining smaller banks in Union County which may lead to further attempts by such banks toward merger and consolidation. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-1-61) Through the ownership of stock and stock options, Union County Trust Company exercises control of the Linden Trust Company. The latter, 3.8 miles from Union, was organized and established by Union and for all practical purposes has been operated as an office of Union through common management and policies. Competition between the two banks is nominal. The effect of the merger would be to combine into unified corporate form an affiliate relationship which has existed for many years. The formalizing of this relationship would have little effect on competition. The resulting bank, with its greater resources, broader banking services, and increased facilities would be in a better position to serve the banking needs of Elizabeth and Linden, particularly the latter, and to compete with the nearby New York City banks. For notes see p. 183. 152 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated i • No. 5—Petersburg Savings and American 19.9 5 Trust Company, Petersburg, Va. to merge with The Bank of Hopewell, Hopewell, Va. 1.9 1 SUMMARY REPORT BY ATTORNEY GENERAL (1-12-61) The Department of Justice reports that the proposed merger of The Bank of Hopewell, into the Petersburg Savings and American Trust Company, would not have significant adverse competitive effects. Competition between the two banks does not appear to exist in a real sense since The Bank of Hopewell, from its organization, has been in reality under the same ownership and management as the Petersburg Savings and American Trust Company. While this fact would not be sufficient to justify the merger between the two banks, the competition affected appears otherwise to be insubstantial. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-1-61) Very little competition exists between these commonly owned and managed banks which are nine miles apart and located in an industrial area approximately 25 miles south of Richmond. As a merger of these closely affiliated institutions would have virtually no effect on competition, it appears that combining them into a single unit would be in the public interest. No. 6—Riverside Trust Company, 35.4 Hartford, Conn. to merge with Broad Brook Bank and Trust Company, 3.2 East Windsor, Conn. SUMMARY REPORT BY ATTORNEY GENERAL (1-12-61) The Riverside Trust Company of Hartford, Conn. (Riverside Trust), proposes to merge with The Broad Brook Bank and Trust Company at East Windsor, Conn. (Broad Brook Bank), and to continue to operate the latter as its Broad Brook office. Riverside has deposits of $31,345,000. Broad Brook has deposits of $2,892,000. There is at present no competition between the two banks which transact business in two different communities approximately 15 miles apart. Riverside Trust is the third largest bank in its service area and the resulting bank will remain the third largest bank in the downtown Hartford area. Broad Brook Bank is the only bank in East Windsor. The nearest bank, approximately V/i miles from Broad Brook, is the First National Bank of Windsor Locks. It does not appeal* that the merger of Riverside Trust with Broad Brook Bank will lessen competition unduly or tend to create a monopoly. For notes see p. 183. 153 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-2-61) The proposed merger of Broad Brook Bank and Trust Company, East Windsor, Conn., and Riverside Trust Company, Hartford, Conn., would eliminate very little competition as there is virtually no existing competition between these two banks which are about 15 miles apart. Competition with the large Hartford banks operating in the trade area probably would be intensified rather than diminished, as Riverside Trust Company would provide the East Windsor area with a wider range of banking services and a larger credit source. This merger would also solve a management succession problem now existing at Broad Brook Bank and Trust Company. No. 7—Montgomery County Bank and Trust 97.9 11 Company, Norristown, Pa. 13 to merge with The National Bank and Trust Company of 7.6 2 Spring City, Spring City, Pa. SUMMARY REPORT BY ATTORNEY GENERAL (1-19-61) The proposed merger would have the effect of eliminating competition between Montgomery County Bank and Trust Company and The National Bank and Trust Company of Spring City in the service area of the latter bank. Although the information furnished by the applicant does not permit an accurate evaluation of the extent of this competition, it appears that a substantial amount of competition now exists with respect to deposits, mortgages, and other loans. In addition, the acquisition by Montgomery County Bank and Trust Company of the two Spring City offices would create, for the former, an unfair competitive advantage over the remaining banks now doing business in the service area of the National Bank and Trust Company of Spring City by increasing an already-existing substantial disparity in size between the acquiring bank and these remaining smaller banks. For this reason it is probable that the merger would be conducive to a further concentration of commercial banking facilities within the service area of the National Bank and Trust Company of Spring City by suggesting to these smaller banks the need for their merger with or acquisition by larger commercial banks in order to compete effectively with the Montgomery County Bank and Trust Company. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-15-61) Merging these two banks will provide the Spring City area with improved banking services. Offices of these two banks are about seven miles apart; however, competition between them is not so great as might appear on the surface, for although the applicant has a fairly substantial volume of business originating in the Spring City area, much of it is in larger For notes see p. 183. 154 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. loans and trust business of the type which the smaller bank is not able to handle. No banking offices are being eliminated and alternative banking sources are within a reasonable distance of Spring City. While the proposed merger will add but very little to the size of Montgomery County Bank, it will enable it to compete somewhat more effectively with the large Philadelphia banks operating in Montgomery County which are its principal competitors. The over-all effect on competition would not be great as branches of larger banks are already somewhat competitive throughout most of the service area. The small bank most immediately concerned indicated that the proposed merger would have no adverse effect on it. No. 8—The Liberty Bank of Buffalo, 172.7 23 Buffalo, N.Y. 24 to merge with Erie County Trust Company, 15.0 1 East Aurora, N.Y. SUMMARY REPORT BY ATTORNEY GENERAL (2-9-61) Competition between Liberty Bank and Erie County Trust Co. is small at present, but may be expected to grow; it appears that the Erie County Bank could continue to operate successfully as an independent bank. This acquisition by the third largest of five commercial banks having head offices in Buffalo would increase its share of deposits and of loans and discounts for the combined service areas of the merging banks by less than 1 per cent. Thus the proposed merger would not appear to have a substantial impact on banking competition in the service area of the acquiring bank. In the service area of the merging bank, the effect of the merger would be to replace an effective independent bank with a branch of a much larger institution to compete with a branch bank of the largest bank in western New York. However, this development may add to the competitive handicaps of two smaller banks in the nearby towns of Holland and Orchard Park, located ten and five miles respectively from East Aurora, the location of the merging bank and a branch of western New York's largest bank. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-27-61) Liberty Bank is the third largest bank in the Ninth Banking District of New York State, but does not have a district-wide branch system as have the two largest banks. In the past this bank has restricted its operations primarily to Buffalo. By extending its scope of operations into suburban and outlying areas it will be able to provide more effective competition to the two large Buffalo banks. For notes see p. 183. 155 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961 —Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. While this merger would eliminate competition now existing between the two banks involved, such competition is not strong at this time. The positive benefits inuring from this merger such as an increased lending limit and expanded services for customers of Erie Trust, enhanced competition for the local branch of the district's largest bank, Marine Trust Company of Western New York, and a needed strengthening of the management of Liberty Bank—more than offset the elimination of competition between the two banks involved. No. 9—The Liberty Bank of Buffalo, 172.7 4 24 Buffalo, N.Y. 26 to merge with The National Bank of Fredonia, 7.9 2 Fredonia, N.Y. SUMMARY REPORT BY ATTORNEY GENERAL (1-19-61) The proposed merger involves the third ranking bank among five commercial banks with principal offices in Buffalo, N.Y., and one of two relatively small independent banks competing with branches of much larger banks in a different service area—Fredonia, Brocton, Dunkirk, New York area. There appears to be no competition existing between the merging banks; thus no elimination of competition between them. The merging bank, with total resources of $169,656,000, is much smaller than its two major competitors in its service area. The addition of the relatively small resources ($7,942,000) of the merging bank would not appear to adversely affect banking competition in the Buffalo, New York service area. In the service area of the merging bank the combined bank will face competition from branch offices of two much larger banking institutions. However, the entry of an additional large banking organization into the service area of the merging bank may further endanger the ability of the remaining small independent bank, with deposits of $12,413,000, to effectively compete with branches of three much larger banking institutions. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (2-27-61) There is virtually no competition between these two banks whose nearest offices are about 30 miles apart. Liberty Bank, third largest bank in the Ninth Banking District of New York State, in the past restricted its operations primarily to Buffalo. A merger of these two banks would provide broader banking services and a larger lending limit to present customers of Fredonia National, would solve an acute management succession problem existing at Fredonia National, and should provide significantly stronger For notes see p. 183. 156 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. competition for the Fredonia branch of Manufacturers and Traders Trust Company, Buffalo, New York, second largest bank in the Ninth Banking District. The proposed merger should not have any detrimental effect on the small independent banks in the Fredonia area as they have demonstrated ability to compete successfully with branches of large banks. No. 10—Genesee Merchants Bank & Trust 139.2 18 Co., Flint, Mich. 20 to consolidate with The Vernon State Bank, Vernon, Mich. 4.2 SUMMARY REPORT BY ATTORNEY GENERAL (1-27-61) The Genesee Merchants Bank & Trust Co. (applicant bank for consolidation), with total assets of $141,666,880 is the third largest bank in its service area. It is much smaller, however, than the dominant bank in the area. The Vernon State Bank, with total assets of just over $4 million is the smallest of several banks operating in its service area. There appears to be little competition between the two banks seeking to consolidate. Thus the consolidation would not appreciably affect competition between the consolidating banks. Nor would it materially increase the size of the Genesee Merchants Bank. However, an independent factor would be eliminated and the relatively smaller bank remaining in the service area of The Vernon State Bank may find it increasingly difficult to compete with branches of much larger banks, including the branch of the Genesee Merchants Bank in such service area. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-1-61) There appears to be little competition between the two banks involved in the proposed consolidation. Merging these two banks will provide Vernon, 22 miles southwest of Flint, and the immediate area with broader banking services and will make available loanable funds to satisfy demands which cannot now be satisfied by the heavily loaned Vernon bank. It will also provide management succession for the small bank. While adding but very little to the size of the area's second largest bank, the consolidation will enable it to compete directly in one more area with the largest bank. The over-all effect on small banks in this area should not be significantly adverse as the largest bank now has a branch in the vicinity and competes throughout much of the same area. Small area banks located in Corunna, Owosso, Swartz, and Linden are well established and cater principally to local farmers. Consummation of this consolidation could well stimulate competition in the area. For notes see p. 183. 157 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611-—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. The Peoples Bank of Hamburg was incorporated on May 22, 1891. It has loans of $6,860,103 and total deposits are $12,787,473, as of June 30, 1960. The Bank of North Collins was incorporated on August 31, 1895. It has loans of $1,626,646 and total deposits are $3,535,743, as of June 30, 1960. The amount of competition that may be eliminated by the merger does not appear to be substantial since the banks only compete with each other to a limited extent. And the advantages of the merged bank over its smaller competitors do not appear to be pronounced. It does not appear that this transaction will have a substantial adverse effect on competition or tend to create a monopoly. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-15-61) There is only a small amount of competition between these two banks whose contiguous trade areas overlap slightly. Two of the three largest banks in the Ninth Banking District of New York have branches in the areas served by the two banks involved; although the merged bank would be vastly smaller than either of these large Buffalo institutions, it would be a more effective competitor, particularly in the North Collins area. This proposal would provide needed strengthening of executive management for the continuing institution, for under the proposed realignment of officers the present chief executive of North Collins Bank would become president of the continuing bank. This individual is an experienced and capable banker who has had a considerable amount of service with both banks. No. 13—State Street Bank and Trust 453.1 Company, Boston, Mass. to merge with 14 Rockland-Atlas National Bank of Boston, 145.8 Boston, Mass. SUMMARY REPORT BY ATTORNEY GENERAL (2-24-61) The proposed merger would unite the third and the fifth largest commercial banks in Boston, and advance the applicant bank to the position of second largest bank by a small margin. This would enhance its ability to compete with Boston's largest bank which has assets in excess of all other Boston banks combined. However, other recent combinations in the area together with the one currently under consideration will leave Boston in the position of having four large banks with 79 offices and, contrastingly, four relatively small banks with only six offices. Thus a high degree of banking concentration will be further enhanced. For notes see p. 183. 159 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961'—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. Such consolidations are indicative of a trend in the area which will place the smaller banks in increasingly disadvantageous competitive positions, and give rise to further consolidations with substantially adverse competitive results. The proposed consolidation will unite banks with $402,719,000 and $128,738,000 in total resources, $350,767,000 and $113,607,000 in total deposits and $199,865,000 and $72,147,000 in total loans and discounts. These banks have 13.60 and 4.13 per cent of IPC [individuals, partnerships, and corporations] loans and 13.78 and 4.62 per cent of IPC deposits among the commercial banks in the Boston area. It is obvious that a combination of such active competitors will eliminate very substantial competition in commercial banking in such area. It is also a further step toward oligopoly in banking in Boston. Thus the proposed consolidation will have substantial adverse effects on competition in commercial banking in the important Boston area. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (4-11-61) The nine commercial banks headquartered in Boston operate 87 offices in Suffolk County with aggregate IPC deposits exceeding $2.2 billion. In terms of IPC deposits of these nine commercial banks, the proposed merger would combine the third and fifth largest banks; the resulting bank, with 18.7 per cent of these IPC deposits, would rank second by a small margin, but would be only about one-third the size of the largest commercial bank in Boston. While the proposed merger would eliminate the smallest of the five large commercial banks in the city and the present competition between State Street Bank and Rockland-Atlas National Bank, the resulting bank could, because of its increased size, larger lending capacity, and broader banking services, as well as strengthened management, stimulate competition in Boston—and particularly in the larger Boston Metropolitan Area. The proposed merger would enable the resulting bank to compete on more effective terms with the significantly larger First National Bank of Boston, with Baystate Corporation's seven area banks, and with the thirteen area banks in the Shawmut Group. Insofar as the Boston Standard Metropolitan Statistical Area is concerned, the resulting bank would have total deposits greater than those of the Baystate Group, but significantly less than those of either the Shawmut Group or The First National Bank of Boston. Moreover, The First National Bank, the Shawmut Group, and the Baystate Group all have decided competitive advantages arising from their large numbers of branches. The three groups operate about two, four, and five times, respectively, as many offices in the Boston Standard Metropolitan Statistical Area as will the resulting bank. For notes see p. 183. 160 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated No. 11—Wells Fargo Bank American Trust 2,677.3 124 Company, San Francisco, Calif. 1 126 to merge with Pajaro Valley Bank, Watsonville, Calif. 32.9 2 SUMMARY REPORT BY ATTORNEY GENERAL (2-1-61) The merger of Wells Fargo Bank American Trust Company and Pajaro Valley Bank would unite the third largest bank in California and a local bank in the city of Watsonville. It would eliminate some existing and potential competition between the two banks, and would further increase concentration in commercial banking in a State with a high degree of existing concentration, which is due in substantial measure to past acquisitions by the applicant. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (3-2-61) Wells Fargo Bank American Trust Company, headquartered in San Francisco, operates 124 offices and has deposits of approximately $2.3 billion. Watsonville, population 13,550, located about 72 miles southeast of San Francisco, is the center of a fertile agricultural area, and its trade area contains approximately 32,000 residents. There are three banking offices in Watsonville: the head office and branch of Pajaro Valley Bank and a branch of Bank of America NT & SA. The applicant operates no branch nearer than ten miles from Watsonville, and this branch is not considered to be in the area served by Pajaro Valley Bank. Competition between the Wells Fargo Bank American Trust Company and Pajaro Valley Bank is virtually nonexistent. The proposed merger would not alter the competitive position of Wells Fargo Bank American Trust Company in the State of California or in San Francisco. The Pajaro Valley Bank has experienced difficulty in adequately servicing Watsonville and the surrounding area. Replacing the offices of Pajaro Valley Bank with branches of Wells Fargo Bank American Trust Company would provide customers in the Watsonville area with a wider range of banking services and a larger credit source. Competition in Watsonville will probably be increased through the entry of this larger bank, able to compete more effectively with the local branch of Bank of America NT & SA. No. 12—The Peoples Bank of Hamburg, 14.2 1 Hamburg, N.Y. to merge with The Bank of North Collins, 3.9 1 North Collins, N.Y. SUMMARY REPORT BY ATTORNEY GENERAL (1-11-61) Each of the banks involved are comparatively small independent banks of long standing serving the needs of their respective agricultural and residential communities. For notes see p. 183. 158 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2L DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. The accompanying table compares banking offices, total deposits, and IPC deposits of the participants, First National Bank of Boston, the Baystate and Shawmut Groups and other commercial banks in the Boston Standard Metropolitan Statistical Area as of June 15, 1960. Offices Total deposits IPC deposits Name of bank or group Amount Amount Num- Per (in millions Per (in millions Per ber cent of dollars) cent of dollars) cent State Street Bk. & Tr. Co. »7 2.5 330.8 9.0 262.0 9.1 Rockland-Atlas National Bk. 7 2.5 116.9 3.2 95.9 3.3 RESULTING BANK 14 5.0 447.7 12.2 357.9 12.4 The First N /B of Boston 26 9.3 1,401.6 38.3 1,071.3 37.2 Baystate group (7 banks) 74 26.4 366.0 10.0 317.9 11.1 Shawmut group (13 banks)b 59 21.1 541.4 14.8 412.4 14.4 Other (55 banks) 107 38.2 904.8 24.7 715.3 24.9 Total—all banks 280 100.0 3,661.5 100.0 2,874.8 100.0 a Excludes one branch, which is not open to the general public, currently being used as a central office for maintaining records pertaining to consumer credit business. b Includes The National Shawmut Bank of Boston, second largest in the area, with 32 offices, $400.5 million in total deposits, and $292.2 million in IPC deposits. The proposed merger can be expected to result in intensified competition among the four large commercial banks which will exist subsequent to the proposed transaction. There will remain a number of alternative commercial banking outlets as well as many mutual savings banks which actively compete in the area; furthermore, the proposed merger probably will not create an environment in which small banks will find it more difficult to operate. No. 14—First Trust Company of Albany, 93.1 Albany, N.Y. to merge with The Johnstown Bank, Johnstown, N.Y. 10.0 SUMMARY REPORT BY ATTORNEY GENERAL (3-7-61) The application for prior written consent to effect the merger gives the following figures (December 31, 1960) concerning the size of the charter and merging banks: For notes see p. 183. 161 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—-Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. Charter bank Merging bank IPC deposits $40,540,748 $8,151,549 Total deposits 86,076,000 9,197,000 Loans and discounts (net) 30,208,000 4,341,000 The application shows the banks and comparative sizes thereof in the service area of the merging bank as follows: Total Total loans IPC deposits (in millions (in millions of dollars) of dollars) Johnstown Bank 4.3 8.2 State Bank of Albany 208.9 193.8 State Bank of Albany (Johnstown Branch) 15.0 Trust Co. of Fulton County ' 5*5 8.6 Fulton County Natl. Bank & Trust Co. of Gloversville 8.6 12.6 City Natl. Bank & Trust Co. of Gloversville 9.8 15.2 Central Natl. Bank of Canajoharie 14.9 22.1 Central Natl. Bank of Canajoharie (Fonda Branch) 3.2 Natl. Com. Bk. & Tr. Co. of Albany 169.6 168.4 Natl. Com. Bk. & Tr. Co. of Albany (Fultonville Branch) 1.5 In the City of Johnstown, The Johnstown Bank, a bank having IPC deposits of only $8,150,000, must presently compete with the State Bank of Albany, a bank having IPC deposits of over $193,000,000. The Johnstown branch of this latter bank, alone, has IPC deposits of $15,000,000, almost twice those of the merging bank. The merging bank also competes with a branch of a second large bank, National Commercial Bank & Trust Company of Albany, located some five miles away. Further, the merging bank, in its service area, is competing with four additional local independent banks, all of which are larger than itself. Although the merger will eliminate a small independent bank in the service area involved, there will still remain therein a number of larger independents. However, the entry of another large commercial bank into the service area of the four remaining smaller independent banks may further affect adversely the ability of such banks to effectively compete. The application shows that one of the main reasons for the merging bank seeking merger with a large bank is its difficulties in trying to compete with branches of much larger banks which have recently moved into its service area by means of mergers and acquisition of other independent banks. For notes see p. 183. 162 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (4-13-61) The proposed merger would combine two banks about 45 miles apart which are not in direct competition. As a branch of a larger institution, The Johnstown Bank would be able to provide more effective competition to the branches of the two large Albany banks with which it is now in direct competition. The capacity of The Johnstown Bank has proven insufficient to meet the requirements of the large industrial accounts in the area, the bank's growth has been sluggish, it has a management succession problem, and its earnings have been adversely affected by heavy interest expense on savings and the necessity for employing outside assistance to manage certain aspects of its instalment loan portfolio. Although the merger reflects a continuation of the trend toward greater concentration of area resources into the larger Albany commercial banks, there is no indication it will work any hardship on existing unit banks. Substituting a branch of a progressive bank for a bank with rather serious problems should stimulate competition in the Johnstown area, particularly in Johnstown where the largest bank in the area operates a branch. No. 15—Commonwealth Trust Company of 117.7 Pittsburgh, Pittsburgh, Pa. 5 11 to merge with Butler Savings and Trust Company, 38.4 Butler, Pa. SUMMARY REPORT BY ATTORNEY GENERAL (5-8-61) While no banking factors would require a merger of these banks, with equal force there would be no apparent adverse effect upon competition. This merger would seem to promote increased competition between these banks and the two large banks, Mellon National Bank & Trust Company and Pittsburgh National Bank, which compete in the service areas of both the acquiring and merging banks. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (5-29-61) There is virtually no competition between these two banks whose service areas are separated by a heavily populated area containing several offices of commercial banks. The continuing bank would provide broader services, and these together with its increased capacity would probably stimulate competition in the Butler area, which is currently served by branches of both Mellon National Bank & Trust Company and Pittsburgh National Bank, major Pittsburgh institutions. For notes see p. 183. 163 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated No. 16—Gloucester Safe Deposit & Trust 9.5 2 Company, Gloucester, Mass. i • to merge with The Cape Ann National Bank of 7.1 2 Gloucester, Gloucester, Mass. SUMMARY REPORT BY ATTORNEY GENERAL (3-23-61) It is our view that the proposed merger would have the effect of eliminating substantial competition between the participating banks and would tend to create a monopoly in commercial banking in the Gloucester area. The main offices of the banks are at 154 Main Street and 191 Main Street, respectively, and both banks transact substantially the same type of commercial banking business. The similarity of the banking businesses of each, the proximity of their main offices to each other, the fact that the customers of both banks come from the same service area, and the figures regarding common depositors and borrowers with deposits in or loans from both banks, all indicate that competition between these banks is substantial. The merger would, of course, eliminate this competition. In addition, the merger would tend to create a monopoly of the commercial banking business in the Gloucester area. Gloucester Safe Deposit & Trust Company is the largest commercial bank in the area., with IPC deposits of approximately 29.9 per cent and loans and discounts of approximately 28.6 per cent. Cape Ann National Bank is the second largest bank in the area, with IPC deposits of 22.7 per cent of those in the area and loans and discounts of 23.4 per cent. The resulting bank, with IPC deposits of 52.6 per cent and loans and discounts of 52 per cent of those in the service area would be substantially more tham three times the size of its nearest competitor. By increasing an already-existing substantial advantage in size which each of the participating banks enjoys over all other competitors, the merger also would promote a tendency toward further concentration of commercial banking. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (5-31-61) There are at the present time three commercial banks, a savings bank, and a cooperative bank (State-chartered savings and loan association) located in the city of Gloucester, while within the Gloucester service area two offices of commercial banks and an office of a mutual savings bank provide additional competition for Gloucester financial institutions. The following schedule shows the offices, total IPC deposits, and loans of commercial and savings banks situated in Gloucester and in the service area of the two participants as of December 31, 1960. For notes see p. 183. 164 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. Total IPC deposits Loans Number of Per cent in Per cent in Bank offices Amount service area Amount service area (in mil- (in millions of lions of dollars) Com. All dollars) Com. All banks banks banks banks Gloucester Safe Deposit 2 7.3 30.4 16.6 4.9 28.8 15.7 Cape Ann Natl. Bank 2 5.6 23.4 12.7 4.0 23.3 12.8 Resulting Bank 4 12.9 53.8 29.3 8.9 52.1 28.5 Gloucester Natl. Bank 1 4.1 17.1 9.3 2.6 15.3 8.3 Rockport Natl. Bank 1 3.8 15.8 8.6 2.6 15.3 8.4 First Natl. Bk. of Ipswicha (Branch at Essex) 1 3.2 13.3 7.2 3.0 17.3 9.5 Total—com. banks 7 24.0 100.0 54.4 17.1 100.0 54.7 Cape Ann Savings Bank 1 16.7 37.8 11.6 37.3 Granite Savings Bank, Rockport 1 3.4 7.8 2.5 8.0 Total—all banks 9 44.1 .... 100.0 31.2 .... 100.0 a Deposits and loans for this bank include both head office and branch totals, although the head office is located outside the service area of the participants. Gloucester Safe Deposit & Trust Company is the largest commercial bank in the city and in the service area which includes most of the Cape Ann Peninsula. The other participant, The Cape Ann National Bank of Gloucester, is the second largest commercial bank in the area. While the proposed merger would eliminate present and potential competition between these two banks, the larger resulting institution would provide expanded commercial banking services in the Gloucester service area and would provide increased competition with savings institutions, particularly mutual savings banks. In Massachusetts mutual savings banks are particularly effective competitors for commercial banks as they exercise somewhat broader powers than mutual savings banks in most other States. The Cape Ann Savings Bank is now and would remain the largest financial institution in the area holding about 38 per cent of total IPC deposits For notes see p. 183. 165 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961 ^Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. of commercial and savings banks in the area. Competition between savings banks and commercial banks is very keen, and in the Gloucester area deposits of savings banks increased 20 times as rapidly as did deposits of commercial banks during the period 1950 to 1960. No. 17—The Farmers & Merchants Bank of 3.9 Spencer, Spencer, N.Y. to merge with The First National Bank of Candor, 1.8 Candor, N.Y. SUMMARY REPORT BY ATTORNEY GENERAL (3-30-61) The Department of Justice has reported to the Board of Governors of the Federal Reserve System that the proposed merger of The Farmers & Merchants Bank of Spencer and The First National Bank of Candor would not have substantial adverse effects on competition. The Farmers & Merchants Bank is the only bank in the town of Spencer, a town with a population of 1,795 persons, located in Tioga County. Farmers & Merchants Bank offers banking services to a trade area in and around Spencer with the reported population of approximately 3,073 persons. As of October 3, 1960, Farmers & Merchants Bank reported total assets of $3,891,000, demand deposits of $1,173,000, time deposits of $2,364,000, and a capital account totaling $304,000. The First National Bank of Candor is the only bank in Candor, a town approximately nine miles east of Spencer in Tioga County. Population of Candor is listed as 802 persons, and the bank service area surrounding Candor is reported to have a population of 3,484 persons. First National, as of October 3, 1960, reported total assets of $1,778,000, demand deposits of $791,000, time deposits of $750,000, and a capital account totaling $237,000. The First National Bank of Candor has not been a vigorous competitive factor in its area in recent years. The Farmers & Merchants Bank of Spencer, on the other hand, has been receiving deposits and making loans to the Candor area, in such amounts that it considered it advisable to merge with the Spencer bank to better serve that area. Following these efforts, the individuals owning and managing the Spencer Bank acquired stock in, and control of, the Candor bank. In view of the size of the banks and the existence of substantial banking services available in nearby cities, it does not appear that a merger of The First National Bank of Candor and The Farmers & Merchants Bank of Spencer would have a substantial adverse effect upon competition. For notes see p. 183. 166 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 196V—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (5-31-61) In September 1960 stockholders of The Farmers & Merchants Bank of Spencer acquired control of The First National Bank of Candor as the elderly management of that bank had indicated a desire to sell the controlling interest in the bank. The Candor bank, about 10 miles from Spencer, had been operated very conservatively for a number of years during which time the Spencer bank had obtained a significant amount of business originating in the immediate area of Candor; the Candor bank had very little business originating in the immediate area of Spencer. Younger and aggressive management has been installed in the Candor bank since stockholders of the Spencer bank acquired control of the bank in Candor. The proposed merger will unite two affiliated corporate entities, and the resulting bank should be able to compete more effectively with the larger banks in the area without adversely affecting the local independent banks. No. 18—United California Bank, 2,030.7 122 Los Angeles, Calif. 125 to merge with Bank of Encino, Los Angeles, Calif. 20.4 SUMMARY REPORT BY ATTORNEY GENERAL (5-1-61) United California Bank operating 122 offices throughout the State, including five in San Fernando Valley, proposes to acquire Bank of Encino operating three offices in the San Fernando Valley area of Los Angeles. In addition, Bank of Encino has obtained approval to establish a branch bank in a community in which United has a branch, and United has pending an application for a branch bank in a community in which Bank of Encino has a branch bank. United also has received approval for a branch and applied for another branch in the San Fernando Valley area. Bank of Encino, with assets of $20,400,000, had experienced rapid growth for four years but has not progressed much since 1957. It faces strong competition from numerous branches of Bank of America and Security-First National, California's two largest banks, among others. The same applies to other small banks in the area. The acquisition would increase United California's share of estimated bank deposits in the San Fernando Valley from 10 per cent to 13 per cent. Moreover, it would eliminate substantial actual and potential competition between the merging banks. The acquisition is also another step in the continuing disappearance of independent banking in California brought about through mergers and acquisitions. The effect upon competition of this acquisition would appear to be adverse and would contribute to the growing concentration in banking in the State of California. For notes see p. 183. 167 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-16-61) At the present time there are 12 banks operating a total of 63 offices in the San Fernando Valley, a densely populated residential area of the city of Los Angeles approximately 18 miles north of the downtown business district. Bank deposits in this area total approximately $516.4 million. Also, eight savings and loan associations with aggregate withdrawable balances exceeding $1,447.8 million and loans exceeding $1,451.1 million provide keen competition. In the San Fernando Valley, United California Bank and Bank of Encino are currently operating five and three offices, respectively, and each has one other office approved but not yet established. The existing offices of each of these banks are no nearer than two miles from offices of the other. The proposed merger would not reduce the number of banking offices available to the public and there would remain in the area a number of alternative sources of banking services. While an independent bank would be eliminated, Bank of Encino, through its reluctance to provide needed capital and its failure to establish additional offices, is not adequately serving the needs of the area. The resulting bank would provide the community and present and potential customers of Bank of Encino with a stronger banking institution offering a wider range of banking services, greater capital, and resources. The proposed merger would intensify competition among the large banks in the areas now served by Bank of Encino without adverse effect on the present banking situation. No. 19—Bank of Powhatan, Incorporated, 10.3 1 Powhatan, Va. to merge with Cumberland County Bank, 1.3 1 Cumberland, Va. SUMMARY REPORT BY ATTORNEY GENERAL (5-25-61) Bank of Powhatan, Inc. (Powhatan) and Cumberland County Bank (Cumberland), both relatively small banks operating in rural areas, seek approval to merge. The combination of Powhatan and Cumberland will increase the size of the resulting bank to a point where its former competitors, and potential entrants, may be at a competitive disadvantage. However, in view of the fact that both banks are controlled by the same parties, and the merging bank is quite small, it does not appear that the effect on competition would be substantial. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (6-29-61) Powhatan is about 30 miles west of Richmond and 20 miles east of Cumberland. Both Bank of Powhatan and Cumberland County Bank serve For notes see p. 183. 168 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. rural areas and, due largely to a very close relationship, do not compete. Twenty-three stockholders with equity interests in both banks own 31 per cent of the stock of Bank of Powhatan and 45 per cent of the stock of Cumberland County Bank. The two banks have the same president and are served by other directors in a common capacity. Cumberland County Bank was organized by officers and directors of Bank of Powhatan and has, for practical purposes, been operated since its organization as a branch of Bank of Powhatan. The proposed merger will formally incorporate into a single entity an existing branch-bank relationship which operates as two separate corporations and will permit economies of operation. Merging these two banks probably will have no adverse effect on smaller banks in the area. No. 20—United California Bank, 2,030.7 122 Los Angeles, Calif. 123 to merge with Farmers and Merchants Bank, 6.0 1 Hemet, Calif. SUMMARY REPORT BY ATTORNEY GENERAL (5-12-61) In cognizance of the position of United California and the danger to the whole of its continuing the practice of small acquisitions, this merger would appear to have significant adverse competitive effects as well as contributing to the further decrease of commercial banking in the State of California to a dangerous degree. It is the opinion of this Department that the merger would lessen existing and potential competition in the Hemet service area and would further increase concentration in commercial banking in the State of California. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-10-61) Farmers and Merchants Bank, Hemet, is situated about 85 miles east of downtown Los Angeles and separated from the Los Angeles metropolitan area by natural barriers and lack of highway access. The primary service area of the bank has a population of about 22,000 and is contained entirely within the Hemet-San Jacinto Valley in Riverside County. Although Farmers is the oldest bank in the area, its growth has been less than other banks serving the same area and Riverside County as a whole. This lack of growth has been due primarily to ultraconservative lending policies and unprogressive methods of management. In addition, the chief executive officer, who owns more than 25 per cent of the outstanding capital stock of the bank, is over 70 years of age and is eager to retire at an early date. Provision for adequate management succession has not been made up to this time. For notes see p. 183. 169 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. The Hemet office of Security-First National Bank, Los Angeles, is the principal competitor within the service area of Farmers Bank, and offers a complete range of banking and trust services. Security-First National, the second largest commercial bank in the State, also has an office at Perris, 16 miles west of Hemet, and although not in the same primary service area, this office competes at the western edge of the Hemet-San Jacinto Valley. The United California Bank office at San Jacinto, three miles north of Hemet, is its nearest competing office to Farmers Bank. Subsequent to the proposed merger the applicant would hold less than 6 per cent of total deposits and would operate four of 37 banking offices in Riverside County, including offices at Riverside and Corona, 28 and 45 miles from Hemet, respectively. The proposed merger would, to a minute degree, increase the concentration of banking resources in the State of California held by one of its largest banks. However, the resulting bank would be a more active competitor in the area while providing the community and present and potential customers of Farmers and Merchants Bank with a stronger, more aggressive banking institution offering a complete range of public services. No. 21—Dauphin Deposit Trust Company, 95.1 6 Harrisburg, Pa. 10 to merge with Camp Curtin Trust Company, 19.7 4 Harrisburg, Pa. SUMMARY REPORT BY ATTORNEY GENERAL (12-16-60) It is our view that the proposed merger would have the effect of eliminating a substantial amount of competition in Harrisburg between the two banks. Although the main offices of the banks are approximately 1.8 miles apart, the intermediate area is a well-settled residential and business area. Total borrowings of loan accounts common to both banks exceed $2,500,000, the deposits of common depositors total approximately $7,000- 000, and the banking services offered by both banks are substantially similar. Dauphin indicates that following the merger, in order to accomplish centralized and uniform accounting operations, the higher charges of Dauphin will be made on certain loans and account activity at the Camp Curtin offices. In addition, the merger would tend to create in Dauphin a monopoly of the commercial banking business in Harrisburg. Dauphin is now the largest commercial bank and trust company in Central Pennsylvania, with 22.56 per cent of deposits and 25.98 per cent of trust funds in its service area. The resulting bank would have approximately 27 per cent of deposits and trust funds in its service area. By increasing an already-existing sub- For notes see p. 183. 170 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. stantial advantage in size which Dauphin enjoys over its closest competitors, the merger would promote a tendency toward monopoly and would also encourage the existing tendency toward further concentration of commercial banking in the area. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-12-61) While Dauphin Deposit Trust Company and Camp Curtin Trust Company are both located in Harrisburg, their nearest offices are 1.8 miles apart and separated from each other by a well-established residential and business area. Although competition existing between these two banks would be eliminated by the proposed merger, such competition is not particularly keen as the principal areas of service are somewhat different and since Dauphin specializes in large loans to industry and business whereas Camp Curtin extends primarily consumer credits. The consolidated institution would be the largest commercial bank headquartered in Harrisburg; however, such concentration of banking resources into one bank probably would not create an atmosphere in which smaller banks would find it unduly difficult to operate profitably. Dauphin Deposit has been denied State supervisory permission to establish an original branch in the area now served primarily by Camp Curtin; thus it is only by merging that Dauphin Deposit can enter Camp Curtin's area to provide the broader banking services and increased capacity needed to serve more fully and effectively the expanding needs of this growing suburban area. There would remain a number of alternative banking sources in Harrisburg; moreover, this merger would solve a management succession problem which now exists at Camp Curtin Trust Company. No. 22—Wachovia Bank and Trust Company, 819.6 79 Winston-Salem, N.C. 80 to merge with First National Bank of Thomasville, 13.2 1 Thomasville, N.C. SUMMARY REPORT BY ATTORNEY GENERAL (5-16-61) Wachovia Bank and Trust Company, the largest bank in the southeast, proposes to merge with the First National Bank of Thomasville. First National operates one office and has total assets of $13,196,000, total net loans and discounts of $5,800,000, total deposits of $11,475,000, and total capital accounts of $1,391,733. Wachovia has a recent history of mergers and acquisitions which has contributed substantially to the wave of bank mergers in North Carolina, a State which permits branch banking. This merger would eliminate still another independent unit bank which provides substantial competition to Wachovia. We, therefore, conclude that the effect on competition would be adverse. For notes see p. 183. 171 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (7-27-61) Wachovia Bank and Trust Company with total resources in excess of $800 million on December 31, 1960, is the largest bank in North Carolina. It operates on a local, regional, national, and international scale and has 79 offices operating or approved in 28 counties located in a somewhat scattered pattern from east to west across the State. First National Bank of Thomasyille, with resources in excess of $11 million as of December 31, 1960, has its main and only office in Davidson County. There are five other commercial banks in Davidson County with seven offices; the banks range in size from about $1 million to about $14 million in total deposits and have about $31 million deposits among them. Wachovia has offices in three of the six counties bordering on Davidson County but has no offices in Davidson County. Although this merger would eliminate a degree of competition and an alternative banking outlet, these factors are more than offset by the positive benefits flowing from the merger. This merger would make available to the residents of Thomasville substantially broadened banking services and also* solve a rather serious management succession problem confronting the national bank. There would remain a number of other banking outlets, including offices of the second and third largest banks in the State, reasonably convenient to residents of Thomasville, providing continuing competitive services. Smaller banks in the area probably will not experience undue adverse effects from the merger. 23—First Bank and Trust Company, 41.3 1 Perth Amboy, N.J. to acquire the assets and assume the liabilities of The Fords National Bank, Fords, N.J. 12.8 SUMMARY REPORT BY ATTORNEY GENERAL (7-6-61) First Bank and Trust Company, the leading bank in its immediate service area with 62.4 per cent of IPC deposits and 46.6 per cent of loans, had as of April 12, 1961, total assets of $41,295,000, total deposits of $36,581,000, and loans and discounts of $18,120,000. The Fords National Bank is also the dominant bank in its immediate service area controlling 42.9 per cent of IPC deposits and this bank had, as of April 12, 1961, total assets of $12,844,000, total deposits of $11,812,000 and loans and discounts of $3,883,000. The resulting bank in the combined and expanded trade area would rank first in size with 43 per cent of IPC deposits and 41.5 per cent of loans while the second largest bank would have only 14.9 per cent of IPC deposits and 23.1 per cent of loans. Both banks have grown substantially in recent years and the merger appears to be unnecessary for their normal development. Trie merger For notes see p. 183. 172 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961'—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. would serve to remove another independent bank and thereby eliminate the competition presently existing between the participating banks. The substantial increase in concentration of banking resources in the area would adversely affect the remaining smaller competitors which inevitably will lead toward further concentration in the general banking area. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-7-61) There are 22 banks with head offices in Middlesex County operating 37 offices and holding total deposits of $333,545,000. The purchase of assets and assumption of liabilities of The Fords National Bank, Fords, New Jersey, by First Bank and Trust Company, Perth Amboy, would combine the second and tenth largest banks in the county and the continuing bank would become the largest bank in Middlesex County. Although this proposal would eliminate one competing bank and a fairly significant degree of competition, the continuing bank with its increased size, broader banking services, and new management more inclined to utilize the branching privileges of State law, would be likely to serve more effectively the growing needs of an expanding residential and industrial area. There would remain a number of alternative banking outlets, and it does not appear that consummation of this proposal would create an environment wherein smaller area banks would find it more difficult to compete. No. 24—The Home Banking Company, 5.6 Gibsonburg, Ohio. to consolidate with The Gibsonburg Banking Company, 1.7 Gibsonburg, Ohio. SUMMARY REPORT BY ATTORNEY GENERAL (7-13-61) The Home Banking Company has deposits of $5,075,000, loans and discounts of $2,359,000, and assets of $5,580,000. Gibsonburg Banking Company has deposits of $1,575,000 of which over two-thirds are time deposits, loans and discounts of $478,000 and assets of $1,748,000. Both banks are located in Gibsonburg, a small town about 20 miles south of Toledo. In our view the merger would eliminate a degree of existing competition between Home and Gibsonburg and increase the concentration of banking resources in the trade area. Because of the relative unimportance of Gibsonburg as a competitor in such commercial banking services as demand deposits and loans, it is not believed these effects on competition would be significantly adverse. For notes see p. 183. 173 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (8-23-61) While the proposed consolidation of The Gibsonburg Banking Company with The Home Banking Company would eliminate one of Gibsonburg's two banks, in view of the smaller bank's relative unimportance as a competitor, a local lessening of competition would not be significant, nor should the enhanced competitive ability of the merged bank be adverse to the banks situated in the immediate trade area. The continuing bank would be able to compete more effectively with the larger banks in Fremont, 13 miles distant, and its customers would have a larger source of credit at their disposal. The continuing bank will be able to provide somewhat expanded banking services in Gibsonburg, and the proposed consolidation will solve a management succession problem confronting The Gibsonburg Banking Company. No. 25—State Bank of Albany, Albany, N.Y. 424.0 21 to merge with 22 The Fort Plain National Bank, 8.1 1 Fort Plain, N.Y. SUMMARY REPORT BY ATTORNEY GENERAL (4-20-61) State Bank of Albany, with 21 offices and $423,982,000 in total assets, proposes to acquire The Fort Plain National Bank, with one office, located about 40 miles west of Albany, and total assets of $8,055,000. State Bank now has three branches immediately adjacent to and surrounding the service area of Fort Plain, and in another application, has recently sought to acquire three additional branches 20 miles north of Fort Plain. The merger would eliminate one of the two local competitors and give State Bank a dominant position in the Fort Plain area. It would also greatly enhance State Bank's already leading position in the several counties west of Albany. The competitive disadvantage thus forced upon the one remaining small competitor in the Fort Plain area would result in a tendency toward monopoly in commercial banking in that area. The proposed acquisition is only one of several other acquisitions recently proposed or consummated in this area by large Albany banks, a pattern of activity that appears to threaten the existence of local banks in the region. ADDITIONAL COMMENT BY ATTORNEY GENERAL (6-30-61) (Based on supplemental information furnished by the Applicant.) It is also noted that State Bank presently proposes to acquire The Fulton County National Bank and Trust Company of Gloversville, which will give State Bank two additional offices in the Johnstown-Gloversville area, For notes see p. 183. 174 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. and that on May 1, 1961, the Johnstown Bank was merged into the First Trust Company of Albany. As we stated in our supplemental June 20, 1961, letter to you, State Bank's acquisition of The Fulton County National Bank would leave only three independent unit banks in Fulton County. Moreover, it is noted that on February 20, 1961, The National Bank of Amsterdam merged into The National Commercial Bank and Trust Company of Albany. The result of this merger, as pointed out in the letter of Mr. Karl A. Wohlgemuth to the Department of Justice, a copy of which was mailed to the Board of Governors on May 23, 1961, is to leave only three independent banks in Montgomery County, one of which would be eliminated by State Bank's acquisition of Fort Plain. We also refer again, as we did in our June 20, 1961, letter, to the competitive advantages enjoyed by a large, multiunit bank by virtue of having a number of widely separated branches, particularly the advantage of great flexibility in the use of loanable funds. As its supplemental information shows, State Bank has made extensive use of this advantage; the loandeposit ratios of its offices range from 21.8 per cent to 112.7 per cent. The competitive advantage thus enjoyed by State Bank has developed largely through acquisitions and will be considerably enhanced by State Bank's proposed acquisitions of Fort Plain and the Fulton County National Bank. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (9-6-61) State Bank of Albany, the largest bank in New York's Fourth Banking District, competes generally throughout the district. However, competition between it and Fort Plain National is not particularly keen primarily because it has no offices within 20 miles of Fort Plain. The moderate amount of competition eliminated would be more than offset by such positive benefits flowing from the merger as improved banking services and a larger lending base available to Fort Plain National's customers, solution of Fort Plain's rather severe management problem, and improvement of the national bank's earnings. There would remain alternate banking facilities in the area, and while competition in the Fort Plain area would be greater, banks in the area have competed successfully with branches of large banks for some time. No. 26—Manufacturers Trust Company, 3,845.4 120 New York, N.Y. 130 to merge with The Hanover Bank, New York, N.Y. 2,156.4 10 SUMMARY REPORT BY ATTORNEY GENERAL (5-19-61) Two of New York City's leading commercial banks seek approval to merge. If approval is granted, Manufacturers Trust Company will merge with the Hanover Bank. For notes see p. 183. 175 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 196r--Continiied Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. There are numerous adverse competitive effects which would result from the proposed consolidation. They include the following: 1. Local markets (New York City and the New York Metropolitan Area) a. The deposit and loan concentration indices in New York City are unduly high. (1) Five banks account for: (a) 70.59 per cent of demand deposits. (b) 73.09 per cent of commercial amd industrial loans. (c) 70.29 per cent of total deposits. (d) 72.24 per cent of total loans. b. Concentration of deposits and loans in New York City will be unduly augmented if the proposed merger is consummated: (1) Five banks will account for: (a) 76.02 per cent of demand deposits (an increase of 5.43 per cent). (b) 78.36 per cent of commercial and industrial loans (an increase of 5.27 per cent). (c) 75.22 per cent of total deposits (an increase of 4.93 per cent). (d) 77.19 per cent of total loans (an increase of 4.95 per cent). c. Substantial actual and potential competition between the merging banks will be eliminated in at least the following services. (1) Demand deposits. (2) Commercial and industrial loans. 2. National market a. Concentration of deposits, loans, and capital in the United States as a whole will also be increased if the proposed merger is consummated. This proposed merger is but the latest of a series of mergers among major New York City banks in recent years which have eliminated the competition between the merging banks and substantially increased concentration in commercial banking in that leading financial center of the nation. The proposed merger will eliminate another substantial factor in competition, eliminate substantial existing and potential competition between the merging banks, increase the trend toward oligopoly in commercial banking, and further adversely affect the ability of the smaller banks to effectively compete unless they too merge or consolidate with other banks. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (9-6-61) As of December 31, 1960, there were in New York City 33 banks conducting a general commercial banking business; they operated 569 banking For notes see p. 183. 176 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. offices and had aggregate deposits of approximately $37.3 billion. In terms of deposits, Manufacturers Trust Company and Hanover Bank were the fifth and eighth largest of the commercial banks; they held, respectively, 9.3 per cent and 5.1 per cent of the deposits of such banks and 21.1 per cent and 1.8 per cent of commercial banking offices. The proposed merger would combine these two banks to form the third largest commercial bank in New York City, which would hold 14.4 per cent of total commercial deposits and 22.9 per cent of commercial banking offices. While banking comparisons on a national basis are in general less significant than local or regional comparisons, it may be noted that in terms of deposits Manufacturers and Hanover ranked sixth and fourteenth among all commercial banks of the country, and held 1.5 per cent and .8 per cent, respectively, of the deposits of those banks. The total deposits of the 22 commercial banks in the United States having deposits of $1 billion or more aggregated $68.9 billion, of which Manufacturers had 5.0 per cent and Hanover 2.7 per cent. The resulting bank would rank fourth in size nationally, with 2.3 per cent of deposits of all commercial banks and 7.8 per cent of deposits held by the $ 1 billion group. Although Manufacturers Trust Company has many large accounts, through its widespread branch system it has long emphasized "retail banking," that is, the serving of large numbers of relatively small depositors and small borrowers. The business of Hanover Bank is confined almost exclusively to banks and large corporate customers, and it is characterized as a "wholesale bank." The combining of these two generally different and complementary banking functions would serve the public interest and the convenience and needs of the community through greater opportunity for diversification of risks, improved specialization, and broader banking services. While the proposed merger would increase the percentage of deposits held by the five largest commercial banks in the city from 71.9 per cent to 77.0 per cent and the offices of these banks from 73.5 per cent to 75.3 per cent, this is more than offset by the resulting advantages. The continuing bank, with its increased diversification and larger lending limit, would be able to compete more effectively, particularly in the national and international fields, with the two largest banks in New York. The merger would tend to stimulate competition without significantly affecting the number or competitive strength of alternative sources of banking services. No. 27—Farmers State Bank of Alto, 1.5 Alto, Mich. to consolidate with The Edwin Nash State Bank, 1.1 Clarksville, Mich. SUMMARY REPORT BY ATTORNEY GENERAL (9-1-61) The consolidating banks are located seven miles apart, in a predominately rural area. Within a radius of twenty miles are an additional seven For notes see p. 183. 177 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. small communities with a total of eight commercial banks. The data presented indicates that each of these banks services primarily the small community wherein it is situated, together with the surrounding rural area. There appears to be little present competition between the consolidating banks, and, although the merger will result in the elimination of one independent bank while increasing the concentration of bank resources, it does not appear that the proposed consolidation will have a substantial adverse effect on competition. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (9-26-61) Farmers State Bank of Alto and The Edwin Nash State Bank, two small banks seven miles apart, have common management and common major stockholders and there is little competition between them. Consolidating these two institutions would result in a bigger bank able to provide increased services and a larger lending limit for its customers. Although the continuing bank will remain the smallest in the area, it could provide more effective competition to other area banks. No. 28—Liberty Bank and Trust Company, 194.2 25 Buffalo, N.Y. 26 to merge with Exchange Bank, Oakfield, N.Y. 5.5 1 SUMMARY REPORT BY ATTORNEY GENERAL (8-24-61) The Liberty Bank and Trust Company operates its main office in Buffalo with 24 branches in Erie, Chautauqua, and Niagara Counties. It does not presently operate a branch in Genesee County, in which the Exchange Bank is located. As of April 12, 1961, Liberty had total deposits of $176,539,000, net loans and discounts of $107,901,000, and total assets of $194,155,000. Thus far in 1961, Liberty has already acquired the National Bank of Fredonia, New York, and the Erie County Trust Company, East Aurora, New York. These mergers added deposits of over $20 million and loans of over $12 million to Liberty's resources. The Exchange Bank is located in Oakfield, an agricultural and residential area some 43 miles northwest of Buffalo. It has only one office and has participated in no mergers. As of April 12, 1961, it had total deposits of $5,012,000, net loans and discounts of $3,027,000, and total assets of $5,491,000. The merger appears to be part of an extensive program of acquisitions contemplated by Liberty. It would eliminate the Exchange Bank which appears to be a strong unit bank in its own area. The possibility that Liberty may be able to offer certain improved services to Exchange's customers is at least partially offset by Liberty's plan to increase checking account charges to the higher level commanded by the large Buffalo banks. For notes see p. 183. 178 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. Furthermore, the proposed merger would leave the Oakfield area with only three other unit banks. While the history of the area does not clearly show that these banks would be placed at an immediate disadvantage by Liberty's entry, approval of the present application would create a climate favorable to further mergers resulting in the disappearance of the few remaining unit banks. We therefore believe that the effect of this merger on competition would be adverse. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-10-61) Liberty Bank and Trust Company, the third largest of the three major banks in Buffalo, has in the past restricted its operations primarily to Buffalo and the immediate surrounding area. It has only recently begun to expand its branch system into the suburban and outlying areas in an effort to strengthen its competitive position with the widespread branch systems of the two substantially larger Buffalo banks. Consummation of the proposed merger would combine Liberty Bank and Trust Company with a small independent bank located about 43 miles from Buffalo which is not in direct competition with the Liberty Bank. The merger would provide the latter with an office in an area in which it is not now represented but in which the two larger Buffalo banks have long been established. The continuing Liberty Bank with its broader banking services and greater resources would be able to provide present and potential customers of the small Oakfield bank with banking services which are not now made available by the Oakfield bank. Moreover, Liberty with a substantially larger lending limit would be in a better position to satisfy the credit needs of the Oakfield area and would provide a third source of credit for large borrowers. Its entry into the area would intensify competition without creating an environment in which the smaller banks would find it difficult to operate profitably. No. 29—Elston Bank & Trust Company, 15.2 Crawfordsville, Ind. to acquire the assets and assume the liabilities of The Waynetown State Bank, 2.1 Waynetown, Ind. SUMMARY REPORT BY ATTORNEY GENERAL (8-2-61) Elston Bank & Trust Company has total assets of $15,183,000, total deposits of $13,815,000, and net loans and discounts of $7,117,000. Its main office and one branch are located in Crawfordsville, Indiana, with a third branch located in Waveland, approximately ten miles to the south. The Waynetown State Bank has total assets of $2,101,000, total deposits of $1,868,000, and net loans and discounts of $941,000. Its only office is located in Waynetown, approximately eight miles west of Crawfordsville. For notes see p. 183. 179 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 1961—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated SUMMARY REPORT BY ATTORNEY GENERAL—CONT. In our view the proposed merger would have the following effects on competition: Direct competition between Elston and Waynetown would be eliminated; one of nine independent factors in competition in the Montgomery area would be eliminated; the size of the Elston Bank would be increased by over 10 per cent, greatly strengthening its dominant position and raising serious questions of tendency to monopoly. The application reveals, however, that individual stockholders of Elston have already purchased 84.33 per cent of the shares of Waynetown. An amendment of the application states that the premium paid by these shareholders for Waynetown's stock will "be ultimately charged to undivided profits of Elston Bank & Trust Company." In view of the control of Waynetown by stockholders of Elston, competition between Elston and Waynetown will be eliminated regardless of the action taken on this application. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (10-13-61) Montgomery County, with a population of approximately 32,000 of which 14,000 reside in Crawfordsville, is served by eight banks operating eleven offices. Elston Bank & Trust Company, the largest bank in the county, competes generally throughout the county. The Waynetown State Bank, about 8 miles from Crawfordsville, is the only bank in a small community of approximately 900 persons. Competition between these two banks was virtually eliminated when stockholders and directors owning approximately 36 per cent of stock of the Crawfordsville bank purchased over one-half of the outstanding stock of The Waynetown State Bank. Although consummation of this proposal would add slightly to the size of the largest bank in the area, this unfavorable factor is more than offset by such benefits as expanded banking services in the Waynetown area and the ability to make larger loans for which a degree of need exists. Competition for the First National Bank of Crawfordsville's Wingate branch, six miles from Waynetown, may be increased; however, the national bank is the second largest in the area and well able to compete on even terms. No. 30—The Elyria Savings and Trust 34.4 Company, Elyria, Ohio to consolidate with The First Wellington Bank, Wellington, Ohio. SUMMARY REPORT BY ATTORNEY GENERAL (10-19-61) The proposed merger of The First Wellington Bank, Wellington, Ohio, into The Elyria Savings and Trust Company, Elyria, Ohio, would result in the merged bank having approximately 33 per cent of loans and about 32 per cent of IPC deposits in the combined service area of the two banks. The merger would result in two banks sharing about 75 per cent of the banking business in the Elyria-Wellington area. Thus, the effect on competition would be adverse. For notes see p. 183. 180 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (12-18-61) The proposed consolidation of The Elyria Savings and Trust Company and The First Wellington Bank would eliminate very little competition as virtually none exists between these two institutions which are 17 miles apart. A consolidation of these banks will provide broader banking services to the Wellington area. The applicant would become the second largest bank in Lorain County with IPC deposits increasing from $30,233- 000 to $35,200,000 or from 16.2 per cent to 19.0 per cent of total county IPC deposits of $185,332,000. As the second largest bank in Lorain County, the continuing bank could provide more effective competition for the largest bank in the county, without, however, creating an environment in which smaller banks will find it difficult to operate profitably. No. 31—The Fifth Third Union Trust 313.1 27 Company, Cincinnati, Ohio. to acquire the assets and assume the 29 liabilities of The Norwood-Hyde Park Bank and 21.0 Trust Company, Norwood, Ohio. SUMMARY REPORT BY ATTORNEY GENERAL (8-24-61) The Fifth Third Union Trust Company, Cincinnati, Ohio, proposes to acquire the assets and assume the liabilities to pay the deposits made in The Norwood-Hyde Park Bank and Trust Company, Norwood, Ohio, under the charter and title of The Fifth Third Union Trust Company. The proposed merger would eliminate substantial existing and potential competition between the two banks; combine the second and sixth largest banks in the Cincinnati area and add to the concentration of commercial banking resources in the hands of four large institutions. For these reasons the effect on competition would be adverse. BASIS FOR APPROVAL BY BOARD OF GOVERNORS (12-22-61) Of the ten banks headquartered in Hamilton County, the four largest ones have main offices in downtown Cincinnati. These four large banks hold $1,146,461,000 of total county deposits of $1,231,032,000. The Fifth Third Union Trust Company, second largest bank in Cincinnati, operates 27 offices and holds 26 per cent ($316,268,000) of total deposits of Hamilton County banks. Upon consummation of this proposal, Fifth Third would remain the second largest bank in Cincinnati with its share of county deposits being increased by less than 2 per cent. Fifth Third would continue, on the basis of total deposits, approximately $70 million smaller than the largest bank and about $49 million larger than the third largest bank. For notes see p. 183. 181 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS—CONT. While the moderate amount of competition existing between the Norwood-Hyde Park Bank and Trust Company and Fifth Third would be eliminated, this would be more than offset by a significant increase in competition resulting from consummation of the; proposal. The First National Bank of Cincinnati, largest bank in the city, has direct representation in both the Norwood and Hyde Park areas, and this proposal, which would enable Fifth Third to compete directly in an area where it does not now have offices, should increase competition between the two largest Cincinnati banks. The proposal would not reduce the number of alternate banking sources available in either Hyde Park or Norwood, as Fifth Third has no office in either of these areas, This proposal would solve a management succession problem existing at Norwood-Hyde Park Bank and Trust Company. No. 32—Wells Fargo Bank American Trust 2,733.2 128 Company, San Francisco, Calif. 130 to merge with The Fanners and Merchants National Bank 15.6 2 of Santa Cruz, Santa Cruz, Calif. SUMMARY REPORT BY ATTORNEY GENERAL (7-3-61) Wells Fargo Bank American Trust Company, the third largest bank in California, operates in nineteen counties with 125 banking offices and has, as of April 12, 1961, assets of $2,733,248,000, total deposits of $2,478- 980,000, and loans and discounts of $1,428,211,000. Acquisitions and mergers during the last ten years have been responsible for over one-fourth of Wells Far go's present deposit total. The Farmers and Merchants National Bank operates solely in the County of Santa Cruz and has, as of April 12, 1961, assets of $15,616,000, total deposits of $14,271,000, and loans and discounts of $7,888,000. A high degree of banking concentration exists in California with three large banks controlling 65.9 per cent of total deposits and 67.2 per cent of total loans and the nine largest controlling 89.6 per cent and 90.3 per cent of total deposits and loans, respectively. This pronounced concentration is due in large part to mergers and acquisitions and if the pattern continues independent banking in California threatens to be eliminated. The merger if approved would, by eliminating another independent bank, increase to a greater degree the already intense concentration of banking resources in the State of California. It would also eliminate the substantial effective competition presently existing between the banks seeking merger and would lessen existing and potential competition in the County of Santa Cruz. For notes see p. 183. 182 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED BY THE BOARD OF GOVERNORS DURING 19611—Continued Banking offices Name of bank, and type of transaction 2 Resources (in chronological order of determination) (in millions of dollars) In To be operation operated BASIS FOR APPROVAL BY BOARD OF GOVERNORS (12-22-61) The Farmers and Merchants National Bank of Santa Cruz, Calif., is situated 79 miles south-southeast of San Francisco and serves, generally, the western half of Santa Cruz County. Its primary service area contains about 45,000 persons and is separated from the eastern section of the county by the Santa Cruz mountains. The projected increase in residential and industrial activity in Santa Cruz County within the next few years is quite substantial. There are 14 banking offices of four banks with aggregate deposits of $135,699,000 operating in Santa Cruz County. Farmers and Merchants has its head office and one branch in Santa Cruz and Wells Fargo Bank has two offices at Watsonville, 16 miles east of Santa Cruz, serving only the eastern half of the county. Three of the remaining offices are operated by Bank of America NT & SA and seven by County Bank of Santa Cruz. There is virtually no overlapping of the areas served by Farmers and Merchants and the Watsonville offices of Wells Fargo Bank. The proposed merger would not alter significantly the competitive position of Wells Fargo Bank in its present 19-county service area, or in the State of California. Competition in Santa Cruz would probably be increased through the entry of Wells Fargo Bank, which would be able to compete more effectively with Bank of America and County Bank. While the proposed merger would to a very small degree increase the concentration of banking resources in California held by one of the largest banks in that State, the resulting bank would provide the community and the present and potential customers of Farmers and Merchants with a stronger, more aggressive banking institution offering a complete range of banking services, greater capital, and a larger credit source. 1 During 1961 the Board disapproved four mergers, etc. However, under Section 18(c) of the Federal Deposit Insurance Act, only those transactions approved by the Board must be described in its annual report to the Congress. 3 Except where specifically stated the merger, etc., was effected under the charter of the first named bank. 3 Sixty-five branches of First Western Bank and Trust Company will be transferred at the time of merger to a newly chartered bank of the same title to be organized before the merger. 4 Includes one branch to be acquired by The Liberty Bank of Buffalo in its merger with Erie County Trust Company, East Aurora, N.Y., listed as case No. 8. 5 East Brady branch of Butler Savings and Trust Company will be sold before the merger as it cannot legally be operated by Commonwealth Trust Company of Pittsburgh. e Head office of The Gibsonburg Banking Company will be closed. 183 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1961] Term expires WM. MCC. MARTIN, JR., of New York, Chairman January 31, 1970 C. CANBY BALDERSTON of Pennsylvania, Vice Chairman. January 31, 1966 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, 1974 GEORGE W. MITCHELL of Illinois January 31, 1962 WOODLIEF THOMAS, Adviser to the Board RALPH A. YOUNG, Adviser to the Board CHARLES MOLONY, Assistant to the Board CLARKE L. FAUVER, Assistant to the Board OFFICE OF THE SECRETARY MERRITT SHERMAN, Secretary KENNETH A. KENYON, Assistant Secretary ELIZABETH L. CARMICHAEL, Assistant Secretary LEGAL DIVISION HOWARD H. HACKLEY, General Counsel DAVID B. HEXTER, Assistant General Counsel G. HOWLAND CHASE, Assistant General Counsel THOMAS J. O'CONNELL, Assistant General Counsel JEROME W. SHAY, Assistant General Counsel WILSON L. HOOFF, Assistant General Counsel DIVISION OF RESEARCH AND STATISTICS GUY E. NOYES, Director FRANK R. GARFIELD, Adviser ROBERT C. HOLLAND, Adviser ALBERT R. KOCH, Adviser DANIEL H. BRILL, Associate Adviser LEWIS N. DEMBITZ, Associate Adviser KENNETH B. WILLIAMS, Associate Adviser DIVISION OF INTERNATIONAL FINANCE RALPH A. YOUNG, Director J. HERBERT FURTH, Adviser A. B. HERSEY, Adviser ROBERT L. SAMMONS, Adviser SAMUEL I. KATZ, Associate Adviser 184 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM—Cont. DIVISION OF BANK OPERATIONS JOHN R. FARRELL, Director GERALD M. CONKLING, Assistant Director M. B. DANIELS, Assistant Director JOHN N. KILEY, JR., Assistant Director DIVISION OF EXAMINATIONS FREDERIC SOLOMON, Director ROBERT C. MASTERS, Associate Director C. C. HOSTRUP, Assistant Director GLENN M. GOODMAN, Assistant Director HENRY BENNER, Assistant Director JAMES C. SMITH, Assistant Director BRENTON C. LEAVITT, Assistant Director LLOYD M. SCHAEFFER, Chief Federal Reserve Examiner DIVISION OF PERSONNEL ADMINISTRATION EDWIN J. JOHNSON, Director H. FRANKLIN SPRECHER, JR., Assistant Director DIVISION OF ADMINISTRATIVE SERVICES JOSEPH E. KELLEHER, Director HARRY E. KERN, Assistant Director OFFICE OF THE CONTROLLER J. J. CONNELL, Controller SAMPSON H. BASS, Assistant Controller OFFICE OF DEFENSE PLANNING INNIS D. HARRIS, Coordinator 185 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL OPEN MARKET COMMITTEE [December 31, 1961] 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) WATROUS H. IRONS (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) GEORGE W. MITCHELL (Board of Governors) J. L. ROBERTSON (Board of Governors) CHAS. N. SHEPARDSON (Board of Governors) ELIOT J. SWAN (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) EDWARD A. WAYNE (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) OFFICERS RALPH A. YOUNG, ERNEST T. BAUGHMAN, Secretary Associate Economist MERRITT SHERMAN, P. E. COLDWELL, Assistant Secretary Associate Economist KENNETH A. KENYON, ROBERT S. EINZIG, Assistant Secretary Associate Economist HOWARD H. HACKLEY, GEORGE GARVY, General Counsel Associate Economist DAVID B. HEXTER, GUY E. NOYES, Assistant General Counsel Associate Economist WOODLIEF THOMAS, BENJAMIN U. RATCHFORD, Economist Associate Economist AGENT FEDERAL RESERVE BANK OF NEW YORK; ROBERT G. ROUSE, Manager of System. Open Market Account During 1961 the Federal Open Market Committee met approximately every three weeks as indicated in the Record of Policy Actions taken by the Committee (see pp. 33-99 of this Report). 186 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL ADVISORY COUNCIL [December 31, 1961] MEMBERS District No. 1—OSTROM ENDERS, Chairman, Hartford National Bank and Trust Company, Hartford, Connecticut. District No. 2—GEORGE A. MURPHY, Chairman of the Board, Irving Trust Company, New York, New York. District No. 3—HOWARD C. PETERSEN, President, Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania. District No. 4—REUBEN B. HAYS, Chairman of the Board, The First National Bank of Cincinnati, Cincinnati, Ohio. District No. 5—ROBERT B. HOBBS, Chairman of the Board, First National Bank of Baltimore, Baltimore, Maryland. District No. 6—JOHN C. PERSONS, Chairman of the Board, The First National Bank of Birmingham, Birmingham, Alabama. District No. 7—HOMER J. LIVINGSTON, Chairman, The First National Bank of Chicago, Chicago, Illinois. District No. 8—NORFLEET TURNER, Chairman, The First National Bank of Memphis, Memphis, Tennessee. District No. 9—GORDON MURRAY, President, First National Bank of Minneapolis, Minneapolis, Minnesota. District No. 10—R. OTIS MCCLINTOCK, Senior Chairman of the Board, The First National Bank and Trust Company of Tulsa, Tulsa, Oklahoma. District No. 11—I. F. BETTS, President, The American National Bank of Beaumont, Beaumont, Texas. District No. 12—CHARLES F. FRANKLAND, President, The Pacific National Bank of Seattle, Seattle, Washington. OFFICERS HOMER J. LIVINGSTON, President GORDON MURRAY, Vice President HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Assistant Secretary EXECUTIVE COMMITTEE HOMER J. LIVINGSTON, ex officio GORDON MURRAY, ex officio OSTROM ENDERS GEORGE A. MURPHY REUBEN B. HAYS Meetings of the Federal Advisory Council were held on February 20-21, May 15-16, September 18-19, and November 20-21, 1961. The Board of Governors met with the Council on February 21, May 16, September 19, and November 21. 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. 187 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS AND BRANCHES [December 31, 1961] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Chairman and Federal Reserve Bank of— Deputy Chairman Federal Reserve Agent Boston Nils Y. Wessell Erwin D. Canham New York .. Philip D. Reed James DeCamp Wise Philadelphia . Henderson Supplee, Jr... Walter E. Hoadley Cleveland ... Arthur B. Van Buskirk.. Joseph H. Thompson Richmond ... Alonzo G. Decker, Jr... Edwin Hyde Atlanta Walter M. Mitchell.... Henry G. Chalkley, Jr. Chicago .... Robert P. Briggs James H. Hilton St. Louis Pierre B. McBride J. H. Longwell Minneapolis . Atherton Bean Judson Bemis Kansas City . Raymond W. Hall Homer A. Scott Dallas Robert O. Anderson Lamar Fleming, Jr. San Francisco F. B. Whitman 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 with and advise the Board of Governors. A meeting of the Conference of Chairmen was held on November 30- December 1, 1961, and was attended by members of the Board of Governors and also by the Deputy Chairmen of the Federal Reserve Banks. Mr. Van Buskirk, Chairman of the Federal Reserve Bank of Cleveland, who was elected Chairman of the Conference and of the Executive Committee in December 1960, served in that capacity until the close of the 1961 meeting. Mr. McBride, Chairman of the Federal Reserve Bank of St. Louis, 188 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. and Mr. Whitman, Chairman of the Federal Reserve Bank of San Francisco, served in 1961 with Mr. Van Buskirk as members of the Executive Committee, Mr. McBride also serving as Vice Chairman of the Conference. At the meeting held on December 1, 1961, Mr. Reed, Chairman of the Federal Reserve Bank of New York, was elected Chairman of the Conference and a member of the Executive Committee to serve for the succeeding year; Mr. Decker, Chairman of the Federal Reserve Bank of Richmond, was elected Vice Chairman and a member of the Executive Committee; and Mr. Whitman was re-elected as the other member of the Executive Committee. 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. Term expires DIRECTORS District I—Boston Dec. 31 Class A: William M. Lockwood... President, The Howard National Bank and Trust Company, Burlington, Vt 1961 William D. Ireland Chairman of the Executive Committee, State Street Bank and Trust Company, Boston, Mass 1962 Arthur F. Maxwell President, The First National Bank of Biddeford, Maine 1963 189 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961—Cont. Term expires DIRECTORS—Com. Dec. 31 Class B: Eugene B. Whittemore.. .President and Treasurer, The Morley Company, Portsmouth, N. H 1961 Milton P. Higgins Chairman of the Board, Norton Company, Worcester, Mass 1962 William R. Robbins Vice President and Controller, United Aircraft Corporation, East Hartford, Conn 1963 Class C: Erwin D. Canham Editor, The Christian Science Monitor, Boston, Mass 1961 Nils Y. Wessell President, Tufts University, Medford, Mass 1962 William Webster President, New England Electric System, Boston, Mass 1963 District 2—New York Class A: Henry C. Alexander Chairman of the Board, Morgan Guaranty Trust Company of New York, N. Y 1961 Cesar J. Bertheau Chairman of the Board, Peoples Trust Company of Bergen County, Hackensack, N. J 1962 A. Leonard Mott President, The First National Bank of Moravia, N.Y 1963 Class B: B. Earl Puckett Chairman of the Board, Allied Stores Corporation, New York, N.Y 1961 Kenneth H. Hannan Executive Vice President, Union Carbide Corporation, New York, N.Y 1962 Albert L. Nickerson Chairman of the Board, Socony Mobil Oil Company, Inc., New York, N.Y 1963 Class C.- James DeCamp Wise... .Formerly Chairman of the Board, Bigelow-Sanford, Inc., Frenchtown, NJ 1961 Philip D. Reed Formerly Chairman of the Board, General Electric Company, New York, N.Y 1962 Everett N. Case President, Colgate University, Hamilton,, N.Y.. 1963 Buffalo Branch Appointed by Federal Reserve Bank: John W. Remington Chairman of the Board, Lincoln Rochester Trust Company, Rochester, N.Y 1961 190 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Com. Dec. 31 Anson F. Sherman President, The Citizens Central Bank, Arcade, N.Y 1961 Howard N. Donovan President, Bank of Jamestown, N.Y 1962 Francis A. Smith President, The Marine Trust Company of Western New York, Buffalo, N.Y 1963 Appointed by Board of Governors: Whitworth Ferguson.... .President, Ferguson Electric Construction Co., Inc., Buffalo, N.Y 1961 Raymond E. Olson President, Taylor Instrument Companies, Rochester, N.Y 1962 Thomas E. LaMont Farmer, Albion, N.Y 1963 District 3—Philadelphia Class A: O. Albert Johnson President, The First National Bank of Eldred, Pa 1961 Frederic A. Potts President, The Philadelphia National Bank, Philadelphia, Pa 1962 J. Milton Featherer Executive Vice President and Trust Officer, The Penn's Grove National Bank and Trust Company, Penns Grove, N.J 1963 Class B: Frank R. Palmer Chairman of the Board, The Carpenter Steel Company, Reading, Pa 1961 R. Russell Pippin Treasurer, E. I. du Pont de Nemours and Company, Wilmington, Del 1962 Leonard P. Pool President, Air Products, Inc., Allentown, Pa... 1963 Class C.- Henderson Supplee, Jr President, The Atlantic Refining Company, Philadelphia, Pa 1961 David C. Bevan Vice President, Finance, The Pennsylvania Railroad Company, Philadelphia, Pa 1962 Walter E. Hoadley Vice President and Treasurer, Armstrong Cork Company, Lancaster, Pa 1963 District 4—Cleveland Class A: Ray H. Adkins President, The National Bank of Dover, Ohio. 1961 Francis H. Beam Chairman of the Board, The National City Bank of Cleveland, Ohio 1962 191 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—ConU Dec. 31 Paul A. Warner President, The Oberlin Savings Bank Company, Oberlin, Ohio 1963 Class B: Charles Z. Hard wick Executive Vice President, The Ohio Oil Company, Findlay, Ohio 1961 W. Cordes Snyder, Jr Chairman of the Board and President, Blaw- Knox Company, Pittsburgh, Pa 1962 Edwin J. Thomas Chairman of the Board and Chief Executive Officer, The Goodyear Tire & Rubber Company, Akron, Ohio 1963 Class C.- Arthur B. Van Buskirk.. .Vice President and Governor, T. Mellon and Sons, Pittsburgh, Pa 1961 Joseph H. Thompson Chairman of the Board, The Hanna Mining Company, Cleveland, Ohio 1962 Aubrey J. Brown Professor of Agricultural Marketing and Head of Department of Agricultural Economics, University of Kentucky, Lexington, Ky 1963 Cincinnati Branch Appointed by Federal Reserve Bank: Frank J. Van Lahr President, The Provident Bank, Cincinnati, Ohio 1961 LeRoy M. Miles President, First Security National Bank and Trust Company of Lexington, Ky 1962 Logan T. Johnston President, Armco Steel Corporation, Middletown, Ohio 1963 H. W. Gillaugh President, The Third National Bank and Trust Company of Dayton, Ohio 1963 Appointed by Board of Governors: Ivan Jett Farmer, Georgetown, Ky 1961 Howard E. Whitaker Chairman of the Board, The Mead Corporation, Dayton, Ohio 1962 Walter C. Langsam President, University of Cincinnati, Cincinnati, Ohio 1963 Pittsburgh Branch Appointed by Federal Reserve Bank: A. Bruce Bowden Vice President, Mellon National Bank and Trust Company, Pittsburgh, Pa 1961 192 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Samuel R. Evans President and Trust Officer, Windber Trust Company, Windber, Pa 1962 Chas. J. Heimberger President, The First National Bank of Erie, Pa. 1963 S. L. Drumm President, West Penn Power Company, Greensburg, Pa 1963 Appointed by Board of Governors: William A. Steele Chairman of the Board and President, Wheeling Steel Corporation, Wheeling, W.Va 1961 John T. Ryan, Jr President, Mine Safety Appliances Company, Pittsburgh, Pa 1962 G. L. Bach Dean, Graduate School of Industrial Administration, Carnegie Institute of Technology, Pittsburgh, Pa 1963 District 5—Richmond Class A: A. Scott Offutt Chairman of the Board and President, The First National Bank of Washington, D.C 1961 H. H. Cooley President, The Round Hill National Bank, Round Hill, Va 1962 Addison H. Reese President, North Carolina National Bank, Charlotte, N.C 1963 Class B: L. Vinton Hershey President, Hagerstown Shoe Company, Hagerstown, Md 1961 R. E. Salvati Chairman of the Board, Island Creek Coal Company, Huntington, W.Va 1962 Robert E. L. Johnson Chairman of the Board, Woodward & Lothrop, Incorporated, Washington, D.C 1963 Class C.- Edwin Hyde President, Miller & Rhoads, Inc., Richmond, Va. 1961 Alonzo G. Decker, Jr President, The Black & Decker Manufacturing Company, Towson, Md 1962 William H. Grier President, Rock Hill Printing & Finishing Company, Rock Hill, S.C 1963 193 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Com. Dec. 31 Baltimore Branch Appointed by Federal Reserve Bank: Harvey E. Emmart Senior Vice President and Cashier, Maryland National Bank, Baltimore, Md 1961 John W. Stout President, The Parkersburg National Bank, Parkersburg, W.Va 1961 James W. McElroy Director, First National Bank of Baltimore, Md. 1962 J. N. Shumate President, The Farmers National Bank of Annapolis, Md 1963 Appointed by Board of Governors: J. T. Menzies, Jr President, The Crosse & Blackwell Company, Baltimore, Md 1961 Gordon M. Cairns Dean of Agriculture, University of Maryland, College Park, Md 1962 Harry B. Cummings Vice President & General Manager, Metal Products Division, Koppers Company, Inc., Baltimore, Md 1963 Charlotte Branch Appointed by Federal Reserve Bank: I. W. Stewart Honorary Chairman of the Board, North Carolina National Bank, Charlotte, N.C 1961 G. G. Watts President, The Merchants & Planters National Bank, Gaffney, S.C 1961 G. Harold Myrick Executive Vice President and Trust Officer, First National Bank of Lincolnton, N.C 1962 W. W. McEachern President, The South Carolina National Bank, Greenville, S.C 1963 Appointed by Board of Governors: Clarence P. Street President, McDevitt & Street Company, Charlotte, N.C 1961 J. C. Cowan, Jr Vice Chairman of the Board, Burlington Industries, Inc., Greensboro, N.C 1962 George H. Aull Agricultural Economist, Clemson College, Clemson, S.C 1963 District 6—Atlanta Class A: William C. Carter Chairman of the Board and President, Gulf National Bank, Gulfport, Miss 1961 194 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 M. M. Kimbrel Chairman of the Board, First National Bank, Thomson, Ga 1962 George S. Craft President, Trust Company of Georgia, Atlanta, Ga 1963 Class B: Donald Comer Chairman of the Board, Avondale Mills, Birmingham, Ala 1961 McGregor Smith Chairman of the Board, Florida Power & Light Company, Miami, Fla 1962 W. Maxey Jarman Chairman, Genesco, Inc., Nashville, Tenn 1963 Class C.- Walter M. Mitchell Vice President, The Draper Corporation, Atlanta, Ga 1961 J. M. Cheatham President, Dundee Mills, Incorporated, Griffin, Ga 1962 Henry G. Chalkley, Jr... .President, The Sweet Lake Land & Oil Company, Lake Charles, La 1963 Birmingham Branch Appointed by Federal Reserve Bank: 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 R. J. Murphy Executive Vice President, Citizens-Farmers & Merchants Bank, Brewton, Ala 1962 Frank A. Plummer Chairman of the Board and President, Birmingham Trust National Bank, Birmingham, Ala. 1963 Appointed by Board of Governors: John E. Urquhart Chairman of the Board, Woodward Iron Company, Woodward, Ala 1961 Jack W. Warner Chairman of the Board and President, Gulf States Paper Corporation, Tuscaloosa, Ala... 1962 Selden Sheffield Cattleman, Greensboro, Ala 1963 Jacksonville Branch Appointed by Federal Reserve Bank: Roger L. Main Chairman, Jacksonville Expressway Authority, Jacksonville, Fla 1961 195 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 A. L. Ellis Chairman of the Board, First National Bank in Tarpon Springs, Fla 1961 Leonard A. Usina Chairman of the Board, Peoples National Bank of Miami Shores, Fla.. 1962 Godfrey Smith President, Capital City National Bank of Tallahassee, Fla 1963 Appointed by Board of Governors: Harry T. Vaughn President, United States Sugar Corporation, Clewiston, Fla 1961 Claude J. Yates Vice President and General Manager, Southern Bell Telephone and Telegraph Company, Jacksonville, Fla 1962 J. OUie Edmunds President, Stetson University, DeLand, Fla 1963 Nashville Branch Appointed by Federal Reserve Bank: C. A. Whelchel President, First Farmers and Merchants National Bank of Columbia, Tenn 1961 W. E. Newell President, The First National Bank, Kingsport, Tenn 1961 D. L. Earnest President, The Blount National Bank of Maryville, Tenn 1962 D. W. Johnston Executive Vice President, Third National Bank in Nashville, Tenn 1963 Appointed by Board of Governors: V. S. Johnson, Jr Chairman of the Board and President, Aladdin Industries, Inc., Nashville, Tenn 1961 Andrew D. Holt President, University of Tennessee, Knoxville, Tenn 1962 W. N. Krauth President and General Manager, Colonial Baking Company of Nashville, Tenn 1963 New Orleans Branch Appointed by Federal Reserve Bank: 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, La 1961 Frank A. Gallaugher President, Jeff Davis Bank & Trast Company, Jennings, La 1962 196 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Giles W. Patty President, First National Bank, Meridian, Miss. 1963 Appointed by Board of Governors: Gerald L. Andrus President, New Orleans Public Service Inc., New Orleans, La 1961 J. O. Emmerich Editor, Enterprise Journal, McComb, Miss 1962 Frank A. Godchaux, III. .Vice President, Louisiana State Rice Milling Company, Inc., Abbeville, La 1963 District 7—Chicago Class A: John H. Crocker Chairman of the Board, The Citizens National Bank of Decatur, 111 1961 Vivian W. Johnson Chairman of the Board, First National Bank, Cedar Falls, Iowa 1962 David M. Kennedy Chairman of the Board, Continental Illinois National Bank and Trust Company of Chicago, 111 1963 Class -B.- William J. Grede President, J. I. Case Co., Racine, Wis 1961 William A. Hanley Director, Eli Lilly and Company, Indianapolis, Ind 1962 G. F. Langenohl Treasurer and Assistant Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis 1963 Class C.- Robert P. Briggs Executive Vice President, Consumers Power Company, Jackson, Mich 1961 James H. Hilton President, Iowa State University of Science and Technology, Ames, Iowa 1962 John W. Sheldon President, Chas. A. Stevens & Co., Chicago, 111. 1963 Detroit Branch Appointed by Federal Reserve Bank: Donald F. Valley Chairman of the Board, National Bank of Detroit, Mich 1961 C. Lincoln Linderholm.. .President, Central Bank, Grand Rapids, Mich.. 1962 William A. Mayberry Chairman of the Board, Manufacturers National Bank of Detroit, Mich 1963 Franklin H. Moore President, The Commercial and Savings Bank, St. Clair, Mich.. 1963 197 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires D3RECTORS—Cont. Dec. 31 Appointed by Board of Governors: C. V. Patterson Director, The Upjohn Company, Kalamazoo, Mich 1961 J. Thomas Smith President, Dura Corporation, Oak Park, Mich.. 1962 Carl A. Gerstacker Chairman of the Board, The Dow Chemical Company, Midland, Mich 1963 District 8—-St. Louis Class A: Arthur Werre, Jr Executive Vice President, First National Bank of Steeleville, 111 1961 Kenton R. Cravens President, Mercantile Trust Company, St. Louis, Mo 1962 H. Lee Cooper President, Ohio Valley National Bank of Henderson, Ky 1963 Class B: S. J. Beauchamp, Jr President, Terminal Warehouse Co., Little Rock, Ark 1961 Harold O. McCutchan... Executive Vice President, Mead Johnson & Company, Evansville, Ind 1962 Edgar M. Queeny Chairman of the Finance Committee and member of Board of Directors, Monsanto Chemical Company, St. Louis, Mo 1963 Class C: J. H. Longwell Director, Special Studies and Programs, College of Agriculture, University of Missouri, Columbia, Mo 1961 Pierre B. McBride President, Porcelain Metals Corporation, Louisville, Ky 1962 Jesse D. Wooten Executive Vice President, Mid-South Chemical Corporation, Memphis, Tenn 1963 Little Rock Branch Appointed by Federal Reserve Bank: J. V. Satterfield, Jr President, The First National Bank in Little Rock, Ark 1961 H. C. Adams Executive Vice President, The First National Bank of De Witt, Ark.. 1962 J. W. Bellamy President, National Bank of Commerce of Pine Bluff, Ark 1963 198 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Coot. Dec. 31 R. M. LaGrone, Jr President, The Citizens National Bank of Hope, Ark 1963 Appointed by Board of Governors: Waldo E. Tiller President, Tiller Tie and Lumber Company, Inc., Little Rock, Ark 1961 T. Winfred Bell President, Bush-Caldwell Company, Little Rock, Ark 1962 Frederick P. Blanks Planter, Parkdale, Ark 1963 Louisville Branch Appointed by Federal Reserve Bank: John R. Stroud Executive Vice President, The First National Bank of Mitchell, Ind 1961 Merle E. Robertson Chairman of the Board and President, Liberty National Bank and Trust Company of Louisville, Ky 1962 Ray A. Barrett President, The State Bank of Salem, Ind 1963 John G. Russell President, The Peoples First National Bank & Trust Company of Paducah, Ky 1963 Appointed by Board of Governors: J. D. Monin, Jr Farmer, Oakland, Ky 1961 William H. Harrison President, Taylor Drug Stores, Inc., Louisville, Ky 1962 Philip Davidson President, University of Louisville, Ky 1963 Memphis Branch Appointed by Federal Reserve Bank: J. H. Harris Chairman of the Board, The First National Bank of Wynne, Ark 1961 Charles R. Caviness President, National Bank of Commerce of Corinth, Miss 1962 John E. Brown President, Union Planters National Bank of Memphis, Tenn 1963 Simpson Russell Chairman of the Board, The National Bank of Commerce of Jackson, Tenn 1963 Appointed by Board of Governors: Frank Lee Wesson President, Wesson Farms, Inc., Victoria, Ark... 1961 William King Self President, Riverside Industries, Marks, Miss... 1962 Edward B. LeMaster President, Edward LeMaster Company, Inc., Memphis, Tenn 1963 199 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 District 9—Minneapolis Class A: John A. Moorhead President, Northwestern National Bank of Minneapolis, Minn 1961 Harold N. Thomson Vice President, Farmers & Merchants Bank, Presho, S.D 1962 Harold C. Refling Cashier, First National Bank in Bottineau, N.D. 1963 Class B: T. G. Harrison Chairman of the Board, Super Valu Stores, Inc., Minneapolis, Minn 1961 Alexander Warden Publisher, Great Falls Tribune-Leader, Great Falls, Mont 1962 Ray C. Lange President, Chippewa Canning Company, Inc., Chippewa Falls, Wis 1963 Class C.- John H. Warden President, Upper Peninsula Power Company, Houghton, Mich 1961 Atherton Bean President, International Milling Company, Minneapolis, Minn 1962 JudsonBemis President, Bemis Bro. Bag Co., Minneapolis, Minn 1963 Helena Branch Appointed by Federal Reserve Bank: O. M. Jorgenson Chairman of the Board, Security Trust and Savings Bank, Billings, Mont. 1961 Roy G. Monroe Chairman of the Board and President, The First State Bank of Malta, Mont 1962 Harald E. Olsson President, Ronan State Bank, Ron an, Mont... 1962 Appointed by Board of Governors: John M. Otten Farmer and rancher, Lewistown, Mont 1961 Harry K. Newburn President, Montana State University, Missoula, Mont 1962 District 10—Kansas City Class A: W. S. Kennedy President and Chairman of the Board, The First National Bank of Junction City,, Kans 1961 Burton L. Lohmuller President, The First National Bank of Centralia, Kans 1962 200 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Harold Kountze Chairman of the Board, The Colorado National Bank of Denver, Colo 1963 Class B: Robert A. Olson President, Kansas City Power & Light Company, Kansas City, Mo 1961 K. S. Adams Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla 1962 Max A. Miller Livestock rancher, Omaha, Neb 1963 Class C.- Raymond W. Hall Hillix, Hall, Hasburgh, Brown & Hoffhaus, Attorneys, Kansas City, Mo 1961 Oliver S. Willham President, Oklahoma State University, Stillwater, Okla 1962 Homer A. Scott Vice President and District Manager, Peter Kiewit Sons' Company, Sheridan, Wyo 1963 Denver Branch Appointed by Federal Reserve Bank: Stewart Cosgriff Director, Denver United States National Bank, Denver, Colo 1961 J. H. Bloedorn President, The Farmers State Bank of Fort Morgan, Colo 1962 Cale W. Carson President, First National Bank in Albuquerque, N. Mex 1962 Appointed by Board of Governors: Robert T. Person President, Public Service Company of Colorado, Denver, Colo 1961 R. A. Burghart Ingle Land and Cattle Company, Colorado Springs, Colo 1962 Oklahoma City Branch Appointed by Federal Reserve Bank: C. P. Stuart Chairman of the Board, The Fidelity National Bank & Trust Company, Oklahoma City, Okla 1961 R. L. Kelsay Chairman of the Board and President, The First National Bank in Hobart, Okla 1962 C. L. Priddy President, The National Bank of McAlester, Okla 1962 201 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: James E. Allison President, Warren Petroleum Corporation, Tulsa, Okla 1961 Otto C. Barby Attorney and rancher, Beaver, Okla 1962 Omaha Branch Appointed by Federal Reserve Bank: R. E/Barton President, The Wyoming National Bank of Casper, Wyo 1961 C. Wheaton Battey Chairman of the Board, First Continental National Bank & Trust Company, Lincoln, Neb. 1961 John F. Davis President, First National Bank, Omaha, Neb... 1962 Appointed by Board of Governors: James L. Paxton, Jr President, Paxton-Mitchell Company, Omaha, Neb 1961 Clifford Morris Hardin...Chancellor, The University of Nebraska, Lincoln, Neb 1962 District 11—Dallas Class A: J. Edd McLaughlin President, Security State Bank & Trust Company, Rails, Tex 1961 John M. Griffith President, The City National Bank of Taylor, Tex 1962 Roy Riddel President, First National Bank at Lubbock, Tex. 1963 Class B: H. B. Zachry President and Chairman of the Board, H. B. Zachry Co., San Antonio, Tex 1961 J. B. Perry, Jr President and General Manager, Perry Brothers, Inc., Lufkin, Tex 1962 D. A. Hulcy Chairman of the Board, Lone Star Gas Company, Dallas, Tex 1963 Class C: Lamar Fleming, Jr Member, Board of Directors, ^Jiderson, Clayton & Co., Inc., Houston, Tex 1961 Robert O. Anderson President, Hondo Oil & Gas Company,Roswell, N. Mex 1962 Morgan J. Davis Chairman of the Board, Humble Oil & Refining Company, Houston, Tex 1963 202 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 El Paso Branch Appointed by Federal Reserve Bank: Joseph F. Irvin President, Southwest National Bank of El Paso, Tex 1961 Chas. B. Perry President, First State Bank, Odessa, Tex 1962 Floyd Childress Vice President, The First National Bank of Roswell, N. Mex 1963 Dick Rogers President, First National Bank in Alpine, Tex.. 1963 Appointed by Board of Governors: Dysart E. Holcomb Director of Research, El Paso Natural Gas Products Company, El Paso, Tex 1961 Roger B. Corbett President, New Mexico State University, University Park, N. Mex 1962 William R. Mathews Editor and Publisher, The Arizona Daily Star, Tucson, Ariz 1963 Houston Branch Appointed by Federal Reserve Bank: J. W. McLean President, Texas National Bank of Houston, Tex. 1961 M. M. Galloway President, First Capitol Bank, West Columbia, Tex 1962 J. A. Elkins, Jr President, First City National Bank of Houston, Tex 1963 John E. Gray President, First Security National Bank of Beaumont, Tex 1963 Appointed by Board of Governors: Tyrus R. Timm Head, Department of Agricultural Economics and Sociology, A. & M. College of Texas, College Station, Tex 1961 A. E. Cudlipp Vice President and Director, Lufkin Foundry & Machine Company, Lufkin, Tex 1962 Max Levine President, Foley's, Houston, Tex 1963 San Antonio Branch Appointed by Federal Reserve Bank: Burton Dunn Chairman of the Executive Committee, Corpus Christi State National Bank, Corpus Christi, Tex 1961 Dwight D. Taylor President, Pan American State Bank, Brownsville, Tex 1962 203 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Donald D. James Vice President, The Austin National Bank, Austin, Tex 1963 Forrest M. Smith President, National Bank of Commerce of San Antonio, Tex 1963 Appointed by Board of Governors: Harold Vagtborg Executive Chairman, Board of Governors, Southwest Research Center, San Antonio, Tex 1961 John R. Stockton Professor of Business Statistics and Director of Bureau of Business Research, The University of Texas, Austin, Tex 1962 G. C. Hagelstein President and General Manager, Union Stock Yards San Antonio, Tex 1963 District 12—San Francisco Class A: John A. Schoonover Director, The Idaho First National Bank, Boise, Idaho 1961 M. Vilas Hubbard President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Calif. 1962 Carroll F. Byrd Chairman of the Board and President, The First National Bank of Willows, Calif. 1963 Class B: Walter S. Johnson Chairman of the Board, American Forest Products Corporation, San Francisco, Calif. 1961 N. Loyall McLaren Partner, Haskins & Sells, San Francisco, Calif.. 1962 Joseph Rosenblatt President, The Eimco Corporation,, Salt Lake City, Utah 1963 Class C: Y. Frank Freeman Vice President, Paramount Pictures Corporation, Hollywood, Calif 1961 F. B. Whitman President, The Western Pacific Railroad Company, San Francisco, Calif 1962 John D. Fredericks President, Pacific Clay Products, Los Angeles, Calif. 1963 204 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 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. 1961 (Vacancy) 1962 Roy A. Britt President, Citizens National Bank, Los Angeles, Calif. 1962 Appointed by Board of Governors: Robert J. Cannon President, Cannon Electric Company, Los Angeles, Calif. 1961 S. Alfred Halgren Vice President and Director, Carnation Company, Los Angeles, Calif. 1962 Portland Branch Appointed by Federal Reserve Bank: C. B. Stephenson Chairman of the Board, The First National Bank of Oregon, Portland, Ore 1961 D. S. Baker President, The Baker-Boyer National Bank, Walla Walla, Wash 1962 E. M. Flohr President, The First National Bank of Wallace, Idaho 1962 Appointed by Board of Governors: Graham J. Barbey President, Barbey Packing Corporation, Astoria, Ore 1961 Raymond R. Reter Reter Fruit Company, Medford, Ore 1962 Salt Lake City Branch Appointed by Federal Reserve Bank: Oscar Hiller President, Butte County Bank, Arco, Idaho 1961 J. E. Brinton President, The First National Bank of Ely, Nev. 1962 Reed E. Holt President, Walker Bank & Trust Company, Salt Lake City, Utah 1962 Appointed by Board of Governors: Howard W. Price Executive Vice President, The Salt Lake Hardware Co., Salt Lake City, Utah 1961 Thomas B. Rowland Manager, Co-Owner, Rowland Bros. Dairy, Pocatello, Idaho 1962 205 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1961 — Cont. Term expires DIRECTORS—Cont. Dec. 31 Seattle Branch Appointed by Federal Reserve Bank: Joshua Green, Jr President, Peoples National Bank of Washington, Seattle, Wash 1961 Chas. H. Parks Executive Vice President, Seattle-First National Bank, Spokane and Eastern Division, Spokane, Wash 1962 M. F. Hastings President, The First National Bank of Ferndale, Wash 1962 Appointed by Board of Governors: Henry N. Anderson President, Twin Harbors Lumber Company, Aberdeen, Wash 1961 Lyman J. Bunting President, Artificial Ice & Fuel Company, Yakima, Wash 1962 206 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31,1961—Cont. PRESIDENTS AND VICE PRESIDENTS Federal Reserve President Vice Presidents Bank of— First Vice President Boston George H. Ellis D. H. Angney Dana D. Sawyer E. 0. Latham Ansgar R. Berge 0. A. Schlaikjer Benjamin F. Groot Charles E. Turner New York... Alfred Hayes H. A. Bilby H. H. Kimball William F. Treiber Charles A. Coombs Robert G. Rouse Howard D. Crosse Walter H. Rozell, Jr. M. A. Harris H. L. Sanford T. G. Tiebout Philadelphia.. Karl R. Bopp Joseph R. Campbell David P. Eastburn Robert N. Hilkert W. M. Catanach Murdoch K. Goodwin Norman G. Dash J. V. Vergari Richard G. Wilgus Cleveland ... W. D. Fulton Roger R. Clouse L. Merle Hostetler Donald S. Thompson E. A. Fink Fred O. Kiel C. Harrell Martin Morrison W. Braddock John E. Orin Hickman Paul C. Stetzelberger Richmond ... Edw. A. Wayne J. G. Dickerson, Jr. J. M. Nowlan Aubrey N. Heflin Upton S. Martin Benj. U. Ratchford John L. Nosker James M. Slay Atlanta Malcolm Bryan J. E. Denmark L. B. Raisty Harold T. Patterson J. E. McCorvey Brown R. Rawlings Charles T. Taylor Chicago .... Carl E. Allen E. T. Baughman L. H. Jones C. J. Scanlon A. M. Gustavson C. T. Laibly H. J. Helmer R. A. Moffatt Paul C. Hodge H. J. Newman Harry S. Schultz St. Louis .... Delos C. Johns Marvin L. Bennett Dale M. Lewis Darryl R. Francis Homer Jones H. H. Weigel Geo. E. Kroner J. C. Wotawa 207 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31,1961—Cont. PRESIDENTS AND VICE PRESIDENTS—Cont. Federal Reserve President Vice Presidents Bank of— First Vice President Minneapolis. Frederick L. Deming Kyle K. Fossuim A. W. Johnson A. W. Mills C. W Groth H. G. McConnell M. B Holmgren F. L. Parsons M. H. Strothman, Jr. Kansas City.. George H. Clay John T. Boysen L. F. Mills Henry 0. Koppang C. A. Cravens E. U. Sherman J. R. Euans Clarence W. Tow F. H. Larson J. T. White Dallas Watrous H. Irons Jamesi L. Cauthen J. A. Parker Harry A. Shuford P. E. Coldwell T. W. Plant T. A. Hardin L. G. Pondrom G. R. Murff W. M. Pritchett San Francisco Eliot J. Swan J. L. Barbonchielli E. H. Galvin H. E. Hemmings R. S.Einzig A. B. Merritt John A. O'Kane 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. Bryan, President of the Federal Reserve Bank of Atlanta, and Mr. Fulton, President of the Federal Reserve Bank of Cleveland, were elected Chairman of the Conference and Vice Chairman, respectively, in March 1961, and served in those capacities during 1961. Mr. Basil A. Wapensky of the Federal Reserve Bank of Atlanta was appointed Secretary of the Conference in March 1961 and served as such during the remainder of 1961. 208 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31,1961—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES Federal Reserve Bank of— Branch Vice President New York ... Buffalo I. B. Smith Cleveland ... Cincinnati R. G. Johnson Pittsburgh (vacant) Richmond ... Baltimore D. F. Hagner Charlotte E. F. MacDonald 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 C. A. Van Nice Kansas City . Denver Cecil Puckett Oklahoma City H. W. Pritz 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 A. L. Price Seattle E. R. Barglebaugh 209 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE FEDERAL RESERVE SYSTEM"*^ f# S&DTOAL 1&«ME I>*Sm&ICl$ A^B "THEIR BRANCH 1 EPJtlTORIES o HAWAII - Legend , O Board of Gov^mots ol Federal Eeserve Baik Cifc - JPMteral R^erve Braudi ^ branch territories' for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index Page Acceptance powers of member banks Ill Acceptances, bankers': Authority to purchase, and to enter into repurchase agreements 49, 91 Federal Reserve Bank holdings 118, 124, 126 Open market transactions during 1961 132 Assets and liabilities: Banks, by classes 144 Board of Governors 120 Federal Reserve Banks 124-29 Balance of payments 26 Bank holding companies: Board actions with respect to 108 Litigation 114 Bank Holding Company Act, proposed amendments 113 Bank mergers and consolidations 107, 149 Bank premises, Federal Reserve Banks and branches . 119, 124, 126, 128, 133 Bank reserves {See Reserves) Bank supervision by Federal Reserve System 106 Banking offices: Changes in number 146 On, and not on, Par List, number 147 Board of Governors: Audit of accounts 119 Income and expenses 119-21 Litigation 114 Members and officers 184 Policy actions 100-05 Regulations {See Regulations) Rules of Organization and Procedure 122 Branch banks: Domestic, changes in number 108, 146 Federal Reserve {See Federal Reserve Banks) Foreign 109 Capital accounts: Banks, by classes 144 Federal Reserve Banks 125, 127, 129 Chairmen of Federal Reserve Banks 188 Check clearing and collection: Check mechanization program 116 Volume of operations 138 211 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Commercial banks: Assets and liabilities 144 Banking offices, changes in number 146 Number, by classes , 144 Condition statement of Federal Reserve Banks 124-29 Continental Bank and Trust Company, Salt Lake City, Utah, litigation involving 114 Defense production loans 115, 140 Deposits: Banks, by classes 144 Federal Reserve Banks 125, 127, 129, 142 Savings deposits, definition of 104 Time and savings deposits, maximum permissible rates: Increase in 9, 101 Table of 139 Deputy Chairmen of Federal Reserve Banks 188 Directors, Federal Reserve Banks and branches 189 Discount rates at Federal Reserve Banks 139 Discounts and advances by Federal Reserve Banks. .117, 124, 126, 128, 142 Dividends: Federal Reserve Banks 116, 135, 136 Member banks 145 Earnings: Federal Reserve Banks 116, 118, 134, 136 Member banks 145 Economic review 1 Examinations: Federal Reserve Banks 106 Foreign banking and financing corporations Ill Holding company affiliates 109 Member banks 106 State member banks 106 Expenses: Board of Governors 119-21 Federal Reserve Banks 116, 134, 136 Member banks 145 Federal Advisory Council 187 Federal Farm Mortgage Corporation bonds, references in Federal Reserve Act eliminated 113 Federal Open Market Committee: Authorization to effect transactions in intermediate- and longer-term securities 39, 45, 54, 58, 61, 64, 66, 70, 72, 75, 78, 80, 83, 86, 88, 94 Directive to Federal Reserve Bank of New York, form of 91 Meetings 33, 186 212 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Federal Open Market Committee—Continued Members and officers 186 Operating procedures 7, 39, 46, 54, 89 Policy actions 33-99 Review of continuing authorities 46 Statements of operating policies: Review of 46 Termination of , 94 Federal Reserve Act: Sections 13 and 14(b), references to Federal Farm Mortgage Corporation bonds eliminated 113 Section 24, amendments relating to national bank real estate loans. . . 112 Federal Reserve Banks: Assessment for expenses of Board of Governors 121, 134 Bank premises 124, 126, 128, 133 Branches: Bank premises 119, 133 Directors 189 Vice Presidents in charge of 209 Capital accounts 125, 127, 129 Chairmen and Deputy Chairmen 188 Check mechanization program 116 Condition statement 124-29 Directors 189 Discount rates 139 Dividends 116, 135, 136 Earnings and expenses 116, 118, 134, 136 Examination of 106 Foreign and international accounts 118 Officers and employees, number and salaries 138 Presidents and Vice Presidents 207 Profit and loss 135 U. S. Government securities: Holdings of 117, 124, 126, 128, 130, 142 Open market transactions during 1961 132 Special certificates purchased direct from Treasury 131 Volume of operations 115, 138 Federal Reserve notes: Condition statement data 124-29 Cost of issue, printing, and redemption 121 Interest paid to Treasury 116, 135, 136 Old Series Currency Adjustment Act, provisions relating to 113 Federal Reserve System: Bank supervision by 106 Map of Federal Reserve Districts 210 Membership 108 213 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Financial market developments 10 Foreign banking and financing corporations Ill Foreign branches of member banks 109 Gold certificate reserves of Federal Reserve Banks 124, 126, 128 Government securities (See U. S. Government securities) Holding company affiliates 109 Insured commercial banks 144, 146 Inter-Agency Bank Examination School 112 Interest rates: Discount rates at Federal Reserve Banks 139 Regulation V loans 140 Time and savings deposits, maximum permissible rates: Increase in 9, 101 Table of 139 Investments: Banks, by classes 144 Federal Reserve Banks 124, 126, 128 Legislation: Bank Holding Company Act, proposed amendments 113 Federal Farm Mortgage Corporation bonds 113 National bank real estate loans 112 Old Series Currency Adjustment Act 113 Litigation 114 Loans: Banks, by classes 144 Federal Reserve Banks 117, 124, 126, 128, 142 National bank real estate loans, amendments to Section 24 of Federal Reserve Act 112 Regulation V loans 115, 140 Margin requirements: Arbitrage transactions, amendments to Regulations T and U 100 Table of 140 Transfer of accounts, amendment to Regulation T 100 Transfer of loans between borrowers, amendment to Regulation U . . 100 Marine Corporation, litigation under Bank Holding Company Act 115 Member banks: Acceptance powers Ill Assets, liabilities, and capital accounts 144 Banking offices, changes in number 146 Examination of 106 Foreign branches 109 Income, expenses, and dividends 145 Number 108, 144, 146 Reserve requirements 141 Reserves and related items 142 214 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Membership in Federal Reserve System 108 Mergers (See Bank mergers and consolidations) Monetary policy: Digest of principal policy actions 4 Review of 5 Mutual savings banks 144, 146 National banks: Assets and liabilities 144 Banking offices, changes in number 146 Foreign branches 110 Number 108, 144, 146 Real estate loans, amendments to Section 24 of Federal Reserve Act. 112 Trust powers: Amendment of Section 12 of Regulation F 100 Number of banks granted 109 Nonmember banks 144, 146 Northwest Bancorporation, litigation under Bank Holding Company Act. 114 Old Series Currency Adjustment Act 113 Open Market Committee (See Federal Open Market Committee) Open market operations 33-99, 132 Par List, banking offices on, and not on, number 147 Policy actions, Board of Governors: Regulation D, Reserves of Member Banks: Definition of savings deposits 104 Regulation F, Trust Powers of National Banks: Amendment of Section 12 100 Regulation Q, Payment of Interest on Deposits: Definition of savings deposits 104 Maximum permissible rates on time and savings deposits, increase in 101 Regulation T, Credit by Brokers, Dealers, and Members of National Securities Exchanges: Arbitrage, amendment with respect to 100 Transfer of accounts, amendment with respect to 100 Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks: Arbitrage, amendment with respect to 100 Transfer of loans between borrowers, amendment with respect to. . 100 Policy actions, digest of 4 Policy actions, Federal Open Market Committee: Authority to effect transactions in intermediate- and longer-term securities 39, 45, 54, 58, 61, 64, 66, 70, 72, 75, 78, 80, 83, 86, 88, 94 Authority to effect transactions in System Account 33-99 215 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Policy actions, Federal Open Market Committee—Continued Bankers' acceptances, purchases of, and repurchase agreements based thereon 49 Directive to Federal Reserve Bank of New York, form of 91 Repurchase agreements covering U.S. Government securities 47 Review of continuing authorities 46 Statements of operating policies: Review of 46 Termination of 94 Presidents of Federal Reserve Banks: Conference of 208 List of 207 Salaries 138 Profit and loss, Federal Reserve Banks 135 Record of policy actions (See Policy actions) Regulations, Board of Governors: D, Reserves of Member Banks: Definition of savings deposits 104 F, Trust Powers of National Banks: Amendment of Section 12 100 Q, Payment of Interest on Deposits: Definition of savings deposits 104 Maximum permissible rates on time and savings deposits, increase in 9, 101 T, Credit by Brokers, Dealers, and Members of National Securities Exchanges: Arbitrage, amendment with respect to 100 Transfer of accounts, amendment with respect to 100 U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks: Arbitrage, amendment with respect to 100 Transfer of loans between borrowers, amendment with respect to. . 100 Repurchase agreements: Bankers' acceptances 49, 91, 124, 126, 132 U.S. Government securities 47, 91, 124, 126, 131, 132, 142 Reserve requirements, member banks 141 Reserves: Federal Reserve Banks 124-29 Member banks 142 Rules of Organization and Procedure of Board 122 Salaries: Board of Governors 121 Federal Reserve Banks 138 Savings bond meetings 117 216 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX Page Savings deposits (See Deposits) State member banks: Assets and liabilities 144 Banking offices, changes in number 146 Examination of 106 Foreign branches 110 Litigation 114 Mergers and consolidations 107, 149 Number 108, 144, 146 System Open Market Account: Audit of 106 Authority to effect transactions in 33-99 Time deposits (See Deposits) Trust powers of national banks: Amendment of Section 12 of Regulation F 100 Number of banks granted 109 U.S. Government securities: Authority of System Account to effect transactions in intermediateand longer-term securities 39, 45, 54, 58, 61, 64, 66, 70, 72, 75, 78, 80, 83, 86, 88, 94 Bank holdings, by class of bank 144 Federal Reserve Bank holdings 117, 124, 126, 128, 130, 142 Open market operations 33-99, 132 Repurchase agreements 47, 91, 124, 126, 131, 132, 142 Special certificates purchased direct from Treasury 131 V loans 115, 140 Voting permits issued to holding company affiliates 109 217 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis