Federal Reserve Bulletin, 1959-08

FEDERAL RESERVE August BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

E D I T O R I AL C O M M I T T EE Winfield W. Riefler Woodlief Thomas Charles Molony Ralph A. Young Susan S. Burr The Federal Reserve BULLETIN is issued monthly under the direction of the staff editorial committee. This committee is responsible for opinions expressed, except in official statements and signed articles. Contents Saving and Financial Flows 821 A Quarterly Presentation of Flow of Funds, Saving, and Investment 828 The Government Securities Market 860 Proposed Housing Legislation S-57 882 Revisions for Weekly Reporting Banks 885 Law Department 888 Current Events and Announcements 982 National Summary of Business Conditions 984 Financial and Business Statistics, U. S. (Contents on p. 987) 989 International Financial Statistics (Contents on p. 1065) 1066 Board of Governors and Staff 1083 Open Market Committee and Staff; Federal Advisory Council 1084 Federal Reserve Banks and Branches 1084 Federal Reserve Board Publications 1086 Index to Statistical Tables 1088 Map of Federal Reserve System Inside back cover Volume A.C Number 8 Subscription Price of Bulletin A copy of the Federal Reserve Bulletin is sent to each member bank without charge. The subscription price in the United States and its possessions, Bolivia, Canada, Chile, Colombia, Cost Rica, Cuba, Dominican Republic, Ecuador, Guatemala, Haiti, Republic of Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, El Salvador, Uruguay, and Venezuela is $6.00 per annum or 60 cents per copy; elsewhere, $7.00 per annum or 70 cents per copy. Group subscriptions in the United States for 10 or more copies to one address, 50 cents per copy per month, or $5.00 for 12 months. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Saving and Financial Flows GROSS NATIONAL SAVING has returned to GROSS NATIONAL SAVING high levels this year. In the first quarter of Billions of dollars 1959 such saving totaled $30 billion, about 120 $5 billion or one-fifth larger than a year - 100 earlier. The increase accompanied recovery in economic activity that began in the spring of 1958. Analysis in this article is based mainly on the Board's new quarterly flow-of-funds and saving data given on pages 1046-62 of this BULLETIN. Concepts and measures are discussed in the article "A Quarterly Presentation of Flow of Funds, Saving, and Investment," pages 828-59. A large part of gross saving is offset by estimates of capital consumption related to the nation's stock of reproducible tangible assets, or capital goods. After charges for 20 19S2 1954 1956 1958 such consumption, net national saving also increased in 1959 from the reduced level of NOTE.—For additional detail, see Table 2, p. 1047. The consumer sector includes personal trusts and nonprofit organiza- 1958. Available estimates indicate that tions serving individuals. Coverage of government saving is not comparable with that capital consumption charges accounted for of private saving. Because of conceptual and statistical problems, government outlays on capital goods are treated as current $75 billion of the $93 billion of gross na- outlays rather than as part of national investment. If currently available data on government construction expenditures were tional saving for the year 1958, and that treated as capital outlays, government gross saving would be positive in each of the past 10 years, ranging from a low of $2 almost half of these charges represented de- billion in 1953 to a high of $16 billion in 1956, and national saving and investment would be correspondingly higher. II preciation on consumer durable goods. Em- estimates of government equipment outlays were also included, both government and national saving and investment would be even higher. For further discussion, see pp. 834-35. phasis in this article is placed on gross saving and gross investment, however, because of fallen short of their expenditures. Statisthe limitations of currently available meas- tically, dissaving by governments results ures of capital consumption charges. from the treatment of their capital expendi- The nation's saving originates in many tures in the flow-of-funds and saving acsectors of the economy. In recent years, as counts. Because of conceptual and statisthe accompanying chart shows, total saving tical problems government outlays on capof consumers, nonfinancial businesses, and ital goods are treated as current expendiother private sectors has usually exceeded tures rather than as part of national investthe figure for national saving because gov- ment. (See subscript to chart.) ernments—Federal, State, and local—in the A decline of about $17 billion in gross aggregate have had negative saving, or have national saving in 1958 was made up of a dissaved; that is, their current receipts have $3 billion decrease in private saving and 821 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

822 FEDERAL RESERVE BULLETIN • AUGUST 1959 a $13 billion increase in government dissaving, almost entirely accounted for by GROSS NATIONAL INVESTMENT Billions of dollars the Federal Government. The shift in finan- 120 cial position of the Federal Government from small saving in 1957 to large dissav- TOTAL 100 ing in 1958 resulted from a $3 billion decrease in current receipts and a $9 billion •0 rise in outlays. The greater part of the decrease in private saving occurred in the nonfinancial business sectors. PLANT AND EQUIPMENT Consumers, as usual, provided the bulk CONSUMER DURARIE GOODS —more than 60 per cent—of gross private saving in 1958, while nonfinancial busi- REStOENTIAt CONSTRUCTION (NONFAffM) 20 nesses accounted for 35 per cent. Fluctu- CHANGE IN BUSINESS INVENTORIES ations in these shares over the preceding decade were relatively limited. 1952 1954 1956 1958 NATIONAL INVESTMENT Gross national investment embodies the re- NOTE.—The detail of this chart is based mainly on the national income and product accounts data of the Department of sources released by saving, and conceptually Commerce. Consumer durable goods, however, are not shown as investment in the national income accounts. Plant and equipment expenditures are the sum of producers' durable is equal to gross national saving. Because equipment and construction other than nonfarm residential, as shown in the national income accounts, and of business purof statistical discrepancies, however, the dol- chases of used equipment from the Government. Net change in claims on foreigners does not correspond statistically to net lar measures may not be equal. National foreign investment in national income accounts; for further comment on this point, see p. 859. investment totaled $93 billion in 1958, $18 billion below the record of the previous year. ceased by the year-end, and in early 1959 As defined in this article, national invest- accumulation proceeded at a high rate. ment includes purchases of houses and durable goods by consumers as well as capital CONSUMER GROSS SAVING AND INVESTMENT outlays by businesses and the change in U. S. net financial claims on the rest of the world; Consumer gross saving in 1958 was $67 as already indicated, it excludes expendi- billion, only $1 billion less than in the pretures on capital goods by governments. vious year. The ratio of gross saving to con- Most major components shared in the re- sumer disposable receipts, which fluctuates covery of investment after mid-1958, but near one-fourth, declined slightly from 1957 the timing and magnitude of movement dif- to 1958, reflecting a greater rise in current fered. Recovery was accompanied by a expenditures than in disposable receipts. sharp expansion in residential construction The small decline in consumer gross savand by rising purchases of consumer durable ing last year was accompanied by shifts in goods, particularly in the fourth quarter as consumer investment. Capital outlays were buying of automobiles accelerated. Busi- smaller for the year as a whole. On the ness investment in fixed capital remained other hand, net funds obtained by borrownear its recession low longer and recovered ing increased slightly, as greater use was more slowly than consumer capital expendi- made of mortgage and security credit and tures. Liquidation of business inventories smaller use of consumer credit. The net Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SAVING AND FINANCIAL FLOWS 823 amount of financial assets acquired increased somewhat but preferences for assets CONSUMER CAPITAL EXPENDITURES AND DEBTS changed. Additions to demand deposits Billions of dollars and fixed-value redeemable claims increased, DURABLE GOODS while net purchases of credit and equity market instruments declined sharply. With recovery to high levels of economic activity, the pattern of consumer investment in early 1959 differed from that a year ear- INCREASE IN CONSUMER CREDIT lier when the recession was at or close to V its low. Consumer capital expenditures were larger and borrowing rose more than acquisitions of financial assets. Compared with the previous year, the increase in time HOMES INCREASE deposits was considerably smaller in the EXPENDITURES IN MORTGAGES first quarter of 1959, while net purchases of credit and equity market instruments were larger. Aggregate consumer invest- 19S6 1957 1958 •59 ment was $19 billion, or 7 per cent, larger than a year earlier. NOTE.—Quarterly data. The consumer sector includes personal trusts and nonprofit organizations serving individuals. Capital expenditures and debts. Consumers Depreciation on durable goods, estimated by the Federal Reserve, is on a current-cost basis—that is, allowance has been spent about as much on new houses in 1958 made for price changes after purchase. Depreciation on homes is based on data in the national income and product accounts as in 1957, reflecting recovery of home buy- of the Department of Commerce and reflects depreciation on an original-cost basis. ing in the second half of the year. With greater availability of mortgage funds, con- less, and second-quarter expansion much sumer mortgage indebtedness rose $6 billion greater, in 1959 than in 1958. in the last half of 1958, two-fifths more than Acquisition of financial assets. The decline in the same period of 1957. In the first in purchases of credit and equity market half of 1959 mortgage debt expansion was instruments by consumers last year took substantially larger than a year earlier. place primarily in private and government A decline in consumer outlays for durable bonds; net acquisitions of mortgages and goods last year was accompanied by a sharp corporate stocks were only slightly smaller reduction in extensions of short- and inter- than in 1957. Consumer holdings of marmediate-term consumer credit. With re- ketable Federal obligations declined in 1958, payments maintained at high levels, the in- as compared with an increase in the precrease in outstanding consumer credit was vious year, while acquisitions of State and only $300 million for the year, the smallest local government and corporate bonds were of the postwar period and more than $2 smaller than in 1957. In the first quarter billion less than in 1957. Expansion of of 1959 consumers were net purchasers of consumer credit resumed in the fourth quar- Federal obligations, but net sellers of corter of last year along with a resurgence of porate bonds. spending on durable goods. These tenden- Consumers added larger amounts to their cies have continued. First-quarter contrac- holdings of fixed-value redeemable claims tion in consumer credit was considerably in 1958 than in 1957. They increased the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

824 FEDERAL RESERVE BULLETIN • AUGUST 1959 flow of funds into time deposits and savings years of relatively steady growth, deposits at shares and reduced substantially net re- mutual savings banks and shares in savings demption of U. S. savings bonds. The ac- and loan associations increased by excepcelerated flow of consumer funds into time tionally large amounts last year. In the deposits at commercial banks began in early first quarter of 1959 consumer holdings of 1957, after the maximum permissible inter- fixed-value redeemable claims rose at a est rate on such deposits was raised, con- considerably slower rate than a year earlier. tinued through most of 1958, and tapered off toward the year-end. Also, after three BUSINESS SAVING AND INVESTMENT Gross saving of nonfinancial businesses CONSUMER INVESTMENT totaled $36 billion in 1958, $2 billion less TYMS Billions of dollars than in 1957. The reduction was almost in proportion to the decline in business income before taxes. Business inventory accumulation and fixed capital outlays were each about $6 billion smaller than in 1957. Since capital expenditures declined more than gross saving, business need for funds from other sectors was much smaller in 1958 than in the previous year. In the first half of 1958 the contraction in need for funds was reflected primarily in reduced borrowing. In the second half borrowing recovered to prerecession rates and businesses increased their acquisitions of liquid assets. Corporate holdings of cash and U. S. Government securities rose about $8 billion in the last half of 1958, more than twice as much as in the last half of 1957. Capital expenditures in early 1959 were larger than a year earlier, primarily for inventory accumulation, and business borrowing was also larger. With larger profits before taxes and relatively small profits tax payments, corporate holdings of cash and U. S. Government securities declined much less than usual in the first quarter. NET FINANCIAL INVESTMENT In the postwar period consumers and finan- 1957 1958 cial institutions have generated a larger amount of saving than they have absorbed NOTE.—Quarterly data. The consumer sector includes personal trusts and nonprofit organizations serving individuals. in their own purchases of capital goods. As For additional detail, see Table 4 (A), p. 1049. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SAVING AND FINANCIAL FLOWS 825 consumers, at $12 billion, were slightly NET FINANCIAL INVESTMENT r- larger than in 1957. Billions of dollars +, net funds made DEMAND FOR FUNDS IN CREDIT MARKETS Much of the nation's saving and investment is effected by the flow of funds into and out of credit and equity markets. The major 4 -. part of financing among sectors goes through these markets, either in the form of direct flows between ultimate lenders and borrowers or in the form of flows through financial institutions. In 1958 net funds raised in — , net iunds obtained such markets (that is, the excess of borrow- I I L_ 20 1952 1954 1956 1958 ings over repayments) totaled $45 billion, a postwar high. The $9 billion, or 25 per NOTE.—Net financial investment for a sector is equal to the increase in its financial assets less the increase in its liabilities; cent, increment over 1957 was equal to the when positive, it represents the net amount of funds made available to other sectors; when negative, the net amount increase in government borrowing, almost obtained from other sectors. all of which was by the Federal Government. a result, they have made funds available on In the first half of 1959 funds raised in balance to other sectors through their net credit markets, according to preliminary esfinancial investment. In other words, their timates, reached $25 billion, a postwar high net acquisitions of financial assets have ex- for the first half of the year. More than ceeded the net increase in their liabilities. half of the increment over the year-earlier On the other hand, governments in the amount was in consumer borrowing. Funds aggregate and nonfinancial businesses typi- raised by other private sectors were also cally have been deficit sectors that obtained larger, while total government borrowing funds on balance. was little changed. The changing pattern of net financial in- The record amount of borrowing in the vestment by the various sectors, in addition year 1958 is attributable to strong private to reflecting nonfinancial flows, summarizes credit demands as well as the increase in the complex of financial flows among sec- government borrowing. Increased borrowtors as they mutually adjust their demands ing by consumers and foreigners offset defor and supplies of credit, preferences for creased borrowing by the nonfinancial busifinancial assets, and liquidity needs. In ness and financial institutions sectors. The 1958, as the accompanying chart shows, maintenance of private borrowing conthe net funds obtained from other sectors by trasted with the $14 billion reduction in prigovernments—that is, the excess of borrow- vate capital outlays and the $9 billion ining over acquisition of financial assets—was crease in private saving in financial form. $13 billion compared with a near balance Mortgage borrowing by consumers rose the year before. This increased need for sharply in the second half of 1958 and funds last year was matched in large part was at high levels in the first half of 1959, by a decrease in net need for outside funds as already indicated. The increase in mortby nonfinancial businesses and foreigners. gage debt in the second half of last year was Meanwhile, net funds made available by much greater relative to consumer purchases Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

826 FEDERAL RESERVE BULLETIN • AUGUST 1959 FLOW OF FUNDS IN CREDIT AND EQUITY MARKETS struction outlays by these governments. The [In billions of dollars] timing was different, however, as the increase in borrowing occurred in the first 1957 1958 1959 half and the greater part of the rise in out- Flow-of-funds sector 1st 2d 1st 2d 1st half half half half half? lays in the second half of the year. Funds raised, total 12.1 24.6 16.4 28.8 25.0 SUPPLY OF FUNDS TO CREDIT MARKETS Government -3.7 9.5 3.9 11.3 4.3 Federal -6.1 7.1 .3 9.1 1.3 The funds flowing into credit and equity State and local 2.4 2.4 3.6 2.2 3.0 Private domestic 15.2 14.2 11.4 16.2 20.1 markets in 1958 came predominantly from Consumer 5.4 6.3 4.3 1.1 8 9 Business 8.7 6.3 6.0 8.1 8.5 financial sectors—commercial banks, sav- Financial institutions 1.1 1.6 1.1 .4 2.7 Rest of the world .6 .7 1.1 1.2 .6 ings institutions, insurance companies, and Funds advanced, total 12.1 24.5 16.7 28.7 25.0 other financial organizations—as the im- Commercial banking 1 -2.4 6.7 9.7 7.4 -1.1 Other financial institutions... 9.3 8.4 9.9 9.9 12.6 mediate source, and reflected an increase in Other 5.2 9.4 -2.8 11.4 13 5 Consumer . 6.0 3.7 1.4 1.6 J 9.0 indirect advances of nonfinancial sectors Business -3.5 2.5 -4.4 5.8 Government 2.6 2.7 1.3 2.9 3.7 through financial institutions. In the first Rest of the world .1 .5 -1.1 .8 ' half of 1959 the flow of funds from non- P Preliminary. i Includes Federal Reserve System and certain Treasury monetary financial through financial sectors slowed funds. down, and financial institutions supplied a NOTE.—For coverage of credit and equity market instruments and further details, see Table 3, p. 1048. Funds raised are the excess of borrowing through market instruments over repayments, etc.; funds smaller volume of funds. The total of advanced are the excess of lending through market instruments over repayments, etc. Total of funds raised may differ from total of funds advanced directly to credit markets funds advanced because of statistical discrepancies. by the nonfinancial sectors, which declined of new houses than in 1957. Mortgage in the year 1958, rose in the first half of credit had become more readily obtainable, 1959 to a level considerably above that a and FHA-insured loans were made on ex- year earlier. isting houses at double the 1957 rate. In 1958, as shown in the table on this Increased use of security credit by con- page, funds placed through credit and equity sumers last year accompanied active trad- markets totaled $45 billion of which $37 ing in the stock market. Changes in credit billion was advanced by financial instituduring the year also reflected activity in the tions. These institutions supplied $15 bil- Government bond market. In the first half lion more than a year earlier, while nonof 1959 security credit increased less than a financial sectors advanced directly $6 bilyear earlier. lion less. The fall-off in funds advanced Business demand for funds in credit and directly by consumers exceeded the reducequity markets was relatively small in the tion for nonfinancial sectors as a whole. first half of 1958. Although capital out- The increase from nonfinancial businesses, lays, and need for outside funds, remained as their liquidity positions improved, was relatively small in the last half, business bor- partly offset by decreases from governments rowing from banks expanded. In this pe- and foreigners. riod, and in early 1959, business demand Investments by financial institutions. About for credit was above that a year earlier. four-fifths of the $15 billion increase in in- State and local governments borrowed vestments by financial institutions in 1958 a record amount of almost $6 billion in went into Federal Government obligations, 1958, $1 billion more than in 1957. The purchased mainly by the commercial bankincrease was about the same as that in con- ing sector in the first half of the year, but Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SAVING AND FINANCIAL FLOWS 827 FLOW OF FUNDS THROUGH FINANCIAL INSTITUTIONS $2.5 billion, more than $500 million larger INTO CREDIT AND EQUITY MARKETS than in 1957. Consumers purchased only [In billions of dollars] $200 million net, a smaller amount than in 1957 1958 1959 1957, of stocks other than those of open- Type of market instrument, and source of funds end investment companies, but increased 1st 2d 1st 2d 1st half half half half halfp their purchases of shares in such companies. Market instruments acquired, Commercial banking sector. The commertotal 6.9 15.3 19.4 17.3 11.5 cial banking sector, which includes Federal Federal obligations -5.5 4.6 7.4 3.7 -5.8 State and local obligations... 1.0 1.0 2.7 1.0 1.1 Reserve Banks and certain Treasury mone- Corporate and foreign bonds. 2.5 2.8 2.5 2.1 2.0 Corporate stocks 1.1 1.0 1.1 1.4 1.5 tary funds, accounted for more than four- Mortgages.... 3.8 4.5 5.2 7.2 7.2 Consumer credit 1.3 1.0 -.6 .2 2.4 Security credit 0) -.3 1.8 -.8 -.2 fifths of the increase from 1957 to 1958 in Other .7 n 2.5 3.3 total credit flow from financial institutions. 2.7 Sources of funds, total 15.7 18.8 17.2 11.0 Increase in liabilities, total2.. 7 6. . 2 0 14.9 17.1 14.7 8.0 In the first half of 1959 the total flow was Demand deposits and cur- smaller than a year earlier and reflected a rency : Federal Govt. deposits.. 1.0 -.8 5.0 -4.9 A Other -6.3 5.3 -3.8 9.5 -4.9 reduction in funds advanced by commercial Time deposits and savings shares 6.9 5.2 10.8 5.9 6.0 banks. Marked expansion in bank credit Life insurance and pension reserves 3.4 3.4 3.4 4.1 3.7 in 1958 reflected a Federal Reserve policy Securities and borrowing.. 1.1 1.6 1.1 .4 2.7 of monetary ease during a period of re- Decrease in gold assets -.6 1.5 .8 .8 Other 3 1.4 '.9 .2 1.7 2.2 duced economic activity, while the slower P Preliminary. increase in bank credit in early 1959 re- 1 Less than $50 million. 2 Includes miscellaneous liabilities not shown separately. flected a shift in policy toward restraint in 3 Gross saving and net decreases in assets other than market instruments and gold. a period of vigorous economic expansion. NOTE.—Financial institutions include Federal Reserve System and certain Treasury monetary funds. Total of net purchases differs The increase in privately held demand from total of sources because of statistical discrepancies. deposits and currency—the active money also by other financial organizations. Net supply—in 1958 was about $7 billion purchases of $11 billion of Federal obliga- greater than in 1957. The active money tions by financial institutions in 1958 ex- supply declined in the first half of 1959, ceeded the $9 billion increase in such obliga- the usual seasonal movement. The decline tions outstanding as consumers on balance was larger than a year earlier, but at midsold Federal securities. year the active money supply was $5 billion Commercial banks and other financial above that in mid-195 8. institutions also increased substantially their The increase in bank loans and investnet purchases of State and local obligations ments in 1958 also reflected a record growth and 1- to 4-family mortgages. Partly off- in time deposits at commercial banks, which setting these increased flows was a marked amounted to $8 billion, or 45 per cent more reduction in net extensions of short- and than in 1957. In addition, Federal Reserve intermediate-term credit to consumers. actions to offset the $2 billion decrease in The market for equity securities also re- gold assets last year—in contrast to the gold flected the greater availability of institu- inflow of 1957—were also reflected in the tional funds last year. Net purchases of sector's loans and investments. In the first corporate stocks by financial institutions, half of 1959 both the inflow of time deposits notably by noninsured pension funds and and the decrease in gold assets were smaller open-end investment companies, totaled than a year earlier. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A Quarterly Presentation of Flow of Funds, Saving, and Investment INTERACTIONS of financial and nonfinan- Bureau of the Budget. The Budget Bureau cial developments are important elements asked the Board to assume more responsiin the determination of the course of eco- bility in the area of saving statistics and to nomic events, both in the short run and over explore various problems related to the longer sweeps of economic activity. Pat- measurement and publication of estimates terns of financial and nonfinancial flows of of national and sector saving and investfunds through the economy and patterns of ment. saving and investment play significant roles As the latest step in these programs, the both in determining and in revealing these Board's Division of Research and Statistics interactions. An understanding of these pat- presents in this issue of the BULLETIN a terns is thus vital in economic analysis and new version of the flow-of-funds accounts. in formation of monetary and other eco- The most significant advances in the new nomic policies. Such understanding is version are the placing of the accounts on greatly facilitated when it is based upon a a current quarterly basis and the presentafirm statistical foundation and an appropri- tion of saving and investment series for both ate statistical framework. individual sectors and the economy as a The Board of Governors of the Federal whole as integral elements of the flow-of- Reserve System has long been concerned funds structure of accounts. with the quality and pertinence of statistics Quarterly estimates. Beginning with this in these areas. One expression of this inter- issue of the BULLETIN the flow-of-funds est has been its development of the flow-of- system of accounts will be published regufunds system of national accounts, first pub- larly on a quarterly basis, with about a fourlished in 1955.1 Developmental work since month lag in publication of estimates for the 1955 has stemmed both from a continuing latest quarter. The quarterly flows are program to improve the flow-of-funds ac- shown, in general, without adjustment for counts and from work in connection with seasonal variation. Quarterly estimates on saving statistics undertaken at the request the new basis have been prepared for the of the Office of Statistical Standards of the years beginning with 1952.2 1 The pioneering work in this area was conducted serve System, Washington, D.C., 1955). Statistical by Professor Morris A. Copeland, now of Cornell revisions and later annual data have appeared in the University. The results of his work were published BULLETINS for April and October 1957, pp. 376-85 in his book, A Study of Moneyftows in the United and 1190-94, respectively, and in mimeographed form. States (National Bureau of Economic Research, New York, 1952). Structural and statistical development 2 Annual estimates on the new basis begin with of the system was continued by the staff of the Board; 1946 for transaction flows and with year-end 1945 for the first publication of the Board's work was in the amounts outstanding of financial assets and liabilities. Federal Reserve BULLETIN, October 1955, pp. 1085- Detailed descriptions of the form and time cover- 1124, and in Flow of Funds in the United States, age of the tables presented in this BULLETIN are given 1939-1953 (Board of Governors of the Federal Re- on p. 843. 828 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 829 Saving and investment estimates. Another and decisions with respect to income, proimportant development in the accounts is duction, and the markets for goods and the presentation of totals of saving and in- services are interdependent and mutually vestment for each domestic sector and for determining. Liquidity position, portfolio the nation as a whole as integral elements composition, credit availability, and changes of the system of accounts. This is part of a in each are reflected in markets for goods broader set of changes, introduced over and services and thereby in the changing time, whereby current and capital elements total and composition of spending and outof the accounts are separated more sharply put; at the same time, changes in income, and "internal" entries between current and prices, expenditures, and output influence capital accounts are recorded. saving and investment decisions, borrowing To a great extent, introduction of saving and liquidity needs, and thus flows through and investment totals into the flow-of-funds financial channels. system could be accomplished by striking The flow-of-funds system of accounts is subtotals of flows already recorded in the designed to provide a statistical framework accounts. In some instances, however, appropriate to the analysis of problems intreatments of transactions were modified to volving relationships among financial and accommodate the desired concepts of sav- nonfinancial developments and to permit ing and investment.8 the tieing together of sector and financial Placing saving and investment totals with- market analyses into an integrated analysis in the framework of the flow-of-funds sys- for the economy as a whole. The major tem of accounts provides perspective for characteristics of the system with respect to these totals in terms of sector transactions scope and with respect to organization of and in terms of financial market develop- transaction entries into sector and transacments that are important both as deter- tion accounts stem from the general requireminants and as consequences of the patterns ments of such integrated analysis. of saving and investment. Similarly, the Thus the accounts encompass estimates explicit recording of saving and investment of both financial and nonfinancial flows artotals in the accounts provides convenient ranged in a single internally consistent summaries of current flows and of capital structure. Since mutual interactions occur flows in terms of concepts that are often through decisions of economic units made used as strategic elements in analyzing the in light of their whole pattern of receipts levels and fluctuations of total demand, in- and outlays, borrowing and lending, and come, and employment, as well as growth in saving and investment, analytic emphasis income and productive capacity. is placed on the behavior of groups of economic units. An explicit sector organiza- ANALYTIC ORIENTATION OF THE tion of the accounts follows from this em- ACCOUNTS phasis; all transactions—current and capi- Developments and decisions in the financial tal, financial and nonfinancial—of a given sphere of the economy and developments group of economic units are recorded in a 3 The place of the saving and investment totals in sector account of sources and uses of funds, the structure of accounts and the concepts of saving which covers current income of all types, and investment used are discussed in later sections of this article. current expenditures, capital expenditures, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

830 FEDERAL RESERVE BULLETIN • AUGUST 1959 borrowing, and lending and other acquisi- To the analysis of this wide range of probtions of financial assets. lems, which economists have long dealt The transactions of the various sectors with on the basis of less comprehensive arare classified in a standard way throughout rays of statistical resources, the flow-ofall sector accounts. Each payment by one funds system of accounts contributes a coneconomic unit is also a receipt of another, trolled statistical approach and an internally and each debt of one unit also a financial consistent body of data that highlight the asset of another; with both sides of each complex of transactions in the economy. transaction or claim classified similarly, the The constraints provided by a system in transactions of one sector can be related which every flow is consistently recorded to those of other sectors, and transaction both as receipt and payment and in which accounts can be set up showing the amounts explicitly recorded sources and uses of funds various sectors put into, and receive from, balance for each sector enforce a consistency various broad markets. In the financial of analysis not easily achieved otherwise. area, standardization of transaction classi- While the accounts are an aid to analysis, fication provides a consistent structure of they do not, by themselves, constitute analyall financial flows. Estimates of outstanding sis or offer automatic answers to problems. amounts of financial assets and liabilities Examination of the accounts may provide similarly provide an over-all picture of the some insight into the functional relations bestructure of debt relationships. tween variables, may suggest workable hypotheses, and may permit the screening out While the individual sector and transof obviously implausible hypotheses, but action accounts provide a statistical basis each user must supply his own analysis and for examining separate parts of the economy, adapt the accounts to his own purposes and the system of accounts is oriented primarily, methods. through its interlocking of sector and mar- In designing the accounts, effort was made ket perspective, toward analysis of relations to keep the structure of the system adaptable among all the parts and, through these reand flexible so as not to restrict unduly the lations, toward analysis of developments in the economy as a whole.4 It finds its major user's freedom to select hypotheses for testing or his freedom to combine or correlate use in problems that involve both financial data in testing. The structure of the system and nonfinancial variables and that relate is thus not geared to any particular problem to the interactions of the decisions of variwithin the wide range of analysis for which ous groups in the economy and to interrelathe accounts are appropriate; nor is it geared tions among various financial markets. to any specialized theory, hypothesis, or ap- 4 The interlocking of sector and transaction perspec- proach. For any given use it may be desirtive in the accounts is highlighted, particularly for able to condense or otherwise rearrange the financial flows, in Table 1 (p. 1046) of the BULLETIN accounts to fit the specific analytic objective. flow-of-funds tables. Sector accounts are shown vertically and market or transaction accounts are pre- Different problems and approaches may resented, simultaneously with the sector accounts, horiquire different rearrangements. The value zontally in the table. In order to keep the table to manageable proportions, current account receipts and of the system of accounts is thus enhanced outlays for each sector are summarized into a single by its presentation in a form detailed enough entry for saving, but more of the current account detail is shown in the sector accounts of Table 4. to permit such rearrangements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 831 STRUCTURE OF THE ACCOUNTS shown in the BULLETIN tables differ from The basic form of the presentation is a set one sector statement to another in kind and of interlocking, internally consistent sources amount of detail and in extent to which and uses of funds statements for the major the transactions are netted.6 The greatest sectors into which the economy has been amount of such detail is recorded in the divided. consumer and government accounts. Nonfinancial capital flows are shown in Sector and transaction classifications. The the private domestic sector statements in economy has been divided into 11 sectors: the following categories: purchases of con- (1) consumers and nonprofit organizations; sumer durable goods, residential constructhree nonfinancial business sectors— (2) tion, plant and equipment expenditures, and farm business, (3) nonfarm noncorporate net change in inventories.7 No nonfinancial business, and (4) corporate business; two capital flows are entered in the capital transgovernment sectors—(5) Federal Governactions subaccounts of the government secment, and (6) State and local government; tors; they are recorded, together with other four financial sectors—(7) commercial purchases of goods and services, in the govbanking and monetary authorities, (8) savernment current transactions subaccounts. ings institutions (mutual savings banks, sav- Financial flows for each sector are shown ings and loan associations, and credit in the following categories, which are deunions), (9) insurance companies and prifined consistently for all sectors:7 vate pension plans, and (10) finance not elsewhere classified (security brokers and Gold and Treasury currency dealers, open-end investment companies, Demand deposits and currency sales finance companies, etc.); and (11) a Fixed-value redeemable claims: Time deposits sector for the rest of the world (that is, for Savings shares foreign transactions with the United States).5 U. S. savings bonds (consumer-held) The statement for each sector records all Saving through life insurance the financial and nonfinancial flows for that Saving through pension funds sector arising from its transactions—flows Credit and equity market instruments: Federal obligations of means of payment, purchases and sales, State and local obligations transfers and gifts, and borrowing and ad- Corporate and foreign bonds vance of funds. Each sector account is Corporate stock divided into a current transactions subac- Mortgages on 1- to 4-family properties count, which records current nonfinancial Other mortgages Consumer credit flows, and a capital transactions subaccount, Security credit which records nonfinancial capital flows and Bank loans not elsewhere classified financial flows. Internal transfers of value Other loans between the subaccounts of any given sec- Trade credit tor are also recorded. Proprietors' net investment in noncorporate business Current account transactions specifically Miscellaneous financial transactions 5 Subsector statements are also prepared for the 6 For a list of nonfinancial transaction categories major components of the financial sectors but are underlying the present estimates, see p. 848. not presented in the BULLETIN. Detailed definitions and coverage of the sectors are given on pp. 846-48. 7 For description of these categories, see p. 852. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

832 FEDERAL RESERVE BULLETIN • AUGUST 1959 Financial flows for each sector are re- action categories as is used in the flow accorded on a net transaction basis for each counts.10 financial transaction category; that is, for Saving and investment in the structure of each sector for each financial transaction accounts. Within this structure of sector category the asset entry represents funds and transaction accounts, saving and investused to acquire assets of that type in the ment for each domestic sector and for the accounting period less funds realized from economy as a whole are shown as subtotals the disposition of assets of that type in the of pertinent flows in the accounts.11 Saving accounting period; and the liability entry is defined in terms of current transactions, represents funds raised by borrowing less that is, as the excess of current receipts over funds used in repayment in the accounting current expenditures.12 It is shown both period.8 gross and net of capital consumption. For In two respects, however, entries for finan- each sector, gross saving—the balancing cial flows are on a gross basis: (1) Liabili- use of funds within its current transactions ties (assets) of one transaction category are account—is carried to its capital transacnot netted against assets (liabilities) of an- tions account as a source of funds for that acother. For example, consumer borrowing count. Investment for each sector is defined to purchase securities is not netted against in terms of capital transactions, that is, as the consumer purchase of the securities; both sum of net purchases of tangible assets (exare shown in the consumer account. (2) penditures for both newly produced and pre- For any sector, asset and liability entries viously existing tangible assets less sales of within a single transaction category are not tangible assets) and net acquisitions of financial assets less net increases in liabilities. netted; both are shown (except for internal Government net tangible capital expendiholdings in consolidated sector accounts). tures, however, are omitted from govern- For example, consumer mortgage assets are ment sector and national investment totals not netted against consumer mortgage liafor the present due to unresolved conceptual bilities. and statistical problems in this area.13 In addition to estimates of financial flows, Saving and investment for the economy estimates of amounts of financial assets and as a whole are shown as the sums of saving liabilities outstanding are provided in the and of investment, respectively, for all doform of partial balance sheets for the various sectors.9 These estimates are shown in the same structure of sector and financial trans- 10 Financial flows are recorded on a transaction basis, while amounts outstanding reflect valuation changes as well as transactions; hence annual changes 8 To simplify terminology and table form, the term in amounts outstanding are not necessarily equal to the corresponding figures on flows. "liability" is used to cover both equity and debt claims. 11 For a description of the main features of the sav- 8 The balance sheets shown are partial in that they ing and investment series for the various sectors, see p. 849 of this BULLETIN. do not include estimates for the value of tangible assets either by sector or for the economy as a whole. 33 A subtotal of "current surplus" is also shown for Correspondingly, no levels are shown for net worth or each sector. Current surplus is measured before defor net equity of owners in sector's assets. At the preciation and before certain net imputations incident present time, the statistical basis for estimates of tangi- to the treatment of life insurance and pension funds, as discussed on p. 849 of this BULLETIN. ble wealth is insufficient to warrant incorporating such estimates in the accounts. 13 See discussion on p. 834. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 833 mestic sectors.14 In the measure of invest- striking subtotals does not destroy this conment for any group of economic units, fi- ceptual equality.17 nancial flows among the units cancel out. The fact that saving is in concept equal Thus, in the measure of total national in- to investment means that as a statistical vestment, financial claims owed and held matter either item can be estimated from the within the domestic economy, which are current transactions account or from the important components of sector investment, capital transactions account. The procedure cancel out and the financial component of followed here of estimating both saving and national investment consists of the increase investment in terms of their basic definitions in net financial claims on foreigners.15 Simi- seems less conducive to semantic confusion larly transactions in previously existing tan- than if the alternative procedure of estimatgible assets among domestic sectors cancel ing one of them in terms of its statistical out (if both the purchase and the sale are equivalent were used.18 recorded in capital transactions accounts) in the measure of the tangible component CONCEPTS AND DEFINITIONS OF SAVING AND INVESTMENT of national investment. Presenting saving and investment within the For each sector and for the economy as framework of a comprehensive structure of a whole, saving measured from the current national accounts clarifies many conceptual transactions account is conceptually equal to investment measured from the capital 17 It is sometimes considered convenient to record transactions account. In practice, however, certain transfers, gifts, or grants as "capital transfers," the two measures are not necessarily equal that is, as transfers out of capital account rather than out of current account. Examples of items suggested because of statistical discrepancies.18 The for such treatment are estate taxes, gifts of capital conceptual equality of saving and investment to charitable institutions, parts of foreign aid. In such cases, the definitional equality for each sector in these accounts is an alternative statement is not "saving = investment," but "saving = investof the conceptual equality of sources and ment + net capital transfers paid." If all capital transfers were between domestic sectors, with both uses of funds or of credits and debits. Rethe receipt and payment recorded in capital transgrouping sources and uses of funds into two actions accounts, such capital transfers would be offsetting for the economy as a whole and the national categories—current and capital flows—and definitional equality would be "saving = investment." To the extent that the capital transfers are from or to 14 Stated alternatively, the capital transactions ac- foreign countries or that one side of a domestic capital count for the economy as a whole represents a con- transfer is recorded in a current account, the equality solidation of the capital transactions accounts for the for the economy as a whole is "saving = investment domestic sectors. + net capital transfers." In the present accounts, all 15 While the domestic financial components of sec- taxes and transfers are treated as current transactions tor investment—that is, the financial flows among and thus "saving = investment" by definition. domestic sectors—cancel out in the measure of na- 18 The conceptual equality of saving and investment tional investment, they are significant elements in and the consequent possibility of estimating saving the determination of national investment. The forms through investment has resulted in an increasing in which people save, the extent to which funds tendency to identify saving and investment terminofrom savers are channeled through financial markets logically, that is, to label investment series as "saving." and financial institutions to the purchasers of in- Investment is the "form that saving takes," and it is vestment goods, the pattern of financial flows in the the "uses to which saving is put," but it is not saving. economy, and the state of the financial markets all To apply the term "saving" both to the current have effect on sector decisions to purchase investment sources of funds in the capital transactions account goods and on foreign financial transactions and thus on and to the capital uses of funds is to blur a disthe amount and form of national investment. tinction that is as analytically significant, for example, 16 See pp. 857-59 of this BULLETIN for a discussion as that between sources and uses of funds, or between of discrepancies in the accounts. supply and demand. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

834 FEDERAL RESERVE BULLETIN • AUGUST 1959 issues and helps to prevent inconsistencies in that satisfy the criterion and those that do treatment and definition. It does not deter- not. The borderline is not sharp, and any mine the basic concepts and definitions of selection of items will to some extent be saving and investment. Rather, within the arbitrary. The following paragraphs discuss structure of the national accounts, the con- some of the areas of specific decision. cepts of saving and investment influence (1) Government investment. Governthe boundaries between current transactions ment tangible investment, including that by and capital transactions, the form of rela- both general government and government tionship between various sectors, the extent enterprises, is the most important class of to which certain transaction complexes are items excluded from the present total of nareflected in financial flows, and the need for tional investment. This exclusion stems from imputations. In general, the structure of both conceptual and statistical problems: the flow-of-funds accounts can be adapted Although a significant part of purchases of to accommodate any desired concept of goods and services by government can saving and investment. properly be considered as representing capi- Specific measures of saving and invest- tal formation and thus as part of total nament are determined mainly by decisions on tional investment, unresolved conceptual the coverage of investment. Since all trans- problems involved in drawing the line beactions are classed as either capital or cur- tween the current and capital expenditures rent, decisions as to the coverage of invest- of the government sectors justify omitting ment also determine the scope of current series on government tangible investment.19 transactions and thus of saving. Despite the availability of many pieces of Investment in tangible assets. In this pres- pertinent data, there are also many statistientation, the basic emphasis in the cover- cal problems in compiling consistent quarage of investment in tangible assets is on the terly series for government expenditures on acquisition of goods that yield services over tangible capital assets. Some of these probtime, that is, beyond the current accounting lems relate to estimates of capital consumption. period. Under this general criterion, national investment in tangible form in the Much work remains to be done on these accounts consists of capital formation in the problems before satisfactory series for govfollowing forms: private business purchases ernment tangible capital can be constructed. of plant and equipment, including business When these problems are settled, tangible purchases of residential construction; net capital expenditures will be broken out of change in private business inventories; current transactions in the government acconsumer purchases of residential construc- counts and added to government capital tion for owner-occupancy and of consumer transactions accounts. Until then, governdurable goods; and nonprofit organization 19 An alternative would be to show tangible capital expenditures for plant and equipment. series that consist of a limited group of capital ex- Specific areas of decision. The general penditures, such as government construction outlays, for which data are published currently. Aside from criterion for investment in tangible assets, the possibly misleading aspects of such a partial that is, the yielding of services over time, series, the absence of related depreciation estimates does not in practice result in a unique de- leads to the rejection of this alternative. Government construction outlays, however, are identified in the marcation between those uses of resources government sector accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 835 ment investment as shown in the flow-of- properly be considered part of investment, funds accounts will cover only the financial only changes in private business inventories transactions—net lending less net borrowing are so treated. —of the government sectors. (4) Transactions in existing assets. (2) Expenditures on research and edu- Transactions in land and other previously cation. Expenditures on research and de- existing assets present other statistical probvelopment, and by extension all expenditures lems. In principle, investment expenditures on training and education, also present un- of each sector should include all such items resolved problems for measures of invest- as purchases and sales of land and existing ment. Many such expenditures yield their plant and equipment as positive and nega- "services" over time, and many result in in- tive elements, respectively. Data for these creased production and productivity. The items are extremely poor and the accounts extent to which it is desirable or meaningful include only a few items for which estimates to treat such uses of resources as capital are available, namely business purchases of expenditures is an unsettled question. Prob- used plant and equipment from the Governably even more troublesome is the question ment and business lease-back transactions of the proper pattern of depreciation in- with insurance companies. Other existing volved if research and development are made asset transactions have not been entered part of capital outlays. At the present time in the capital transactions accounts. outlays on research, development, educa- When both the purchase and the sale tion, and training are not included in the entries for transactions in previously existnational investment series, except insofar ing assets are recorded in capital transacas they take the form of private expenditures tions accounts of domestic sectors, such on plant and equipment. transactions do not enter the total of na- (3) Consumer tangible investment. Tan- tional investment, and statistical inadequagible investment expenditures for consumers cies in their measurement do not affect the cover purchases of consumer durable goods estimates of total investments.20 However, to as classified in the national income accounts the extent that the existing asset transacand of residential housing. Some goods tions take place across sector lines, statistical classified as nondurable (for example, inadequacies affect the measures of distribuclothing and other textile goods) and some tion of national investment by sector and services (ranging from education to shoe contribute to sector discrepancies between repairs and clothing alterations) yield their saving and investment. Transactions in services over time and thus in principle are existing houses are not a major problem in part of capital formation. For reasons of this respect because most of these transstatistical convenience, however, the published series on consumer expenditures for 20 Because net tangible capital expenditures of government do not appear in the national investment durable goods has been used with no additotal, private business purchases of existing assets tions or deletions. For the same reason, from government appear in the measure of total national investment recorded in the accounts. When changes in consumer inventories of nongovernment net tangible capital expenditures are added durable goods have been excluded from na- to the government capital transactions accounts (and thus to national investment), business purchases of tional investment. Even though change in existing assets from government will be eliminated by inventories anywhere in the economy might offset from the total of national investment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

836 FEDERAL RESERVE BULLETIN • AUGUST 1959 actions take place within the consumer approximation than that now available can sector. probably be developed. Capital consumption charges. Capital For the purposes of measuring increconsumption charges are an important ele- ments to capital and analyzing the relation ment in the calculation of measures of net of saving and investment to economic saving and net investment to be used in growth, many of the present data are deanalyses of economic capacity and of eco- ficient in both the valuation basis and the nomic growth. time patterns used in calculating depreci- In this presentation, capital consumption ation. Valuation bases and lengths of life charges against reproducible tangible assets that are appropriate for tax purposes are consist of depreciation, accidental damage not necessarily significant for such measureto fixed capital, and capital outlays charged ment purposes. One step toward a working to current account in business usage. Sav- approximation suitable for the latter puring is shown both gross and net of capital poses might be to shift all elements of depreconsumption charges, but investment is ciation now on an original-cost basis to a current-cost basis. Another step might be the shown only in gross form. Depreciation on determination and adoption of estimates of consumer durable goods is estimated by the the useful life of each class of asset that Federal Reserve on a current-cost basis; all would be appropriate for measuring net savother annual capital consumption charges in ing and investment. the accounts are based on figures in the Other problems with taxed-based deprenational income and product accounts of ciation series stem from discontinuities inthe Department of Commerce and are on troduced by occasional use of rapid amorthe valuation basis used in those accounts, tization schedules and recent shifts from mainly original cost with the principal exstraight-line depreciation to declining-balception of farm depreciation, which is on a ance and other methods that concentrate current-cost basis. depreciation relatively more in the early life Most of the elements of present data on of the asset. Mixed valuation bases and capital consumption have significance privarying methods of allocating charges over marily as allowable tax deductions or as time in the depreciation estimates now availallocations of acquisition costs over time. able tend to restrict the comparability of For a number of reasons, they may be measures of net saving and investment both inappropriate for purposes of measuring over time and as between sectors. net saving and net increments to the econ- Estimates of capital consumption that are omy's physical capital and for the analmore appropriate for measuring net saving ysis of the relation of saving and investment and net capital formation will be added to economic growth. For such purposes, to the presentation if they are developed. capital consumption charges for a given ac- At least until then, estimates of gross saving counting period should represent asset values and gross investment are statistically more lost during that period through use and pas- significant than estimates of net saving and sage of time. There is some question as to net investment. whether capital consumption in this sense Financial investment. The financial relacan really be measured, but a closer working tionships that determine the content of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 837 financial investment for each sector and for miums (that is, premiums less benefits) are the economy as a whole are indicated by the not a satisfactory measure of policyholders' structure of accounts, the list of financial investment in life insurance because the categories, and the descriptions of these value of the claim is also affected by investcategories on pages 851-57 of this BULLE- ment income and costs of operations of the TIN. In most instances, decisions as to what insurance funds. Cash surrender values does or does not constitute a financial re- provide a measure of the liquid part of inlationship were clear, but in the instances vestment in life insurance but in some discussed in this section alternative treat- cases, such as matured annuities, they fail ments were possible. to give even an approximate indication of Financial flows among domestic sectors the total claim involved. cancel out in the measurement of national The use of total assets as a measure of investment. Thus, except to the extent that insurance claims also involves difficulties: financial relationships with foreign coun- Private life insurance companies usually tries are involved, definitional decisions re- conduct operations other than life insurance lating to financial relationships affect do- through nonlife insurance and pension demestic sector totals of saving and investment partments, and the assets of most compaand the distribution of saving and invest- nies are not segregated by department. ment among the domestic sectors, but not the Moreover, some of the assets reflect internal measures of national saving and investment. saving by the companies in the form of re- In principle most of the relationships dis- tained earnings, reserves for special contincussed below might affect measures of for- gencies, and unassigned surplus. While such eign financial flows and thus measures of internal saving strengthens the company's finational investment, but as a matter of fact, nancial position, it does not under normal mainly because of lack of information, they circumstances reflect a claim of the individare treated in these accounts as involving ual policyholder against the company. only intradomestic relationships.21 Policy reserves appear to be the best basis Life insurance. Life insurance, govern- for estimating the financial claims involved ment as well as private, is reflected in the in life insurance. For private life insurance, financial assets of the consumer sector and the claim is estimated as equal to changes in liabilities of life insurance companies and in reserves against life policies and supplethe Federal Government. The problem in mentary contracts and in dividend accumuthis area relates not to the existence of a lations. The difference between total assets claim but to the exact nature of the claim and the total of these items is a measure of and how to measure it. the saving and investment of the life insur- Four means of measuring the life insur- ance companies themselves. Similarly, with ance claim are available—net premiums, respect to Government life insurance, the cash surrender values, total assets of insur- claim has been estimated as equal to policy ance funds, and policy reserves.22 Net pre- reserves and liabilities for matured contracts. 21 The main error in this assumption probably in- The asset side of the life insurance finanvolves the area of insurance relationships across national boundaries. nancial claims and current flows involved in life 22 For a discussion of the relations between fi- insurance, see p. 849 of this BULLETIN. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

838 FEDERAL RESERVE BULLETIN • AUGUST 1959 cial claim has been attributed entirely to mate of the ultimate value of the claims. consumers. As a matter of fact, businesses The old age and survivors insurance proare beneficiaries of some life insurance poli- gram (OASI) also generates claims to fucies and therefore the holders of the claim. ture income, but in this case it was decided Because the amounts are relatively small and to treat the tax and transfer flows entirely estimates are not available, these business on a current basis, as is done in the case claims have not been separated from con- of payments of veterans' and military pensumer claims. sions (for which no Government trust funds Pension plans. Both private pension plans have been established). Hence the claims and government employee retirement and arising out of the OASI program are not railroad retirement plans are reflected in reflected in any financial instruments in the consumer investment in financial assets and accounts. The same treatment is used for in liabilities of the government and insurance the unemployment compensation system, sectors.23 On the other hand, social security where the case for it is even stronger; betransactions in connection with old age and cause of the contingent nature of the claim, survivors insurance and unemployment unemployment insurance is more akin to compensation programs are treated as cur- nonlife insurance than it is to the life insurrent, not investment, transactions. ance and pension relationships that are ex- The basis for treating claims on pension pressible as financial claims. funds as financial claims in the accounts is Noncorporate business saving. The probnot so clearcut as it is for life insurance. lems involved in dividing saving and invest- While there is an element of saving that is ment between unincorporated enterprises being done by or for the employees covered and their proprietors are part of a broader in the funds, neither the nature of the claims range of statistical and conceptual problems nor the relationship between the size of the centering on the relations between such funds and the ultimate claims against them businesses and proprietors. Depending upon is clear for the funds taken in the aggregate. the nature of the entry shown for income Despite the uncertainty of the measurement withdrawals by proprietors from the busiof the employees' claims against the funds, nesses, the amount of saving done out of the it is more convenient to show the saving as net income of the business can be recorded being done by the ultimate beneficiaries in the noncorporate business sector accounts rather than by the funds themselves. Thus, or in the consumer account or divided bethe estimate for the financial claims in- tween them. If it were possible to define volved—change in reserves in the case of operationally and to measure actual current plans administered by life insurance com- income withdrawals by proprietors (includpanies and change in total assets for private ing amounts for payment of income taxes noninsured plans (those not administered on business income), the difference between by life insurance companies), government these withdrawals and the net income of the employee retirement funds, and the railroad business would provide a measure of busiretirement fund—is one of convenience; it ness retained earnings or the net saving of does not necessarily represent an esti- the business. In turn, the difference between this business net saving and the excess of 28 For a discussion of the relations between the business investment expenditures (for both financial claims and the current flows involved in tangible and financial investment) over deretirement plans, see p. 849 of this BULLETIN. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 839 preciation and net borrowing would provide transactions transfer noncorporate business a measure of the flow of new equity funds net saving and net investment to the coninto unincorporated business net of capital sumer sector for the year as a whole, funds withdrawn. However, there is no sta- leaving gross noncorporate business saving tistical basis for such a separation of un- and investment equal to capital consumpincorporated business net income into pro- tion charges.25 prietors' current withdrawals and business There are also serious conceptual and net saving. statistical problems in allocating certain In the present accounts, "income with- financial instruments between the consumer drawals by proprietors" for each year as a sector and noncorporate business. In the whole is treated as equal to the total net in- present accounts, the allocation in these come of unincorporated businesses, both cases has been made entirely to the consumer farm and nonfarm, and accordingly unin- sector except where there is specific indicacorporated business retained income, or net tion of noncorporate business participation. saving, is shown as zero on an annual basis.24 Such allocation decisions affect the distri- As a correlate of this treatment, the financial bution of consumer and noncorporate incategory "proprietors' net investment in non- vestment by type, but they do not affect the corporate business" covers not only the net totals of saving and investment for any of flow of new equity funds into unincorpor- the sectors involved, since any changes in ated business but also the net earnings re- such allocations are offset by equal changes tained in the business. "Proprietors' net in the item for proprietors' net investment investment in noncorporate business" is thus in noncorporate business. equal statistically to the investment expendi- Profits tax accruals. No financial relationtures (for both tangible and financial invest- ship is recorded between corporate business ments) of such businesses less increases in and the government sectors with respect to liabilities other than proprietors' net invest- corporate profits tax accruals; the saving ment and less capital consumption charges. figures of corporate business and of the In this treatment, net retained earnings of government sectors reflect tax payments and unincorporated businesses for the year as a tax receipts, respectively, rather than tax whole are reflected in consumer saving accruals. Corporate profits tax accruals, rather than in business saving. The finan- particularly as currently accruing, are more cial and current transactions recorded be- a unilateral internal segregation of reserves tween unincorporated enterprises and their in recognition of future payments than a owners thus have the effect of showing zero financial flow or a specific debt instrument annual net investment and zero annual net between corporations and government. The saving for noncorporate business; these amount as currently accrued is not agreed upon by the "creditor"; the current accruals 24 It seems reasonable to assume that income with- may in specific cases bear little relation to drawals by proprietors have a smoother pattern the amounts that will actually be paid. The within the year than business net income, which has large seasonal fluctuations. A consequence of this amount of accrual influences portfolio and assumption is that in some quarters of the year proprietors' withdrawals are larger than income and in other quarters are smaller than income. The data 25 Net saving and investment of the farm business therefore show seasonal movements of noncorporate sector reflect the retained earnings of corporate farms, business net saving and dissaving that add to zero which are not transferred to the consumer sector in over each year. this manner. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

840 FEDERAL RESERVE BULLETIN • AUGUST 1959 other decisions and is needed in analysis, larger (because liabilities are smaller) than but for these purposes it is preferable to in the alternative. Since Government inrecord it as an internal charge rather than vestment includes Government net lending as government receipts involving financial but not Government purchases of tangible relations. (The internal charge is shown in assets, the alternative treatments yield differa memorandum line in the corporate busi- ent totals of Government investment and of ness sector account.) national investment. In the purchase treat- Commodity Credit Corporation loans. ment adopted, Government investment and CCC nonrecourse price-support loans (both national investment are both less—by the direct loans and guaranteed loans held by amount of the net increase in crops under banks) can be treated as (1) borrowing CCC nonrecourse loans—than they would (secured by inventories) that does not have be in the loan treatment.28 to be repaid in cash (and on which the in- Alternative definitions. The criterion used terest need not be paid) except at the op- here in defining investment—acquisition of tion of the borrower or as (2) sales to the assets that yield services over time—is not CCC, with the seller having an option to the only one that has been suggested as the repurchase at a minor penalty rate. The core of an investment concept. In some latter treatment has been adopted for this cases, narrower versions of the same cripresentation.26 Under this treatment, Gov- terion are sought, for example, a concept of ernment purchases include the net change in capital formation that would be restricted crop inventories securing direct and guaran- in some sense to business capital, or to capiteed CCC nonrecourse price-support loans tal that yields services in production for as well as the net change in inventories held sale. It is not necessary to discuss here directly by the CCC; these crops appear in the concepts of capital, production, and ecofarm marketings at the time they are put nomic goods implicit in the narrower criunder CCC loan; and no farm debt is shown teria; it should be pointed out, however, for the CCC loans.27 All CCC-guaranteed that the detail on capital expenditures by loans held by banks are recorded as debts of type and by sector shown in this presentathe CCC and hence of the Federal Govern- tion permits the construction of a number ment sector. of subtotals that can serve either as meas- The choice of treatment of CCC loans ures of narrower concepts of capital formadoes not affect total saving and total in- tion or as measures useful in analyses of vestment of the farm sector, but it does particular aspects of capital formation. affect the composition of farm investment as Other criteria that have been suggested or between tangible and financial investments; used, explicitly or implicitly, as the basis for in the treatment adopted, tangible investdefinitions and measures of saving and inment is smaller and financial investment 28 To the extent that the loans are not repaid in cash 26 This treatment is also used in the national income and the crops are taken over by the CCC, the differaccounts and by the Department of Agriculture in its ence between the two treatments is merely one of farm income statistics. timing. 27 However, CCC loans for storage facilities are If Government tangible investment were recorded treated as financial transactions and CCC loans on in the capital transactions account of the Government tobacco (owed entirely by cooperatives) are an ex- sector, total Government and national investment ception to the general treatment of nonrecourse price- would be unaffected by the choice of treatment, with support loans. CCC loans not included in farm debt only the breakdown in the Government sector between are shown in a memorandum line in Table 8 (B). tangible and financial investment differing. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 841 vestment relate not to the role of investment tion of private financial and nonfinancial in production but to the relation of invest- business has been provided by shifting fiment to other economic variables, for ex- nance companies and security brokers and ample, to financing or to various forms of dealers from the business sectors to a fiincome. Thus investment is sometimes de- nance sector. The sector accounts covering fined in terms of purchases that are generally financial businesses have been rearranged financed through borrowing, or that are into more significant groupings. Thus, munot wholly financed out of current income. tual savings banks and the Postal Savings Alternatively, investment is sometimes de- System have been separated from the comfined indirectly as an "offset" to saving where mercial banking system (that is, commercial saving or consumption is defined in terms banks and monetary authorities); and a new of stability in relation to certain forms of sector has been set up to cover private savincome. ings institutions. Without discussing the problems involved Financial instruments have been rein basing saving or investment concepts on grouped to provide more homogeneous and, such criteria, it may be noted that the analy- in some cases, more detailed transaction tic significance of groupings of transactions categories. Examples of such changes rebased on such criteria does not depend upon late to savings deposits and shares, savings the groupings being labeled "saving" and bonds, corporate securities, mortgages, con- "investment." The flow-of-funds accounts sumer credit, security credit, and bank are constructed and presented in consider- loans. Some transaction complexes—insurable detail so as to permit the ready rear- ance, pensions, and flows between uninrangement of the specific flows into cate- corporated enterprises and their proprietors gories of significance for many different —formerly handled entirely as nonfinancial problems and hypotheses. The concepts of flows are now also recorded in new financial saving and investment adopted for this pres- transaction categories. entation in no way restrict or limit such Other changes have been dictated by lack rearrangements or the analyses in which of adequate data. Thus consumers and nonthey are to play a role. profit organizations have been combined into a single sector account because of sta- COMPARISON WITH OTHER PRESENTATIONS tistical difficulties in separating them. Lack The material presented in this version of the of data has caused curtailment in entries for flow-of-funds accounts differs both from transactions in existing tangible assets. earlier versions of the accounts and from sav- A major difference from the earlier form ing series published in other compilations. of the flow-of-funds accounts occurs in the Earlier flow-of-funds accounts. The shift presentation of current nonfinancial flows. to a quarterly basis and the incorporation of In the earlier form, these flows were shown saving and investment totals have already on a gross basis for a number of transacbeen discussed. In addition to these general tion categories, with consistent classification developments and to the general process of for all sectors. In the present version, the statistical revision, there have been several amount of detail shown for current nonspecific changes in the structure of the ac- financial flows varies from sector to sector, counts from the form previously published. but in general there is less detail and more In the sector structure, a cleaner separa- netting than formerly. The basic data for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

842 FEDERAL RESERVE BULLETIN • AUGUST 1959 estimating many elements of the gross de- as part of an internally consistent structure tailed flows are not available quarterly; of accounts, publishes a table showing shifting to a quarterly publication basis has estimates of the investment equivalent of also resulted in the elimination of many ele- net personal saving.29 The financial elements of the annual gross nonfinancial ments in that table are based on Securities flows. It is hoped that the preparation of and Exchange Commission estimates of insuch details in a form consistent with the dividuals' saving. new structure of accounts can be resumed In the comparison of the investment side in the future. of the flow-of-funds account for the con- Other saving series. Saving and investment sumer sector and the Department of Comseries in the flow-of-funds accounts differ merce table the differences listed above for in several respects from corresponding series the saving side also appear. In addition published by the U. S. Department of Com- there are the following differences: (1) merce in the national income and product the flow-of-funds account records on a gross accounts and by the Securities and Exchange basis some items that are recorded on a Commission. The following discussion in- consolidated or other net basis in the Comdicates some of the major differences. Rec- merce table (for example, consumer credit, onciliation tables detailing many of the mortgages); (2) assets and liabilities of undifferences between the flow-of-funds ac- incorporated businesses enter the two prescounts and the national income and product entations differently—in the flow-of-funds accounts will be made available later. consumer table, they are reflected in the Consumer net saving in the flow-of-funds category "proprietors' net investment in accounts differs from net personal saving noncorporate business"; in the Commerce in the national income accounts as presently table, the specific business assets and liabilipublished in several respects. It is larger ties themselves are entered; and (3) by the amount of three items not reflected amounts estimated for individual items in the Commerce personal saving figure: differ. Of these additional differences, only (1) purchases of consumer durable goods, the last results in different investment totals. net of depreciation on such goods; (2) sav- Differences also exist between corporate ing through Government life insurance; (3) sector saving, saving of the government secsaving through government employee re- tors, and net foreign investment as pretirement funds and through the railroad re- sented in the two systems. These differences tirement fund. It is less than the Com- stem mainly from treatments relating to busimerce series by the amount of the internal ness sectoring, the internal saving of life insaving of life insurance companies and of surance companies and mutual financial inmutual financial institutions, which is re- stitutions, corporate profits taxes, timing of flected in the Commerce series. Government receipts of personal income A form of comparison can also be made taxes, Government life insurance, governon the investment side of the consumer ac- ment employee retirement, railroad retirecount because the Department of Commerce, while not showing sector capital 29 U. S. Income and Output—A Supplement to the Survey of Current Business (Government Printing transactions subaccounts or financial flows Office, Washington, D. C, 1958), Table V-9. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 843 ment, sale of Government plant and equip- Federal Reserve to eliminate as many of ment to business, government purchases of these differences as possible. This work, land, choice of control totals in Treasury when completed, may result in revisions in statistics, and the "errors and omissions" in both sets of data. the balance-of-payments statement of the TABULAR PRESENTATION Department of Commerce.30 Tables showing estimates for the flow-of- Many of the differences mentioned in confunds system of accounts are in three parts: nection with the saving of various sectors a set of quarterly BULLETIN tables, a set of affect only the distribution of saving as annual BULLETIN tables, and supplementary among sectors, but a few of them result in tables to be made available in some other differences between the two presentations form. in coverage and in estimates of national The tables on pages 1046-62 of this issue saving and investment. Thus, gross national of the BULLETIN constitute the first presinvestment in the flow-of-funds accounts entation of both the regular quarterly and includes two items—purchases of consumer the regular annual BULLETIN tables. The durable goods and business purchases of tables on flows in this issue present quarterly used plant and equipment from the Federal figures for 1957 and 1958 and the first Government—not in gross investment in quarter of 1959, together with annual figures the income and product accounts.31 In adfor 1954-58; the tables on amounts outdition, the investment totals in the two sets standing show annual data for the entire of accounts differ by the amount of the period 1945-58. Quarterly data for 1952entry for errors and omissions in the balance- 56 and annual flow data for 1946-53 will of-payments statement.32 be available for distribution later. There are also statistical differences, as Quarterly tables. Tables 1 through 4 on well as a few conceptual ones, between the pages 1046-53 will appear in the BULLETIN Securities and Exchange Commission series once each quarter. These tables are all in on the "Volume and Composition of Interms of flows. The four tables record the dividuals' Saving" and the financial comsame basic estimates in the same categories, ponents of the investment side of the conbut with differences in emphasis, degree of sumer account in the flow-of-funds accounts. summarization, and time periods covered. Work is now under way at the SEC and Detailed descriptions of the various sector 30 The quarterly estimates for the corresponding and transaction categories used in these series also differ because the Commerce figures are at tables are given in the "Technical Notes," annual rates and in general are on a seasonally adjusted basis while the flow-of-funds estimates are pages 846-59, and more briefly in footnotes quarterly totals and in general are not adjusted for to the tables. seasonal variation. Table 1 presents a detailed sector-by- 81 See note 20, p. 835. transaction matrix of the saving, tangible 32 In the national income accounts, net foreign capital, and financial flows for the entire investment is measured from the current side of the balance-of-payments statement; in the flow-of-funds economy for the latest quarter for which accounts, from the capital side. The discrepancy estimates are available; current nonfinancial between the two sides of the balance-of-payments statement, "errors and omissions," thus appears as a transaction flows are summarized in a line difference between the national investment totals in for saving but are not recorded in detail in the two sets of accounts. This item is not a difference between national saving totals in the two systems. this table. (Details on current nonfinancial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

844 FEDERAL RESERVE BULLETIN • AUGUST 1959 flows are presented in Table 4.) Table 1 each sector except the three nonbank finanis the basic table of the presentation in that cial sectors (savings institutions, insurance, it portrays the structure of the accounts and and finance n.e.c), which are shown in a gives an over-all view of the pattern of finan- single combined statement (but with some cial flows among sectors. It provides a single sector detail and identification). period panorama or directory of the system. Annual tables. Tables 5 through 8 on While analysis of individual parts of the sys- pages 1054-62 contain annual estimates and tem can be done on the basis of the other will appear in the BULLETIN once each year. tables, which show the movements through Table 5 presents a flow matrix for the latest time of elements of Table 1 (both in sum- year in the same form as Table 1. Tables marized and expanded forms), the inter- 6-8 present estimates of amounts outstanding of financial assets and liabilities for yearrelations and mutual impacts among sectors end dates. Table 6 is a matrix of amounts and markets are approached more effecoutstanding for the latest year-end and cortively through the matrix. This table also responds in form to the financial parts of shows most clearly the relations between Tables 1 and 5. Tables 7 and 8 are time the totals of saving and investment and the series tables of amounts outstanding and structure of capital flows, and between seccorrespond in form to Table 3 and the fitor and national totals for saving and investnancial parts of Table 4, respectively. ment. Tables 6 and 8 present more detail by type Table 2 presents a time series summary of financial instrument than the correspondof the saving and investment series in Table ing flow tables. In addition, Table 8, which 1. The table shows net national saving, nashows partial balance sheets for each sector, tional capital consumption, and gross napresents separate statements for each of the tional saving by sector; and gross national subsectors of the commercial banking sysinvestment by type of investment and by tem and for each of the three nonbank fisector. nancial sectors. Table 3 presents a time series summary Supplementary tables. In addition to the of the major types of financial flows rematerial regularly published in the BULLEcorded in Table 1. The table is in four TIN, tables of supplementary data will be parts—demand deposits and currency, fixedmade available, from time to time, in some value redeemable claims, saving through life other form. Availability of supplementary insurance and pension funds, and credit and material will be announced in the BULLETIN. equity market instruments. For each part Several groups of such material are now the table presents detail by type, by debtor being prepared and will be released later. sector, and by holder sector. This table does These include: (1) annual estimates for not contain cross-classifications by sector by 1946-53 and quarterly estimates for 1952type; such cross-classifications may be ob- 56, which are not presented here; (2) finantained from Tables 1 and 4. cial sector and subsector statements not Table 4 presents in time series form the shown separately in Tables 4 and 8; (3) fiindividual sector sources-and-uses-of-funds nancial transaction accounts in time series accounts contained in Table 1. The table form (that is, separate tables for each cateis in nine parts with a sector statement for gory showing sector participation on the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 845 asset and liability sides);33 and (4) detailed those derived from final Statistics of Income statements of reconciliation to (a) corre- tabulations (which are annual but with a sponding series on saving, investment, in- three-year lag) or from infrequent bank come, and expenditures in the national in- loan surveys, etc. come and product accounts, and (b) corre- The time series tables (Tables 2-4 and sponding series in Treasury and banking 7-8) will be revised each quarter or year as statistics. required, with revisions entered for all quar- Revisions. The many types of data used ters and years currently carried in the BULin the accounts are subject to statistical re- LETIN. Revisions for quarters or years earvision at various intervals and with varying lier than those carried currently in the BULfrequencies. The nonfinancial flows in the LETIN will be made available from time to accounts are derived mainly from national time in some other form. The sector-transincome and product accounts of the Depart- action matrices (Tables 1, 5, and 6) are ment of Commerce and such flows will in presented only for the most recent quarter general be revised once a year in accordance (Table 1) and for the most recent year with the revision policy of the National In- (Tables 5 and 6). For any given quarter or come Division. Such annual revisions ordi- year, they will not ordinarily be repeated in narily apply to the preceding three years but the BULLETIN in revised form. Thus a runmay cover much longer periods as Census ning file of Tables 1,5, and 6 as they appear benchmarks become available. in the BULLETIN would reflect no revisions; For the financial flows, a larger number and since some revisions will occur in the and variety of data sources are used. Many of next succeeding quarterly publication, these these maintain quarterly, and even monthly, tables should be used as data sources only revision schedules as they shift from prelim- for the most recent quarter or year, unless inary and sample type information to firmer they have been kept up to date by entering and more complete tabulations. Moreover, in them the revisions for corresponding enin several instances, the first estimates used tries appearing in the revised Tables 2-4 and in the flow-of-funds tables must be based 7-8 as published each quarter and year. on rough approximations and these are replaced as soon as data from the usual FUTURE DEVELOPMENTS sources become available. The desirabil- Estimates in this presentation are based on ity of keeping the financial estimates as data collected, compiled, and processed by consistent as possible with published sources a large number of sources, both governhas resulted in a policy of frequent revision mental and private. The principal Governwith respect to the financial flows. In addi- mental sources are the Securities and Extion to the current short-run revisions, the change Commission, the Office of Business financial flows are also subject to longer Economics and the Census Bureau of the run adjustments to benchmarks, such as Department of Commerce, the Treasury Department, the Federal Deposit Insur- 33 The transaction accounts are valuable aids to ance Corporation, and the Federal Reserve analysis when used in conjunction with the sector accounts and the matrices. Tables 3 and 7 represent System. The principal nongovernmental very summary financial transaction accounts and the sources are insurance publications, the Insupplementary tables showing the transaction accounts can be considered detailed breakdowns of these tables. stitute of Life Insurance, National As- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

846 FEDERAL RESERVE BULLETIN • AUGUST 1959 sociation of Investment Companies, Na- government capital formation, separation of tional Association of Mutual Savings Banks, nonprofit organizations and personal trusts United States Savings and Loan League, and from the consumer account, noncorporate various private research organizations. In financial transactions, gross financial flows, addition to providing some of the basic data gross nonfinancial flows, transactions in and estimates, the statistical work of the existing assets, distribution of bank debt by Federal Reserve in preparing this presenta- debtor sector, quarterly patterns of deposit tion has consisted of evaluating available ownership, quarterly nonfinancial flows, the statistics, selecting the series to be used, and area of seasonal adjustment, and full sector making the many adjustments of timing, balance sheets. valuation, sector and transaction coverage, In addition to structural developments deand sector allocation required to fit the pendent upon statistical improvements, series into a consistent over-all framework. there will undoubtedly be conceptual There are many inadequacies in the data changes in form of presentation as progress available for constructing a comprehensive is made in work on the problems of conpresentation of flow of funds, saving, and structing a single national accounting sysinvestment. Because of the large number tem that fully integrates the income and of sources and series involved in the con- product accounts and the flow-of-funds acstruction of the accounts, statistical improve- counts. When this work comes to fruition, ment of estimates of flow of funds, saving, it is likely to affect the form and nature of and investment is a matter of achieving de- all bodies of data to be incorporated into tailed improvements throughout a wide the single integrated system. Exploratory range of economic statistics. Future im- work on such integrated accounts is curprovements in basic data in many areas will rently under way at the Federal Reserve, at make possible desirable statistical and struc- the Department of Commerce, at statistical tural changes in the accounts. Among the agencies of the United Nations, other interaspects of the accounts in need of improve- national organizations, and some foreign ment and development are depreciation, countries, and at private research agencies. TECHNICAL NOTES These notes define the sector and transaction households, (2) personal trusts, and (3) nonprofit groupings and the saving and investment concepts organizations serving individuals, for example, used in Tables 1-8 on pages 1046-62. The present foundations, private schools and hospitals, labor flow-of-funds sector and transaction categories dif- unions, and charitable, welfare, and religious orfer in several instances from those used in previous ganizations. The sector excludes the business publications of flow-of-funds estimates and de- activities of individuals as proprietors of unincorscribed in those publications.1 porated businesses, both farm and nonfarm, and the lessorship activities of individuals acting as SECTOR COVERAGE landlords; these are covered by the farm and non- The consumer and nonprofit organization sector corporate business sectors. covers (1) persons in their capacity as members of The farm business sector covers all farm operat- 1Flow of Funds in the United States, 1939-1953 ing activities in the United States. It includes (Board of Governors of the Federal Reserve System, unincorporated farm enterprises, corporate farms, Washington, D.C., 1955); and "Summary Flow-ofand, on a consolidated basis, farm credit coopera- Funds Accounts, 1950-55," Federal Reserve BUL- LETIN, April 1957, pp. 372-91. tives (national farm loan associations and produc- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 847 tion credit associations) and the farm activities in the commercial banking sector, and (2) the of nonfarm landlords of farm property. The District of Columbia, which is included in the sector excludes farm marketing, purchasing, and sector for State and local governments. The secutility cooperatives and the nonfarm business tor account is consolidated; transactions between activities of farm families, all of which are in the components of the sector are not shown. nonfarm business sectors. It also excludes most The State and local government sector comof the consumer transactions, other than housing, prises all political subdivisions in the United of farmers. States, including the government of the District The nonfarm noncorporate business sector of Columbia. It includes all departments, trust covers unincorporated nonfinancial enterprises, and sinking funds, corporations and enterprises predominantly those in trade, construction, and the (such as State liquor monopolies and municipally professions. It includes mutual organizations en- owned utilities), and authorities (such as toll road gaged in production or commerce—such as farm and port authorities) of such governmental units. marketing, purchasing, and utility cooperatives— The sector account is a combined statement of but not farm credit cooperatives. The lessor ship consolidated accounts for individual governmental activities of individuals are included, as are non- units. The latter consolidations are not complete, profit organizations serving business, for example, however, with respect to debt and interest transtrade associations. The sector excludes farms; actions between governmental units and their own security and commodity-exchange brokers and trust and sinking funds. The securities of a govdealers, finance companies, factoring firms, and ernment held by trust or sinking funds of that govmortgage companies (all in the finance n.e.c. sec- ernment are included in both the assets and liabilitor); mutual financial institutions such as credit ties of the sector account. unions (in the savings institutions sector); and The commercial banking and monetary authorinonprofit institutions serving individuals and the ties sector consists of the following elements: (1) consumer activities of business proprietors (in the commercial banks in the United States excluding consumer sector). territories and possessions,2 (2) the Federal Re- The corporate business sector comprises private serve System, and (3) Treasury monetary funds, nonfinancial, nonfarm corporations. It includes, which consist of the Exchange Stabilization Fund, on a consolidated basis, holding companies and the gold account, the silver account, and an acclosed-end investment companies (other corpora- count constructed from various Treasury data to tions in finance industries are classified in the record currency liabilities of the Federal Governbanking, savings institutions, insurance, and fi- ment not elsewhere classified and the assets undernance n.e.c. sectors). The activities of pension, lying these liabilities.3 The sector account is on a welfare, and profit-sharing plans established by consolidated basis; that is, loans, reserve balances, corporate business are excluded from this sector deposits, and other financial claims among eleinsofar as identifiable. ments of the sector are eliminated. The Federal Government sector covers, with Subsector accounts for commercial banks and certain exceptions, all departments and branches for monetary authorities (the Federal Reserve and of the Government, including trust funds, deposit the Treasury monetary funds) are also prepared fund accounts, the Postal Savings System, Gov- but are not presented in the BULLETIN quarterly ernment corporations and credit agencies, and other Federal enterprise funds, whether wholly or 2 Discontinuities in the banking sector coverage and in each of the banking series result from the partly owned by the Government. It includes two admission of new States. Banks in Alaska are cov- Government-sponsored institutions—the Federal ered in the banking sector, instead of in the finance land banks and Federal home loan banks—that n.e.c. sector, beginning with the first quarter of 1959. became wholly privately owned when the Treas- Banks in Hawaii will be transferred to the banking sector beginning with the third quarter of 1959. ury capital investment in them was retired. The following instrumentalities of the Government are 8 See Flow of Funds in the United States, 1939not included in this sector: (1) the Exchange 1953, Ch. 8, for further detail. The present sector differs from the description given there mainly be- Stabilization Fund, the Federal Reserve System, cause it excludes mutual savings banks and the Postal and certain monetary accounts, all of which are Savings System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

848 FEDERAL RESERVE BULLETIN • AUGUST 1959 flow tables. In addition to the annual partial bal- the rest-of-the-world sector, that is, within and ance sheets for the consolidated sector, summar- among other countries. ized partial balance sheets are presented for the two subsectors. These highlight the intersubsector CLASSIFICATION OF TRANSACTION CATEGORIES financial relations eliminated in consolidating the Transactions in the accounts are arranged in full sector account. Each subsector statement is three major transaction groups—current nonfinanalso a consolidated account for that subsector; thus cial flows, capital nonfinancial flows, and financial loans from one commercial bank to another and flows. In addition there are several internal endeposits of one commercial bank with another are tries, subtotals, and transfers between current and excluded from the totals of loans and deposits in capital subaccounts, such as capital consumption the commercial bank subsector account; similarly charges, current surplus, saving, investment, corin the monetary authorities subsector, intrasector porate profits, and unincorporated business net inrelations are not recorded. come. The savings institutions sector consists of mutual Current nonfinancial transaction categories. Desavings banks, savings and loan associations, and tailed categories of current nonfinancial transcredit unions. Subsector flow statements are also actions are not shown on a systematic basis in the prepared but are not presented in the BULLETIN. BULLETIN presentation of the accounts. The The insurance sector consists of all domestic amount of detail shown is restricted by liminsurance companies (life and nonlife), private ited availability of both quarterly data and pubnoninsured pension and retirement plans (that is, lication space. In Table 1, no detail on these those not administered by insurance companies), flows is shown, the current transaction categories and the insurance activities of fraternal orders. It being represented by a single net figure for each excludes governmental insurance and retirement sector. In Table 4, where more detail is given, programs, which are in the government sectors. both the amount and kind of detail vary from Subsector accounts are also prepared but are not sector to sector: For the consumer sector and the presented in the BULLETIN. government sectors, considerable detail is shown; The finance n.e.c. sector consists of finance com- for the nonbank financial sectors, only a single panies, such as sales finance companies, industrial net current flow is given; and for the business and personal finance companies, mortgage com- and commercial banking sectors, an intermediate panies, and short-term business finance companies; amount of detail is shown. An attempt has been open-end investment companies; security and commade to record, within the space available for each modity-exchange brokers and dealers; banks in sector, groupings of current nonfinancial flows that U.S. territories and possessions; and agencies of are of interest for that particular sector. The notes foreign banks in the United States. Closed-end to Table 4 indicate the contents of most of the curinvestment companies are in the corporate business rent nonfinancial transactions groupings used in sector. the sector statements in that table. The rest-of-the-world sector comprises the resi- The full list of current nonfinancial transaction dents and governments of countries outside the categories underlying the detail, subtotals, and net United States and its territories and possessions. amounts shown in Table 4 is as follows: payrolls, It includes international organizations (such as interest, rents and royalties, dividends and branch the International Monetary Fund, the International Bank for Reconstruction and Development, and profits, income withdrawals by proprietors,4 various the United Nations) and employees of these or- insurance premium and benefit categories,5 grants ganizations who are not citizens of the United and donations, income taxes and tax refunds, other States. The definition of the rest of the world is taxes and tax refunds, sales and current purchases approximately the same as that in the U. S. of other goods and services, and credits imputed balance-of-payments statements, although the clas- to consumers in connection with life insurance and sification and coverage of transactions are some- pension funds.5 what different. The sector account is consolidated; it records only transactions of the rest of the world 4 See discussion on p. 856. with the United States and not transactions within 5 See discussion on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 849 With the major exception of the last category— are reflected in both current and capital transcredits imputed, etc.—the transaction categories, actions.6 Total premiums (including payroll dein general, exclude imputations and exchanges in ductions) and total benefits are included in the kind. Many of the current flows are on an accrual pertinent transaction categories (indicated by notes rather than a cash basis, notably in the categories to Table 4) as current flows in the consumer, of interest, income withdrawals by proprietors, Federal Government, State and local government, other goods and services, and credits to consumers and insurance sectors. The net accrual of equity in connection with life insurance and pension in insurance and pension funds is imputed as a funds. Taxes, however, are on a payments and current flow from these funds to consumers in the receipts basis, not on an accrual basis. category "credits imputed to consumers in con- Business net income is recorded for each busi- nection with life insurance and pension plans." As a counterpart to these income credits, consumers ness sector. The line for this item summarizes are shown as investing these accrued values back and nets current business receipts and costs (inin the funds through the financial transaction cluding capital consumption) before distribution categories "saving through life insurance" and of income to owners and payment of direct taxes. "saving through pension funds." 7 The net accrual For the farm business sector, the annual figures for flows, "credits to consumers, etc.," differ from the this entry are equal to farm net income in the net of the corresponding premium and benefit national income accounts of the Department of flows, being larger by the amount of the investment Commerce less noncash income (home rental income of the funds and employer contributions values, home consumption, and perquisites). For to the funds and smaller by the amount of the the nonfarm noncorporate business sector, the operating expenses of the funds (including the annual figures are equal to the national income pertinent internal saving of life insurance comseries on business and professional proprietors' panies). income (after inventory valuation adjustment) and rental income of persons, excluding net imputed Current surplus is a net total of all current flows rental income in connection with owner-occupied other than "credits imputed to consumers in connonfarm homes. For the corporate nonfinancial nection with life insurance and pension plans" and business sector, the annual figures are equal to the capital consumption charges. It thus includes all national income series "corporate profits and in- insurance premiums and benefits as current transventory valuation adjustment" after removal of actions. For all sectors other than the consumer, financial, farm, and foreign components of this Federal Government, State and local government, Commerce series. The quarterly figures for the and insurance sectors, current surplus is the same series are on an estimated, seasonally unadjusted as gross saving. basis. Capital consumption charges are discussed on Life insurance and pension transactions enter page 836 of this BULLETIN. the accounts in several ways. Premiums and Saving and investment, shown for each domesbenefits in connection with life insurance, indi- tic sector and for the economy as a whole, are vidual annuities, private pension plans, government summaries of current and capital transactions, employee retirement funds, and railroad retire- respectively.8 Saving, presented both net and ment funds have characteristics of both capital transactions and current transactions. On the one 6 Social insurance operations such as OASI and unemployment compensation are reflected only in hand, they can, in large part, be considered financurrent transactions. cial flows representing increased claims (or liquida- 7 In addition to the investing of the income credits, tion of claims) on insurance, pension, and retire- "saving through life insurance" covers financial flows ment funds. On the other hand, they can also, related to policyholder dividend accumulations and to a great extent, be considered current outlays supplementary contracts not involving life contingencies. See p. 854 for a description of the statistical (many of them on a payroll deduction basis) and content of these flows. current income to consumers. 8 For the rest-of-the-world sector, current surplus The present treatment recognizes the ambivalent rather than gross saving is a more appropriate label nature of these transaction complexes and they for Line A of Table 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

850 FEDERAL RESERVE BULLETIN • AUGUST 1959 gross of capital consumption charges, is the excess between unincorporated businesses in both these of current receipts over current outlays. As the sectors and the consumer sector have the effect of balancing item in the sector current transactions showing zero annual net saving and investment for subaccount, gross saving is carried down from this the unincorporated businesses, and annual gross subaccount to the sector capital transactions sub- saving and investment for them equal to capital account.9 Investment, presented gross of capital consumption charges. Farm sector saving, in adconsumption charges, is the sum of net purchases dition, includes the retained earnings of corporate of tangible assets and net acquisitions of financial farms. Quarterly net saving of unincorporated assets less net increases in liabilities. Investment businesses, adding to zero for the year as a as measured in the capital transactions subaccounts whole, is equal to the difference between busiand saving as measured in the current transactions ness net income and the income withdrawals by subaccounts are equal in concept, but statistical proprietors, which are shown with a smoother discrepancies between the two exist in practice.10 quarterly pattern than the business net income The following descriptions of saving and invest- series. ment series for particular sectors stress certain (3) Corporate business sector. Saving is rehighlights or features rather than the detailed tained earnings after tax payments. The series make-up of each series. Complete definitions of is after inventory valuation adjustment. saving and investment for the various sectors and (4) Government sectors. Saving of government for the economy are indicated by the specific cursectors is the excess of all nonfinancial receipts rent receipts and outlays that are netted together over all nonfinancial expenditures including net to derive the saving measures as shown in Table 4 purchases of tangible assets. Government investand by the specific tangible and financial capital ment thus consists only of net financial investment flows recorded in the tables and described in fol- —net acquisitions of financial assets less net inlowing paragraphs. The concepts of saving and creases in liabilities (including liabilities for coninvestment used in this presentation and their role sumer claims on Government life insurance and in the structure of accounts are discussed further on pages 832-41 of this BULLETIN. government and railroad employee retirement (1) Consumer and nonprofit sector. Tangible funds)—government tangible capital expenditures investment consists of net purchases of consumer being grouped with current nonfinancial expendidurable goods, purchases of residential construc- tures. tion for owner-occupancy, and plant and equip- (5) Insurance sector. Saving of the insurance ment expenditures by nonprofit organizations; net sector consists of the following: for life insurance financial investment includes inter alia saving companies and fraternal orders—change in surthrough life insurance, both private and Govern- plus and other reserves except legal reserves on ment, saving through private pension plans and life insurance and pension plan contracts; and for government employee and railroad retirement nonlife insurance companies—total change in surfunds (but not through the OASI program), and plus and other reserves, since no financial claim proprietors' net investment in unincorporated busiagainst the companies is recorded for policynesses. On an annual basis, consumer saving reholders' prepayments of premiums. (Saving of flects retained earnings of unincorporated businonlife insurance companies thus equals the subnesses, net of depreciation. sector's net acquisition of assets, plus the sub- (2) Farm and noncorporate business sectors. sector discrepancy.) No saving is recorded for The income and investment transactions recorded the noninsured pension plans subsector since consumer claims against the subsector are estimated 9 In order to save space in the tabular presentation, as equal to its total assets. gross saving is shown only once rather than as both a current account use of funds and a capital account Capital nonfinancial transaction categories. Capital source of funds. nonfinancial transaction categories, as shown in the 10 For discussion of discrepancies in the accounts, accounts, cover private purchases of tangible assee pp. 857-59; for further comments on the definitional equality of saving and investment, see p. 833. sets; government nonfinancial capital outlays are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 851 included with government current transactions.11 porate sector include purchases of existing plants Capital expenditures are shown gross of capital from the Federal Government and are net of sales consumption charges, but in general are net of of plant and equipment on leaseback agreements. sales of capital assets. In principle, net capital ex- Estimates for the insurance sector include purpenditures cover purchases and sales of land and chases of properties in leaseback agreements. The other previously existing tangible assets as well as sum for all sectors is equal to the sum of producers' purchases of newly produced assets, but, because durable equipment and construction other than of statistical inadequacies, no transactions in land nonfarm residential as shown in gross national and only a few in other previously existing assets product estimates plus business purchases of used are explicitly recorded in capital expenditures.12 equipment from the Government." In presenting nonfinancial capital expenditures, Net change in inventories is shown only for the a standard system of classification is used in all three nonfinancial business sectors. Inventory accounts and tables. change is after valuation adjustment. The series Capital expenditures is the sum, in each private shown are the same as the inventory component of domestic sector, of net purchases of tangible assets, gross national product. as described in following paragraphs. The gov- Farm inventories exclude crops pledged as colernment and rest-of-the-world sectors have no lateral for CCC direct and guaranteed nonrecourse entries for this total. price-support loans. Net increases in such pledged Consumer durable goods consists of purchases crops are treated as Government purchases.14 of new and used consumer durable goods net of Financial transaction categories. Financial transsales of used durable goods; this category is shown action categories are presented in terms of quaronly for the consumer sector. Figures shown are terly net flows and of annual net flows in the tables the same as the consumer durable goods compublished quarterly. Estimates of amounts of fiponent of gross national product. nancial assets and liabilities outstanding for year- Nonfarm residential construction consists of the end dates are presented in the tables published anfollowing items: For the consumer sector, purnually. The following notes apply, in general, to chases of newly constructed nonfarm dwelling both flows and amounts outstanding; any major units (and major alterations and repairs) for differences between flows and outstandings are owner-occupancy; transactions in existing homes noted in the appropriate descriptions. among consumers are netted out. For the cor- Financial uses and sources of funds for each porate and nonfarm noncorporate business sectors, sector are recorded on a net transaction basis; that purchases of newly constructed nonfarm dwelling is, for each sector the entry for each financial asset units (and major alterations and repairs and nonfor any given period represents funds put into the housekeeping construction, for example, hotels) acquisition of that type of asset in that period less for tenant-occupancy and net change in work-infunds realized from the disposition of that asset in process on all nonfarm residential construction. that period; and the entry for each liability repre- For the insurance sector, construction of multisents funds raised by borrowing in that psriod less family units. The total for all sectors is the same funds used in repayment in that period. In Tables as the nonfarm residential construction component 1 and 5, each sector's net acquisitions of financial of gross national product. For statistical reasons, assets (both increases and decreases) are shown the series exclude the net value of land transferred with these properties. 13 Ordinarily, capital transactions in existing assets Plant and equipment expenditures covers private are not reflected in the national totals because the fixed capital outlays for other than nonfarm resi- purchase and sale offset each other. However, govdential construction. Amounts shown for the cor- ernment nonfinancial capital transactions are not recorded in a capital account and do not enter the national totals; private business purchases of existing 11 See discussion on p. 834. Government construcplant from the government are thus not offset in the tion expenditures are identified as specific elements national totals. See discussion on p. 835. of current purchases. 12 See also discussion on p. 835. 14 See discussion on p. 840. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

852 FEDERAL RESERVE BULLETIN • AUGUST 1959 under uses of funds (with appropriate sign), and with the United States. Annual changes in this net increases in liabilities, under sources of funds figure differ from the corresponding figures in the (with appropriate sign). To simplify terminology flow tables by the amount of this net foreign gold and table form, the term "liability" in this presenta- production. tion is used to cover both equity and debt claims. Treasury currency consists of silver held as The financial flow entries are gross in two re- monetary reserve by the domestic economy and spects: (1) Liabilities (assets) in one category are certain asset-debt relationships between the banknot netted against assets (liabilities) in other cate- ing system and the Federal Government in congories. For example, consumer borrowing to pur- nection with the monetary system—seigniorage on chase securities is not netted against the purchase silver, deposits with Federal Government for reof the securities; both are shown. Similarly, Gov- demption of Federal Reserve Bank notes and naernment holdings of demand deposits and currency tional bank notes, and liability of Federal Govare not netted against Government debt to the ernment in connection with minor coin and U.S. banking system. (2) For any one sector, asset and notes not backed by gold reserve.16 The transaction liability entries within the same transaction cateflows for this category occur only in the comgory are not netted; both are shown (except for inmercial banking and Federal Government sectors. ternal holdings in consolidated accounts). For Commercial and industrial purchases and sales of example, consumer mortgage assets are not netted silver and foreign transactions in silver are exagainst consumer mortgage liabilities. cluded from the category. Commercial banking Net financial investment for each sector is the sector uses of funds in the category are net innet of all financial flows—the net acquisitions of creases in monetary silver and in claims on the Fedfinancial assets less the net increases in liabilities. eral Government sector that represent the non- It measures the net funds advanced by each sector metallic backing for U.S. currency other than to all other sectors. The net financial investment Federal Reserve notes. Federal Government sector for each sector plus the statistical discrepancy for sources of funds are seigniorage on silver and that sector equals the sector net surplus on all nonchanges in the liabilities corresponding to the nonfinancial transactions. silver banking assets in this category; Federal Gov- Gold and Treasury currency is a single entry ernment sector uses of funds consist of changes in in the flow matrix (Table 1), but the individual Treasury holdings of silver bullion valued at items are shown in the sector flow accounts in cost.17 Table 4 and in the tables on amounts outstanding. The large difference between total assets and Gold consists of gold held as a monetary reserve. total liabilities in the estimates of amounts out- Transaction flows for the gold category, which exstanding in the gold and Treasury currency cateclude commercial and industrial purchases and gory results from the fact that gold and silver sales, are recorded only for the commercial banking and rest-of-the-world sectors.15 Commercial are shown in the accounts as assets of the sectors holding them, but no sector is shown as bearing banking sector uses of funds are net increases in corresponding liabilities (except for seigniorage monetary gold stock, including the active gold of revaluations on silver, which are treated as a Fedthe Exchange Stabilization Fund. Rest-of-theeral Government liability). In this respect gold world uses of funds are gold transactions with the United States. and silver are treated as tangible rather than financial assets. Rest-of-the-world gold assets in the tables on amounts outstanding reflect net foreign gold pro- Demand deposits and currency covers demand duction (output plus net gold exports of the deposits at commercial banks in the United States U.S.S.R., less consumption and net increase in (excluding territories and possessions); Governprivate holdings) in addition to gold transactions 18 For a detailed discussion of these relationships, see Flow of Funds in the United States, 1939-1953, 15 Both the gold and the Treasury currency trans- Ch. 17. actions of the commercial banking system occur in 17 This silver is not part of the silver account and that part of the monetary authorities subsector that is not classified as an asset of the commercial bankconsists of the Treasury monetary funds. ing sector. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 853 ment and foreign deposits at Federal Reserve deposited by the nonconsumers. No information Banks; and United States currency.18 is available on the magnitudes of these offsetting The consolidated banking sector's liability for differences between the other-party-record and the demand deposits and currency differs from the sum gross bank-record bases, but it appears reasonable of amounts held by all other sectors principally be- that they are not too dissimilar in size. On the basis cause of mail float (that is, checks in the mail from of the simplifying assumption that they are apdrawer to drawee). The liability figure is a bank- proximately equal, the other-party-record basis is record figure adjusted for checks in process of col- estimated as equal to the gross bank-record basis. lection through the banking system, that is, for For the demand deposit and currency account total bank float, which is measured by the sum of as a whole, this treatment results in a difference cash items in process of collection as reported by between the liability side (on a net bank-record commercial banks and Federal Reserve float. The basis) and the asset side (partly on a holder-record, asset figures are on varying bases: Demand de- partly on a bank-record, and partly on an otherposit assets of State and local governments and of party-record basis) that is roughly equal to nonthe rest-of-the-world sector are derived from bank consumer checks to nonconsumers still in the mail records without float adjustments. Holdings of all from drawer to drawee. This difference is only other sectors except the consumer sector are on an part of the total mail float. The discrepancy in the estimated holder-record basis. demand deposit and currency account also contains several other elements of much smaller mag- Because of the lack of direct information, estinitude. mates for most of the consumer sector transactions appear in the accounts not with the timing they In the commercial banking sector portion of would have in consumer records but with the Tables 4 and 8, details are shown under the litiming with which they appear in the records of the ability entry for demand deposits and currency on other parties to the transactions. To be consistent amounts due to U.S. Government, due to rest of with the rest of the consumer account, consumer the world, and due to others. This allocation of the demand deposits are estimated on an other-party- liability side of the demand deposit and currency record basis rather than a holder-record basis. The account differs from the corresponding estimates on the asset side of the demand deposit and curother-party-record basis differs from a consumer rency account in the following respects: (1) The holder-record basis by the inclusion in consumer item "due to U.S. Government" (shown in Tables demand deposit assets of checks in the mail from 4 (G) and 8 (G)) is taken from banking statistics nonconsumers to consumers and from consumers and differs from the asset entry for the Federal to nonconsumers and consumers. Government sector holdings of demand deposits The other-party-record basis for consumer holdand currency (shown in Tables 1, 3, 4(E) and ings of demand deposits differs from a gross bank- 8(E)), which is derived from U.S. Treasury data. record basis (that is, before adjustment for bank (2) The item "due to rest of the world" equals float) by (1) the inclusion of checks from nonrest-of-the-world demand deposit and currency asconsumers to consumers not yet deposited or resets, since both are on a bank-record basis. (3) The ceived by consumers, and (2) the exclusion of all entry "due to others" is on a bank-record basis, net checks from consumers in process of collection of bank float; it differs from the corresponding asthrough the banking system and of consumer set figures for demand deposits and currency, which checks to nonconsumers received but still held unare estimated partly on a holder-record basis and 18 In the statements for the sub sectors of the partly on an other-party-record basis, as described banking sector (shown in annual presentation of in the preceding paragraphs. amounts outstanding), the category includes the fol- Fixed-value redeemable claims is a summary lowing deposit and currency relationships between grouping of time deposits, savings shares, and convarious elements of the commercial banking system that do not appear as part of the category for the sumer-held savings bonds. It represents fixedconsolidated banking system (and are not part of the value instruments (other than currency and decategory totals): (1) member bank reserves and other mand deposits) that are readily redeemable. commercial bank deposits at the Federal Reserve, Time deposits consists of deposits at mutual (2) commercial bank currency holdings, and (3) Federal Reserve float. savings banks (in the savings institutions sector), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

854 FEDERAL RESERVE BULLETIN • AUGUST 1959 time deposits at commercial banks, and deposits Credit and equity market instruments is a sumin the Postal Savings System (in the Federal Gov- mary grouping of loans and securities. It covers ernment sector). For purposes of statistical government obligations, business and foreign secursimplification, the small amount of demand deposit ities, mortgages, consumer credit, security credit, liabilities of mutual savings banks is grouped with and bank and other loans. It excludes trade credit, this category rather than with demand deposits. proprietors' investment in unincorporated enter- Savings shares consists of savings and loan as- prises, and miscellaneous financial transactions. sociation shares and credit union shares. Federal obligations covers all marketable Treas- Savings bonds covers (1) consumer holdings of ury and Federal; agency (including Federal land U.S. savings bonds, including the accrued interest bank and Federal home loan bank) securities— on these bonds, and (2) for years prior to 1954, direct, fully guaranteed, and nonguaranteed—net armed forces leave bonds. U.S. savings bonds of holdings by agencies and funds that are part of held by other sectors are included in the Federal the Federal Government sector. The category inobligations category. cludes some nonmarketable securities, such as Saving through life insurance covers saving savings bonds held by others than consumers, inthrough private life policies, annuity contracts vestment series bonds, savings notes prior to their other than those connected with pension plans, and retirement in 1956, depositary bonds, and matured Government life insurance policies. The category debt. It also includes accrued interest on outstandalso covers deposit claims of policyholders and ing Treasury bills and on savings bonds not held by beneficiaries against insurance companies arising consumers. out of dividend accumulations and supplementary A breakdown of Federal obligations into shortcontracts not involving life contingencies. Policyterm direct, other direct and guaranteed, and nonholders' borrowing on policies from insurance comguaranteed components is shown in several of the panies and from Government insurance programs sector accounts. Beginning with 1951 the subis a positive element of the "other loans" category category "short-term" covers direct marketable rather than a negative element here. All assets in Treasury debt maturing within one year, and the category are attributed to the consumer sector; prior to 1956 it covers savings notes. Prior to 1951 the liabilities are those of the insurance and Federal Government securities were, in practice, redeemed Government sectors. Statistically, the category is at the first call date and for that period short-term estimated as equal to changes in policy reserves covers debt callable or maturing within one year. against private and Federal Government life in- Not all liabilities of the Federal Government surance policies, including individual annuities and supplementary contracts, and changes in policy sector are covered by the Federal obligations catedividend accumulations.19 gory. Some of them are included in other financial transaction categories, as the accompanying tabu- Saving through pension funds covers saving lation indicates. through private pension plans (both those administered by insurance companies and other private Federal Government liability Transaction category plans), government employee retirement funds, Consumer-held U. S. savings bonds Savings bonds and the railroad retirement fund. It does not cover Armed forces leave bonds (prior to 1954) the OASI social insurance program. Only the con- Special notes issued to the International Miscellaneous financial sumer sector holds assets in this category; liabilities Monetary Fund Trust and deposit liabilities are those of the insurance sector and the two Certain accrued interest (beginning government sectors. Statistically, the category is with fiscal year 1956) estimated as equal to changes in reserves of private Currency items in the public debt Treasury currency Other Treasury currency liabilities plans administered by insurance companies and Certain accounts payable Trade debt changes in assets of other private plans, govern- CCC liability for CCC-guaranteed Other loans ment employee retirement funds, and the railroad loans and certificates of interest held retirement fund.20 by commercial banks State and local obligations covers the total debt 19 See discussion on p. 837. 20 See discussion on p. 838. of all State and local government units, except Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 855 loans from the Federal Government (in "other (a) Commercial and industrial loans, exloans") and trade debt. State and local obligations cept open market paper (in the flow-of held by State and local governments and their funds "other loans" category); agencies, including holdings of their own debt, are (b) Agricultural loans, except CCC-guaranincluded in both the assets and the liabilities of the teed loans and CCC certificates of interest State and local government sector. (in the "other loans" category); Corporate and foreign bonds consists of the (c) Other loans to individuals, except conbonded debt of U.S. private corporations and sumer credit loans (in the consumer credit foreign (private, governmental, and international category); agency) bonds held in the United States. Annual (d) Loans to foreign banks (loans to dochanges in amounts outstanding are less than the mestic commercial banks are eliminated in corresponding annual flows because they reflect consolidating the banking sector statewritedowns of defaulted securities as well as net ment); and funds raised. (e) Other loans. Corporate stock represents net issues and sales (2) By Federal Reserve Banks: and purchases of equity securities of private domes- (a) Foreign loans on gold; and tic corporations and net U.S. purchases of stocks (b) Industrial loans. of foreign corporations. The category includes in- All bank loans in the call report classifications of vestment company shares. It covers both common mortgage loans and security loans are excluded and preferred stock. Figures for asset levels of from the bank loans n.e.c. category and are sector holdings are stated at market value, and ancovered in the flow-of-funds mortgage and security nual changes in levels differ from net purchases becredit categories. cause of fluctuations in market price. No estimates Both the asset and liability sides of the cateof amounts outstanding of corporate stock are gory are measured gross of bank valuation reserves shown for issuing sectors. for bad debts, etc. Mortgages on 1- to 4-family properties covers all The sectors that appear as debtors in the bank debt and holdings of debt secured by 1- to 4-family loans n.e.c. category are listed in the accompanynonfarm residential properties. The category has ing tabulation. This tabulation indicates both the the same coverage as the corresponding series pubcall report classification of the debts of each sector lished monthly in the Federal Reserve BULLETIN. in the financial category and the part of the sector Other mortgages consists of all debt and holdowing this type of debt. ings of debt secured by multifamily residential properties, commercial properties, and farm prop- Flow-of-funds sector Call report category erties. The category has the same coverage as the Consumer (nonprofit organi- Other loans corresponding series that are published monthly zations) in the Federal Reserve BULLETIN. Farm business Other loans to farmers in agricultural loans Consumer credit comprises short- and inter- Noncorporate business Commercial and industrial loans mediate-term consumer instalment and noninstal- Other loans to individuals ment credit, including both bank and nonbank Corporate business Commercial and industrial loans credit. The category has the same coverage as the Savings institutions (savings and Other loans loan associations) consumer credit series published monthly in the Federal Reserve BULLETIN. Fin S a a n le c s e f n in .e a . n c c .: e companies, fac- Commercial and industrial loans Security credit is made up of customers' net free tors, and mortgage companies credit and net debit balances with security brokers Personal finance companies Other loans and dealers and bank loans for purchasing or Rest of the world Commercial and industrial loans Loans to banks carrying securities. Federal Reserve loans on gold Bank loans n.e.c. (not elsewhere classified) Other loans consists of the following types of covers the following types of bank loans: loans: (1) By commercial banks in the United States excluding territories and possessions (in terms of (1) Finance company paper; call report classifications): (2) Bankers' acceptances; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

856 FEDERAL RESERVE BULLETIN • AUGUST 1959 (3) Other open market paper; business as well as flows of new equity funds and (4) Finance company loans to business; capital withdrawals. In this treatment any net retained earnings of unincorporated businesses are (5) Federal Government loans (other than mortreflected in consumer sector saving rather than in gages and trade credit, both included in other financial categories, and most CCC direct business net saving. Net investment by proprienonrecourse loans, treated as purchases of tors is equal statistically to the net investment exinventories);21 penditures for both tangible and financial assets by the business less increase in liabilities and less (6) Bank loans guaranteed by the CCC and bank capital consumption charges. (Any errors in alloholdings of CCC certificates of interest (both of which are liabilities of the Federal Gov- cating assets as between proprietors and consumers ernment sector); and their businesses are reflected in the net investment figure but do not affect total consumer invest- (7) Loans (other than mortgages) by banks in ment or result in any discrepancies in the flow- U.S. territories and possessions; of-funds system.) Proprietors' net investment so (8) Loans (other than mortgages and consumer calculated does not necessarily reflect the change credit) by mutual savings banks; and in total equity of owners in the business, for (9) Policy loans on life insurance policies. changes in equity resulting from revaluation of Trade credit is an approach to a book credit assets (that is, capital gains and losses) do not category; it consists of receivables and payables affect this measure. (other than consumer credit, finance company For the quarterly estimates, a somewhat paper, business debt to finance companies, bankers' different procedure is used. It is assumed that inacceptances, and other open market paper). As come withdrawals by proprietors over the year direct loans and notes payable in the trade credit do not reflect the quarterly seasonal movement of category are further identified, they will be shifted the net income of unincorporated businesses (this to more appropriate categories. In the flow tables is particularly important for unincorporated farm noncorporate receivables are netted against pay- enterprises); the income withdrawals are estimated ables, but in the annual sector tables on amounts to occur more smoothly throughout the year. The outstanding they are shown separately. resulting quarterly differences between business Proprietors' net investment in noncorporate busi- net income and owner withdrawals represent seaness covers net flows of equity funds invested by sonal net saving by unincorporated businesses. proprietors in unincorporated businesses, both This seasonal net saving adds to zero for the year farm and nonfarm. No figures on amounts out- as a whole. For each quarter, then, proprietors' standing are presented. net investment is equal to business investment ex- Given the statistical and conceptual problems in- penditures net of increases in liabilities and of volved in distinguishing household and business ac- capital consumption charges less the quarterly counts of proprietors of unincorporated businesses business net saving. and in allocating certain financial assets to non- Miscellaneous financial transactions consists of: corporate business, the measure of proprietors' net (1) Miscellaneous equity items:22 investment must be arbitrary to some extent. For the annual estimates in the present treatment, in- (a) Privately owned interest in Government come withdrawals by proprietors are taken to be corporations; equal to the net income of unincorporated busi- (b) Capital stock of the Exchange Stabilinesses (that is, including any retained business zation Fund; earnings), and the net investment of proprietors in their businesses includes retained earnings of the 22 In addition to the items listed, the subsector statements of the commercial banking sector show a miscellaneous equity item—capital stock of the 21 CCC loans to cooperatives on tobacco and CCC Federal Reserve Banks—that is eliminated in the storage facility loans are treated as loans and in- consolidated sector account and that does not enter cluded in the "other loans" category. the category totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 857 (c) Federal Government subscription to cap- Sector Participation in miscellaneous financial category ital stock of production credit associations; Consumer Assets: Holdings of Federal Government (d) Federal Government subscription to the trust and deposit liabilities International Monetary Fund and the In- Farm Assets: National farm loan associations' business holdings of capital stock of Federal land ternational Bank for Reconstruction and banks Liabilities: Capital stock of production Development; and credit associations held by the Federal Government (e) Direct investment claims between U.S. Noncorporate Assets: Cooperatives' holdings of capital and foreign companies and branches. business stock of the banks for cooperatives Corporate Assets: Holdings of foreign deposits and (2) Miscellaneous deposits: business currency Assets and liabilities: Direct investment (a) Trust and deposit liabilities of the Fed- claims between U.S. and foreign companies and branches eral Government; Federal Government Assets: Subscriptions to the International (b) Special notes issued by the Federal Gov- Monetary Fund and the International Bank for Reconstruction and Developernment to the International Monetary ment Capital stock of the Exchange Stabili- Fund; zation Fund and of production credit associations (c) Foreign deposits and currency held by Holdings of foreign deposits and currency domestic sectors; Liabilities: Private interest in Government corporations (d) Deposits with agencies of foreign banks Special notes issued to the International Monetary Fund in the United States; Trust and deposit liabilities Interest due and accrued (e) Commercial bank balances due to and Commercial banking Assets: Foreign deposits and currency due from own foreign branches; and and monetary Exchange Stabilization Fund deposits authorities with U.S. Treasury (f) Deposit liabilities of banks in U.S. terri- Balances due from own foreign branches tories and possessions. Liabilities: Capital stock of Exchange Stabilization Fund Balances due to own foreign branches (3) Other: Assets and liabilities (unconsolidated subsector statements only): Capital stock of (a) Unidentified financial assets and liabili- Federal Reserve Banks ties of the rest of the world; and Savings Assets: Savings and loan association holdinstitutions ings of capital stock of and deposits at Federal home loan banks (b) Due and accrued interest on U.S. Government debt, beginning with 1956.-3 Finance n.e.c. Lia w b i i t l h it ie a s g : en L c i i a e b s ili o t f ie s f o f r o e r ig n fo r b ei a g n n k s de in p os t i h t e s United States No estimates of amounts outstanding are made Deposit liabilities of banks in U.S. territories and possessions for the two items listed under "other" miscella- Rest of the world Assets: Foreign deposits with agencies of neous; annual changes in amounts outstanding of foreign banks in the United States Special U.S. Government notes held the miscellaneous financial category thus differ by the International Monetary Fund Liabilities: Federal Government subscripfrom the corresponding figures in the flow tables. tions to the International Monetary Fund and the International Bank for Recon- Each sector's participation in the various ele- struction and Development Foreign deposits and currency held by ments of the miscellaneous category is shown in U.S. domestic sectors Assets and liabilities: Direct investment the following tabulation. claims between U. S. and foreign companies and branches Balances due to and from own foreign branches of U.S. commercial banks 23 This Federal Government liability reflects the the U r n e i s d t e n o t f i f t i h e e d w a o s r s l e d ts and liabilities of difference between the monthly interest accruals that have been the basis of recording Federal Government interest payments in Treasury reports since fiscal Discrepancies. In principle, the flow-of-funds year 1956 and interest payments as reflected in cash outgo and (in the case of savings bonds and Treasury system constitutes an interlocking and balancing set bills) in increases in the public debt. The interest of sector and transaction accounts with total accruals on savings bonds and Treasury bills that are sources of funds equal to total uses of funds for classified as part of the public debt are in the cateeach sector account and with total receipts equal gories for Federal obligations and consumer-held to total payments for each transaction account. savings bonds rather than in this part of the miscellaneous category. Discrepancies exist, however, because many of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

858 FEDERAL RESERVE BULLETIN • AUGUST 1959 sector and transaction accounts as constructed do residuals on other accounts, the consumer account not in fact balance statistically.24 discrepancy is one of the major resting places for Discrepancies arise from many factors—incon- inconsistencies occurring throughout the system of sistencies in timing, valuation, coverage, and clas- accounts. The corporate sector account contains sification, and such statistical inadequacies as er- the other major sector discrepancy. The remaining rors in the basic data or omissions of pertinent sector accounts usually show more moderate distransactions or transactors. crepancies. Some of the sector accounts show The relation between the incidence of errors marked seasonal patterns in their discrepancies; and inconsistencies and the appearance of dis- these stem from timing problems and inconsistencrepancies depends upon the detailed statistical cies in the available measures on seasonally unprocedure used in constructing the accounts. In adjusted flows. any social accounting system, the constructor of The BULLETIN presentation of the accounts does the accounts in effect chooses where to show dis- not show detailed categories of nonfinancial transcrepancies or whether to show them at all. For actions in the form of complete transaction acthis and other reasons, there is low correlation counts. Of the underlying detailed categories only between errors and discrepancies. two—other goods and services and, to a much Discrepancies may appear both in sector and in lesser extent, taxes—show any significant discreptransaction accounts; and the transaction account ancies. In Table 1 all nonfinancial transactions, discrepancies may appear both in nonfinancial and in effect shown as a single transaction category, in financial transaction accounts. Since the struc- are recorded on two lines—all current nonfinancial ture of accounts, including the discrepancy entries, transactions (on a net receipts basis for each secis a closed system, the sum of sector account dis- tor) on line A, and all capital nonfinancial transcrepancies must be equal to the sum of transaction actions (on a net expenditures basis for each account discrepancies. Discrepancy elements in sector) on line E. The difference between lines the accounts occur in pairs—each element in a A and E in the "all sectors" column is the total sector account discrepancy is matched by an ele- discrepancy for the nonfinancial transaction catement of opposite sign in another sector account gories. This discrepancy is recorded for convenidiscrepancy or by an element of the same sign in a ence on line A in the discrepancy column. transaction account discrepancy. Of the financial transaction categories, the fol- A sector (transaction) account that has one lowing transaction accounts have no discrepancies of its entries estimated as a residual on that whole because of residual calculations: savings shares, account shows no discrepancies. The residual U.S. savings bonds, saving through life insurance, calculation, in effect, transfers any discrepancy saving through pension funds, State and local elements to a transaction (sector) account, where obligations, corporate bonds, corporate stock, another residual calculation may transfer the dis- mortgages, consumer credit, security credit, and crepancy elements to still another sector (trans- proprietors' net investment in noncorporate busiaction) account. ness. The flow accounts for several other cate- The farm, noncorporate business, and Federal gories—gold and Treasury currency, time deposits, Government sector accounts show no discrepancies Federal obligations, bank loans n.e.c, other loans, because of residual entries. The consumer sector and miscellaneous financial transactions—have relaccount usually shows the largest of the sector atively small discrepancies. discrepancies. Because so many of the transaction The largest financial account discrepancies occur entries in the consumer account are computed as in the demand deposit and currency account and in the trade credit account. The discrepancy in 24 The presence of discrepancies does not really the former account, mainly a timing discrepancy affect the closed, balancing characteristics of the system. The system of accounts includes a "dis- attributable to mail float (that is, to checks in the crepancy sector account" recording the transaction mail between drawer and drawee), was discussed account discrepancies and a "discrepancy transaction on pages 852-53. The discrepancy in the trade account" recording the sector account discrepancies. credit account relates partly to timing or float but For a more detailed discussion of the origin of the discrepancies and their role in the accounts see Flow it also reflects deficiencies in the basic statistics for of Funds in the United States, 1939-1953, Appendix A. this account. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

QUARTERLY PRESENTATION OF FLOW OF FUNDS 859 The discrepancy in each sector cannot in gen- sum of domestic sectors' investment, the discreperal be attributed to particular entries; it reflects ancy between national saving and investment all the inconsistencies in the sector account. Since would be equal to the sum of domestic sector the individual items in a sector account can be discrepancies. With the treatment of the financial grouped and summarized in different ways, the transaction discrepancies just described, the disdiscrepancy can be viewed in several ways: as the crepancy between national saving and national difference between total sources and total uses of investment, as shown in both Tables 1 and 2, is funds recorded for the sector, or between the net equal to the sum of the domestic sector discrepsum of nonfinancial transactions and the net sum ancies minus the sum of the financial transaction of financial transactions, or between the net sum discrepancies. This net sum is also equal to the of current transactions and the net sum of capital nonfinancial transaction discrepancy (line A in the transactions (both financial and nonfinancial), or discrepancy column) minus the sector discrepancy between saving and investment of the sector. in the rest-of-the-world account. These are all equivalent statements and no one of The sector discrepancy in the rest-of-the-world them has more or different significance than the account is equal to "errors and omissions" in the others. The one that is used depends entirely on U.S. balance-of-payments statement as published the form of tabular presentation adopted. In the by the Department of Commerce. In the calcula- BULLETIN tables the sector discrepancies appear tion of net foreign investment in the national as the difference between gross saving and gross income accounts the errors and omissions item is investment. ignored (or alternatively all errors and omissions In the computation of national investment, the are assumed to affect only financial flows) and net discrepancies in the financial transaction accounts foreign investment is estimated from the current are attributed entirely to domestic transactions in transactions side of the balance-of-payments statethese accounts. The financial component of na- ment. The financial component of national intional investment thus equals the sum of the vestment in the flow-of-funds presentation, on the domestic sectors' financial investment plus the other hand, is estimated from the capital side of sum of financial transaction discrepancies (or the balance-of-payments statement. These series alternatively to the negative of the net financial in the two systems of accounts thus differ by the investment of the rest-of-the-world sector in the amount of the errors and omissions in the balance- United States as recorded in the rest-of-the-world of-payments statement, that is, by the sector disaccount). If national investment were simply the crepancy in the rest-of-the-world sector account. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Government Securities Market SUMMARY OF TREASURY-FEDERAL RESERVE STUDY (Joint Statement Relating to the Treasury-Federal Reserve Study of the Government Securities Market by Robert B. Anderson, Secretary of the Treasury, and William McChesney Martin, Jr., Chairman of the Board of Governors of the Federal Reserve System (presented for the record in connection with Secretary Anderson's appearance before the Joint Economic Committee, 10 a.m., EDT, July 24, 1959).) The objectives of national financial policy OBJECTIVES AND CONDUCT OF STUDY as pursued by both the Treasury and the The immediate background of our joint Federal Reserve System have meaning, of study was the wide and rapid price fluctuacourse, only as they contribute to the sound tion in the Government securities market functioning of our nation's economy. For during the economic recession and revival of 1957-58. These market movements our economy to remain healthy and growing, were naturally a matter of concern to the market mechanisms must perform their es- Treasury in view of its debt management sential function of providing a meeting responsibilities. They were of equal conplace where the forces of supply and demand cern to the Federal Reserve because of its can operate to achieve the best utilization of responsibilities for over-all credit and moneresources. One of the problems which has tary conditions. constantly confronted us as a nation has been In undertaking the study our purposes how to protect freely competitive markets were to find out how organization and techfrom forces which would hamper or reniques in the Government securities market strict the performance of this essential func- might be improved, and by what means the tion. Only as everyone concerned remains danger of future speculative excesses in this alert to new developments in marketing market might be lessened. The first step, techniques and organization can we be as- we felt, was to provide the widest possible sured that distortions and restrictive prac- basis of factual information. Accordingly, tices have not crept in, to the detriment of we undertook a detailed and analytic study healthy growth. This is, of course, just as of the underlying causes of the 1957-58 movements. At the same time we undertook important and necessary in the financial a broad re-examination and reconsideration sector as it is in other areas of the economy. of the market's general organization. Developments in the Government securi- While experience of the Government seties market a year ago led the Treasury and curities market during a particular recent the Federal Reserve System to undertake a period thus provided a specific occasion for joint study of current techniques and orinitiating this special study, both the Treasganization in that market. This joint stateury and the Federal Reserve have recognized ment is devoted to a discussion of the progfor some time the need for such a study. ress of the study thus far. The last such study, with somewhat more 860 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 861 restricted objectives, was made in 1952 practices, our aim throughout was to seek under the auspices of the Federal Reserve's out the means whereby the Government se- Open Market Committee. The Treasury curities market could function best in the did not participate in that study since it was public interest. In our inquiry the needs primarily concerned with the interrelation- of the small buyers and sellers were conship of the market and Federal Reserve sidered carefully, along with those of the operations. Since that time there have been Government and of institutional and other many new developments in the market's large investors. machinery and practices, and both the Treas- Consultants included various officials of ury and the Federal Reserve felt that these large commercial banks, of insurance comdevelopments needed careful evaluation. panies and savings banks, and of investment The published version of our study will banking firms; primary dealers and interconsist of three parts. Part I, which is being mediary brokers in the Government securimade available for public release next Monties market; financial officers of several large day, consists, first, of a summary of informal nonfinancial corporations; a number of consultations—some conducted in person members and officials of the New York and some through written communication— Stock Exchange; a group of financial econheld with informed observers of the Governomists; and a group of academic economists. ment securities market and important par- In all, approximately 75 persons particiticipants in that market. Part I also includes pated in individual or group consultation a special technical study of the possibilities and about 30 others provided written comof an organized exchange, or auction marments. The individual and group consultaket, to take care of the major part of the tions were held in Washington, D. C. and huge volume of Government securities transin New York City, and each lasted from an actions. These are handled at present, as hour to a full day. The discussions with you know, in the over-the-counter or dealer financial and academic economists were on market, where more than $ 1 billion of transa panel basis, but the remaining consultaactions are handled in a typical trading day. tions were held separately on an informal The informal consultations represented basis with one or more individuals from a one of the major phases of our study prosingle organization. gram. These consultations had three ob- Part II of our study is a factual analysis jectives: first, to obtain informed impressions of the performance of the Government and judgments on basic causes of last year's securities market from late 1957 to late market experience, especially toward mid- 1958. Rapidly changing market conditions year and after; second, to find out how marin this period presented an unusually wide ket observers and participants viewed and range of problems. To obtain the most comappraised existing market processes and plete information possible on the market mechanisms; and third, to get the benefit of whatever suggestions might be made for forces at work, special questionnaire surimproving and strengthening the market. veys were addressed to all major lenders and While our consultations were limited by the participants in the market. On the basis of special purposes of the study to those who the answers received, we were able to comwere thoroughly acquainted with market pile much new data relating especially to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

862 FEDERAL RESERVE BULLETIN • AUGUST 1959 market developments from spring through ment securities market was focused on the early fall of 1958. wide swings in market prices and yields of Concerning this second part of the study, Government securities from late 1957 it is gratifying to report that the responses through the fall of 1958, with special attento our detailed requests for new statistical tion paid to the mid-1958 market exinformation were exceptionally good— perience. Through systematic re-examinaindeed, virtually 100 per cent. tion of available data and the development Part III of the joint project consists of of new data, we endeavored to find out what four supplementary and technical studies lessons could be derived from this exgrowing out of the suggestions and findings perience which would be of benefit to inof the first two parts. We comment later vestors generally as well as to those who on their particular focus and scope. Neither are responsible for fiscal policy, debt man- Part II nor Part III has been printed as agement policy, and monetary policy. yet, but both are being made available in We have not had sufficient time as yet to preliminary form also for release Monday make a complete evaluation of all the data morning. which have been brought to light by the joint Before turning to the substance of the study. Four general observations relating entire study itself, a word should be added to private investment and credit extension, about how the project was staffed. Both fiscal policy, debt management, and monethe Treasury and the Federal Reserve tary policy, however, are pointed out by the System assigned to the study senior personstaff group, as follows: nel experienced in the observation and First, for purchasers of marketable Govanalysis of the Government securities marernment securities and for lenders, the risks ket. In addition, the Treasury retained the of speculation on anticipated cyclical price services of a former staff official, having movements of fixed-income Government both debt management experience in the securities, and particularly of speculation on Treasury and practical experience in the slim margin, credit-financed holdings, have market, as technical consultant on the been widely learned. study. Federal Reserve personnel were Second, in the area of fiscal policy, there drawn mainly from staffs of the Board of is the problem that recession deficits often Governors and the New York Federal Rerun to very large size and are delayed serve Bank, but selected personnel from beyond the turn in the economy; as a result other Reserve Banks also shared in the they provide stiff financing competition work. A central Treasury-Federal Reserve when growing demands for the financing of staff group was given full responsibility for recovery must be satisfied from a more carrying out the project, and since early slowly growing savings supply, and this spring the members of this group have competition for savings funds may have sigdevoted a major share of their time to it. nificant, but largely unavoidable, effects on securities prices and interest rates. INTERPRETATION OF THE 1957-58 MARKET Third, in the area of debt management, EXPERIENCE there is the problem as to whether, in periods As noted earlier, our study of the Govern- when easy credit conditions lend investor Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 863 favor to longer term, higher yielding issues, receipts and increased social insurance paya large and rapid shift in the maturity struc- ments or because of specific public policy ture of the debt may result in supply and actions taken to combat recession. These demand distortions, which may later have in turn have a direct impact on the prices of upsetting and disruptive effects on the Government securities. market. The additional burden of increasing debt Fourth, in the area of monetary policy, in such periods—particularly when prethere is the problem as to whether easy ceded by inadequate budget surpluses for credit conditions and accelerating monetary debt reduction during the preceding rise expansion for counter-cyclical objectives in the economy—may also have a psychomay be carried to the point where banks logical effect on investors. This may be and other lenders respond too actively to expected because of the fact that investors speculative demands for credit, so that are concerned about future budgetary polilenders, in their zeal to keep their funds cies as well as the size of the particular employed to fullest advantage, may too financing needs of the moment. easily relax the credit standards which long There are other perplexing dilemmas in experience has taught to be sound. periods of general economic instability These broad conclusions arising out of which arise from the very flexibility of our our study point up a major financial market mechanisms. Investors, for example, dilemma which is faced in coping with re- are faced in recessionary periods with either cession in a free enterprise, market econ- keeping their funds highly liquid (with low omy. earnings) or attempting to obtain higher We all agree that reduction of economic yields available only on longer term investinstability is one of our major objectives. ments and thus sacrificing liquidity. Con- National financial policy—which refers to centration on liquidity would, of course, fiscal policy, debt management policy, and accentuate recession tendencies, while emmonetary policy in combination—is the phasis on higher yields would help to primary means available to the Federal counteract such tendencies. Government for cushioning recession and The Treasury faces difficult choices stimulating recovery. during a recession. The orthodox theory of Yet, the vigorous use of financial policy debt management emphasizes short-term to promote economic stability runs the risk financing when resources are not fully emof being accompanied by instability in the ployed. At such times, however, the longfinancial markets, where flexible movement term market is receptive to offerings—peris an essential part of market mechanism. haps for the first time since the middle part This appears to be a risk which we must of the previous upswing in the business take, while doing everything we can to cycle. When the Treasury enters such a minimize the incidence of instability in these period with a large and growing floating markets. debt, it would seem advantageous to re- We know, of course, that many difficulties finance some part of this debt at longer arise in the effective use of fiscal policy in term. Such a course is also desirable to prorecession. Deficits in recession are incurred vide greater leeway in choosing financing either automatically because of reduced tax alternatives when the recession-induced Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

864 FEDERAL RESERVE BULLETIN • AUGUST 1959 deficit is sooner or later encountered. And developments was to arrive at possible since a recession deficit when it occurs must adaptations of public policy and also of be financed within a relatively short period market institutions which might lessen the of time, the Treasury must look forward to market's exposure to such excesses in the making heavy calls on available savings future. during the deficit financing period. In the The excesses which occurred last year second half of 1958, for instance—a re- were associated with the build-up in the covery period, but one coinciding with Government securities market prior to the heavy deficit financing requirements—the Treasury's offering in late May 1958 of a Treasury was obliged to absorb the equiva- 2% per cent, seven-year bond as one lent of a third or more of the total new option available in its June 15 refinancing savings funds then available. The Treasury's of $9.5 billion of maturing obligations held problem of maintaining a debt structure by the public. The other option was a adaptable to changing circumstances with- one-year 1 V\ per cent certificate. Altogether out itself contributing to instability of the the holders of about $7.5 billion of the economy is a formidable one. maturing issues preferred the 2% per cent Monetary policies, if they are to con- bonds—a figure which was more than tribute to resolving our problems of general double what had been estimated by the economic instability, must be deliberately financial community or by Government and appropriately adjusted to combating agencies as true investor demand. This recession and they must be shifted when was a surprise to the market and suggested an upturn is evident. The timing and ex- that a sizable amount of the newly acquired tent of monetary actions—like those in the securities were speculatively held. Neverfiscal field—must surely be determined by theless, there was general market agreement other considerations in addition to their after the announcement was made that the impact upon interest rates and the prices of market would be able to absorb the excess securities. Again, however, such effects are supply over a period of time. not to be ignored. About this same time, however, market observers were beginning to realize that the Federal deficit in the year ahead would be SOME FINDINGS ABOUT MARKET FUNCTIONING the largest since World War II, and that most of it would have to be financed in the While the study indicated certain broad second half of 1958, coinciding with the lessons from the 1957-58 experience for period of heavy Treasury seasonal borrowboth investors and national financial policy, ing. At least part of the flow of economic and also highlighted some of the fundainformation in the first half of June had been mental and conflicting dilemmas inherent in mildly encouraging; but it was not until such a period, it focused on the functional around mid-June that market observers and mechanical aspects of the Government took into account that economic recovery securities market in a setting of recession might already have begun and that conand recovery. A specific interest was the ditions of active ease in credit markets might speculative and credit excesses that de- be coming to an end. In this setting, liquidaveloped. Our objective in studying these tion of temporary holdings of 2% per cent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 865 bonds began and gathered rapid momentum, Much more important, however, is the fact with an accompanying sharp decline in that too many speculatively motivated exmarket prices of Government securities and changes into the 2% per cent bonds were an associated sharp rise in security yields. apparently based on investor judgments that As you know, the opportunity for either recession would continue for some time, profits or losses on the price behavior of and that long-term interest yields would a longer term bond is much greater than on decline further. short-term securities for a given change in Speculation financed by credit created interest rates. a particular problem in this instance be- This liquidation period, you may recall, cause there were large blocks of holdings occasioned intervention in the market, first acquired by newcomers to the market who by the Treasury in late June and early July bought or made commitments to buy Govto relieve the market of some of the excess ernment securities on very thin margin—or supply of 2% per cent bonds issued at mid- in many cases on no margin at all. Several June, and second by the Federal Reserve Stock Exchange houses made large comlater in July to correct a disorderly con- mitments themselves and acted between dition which developed around the time of lenders and speculators. Some commercial the international crisis in the Middle East banks and business corporations, actively and a Treasury financing. seeking higher yielding outlets for funds Many observers have placed principal than were provided by Treasury bills and blame for this upsetting market episode other short-dated securities, directly or on excessive speculation in the June re- indirectly helped to finance these operations. fundings, financed by the use of credit ex- The activities of one Stock Exchange tended on unduly thin margins. Our study member specializing in money brokerage shows that there was indeed a substantial facilitated the financing of a substantial volume of credit-financed participation in volume of the June rights. These operations the June refunding—about $1.2 billion. were found to be in violation of Stock Ex- Considering that $7.5 billion of the 2% per change rules. The enforced unwinding of cent bonds were issued, it is obvious that at these very large positions came at a parleast four-fifths of the subscriptions repre- ticularly sensitive stage of the market desented outright holdings. A significant cline and, combined with other liquidation share of these were probably also temporary of speculative holdings, put the market holdings purchased in the hope of specula- under severe supply pressure. The New tive gain. The outright holdings largely York Stock Exchange has since modified its represented subscriptions on the part of rules so as to prevent a repetition of this commercial banks and business corpora- kind of speculative financing activity in the tions. future. In retrospect, one key to this widespread While positions financed on credit were speculation may have been the absence of not the largest speculative element in the adequate information about current tenden- market at the time of the June refunding, cies in the Government securities market they were certainly important in initiating itself, which is, of course, the pivotal market and accentuating the June-July decline in in this economy's financial organization. market prices which accompanied the eco- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

866 FEDERAL RESERVE BULLETIN • AUGUST 1959 nomic upturn. Once liquidation of the new cumulating funds in earlier months in- Treasury bonds was under way and prices vested a large portion of them by arrangewere declining sharply, it was inevitable that ments to buy Government securities and, at some margin calls and related selling to the same time, agreeing to resell the securiprotect lenders' positions would occur. At ties to dealers on a fixed date in June—again the same time, there was substantial liqui- to cover cash needs related to dividend and dation by holders who had done no borrow- income tax disbursements at that time. The ing at all as they realized that profits were short-term securities underlying these not in prospect and sought to minimize or arrangements had to be refinanced in June avoid losses by selling out. The develop- through placement by dealers with banks ment of the Lebanon crisis in mid-July and or other lenders. the growing awareness of the prospects of When the June exchanges were completed large Treasury deficit financing in a period dealers undertook to accomplish a distribuof rising private demand for loan funds and tion of their underwriting holdings of the accompanying expectations of tightening new 25/s per cent bonds. Such undercredit conditions, based in part on rumors writing can result in losses as well as profits of a shift in Federal Reserve policy, height- to dealers because of the market risks ened market uncertainties during this period assumed by them. These risks proved to be of liquidation. There also was considerable real in the June financing. Normally, the disuneasiness due to fears that the large budget- tribution of the securities acquired in underary deficit would induce renewed inflation- writing would have proceeded throughout ary pressures. the remainder of June and July. In view of Over this entire period of rapid market the then-existing market uncertainties, change, the figures compiled for the study dealers intensified their distribution efforts indicate that dealers operated chiefly in their and cut back on their total positions gennormal primary function as intermediaries. erally. These acivities also contributed to As the June financing approached, dealers supply pressures in the market. were called upon to absorb large amounts Once market decline had set in, investors, of short-term issues that were being sold to speculators, and dealers were obliged to meet corporate liquidity needs over dividend make market judgments in the light of their dates and the June tax period. As a result, own portfolio and speculative situations and dealers' holdings of Government securities their individual appraisal of current and increased substantially. The enlargement future uncertainties. There were times in occurred mainly in Treasury bills and in this period, we were told by market par- June "rights" (maturing issues eligible for ticipants, when dealers in order to protect the exchange), and these rights were largely their own capital positions would accept exchanged for the 2% per cent bonds. large-size orders to sell only on an agency To make matters more difficult over the basis, promising to make the best effort period covered by the June financing, possible to carry out the customers' redealers had to meet large maturities of re- quests. The volume of Government security purchase agreements which they had made transactions by the dealer market, however, with nonfinancial business corporations. continued large throughout the decline. Under these agreements, corporations ac- The question still to be answered from our Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 867 examination of the 1957-58 market ex- sulted in a situation whereby market parperience is just what specific findings and ticipants in the June refunding were eninterpretations may be drawn about market couraged to convert an undue amount of excesses and mechanisms. While any spe- short-term issues into longer term issues, cific conclusions at this stage are subject to thus oversupplying the longer term area of later modifications or supplement, the fol- the market and at the same time sharply lowing are the main ones drawn by the reducing the market supply of short-term study group in the preliminary version of instruments. Pressure on earnings created Part II of the study (Chapter VIII). by the low level of short-term yields led "(1) Investor and speculator judgments many banks and some corporations to in the late spring period preceding the June reach out for the higher yields available in refunding were made largely in the light of the June financing in an effort to protect information pertaining to an economic situa- their earnings. tion of one to two months earlier. This lag "(4) Speculative positioning of 'rights' in the flow of economic information was a to the June refunding on the part of outfactor of basic import in conditioning ex- right owners, together with the conversion pectations in this critical period of market into 2% per cent bonds of a disproportiondevelopment. The role of changing market ate amount of their investment holdings of expectations as to the economic outlook in the maturing issues, was of greater volume this period of 1958 clearly emphasizes the than speculative positioning by investors need for an adequate supply of current in- who financed by credit. A large number of formation about trends in the economy banks and business corporations particigenerally to facilitate the orderly function- pated in this outright speculative positioning of financial markets. ing. "(2) Underlying the late spring specu- "(5) Although speculation on an outlative positioning of Government securities right basis in the June financing was larger was a very low absolute level of short-term than credit-financed speculation, the latter market interest rates, as well as an unusually was excessive considering the size of the wide spread between short- and long-term refunding operation. Moreover, liquidation market yields. This low short-term rate of credit-financed positions appeared almost level, together with the prevailing yield immediately upon the settlement date for structure, vitally influenced the shaping of the refunding for various reasons and both market expectations of further increases in triggered and accentuated the declining Government bond prices. It further pro- phase of the market. vided the incentives that led to unusual "(6) The equity margins put up in this adaptations of customary credit instru- period by credit speculators were, in too ments and terms, which facilitated a rapid many instances, either nonexistent or too swelling in the market's use of credit. This thin. Despite the low margins, the losses development made the market vulnerable to suffered on credit-financed transactions liquidation pressures. were incurred chiefly by the borrowers "(3) These conditions in the market, rather than the lenders. along with investor expectations of still "(7) In the speculative market buildhigher prices of Government bonds, re- up, the use of the repurchase form of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

868 FEDERAL RESERVE BULLETIN • AUGUST 1959 credit financing as a vehicle to carry the Treasury issues as the mechanism for this speculative positions of nonprofessional and speculation. unsophisticated participants proved to be "(12) The total number of commercial unsound. Use of this particular type of banks outside New York City and also the financing instrument, in effect, resulted in total number of nonfinancial corporations lenders' advancing credit to unknown drawn into the credit financing of the midborrowers of unknown credit standing or 1958 speculative build-up was relatively capacity. small, and the major portion of the credit "(8) Even among known borrowers of extended was from only a few banks and professional standing, the use of the re- business corporations. purchase agreement device was stretched in "(13) In the late spring market build-up, terms of the types of the security which it some lending by New York City banks, covered. In the past, this instrument was collateralled by Government securities, was employed in the dealer market mainly to at rates and margins that, under the prefinance securities of the shortest term. In vailing market psychology and the thenits 1958 market usage, the instrument was existing conditions, were conducive to the extended in numerous instances to longer financing of speculative positions. term securities where the maturity bore little "(14) The sizable increase in dealer or no relationship to the date of termination positions prior to the Treasury's June 1958 of the agreement. financing was partly associated with the heavy volume of market trading in that " (9) Where used in the mid-1958 period period. Although largely concentrated in to finance holdings of longer term securities, short-term securities, the expanded dealer the repurchase agreement technique in some positions did provide a market for these cases provided a convenient means to cirissues which facilitated the lengthening of cumvent owners' equity requirements that portfolios and speculative positioning by would have been applicable on loans, many investors during the period, particuthrough margins required by lenders. larly banks. "(10) The use of forward delivery con- "(15) Even though dealer positions at tracts in the pre-June market build-up inthe time of the June refunding were heaviest volving 'rights' to the June exchange offerin the short-term maturities in the market, ings, though of lesser magnitude than reliquidation of these positions in the followpurchase financing, nevertheless facilitated ing three months, though largely necessary an excessive amount of speculative positionto protect dealer capital positions, did add ing in this issue without any commitment significantly to the supply pressures otherof purchaser funds. wise present in the market during this "(11) In the pre-June market build-up, liquidation phase. dealers and brokers were not always aware "(16) The extensive use of the repurthat their credit standing was in effect used chase instrument for financing all types of by others to underwrite speculation with no Government securities in late spring of 1958 equity. The preponderance of June 'rights' resulted in very large repurchase maturities among the forward delivery contracts would in mid-June coincident with other churning suggest a strong preference for 'new' in the money market in connection with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 869 settlement for the Treasury refunding. The that economic recession had set in, was necessity of refinancing the securities under- effected within a short time span—less than lying these repurchase transactions put the four months. The sharp rise in market rates Government securities market under heavy on Treasury issues, following confirmation internal strain at that time. after mid-195 8 that economic recovery had "(17) The absence of a Treasury tax begun, was likewise effected in a short time anticipation security maturing at mid-June span—about four months. Although led to much corporate interest in the June liquidation of Government security posimaturities as corporations made use of these tions, built up in hopes of speculative gains issues to invest accumulating funds to meet in the June refunding, played a central role their June tax and dividend needs. This in accentuating the rise in market interest accounted for a considerable part of the rates after mid-1958, it does not necessarily market churning at the time of the refunding. follow that the upward interest rate move- "(18) The availability of regularly ment of the entire recovery period would issued statistical information about the have been smaller if the earlier speculative market itself might have succeeded to some distortions had been avoided. Upward extent in forewarning market participants pressures on interest rates from cyclical and interested public agencies of potential Federal deficit financing in combination speculative dangers around mid-1958. The with expanding private demands for financfact of the matter, however, is that no such ing, given the savings supply over these objective information was available to months, would still have resulted in a subeither group to gauge the extent of the stantial, if not identical, rise in market speculative forces that were present in the interest rates." market. "(19) In the closing months of 1958, AN ORGANIZED EXCHANGE OR A when many commercial banks were ex- DEALER MARKET? periencing seasonal credit demands, study At the hearing of the Joint Economic Comdata show a movement of funds from the mittee earlier this year on the President's Government securities market to the banks Economic Report, there was some diseffected through the vehicle of the repurcussion of the functioning of the Governchase agreement. In other words, some ment securities market. The question was dealers were functioning as money brokers, raised whether the market might not be acting as principals in obtaining funds from more effective if it were a formally organbusiness corporations under repurchase ized exchange or auction-type market, with arrangement and in turn supplying funds to banks under a reverse repurchase arrange- maximum current publicity on transactions, ment (resale agreement) with them. Ques- rather than an informal over-the-counter tion can be raised regarding the appropriate- dealer market, subject to more limited ness of a money brokerage function as part public observation. of the dealer operation. As part of this current study of the Gov- "(20) Most of the decline in market ernment securities market, accordingly, we interest rates on Government securities, fol- not only raised this question with market lowing confirmation in the late fall of 1957 participants but asked our study group to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

870 FEDERAL RESERVE BULLETIN • AUGUST 1959 provide a special technical evaluation of sequently the number of transactions that the suggestion. The New York Stock Ex- could be effectively handled through the change also gave very careful consideration auction mechanism of the Exchange conto the question and reported its conclusions tinued to decline. By 1958 trading in Govto us. ernment bonds on the Exchange had A specialized market tends to develop dwindled to an insignificant volume in comin a particular form as the individual par- parison with trading in such securities in the ticipants compete to serve more efficiently over-the-counter dealer market. and economically the needs of buyers and The standards of performance to be sellers of the kind of security or commodity applied in evaluating the present dealer traded. The present market mechanism for market are, of course, related to the specific Government securities has grown as a job which the market has to do as well specialized market ever since World War I. as to the public interest in a well-function- Transactions in Treasury issues in the 1920's ing market economy. The job to be done were carried out both on the New York first of all is the matching up of purchases Stock Exchange and through the over-the- and sales by investors and traders. But it counter dealer market. Even during the also involves the Treasury as issuer of early 1920's, however, a steady decline in new securities and the Federal Reserve transactions on the auction market repre- through the execution of its monetary sented by the Exchange and a steady rise in policies. It is the conclusion of our joint the volume handled on dealer markets was study to date that both the broad public taking place. By the mid-1920's, the dealer interest and the special interests of the market was dominant and agency trans- Treasury and the Federal Reserve—which actions of the Federal Reserve Bank of New are, of course, designed only to serve the York for the account of the Treasury were public interest—are being effectively served moved to the dealer market. through the present market. Those who par- Only marketable Treasury bonds are ticipated in our study, including a broad listed on the New York Stock Exchange and range of investors as well as dealers and this has been true throughout its history. brokers, were virtually unanimous in the Therefore, the introduction of the Treasury view that the present type of over-thebill in 1929 and its subsequent development counter dealer market in Government seas the primary liquidity instrument of the curities is preferable to an exchange, money market—a development accelerated auction-type market. Even if confined to by war and postwar financial trends— bonds, and therefore excluding bills, certifurther added to the importance of the over- ficates and notes, the exchange-type market the-counter dealer market. The growth in was regarded as an unsatisfactory alternathe Federal debt in the 193O's and during tive. the war years, together with the broader par- Probably the most important standard of ticipation of large financial institutions in performance required of the Government the market, greatly increased the size of securities market in serving existing interests typical market transactions in Governments. is its ability to handle without disruptive Large transactions are more efficiently man- price effects the typically large transactions aged in a dealer-type market, and con- that arise as large institutional holders Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 871 adjust their liquidity and investment posi- of dealers' earnings is derived from managtions. These individual transactions—by ing their own portfolios and from supplying, commercial banks in adjusting their reserve through repurchase agreements, investment and portfolio positions, by corporations in instruments which have the exact maturity adjusting to their cash flow needs around date needed by customers. Such operations dividend and tax dates, or by savings insti- also, of course, involve risk of loss. tutions or other institutional investors in The dealer market is effectively organmaking portfolio changes—often run to ized to serve customers throughout the many millions of dollars, particularly in country even though its organization is short-term issues. If these holders were un- informal. Transactions are completed able to purchase and sell readily in such promptly by telephone and customers know large amounts, their interest in Treasury the price or price range when the order is issues would decline. placed for execution. Moreover, through The dealers in Government securities their intimate experience with the highly appear to have developed better facilities technical aspects of each Treasury issue as and techniques for handling large trans- well as the ways in which the Treasury, the actions promptly and without excessive price Federal Reserve, and the money market effects than would be possible in an organ- operate generally, dealers provide specialized exchange. They do this by purchasing ized market advice that customers value. and selling for their own account; by main- The primary dealers further provide imtaining substantial inventories of securities portant services in the secondary distribuin different maturity categories; by a chain tion of new Treasury issues. They also proof transactions with other dealers—pur- vide a convenient point of contact for Fedchases, sales, and exchanges or swaps; and eral Reserve open market operations in by keeping themselves informed, through short-term Government securities. their nationwide organizations or corre- The major defects attributed by some spondent networks, of major sources of critics to the dealer market in U. S. Governsupply and demand for Government secu- ment securities reflect three features: first, rities throughout the country. In its opera- the market is concentrated in a relatively tions, the dealer market acts as a buffer small group of primary dealers and thereto equalize hourly and daily movements in fore may not be as competitive as an organsupply and demand, and to absorb the im- ized exchange market; second, there is little pact of large individual transactions that information about its operations, without might otherwise result in abrupt price effects supervision or formal rules governing its or undue delays in execution of orders. practices, despite its special public interest; The specialized dealer market provides and third, the market is not geared to hana number of other services that institutional dling small and odd-lot transactions nor is customers consider to be valuable. The cost it especially interested in them. of a transaction in this market is very small As to competition, there is no question because of the large volume of business, be- that the primary dealer market is very highly cause of keen competition among dealers, competitive, even though it comprises only and because dealer profits do not depend twelve nonbank firms and five bank dealers, solely on trading margins. A significant part most of whom have central offices in New Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

872 FEDERAL RESERVE BULLETIN • AUGUST 1959 York City. There is necessarily spirited buy or sell orders of these numerous and competition between the dealers for the varied investors promptly and efficiently and available volume of trading business. Any the business must be handled in accordance offers to sell at a price even slightly be- with high ethical standards. Moreover, if low the market usually are quickly taken he is to obtain future business, such investadvantage of, as are offers to buy at any- ment advisory services as the dealer renders thing above whatever the price may be at his customers must stand the test of time. the moment. In volume, the Government Each of the primary dealers, through one securities market is by far the largest means or another, operates throughout the financial market in the country. It handles country because broad coverage is essential each year a dollar volume of transactions to the maintenance of a sufficient volume of approximating $200 billion, or more than business for profitable operations. This is five times as much as the dollar volume probably a major reason why there are not of transactions in all corporate stocks as more dealer firms active in the market. well as bonds on the New York Stock Another reason, according to information Exchange. received in this study, is that the number of The dealers are principally wholesalers qualified and experienced personnel availand their customers consist of several able to staff new firms is relatively small. hundred nonfinancial corporations, several Regarding the criticism of market methousand commercial banks who submit chanics, it is true that the dealer market orders both for their own account and for makes available to the public practically no customers, other security brokers and deal- information on its operations other than ers handling transactions for customers, market bid and offer quotations. There is hundreds of insurance companies, mutual no requirement for making available either savings banks, pension funds, and savings to the public or to a duly constituted auand loan associations throughout the coun- thority the records of dealer net positions try, the special funds of State and local gov- in securities or amounts borrowed, such as ernments, personal trust accounts, and some are required of members of the New York individual investors of substantial means. Stock Exchange. These investors and traders who use the The lack of formal rules, supervision, and market to buy or sell are generally them- adequate information leaves the market selves expertly informed and experienced in open on occasion to suspicion that it may investment matters: each is seeking the best not always be operating in the public inreturn on the funds he places in Government terest. It has been suggested that in insecurities; each is continuously comparing stances dealers' interests may conflict with these returns with those on alternative in- those of customers, that dealer operations vestment opportunities; and each of the may unduly accentuate swings in securities larger investors, who regularly use the serv- prices, and that dealer advice may not be ices of several dealers, is constantly com- entirely accurate. There was, however, little paring the relative performance of the deal- or no evidence gathered in the study that ers with whom he is in contact. such problems are common in the dealer In this type of highly competitive market, market. All of the market customers conthe dealer who succeeds must execute the sulted in the present study expressed their Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 873 full confidence in the Government securities and, when sharp price movements occur, dealers, individually and as a group, and quotations on maturities throughout the testified to their high standards of integrity list tend to move together much more so and business practice. than in the market for specific corporate Concerning small transactions in the stocks or bonds. Finally, because of the market, consultants to the study have indi- public nature of transactions at Exchange cated that they generally go through other trading posts, specialists taking positions to brokers and dealers and commercial banks, make orderly and continuous markets would and that when they reach the market they be unduly exposed to possible raids by nonare handled promptly by dealers at a rela- member dealers and other large traders. tively low cost that is in part subsidized by There is also the problem of developing the large transaction. As the dealers are an adequate incentive for handling Governorganized primarily to handle large trans- ment securities on the Exchange through a actions, it is understandable that they view commission schedule that would be comthe small deals as an accommodation, and petitive with narrow spreads prevailing in do not actively encourage them. It seems the dealer market. clear that if facilities designed more spe- Other conditions set by the Exchange for cifically to serve small investors' interests in an effective auction market under its marketable bonds are to be established, auspices would be: there would have to be some additional (a) A larger supply of long-term Govincentive provided. ernment bonds in the market, especially of The New York Stock Exchange, bonds attractive to individual investors prompted by our study, reviewed the po- through tax exemption or other special tentialities for re-establishing a vigorous features since these investors now find only auction-type market in Government secu- limited interest in Governments other than rities on the Exchange. After extended con- savings bonds. sideration of the matter, however, Exchange (b) The placing on the Exchange of all officials concluded that, even though such Federal Reserve agency transactions in a development was theoretically possible, bonds, possibly plus official support of the problems raised by the suggestion would be Exchange market; and insurmountable unless both the Government (c) A potential requirement for the and the Exchange shifted a number of fun- execution of all transactions of member damental policies. firms in Government bonds on the Ex- One specific problem to be resolved is change, except for some "off-floor" trades the difficulty under existing conditions of in special circumstances. encouraging Exchange specialists to take the (d) Some protection of the position of financial risk of making a market in Gov- member firms who are acting as Governernment securities. The specialist would ment security dealers. be in competition with established Govern- The Exchange did not suggest that its ment securities dealers. In addition, they facilities could be adaptable at all to trading might on many occasions need to build up in Treasury bills, certificates of indebtedvery large positions in Government secur- ness, or notes, which together constitute ities, since this is a heavy volume market more than half of the outstanding market- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

874 FEDERAL RESERVE BULLETIN • AUGUST 1959 able Federal debt and are also the issues in liminary form, they have not yet been rewhich the overwhelming volume of market viewed. Hence, they cannot be interpreted transactions takes place. as reflecting any official recommendations These conditions make it clear to us that for market improvement. There may also it would be difficult to develop an auction- be other supplementary studies undertaken type market for Government securities on a as we re-examine market processes and broad scale under the existing organized mechanisms and we naturally intend to exchange mechanism. pursue this phase of our inquiry as far as The alternative approach of improving will serve a constructive purpose. the mechanism and institutions of the pres- A first area of supplementary study perent Government securities market, by care- tains to the adequacy of statistical and other fully studying and remedying defects in the information relating to the dealer market. dealer market as they come to light, appears As mentioned earlier, it is commonly recogto us to promise results that will serve the nized that openly competitive and efficient public interest. At the same time, the New markets are characterized by informed York Stock Exchange should be encour- buyers and sellers. A broad range of obaged to develop further the auction facilities jective information needs to be available to it now provides for transactions in Govern- serve effectively the interests of all market ment bonds. The total market cannot be participants, including the Treasury as harmed and may indeed be improved by issuer of securities for the market and the more active competition between the Ex- Federal Reserve as it participates in the change market and the dealer market in market in regulating over-all credit and bond trading. monetary conditions. In this light the present flow of information relating to the market is inadequate, a point that was AREAS FOR IMPROVING MARKET MECHAN- ISMS AND FUNCTIONING agreed to by many of our study consultants. As a result, our study group undertook Our study was launched, as stated earlier, a thorough analysis of the information that in the hope that the suggestions advanced ought to be regularly available. We were and problems revealed might indicate cer- encouraged in this by the excellent cotain improvements in the way the Govern- operation received from dealers and other ment securities market operates, with par- market participants in supplying informaticular emphasis on the prevention of future tion for our review of market experience in speculative excesses in the market. In the 1957-58. We believe, therefore, that a relight of consultants' suggestions and of find- porting program can be worked out by the ings of our factual review of the 1957-58 Federal Reserve and Treasury staffs to put market experience, our study group initiated an adequate information program into four supplementary studies to evaluate pos- active operation in the not too distant future. sible means of improving the market's A second area of supplementary study is functioning. These are in the nature of the credit financing of Government secuworking papers for consideration by Treas- rities transactions. Last year's market exury and Federal Reserve officials. As their perience has clearly indicated that at times preparation has just been completed in pre- an undue amount of speculation financed on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 875 thinly margined credit can be detrimental ing of Government securities. This is not a to the market and that competition of lend- new method of credit financing, but it is a ers in extending credit to prospective holders method that is easy to apply to Government may result in deterioration in appropriate securities transactions and, because of its equity margin standards. This experience flexibility and adaptability, has become raises the question of the need for some much more popular in recent years. Govaction to assure that sound credit standards ernment securities market activity last year will be consistently maintained by lenders brought to light certain uses of repurchases in credit extension backed by Government that were not in the public interest when securities and also to keep the total volume such financing was arranged without the of such credit from expanding unduly at borrower putting up adequate margin. The times. study discusses various alternatives which Our study has indicated that there are might be applied to prevent future abuse. three approaches which the Government A fourth area of special study of the might consider in dealing with this problem: existing mechanism of the Government first, a statement by bank supervisors to each securities market relates to its present lack lending institution within its jurisdiction in- of formal organization. In our consultadicating minimum margins to be adhered tions, a number of market participants and to as standard; second, a requirement that observers suggested that the market might each investor participating in the exchange be improved and strengthened through coof maturing Treasury issues for new issues operative action of primary dealers themstate his equity position in those securities selves, working through a dealers' associain compliance with Treasury standards (plus tion. Various specific functions that an assothe continuing requirement by the Treasury ciation might perform to improve the marof appropriate deposits on subscription to ket's functioning were indicated, including: its new issues offered for cash); and third, (a) the adoption of standard rules to assure the introduction of special margin regula- fair treatment of buyers and sellers in both tion, similar to that now applicable under large and small transactions; (b) the dethe Federal Reserve Board Regulations T velopment of standard practices to help and U to the purchasing or carrying of maintain dealer solvency; and (c) greater corporate securities. The latter type of regu- liaison between the Treasury and the dealers lation would, of course, require Con- in Treasury financing operations. It was gressional action, since present law specifi- also suggested that a dealers' association cally exempts Government securities from could be useful in identifying primary dealthis type of credit regulation. It must be re- ers in Government securities both to imemphasized here that these are merely prove dealer service and to apply any marpossible approaches; they have not yet been ket rules which may be adjudged in the fully appraised by either Treasury or Fed- public interest. Since the possible advaneral Reserve officials and other alternatives tages of such an organization as well as its may be developed in the light of additional possible disadvantages obviously require study. careful and detailed examination, the task A third area for special study is the use of of this supplementary study has been to> the repurchase arrangement in credit financ- makes this much-needed evaluation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

876 FEDERAL RESERVE BULLETIN • AUGUST 1959 A question that naturally arises at this to changing needs. From the standpoint of point is whether in the light of the present the public interest, study of these adaptastudy there will be any occasion later for tions is never ending. Study efforts may be special legislative requests pertaining to the intensified from time to time, as in the case operation of the Government securities of the present Treasury-Federal Reserve market. This question cannot be answered study, but they are basically continuous. yet. Before it is, we must try to determine Continuing observation and study of the what can be accomplished in improving Government securities market is a responsimarket processes and mechanisms without bility which both the Treasury and the Fedlegislative action and then ask whether these eral Reserve recognize. improvements are enough. The fact of the In conclusion, we repeat that improvestudy itself, together with educational efforts ment in the processes and mechanisms of undertaken by the Treasury and Federal the Government securities market will in no Reserve System, has already set in process way solve our problems of fiscal imbalance. a fuller appreciation on the part of market Nor can they correct our problems of too participants of the undesirable effects of much short-term public debt; of our need for certain market practices. If we find that continuous flexibility in our approach to desired improvement of market mechanisms monetary policies; of attaining a volume of and institutions requires new statutory au- savings which will match our expanding thority, we will propose appropriate legis- investment needs; or of the cyclical inlation to the Congress. stability of our financial markets. These are Markets are dynamic economic institu- basic problems. We must all work toward tions. They require successive adaptation their ultimate solution in the public interest. THE GOVERNMENT SECURITIES MARKET AND ECONOMIC GROWTH (Statement of William McChesney Martin, Jr., Chairman, Board of Governors of the Federal Reserve System, before the Joint Economic Committee, July 27, 1959.) In this opening statement, I would like broadly based and justified confidence in a to comment first on one aspect of the prob- reasonably stable dollar. lem you are considering—the importance of freely competitive markets to maximum ROLE OF FREE MARKETS economic growth. In so doing, I do not wish to understress the importance of any other No one here would deny that free markets conditions necessary to healthy economic are essential to the vital and vigorous pergrowth. Indeed, if there is one essential formance of our economy. No one would for sustained growth that stands out above urge that we encourage monopolistic pracall others, it is the maintenance of a volume tices or administered pricing, and few would of real saving and investment sufficient to advocate Government interference with the support continuous renewal, adjustment, market process as a general principle. On and expansion of our total capital resources. the contrary, nearly everyone would agree As you know, the maintenance of adequate that such developments are injurious to the saving and investment depends upon best use of our resources, that they distort Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 877 the equitable distribution of final product, of the reserve position of the banking sysand that they interfere with economic prog- tem without some such facility through ress. which to conduct open market operations Differences of viewpoint on free markets of large magnitude. arise only when the complexities of specific The initial results of our study of this market situations make it difficult to discern market with the Treasury are encouraging in whether markets are, in fact, functioning as many ways. As was pointed out in the sumefficiently as we might reasonably expect. mary of the study made available to you on Well-informed and well-intentioned observ- Friday, huge transactions are carried out ers will disagree as to whether an appro- every day in an orderly fashion and at very priate degree of competition exists in par- small cost to ultimate investors. One cannot ticular markets and, if not, as to what fail to be impressed by the fact that there are corrective steps, if any, it is appropriate for dealers who stand ready, at their own initia- Government to take. tive and at their own risk, to buy or sell If the policies we follow in the financial large blocks of securities. Frequently, single field are to be fully effective in promoting transactions run into millions of dollars. growth and stability, they must be able to Despite the absence of any assurance that a permeate the economy through the mecha- given purchase will be followed by an offnism of efficient markets. This generaliza- setting sale, dealers quote bid and ask prices tion applies to all markets, for all types of that typically have a spread of less than onegoods and services. Naturally, the Treasury fourth of 1 per cent on the price of long-term and the Federal Reserve are most immedi- bonds and range down to a few oneately concerned with financial markets, both hundredths of 1 per cent on Treasury bill because we have some direct responsibility yields. for these markets, and because they repre- If you have had an opportunity to sent the main channel through which the examine the preliminary study manuscripts, Government financial policies to foster you are aware that they do suggest that some growth and stability must pass. improvements in the Government securities market may be in order. We would hope that these improvements can be made within THE MARKET FOR GOVERMENT SECURITIES the framework of existing authority and We are especially concerned with the market through voluntary cooperation with various for U. S. Government securities. With a market participants. There is, however, a Federal debt of $285 billion, Government possibility that further authority might be> securities are a common and important asset necessary or desirable. We expect to have a in the portfolios of businesses, financial in- clearer idea about how to accomplish desirstitutions, and individuals. An efficient able improvements after we have had an market for Government securities is opportunity to consider carefully the findobviously needed for the functioning of our ings of the staff study just completed last financial mechanism. We are fortunate in week. this country to have such a market. From There is one possible change in the organthe standpoint of the Federal Reserve, it is ization of the Government securities market hard to conceive of the effective regulation that would not, as I view it, lead to improve- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

878 FEDERAL RESERVE BULLETIN • AUGUST 1959 ment. That change would be the enforced the greater part of the volume of all trading conversion of the present over-the-counter occurs. Dealer positions are characterdealer market into an organized exchange istically and understandably concentrated in market. The reasons why this change would these shorter issues. Differences of view on not be constructive or even practicable are whether System trading should extend outset forth in the joint statement on the study's side the short-term area hinge upon whether findings. On the other hand, any efforts on or not some small part of our regular buying the part of existing organized exchanges to and selling should be done in the longer extend or strengthen the facilities now made term area. available to buyers and sellers of Govern- To appraise this difference in viewpoint, ment securities should certainly be en- we need first to consider the basic economics couraged. There is no reason why better of System open market operations. Federal exchange facilities would not prove to be a Reserve operations in Government securihelpful supplement to those provided by the ties influence prices and yields of outstandpresent dealer market. ing securities in three fundamentally dif- Another change affecting the Government ferent ways: securities market that has been suggested (1) They change the volume of reserves relates to Federal Reserve participation in otherwise available to member banks for it, and pertains in particular to the extenmaking loans and investments or paying off sion to longer term maturities of Federal debts; Reserve open market operations. Some dis- (2) They affect the volume of securities cussion of this suggested change is approavailable for trading and investment; and priate here, for it is not a matter encom- (3) They influence the expectations of passed by the Treasury-Federal Reserve professional traders and investors regarding study. market trends. Of these effects, the first is by far the most SYSTEM OPERATIONS IN SHORT-TERM important. Under our fractional reserve GOVERNMENT SECURITIES banking system, additions to or subtractions Since the Treasury-Federal Reserve accord from commercial bank reserves have a In 1951, the System's day-to-day trading in multiple expansive or contractive effect on Government securities has largely been in bank lending and investing power. Other short-term issues. In 1953, after extensive things being equal, this means that any given re-examination of System operations in the change in System holdings of securities will open market, the Federal Open Market tend to be accompanied by a change in com- Committee formally resolved to make this mercial bank portfolios of loans and investa continuing practice. ments several times as large. Unlike many I think that nearly everyone who has other institutional investors, commercial studied these matters would agree that the banks maintain Government security portbulk of Federal Reserve operations must be folios with a wide maturity distribution conducted in short-term securities; that although the largest component will be necessarily means largely in Treasury bills. short-term securities. Hence, the major The short-term sector of the market is where effect on market prices and interest rates will Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 879 result from the actions subsequently taken liquid because they could be more readily by commercial banks to expand or con- converted into cash. The problem of excess tract their asset portfolios, and the impact liquidity in the economy, already a serious will be distributed throughout the market. one, would be intensified. The Treasury With regard to the effect on the avail- now, even with the present interest rate ability of securities in the market, substantial ceiling, would have no difficulty in reaching System purchases or sales of short-term the same result. It has merely to issue securities exert a minimum influence on the some $20 billion of short-term securities market supply. For example, most of the and use the proceeds to retire outstanding $35 billion of bills outstanding is in the long-term debt. Fortunately, it is not conhands of potential traders. On the other templating any such action. hand, much the largest part of the market- The effect of System open market operaable longer term issues is in the hands of tions on the expectations of market profespermanent investors. Current trading in sionals can be of critical importance them is confined to a very small fraction of depending upon the market area in which the outstanding volume. For this reason, the operations are conducted. In the longer the long-term area of the market shows term area of the market, dealers, traders, greater temporary reaction than the short- and portfolio managers are particularly term area to large purchase or sale orders. sensitive to unusual changes in supply and Any attempt to use System operations demand. One important reason is that to influence the maturity pattern of interest long-term securities are subject to wider rates to help debt management would not, price fluctuation relative to given changes in my opinion, produce lasting benefits in interest rates than are short-term issues. —I emphasize the word "lasting"—and Therefore, trading or portfolio positions would produce real difficulties. If an in them incur a greater price risk. attempt were made to lower long-term These traders and investors in long-term interest rates by System purchases of bonds securities are aware that the System holds and to offset the effect on reserves by ac- the economy's largest single portfolio of companying sales of short-term issues, Government securities. They also know market holdings of participants would shift that the System is the only investor of by a corresponding amount from long-term virtually unlimited means. Consequently, securities to short ones. This process could if the System regularly engaged in open continue until the System's portfolio con- market operations in longer term securities sisted largely of long-term securities. Ac- with uncertain price effects, the profescordingly, the System would have put itself sionals would either withdraw from active into a frozen portfolio position. trading or endeavor to operate on the same The effect of thus endeavoring to lower side of the market as they believed, rightly long-term yields, without affecting bank or wrongly, that the System was operating. reserves, would be to increase the over-all If the professionals in the market did the liquidity of the economy. Not only would former, the Federal Reserve would become the supply of short-term issues in the mar- in fact the price and yield administrator of ket be increased, but also all Government the long-term Government securities market. bonds outstanding would be made more If they did the latter, the total effect might Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

880 FEDERAL RESERVE BULLETIN • AUGUST 1959 be to encourage artificially bullish or bearish It is subject to change at any time and is expectations as to prices and yields on long- formally reconsidered once each year by the term securities. This could lead to unsus- Federal Open Market Committee in the tainable price and yield levels which would light of recent experience. Exceptions can not reflect basic supply and demand forces. be, and have been, authorized by the Com- The dangerous potentialities of such a mittee in situations where either Treasury development are illustrated by the specula- financing needs, conditions in the money tive build-up and liquidation of mid-1958, market, or the requirements of monetary described in detail in the Treasury-Federal policy call for such variations. The System Reserve study. at times has been a subscriber to longer Either of these effects would permeate, term issues in Treasury exchange offerings and tend to be disturbing to, the whole when appropriate, and at other times has capital market. Accordingly, instead of purchased such securities in the market. working as a stabilizing force for the econ- In other words, we endeavor to apply omy, such open market operations in long- this practice flexibly as we do all of our term securities could have the opposite practices in the administration of monetary result. In other words, if the Federal policy. As I have stated to this Commit- Reserve were to intrude in the adjustment tee on other occasions, flexibility is an of supply and demand in order directly to essential ingredient of our entire reserve influence prices and yields on long-term banking operation. When reserve banking securities or in a way that resulted in un- loses flexibility, it will no longer be able to sustainable prices and yields, it would impair do the job that is required of the central the functioning of a vitally important mar- bank in the market economies of the free ket process. world. Some public discussion of the Federal Reserve's present practice of conducting MEASUREMENT OF ECONOMIC GROWTH open market operations in short-term securities implies, it seems to me, that the Before concluding my statement, I want System has assumed an intractable and to mention one entirely different matter that doctrinaire position on this matter. This has special relevance to the broad scope of is not a correct interpretation of what we this Committee's interest. That is the have done. We adopted this practice after measurement of growth. As you know, one a careful study of experience and of the of the frequently used indicators of growth effects of our operations upon the market in the industrial sector has been the Board's and the banking system. In this review, index of industrial production. One of the we were naturally mindful of the specific great lessons we learn from the compilation tasks of the System, namely, to regulate the of this index, which we try to do as carefully growth of the money supply in accordance and competently as we know how, is that the with the economy's needs and to help main- mere matter of measuring growth is a very tain a stable value for the dollar. tricky thing. The practice or technique was adopted, As the structure of the economy keeps not as an iron rule, but as a general pro- changing, the job of combining measures cedure for the conduct of current operations. of its many parts into a single index cannot Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE GOVERNMENT SECURITIES MARKET 881 be done, despite our best efforts, without this measure of industrial growth over the having to make major revisions every few past decade. For example, it now appears years. We again have under way a basic that industrial output of consumer goods on revision, the final results of which will be a revised basis has risen at an average available soon. The nub of what this re- annual rate of 3.8 per cent as compared with vision shows is that the growth rate in the 3.2 per cent shown by the unrevised index sectors covered by the Board's index has for the consumer goods sector. Populabeen materially greater over the past decade tion growth has been at a rate of 1.7 per than has appeared from the unrevised index. cent per year. The statistical data that we have to use Industrial production, to be sure, is only from month to month can only be cross- one of the ways that growth might be checked in a comprehensive way when we measured, but it is a measure in real terms have available the results of a full census. and so is free of price influences. Crude Congress authorized the Department of measurements of growth in aggregate dollar Commerce to conduct one of these in 1947, terms can be seriously misleading, not and another as of 1954. The immense task only with respect to what the economy of digesting and reappraising the results of has done but also in marking out guidethese censuses, and then refitting all of the lines as to how we may reasonably monthly data into these basic benchmarks, expect the economy to grow in the years has now progressed far enough to indicate ahead. It is no achievement to have a rise that the revised index, with the 1947-49 of 10 per cent in the general price level such period as the starting point at 100, will show as occurred in the months after the Korean a level of around 165 at mid-1959. That outbreak—even though that does puff up is 10 points higher than the figure shown the figures on gross national product quite by our unrevised index for June. handsomely. The increase of 15 per cent Some of this difference results because we in the current dollar value of gross national are now able to include, with appropriate product from 1955 to 1957 was only half proportional weight alongside other items, of what it seemed to be because it was more of the fuel and energy production that inflated by a general price increase of 7 per has been going on all the time without being cent. represented in the index. More than half Throughout its entire history, this econof the difference, however, results from omy has grown by staggering magnitudes. improvements in measurement of presently It is because I, for one, want to do everyincluded industries. The monthly move- thing I can to keep it growing that I urge ments of the revised and present indexes the maintenance of free markets and reaare quite similar, so that the main effect of sonably stable prices as primary objectives the revision in the total is to tilt upward of public policy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Proposed Housing Legislation, S. 57 The vital social importance of accom- before. The average quality of these homes modating the needs of the public for good is the highest in history. housing is unquestionable. A decade has Despite the fact that we have moved already passed since the Congress under- closer in recent years to the goal of decent lined this fact by declaring that "the general housing for everyone, the number of perwelfare and security of the nation and the sons quartered in inadequate accommohealth and living standards of its people dations is still a matter of serious concern. require . . . the realization as soon as Here again, the question arises: To what feasible of the goal of a decent home and a extent can we accelerate our progress fursuitable living environment for every Ameri- ther in the present period of broad economic expansion and mounting inflationary prescan family ..." sures and expectations? A basic question, however, raised by S. 57, the "Housing Act of 1959," is this: Unfortunately, the rapid growth and improvement of the housing supply in the How far and how fast we can move toward postwar period has been accompanied by a that objective and at the same time meet sharp rise in costs. For the entire period without undue strain the many other presssince World War II, prices of building ing demands upon our economy? materials, as well as prices of homes, have We have already made considerable risen more than general wholesale prices housing progress in the postwar years. Since or prices of all consumer goods and serv- 1950, well over 11 million dwelling units ices. The relative inflation of building have been placed under construction. This materials prices and of residential construcis an impressive achievement—a total tion costs has intensified over the past year. exceeding the inventory of all housing in This inflationary advance in housing costs existence at the turn of the century. and prices, coupled with a liberalization Progress has been recorded, too, in conin lending terms, has been associated with serving and improving the older habitable unprecedented demands for mortgage credit portion of our housing stock which comto help finance the purchase of new houses prises an important share of our national and the transfer of existing ones. Home wealth and in which the majority of our mortgage needs have dominated the capital households live. As a result of the construcmarkets since World War II and represented tion of millions of new dwellings and marked the largest single use of capital funds. In improvements to existing ones, our housing the postwar period, nonfarm home mortsupply today consists of more units than ever gages have accounted for more than onethird of the over-all increase in outstanding NOTE.—Statement of William McChesney Martin, Jr., Chairman, Board of Governors of the Federal net debt, including all mortgages, securities, Reserve System, before the Housing Subcommittee and other obligations. Since the end of of the Senate Banking and Currency Committee, July 29, 1959. 1949, the volume of nonfarm home mort- 882 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PROPOSED HOUSING LEGISLATION, S. 57 883 gage debt outstanding has more than tripled Raising maximum interest rates on to well over $120 billion. insured mortgages under several FHA To preserve the integrity of this debt programs, as authorized under certain structure as well as to meet housing needs in sections of S. 57, would also be a desirable the future requires more than ever before step. Complete flexibility of interest rates the maintenance of sound standards of might be even better. Mortgage insurance mortgage finance, as well as stability of reduces investment risk to lenders. Experiprices and capital values generally in the ence suggests that under flexible interest economy. Overdrafts upon capital markets rates, market forces would set a lower rate for home mortgage funds or over-stimulation on insured than on uninsured mortgages of building activity under currently devel- with otherwise similar terms. Interest rates oping boom conditions in the economy could fluctuating freely according to market conprecipitate or intensify a later downturn. ditions would in fact be desirable for all Even now, the Federal Government has housing programs. assumed a huge volume of commitments Certain other features of S. 57 appear in underwriting FHA-insured and VA- to the Board to be inappropriate for enactguaranteed home mortgage loans and in ment at this time when mortgage lending insuring deposits and shares in financial and housing starts are at or near record institutions which hold a major portion of levels and when growing pressures in the all mortgage debt. capital markets are being reflected in high In the light of these general observations, and rising interest rates. I refer specifically I should like to examine some of the pro- to provisions which would provide discrevisions of S. 57 which have a significant tionary authority to reduce again minimum bearing upon mortgage finance and eco- downpayments on homes with FHA-insured nomic growth and stability. The Board mortgage loans, and to extend further the believes that certain features of the bill are maximum term on Federally underwritten desirable and necessary at this time to the home mortgages. continuance of vital housing programs under The former proposal, if put into effect, way. Among such provisions are the ex- would permit a 5 per cent reduction in the tensions of the FHA Title I property downpayment on a $14,000 house with an improvement loan insurance program, the FHA mortgage, to a minimum of $455. FHA mortgage insurance program for On an $18,000 house, the reduction would armed services housing, the Voluntary Home be 38 per cent, to a minimum of $855. You Mortgage Credit Program, and the increase will note from the following table that miniin general mortgage insurance authorization mum downpayments proposed in S. 57 are for the Federal Housing Administration. well below the ones authorized by statute With regard to the latter, it would be pref- in earlier years, but exceeded from time erable to remove all limits on FHA insurance to time by administrative regulation. On a in force. Such limitations serve no useful new $14,000 house with an FHA-insured purpose. Moreover, should that step be mortgage loan, for example, the minimum taken, Congress would still have an oppor- downpayment requirement enacted early tunity, through the appropriations process, in 1950 was $2,800. This statutory limit was to review annually the standards under reduced in 1954 to $1,700, inl957 to $900, which the program is carried on. and in 1958 to the present figure of $480. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

884 FEDERAL RESERVE BULLETIN • AUGUST 1959 MINIMUM STATUTORY DOWNPAYMENTS ON NEW year in nonfarm home mortgage debt out- HOMES WITH MORTGAGES INSURED BY THE FHA standing has been sustained in part through [Under Sec. 203 (b) (2) of the National Housing Act, 1950 to date] a high level of mortgage warehousing, a Date of enactment record volume of mortgage purchases by Appraised value of the Federal National Mortgage Association, new home April August July April Proposed 1950 1954 1957 1958 in S. 57 and a record amount of outstanding Federal Home Loan Bank advances. To place $10,000 $1,250 $ 700 $ 300 $ 300 $ 300 12,000 2,400 1,200 600 360 360 capital markets under additional pressure 14,000 2,800 1,700 900 480 455 16,000 3,200 2,200 1,200 780 655 18,000 3,600 2,700 1,800 1,380 855 through any further reduction in downpay- 20,000 4,000 3,200 2,400 1,980 1,455 ments or any further extension in maturities NOTE.—Statutory minima have been exceeded at times by higher would be untimely and unwarranted. Now minimum requirements imposed by administrative regulation. Limits given in the table exclude Presidential discretionary authority, is the time to encourage a higher rate of authorized at certain times, to permit certain further reductions under specified circumstances. Recently, the statutory minima saving—not a higher rate of borrowing. given in this table have also applied to existing houses. Now is the time, in fact, for the Federal As mentioned earlier, S. 57 would reduce Government of this, the most advanced the limit further to $455. country in the world, to continue to demon- The latter proposal would extend the strate its capacity for leadership by exermaximum term on FHA-insured and VA- cising financial discipline. This would make guaranteed home mortgages and on VA clear to all peoples that its economic policy direct home loans to 35 years from the is wisely directed to the maintenance of present limit of 30 years. If effective in that economic stability essential to sustained the market, such an extension would tend economic growth. As a nation, we must conto increase the amount of outstanding tinue to serve as an anchor to which other mortgage debt by lowering repayment rates, democracies can tie without any doubt about even though the number and amount of the strength of that anchor to hold firm credit transactions remained unchanged. against the tides of inflationary forces. This is no time for measures to encourage Nearly a century ago, Benjamin Disraeli additional borrowing either by home buyers said: "The best security for civilization is or by the Treasury that would place the dwelling, and upon proper and becoming additional demands upon our strained dwellings depends more than anything else capital markets. During the first half of the improvement of mankind. Such dwell- 1959, nonfarm home mortgage debt outings are the nursery of all domestic virtues, standing climbed an unparalleled amount. and without a becoming home the exercise In only six months it rose about $7 billion of those virtues is impossible." compared with an increase of $10 billion in That statement is as true now as it was the entire year of 1958, and $12.5 billion then. In striving toward the end of "proper in the record year of 1955. The current and becoming dwellings," however, we threat to sustained housing activity is must be certain that the means we use and not that mortgage lending terms are too their timing are also "proper and becoming" strict, but that savings may be inadequate to our over-all goals of long-run economic to accommodate the volume of housing stability and sustained economic growth. demanded under current financing terms. That is what the Board had in mind in con- The unprecedented growth so far this sidering some of the provisions of S. 57. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Revisions for Weekly Reporting Banks BEGINNING WITH THE DATA for July 8, distortions that would otherwise have re- 1959, the weekly series of statistics reported sulted from mergers of nonreporting banks by member banks in leading cities and pub- with reporting banks. This revision alone lished by the Board of Governors reflects re- accounted for about two-fifths of the $10 visions to increase and improve the coverage billion of assets added to the series. of the series and to provide a more adequate classification of loans and investments. This REVISED FORM OF REPORT is the first major revision in the weekly series The new report form adopted for weekly since 1947 (see Federal Reserve BULLETIN reporting member banks is designed to profor June 1947, pages 692-93). vide a more adequate breakdown of loans and to show more information on the maturi- COVERAGE ties of U. S. Government security holdings. Over the decade since the last revision in Loans. The most important change among the weekly reporting series, banking has ex- loan categories is the segregation of loans to panded more in some areas than in others. financial institutions. Loans to these insti- This has made it advisable to change the re- tutions, which previously were included in porting groups in many areas to improve the commercial and industrial loans, in "other" usefulness of the series for regional analysis. loans, and, to a lesser extent, in loans to On July 8, 1959, the number of cities, in- banks will be shown for four types of cluding only the head-office cities of branch institutions: systems, was increased from 94 to 107, (1) Domestic commercial banks while the number of banks was increased (2) Foreign banks from 357 to 368, a net expansion in cover- (3) Sales finance, personal finance, facage of 11 banks (37 added and 26 elimitors, and other business credit comnated). For the most part the banks that panies were added were of substantial size, while (4) Other financial institutions (mutual those taken out were relatively small. As a savings banks, insurance companies, result of these changes, the proportion of mortgage companies, savings and total commercial bank deposits represented loan associations, and Federal lendby the weekly reporting member bank series ing agencies) increased from about 55 to 60 per cent, while the proportion of total member bank Users of bank data have felt for some time deposits represented increased from about 65 that inadequacies in the loan classification to 70 per cent. seriously limited the analytical value of the In the process of revising the coverage of data. In the first place, the commercial and the series, adjustments that had been made industrial loan category was not a clean in the series over the years were eliminated. measure of business loans because it included These adjustments had been made to prevent loans to sales finance companies and to 885 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

886 FEDERAL RESERVE BULLETIN • AUGUST 1959 mortgage companies. In some weeks, purchasing or carrying U. S. Government changes in loans to sales finance companies obligations separately from loans for puralone were larger than the net change in chasing or carrying other securities. Henceloans to all other business borrowers com- forth, all weekly reporting banks will show bined. this breakdown. Such a breakdown will Secondly, no category reflected the volume help to identify the amounts of credit being of bank credit being extended to the fore- used to finance these two groups of secugoing financial intermediaries nor to other rities. types such as personal loan and finance com- U. S. Government securities. According to panies, insurance companies, and savings the new form, each bank will report its comand loan associations. Loans to the latter bined holdings of Treasury notes and U. S. types of institutions were reported with Government bonds for the following "other" loans, along with loans to churches, maturities: charitable and educational institutions, etc. Within 1 year At times, the volume of credit to these After 1 year but within 5 years financing institutions expanded sharply and After 5 years was not identifiable except through special surveys. This maturity breakdown will furnish data for studies of current developments in bank Segregation of loans to financial instiliquidity and will show the extent to which tutions and redefinitions of other loan catecity banks participate in, or otherwise regories to remove the loans to these instiarrange their portfolios at times of, major tutions will provide users of the series with Treasury financing operations. a more accurate measure of the amount of bank credit that is being channeled from BACK DATA AND RECONCILIATION banks through nonbank financial intermediaries and will improve the usefulness of For all items that have not been reclassified, all loan categories, particularly the commer- year-ago data are being compiled to reflect cial and industrial loan segment. Avail- the added coverage of cities and banks. ability of figures for loans to domestic com- These data will be published in a later issue mercial banks will provide an accurate of the BULLETIN. Some of the banks added measure of domestic interbank transactions. were already reporting weekly to the Federal Heretofore it was difficult to measure such Reserve Bank in their district, but in many loans, for they were combined with loans to cases weekly figures for the period July mutual savings banks and loans to foreign 1958-June 1959 had to be estimated from banks; loans to the latter have become in- less frequent reports of condition, deposit creasingly important. reports for reserve computation purposes, A less important change in loan classi- and other sources. The portion estimated is fications is the provision of more information small in relation to the total. on the types of securities for which loans for No data are available prior to July 1, purchasing or carrying securities are being 1959, however, for the revised loan classimade. In the past, all reporting banks fications or subdivided items; these include showed loans to brokers and dealers sepa- commercial and industrial loans, loans to rately from those to others, but only New banks, other loans, loans to financial insti- York and Chicago banks reported loans for tutions, the breakdown of loans for purchas- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

REVISIONS FOR WEEKLY REPORTING BANKS 887 ing or carrying securities (except at New tutions; (3) $505 million of loans to per- York and Chicago banks), or the maturity sonal finance and loan companies from distribution of U. S. Government bonds and "other" loans to the new item for sales finotes. For the loan items affected by re- nance and personal finance companies; and classification, there is a reconciliation for (4) the following from "other" loans to only one date—July 1, 1959, when the "other" nonbank financial institutions: $74 banks were requested to provide a recon- million of loans to savings and loan and ciliation between the old and the new forms. similar associations, $112 million of loans The accompanying table shows the extent to insurance and investment (that is, those to which the revised loan items were affected holding stock of operating companies for by reclassification as well as by the changes management or developmental purposes) in coverage on that date. Other balance- companies, and $42 million of loans to sheet items were affected only by the changes Federal lending agencies. in coverage. RELATED CHANGES IN OTHER REPORTS EFFECT ON LOANS OF RECLASSIFICATION AND CHANGES In order to reduce classification problems IN COVERAGE, JULY 1, 1959 and to enable banks to establish a consistent [In millions of dollars] system for record keeping and reporting, the loan schedule (Schedule A) of the member Effect of: bank call report of condition is also being Old New Loan category series cla R ss e i - fi- A co d v d e e r d - series revised to include an item for loans to financation age cial institutions other than banks. Other Commercial and industrial.. . 32,012 -4,424 +894 28,482 loan items are being redefined to agree with Nonbank financial institutions : the loan classification used in the weekly Sales finance, personal finance, etc +3,746 + 86 3,832 reporting series. Other + 1,413 +49 1,462 F D o o r m ei e g s n t ic b a c n o k m s mercial banks.. 2,111 -2 +6 ' 1,5 5 1 9 9 6 Changes in the types of loans reported as "Other" 12,992 -733 + 1,381 13,640 commercial and industrial will affect the figures published in the Board's weekly re- The ^classifications consisted of the fol- lease, "Changes in Commercial and Induslowing transfers: (1) from commercial and trial Loans by Industry." This release will industrial loans—$3,241 million of loans continue to reflect the weekly changes in to sales finance companies, factors, etc., to commercial and industrial loans as reported the new item for sales finance and personal by more than 200 of the larger banks in the finance companies, and $1,183 million of weekly reporting series, but data beginning loans to mortgage companies and other real with July 8, 1959, will not be comparable estate lenders to the new item of "other" non- with those published earlier because of the bank financial institutions; (2) $2 million reclassification of loans previously included of loans to mutual savings banks from loans therein, mainly loans to sales finance and to banks to "other" nonbank financial insti- mortgage companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department Administrative interpretations, new regulations, and similar material Reserves of Member Banks a period, and by adding after such fifth paragraph the following: The Act of Congress approved July 28, 1959 (Public Law 86-114) amended certain provisions "Notwithstanding the other provisions of this of the Federal Reserve Act and related laws with section— respect to reserves against deposits required to be "(1) the Board of Governors, under such maintained by member banks of the Federal Re- regulations as it may prescribe, may permit serve System. The Act (1) authorizes the Board member banks to count all or part of their of Governors to permit member banks to treat currency and coin as reserves required unvault cash as reserves; (2) reduces from 13 per der this section; and cent to 10 per cent the minimum reserves against "(2) a member bank in a reserve city demand deposits that member banks in central may hold and maintain the reserve balances reserve cities must maintain; (3) reduces from which are in effect under this section for 26 per cent to 22 per cent the maximum reserves member banks described in paragraph (a), against demand deposits that member banks in and a member bank in a central reserve city central reserve cities may be required to maintain; may hold and maintain the reserve balances (4) increases from 20 per cent to 22 per cent the which are in effect under this section for maximum reserves against demand deposits that member banks described in paragraph (a) member banks in reserve cities may be required to or (b), if permission for the holding and maintain; (5) authorizes the Board of Governors maintaining of such lower reserve balances to permit a member bank located in a central re- is granted by the Board of Governors of serve or reserve city to carry lower reserves than the Federal Reserve System, either in indiother banks in the same city, based upon the vidual cases or under regulations of the nature of the bank's business rather than accord- Board, on such basis as the Board may ing to its geographical location, as heretofore; and deem reasonable and appropriate in view of (6) provides for the termination of the classifica- the character of business transacted by the tion "central reserve cities" on July 28, 1962. The member bank." law also authorizes the Board to designate which SEC. 2. (a) The fifth paragraph of Section 19 holding company affiliate, where there is more of the Federal Reserve Act, lettered (c) (U.S.C., than one with respect to the same bank or a group Title 12, Sec. 462), is amended by striking out of banks, may establish and maintain the reserves the word "thirteen" in such paragraph and subof readily marketable assets required by law. The stituting in lieu thereof the word "ten". text of the Act is as follows: (b) The sixth paragraph of Section 19 of the AN ACT Federal Reserve Act (U.S.C., Title 12, Sec. 462b) To amend the National Bank Act and the Federal Reserve Act is amended by striking out the words "on the b w e i r th b r a e n s k p s e c o t f t o t h t e h e F e re d s e e r r a v l e s R r e e s q er u v ir e e d S y t s o t e b m e m ag a a i i n n t s a t i n d e e d p o b s y it s m e a m nd - date of enactment of the Banking Act of 1935", to eliminate the classification "central reserve city." and by inserting before the period at the end Be it enacted by the Senate and House of Rep- thereof the following: ", except that in the case resentatives of the United States of America in of member banks in reserve cities and central Congress assembled, That Section 19 of the Fed- reserve cities the maximum amount of reserves eral Reserve Act, as amended, is further amended which may be required to be maintained against by striking out the provisos in the fourth and demand deposits shall be 22 per centum". fifth paragraphs of such section, lettered (b) SEC. 3. (a) The amendments made by the and (c), respectively (U.S.C., Title 12, Sec. 462), first two sections of this Act shall be effective by changing the colon in each such paragraph to on the date of the enactment of this Act. 888 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

889 LAW DEPARTMENT (b) Effective three years after the date of the SEC. 4. Paragraph (c) of Section 5144 of the enactment of this Act— Revised Statutes (12 U.S.C. 61 (c)) is amended by inserting before the semicolon at the end (1) New York and Chicago are reclassithereof a period and the following: "In any fied as reserve cities under the Federal Recase in which there is more than one holding serve Act; company affiliate with respect to the same bank (2) the classification "central reserve or group of banks the establishment and maincity" under the Federal Reserve Act, and tenance of the reserve of readily marketable asthe authority of the Board of Governors of sets required by this paragraph by only one of the Federal Reserve System to classify or such holding company affiliates, designated by reclassify cities as "central reserve cities" the Board under such conditions as the Board under such Act, are terminated; may prescribe, shall constitute compliance with (3) Section 5192 of the Revised Statutes such reserve requirement: Provided, That all of of the United States (12 U.S.C., Sec. 144) the stock of the banks affiliated with such holdis amended by striking out "central reserve ing company affiliates which is directly or inor"; directly owned or controlled by them shall be (4) Section 2 of the Act of March 3, owned or controlled, directly or indirectly, by 1887 (ch. 378; 24 Stat. 560) is repealed; the one so designated by the Board. This pro- (5) the last paragraph of Section 2 of viso shall not be interpreted as authorizing the the Federal Reserve Act (12 U.S.C., Sec. Board to require any such designated company 224) is amended by striking out "and cen- to own such stock directly". tral reserve cities"; Approved July 28, 1959. (6) Section ll(e) of the Federal Re- Order under Section 3 of serve Act (12 U.S.C., Sec. 248e) is amended Bank Holding Company Act by striking out "and central reserve" each place it appears; The Board of Governors of the Federal Reserve System, on July 23, 1959, issued the fol- (7) the third paragraph (lettered (a)) of lowing Order and Statements with respect to an Section 19 of the Federal Reserve Act (12 application by a holding company for approval U.S.C., Sec. 462) is amended by striking of the acquisition of voting shares of a bank: out "or central reserve"; (8) the fifth paragraph (lettered (c)) of CITIZENS AND SOUTHERN NATIONAL such Section 19 is repealed; BANK AND CITIZENS AND SOUTHERN (9) subparagraph (2) of the sixth para- HOLDING COMPANY graph of such Section 19 (as added by the first section of this Act) is amended by In the Matter of the Applications of Citizens and striking out "and a member bank in a cen- Southern National Bank and Citizens and Southtral reserve city may hold and maintain the ern Holding Company for prior approval of acreserve balances which are in effect under quisition of voting shares of American National this section for member banks described in Bank of Brunswick, Brunswick, Georgia. paragraph (a) or (b),"; ORDER APPROVING APPLICATIONS (10) the seventh paragraph of such Sec- UNDER BANK HOLDING COMPANY ACT tion 19 is amended by striking out clauses (1), (2), (3), and (4) and inserting in There having come before the Board of Govlieu thereof the following: "(1) by mem- ernors pursuant to Section 3(a)(2) of the Bank ber banks in reserve cities, (2) by member Holding Company Act of 1956 (12 U.S.C. 1843) banks not in reserve cities, or (3) by all and Section 4(a)(2) of the Board's Regulation member banks"; and Y (12 CFR 222.4(a)(2)), applications on be- (11) the seventh paragraph of such sec- half of Citizens and Southern National Bank tion is further amended by striking out "and and Citizens and Southern Holding Company, central reserve cities". whose respective principal office is in Savannah, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

890 FEDERAL RESERVE BULLETIN • AUGUST 1959 Georgia, for the Board's prior approval of the outstanding voting shares of American National acquisition of 2,500 of the outstanding voting Bank of Brunswick, Brunswick, Georgia. shares of American National Bank of Bruns- Views and recommendations of the Comptroller wick, Brunswick, Georgia; a Notice of Tenta- of the Currency. As required by Section 3(b) tive Decision referring to a Tentative Statement of the Act, the Board gave notice of the applion said applications having been published in cations to the Comptroller of the Currency. The the Federal Register on June 30, 1959 (24 F.R. Comptroller recommended that the applications 5319); the said Notice having provided inter- be approved by the Board. ested persons an opportunity, before issuance of Statutory factors. Section 3(c) of the Act rethe Board's final order, to file objections or quires the Board to take into consideration the comments upon the facts stated and the reasons following five factors: (1) the financial history indicated in the Tentative Statement; and the time and condition of the holding company and bank for filing such objections and comments having concerned; (2) their prospects; (3) the charexpired and no such objections or comments acter of their management; (4) the convenience, having been filed; needs, and welfare of the communities and the IT IS HEREBY ORDERED, for the reasons set area concerned; and (5) whether or not the efforth in the Board's Statement of this date, fect of the acquisition would be to expand the that the said applications be and hereby are size or extent of the bank holding company sysgranted and the acquisition by Citizens and tem involved beyond limits consistent with ade- Southern National Bank and Citizens and South- quate and sound banking, the public interest, ern Holding Company of 2,500 of the outstand- and the preservation of competition in the field ing voting shares of American National Bank of banking. of Brunswick, Brunswick, Georgia, is hereby ap- Discussion. Citizens is a bank holding comproved, provided that such acquisition is com- pany under Section 2(a)(l) of the Act because pleted within three months from the date hereof, of its ownership of more than 25 per cent (in and that no action be taken by Citizens and fact, a large majority) of the stock of each of Southern National Bank or Citizens and South- 10 banks, with deposits ranging from $2.5 milern Holding Company that will result in the lion to $27.4 million, and aggregating over $100 termination of the corporate existence of Ameri- million, located in 10 communities in Georgia. can National Bank of Brunswick as a separate National, a bank with its head office in Savanfunctioning banking institution until after 60 nah, Georgia, and its center of operations in days following the date of this Order. Atlanta, operates 12 offices holding aggregate de- Dated at Washington, D. C, this 23rd day posits of $470 million. It is a bank holding of July, 1959. company as defined in Section 2(a)(3) of the By order of the Board of Governors. Act, since all of the outstanding shares of Citizens are held by trustees for the benefit of the Voting for this action: Chairman Martin, Vice Chairshareholders of National. man Balderston, and Governors Szymczak, Mills and Shepardson. Voting against this action: Governors American National Bank, with deposits of Robertson and King. $12.2 million, has its head office in Brunswick, (Signed) MERRITT SHERMAN, the county seat of Glynn County, and a branch (SEAL) Secretary. office in Jesup, the county seat of Wayne County. It appears that the financial history and con- STATEMENT dition, the prospects, and the management of Citizens and Southern National Bank, Savan- American and the two holding companies are nah, Georgia ("National"), and Citizens and satisfactory and would not be adversely affected Southern Holding Company, Savannah, Georgia by the proposed acquisition. ("Citizens"), both of which are bank holding The City of Brunswick (population about 20,companies, have applied, pursuant to Section 3 700) is served by three banks, and there is one (a) (2) of the Bank Holding Company Act of other bank in Glynn County. Wayne County 1956 ("the Act"), for the Board's prior approval has two banking offices, both in Jesup, one of of Citizens' acquisition of 2,500 of the 20,000 them being a branch of American. American Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 891 holds about one-third of all bank deposits in flects Congress' view that acquisition of more Glynn County and a majority of the deposits in than 5 per cent of a bank's stock cannot be re- Wayne County. garded as an insignificant acquisition; that is The Brunswick and Jesup offices of American the reason why, under the Act, such an acquisiare about 77 miles and 66 miles, respectively, tion may not be consummated without the southwest of Savannah, the location of the near- Board's approval. est banking offices of the Citizens and Southern We believe that approval of an application to group. Existing competition between American purchase more than 5 per cent of the stock of an and the banking offices of the group is negli- additional bank must be based on evidence that gible, and this situation would not be changed the public interest will be better served by such by the proposed stock acquisition. It is to be acquisition. noted that the proposed acquisition involves only It is not contended by the applicants, in this HVi per cent of the outstanding stock of Ameri- case, that the proposed acquisition will have any can, so that American will not become a "sub- favorable effect on the convenience, needs, or sidiary" of the holding companies; subsidiary welfare of the community or area concerned. status, under Sections 2(d)(l) and 2(d)(3) of It is true that the transaction will not increase the Act, is based on ownership of 25 per cent the number of statutory "subsidiaries" in the or more of the voting shares of the bank con- Citizens and Southern holding company system, cerned. but this does not mean that the sphere of in- In the opinion of the Board, the proposed fluence of the holding companies will not be extransaction would not have any significant effect panded. We believe that it will be. on the convenience, needs, and welfare of the The absence of prospective benefits that would communities and the area concerned, and would justify the acquisition gives this matter impornot expand the Citizens and Southern holding tance that reaches beyond the immediate transcompany system beyond limits consistent with action. We are concerned lest approval in this adequate and sound banking, the public interest, case may establish a general principle that a and the preservation of competition in the field holding company can acquire substantial minorof banking. ity interests in any banks that are not in direct Conclusion. The above views were incorpor- competition with banks that are already memated in the Tentative Statement issued in con- bers of its system. In view of the Board's decinection with the Notice of Tentative Decision sion in this case, it is difficult to see how any published in the Federal Register on June 30, such application could hereafter be denied with- 1959 (24 F.R. 5319), affording interested per- out making an arbitrary distinction from this case. sons an opportunity to submit comments on or As previously indicated, the acquisition will objections to the Board's proposed action, and no expand the holding companies' sphere of influsuch comments or objections were received ence. In the absence of evidence that the transwithin the period specified for their submission. action would contribute to the convenience, needs, Viewing the relevant facts in the light of the or welfare of the community or area, it is our general purposes of the Act and the factors judgment that such expansion would not be conenumerated in Section 3(c), it is the judgment sistent with the purposes of the Bank Holding of the Board that the proposed acquisition would Company Act or with the public interest in the not be inconsistent with the statutory objectives field of banking. Therefore, we conclude that and the public interest and that, accordingly, the the applications should be denied. applications should be approved. IT IS SO ORDERED. Orders under Section 4(c)(6) of DISSENTING STATEMENT OF Bank Holding Company Act GOVERNORS ROBERTSON AND KING The Board of Governors of the Federal Re- Section 3(a) (2) of the Bank Holding Com- serve System on July 21, 1959, issued Orders repany Act permits a holding company to acquire, lating to requests by four bank holding companies without Board approval, up to 5 per cent of for determinations under Section 4(c)(6) of the the voting shares of additional banks. This re- Bank Holding Company Act of 1956 for exemp- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

892 FEDERAL RESERVE BULLETIN • AUGUST 1959 tion of subsidiary corporations. The Board's buying and selling real estate, and that, the fore- Orders and accompanying Statements and Re- going assurance being given, such requests be apports and Recommended Decisions read as fol- proved. Oral argument having been heard before lows: the Board; the Board having given due consideration to all relevant aspects of the matter; and all OTTO BREMER COMPANY such steps having been in accordance with the In the Matter of the Requests of Otto Bremer Board's Rules of Practice for Formal Hearings Company for Determinations under Section (12 CFR 263): 4(c)(6) of the Bank Holding Company Act of IT IS HEREBY ORDERED, for the reasons set forth 1956. Docket Numbers BHC-29, BHC-31, BHCin the Board's Statement of this date and on the 32, BHC-33, BHC-35. basis of the record made at the hearing in this matter, that: ORDER 1. The activities of Western State Agency, Otto Bremer Company, St. Paul, Minnesota, a Inc., with the exception of its lending activities, bank holding company within the meaning of are determined to be so closely related to the busi- Section 2(a) of the Bank Holding Company Act ness of banking or of managing or controlling of 1956, has filed requests for determinations by banks as to be a proper incident thereto and as to the Board of Governors of the Federal Reserve make it unnecessary for the prohibitions of Sec- System that the corporations hereinafter named tion 4 of the Bank Holding Company Act of and their activities are of the kind described in 1956 to apply in order to carry out the purposes Section 4(c)(6) of the Bank Holding Company of that Act, and, therefore, Applicant's request Act of 1956 (12 U.S.C. §1843) and Section with respect to Western State Agency, Inc. shall 5(b) of the Board's Regulation Y (12 CFR be, and hereby is, granted on the condition that 222.5(b)), so as to make it unnecessary for the Western State Agency, Inc. takes appropriate prohibitions of Section 4 of the Act with respect action to discontinue its lending activities within to retention of shares in nonbanking organizations a reasonable period of time; and to apply in order to carry out the purposes of the 2. The activities of Citizens Agency, Inc. are Act. The corporations with respect to which the determined to be so closely related to the business requests were filed with the hearing Docket Nos. of banking or of managing or controlling banks of each are: as to be a proper incident thereto and as to make it unnecessary for the prohibitions of Section 4 Citizens Agency, Inc. (BHC-29) of the Bank Holding Company Act of 1956 to Western State Agency, Inc. (BHC-31) apply in order to carry out the purposes of that New England Insurance Agency (BHC-32) Act, and, therefore, Applicant's request with Drovers Exchange Agency & respect to Citizens Agency, Inc. shall be, and Realty, Inc. (BHC-33) hereby is, granted; and Willmar Investment Company (BHC-35) 3. The insurance activities of Willmar Invest- A hearing having been held pursuant to Section ment Company are determined to be so closely 4(c)(6) of the Act and in accordance with Secrelated to the business of banking or of managing tions 5(b) and 7(a) of the Board's Regulation Y or controlling banks as to be a proper incident (12 CFR 222.5(b) and 222.7(a)), the Hearing thereto and as to make it unnecessary for the pro- Examiner filed his Report and Recommended De- hibitions of Section 4 of the Bank Holding Comcision wherein he recommended that Applicant's pany Act of 1956 to apply in order to carry out requests designated BHC Nos. 29, 31, 33, and 35 the purposes of that Act; the remaining activities be approved, and that Applicant's request desig- of Willmar Investment Company, with the exnated BHC No. 32 be denied unless Applicant, ception of its real estate business activities, do not with the written consent of that subsidiary to bar that Company from exemption under Section which the request is related, gives proper assur- 4(c)(6); and, therefore, Applicant's request ance, as a condition of exemption, that the said with respect to Willmar Investment Company subsidiary will cease to engage in the business of shall be, and hereby is, granted on the condition Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 893 that within a reasonable period of time the real Reserve System (the "Board") requests for deestate business activities of that Company be dis- terminations that the shares held by it in certain continued; and nonbanking subsidiaries are exempt under Sec- 4. The insurance activities of Drovers Ex- tion 4(c)(6) of the Act from the prohibitions change Agency & Realty, Inc. are determined to of Section 4(a)(2) of the Act. The nonbankbe so closely related to the business of banking ing subsidiaries involved are Western State or of managing or controlling banks as to be a Agency, Inc., Citizens Agency, Inc., Willmar Inproper incident thereto and as to make it unneces- vestment Company, Drovers Exchange Agency sary for the prohibitions of Section 4 of the Bank and Realty, Inc., and New England Insurance Holding Company Act of 1956 to apply in order Agency. to carry out the purposes of that Act; the remain- On July 12, 1957, the Board ordered a coning activities of Drovers Exchange Agency & solidation of the aforesaid applications. Pur- Realty, Inc. do not bar that Company from suant to order for and notice of hearing pubexemption under Section 4(c)(6); and, there- lished in the Federal Register, a hearing on these fore, Applicant's request with respect to Drovers applications was held in Minneapolis, Minnesota, Exchange Agency & Realty, Inc. shall be, and on August 20 and 21, 1957, and on October 8 hereby is, granted; and and 9, 1957, before a duly designated Hearing Examiner. On October 15, 1958, following the 5. The activities of New England Insurance conclusion of this hearing, Applicant filed pro- Agency, with the exception of its real estate busiposed findings of fact and conclusions of law, ness activities, are determined to be so closely with a brief in support thereof. On November related to the business of banking or of managing 25, 1959, the Hearing Examiner filed with the or controlling banks as to be a proper incident Board his Report and Recommended Decision thereto and as to make it unnecessary for the wherein, on the basis of findings of fact and prohibitions of Section 4 of the Bank Holding Company Act of 1956 to apply in order to carry conclusions of law set forth therein, he recomout the purposes of that Act; and, therefore, Ap- mended that the requests of Applicant be granted plicant's request with respect to New England In- as to four of its five nonbanking subsidiaries, surance Agency, shall be, and hereby is, granted but that Applicant's request as to New England on the condition that within a reasonable period Insurance Agency be denied. However, in refof time, New England Insurance Agency ceases erence to the New England Insurance Agency, to engage in its real estate business activities. the Hearing Examiner further recommended that if, prior to the expiration of the time for filing Dated at Washington, D.C., this 21st day of exceptions to his Report, the Applicant, with July, 1959. the written consent of New England Insurance By order of the Board of Governors. Agency, should advise the Board that the Agency Voting for this action: Chairman Martin, Vice Chairwill discontinue its activities in buying and sellman Balderston and Governors Szymczak, Mills, Robertson, Shepardson and King. ing real estate, the Board should grant the Applicant's request for exemption as to that Agency. (Signed) MERRITT SHERMAN, By letter dated May 8, 1959, Applicant sub- (SEAL) Secretary. mitted to the Board a Memorandum Brief in Support of Hearing Examiner's Report and Recom- STATEMENT mended Decision and, on May 11, 1959, pre- BACKGROUND OF THE CASE sented oral argument before the Board in sup- On June 17, 1957, Otto Bremer Company, port of the Recommended Decision of the Hearherein the Applicant, a Minnesota corporation ing Examiner. with its principal office and place of business in The Board's findings and conclusions with St. Paul, Minnesota, and a bank holding com- respect to each of the nonbanking subsidiaries pany as defined in Section 2(a) of the Bank involved are set forth hereafter. Additional Holding Company Act of 1956 ("Act"), filed facts relating to the activities of such subsidiaries with the Board of Governors of the Federal are contained in the Hearing Examiner's Report Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

894 FEDERAL RESERVE BULLETIN • AUGUST 1959 and Recommended Decision attached hereto; and tion prior to 1956, with the exception that net to the extent not inconsistent with this statement, profits are now retained by the Agency for disthe findings of fact of the Hearing Examiner are tribution to its shareholders (who are the same hereby adopted. as Western Bank's shareholders), whereas formerly net profits were distributed directly to Western Bank. I. Western State Agency, Inc. The present offices of Western Agency are Factual summary. Western State Agency, Inc. physically located in the premises of Western ("Western Agency") is a Minnesota corporation, Bank. Western Bank's employees carry on the organized in 1956, and located in the premises activities of Western Agency, all insurance poliof Western State Bank of Marshall, Minnesota, cies being issued in the name of the Agency and ("Western Bank"), a subsidiary of Applicant. countersigned by the President of Western Bank The city of Marshall, with a population of ap- and Western Agency, the two offices being held proximately 7,000, has one other bank. In ad- by the same person. Applicant owns a majority dition, there are approximately 15 other banks of the outstanding shares of both Western Bank in the general area of Marshall. and Western Agency, the stock of both organ- Western Agency is engaged almost exclusively izations being tied together by a shareholders' in the business of an insurance agency. With agreement precluding transfer of any shares of the exception of occasional loans made to cus- either Western Bank or Western Agency withtomers of Western Bank resulting in interest in- out simultaneous pro rata transfer of the stock come during the 19-month period preceding this of the other. Western Agency and Western hearing totaling $164, all of the Agency's income Bank have common officers and directors. Westwas derived from its insurance business. ern Bank is paid a fixed sum per year by Western Preliminary requirement as to nature of ac- Agency as compensation for administrative extivities. Since it appears from the record that penses connected with operation of the insur- Western Agency is engaged solely in insurance ance agency, and the Agency's advertising is done and lending activities, it is clear that it meets in conjunction with that of the Bank, i.e., a joint the initial requirement for exemption under Sec- ad, the cost of which is borne by the Bank. tion 4(c)(6) of the Act that all of the activi- In the six months preceding the hearing on ties of a company must be of a "financial, fidu- this application, Western Agency derived about ciary, or insurance nature." 93 per cent of its gross income from premiums Relationship of insurance activities to bank on sale of hail insurance and of automobile, fire business. Having met the preliminary require- and casualty insurance, a majority of which was ment for exemption to which reference has just written for persons doing business with Western been made, Western Agency is entitled to ex- Bank, either as borrowers or depositors. emption under the statute and Section 5(b) of In the twelve months preceding July 1957, the the Board's Regulation Y issued pursuant to the date of notice of hearing, approximately 33 per statute, only if its activities are so closely re- cent of Western Agency's total premiums collated to the business of banking or of manag- lected represented insurance written on collateral ing or controlling banks, as conducted by the held by Western Bank; approximately 50 per Applicant and its subsidiary banks, as to be a cent of such total premiums represented insurproper incident thereto and as to make it un- ance written for Western Bank borrowers on necessary for the prohibitions of Section 4 of the property not securing loans made by that Bank; Act to apply in order to carry out the purposes approximately 16 per cent of such total preof the Act. miums represented insurance written for non- It appears from the record that prior to the borrowing customers of Western Bank; and apincorporation of Western Agency, Western Bank proximately 2 per cent of such total premiums itself conducted an insurance business through covered insurance written for persons not cusits President as licensed insurance agent. The tomers of Western Bank. present manner of conducting the insurance While the figures set forth above reflect that business is essentially identical with its opera- less than a major portion of the total premiums Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 895 received by Western Agency represent insurance poration for exemption of First Service Agenwritten on collateral securing loans made by cies, Inc., the Board believes that Section 4 of Western Bank, that portion of the total insur- the Act was directed at those potential sources ance written which does represent insurance or of evil found to be inherent only in bank holdcollateral securing such loans by the Bank con- ing company operations. If "potential evils" are stitutes, in the Board's opinion, a substantial found to exist that are prevalent among all banks, part of the Agency's total insurance writings. both holding company banks and nonholding The significance of this connection is enhanced company banks, then any such "potential evils" by the rinding that in excess of 90 per cent of are not of the nature against which Section 4 Western Agency's customers are also customers, of the Act was directed. In this case, the pracin one form or another, of Western Bank. The tice of operating insurance agencies in connection fact of common customers, while not decisive, with banks is sufficiently prevalent and accepted may be given weight as a cumulative factor as to justify the conclusion that the particular where other circumstances indicate the existence relationship here involved is a "proper incident" of the statutorily required relationship. Similar to banking as conducted in the area concerned cumulative weight may be given to the physical and is not inconsistent with the purposes of the and personnel integration of the Agency with Act. the Bank. Lending activities. The single question remains The presence of the requisite relationship is as to whether the lending activities of Western further supported by the fact that the relation- Agency are such as to preclude the granting of ship between Western Bank and the insurance an exemption to which Western Agency appears agency conforms with long-settled area practice. otherwise to be entitled. The record reflects that As set forth in the Board's statement of this Western Agency on infrequent occasions has date in connection with First Bank Stock Cor- made loans for the purpose of accommodating poration's application relating to First Service Western Bank customers who, either because of Agencies, Inc., the practice of operating insur- loan limit restrictions or for other reasons, have ance agencies in connection with banks has pre- not qualified for loans from that Bank. The vailed for many years in the area concerned, Agency's interest income on such loans in the without evidence of objection on the part of the year and a half preceding the hearing on this bank supervisory authorities. application totaled $164. As to this activity, In the State of Minnesota, it was shown that the Hearing Examiner concluded that it was 87 per cent of all the banking offices have con- "clearly related to the banking business connected insurance agencies. In this case, the ducted by its affiliate" and that "in any event Hearing Examiner found this extensive area prac- this segment of the company's business is so tice to be decisively favorable to approval of Ap- small as to be considered de minimis" For plicant's request. While the Board does not give these reasons, the Hearing Examiner concluded conclusive weight to such area practice, it be- that the operations of Western Agency, "in their lieves that it may be given strong weight as sup- totality, satisfy the Section 4(c)(6) requirements porting a finding that the relationship shown is for exemption." an "incident" to the banking business in that area. While the income from Western Agency's lend- Thus, as to Western Agency, the Board finds ing activities appears to be but a very minor porthat the existence of such area practice, when tion of the Agency's total income, this fact alone taken together with other facts found to exist cannot be the basis for a decision as to the naand previously discussed, sufficiently supports a ture of this activity and whether or not it is finding that the insurance activities of Western sufficiently closely related to the business of bank- Agency are so closely related to the business of ing as to escape the divestiture requirement. banking as conducted by Applicant's subsidiary Moreover, the Board cannot agree, on the basis bank as to be an "incident" thereto. of the record, that the lending activities of West- "Proper" incident. As discussed at greater ern Agency are clearly related to the banking length in the Board's statement of this date re- business conducted by Western Bank. The record lating to the application of First Bank Stock Cor- gives no evidence that the loans made had any Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

896 FEDERAL RESERVE BULLETIN • AUGUST 1959 direct connection with the Bank's business other propriate action to discontinue its lending activithan that they were made because the Bank did ties within a reasonable period of time. not make them. This does not constitute a As indicated in the Board's Order, its aptransaction by or for the Bank. It differs in no proval of this request is based solely on the respect, -in the Board's view, from a loan that facts disclosed by the record; and if those facts might be made by the Agency to a person having should substantially change in the future in such no connection or contact with the Agency's affili- manner as to make the reasons for the Board's ated bank. conclusion no longer applicable, the statutory Apart from the fact that the loans made had exemption resulting from the Board's present deno direct connection with the business of West- termination would, of course, cease to obtain. ern Bank, it should be noted that the record is II. Citizens Agency, Inc. void of any suggestion that the practice described is engaged in, to any extent, by other Factual summary. Citizens Agency, Inc. ("Citbanks in the area. Clearly, the competitive ad- izens Agency") is a Minnesota corporation orvantage thus gained by Western Bank over other ganized in 1955, and located in the premises banks in the area might well be regarded as an of Citizens State Bank of Brainerd, Minnesota, evil intended to be precluded by the divestment ("Citizens Bank"), a subsidiary of Applicant. provisions of the Bank Holding Company Act. The city of Brainerd, with a population of ap- Conclusions. On the basis of the facts estab- proximately 14,000, has one other bank. It does lished by the Applicant as to the substantial not presently have a connected insurance agency. direct connection between the insurance activi- According to the testimony of record, except for ties of Western Agency and the business of that one bank, all the other banks in towns banking as conducted by Western Bank, exist- neighboring Brainerd operate insurance agency ence of common customers, other facts evidenc- departments in one form or another. ing physical and personnel integration, and the Preliminary requirement as to nature of acshowing • that the operation of bank-connected tivities. The activities of Citizens Agency are insurance agencies is a prevalent practice in the confined to the writing of various types of proparea involved and has been sanctioned by bank erty and credit life insurance and fiduciary bonds. supervisory authorities, the Board finds that such Accordingly, the preliminary requirement for exinsurance activities of Western Agency are so emption under Section 4(c)(6) of the Act is closely related to the business of banking as con- satisfied. ducted by Western Bank as to be a proper inci- Relationship of insurance activities to banking dent thereto and as to make unnecessary the business. As stated in connection with the application of the prohibition of Section 4 in Board's consideration of Applicant's request for order to carry out the purposes of the Act. To exemption of Western Agency, the fact that an the extent that the findings and conclusions and agency's activities are of a "financial, fiduciary, recommendations of the Hearing Examiner are or insurance nature" is not alone sufficient to consistent with the aforestated findings and con- warrant exemption. In addition, it must be esclusions, they are hereby adopted. tablished, after a hearing, that the Agency's ac- It is the judgment of the Board, for the rea- tivities are so closely related to the business of sons heretofore stated, that the lending activities banking or of managing banks, as to be a proper of Western Agency are not sufficiently "closely incident thereto and as to make it unnecessary related" to the business of banking as conducted for the prohibitions of Section 4 of the Act to by Western Bank so as to be qualified for ex- apply in order to carry out the purposes of the emption from divestiture, and further, that the Act. nature of these activities precludes a finding that In essence, a similar degree of organizational, they are a "proper incident" to that business. physical, and operational integration exists be- Accordingly, it is the Board's judgment that tween Citizens Agency and Citizens Bank as was the requested exemption with respect to Western found to exist between Western State Agency, State Agency, Inc. should be granted on the con- Inc. and Western State Bank of Marshall, heredition that Western State Agency, Inc. take ap- inbefore described. The facts supporting this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

897 LAW DEPARTMENT finding as to Citizens Agency and Citizens Bank (6) of the Act, it seems clear that Congress did are set forth in detail in the Hearing Examiner's not intend that the Board should make determi- Report and are herein incorporated by reference. nations under that provision on the basis of any Another factor, quantitative in nature, bear- set or all-inclusive standard or formula. Whether ing on a determination of the closeness of rela- the activities of a particular nonbanking comtionship, is the proportion of the nonbanking or- pany are of such a nature and/or scope as to be ganization's activities that are directly related to considered sufficiently closely related to the busibank transactions and the extent to which the ness of banking as conducted by an affiliated bank's business is dependent upon, or directly bank, and thus exempt from the prohibitions of related to, the activities of the nonbanking or- Section 4, is a matter to be determined in the ganization. As to the proportion of Citizens light of the facts surrounding each particular Agency's total insurance activities that may be case, and in each instance must reflect considersaid to be directly or indirectly related to the ation of multiple factors. business of Citizens Bank, the record reflects Thus, in the instant case, the fact that approxithat in the 18-month period preceding the hear- mately 45 per cent of Citizens Agency's business ing on this application, Citizens Agency derived is directly related to the banking transactions of approximately 40 per cent of its total income Citizens Bank, while indicative of the requisite from premiums on insurance written on collateral relationship, is not alone determinative. Howsecuring loans made by Citizens Bank. ever, further evidence of satisfaction of this re- In the same period, about 33 per cent of its quirement is reflected in the finding of the manner total premiums represented insurance written for in and extent to which organizational, physical, borrowers from Citizens Bank but not on prop- and operational integration exists between Citerty securing loans from that Bank. Approxi- izens Bank and Citizens Agency. mately 16 per cent of the total premiums re- The evidence of close relationship thus far ceived in this period represented insurance writ- established finds further support in the fact that in ten for nonborrowing customers of Citizens Bank the period from January 3, 1956 to July 31, 1957, and approximately 7 per cent thereof repre- approximately 88 per cent of the total insurance sented insurance written for noncustomers of writings of Citizens Agency were for customers that Bank. Five per cent of the Agency's total of Citizens Bank, and that an additional 5 per premiums received in this period represented in- cent of that total represented insurance written surance under which Citizens Bank was the directly for that Bank. named insured. Thus, approximately 45 per cent The Hearing Examiner attached "no special of the Agency's total premiums received from significance" to the large proportion of Citizens January 1956 to July 1957 represented insur- Agency's insurance activities related to customers ance directly related to the business of banking of Citizens Bank, other than to that proportion as conducted by Citizens Bank. thereof directly related to insurance on property The record does not contain a showing as to securing loans made by Citizens Bank. While no what proportion of the total insurance required great significance should be attributed to the by Citizens Bank on collateral securing loans existence of common customers, the conclusion made by it is or was written by Citizens Agency. appears reasonable that a finding of a large num- Less significant in gauging the degree to which ber of common customers, when supported, as the business activities of each of these affiliates here, by other evidence indicating a close relationis related to the other, but nevertheless relevant, ship, should be given appropriate cumulative is the testimony of the President of Citizens weight. Bank to the effect that he estimated that in ex- The requisite close relationship is further evicess of 75 per cent of the insurance customers denced in this case, as it was in the case of Westof Citizens Agency were also customers of Citi- ern State Agency, Inc., supra, by the existence in zens Bank. This estimate finds substantiation in the area involved, both in neighboring towns and the figures set forth in the Hearing Examiner's in the State as a whole, of the practice among Report. banks of offering to their banking customers From the legislative history of Section 4(c) various insurance services. Not only does such Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

898 FEDERAL RESERVE BULLETIN • AUGUST 1959 area practice support a finding that the insurance 1948. Willmar Co. was organized for the primary activities of Citizens Agency are incidental to the purpose of purchasing these assets from the business of Citizens Bank, but more, negatives trustees, the proceeds of the purchase to redeem the existence of the "potential sources of evil" at the remaining certificates evidencing indebtedness. which Section 4 of the Act appears to be directed. The funds used by Willmar to purchase these as- Conclusion. For the reasons heretofore given, sets were supplied by subscription to Willmar Co. the Board concurs in the conclusion reached by stock by stockholders of the Bank of Willmar and the Hearing Examiner that all of the activities of by a loan from that Bank to Willmar Co. At the Citizens Agency are of an insurance nature and same time, Bank of Willmar transferred to Willare so closely related to the business of banking, mar Co. an unincorporated insurance agency and as conducted by Applicant's subsidiary bank, real estate business formerly operated by the Citizens Bank, as to be a proper incident thereto Bank. The transfer was allegedly made to proand as to make it unnecessary for the prohibitions vide Willmar Co. with a source of operating funds of Section 4 to apply in order to carry out the while in the course of liquidating the assets purpurposes of the Act. chased from the trustees. Insurance activities. The record supports the III. Willmar Investment Company finding of the Hearing Examiner that by far the Factual summary. Willmar Investment Com- greatest portion of Willmar Co.'s income results pany ("Willmar Co.") is a Minnesota corpo- from its insurance agency activities. To this exration, organized in 1948, with its place of busi- tent, Willmar Co. meets the preliminary requireness at Willmar, Minnesota, a city with a popula- ment for exemption under Section 4(c)(6) that tion of about 12,000. Willmar Co. occupies all of a company's activities be of a "financial, rented offices on the same street as and about 200 fiduciary, or insurance nature." feet from the Bank of Willmar, a subsidiary of Relative to the further requirement of that sec- Applicant. From 1948 until March 1957, Will- tion that such activities be so closely related to mar Co. occupied an office at the Bank of Will- the business of banking, as conducted by the Apmar. plicant and its subsidiary banks, so as to be a The record reflects, and the Hearing Examiner proper incident thereto and as to make unnecesfound, that Willmar Co. is engaged principally sary the application of the prohibitions of Section in the writing of fire, general coverage, casualty, 4 in order to carry out the purposes of the Act, the sickness, accident and life insurance. It also con- Board is of the opinion that the record supports ducts noninsurance activities consisting of (1) a finding that such a relationship exists in this the liquidation of assets acquired from the Bank of case. There are present in the case of Willmar Willmar, (2) the holding of properties acquired Co. substantially identical facts with respect to for the future use of its related bank, and (3) physical and personnel relationship as have been the operation of a real estate agency. found to exist in the cases of Western State The circumstances asserted to have given rise Agency, Inc. and Citizens Agency, Inc. These to Willmar Co.'s engagement in the above activi- facts are set forth in detail in the attached Hearties are set forth in the Hearing Examiner's Re- ing Examiner's Report and need not be recited port. They are briefly hereafter summarized in- here. In addition to this evidence of the existence asmuch as they appear to bear directly on the of the required relationship, the record contains questions of the nature of those activities and their statistical evidence bearing on the volume and relation, if any, to the business of banking as con- type of insurance written by Willmar Co. during ducted by Bank of Willmar. a specified period. During the course of a reorganization of the From January 1, 1956 through August 31, Bank of Willmar in 1933, certain bank assets were 1957, 39 per cent of the total premium receipts of transferred to trustees for liquidation, the pro- Willmar Co. represented insurance written on colceeds from which were to be paid to depositor- lateral securing loans made by Bank of Willmar. creditors who were given certificates to evidence During the same period, approximately 29 per their interest in the trust property. A portion of cent of such total premiums received represented these assets remained yet to be liquidated as of insurance written for borrowers from Bank of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 899 Willmar but not on property then securing loans. most banks, of the practice of offering to their About 31 per cent of the premiums received in banking customers insurance services and advice the same period represented insurance written for as part of a well-rounded financial service. The customers of the Bank of Willmar other than fact that such a relationship between insurance borrowers, while approximately 1 per cent of such agencies and banks has been sanctioned by the premiums were on insurance written for persons bank supervisory authorities and has become recnot customers of the connected bank. ognized as a legitimate competitive device, sup- While the Hearing Examiner accurately char- ports the Board's conclusion that the insurance acacterized as "a minor percentage" the portion of tivities under consideration are "closely related" Willmar Co.'s total writings that represent insur- to the business of banking. Such area practice also ance on collateral securing loans of its related negatives existence of the "potential sources of bank, it should be noted that, as stated by the evil" at which Section 4 of the Act was apparently Board in its statement of this date regarding the directed and supports the adoption of the Hearapplication of First Bank Stock Corporation for ing Examiner's finding that the insurance activexemption of First Service Agencies, Inc., the ities of Willmar Co. are a proper incident to the Bank Holding Company Act does not require banking business as conducted by the Bank of that a majority or even a substantial part of the Willmar and are consistent with the purposes of business of a company be directly connected with the Act. The Board's statements on this subject as transactions of a related bank in order to qualify applied to Western State Agency, Inc. and Citifor exemption under Section 4(c)(6). A determi- zens Agency, Inc. are equally applicable here. nation by the Board as to whether a particular Other activities. Willmar Co.'s noninsurance company is entitled to exemption must rest upon activities include liquidation of assets as hereinconsideration of all facts and circumstances evi- before described, the holding of properties for the denced by the record of the hearing on the request. future use of Bank of Willmar and for its own fu- Thus, in the instant matter, in addition to the 39 ture use, and the operation of a real estate busiper cent of its total premiums that represented in- ness. The statements of record concerning these surance on property securing loans made by Bank activities make it clear that they are not of a "fiof Willmar, an additional 59 per cent of the nancial, fiduciary, or insurance nature" so as to fall premiums represented insurance written for within the exemption grant of Section 4(c)(6). customers of Bank of Willmar, some of whom The question is then presented as to whether these were former borrowers, others of whom were other activities are such as to preclude exemption depositors and users of other bank services. of Willmar Co. under Section 4(c)(6). While a conclusion as to the existence or not Section 4(c)(l) of the Act exempts from the of the requisite close relationship between the retention prohibitions of Section 4, inter alia, insurance activities of Willmar Co. and the busi- shares of any subsidiary nonbanking company enness of banking as conducted by Bank of Willmar gaged solely in liquidating assets acquired from an might not be justified by any one of the facts affiliated holding company bank. Also exempt are heretofore discussed, it is the judgment of the shares of bank holding company subsidiaries that Board that these facts—the physical and person- are "engaged solely in holding or operating propnel relationship, the significant portion of the erties used wholly or substantially by any [holding insurance business directly and functionally re- company] bank . . or acquired for such future lated to the business of the Bank of Willmar, and use." the extent to which the remainder of the Agency's Clearly, Willmar Co.'s activities in liquidating writings represents a service rendered to the assets acquired from the Bank of Willmar and of Bank's customers—when taken together, suffi- acquiring and holding properties for the future ciently establish the requisite closeness of relation- use of that Bank are of a nature expressly exempt ship. under Section 4(c)(l). For reasons fully set Further, as in the case of the activities of West- forth in the Board's statement of this date in conern State Agency, Inc. and Citizens Agency, Inc., nection with the application of First Bank Stock the closeness of the relationship is confirmed by Corporation with respect to First Bancredit the existence in the area involved, on the part of Corporation, the Board is of the opinion that, by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

900 FEDERAL RESERVE BULLETIN • AUGUST 1959 engaging in activities that are exempt under Sec- being conducted in order to provide a source of tion 4(c)(l), a company is not disqualified from funds for the employee who formerly managed exemption consideration under Section 4(c)(6). the Company's insurance business. Thus, the Hearing Examiner's conclusion that The Hearing Examiner concluded that the real neither Willmar Co.'s liquidation activities nor estate activities of Willmar Co. could not be reits activities in acquiring and holding properties garded as an "insurance activity." However, he for the future use of the Bank of Willmar barred concluded that this activity on the part of Willmar it from exemption otherwise determined under Co. was properly classifiable as "fiduciary" within Section 4(c)(6), is hereby adopted. the broad meaning of that term, thus satisfying Further, the Company's acquisition and re- the preliminary requirement of Section 4(c)(6). tention of three other parcels of real estate simi- As to whether this "fiduciary" activity was suffilarly do not constitute a bar from exemption con- ciently "closely related" to the business of banksideration. Two of these parcels of land were ing as conducted by the Bank of Willmar, the acquired for future use in connection with the Hearing Examiner concluded that he did not read business operations of the Bank of Willmar and Section 4(c)(6) as requiring, as a condition of thus are exempt under Section 4(c)(l). The exemption, that each particular activity of a third parcel of real estate was acquired by Will- particular company must satisfy the statutory remar Co. for its own use as a situs for the insurance quirement of close relationship. The requirement agency's business and, as found by the Hearing of "close relationship" should be "relaxed," he Examiner, "must be viewed as an integrated part felt, "where special circumstances warrant a deof the Company's insurance activities." parture." It was his judgment that such special The real estate agency activities of Willmar Co. circumstances were here present in view of the inpresent a different problem. The record reflects substantial portion of Willmar Co.'s total income that Willmar Co., from the date of its organiza- represented by the real estate agency business, the tion, has held itself out as being engaged in a asserted temporary nature of the business, together general real estate agency business. Applicant with the purpose for which it was being conducasserts that this business is now being conducted ted, and the assurance given by Applicant that for the primary purpose of providing a source of upon the death or full retirement of the former funds to help finance retirement payments made employee, the real estate business would be disby the Company to a former employee-manager of continued entirely. Thus, the Hearing Examiner the Company's insurance business who is now re- concluded that the real estate activities were not tired but continues to lend his services to Willmar of sufficient substantiality to make necessary the Co. as a real estate agent. Under this arrange- application of the prohibitions of Section 4 in ment, Willmar Co. allows this former employee order to carry out the purposes of the Act. to draw a monthly sum which the Company de- As stated, the Board finds no relationship bescribes as a form of pension intended to supple- tween the real estate activities of Willmar Co. and ment his Social Security benefits. Applicant states that Company's insurance activities or the bankthat the sum thus paid is not in any manner de- ing operations of the Applicant's subsidiary banks. pendent upon the amount of commissions earned Further, despite Applicant's assertion of the de from the sale of real estate, all such commissions minimis character of the income produced by the being paid to Willmar Co. The commissions real estate business and despite Applicant's asearned have consistently exceeded the amount sertion of eventual discontinuance of this busipaid by the Company to the former employee, ness, it appears quite clear that at any time prior although Applicant asserts that such excesses of to cessation of the real estate activities, a major commissions over payments are in fact overstated portion of Willmar Co's income could represent when various business and administrative expenses income from the sale of real estate. To the exare taken into consideration. tent that this potentiality exists, there also exists On the basis of these facts and others set forth the potentiality of evil found by Congress to be in the Hearing Examiner's Report, Applicant inherent in combinations of banking and nonasserts that the real estate agency operations must banking business, thus requiring divestiture. In be regarded as an "insurance activity" since it is the Board's judgment, Applicant has failed to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 901 establish any proper justification for the con- As in the case of each of Applicant's nonbanktinuance of Willmar Co.'s real estate activities. ing subsidiaries heretofore discussed, a substan- Conclusion. For the reasons given, it is the tial degree of organizational, physical, and opjudgment of the Board that, with the exception erational integration has been established beof the real estate sales and brokerage activities tween Drovers Agency and Drovers Bank. Two of Willmar Company, all of its activities are of distinguishing characteristics, of minor signifisuch a nature as to qualify for exemption under cance, relating to the ownership and operation of Section 4(c)(6) or as not to preclude such ex- Drovers Agency, are the facts that all shares of the emption; but that, for the reasons heretofore Agency's capital stock are held by trustees for the stated, the real estate sales and brokerage activi- benefit of the stockholders of Drovers Bank and ties of Willmar Company do not satisfy the that the Agency has its own paid employees. exemption requirements of Section 4(c)(6) and Insurance activities. During the period from that, if continued, they would make necessary December 1, 1955, through July 31, 1957, the application of the prohibitions of Section 4 Drovers Agency derived 14 per cent of its total to the Company as a whole in order to carry income from premiums on insurance written on out the purposes of the Act. For this reason, collateral held by Drovers Bank incident to loans exemption of Willmar Company, as requested, made by it. In addition to this "directly rewill be conditioned upon its disengagement, lated" business, approximately 37 per cent of the within a reasonable time, of all real estate sales Agency's total premium receipts during the same and brokerage activities and cessation of such period represented insurance written for borrowactivities so long as Applicant is subject to the ers from Drovers Bank, not covering property provisions of the Bank Holding Company Act securing loans made by that Bank; approximately or holds more than 5 per cent of the voting shares 31 per cent of its total premiums represented inof Willmar Investment Company. surance written for customers of Drovers Bank other than the borrowers; and approximately 17 As indicated in the Board's Order, its apper cent of this total represented insurance writproval of this request is based solely on the facts ten for noncustomers of that Bank. disclosed by the record; and if those facts should While the percentage of Drovers Agency's substantially change in the future in such manner business related to bank transactions is someas to make the reasons for the Board's concluwhat less than the comparable percentages with sion no longer applicable, the statutory exemprespect to other bank-related agency subsidiaries tion resulting from the Board's present determiof Applicant, hereinbefore discussed, the former nation would, of course, cease to obtain. percentage cannot be said to be insignificant. IV. Drovers Exchange Agency Further, and most significant, the 14 per cent and Realty, Inc. of the Agency's premiums representing "directly related" insurance activities, simultaneously rep- Factual summary. Drovers Exchange Agency resented, according to the Hearing Examiner's and Realty, Inc. ("Drovers Agency") is a Minnesota corporation, the offices of which are lo- finding, about 25 per cent of all insurance covcated in a section reserved for it in the lobby of ering automobiles on which the Bank held a Drovers Exchange State Bank ("Drovers Bank"), chattel mortgage, and about 10 per cent of all a subsidiary of Applicant, located in South St. fire insurance written on other collateral held by Paul, Minnesota. That city has a population of the Bank. approximately 20,000. Within the city there is The sum of the facts thus found—physical, one other bank on the premises of which there personnel, and organizational connections beis also operated a bank-related agency. tween the two organizations, the large percent- The record reflects that Drovers Agency is age of customers common to both Bank and engaged in the writing and selling of various Agency, and the portion of the Agency's total types of insurance and indemnity bonds, and income that represents insurance "directly rethat it also engages in certain real estate activi- lated" to the business of the bank, as well as the ties as hereafter described. proportion of the insurance required by the Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

902 FEDERAL RESERVE BULLETIN • AUGUST 1959 that is written by the Agency—warrants the Other activities. Testimony and financial data Board's adoption of the Hearing Examiner's find- of record reveal that Drovers Agency's real esing that the insurance activities of Drovers tate and property dealings have been restricted Agency are "closely related" to the business of to the acquisition of various properties from Drovers Bank to a degree sufficient to justify Drovers Bank or from customers of that Bank exemption. The validity of this view is sup- for the sole purpose of aiding Drovers Bank in ported by the finding in the Hearing Examiner's liquidating those assets, their nature being such Report that of approximately 26 banks located that the Bank itself could not retain them. The in the general area of St. Paul, South St. Paul circumstances surrounding the Agency's dealings and White Bear, Minnesota, 20 or more such in real estate and other property, together with a banks have insurance agencies located on their description of the property involved, are set forth premises, thus reflecting the prevalence of area in the Hearing Examiner's Report. Suffice it to practice in this regard previously found to exist. say that these details substantiate the finding The fact that the Board has found Drovers that such dealings have been for the sole purpose Agency's activities closely related to the business of liquidation of those assets. In this light, what of its affiliated bank is not alone sufficient basis has been said previously relative to the noninupon which to grant the Applicant's request for surance activities of Willmar Investment Comexemption as to that Agency. As in the Board's pany is equally applicable here. In brief, the consideration of the activities of each of the Ap- Board concludes that Sections 4(c)(l) and 4(c) plicant's agencies here involved, it must be fur- (6) of the Act are to be read as mutually comther established that the activities of the parplementary. Thus, a company otherwise qualiticular agency are "so closely related" as to be a fied for exemption consideration under Section "proper incident" to the business of banking as 4(c)(6) is not disqualified therefrom because it conducted by its affiliated bank and as to make is also engaged in an added activity which, had it unnecessary for the prohibitions of Section 4 it stood alone, would have entitled that comto apply. This requirement is here satisfied as pany to exemption under Section 4(c)(l). to the insurance business by the absence in this record of evidence indicating that the bank- The approval hereinafter given by the Board agency relationship has been established for any to Applicant's retention of its interest in Drovers other primary purpose than to immunize the Agency, will be given subject to the requirement bank from responsibility for agency conduct and that there be no substantial variance in the nato provide a broader scope of service to banking ture of the real estate transactions conducted by customers than could be provided by the bank that Agency from that found to exist at the time itself. Moreover, the propriety of the relation- of this hearing. ship is strongly supported by the fact that area V. New England Insurance Agency practice followed for many years sanctions such relationships between banks and insurance agen- Factual summary. New England Insurance cies. In this connection, the Minnesota Com- Agency ("New England Agency") is a North missioner of Banking testified that his department Dakota corporation organized in 1955, and lopreferred to have an insurance agency depart- cated on the premises of the Citizens State Bank ment separately incorporated so as to immunize of New England, New England, North Dakota its related bank from any liability resulting from ("Citizens State Bank"), a subsidiary of Applithe Agency's operations. cant. The town of New England has a popula- For the above reasons, the Board finds that tion of approximately 1,200 and has no other the insurance activities of Drovers Agency are so banks. However, in southwestern North Dakota, closely related to the business of banking, as the area in which Citizens State Bank and New conducted by Drovers Bank, as to be a proper England Agency are located, there are approxiincident thereto and as to make it unnecessary mately 12 other banks, each of which, accordfor the prohibitions of this section to apply in ing to the testimony of record, has a related order to effectuate the purposes of this Act. insurance agency operating on the bank premises. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

903 LAW DEPARTMENT Applicant owns a majority of the capital stock cent of the total premiums represented insurance of New England Agency and Citizens State Bank. covering property not securing bank loans but Both corporations have the same principal offi- placed by persons who were borrowers from the cers. In these respects, as well as other physical Bank at one time or another. Normally, the and operational arrangements, a similar degree former figure would be an indication that but of integration exists between the banking and a minor fraction of the Agency's insurance writnonbanking organizations here involved as was ings were directly related to the business of bankfound to exist between Applicant's other bank- ing as conducted by its related bank. ing and nonbanking subsidiaries hereinbefore However, not included as insurance written on discussed. The extent of this integration is re- bank collateral during the above-mentioned 19flected by the facts contained in the attached month period, was that insurance written by the Hearing Examiner's Report. Agency insuring crops against hail damage. Preliminary requirement as to nature of ac- These writings represented premium receipts tivities. New England Agency is engaged pri- totaling $102,910. Under North Dakota law a marily in the sale of insurance—fire, automo- bank may not take a mortgage on growing crops. However, as stated in the Report of the Hearbile, life, crop-hail, casualty and hospitalization— ing Examiner, the record shows that, in deterand indemnity bonds. According to the testimining the creditworthiness of a farmer loan apmony, it also deals in the purchase of discounted plicant, the bank considers, among other factors, conditional sales contracts and notes, and, on whether or not the applicant's crop is protected occasion, has made direct loans to individual borby insurance against hail damage. North Darowers. It has also engaged, to some extent, in kota law allows hail insurance policies to carry the purchase and sale of real estate. The Heara loss-payable clause running to the bank in an ing Examiner found that the insurance activities amount equal to the premium charges for the of New England Agency and its activities in buyhail insurance. Thus, in reality, hail insurance ing conditional sales contracts and making loans is properly considered as insurance directly reare of a nature contemplated by the provisions of lated to bank loans. So considered, the per- Section 4(c)(6) of the Act, thus satisfying the centage of New England Agency's total prepreliminary requirement for exemption under that miums attributable to insurance written on colsection; but that the Agency's real estate translateral held by its related bank would be inactions are not of such a qualifying nature. creased to a point where a great majority of its For the reasons hereinafter set forth, the total insurance writings are directly related to Board agrees with this finding and accordingly loans made by its connected bank. so holds. On the basis of the foregoing conclusion as Relationship of insurance activities to bank to the high percentage of New England Agency's business. As in the cases of Applicant's other total premiums that, for all practical purposes, subsidiaries involved in these requests, the fact represent insurance written on property securing of a close relationship between the nonbanking loans made by Citizens State Bank, in view of organization and its related bank is suggested by the extent to which the activities of the related the organizational, physical and personnel inteorganizations are integrated, and considering the gration found to exist. area-wide practice found by the Hearing Exam- The existence of a close relationship is further iner to exist as to other banks in having insurconfirmed by analysis of the insurance writings ance agencies located in the bank premises, and, of New England Agency for the 19-month period apparently, operated as departments of the banks, from January 1, 1956 through July 31, 1957. the Board finds that the insurance business, as During this period, the Agency received $145,500 conducted by New England Agency, is so closely in premiums on insurance written by it. In the related to the business of banking as conducted same 19-month period, approximately 7 per cent by Citizens State Bank as to be a proper inciof these premiums received represented insur- dent thereto, and as to make it unnecessary for ance written on property securing loans made by the prohibitions of this section to apply in order Citizens State Bank; and approximately 85 per to carry out the purposes of this Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

904 FEDERAL RESERVE BULLETIN • AUGUST 1959 Other activities. Apart from its insurance ac- stated he was obliged to disqualify the Comtivities, the Hearing Examiner found that New pany's total activities from exemption consid- England Agency has engaged in the purchase of eration under Section 4(c)(6) unless, prior to conditional sales contracts and other third-party the expiration of the time for filing exceptions to paper and, on occasions, has made direct loans his Report, the Applicant, with the written conto individual borrowers. In addition, according sent of the Agency, should advise the Board that to the testimony of its President, New England "as a condition to exemption, it will not engage Agency regards itself as engaged in the business in the business of buying and selling real esof buying and selling real estate. As to the ac- tate." tivities other than the real estate transactions, the On December 2, 1958, Applicant submitted to Hearing Examiner concluded that they were the Board a written agreement providing that, in "clearly of a financial nature." The Board agrees the event the Board shall grant Applicant's reand for this reason finds that they meet the pre- quest for exemption of New England Insurance liminary exemption requirements of Section Agency from the prohibitions of Section 4 of 4(c)(6). the Act, New England Agency will cease to en- The Hearing Examiner found further that gage in the business of buying and selling real these "financial" transactions were related di- estate and Applicant will so vote its shares in rectly or indirectly to the business conducted by New England Agency as to prohibit that Agency its affiliated bank. This finding was premised from engaging in that business, so long as Apon the fact that the purchase of the conditional plicant is subject to the provisions of the Act sales contracts and other paper was, for the most or is a stockholder in New England Insurance part, to accommodate the interests of Citizens Agency. State Bank, in that, the Bank was either pre- Conclusion. In view of the statement subcluded from directly purchasing the contracts or mitted by Applicant with reference to the dispaper, or, for policy reasons, chose not to do so. continuance by New England Agency of its real The Board concurs in the finding of the Hear- estate business, and with the understanding that ing Examiner as to the nature of the activities such business will be discontinued within a reaabove described and in the further finding that, on sonable period of time, it is the judgment of the basis of the testimony given concerning the the Board that the other activities of New Engcircumstances surrounding these activities, they land Agency are all of an insurance or financial are sufficiently closely related to the business of nature and are so closely related to the business the Agency's related Bank as to be a proper in- of banking as conducted by Citizens State Bank cident thereto. This finding is necessarily pre- as to be a proper incident thereto and as to make mised on the nature and scope of the purchasing it unnecessary for the prohibitions of Section 4 and lending activities as of this date. Any sub- to apply in order to carry out the purposes of stantial increase or change therefrom rendering the Act, and that, therefore, Applicant's request the reasons for the Board's conclusion no longer for exemption of New England Agency should applicable would result in the inapplicability of be approved. the exemption granted. As indicated in the Board's Order, its ap- As to the real estate dealings of New England proval of this request is based solely on the facts Agency, the Hearing Examiner found that this disclosed by the record; and if those facts should activity "plainly does not meet the 'financial, fidu- substantially change in the future in such manciary or insurance' preliminary requirement of ner as to make the reasons for the Board's con- Section 4(c)(6), nor is it such as to be other- clusion no longer applicable, the statutory exwise allowable under the statute." On review emption resulting from the Board's present deof the facts relating to the real estate operation termination would, of course, cease to obtain. of New England Agency as set forth in the Hearing Examiner's Report, the Board agrees that such REPORT AND RECOMMENDED DECISION operation fails in all respects to meet the re- STATEMENT OF THE CASE quirements for exemption. On June 17, 1957, Otto Bremer Company, herein the Applicant, filed with the Board of Governors of In view of this finding, the Hearing Examiner the Federal Reserve System, herein the Board, appli- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 905 cations requesting the Board to determine, pursuant Section 501(c)(3) of the Internal Revenue Code of to Section 4(c)(6) of the Bank Holding Company 1954.3 Act of 1956, 70 Stat. 133, herein the Act, that the 2. At present, the Applicant owns a stock interest shares held by the Applicant in certain nonbanking in 39 banks, located mainly in Minnesota and North companies listed below are exempt from the pro- Dakota. It has a majority interest in 21 of such banks hibitions of Section 4(a)(2) of the Act.1 The appli- and a minority interest in 18. It owns 25 per cent cations now pending before the Board, with hearing or more of the total voting stock of each of 30 of docket number of each, cover the following sub- such banks. Of the 39 banks in which the Applicant sidiary corporations: owns a stock interest, 26 banks operate unincorporated insurance departments in connection with their Citizens Agency, Inc. (BHC-29) banking operations. Western State Agency, Inc. (BHC-31) New England Insurance Agency (BHC-32) 3. In addition to its bank stockholdings, the Appli- Drovers Exchange Agency & Realty, cant owns voting shares in 7 nonbanking com- Inc. (BHC-33) panies. Included are the 5 nonbanking companies Willmar Investment Company (BHC-35) for which divestiture exemption is sought in this consolidated proceeding.* The activities of each of On July 12, 1957, the Board ordered a consolidated the 5 companies and their relationship to the busihearing on the aforesaid applications. Pursuant to ness of banking or of managing and controlling the aforesaid order and a notice of hearing pubbanks, as conducted by the Applicant and its banklished in the Federal Register on July 18, 1957 ing subsidiaries, will be described below. [22 Federal Register 5726], a hearing was held at Minneapolis, Minnesota, on August 20 and 21, 1957, II. The Activities of the Nonbanking Suband on October 8 and 9, 1957, before the under- sidiaries Here Involved and Their Relasigned duly designated hearing examiner. The Appli- tionship to Affiliated Bank Activities cant and the Board—the latter in a nonadversary A. WESTERN STATE AGENCY, INC. capacity—were represented at the hearing by counsel, and were afforded full opportunity to be 1. Western State Agency, Inc., is a Minnesota heard, to examine and cross-examine witnesses, to corporation organized in April 1956. The exemption application states that it is engaged in introduce evidence bearing on the issues, and to file briefs and proposed findings. On October 15, 1958, "conducting a business soliciting and selling the Applicant submitted proposed findings of fact insurance in Marshall and vicinity as an agent and conclusions of law, along with a brief in support for various companies licensed to do business thereof.2 in the State of Minnesota." Upon the entire record in the case and from my The Agency's capital and surplus as of July 31, 1957 observation of the witnesses, I make the following: amounted to $7,869. 2. The Agency is located on the premises of Western State Bank of Marshall, Minnesota, a city FINDINGS OF FACT of approximately 7,000 population.5 There is one I. Introduction other bank in the city. It is affiliated with Northwest Bancorporation. That bank also has a bank-connected 1. The Applicant, Otto Bremer Company, a Min- insurance agency. There are approximately 15 addinesota corporation with its principal office at St. Paul, tional banks in the general area of Marshall, Minnesota, is a bank holding company within the Minnesota. All operate insurance departments or meaning of Section 2(a) of the Act, and has duly have bank-connected insurance agencies. registered as such with the Board. All of the Appli- 3. The Applicant owns or controls 96 per cent of cant's shares of stock are owned by Otto Bremer the outstanding stock of Western State Bank and a Foundation, a charitable foundation exempt from like percentage of the outstanding stock of the income tax exemption pursuant to the provisions of Agency. The minority stockholders of the Bank and of the Agency are also identical. The stock of both 1 The particular sections of the Act here applicable are: the Bank and the Agency is tied together by a share- Sec. 4. (a) Except as otherwise provided in this Act, no holders' agreement conditioning the transfer of stock bank holding company shall— of either upon a simultaneous like transfer of a pro * * * • * . ( . 2) . r a e ft t e a r in tw d o ir e y c e t ar o s r fr i o n m di re th c e t d o a w te n er o s f h i e p n a o c r tm c e o n n t tr o o f l th o i f s a A n c y t 3 Under Section 2(b)(2) of the Act, the Foundation as a voting shares of any company which is not a bank or a bank charitable organization is exempt from the application of the holding company. . . . Act. The Applicant, in a request earlier made to the Board * * * ** for an advisory opinion, contended that it, too, ought to be considered exempt under that section, since it is a "feeder" (c) The prohibitions in this section shall not apply— corporation which has been declared by the Treasury Depart- * * * ** ment to be exempt from income taxation pursuant to the (6) to shares of any company all the activities of which provisions of Section 501(c)(2) of the Internal Revenue Code are of a financial, fiduciary, or insurance nature and which of 1954. The Board in its advisory opinion rejected the Apthe Board after due notice and hearing, and on the basis of plicant's contention, expressing the view that Section 2(b)(2) the record made at such hearing, by order has determined of the Act, as it reads, does not reach "feeder" corporations. to be so closely related to the business of banking or of man- 4 The remaining two are the Saulpaugh Corporation and aging or controlling banks as to be a proper incident thereto Williston Realty Company, each of which, according to the and as to make it unnecessary for the prohibitions of this Applicant, is engaged in holding and operating properties section to apply in order to carry out the purposes of this occupied wholly or partly by a banking subsidiary of the Ap- Act; .... plicant. Originally, Section 4(c)(6) exemption requests were 2 The proposed findings and conclusions are adopted to the also filed for Saulpaugh and Williston, but such requests were extent that their terms or substance are included in or are withdrawn prior to the hearing. consistent with the findings made below, and to the extent not 5 As of June 6, 1957, Western State Bank of Marshall had so adopted are rejected. total capital accounts of $305,973. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

906 FEDERAL RESERVE BULLETIN • AUGUST 1959 rata amount of the stock of the other. Both the Bank Amount of Percentage and the Agency have commen directors and officers. Classification premiums of total 4. The Agency has no separate employees of its On insurance written on collateral held by Western State Bank $32,092.90 32.53 own. It conducts its activities through Bank em- On insurance written for borrowers ployees. Usually, the loan officers of the Bank handle from Western State Bank on propthe insurance transactions although occasionally a erty not securing Bank loans.8 48,881.87 49.56 On insurance written for nonborrowing teller may do so as well.8 All policies placed through customers of Western State Bank the Agency are countersigned by Arthur Persons, the (i.e., depositors and safe-deposit box individual licensed by the State to act as agent.7 On r e i n n t s e u rs r ) ance written for persons who 15,428.68 15.64 Persons is president of both the Bank and the Agency. are not customers of Western State The Bank normally pays the full salaries of those Bank 2,237.72 2.27 who, among their other duties, handle insurance Total $98,641.17 100.00 agency transactions, and the Agency pays the Bank an agreed-upon flat annual amount—last fixed at $4,000 8. Aside from its insurance agency activities, the Agency on infrequent occasions has made loans to —to compensate it for the services of its employees accommodate Bank customers who, either because of and for other administrative expenses. Persons, howloan limit restrictions or for other reasons, were conever, is allowed to retain part of the commissions sidered not qualified for Bank loans. At the time of produced by the Agency's business in order to supthe hearing, only a few loans of small amount were plement his earnings as Bank president. outstanding. The Agency's interest income on such 5. Prior to the Agency's incorporation in 1956, the loans during the period from January 1, 1957 to July Bank itself conducted an insurance agency business 31, 1957, amounted to $164. through Persons as the licensed agent. The business was conducted then in substantially the same B. CITIZENS AGENCY, INC. manner as it is now. The only material difference 1. Citizens Agency, Inc. is a Minnesota corporation was that the net profits then were turned over to the organized in 1955. The exemption application states, Bank, instead of being retained by the Agency for and the record shows, that it is engaged solely in conultimate distribution to its shareholders, who are the ducting an agency for the placement of various types same as the Bank's shareholders. The Agency was of insurance and bonds. The Agency, as of July 31, incorporated for the purpose of immunizing the 1957, had capital and surplus of $11,846. Bank from liability that might flow from errors or 2. The Agency is located in the premises of Citizens omissions in the conduct of the Agency's business. State Bank of Brainerd, in Brainerd, Minnesota, a city 6. During the period from January 1, 1957, through of approximately 14,000 population.* There is one July 31, 1957, the Agency derived its gross income other bank in Brainerd, a national bank. That bank from the following sources: does not have a bank-connected insurance agency at the present time. Except for that one bank, all other Amount of Percentage banks in towns neighboring Brainerd operate insur- Source of income income of income ance agency departments in one form or another. Premiums on sale of hail insurance $29,171.58 42 3. The Applicant owns 65.3 per cent of the capital Premiums on sale of automobile, fire, stock of the Bank and a like percentage of the capital and casualty insurance 35,651.23 51 stock of the Agency. The stock of both corporations Premiums on sale of credit life insurance 4,801.84 7 is tied together by an agreement prohibiting transfer Interest income 164.01 0 of the shares of one without an accompanying transfer Other income 6.50 0 of a proportionate amount of the shares of the other. Total $69,795.16 100 The Bank and the Agency have common officers and directors. 7. The Agency does not confine its activities to the 4. Prior to the Agency's incorporation, an insurplacement of insurance required in connection with ance agency business was conducted in the Bank's bank loans, but holds itself out to the public as en- premises through two bank employees licensed as gaged in the general insurance agency business. How- agents who now serve the Agency in a like capacity. ever, most of its placements are handled for those At that time the profits of the Agency business inured directly to the Bank. The only difference since inwho do business with the Bank, either as borrowers corporation is that the Agency now retains its profits or depositors. The following analysis submitted by for ultimate distribution to its shareholders, who are the Applicant, covering the period from May 22, 1956, the same as the Bank's shareholders. The insurance through July 31, 1957, reflects the extent to which agency was incorporated for the purpose of limiting the Agency's business is directly related to loan activiliability. ties of its related banks or is written for those who 5. The Agency has no separate employees of its have other business contacts with the Bank: own, conducting all of its activities through employees of its affiliate. The Agency pays part of the salaries 6 If a customer applying for a secured loan does not have of the two bank employees who are licensed agents. insurance to support the collateral, the loan-officer will suggest It also pays the Bank $600 a year as compensation that the borrower obtain it from the Agency. But the Bank never makes it a condition to the granting of a loan that a for postage and clerical services provided. Advertisborrower purchase insurance through the Agency. Such coer- ing by the Agency is done jointly with the Bank. cion is specifically prohibited by Minnesota law. (See Section 72.34 Minnesota Statutes Annotated) 7 Minnesota grants insurance agents' licenses only to indi- 8 This category includes those who were Bank borrowers at viduals. But it is a common practice for agents to work through some time or other during the period covered, but not necesagencies, including incorporated agencies. This is an accepted sarily at the time the insurance was placed. method of doing business, recognized and approved by the 9 As of June 6, 1957, Citizens State Bank of Brainerd had State insurance authorities. total capital accounts of $542,710. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 907 6. The Agency does not confine itself to the place- caused the Company to be organized primarily for the ment of any particular kinds of insurance, but holds purpose of purchasing from the trustees the remaining itself out to the public as engaged in a general insur- unliquidated assets so that immediate payment might ance agency business. The following table shows the be made of the balance due trust certificate holders. sources and distribution of the Agency's gross premium To finance the purchase, Bank stockholders subscribed income during the period from January 1, 1957 for $15,000 of the Company's capital, paying in that through July 31, 1957: amount, and the Bank then made a loan to the Company of an additional $25,000. To provide the Com- Source Amount Percentage pany with a source of operating income, the Bank Premiums on sale of fire insurance $12,466.50 2SYz simultaneously transferred to the Company an unin- Premiums on sale of automobile in- corporated general insurance agency and real estate surance 14,922.15 -34V2 Premiums on sale of bonds 4,104.71 9 business theretofore owned by the Bank and operated Premiums on sale of credit life in- by it under a trade name similar to the name the surance 2,903.33 61/2 Company now bears. In consideration of the transfer, Premiums on sale of turkey insurance 6,294.00 141/2 the Company delivered to the Bank its non-negotiable Premiums on sale of marine and other insurance 3,003.52 7 promissory note for $5,000. (c) At the same time, the Company, its subscribing Total $43,694.21 100 stockholders and the Bank entered into an agreement Of the foregoing items, only the credit life and the spelling out the arrangements made for the repayment turkey insurance were entirely related to the affiliated of the Bank loan and for the eventual repayment to bank's lending activities. the subscribing stockholders of the amounts they had 7. The extent to which the Agency's over-all writ- paid in for the Company's stock. The agreement proings are related to its affiliated bank's lending activi- vides that all funds realized from the liquidation of ties, or are otherwise derived from the customers of the segregated assets and from the operating net inthat bank, is reflected by the following table covering come of the acquired business is to be applied first to the period from January 3, 1956 through July 31, the repayment of the Bank loan, and then toward re- 1957: payment to the subscribing stockholders of the amounts paid in for the Company's capital stock. Amount of Percentage Following repayment to the subscribing stockholders, Classification premiums of total the Company's capital stock is to be transferred to the On insurance written on collateral held Bank or its nominee. At the same time the $5,000 by Citizens State Bank of Brainerd $44,224.05 39.65 note given the Bank for the acquisition of the agency On insurance written for Bank borrowers, not covering property securing business is to be cancelled. loans . 36,645.42 32.85 (d) The Company's $25,000 debt to the Bank has On insurance written for nonborrowing customers of Bank (i.e., depositors already been paid, but the subscribing stockholders and safe-deposit renters) 17,343.65 15.55 have not yet been reimbursed for the amounts they On insurance written for persons who paid in. The capital stock of the Company, including are not customers of Bank 7,511.35 6.73 On insurance written directly for Bank 5,817.72 5.22 the shares owned by the Company, thus remains subject to the restrictions and other conditions of the Total $111,542.19 100.00 agreement adverted to above. 3. The Company now owns 12 tracts of real prop- C. WILLMAR INVESTMENT COMPANY erty, some of which produce rental income. Of those, 1. Willmar Investment Company, a Minnesota cor- 9 tracts represent the residue of the segregated assets poration incorporated in 1948, has its place of busi- acquired from the liquidating trustees. It is the Comness at Willmar, Minnesota, a city with a population pany's intention to dispose of them under the liquidaof about 12,000. Until March 1957, when it was tion arrangements as soon as buyers are found who forced to move for lack of space, the Company occu- will purchase them on favorable terms. The remainpied an office at the Bank of Willmar. It now occu- ing three parcels of real estate were acquired by the pies rented offices located on the same street as the Company after 1948. They were purchased for future Bank, about 200 feet distant from it. The Applicant use in connection with regular business operations of owns 1,491 of the 2,000 outstanding shares of capital the Company or its affiliated bank.10 stock of the Bank, and 117 of the 150 outstanding 4. Apart from its ownership and management of the shares of stock of the Company. The same individuals aforesaid properties, the Company's only business acare the principal officers of both the Bank and the tivities—as described in the Applicant's exemption re- Company. The Bank, as of June 6, 1957, had total quest—are as follows: capital accounts of $485,719. The Company's capital and surplus, as of June 30, 1957, came to $44,756. 2. The background of the Company is as follows: 10 Two parcels, both located in the block in which the Bank (a) In 1933 the Bank suffered financial difficulties is situated, but not contiguous to the Bank premises, were purchased for the accommodation of the Bank. It is planned and was reorganized under the supervision of State to put one of such parcels to future use as a parking lot for and Federal banking authorities. As part of the reor- Bank customers. The other was purchased with a view toganization, the Bank segregated and transferred to ward trading it for a parcel of land lying next to the Bank premises that the Bank requires for expansion purposes. Such trustees certain of its assets. The trustees were to a trade was pending at the time of the hearing. It was liquidate the assets for the benefit of depositor-credi- explained that the purchase of the two parcels mentioned above tors who were given certificates to evidence their inter- was made by the Company rather than by the Bank because the State banking authorities might have objected to the Bank est in the trust property. By 1948, about 90 per cent itself purchasing land that was not contiguous to its own premof the outstanding amount of the trust certificates had ises. The third parcel purchased by the Company consists been paid. The trustees, however, still held unliqui- of an improved lot across the street from the Bank. This was dated assets. purchased with a view to providing a future home for the Company in the event the Company is required to relinquish (b) In 1948, the Bank's principal stockholders its present rented quarters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

908 FEDERAL RESERVE BULLETIN • AUGUST 1959 "Writing various kinds of insurance—fire, general there is no assurance that this will continue to be so. coverage, casualty, sickness, accident and life in- At present, Peterson alone handles the Company's real surance—also handles the sale of real estate on estate agency activities. Upon Peterson's death or full which commissions are paid on sales of prop- retirement, the Company intends to discontinue enerty." tirely the real estate agency branch of its business. 5. The Company's insurance agency operations con- D. DROVERS EXCHANGE AGENCY AND REALTY, INC. stitute by far the greatest part of its income producing 1. Drovers Exchange and Realty, Inc., is located activities. Although the Company is housed in a sepa- in the premises of Drovers Exchange State Bank in rate building, almost all of its insurance placements South St. Paul, Minnesota, a city of approximately are made for persons who are also Bank customers. 20,000 population.13 The Company was organized However, only a minor percentage of the insurance in 1950, obtaining its initial capital from an extra written covers property securing bank loans. The dividend paid to the stockholders of the Bank. All following analysis, covering the period from January shares of the Company's capital stock are held in the 1, 1956 through August 31, 1957 shows the distribu- names of three trustees who are also officers of the tion of the Company's premium volume along the lines Bank. Under the terms of the Trust Agreement, the just indicated: trustees are required to distribute all Company dividends to Bank shareholders, pro rata according to Percentage their ownership of stock in the Bank. The Applicant Source of premiums Amount of total owns 66 per cent of the outstanding capital stock of the On insurance written on collateral held byBankofWillmar $51,499.01 38.53 Bank, and has a like beneficial ownership interest in On insurance written for persons who the capital stock of the Company. The Bank and the at some time or other are borrowers Company have common officers and directors. of Bank 39,208.30 29.34 On insurance written for nonborrowing 2. The Company's activities are described in the customers of Bank 41,304.96 30.91 Applicant's exemption request as follows: On insurance written for persons who are not customers of Bank 1,633.45 1.22 "Writing and selling of various types of in- Total $133,645.72 100.00 surance policies, also indemnity bonds. The Corporation also deals in real estate and 6. The Company's real estate agency operation is a property." side line that the Company eventually expects to discontinue. The Company since its beginning has held 3. The Company's primary business is that of an itself out to the public as an agency engaged in listing insurance agency. Substantially all its income is real property for sale and in handling the sale of such derived from that source.13 The Company has a property on a commission basis. In terms of dollar separate section reserved for its operations in the volume, however, the Company's income from this lobby of the Bank. There it is engaged in the sale branch of its business has represented a very small of all forms of insurance, including, inter alia, fire and fraction of its total gross income.11 At the hearing, extended coverage insurance, automobile insurance, Norman Tallakson, the President of both the Com- casualty insurance, life insurance and indemnity pany and the Bank, testified that the Company now bonds. Business is solicited from the public at large regards the real estate agency branch of its business through advertisements that identify the operations as a temporary and special purpose operation. The of the Company with the operations of the Bank. Company—as appears from Tallakson's testimony—is The Agency has is own paid employees. It pays now continuing its real estate agency operations as an the Bank a monthly rent for use of Bank space and accommodation for an old-time employee, J. Albert reimburses the Bank for other expenses incurred in Peterson, now 66 years of age. Until March 1957, its behalf. Peterson managed the Company's insurance agency 4. Prior to the Company's incorporation the Bank and real estate agency operations. In March 1957, itself operated an insurance agency business in much Peterson retired as manager of the insurance agency the same manner as the one now operated by the branch of the Company's business, and was supplanted Company. The only other bank in South St. Paul, a by another manager. At that time Peterson began subsidiary of Northwest Bancorporation, also operto draw old age social security benefits. In order to ates a bank-related agency on its banking premises. help finance Peterson's retirement, the Company made In the general area of St. Paul, South St. Paul and arrangements with Peterson under which he is to White Bear, Minnesota, there are approximately 26 draw $200 a month from the Company as a sort of banks. Some 20 or more of them, according to testipension to supplement his social security benefits. In mony in this record, have insurance agencies located return, Peterson has agreed to lend his services to the on their bank premises. Company as a real estate agent. Under the arrange- 5. The extent to which insurance written through ments made, Peterson's drawings are not made dethe Company is related to bank loans or is otherwise pendent upon the commissions he earns, but are to placed for common customers of the Company and remain constant whether they exceed or fall below the Bank is reflected by the following analysis coverthe commissions he brings in. All commissions earned ing the period from December 1, 1955 through July by Peterson go into the Company's general account. 31, 1957: Since the special arrangement went into effect—at least up until the time of the hearing—Peterson's commission's have actually exceeded his drawings, but 12 As of June 6, 1957, the Bank had total capital accounts of $730,032, and as of July 31, 1957 the Company had capital and surplus of $30,081. 11 In 1949 its commissions from this source amounted to 13 For example, during the year ended November 30, 1956, $3,075; in 1950—$2,446; in 1951—$1,175; in 1952—$1,125; in the Company had a gross income of $43,285, all but $900 of 1953—$1,075; in 1954—$1,905; in 1955—$1,965; in 1956— which was realized from insurance commissions. The $900 $1,406; and in 1957 (first 9 months)—$3,235. represented rental income. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 909 Amount of Percentage minority stockholders of the Bank and of the Agency Classification premiums of total are also identical. To assure inseparable ownership, On insurance written on collateral held by Drovers Exchange State Bank $ 30,453.69 14.01 the shareholders of both the Agency and the Bank On insurance written for Bank bor- have bound themselves by agreement not to dispose rowers on property not securing bank of their stock in one corporation without at the same loans 81,180.24 37.34 On insurance written for nonborrowing time disposing of their stock in the other. Both corcustomers of Bank (i.e., depositors poratioins have the same principal officers. and safe deposit box renters) 68,072.97 31.31 4. Prior to the Agency's incorporation, the Bank On insurance written for persons who are not customers of Bank 37,695.64 17.34 operated an insurance department in the names of its president and cashier, the licensed agents now at- Total $217,402.54 100.00 tached to the Agency. The Agency's insurance oper- The record further reflects that the Company places ations then were conducted in precisely the same manabout 25 per cent of all insurance covering auto- ner that they are now, except that its profits inured mobiles on which the Bank holds a chattel mortgage, to the benefit of he Bank. The Agency was inand about 10 per cent of all fire insurance written on corporated for the purpose of limiting liability. In other collateral held by the Bank. southwestern North Dakota—the area in which the 6. The Company's dealings in real estate and Bank and the Agency are located—there are approxiother property are sporadic. To date, such dealings mately 12 banks. Each of them has a related inhave been confined to situations where the Com- surance agency operating on the bank premises to all pany has acquired property from the Bank or from appearances as a department of the bank, according Bank borrowers in order to aid the Bank in liqui- to testimony in this record. dating assets which the Bank could not itself retain. 5. The Agency solicits all types of insurance busi- Thus, the Company's last balance sheet in evidence ness, whether or not related to bank lending activities. —that of July 31, 1957—shows that the Company The following table, covering the 19-month period then held only three assets which were not directly from January 1, 1956, through July 31, 1957, rerelated to the conduct of its insurance agency busi- flects the range of the Agency's placements, the gross ness. One—designated as a contract receivable premiums received on each type of insurance sold, amounting to $243—represented a balance due on the and the commissions realized thereon: sale by the Company of real property which the Gross Gross Company had acquired from the Bank and which Type of insurance sold premium commission the Bank in turn had acquired as a result of a fore- Fire $ 23,775.52 $ 4,841.40 closed real estate loan. Another—consisting of five Auto 13 075 80 3,212.92 shares of stock valued at $500—represented property Inland marine. . 1,055.00 321.26 Public liability 1,028.77 158.54 which a borrower had originally pledged with the Bonds 1 981 06 369.71 Bank as collateral for a loan and had later trans- Specific disease 55.00 10.00 ferred to the Bank in settlement of his indebtedness. Travel 56.32 18.05 Polio 50.00 12.50 The stock was sold by the Bank to the Company be- Hospitalization 617.61 92.70 cause the Bank could not itself retain it as an un- Life 688 31 545.21 liquidated asset. The third and largest item—con- Health and accident 168.00 25.20 Plate glass 39.04 9.76 sisting of real estate valued at $3,347—represented Hail 102,910.27 12,512.23 property foreclosed by the Bank and then sold to the Company, also because the Bank was precluded Total $145,500.70 $18,721.70 from retaining that property as an asset. All of the 6. As the foregoing table discloses, the placement aforesaid items were acquired by the Company for of hail insurance constitutes the bulk of the Agency's the purposes of liquidation. business. The Bank frequently finances the Agency's 7. Between the years 1951 and 1956, approximately hail insurance customers by advancing them amounts $45,000 paid out by the Company in dividends went equal to the premium charges.14 The loans are made to the shareholders of the Bank. interest free to the customers until September 1, the beginning of the harvesting season. The interim in- E. NEW ENGLAND INSURANCE AGENCY terest is paid to the Bank by the Agency. The Agency 1. New England Insurance Agency is a North is in a position to do this because of the profits it Dakota, corporation organized in 1955. The exemp- earns on the insurance. There is an unwritten undertion application describes its activities as follows: standing between the Agency and the Bank, under which the Bank has recourse against the Agency "Promoting the sale of fire, auto, life, crop- upon any defaulted note given by a customer to fihail, casualty and hospitalization insurance; nance hail insurance. also sale of indemnity bonds. This agency 7. Though the Agency solicits insurance business has also dealt in the purchase of discounted from the public at large, it obtains the greatest part Conditional Sales Contracts and notes." of its business from persons who do business with its affiliated bank, either as borrowers or depositors or in 2. The Agency is located on the premises of the some other capacity. The following analysis sub- Citizens State Bank of New England, in New Engmitted by the Applicant, covering the 19-month land, North Dakota, a town of approximately 1,200 period from January 1, 1956, through July 31, 1957, population. There is no other bank in New England. As of June 6, 1957, the Bank had total capital ac- 14 The loans are unsecured. The hail insurance policies, counts of $232,084, and as of June 30, 1957, the however, carry loss payable clauses running to the bank for Agency had capital and surplus of $15,255. the amount of the premiums advanced. It is unlawful in North 3. The Applicant owns approximately 60 per cent Dakota for a bank to take a mortgage on growing crops. But North Dakota allows hail insurance policies to carry such loss of the capital stock of the Agency and a like per- payable clauses, provided they are limited in amount to precentage of the capital stock of its related bank. The miums advanced. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

910 FEDERAL RESERVE BULLETIN • AUGUST 1959 shows the allocation percentagewise of the Agency's its affiliated bank. As appears from O'Connell's furtotal premium volume as derived from the various ther testimony, the property purchased had previously sources therein classified: been mortgaged to the Bank, payments on the mort- Percentage of gage loan were in arrears, and the purchase price paid Premiums received total premiums by the Agency was applied in part by the seller to pay On insurance written on collateral held by Citizens off his indebtedness to the Bank. Concerning the State Bank of New England 6.90 Agency's future plans, O'Connell testified that the On insurance covering property not securing bank loans placed for persons who are borrowers from Company as part of its business intended to engage the Bank at one time or another but not neces- in further purchases and sales of real estate if and sarily at the time the insurance is placed 85.10 when suitable opportunities arose. But later he quali- On insurance written for nonborrowing Bank customers (i.e., depositors and others who avail fied his testimony by stating that the Agency would themselves of banking services) 5.00 refrain from that type of activity if it were advised On insurance placed for persons who otherwise by its attorney that it would otherwise be disqualified have no business relations with the Bank 3.00 for exemption under Section 4(c) (6) of the Act. Total 100.00 III. Area Practices and Other General Consid- It is to be noted that the foregoing table does not erations Bearing on the Relationship of Ininclude hail insurance as insurance written on bank surance to the Business of Banking as collateral. This is because, as observed above, it is Conducted by the Banks Here unlawful in North Dakota for a bank to take growing Involved crops as security for loans. However, the record shows that in determining the creditworthiness of a A. AREA PRACTICES farmer loan applicant seeking an advance to carry 1. Although banks organized under the laws of Minhim over to the harvesting season, the Bank con- nesota and North Dakota are not granted express corsiders among other factors whether or not the appli- porate power to sell insurance, it is a normal and accant's crop is protected by insurance against hail cepted practice for such State banks to offer insurance damage. If hail insurance were included in the table agency services in conjunction with their banking above as insurance directly related to bank loans, operations. That practice is almost universally folthe first percentage item of the table would be sub- lowed by such State banks located in the smaller stantially increased, and the second percentage item cities and towns. In the larger cities the proportion correspondingly reduced. thins out somewhat, and banks in the largest of them 8. As noted above, the Agency does not confine it- are more apt not to have related insurance agencies, self to insurance agency activities. It also at times though even in cities as large as St. Paul and Minnepurchases conditional sales contracts or other third- apolis there are some banks that do. More than 80 party paper and occasionally makes direct loans. It per cent of all State banks in Minnesota have bankconducts that extra line of business partially as a connected agencies. The proportion is about the means of accommodating the interests of the Bank same in North Dakota. in certain situations, and partially to provide an extra 2. Most usually the related insurance agencies are source of income for the Agency. During the two- operated on the banking premises, to all appearances year period preceding the hearing, the Agency engaged as departments of the bank, with officers or other in some 14 discount transactions of one kind or employees of the bank as the licensed agents. Beyond another. The Agency's balance sheet as of June 30, that, the specific arrangements vary. Thus, in some 1957, reflects that there was then due to the Agency instances banks allow the officer holding the agent's as a result of such transactions the sum of $4,392.15 license to conduct an agency business on the bank Included among the paper then held by the Agency premises entirely for his own benefit. In others, the were (a) a number of conditional sales contracts bank receives part or all of the insurance agency's purchased from automobile dealers; (b) two overdue earnings through rent and other charges made for the hail insurance notes purchased from the Bank pur- use of bank quarters, facilities, and services of bank suant to the recourse agreement referred to above; employees. In still others, arrangements are made to (c) a number of unsecured notes, one made by an em- have the net earnings of the insurance agency paid ployee of the Bank. As to at least some of the fore- directly to the bank's stockholders. This at times is going transactions, the evidence indicates that the ad- accomplished through the separate incorporation of vances were made by the Agency rather than by the the insurance agency business coupled with a stock Bank, because the Bank considered itself precluded tie-in agreement designed to assure continued common by legal or policy restrictions from itself making the ownership of ratable equity interests in both the bank advances. and the agency. The most common arrangement, how- 9. Maurice O'Connell, President of both the Agency ever, is to have the insurance agency business conand the Bank, testified that the Agency also regards it- ducted for the direct benefit of the bank, with payself as engaged in the business of buying and selling ment to the bank of all, or at least a substantial perreal estate. Since its incorporation in 1955, however, centage of, the agency's net profits. the Agency has had only one transaction of this kind 3. Insurance agency operations, even where con- —involving the purchase of a lot in 1957 and its ducted on banking premises and for the direct benefit resale two weeks later at a profit. O'Connell testified of a bank, are not subject to supervision and examiat first that the Agency engaged in that transaction nation by State banking authorities. But the prevalent as a speculative venture, but later stated that the practice of coupling banking and insurance agency purchase was also designed in part to accommodate operations is well known to the banking and insurance authorities of the States of Minnesota and North 15 The Agency's gross interest income for the 6-month period Dakota and has long been acquiesced in by them as a ending June 30, 1957, amounted to $75. During the same period proper practice. The Applicant called Irving C. Rasthe Agency had insurance premium receipts of approximately mussen, the Minnesota Commissioner of Banking, as a $14,500, of which approximately $10,500 was paid or payable to insurance companies. witness. Commissioner Rasmussen testified that it was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

911 LAW DEPARTMENT a "normal and customary part of the banking business volved is engaged in business primarily as an insurin this area to offer an insurance service", and that ance agency. One of the companies does not engage there was no State law or policy making it unlawful or in any other activity. Each of the others engages in improper for a State bank in Minnesota to operate one or more additional activities of kinds not classifian insurance agency department.10 Commissioner able as insurance in character. The initial question to Rasmussen's North Dakota counterpart was not called be decided is whether such companies, notwithstandto testify. Independent examination of the North ing their added activities, satisfy the preliminary statu- Dakota statutes, however, has disclosed no specific tory requirement for exemption consideration. That statutory provision or expressed policy prohibiting question will now be considered as to each company the operation of an insurance agency on banking separately. premises or for the benefit of its related bank. 1. Western State Agency, Inc.: The Company, in addition to its insurance activities, occasionally makes B. OTHER CONSIDERATIONS loans to customers of its affiliated bank who for one 1. The Applicant makes no claim that the affiliated reason or another are not considered qualified for diagencies herein involved are an indispensable adjunct rect bank loans. This added activity is clearly classito the operations of their related banks. The record fiable as "financial". shows that the various types of insurance sold through 2. Citizen's Agency, Inc.: All its activities are of an such agencies are all readily available through com- insurance nature. peting independent agents and agencies that are en- 3. Willmar Investment Company: The noninsurance gaged in business in the same localities. activities of this Company consist of (1) the liquida- 2. The Applicant does claim, however, that the tion of assets acquired from the Bank of Willmar, (2) agencies are of substantial benefit to their affiliated the acquisition and holding of properties for the future banks, and to the stockholders and customers of such use of the Bank and for its own future use, and (3) banks. Among the considerations to which it points the operation of a small real estate brokerage business. are the following: (a) The agency earnings provide (a) The liquidation of bank assets, even if not clasan additional income to the banks' stockholders, a sifiable as "financial", is a type of activity that Conform of income that has become recognized and acgress regarded as so "obviously incidental" to the busicepted in the area as incidental to the business of ness of banking as to require no hearing to establish banking, (b) The agencies facilitate and expedite that fact.17 Section 4(c)(l) automatically exempts the making of certain loans where insurance on colfrom the prohibitions of Section 4, inter alia, the lateral is required, thus providing a service not only shares of any subsidiary nonbanking company engaged to the banks, but to the banks' customers as well, solely in liquidating assets acquired from an affiliated (c) Through the facilities of their affiliated agencies holding company bank. I am satisfied that Congress the banks are in a better position to follow up insurintended in an appropriate situation to allow a couance on bank collateral to assure that proper loss paypling of Section 4(c)(l) and 4(c)(6). Both sections able clauses are obtained and that policies are are harmonious parts of an integrated statutory promptly renewed and kept in force during the life scheme. They are not reasonably to be read as if of a loan, (d) The furnishing of insurance services each were an independent enactment unrelated to the attracts customers and promotes business for the other. If full scope is to be given to both exceptions, banks, (e) Because of area practices, it has become they must be read as mutually complementary. It a competitive factor for banks to be in a position to would achieve an obviously absurd result, and one offer their customers insurance services and advice. that Congress could not reasonably have intended, to hold that a company, otherwise qualified for exemp- IV. Analyses and Concluding Findings tion consideration under Section 4(c)(6), becomes A. THE STATUTORY REQUIREMENTS disqualified therefrom simply because it is also en- Under the terms of Section 4(c)(6) of the Act, as gaged in an added activity which, had it stood alone, clarified by Section 5(b) of the Board's Regulation Y, would have entitled the Company to automatic exthe ownership by a bank holding company of a non- emption under Section 4(c)(l). I conclude that the banking company is exempted from the prohibitions Company's liquidation activities do not bar it from of Section 4 of the Act only if the following conditions exemption consideration under Section 4(c)(6). are met: (b) What has just been said applies equally to Will- (1) All the company's activities must be of a finan- mar's activities in acquiring and holding properties for cial, fiduciary or insurance nature, and the future use of its affiliated bank. Section 4(c)(l) (2) The company must be determined by the Board similarly automatically exempts the shares of bank to be so closely related to the business of banking or holding company subsidiaries that are "engaged solely of managing or controlling banks, as conducted by in holding or operating properties used wholly or subsuch bank holding company or its banking subsidiaries, stantially by any [holding company] bank ... or ac- (a) as to be a proper incident thereto, and (b) as to quired for such future use." As for Willmar's acquisimake it unnecessary for the prohibitions of Section 4 tion of the single parcel of property which it plans to of the Act to apply in order to carry out the purposes put to future use as a home for its insurance agency of the Act. business, this must be viewed as an integrated part of the Company's insurance activities. B. As TO THE COMPANIES* ELIGIBILITY FOR EXEMPTION CONSIDERATION UNDER THE PRELIMINARY REQUIRE- (c) The real estate agency branch of Willmar In- MENT OF SECTION 4(C)(6) vestment Company's operations presents a more diffi- Each of the five nonbanking subsidiaries here in- cult question. I am unable to agree with the Applicant's contention that the real estate agency operation 18 Commissioner Rasmussen further testified that, although must be regarded as an "insurance activity" because it not required by Minnesota law, his department preferred to have an insurance agency department separately incorporated so as to immunize its related bank from any liability resulting 17 See, e.g., H. Rep. 609, 84th Cong., 1st Sess., pp. 17, 24; from the agency's operations. S. Rep. 1095, 84th Cong., 1st Sess., p. 12. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

912 FEDERAL RESERVE BULLETIN • AUGUST 1959 is now being conducted on a temporary basis to provide financial nature. In addition, as appears from the a source of funds to help finance the retirement of an testimony of its president, the Agency also regards itold-time employee who formerly managed the Com- self as now engaged in the business of buying and pany's insurance business.18 But though not "insur- selling real estate. The type of activity last mentioned ance" in nature, the real estate agency activities are plainly does not meet the "financial, fiduciary or innevertheless classifiable as "fiduciary" within the broad surance" preliminary requirement of Section 4(c)(6), meaning of that term. The term "fiduciary" as used in nor is it such as to be otherwise allowable under the law is not confined to formal fiduciaries (such as ex- statute. It is true that the Agency has had only one press trustees; it extends to persons who undertake to transaction of this sort in the approximately two-year act for others in capacities involving trust and con- period that elapsed from the date of its incorporation fidence and requiring the exercise of good faith and to the date of the hearing. But on the basis of the candor in their dealings with those for whom they record showing that the Agency considers itself at act.19 A real estate broker, whose normal function it present to be engaged in the real estate business, I am is to act as an agent for owners seeking purchasers for obliged to find that the Company's total activities are their property, falls within that category. It has long such as to disqualify it from exemption consideration been recognized that such a broker occupies vis-a-vis under Section 4(c)(6). It is noted, however, that the owner for whom he acts a position of trust and during the course of the hearing the Agency indicated confidence calling for a high degree of fidelity and a willingness to refrain in the future from engaging in making him in the eyes of the law a fiduciary as to real estate activities, provided it were advised by its matters within the scope of his agency.20 Indeed, the attorney that continuation of such activities would disvalidity of State laws regulating the business of real qualify it for exemption under Section 4(c)(6). It estate brokers and fixing qualifications of persons who will therefore be recommended that if, prior to the may engage in it, has been upheld largely upon the expiration of the time for filing exceptions to this ground that such brokers are deemed to act for others Report, the Applicant, with the written consent of in a fiduciary capacity.21 the Agency, advises the Board that, as a condition to Accordingly, I find that all the activities of Willmar exemption, it will not engage in the business of buying Investment Company are such as to make it eligible and selling real estate, the Board revise the foregoing for exemption consideration under Section 4(c)(6). finding and find instead that the Agency on the basis Whether they are also such as to satisfy in all their of its remaining activities meets the qualifying standaspects the "closely related" requirement of that sec- ards of the preliminary requirement of Section tion is of course a different question, and one that I 4(c)(6). reach later. 4. Drovers Exchange Agency and Realty, Inc.: This C. As TO THE COMPANIES' QUALIFICATIONS FOR Company, in addition to its insurance agency activi- EXEMPTION UNDER THE "CLOSELY RELATED" REQUIREMENT OF SECTION 4(c) (6) ties, engages, according to its exemption application, in dealings in real estate and other property. As found As each of the nonbanking subsidiaries is engaged above, however, such dealings to date have been rare primarily in insurance agency activities, I shall first and have in all instances been restricted to situations consider the "closely related" issue with respect to involving the acquisition for purposes of liquidation such activities alone, and shall later consider whether of property from its affiliated bank or bank borrowers. the conclusion reached need be altered in the case of What was said above with respect to Willmar Invest- any of the companies because of any added activities ment Company's liquidation activities is equally appli- in which it may be engaged. cable here. On the record made, and on the assump- 1. Insurance Agency Operations tion that the Company's future dealings in property will likewise be limited to the liquidation of bank It is clear, of course, that in an organizational, assets, I find that all the Company's activities are such physical and operational sense the insurance agencies as to make it eligible for exemption consideration are closely related to the banks to which they are under the statute. respectively attached. Thus, their businesses are con- 5. New England Insurance Agency: Apart from the ducted for the profit of affiliated bank stockholders; sale of insurance, this Agency on occasions has en- they are managed and controlled by the officers and gaged in the purchase of conditional sales contracts directors of their related banks; they occupy space in and other third-party paper—activities clearly of a banking quarters or close thereto; they utilize at least 18 As the record shows, the Company has always held itself in some instances bank personnel to carry on their out—even before the retirement of the employee—as engaged day-to-day operations; and they are held out to the in a real estate agency business; indeed, the Company's reg- public as identified with the banks to which they are ular business operations are so described in its exemption respectively attached. But such organizational, physiapplication. Moreover, though that branch of the Company's business is now being continued mainly for the benefit of the cal and operational integration, while a factor to be employee, it is still being conducted as a company activity, considered, is not alone enough to satisfy the statutory functionally unrelated to the insurance agency operations. exemption requirement. The statute speaks not in 19 See Black's Law Dictionary, 4th Ed., p. 753; Restatement of Trusts, § 2b. terms of a close relationship to a banking organiza- 30 See Restatement of Agency § 13 and comments there- tion, but in terms of a close relationship to the busiunder, particularly comment b; also § Id. And see, too, ness of banking, or to the business of managing and Hornby V. St. Paul Mercury Indem. Co., 217 F. 2d 78, 80 controlling banks. (CA 4); Rattray v. Scudder. 28 Cal. 2d 214, 169 P. 2d 371, 376; Kurtz v. Farrington, 104 Conn. 257, 132 A. 540, 544; The close relationship, moreover, must be of a Dolvin Realty Co. v. Holley, 203 Ga. 618, 48 SE 2d 109, 112; special kind. It must be such as to support a con- Berenson v. Nireristein, 326 Mass. 285, 93 NE 2nd 610, 611; Wold v. Patterson, 229 Minn. 361, 39 NW 2d 162; Utlaut v. clusion that under all the circumstances of a given Glick, 246 SW 2d 760 (Mo.); Rosenberg v. Cohen, 370 Pa. case, as reflected by the record made therein, the busi- 507, 88 A 2d 767; Barnard v. Gardner Inv. Corp., 129 Va. ness of the nonbanking company is a "proper inci- 346, 106 SE 346, 348. 21 See, e.g., Riley v. Chambers, 181 Cal. 589, 185 P. 855; dent" to the business of banking or of managing or Roman v. Lobe, 243 NY, 152 NE 461. controlling banks, as conducted by the applicant bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 913 holding company or its banking subsidiaries. And it requirements of Section 4(c)(6), is engaged in a must also be such as to warrant a conclusion that it is business which is so substantially integrated with, "unnecessary for the prohibitions of Section 4 to apply required for, or otherwise identified with the banking in order to carry out the purposes of the Act." In or bank management business to which it is related other words, the keys to a "closely related" determi- as to make it in effect part and parcel of that business. nation are to be found in the "proper incident" and In the latter situation, retention of the nonbanking the "statutory purposes" requirements of Section subsidiary in the holding company system may rea- 4(c)(6).22 sonably be disassociated from the statutory objective As the Board pointed out in the Transamerica case, of keeping banking and nonbanking ventures in fields the "proper incident" and "statutory purposes" re- of their own, and, consequently, justified as in acquirements are both "somewhat similar in character cord with the purposes of the Act. and tend to reinforce each other." In clarification Is the business relationship between the herein of the "proper incident" requirement, the Board in involved insurance agencies and their affiliated bankthat case stated: ing organizations such as to satisfy the statutory criteria as elucidated above? ". . . both legal and nonlegal dictionaries Were it not for the record proof that it is a normal, show that the term 'incident' is used to decustomary and approved practice for State banks in scribe something that 'usually' or 'naturally' Minnesota and North Dakota to offer insurance 'depends upon', 'appertains to', or follows agency services in conjunction with their banking another more important thing. It is clear operation, I would hesitate long before answering that Section 4(c)(6) is intended to exempt that question affirmatively. It is clear, of course, only those nonbanking businesses that that the agencies' activities are in part directly re- 'usually' or 'naturally' 'depend upon' or lated to their affiliated banks' lending operations. It 'appertain to' the business of banking or of is clear, too, that as an incidental aspect of their managing or controlling banks. The section activities, the agencies provide some services that requires that a nonbanking business, in order are of benefit to such banks. But the agencies' activito be exempted under the provision, must be ties in their totality extend far beyond what is not merely an 'incident' but a 'proper incireasonably required for or even connected with, dent' to banking or managing or controlling affiliated banking operations. Each of them is enbanks." gaged in a general insurance agency business, in- In clarification of the "statutory purposes" require- volving the writing of all kinds of insurance and the ment, the Board noted that the "clear purpose" of solicitation of business from the public at large, Section 4 was to remove the potential sources of evil without regard to whether or not such insurance that Congress thought were inherent in common con- is needed in connection with bank lending activities. trol of banks and nonbanking organizations, by re- Only a minor part of their total writings, in terms stricting bank holding systems to banking activities, of premium volume, is referable to insurance on subject to only limited exceptions. The Board stated: property securing affiliated bank loans—in no case quite as much as 40 per cent, and in some cases "This clear purpose of Section 4 . .. substantially less.24 No showing has been made that provides a helpful guide to applying the re- the affiliated banks have any special need for inquirements of Section 4(c)(6). If a non- surance agencies of their own to obtain insurance banking business is a 'proper incident' to coverage on property securing bank loans. All banking or to managing or controlling banks insurance written through the bank-connected agencies ... it is less likely to cause a bank to be is readily available through outside agents or ageninfluenced by the 'unnatural' or extraneous cies with whom the bank-connected agencies comconsiderations or temptations that are 'po- pete for business in the localities where they are tential sources of evil'. Hence, it is more situated. The business of selling general insurance likely to accord with the 'purposes of this is one that may be, and generally is, conducted Act.'" independently of the banking business and without any particular reliance on it. It is not a type of What has just been said may also be expressed in business that characteristically or by reason of its another way. As the legislative history shows, a nature "depends upon" or must "follow" the business primary purpose of the Act was to confine bank holdof banking. ing company systems to business activities connected But the "proper incident" and "statutory purposes" with banking or with the management or control of requirements are not restricted to dependent relationbanks, on the theory that it is in the public interest ships. Section 4(c)(6), as explained in Transamerica, to keep bank ventures in a field of their own, separate and apart from nonbanking enterprises.23 Where the is broad enough also to cover exemption of "those nonbanking businesses that 'usually' . . . 'appertain business of a nonbanking subsidiary is not so "closely related" to an affiliated banking business as to be considered a "usual" or "natural," and also a "proper," 24 I attach no soecial significance—except possibly in the case adjunct thereto, its retention in a bank holding com- of New England Insurance Agency—to the fact that most of the remaining premium volume is referable to insurance placed for pany system cannot be reconciled with the statutory other bank customers. It is to be expected that an insurance objective and the public interest noted above. But agency operating on a bank floor, or otherwise closely identithe situation is different where the nonbanking sub- fied with a bank, will attract a large proportion of its customers from those doing business with the bank; but this does not sidiary, otherwise qualified under the preliminary establish that such writings have a relationship to the business of banking as such. In the case of New England Insurance 22 See, Matter of Travsamerica Corporation, Federal Reserve Agency, which writes principally hail insurance, a substantial BULLETIN, September 1957, p. 1014. See, also, Section 5(b) part of such insurance, though covering unpledged property, of the Board's Regulation Y. may be viewed as referable to bank lending activities, for 23 H. Rep. 609, 84th Cong., 1st Sess., pp. 1, 11, 16; S. Rep. reasons stated in the findings made above dealing specifically 1095, 84th Cong., 1st Sess., pp. 1, 2, 5. with that case. 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914 FEDERAL RESERVE BULLETIN • AUGUST 1959 to' the business of banking or of managing or con- different cases depending on the circumstances; and trolling banks." that activities determined to be a "proper incident" The insurance agencies in this proceeding are to "the business of banking, etc." in one case need attached to State banks in the States of Minnesota not be in another, although in each the activities of and North Dakota. In such States, as has been the nonbanking subsidiary are the same. found, the operation in conjunction with State banks Where banks of a given class—for example naof what are in effect insurance agency departments tional banks located in places with a population of thereof is a common and accepted practice. That under 5,000x—are themselves authorized by law practice is so rooted in tradition and so prevalent to operate insurance agencies in conjunction with —at least in the smaller cities and towns—as to be their banking activities, there can be no doubt that considered "a normal and customary part of the the insurance agency operations are a "proper inbanking business", in the words of the Minnesota cident" to the business of banking as conducted by Commissioner of Banking. Measured against State such banks. And as a corollary proposition, it custom and policy as applicable to State banks in follows that where a bank holding company owns Minnesota and North Dakota, the activities of the or controls banks of the same class, the operation insurance agencies here involved, and the relation- through separate subsidiary corporations of similar ship of such agencies to their affiliated banks, fits into insurance agencies at such banks is a "proper incithe framework of the criteria outlined above—that dent" to the business of banking or of managing or is, it is of a kind that " 'usually' . . . 'appertains to' controlling banks, as conducted by said bank holding the business of banking, or of managing or con- company or its banking subsidiaries. trolling banks". The situation in the instant proceeding is not sub- The question at once arises: Is such a measurement stantially different, and I think the same reasoning is an appropriate one where, as here, a Federal statute applicable. The banking statutes of Minnesota and is being administered? To take into account State North Dakota, to be sure, do not confer express practices and policies where State banking businesses powers on their respective State banks to operate inare involved might quite possibly lead to different surance agencies.27 The fact remains that the over- 4(c)(6) determinations in different States, though whelming majority of State banks in the States of the same kind of company and the same type of Minnesota and North Dakota do have insurance relationship is involved—allowing, for example, re- agencies operated in conjunction with the banks; that tention of an incorporated bank-connected insurance that practice has been carried on for many decades; agency in a State such as Minnesota, while com- that, although specific arrangements vary, the most pelling divestiture of a comparable agency in a State common one is to have the agency profits inure disuch as Illinois.25 But that possibility is not objec- rectly to the agency-related banks; and that the supertionable in itself. The principle that a Federal law visory authorities with full knowledge have acquiesced must be uniformly applied does not preclude devia- in that practice as a proper one and for all practical tions in application based upon valid factual dis- purposes have accepted the existence of bank continctions. What is a proper incident of banking trolled and operated insurance agencies as an inis essentially a question not of law but of fact. The cidental part of the business of banking, or, at least, Board has been charged to make its determination of the business of bank management and control. In in each case upon the record made in that case, that these circumstances, and in the absence of any exis, on the basis of the particular factual considera- ternal evidence to the contrary, the law of Minnesota tions there present. If the Board is to determine and of North Dakota may appropriately be viewed in a given case what is a "proper incident" to the by the Board as allowing, in any event as not probusiness of banking, it must ascertain, inter alia, hibiting, the direct operation of insurance agencies by what is usual and what is allowable. Since this to State banks in such States.28 some extent may vary from State to State, as well In the circumstances of this case, it is difficult to see as among banks of different classes, the scope of how it would effectuate the purposes of the Act to reactivities normally associated with the conduct of quire divestiture of the bank-related agencies. As the particular class of banking business involved is, found above, the agencies, formerly operated as de- I am persuaded, a factual consideration relevant and partments of their respectively related banks, were material to that inquiry. later incorporated primarily for the purpose of im- Support for the view that Section 4(c)(6) does not munizing the banks from responsibility for agency compel absolute uniformity in all cases where the conduct. This purpose to protect bank assets is clearly same type of nonbanking business is involved may in the interest of bank depositors, and, moreover, the be found in Section 5(b) of the Board's Regulation incorporated method of operation is preferred by the Y, issued pursuant to the Act. That section provides that the close relationship required by Section 4(c)(6) 26 Act, Sept. 17, 1916, c. 46, 39 Stat. 753, Federal Reserve Act. Sec. 13. must be "to the business of banking or of managing 27 For purposes of decision here, I find it unnecessary to or controlling banks, as conducted by the [applicant] decide whether, as argued by counsel for the Applicant, such bank holding company or its banking subsidiaries." statutory authority must be deemed conferred by the general grant to Minnesota banks of "all the usual and incidental The italicized words recognize that "the business powers belonging to the business", Minn. Stat. Anno., Sec. of banking or of managing or controlling banks", 48.15. The North Dakota statute grants banks "all such incias referred to in the statute, is not an absolute; that dental powers as shall be necessary to carry on the business of banking." North Dakota Rev. Code, 1943, Ch. 6-0302. the business may possess different characteristics in ^Although perhaps not precisely apposite, an analogy may be drawn to the well known rule of statutory construction, that long, continued, contemporaneous and practical con- 25 Illinois prohibits banks, except national banks in places struction of an ambiguous statute by the executive officers of less than 5000 population, from acting as an insurance charged with its administration and enforcement is of great agent, and extends that prohibition to "any subsidiary, affili- importance in arriving at the proper construction of a ate, officer or employee" contributing directly or indirectly, statute. See 2 Sutherland, Statutory Construction, Sees. 5103, insurance commissions or fees to a bank. 73 Smith Hurd 5105 and 5107 (3rd Ed. 1943); U. S. v. American Trucking 111. Stat. Anno. 1065.53. Assn., 310 U.S. 534. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 915 banking authorities, at least in Minnesota. Except tions of Section 4(a). Section 4 (c) (6) is an exception that agency earnings now flow to bank stockholders to the general prohibitions of 4(a). Its applicability, through other channels, incorporation has brought therefore, is not to be tested by the same consideraabout no change in the relationship between the tions that induced the passage of the section it qualiagencies and the banks. As has been seen, in- fies. The "potential evils" adverted to in Transameridependent banks of the same class are allowed to, ca are of a broad range, and are such as might be and customarily do, operate insurance agencies in expected to be inherent one way or another in practithe same way, either directly or through affiliated cally every situation where banks are under common corporations of their own. To hold in effect that the corporate control with companies of a financial, fibanks in this case, because they happen to be duciary or insurance nature. To limit narrowly the controlled by a bank holding company, may not do 4(c) (6) exemption to cases where there is no potenwhat they could do if they were independent would tiality for such evil would make it virtually impossible, serve no discernible public interest. It was not a save in a most unique sort of case,31 for any company, purpose of the Act to place holding company banks though of a financial, fiduciary or insurance nature, in a less favorable position than independent banks to qualify, thus making 4(c)(6) virtually a dead letter of the same class. The Act, it is true, was incidentally —a result Congress could not have intended. Section aimed at curbing the use of the holding company 4(c)(6) provides its own—and only—test for applicadevice as a means of evading restrictions imposed bility. A company, to be exempted, must "be so on banks by Federal or State laws.29 But it has al- closely related to the business of banking or of manready been shown that no such evasion is here in- aging or controlling banks as to be a proper incident volved. The situation in this case is thus quite differ- thereto." In other words, as explained above, it must ent from one where a bank holding company, as a be one that "properly" (i.e., appropriately, allowably)32 subterfuge to circumvent restrictions imposed on a and "usually" or "naturally" "depends upon" or "apbanking subsidiary, organizes a separate corporation pertains to" that business. It is true that Section through which to conduct at that bank business 4(c)(6) also speaks of the relationship being such as to activities which under applicable law or declared "make it unnecessary for the prohibitions of [Section public policy are forbidden to the bank. 4(a)] to apply in order to carry out the purposes of There is one further aspect to be considered. In the the Act." But, as has also been explained above, Transamerica case the Board set out a number of Section 4(c)(6) subsumes that once a nonbanking com- "potential evils" that Congress considered to be in- pany (financial, fiduciary or insurance) is determined herent in common corporate control of banking and to be a "proper incident" to banking, its retention in nonbanking organizations and therefore sought to re- the holding company system will accord with the purmove through the general prohibitions of Section 4. poses of the Act. The "potential evils" which Congress Among them was found inherent in combinations of banking and nonbanking businesses were reasons for requiring di- ". . . that a holding company, in extending vestiture, not statutory purposes. The purpose or credit, might exert pressure on borrowers to objective of the Act with regard to divestiture, as do business with the lending bank's affiliated earlier stated, was to keep the business of banking corporations rather than with their competi- separate and apart from unrelated businesses. Retors, thus denying those borrowers an ap- tention of a nonbanking company that has in effect propriate freedom of choice." been determined under Section 4(c)(6) to be an integral part of the business of banking is thus recon- There can be no doubt, of course, that the common cilable with that objective.88 corporate control of the agencies and their related banks provides a potentiality for the "evil" quoted As a matter of discretion to the extent there is an above. But, as has been seen, the common control allowable area for its exercise—I am similarly of the in this case is a consequence of the customary and view, in the light of the particular circumstances of accepted practice for State banks in the States in- this case, that the potentiality of borrower coercion volved to operate insurance agencies as adjuncts of that is inherent in the relationship ought not be retheir banking business. The potentiality for such evil would have been no less if the related banks had not 81 Such as Matter of Financial Institutions, Inc., Federal caused the agencies to be incorporated, but had in- Reserve BULLETIN, October 1958, p. 1162. stead allowed them to remain as before, that is, as 82 "Proper" is defined in Funk and Wagnall's Dictionary, unincorporated agencies operated by and for the bene- Unabridged (1952), in part, as follows: fit of the banks. The question now is whether under "1. Having special adaptation or fitness . . . the circumstances here present, the possibility of such "2. Conforming to a standard usage of action; right and allowable . . . borrower coercion must, as a matter of law, or should, "3. Naturally or essentially belonging to a person or as a matter of discretion, be regarded as a bar to thing . . ." exemption. I think not, for the reasons that follow.80 83 The Board's opinion in Transamerica, though equivocal, Section 4(c) (6) does not by its terms limit exemption need not be read as inconsistent with the views expressed above. That opinion does contain dicta at one point that the to situations which escape the potential sources of exemption of Section 4(c) (6) is limited to "situations which evil that led Congress to enact the general prohibi- substantially escape 'the potential sources of evil against ts* See, e.g., 101 Cong. Rec. 8032, 8035; 102 Cong. Rec. 6835. which the general prohibition was directed.' " But coupling 30 It is noted that in Minnesota, where 4 of the 5 agencies l m a a n y g u b a e g e, r e p a a d rti a c s u l i a n r d ly ic a t t h i e n g p o th rt a i t o n t h q e uo B t o ed a rd e a i r n li t e e r n d in ed th t i h s at R e d p i o c r ta t, are located, a State statute makes it unlawful, inter alia, for merely to point out a possible justification for the 4(c)(6) banks to require the purchase of insurance from any particular exception to Section 4(a), rather than to declare a required agent as a condition precedent to a loan. Minnesota Statutes standard of proof applicable to 4(c)(6) determinations. Moreover, elsewhere in the Transamerica opinion, the Board appears Anno. 72.34. Contrary to the Applicant's contention, how- to recognize that the "proper incident" requirement is the ever, I do not view the State law as settling the present issue. touchstone for a "closely related determination", and that The operation of a Federal law, if applicable to a given once the "proper incident" requirement has been met, it may situation, is not suspended merely because there is already in be inferred, without more, that divestiture is unnecessary to carry out the purposes of the Act. This, I think is the correct existence a State law covering that same situation. view of the statute. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

916 FEDERAL RESERVE BULLETIN • AUGUST 1959 garded as a deterrent to exemption. The reason has perhaps different where a company conducts two or already been reiterated—that the operations of the more different kinds of business, each as a separate bank-related insurance agencies are of a pattern that branch functionally independent of the other. Bearconforms to customary and accepted practices in the ing in mind the statutory objective of keeping banking business of banking and bank management as con- separate and apart from unrelated businesses, it may ducted by State banks in the area. It may be observed, be argued with some force that in the latter situation, moreover, that a Board order disallowing the exemp- Section 4(c)(6) is reasonably to be interpreted to tion applications in this case, if intended to eliminate require as a condition of exemption that each branch the "source of potential evil" adverted to above, independently satisfy the statutory requirements. But would be at best an exercise in futility. For, even if I do not think this must be applied as a hard and fast the incorporated agency affiliates were discontinued, rule where special circumstances warrant a departure. the related banks could still revert to their earlier Such circumstances, I believe, are present in the practice of having unincorporated agencies operated Willmar case. Thus it appears (a) that Willmar's real for their direct benefit, with resultant zero effect on estate agency business is of insubstantial size—with the potentiality for evil sought to be eliminated.84 The annual gross earnings never exceeding approximately only practical difference it would make would be to $3,000 since 1949; (b) that it is a relatively insignifideprive the related banks of the advantage gained by cant part of the total business conducted by Willmar; them through agency incorporation—immunization (c) that it is now being operated on a temporary basis of the banks from liability for agency conduct. and for a special purpose as an accommodation for a For the reasons expressed in the foregoing analysis, semi-retired old-time employee who alone handles its I conclude that the insurance agency operations of activities; and (d) that upon the death or full retirethe nonbanking subsidiaries here involved are such as ment of that employee, now over 66 years of age, the to satisfy the "closely related" requirements of Secreal estate agency business is to be discontinued ention 4(c)(6). tirely. Willmar's primary operations have been found 2. Additional Activities "closely related". In the posture of this case, I do not regard the added activities—temporary in nature and Having found that the Companies' insurance agency relatively inconsequential in size—as a factor suffioperations meet the "closely related" standards, I now ciently substantial to warrant revision of that finding turn to consider whether that finding need be revised as to the company as a whole, or to make it necessary in the case of any of the companies because of addifor the prohibitions of Section 4 to apply in order to tional activities in which they are engaged. Of the carry out the purposes of the Act.35 five nonbanking companies involved, only one— Drovers Exchange Agency and Realty, Inc., in Citizens Agency, Inc.—is engaged exclusively in inaddition to its primary insurance agency activities, at surance agency activities. times engages in dealings in real estate and other Western State Agency, Inc. occasionally makes property. Its dealings to date have been restricted to loans to customers of its related bank who are contransactions involving the liquidation of assets sidered by the Bank not qualified for direct bank loans. acquired from its related bank or from bank borrow- Its income from such loans during the 19-month peers. As such, they have been closely related to the riod preceding the hearing amounted to only $164. business of banking as an incident thereto. On the Such activities appear to be clearly related to the facts shown, and on the assumption that the Combanking business conducted by its affiliate. In any event this segment of the Company's business is so pany's future dealings in real estate and property will small as to be considered de minimis. It is found that be similarly so restricted, it is found that the Company the operations of this Company, in their totality, qualifies for a 4(c)(6) exemption. satisfy the Section 4(c)(6) requirements for exemption. New England Insurance Agency at times purchases Willmar Investment Company's noninsurance ac- conditional sales contracts or other third party paper tivities consist of (1) the liquidation of assets acquired and makes direct loans. It also regards itself as from its related bank, (2) the holding of properties engaged in the business of buying and selling real acquired for the future use of the bank, and (3) the estate for profit. At least part of the Agency's finanoperation of a small real estate agency. The first two cial transactions appear to be related directly or inclearly meet the "closely related" standard in their directly to the business conducted by its affiliated own right. The third does not. The question is bank. The financial portion of the Agency's business whether the unrelated activity precludes the Company is in any event insubstantial—its income from that from being found "closely related" within the mean- source during the 6 months preceding the hearing ing of Section 4(c)(6). amounting to $75, as contrasted to commission earn- Section 4(c)(6), grammatically read, does not ings of approximately $4,000 on its insurance business require that all the activities of a nonbanking com- during that same period. I do not view the financial pany be "closely related". Where a company is en- activities in their present form and volume as a gaged entirely in a business of one kind—for example, deterrent to exemption. The real estate branch of the insurance—and its over-all activities are so substan- Agency's over-all business operations is another tially integrated with banking as to be deemed a matter. Apart from being unrelated to the business proper incident thereto, exemption is allowable, al- of banking, it is a kind of activity that disqualifies though part of the company's business may be con- the Agency from exemption consideration under the ducted outside the banking field. The situation is preliminary requirement of Section 4(c)(6), as found above. For that reason, it will be recommended that 34 If, instead, distribution were made of the Applicant's the exemption application relating to New England shares in the agencies, the result in this case would still be the same. As has been noted, the Applicant's sole shareholder is the Otto Bremer Foundation, a charitable organization 35 Should the Board disagree with this specific finding, it is exempt from the reach of the Act by virtue of Section recommended that it condition exemption upon Willmar dis- 2(b)(2) thereof. continuing its real estate agency activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

917 LAW DEPARTMENT Insurance Agency be denied. As earlier noted, how- Dated at Washington, D. C. this 25th day of ever, an opportunity will be provided the Applicant November, 1958. to cure the deficiency found. (Signed) ARTHUR LEFF, Upon the basis of the foregoing findings of fact, and upon the entire record in the case, I make the Hearing Examiner. following: FIRST BANK STOCK CORPORATION CONCLUSIONS 1. All of the activities of In the Matter of the Requests of First Bank Stock Citizens Agency, Inc. (BHC-29), Corporation For Determinations under Section Western State Agency, Inc. (BHC-31), 4(c)(6) of the Bank Holding Company Act of Drovers Exchange Agency & Realty, Inc. 1956. Docket Numbers BHC-36, BHC-37. (BHC-33), and Willmar Investment Company (BHC-35), ORDER and of each of said companies, are of a financial, fiduciary or insurance nature, or are otherwise quali- First Bank Stock Corporation, having its prinfied for exemption consideration under the Act. cipal office and place of business in Minneapolis, 2. The aforesaid companies, and their business Minnesota, a bank holding company within the operations and activities, are so closely related to the business of banking or of managing or controlling meaning of Section 2(a) of the Bank Holding banks, as conducted by the Applicant and its banking Company Act of 1956, has filed requests for subsidiaries herein specificaly involved, as to be a proper incident thereto and as to make it unnecessary determinations by the Board of Governors of the for the prohibitions of Section 4 of the Act to apply Federal Reserve System that First Bancredit Corin order to carry out the purposes of the Act. poration and First Service Agencies, Inc., and 3. All the activities of New England Insurance Agency (BHC-32)—more specifically, its activities with their activities are of the kind described in Secregard to the purchase and sale of real estate—are tion 4(c)(6) of the Bank Holding Company Act not of a financial, fiduciary or insurance nature, or of 1956 (12 U.S.C. § 1843) and Section 5 (b) of a kind otherwise qualified for exemption consideration under the Act. of the Board's Regulation Y (12 CFR 222.5(b)), so as to make it unnecessary for the prohibitions RECOMMENDATIONS of Section 4 of the Act with respect to acquisi- It is recommended that the Board of Governors tion and retention of shares in nonbanking orof the Federal Reserve System: 1. Enter an order determining the issues in this ganizations to apply in order to carry out the consolidated proceeding in accordance with the find- purposes of the Act. ings of fact and conclusions of law made above, and 2. Grant the request of the Applicant, Otto Bremer A hearing having been held pursuant to Sec- Company, in each of the cases docketed as BHC-29, tion 4(c)(6) of the Bank Holding Company Act 31, 33, and 35, and deny its request in the case of 1956 and in accordance with Sections 5(b) and docketed as BHC-32, for a determination that the shares of the nonbanking company therein named 7(a) of the Board's Regulation Y (12 CFR are exempt from application of the prohibitions of 222.5(b) and 222.7(a)); the Hearing Examiner Section 4 of the Act.38 having filed his Report and Recommended Deci- It is further recommended, with reference to the case of New England Insurance Agency (BHC-32), sion wherein he recommended that both of the that if, prior to the expiration of the time for filing above requests be denied; Applicant having filed exceptions to this Report, the Applicant, with the written consent of the aforesaid Agency, advises Exceptions and Brief with respect thereto; oral the Board that, as a condition of exemption, the argument having been heard before the Board; Agency will not engage in the business of buying and the Board having given due consideration to all selling real estate, the Board revise the foregoing Conclusions and Recommendations by (a) adding the relevant aspects of the matter; and all such steps name of New England Insurance Agency to the list having been in accordance with the Board's Rules of companies in paragraph numbered "1" of the above Conclusions, (b) deleting paragraph numbered "3" of of Practice for Formal Hearings (12 CFR 263): said Conclusions, and (c) revising paragraph num- IT IS HEREBY ORDERED, for the reasons set forth bered "2" of the Recommendations to grant the Apin the Board's Statement of this date and on the plicant's request in Case No. BHC-32. basis of the record made at the hearing in this matter, that: 36 The exemption determinations herein recommended are predicated upon the state of facts shown to exist at the time 1. The activities of First Bancredit Corporaof the hearing, as reflected by the findings made above. With respect to the continued application of any such exemption tion are determined not to be so closely related determination, it is to be understood that such determination to the business of banking or of managing or might not apply in the future should any substantial change occur in the character of the affected nonbanking company's controlling banks as to be a proper incident thereoperations or activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

918 FEDERAL RESERVE BULLETIN • AUGUST 1959 to and as to make it unnecessary for the prohi- date of enactment (May 9, 1956) of the Act. bitions of Sectiton 4 of the Bank Holding Com- Bancredit is a nonbanking company the stock of pany Act of 1956 to apply in order to carry out which was entirely owned by the Applicant on the purposes of that Act, and, therefore, Appli- the date of the Act and is presently so owned. cant's request with respect to First Bancredit Pending determination of the present matter, the Corporation shall be, and hereby is, denied; and time allowed for divestment by the Applicant of 2. The activities of First Service Agencies, its ownership of stock in Bancredit has been ex- Inc., are determined to be so closely related to tended by the Board pursuant to provisions of the the business of banking or of managing or con- Act allowing such extensions. Agencies, Inc. is trolling banks as to be a proper incident thereto a nonbanking company of which the Applicant and as to make it unnecessary for the prohibi- has never owned and does not presently own any tions of Section 4 of the Bank Holding Company stock, but of which the Applicant proposes to Act of 1956 to apply in order to carry out the acquire stock. purposes of that Act, and, therefore, Applicant's The Applicant's retention of stock of Banrequest with respect to First Service Agencies, credit and its proposed acquisition of stock of Inc., shall be, and hereby is, granted. Agencies, Inc. escape the prohibitions of the Act Dated at Washington, D. C, this 21st day of only if they fall within one of the exceptions pro- July, 1959. vided by the Act. Section 4(c)(6) of the Act By order of the Board of Governors. excepts shares of a nonbanking company if two requirements are met: (1) if all the activities Voting for this action: Chairman Martin, Vice Chairman Balderston, and Governors Szymczak, Mills, of the company are of a financial, fiduciary, or Robertson, Shepardson, and King. insurance nature, and (2) if the Board deter- (Signed) MERRITT SHERMAN, mines, on the basis of the record made at a hear- (SEAL) Secretary. ing, that the activities of the company are so closely related to the business of banking or of STATEMENT managing or controlling banks as to be a proper BACKGROUND OF THE CASE incident thereto and as to make it unnecessary On December 5, 1957, First Bank Stock Cor- for the prohibitions of Section 4 to apply in poration (hereafter sometimes called the "Ap- order to carry out the purposes of the Act.1 plicant"), a Delaware corporation with its prin- Section 5(b) of the Board's Regulation Y, iscipal office and place of business in Minneapolis, sued pursuant to the Act, paraphrases the pro- Minnesota, and a bank holding company as de- visions of the Act, but requires that the activifined in Section 2(a) of the Bank Holding Com- ties of a company must be closely related to the business of banking or of managing or conpany Act of 1956 (the "Act"), filed with the trolling banks "as conducted by such bank hold- Board of Governors of the Federal Reserve Sysing company or its banking subsidiaries." tem (the "Board") requests for determinations As required by the statute, the Board, on Dethat two of its nonbanking subsidiaries are of cember 20, 1957, ordered that a hearing be held such a nature as to be exempt under Section 4(c)(6) of the Act from the prohibitions of Sec- 1The relevant language of the Act is as follows: tion 4(a) of the Act. The nonbanking sub- "Sec. 4(a) Except as otherwise provided in this Act, no bank holding company shall— sidiaries involved are First Bancredit Corpora- "(1) after the date of enactment of this Act acquire direct or indirect ownership or control of any voting shares of any tion ("Bancredit") and First Service Agencies, company which is not a bank, or "(2) after two years from the date of enactment of this Inc. ("Agencies, Inc.") Act . . . retain direct or indirect ownership or control of any voting shares of any company which is not a bank or a bank Section 4(a) of the Act makes it unlawful, holding company .... subject to certain exceptions, for a bank holding * • • * * "(c) The prohibitions of this section shall not apply— company (1) to acquire direct or indirect own- * * * ** ership or control of voting shares of any com- "(6) to shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which pany that is not a bank, or (2) to retain direct the Board after due notice and hearing, by order has determined to be so closely related to the business of banking or of or indirect ownership or control of voting shares managing or controlling banks as to be a proper incident thereto and as to make it unnecessary for the prohibitions of this of any such company after 2 years from the section to apply in order to carry out the purposes of this Act. . . ." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 919 on the Applicant's requests; and such a hearing ing, St. Paul, Minnesota. Bancredit maintains was held at Minneapolis, Minnesota, before a 10 branch offices in St. Paul, Chicago, Indiaduly designated Hearing Examiner on January napolis, Dallas, Houston, Corpus Christie, 14-22, 1958, and April 17-18, 1958. Follow- Kansas City, Minneapolis, St. Louis and Tulsa. ing the conclusion of that hearing, the Appli- At one time Bancredit had as many as 20 cant on May 26, 1958, submitted proposed find- offices in operation, and as recently as 1947 it ings with an accompanying brief. In his Re- had 17 offices. port and Recommended Decision, filed with the About 80 per cent of the paper Bancredit has Board on July 23, 1958, the Hearing Examiner purchased has been repair and modernization recommended denial of both of the Applicant's paper insured under the provisions of Title I of requests. Subsequently, the Applicant filed with the National Housing Act. The balance, at the Board exceptions to the Hearing Examiner's least in recent years, has consisted of appliance Report and Recommended Decision; and on May financing paper acquired from dealers through 11, 1959, the Applicant presented oral arguments arrangements with public utility or other combefore the Board. panies (known as "schedule" paper) and mis- The salient relevant facts with respect to Ban- cellaneous property improvement paper not incredit and Agencies, Inc., are set forth here- sured under Title I of the National Housing Act. after in this Statement. Additional facts with re- Dollar amounts for the year 1957 are set spect to their activities are contained in the Hear- forth in the report (p. 935) of the Hearing Exing Examiner's Report and Recommended De- aminer, which is attached and made a part of cision attached hereto; and, to the extent not in- this statement. Bancredit originates more Title consistent with this Statement, the findings of fact I paper than any other single organization in made by the Hearing Examiner are hereby the country. adopted. Bancredit's methods of operation differ In determining whether or not the pending re- slightly as between the three different kinds of quests should be granted, the Board has con- paper it handles, and are set forth in detail in sidered solely the facts embraced in the record the Hearing Examiner's Report. Omitting cerof the hearing held in this matter. In addition, tain details that do not alter the principles aphowever, the Board has considered arguments plicable to the case, the operation may be briefly presented in the Applicant's proposed findings, the outlined. Hearing Examiner's Report and Recommended Bancredit handles all details in connection Decision, the Applicant's exceptions thereto, and with the acquisition of the paper, including the the transcript of the record of the oral argu- investigation and approval of the credit of the ment before the Board. The Board's findings obligors. The installment notes are drawn to and conclusions are hereafter set forth with re- the order of the dealer or contractor selling the spect to each of the companies involved. appliance or making the home improvement, and are endorsed by him to the order of Ban- I. First Bancredit Corporation credit. The dealer endorsements are, with minor Factual Summary exceptions, on a nonrecourse basis. In purchasing the installment paper, Bancredit The Applicant's first request for a determinapays the dealer or contractor the cash price tion pursuant to Section 4(c)(6) of the Act charged the customers for the appliance sold relates to First Bancredit Corporation (for conor the improvement made. This is less than the venience sometimes called "Bancredit"). Banface amount of the installment note signed by credit, a Delaware corporation that became a the customer. In computing that face amount wholly owned subsidiary of FBSC in 1929, is there is added on to the cash price the carryprincipally engaged in the business of purchasing ing or interest charges for the term of the loan. installment paper and reselling such paper to Bancredit does not retain in its own portfolio FBSC's affiliated banks. any of the installment paper it acquires, but sells Bancredit's principal office and place of busi- all of it shortly after acquisition to or for the ness is located in the First National Bank Build- account of FBSC affiliated banks. In fact, its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

920 FEDERAL RESERVE BULLETIN • AUGUST 1959 acquisitions are geared to the investment needs facilitated by the use of such equipment. Banof those banks. Bancredit sells all its paper credit makes its equipment and trained personnel directly to the affiliated First National Bank of available to affiliated banks. More specifically, St. Paul, which in turn sells participations or Bancredit handles the accounting for the installundivided interests in pools of acquired paper ment loan departments and pension fund of the to other FBSC affiliated banks. First National Bank of St. Paul and its St. Paul Sales made by Bancredit are on a nonrecourse affiliates; supplies accounting services for the penbasis and at a price equal to the cost of the sion fund, school division and payrolls of such paper to Bancredit (that is, the amount actually affiliated banks; acts as statistical consultant for disbursed by Bancredit to the dealer or contrac- all affiliates where needed; and assists banks aftor from whom the paper was purchased). The filiates in the preparation of plans and contracts price paid Bancredit is thus less than the face related to the installment loan field. All of these amount of the paper sold. As the Hearing are services which the banks must either perform Examiner stated (p. 936): "In other words, the themselves or have performed by others in conpaper is negotiated at a discount." ducting their normal banking activities. For such Bancredit continues to service all installment services, Bancredit charges an amount substanpaper sold, and the affiliated banks have almost tially equal to its costs for the services rendered. no work to do in connection with the paper. Preliminary Test Their gross earnings on the paper thus represent the equivalent of a net yield. The Hearing Ex- As indicated in Matter of Transamerica Corpoaminer's Report describes the carefully worked ration (Federal Reserve BULLETIN, September out manner in which earnings on the paper are 1957, pp. 1014, 1015), Section 4(c)(6) of the determined and distributed among the participat- Act exempts the ownership by a bank holding ing banks and Bancredit. company of shares of a nonbanking company Bancredit paper has proved a desirable form from the prohibitions of Section 4 of the Act only of investment for FBSC banks in terms of both if the following conditions are met: yield and safety. The yield has usually been (1) All of the company's activities must be of at least 1 per cent above the gross rate on a financial, fiduciary, or insurance nature, and prime commercial loans, and has always been (2) The company must be determined by the substantially higher than that on bonds, or other Board to be so closely related to the business securities. The loss on all Bancredit paper has of banking or of managing or controlling banks been only 1/55 of 1 per cent of cumulative (a) as to be a proper incident thereto and (b) total volume, and has been covered about five as to make it unnecessary for the prohibitions of times over by the loss reserves. Section 4 of the Act to apply in order to carry In conjunction with its acquisitions of paper, out the purposes of the Act. Bancredit offers credit life insurance to obligors Bancredit's principal activities, which consist on the paper. The insurance is offered under of the acquisition, sale and servicing of installment group credit life insurance policies which Banpaper, clearly qualify as being of a financial credit has with an insurance company. The nature. It is unnecessary to decide whether its obligors have the option to elect whether or not credit life insurance activities should be considthey will be covered by such insurance. In 1957 ered to be "financial" on the one hand, or "inabout 35 per cent of the items and 44 per cent surance" on the other, since in either event they of the face amount of the paper had this inwould meet the preliminary test of being "finansurance coverage. cial, fiduciary, or insurance." Bancredit's addi- Bancredit's only other activity is to provide certional activity of rendering various accounting, tain accounting, statistical and advisory services statistical and advisory services to affiliated banks to affiliated banks. In conducting its business of purchasing, selling and servicing installment does not appear to be "financial, fiduciary, or inpaper, Bancredit has acquired an extensive in- surance" in nature. However, the following stallation of IBM tabulating machines and has analysis by the Hearing Examiner (p. 939) is developed a staff trained in providing the services adopted and approved on this point: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 921 ". . . If Bancredit were engaged solely in furnishing other participating FBSC banking affiliates. The accounting, statistical and advisory services to FBSC First National Bank of St. Paul purchases the paper affiliated banks, it would be exempted from the Act's from Bancredit at a discount, and without recourse. divestiture requirements by virtue of Section 4(c) "The transactions which give rise to the present (I).22 To the extent that Bancredit's total activities close relationship between Bancredit and FBSC bankspill over the 'financial, fiduciary or insurance' lines ing affiliates are bottomed on a form of self-dealing of Section 4(c)(6), the overflow is entirely con- the Act condemns. Section 6(a) (4) of the Act tained within the borders of Section 4(c)(l). To makes it unlawful for a bank hold in these circumstances that Bancredit may not \ . . to make any loan, discount or exqualify for exemption consideration under Section tension of credit to a bank holding company 4(c)(6) because some of its activities are of a bank of which it is a subsidiary or to any other servicing rather than of a financial, fiduciary or subsidiary of such bank holding company.' insurance nature, would, in my view, both offend logic and be at odds with the legislative intent. In the General Contract Corporation case,13 the Sections 4(c)(l) and 4(c)(6) are integrated parts Board construed the term 'discount' as used in Section of a single statutory scheme, and may not reasonably 6(a)(4) to include within its compass transactions be read as if each were a separate enactment un- identical to those present here, involving the purchase related to the other. The two exemptions are in without recourse of third-party paper by a banking harmony, not in conflict. If full scope is to be subsidiary of a bank holding company from a nongiven to both exemptions, each must be construed banking affiliate of the same holding company. In as supplementing the other so as to allow in an view of the statutory proscription against this form of appropriate case for a combined application. I self-dealing, it follows virtually as a matter of law, therefore find Bancredit preliminarily qualified under and it is found, that the relationship between Banthe first condition of Section 4(c)(6) for exemption credit and the FBSC banking operations is not such consideration." as to constitute a 'proper incident' to the business of banking as conducted by FBSC and its banking subsidiaries. "Discount" Question "The General Contract case provides square au- Examiner's views. After thus finding that Ban- thority for the finding just made. The Applicant does not dispute that the factual situation presented credit met the preliminary test of Section 4(c) (6), here is indistinguishable from that ruled upon by the Hearing Examiner concluded that Bancredit the Board in the cited case. It contends, however, failed to meet the second test, and that it should that the Board was wrong in its statutory construction of the breadth of the term 'discount' as used in not be granted exemption. He stated his reasons 6(a)(4). In effect, the Applicant asks for reconin part as follows (p. 939): sideration and reversal of the Board's views on that subject as earlier declared. The arguments the "The factual findings made above establish clearly Applicant advances to support its position, though enough that Bancredit's operations are not only sub- perhaps more fully elaborated, are basically the same stantially related to the business of banking, but as those which were presented to the Board in the are so closely integrated with FBSC banking activi- Applicant's and amicus curiae briefs filed in the ties as to be in effect an adjunct or incident thereto. General Contract case. It would serve no useful But this alone is not sufficient to satisfy the second purpose to detail them here as they have already requirement of Section 4(c)(6), as outlined above. been noted and ruled upon by the Board in its care- For, as the Board stated in the Transamerica case, fully considered opinion in that case.24 I am persupra, at pp. 1015-1016, suaded that the Board's holding in the General Contract case rests on a solid foundation, but even 'The section requires that a nonbanking if I thought otherwise, I would be obliged to follow business, in order to be exempted under the precedent there established. If the reasoning the provision, must be not merely an "inciin that case is to be re-examined, it must be done dent", but a "proper incident" to banking at a higher level than mine. or managing or controlling banks.' "For the reasons stated, I shall recommend denial It is in the respect just noted that Bancredit falls of the Applicant's exemption request relating to short of the statutory mark. Bancredit." "The finding that Bancredit sustains a close rela- Exceptions and arguments of applicant. Aptionship to FBSC banking operations is predicated mainly upon Bancredit's origination of various types plicant takes vigorous exception to a number of of installment paper for resale to FBSC banking the findings and conclusions of the Examiner, affiliates. In its business relations with FBSC affiliated banks, Bancredit acts as an independent particularly concerning the "discount" question, contractor. It initially acquires the installment paper and to the failure of the Examiner to make certain in its own name and then negotiates it with the findings and conclusions proposed by the Appli- FBSC affiliated First National Bank of St. Paul which acts for its own account and on behalf of cant. 22 Section 4(c)(l) exempts nonbanking companies which 23 Matter of General Contract Corporation, Federal Reserve are engaged, inter alia, "solely in the business of furnishing BULLETIN, March 1958, p. 260. services" for a parent bank holding company or its banking 24 The Board's opinion in that case as well as the relevant subsidiaries. For a general description of the type of services portions of the attached Hearing Examiner's Report, to the considered by Congress to be of a servicing character, see S. extent approved by the Board, are here incorporated by refer- Rep. 1095, p. 12, 84th Cong.; S. Rep. 1095, part 2, p. 3, 84th ence. See, particularly, Federal Reserve BULLETIN, March 1958, Cong. p. 260, at pp. 262-269 and at pp. 282-285." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

922 FEDERAL RESERVE BULLETIN • AUGUST 1959 An initial exception by the Applicant is to the spect to the Hearing Examiner's conclusion that Examiner's failure to accept Applicant's conten- Bancredit's activities conflict with Section 6(a) (4) tion that all of the activities of Bancredit are ex- of the Act. These contentions may be summarized empt as "servicing" activities under Section substantially as follows: 4(c)(l) of the Act. In this connection, the Ap- 1. That the facts in this case are different from plicant refers to an opinion of the Board (Federal those in the General Contract case. Reserve BULLETIN, April 1958, p. 431) concern- 2. That an interpretation published by the ing the solicitation of installment paper business Board in the Federal Reserve BULLETIN, Septemby a nonbanking subsidiary (called "Corporation ber 1958, p. 1059, regarding acquisition of loan Y") of a holding company through offices located "participations" by subsidiary banks is applicable in several States. That opinion was to the effect in the present case. that such activities constituted "servicing" activi- 3. That in any event the Board's conclusion ties exempted by Section 4(c)(l). Applicant in the General Contract case that a nonrecourse argues that the activities of Bancredit are in expurchase of paper is a discount was legally actly the same category. erroneous. This contention by Applicant, however, is made As to the first of these contentions Applicant in the face of another opinion of the Board which argues that Bancredit sells paper to the affiliated was published at the same time (Federal Reserve banks at cost whereas the nonbanking subsidiaries BULLETIN, April 1958, p. 431) and in which the in the General Contract case sold the paper to the Board expressly decided that the activities of Ban- banks at an amount greater than cost. It is becredit are not "servicing" activities under Section lieved that this is not a substantial distinction. In 4(c)(l). Copies of both these interpretations, the General Contract case, the paper was sold to which were published concurrently by the Board, the banks at 1 per cent above cost, apparently for are attached.* Although the published interpre- the purpose of compensating the nonbanking subtation refers to Bancredit anonymously as "Corpo- sidiaries for their service; in the present case, alration X," the opinion on which the published though the paper is sold at cost, Bancredit is statement was based had previously been given separately compensated by the affiliated banks for directly to First Bank Stock Corporation with re- its services in connection with the paper. As spect to Bancredit. The Board distinguished the stated in the General Contract case (Federal Re- Bancredit ("Corporation X") case from the other serve BULLETIN, March 1958, pp. 260, 269): ("Corporation Y") case on the grounds that in ". . . the judicial interpretations of the word 'disthe latter, the activities of the offices of the noncount' show that the term is used very broadly. banking organization are confined to the solicit- In practice the term 'bank discount' is applied broadly ing and servicing of purchases and do not include to transactions by which a bank computes interest in advance so that there is a possibility of comthe actual "purchasing" of the paper by such ofpound interest, and it seems that any purchase of fices, whereas in the Bancredit case the branch paper is a 'discount' in that sense since it permits such advance computation and compounding . . . ." offices themselves purchase the paper and resell it to subsidiary banks, an activity which involves Similarly, other alleged factual distinctions do essentially a financial relationship with the affili- not affect the question here at issue. ated banks as distinguished from a mere "serv- As to the second contention, the Board's Sepicing" relationship. tember 1958 opinion considered four different Although the question was carefully considered factual situations involving participations by subat the time, it has been thoroughly re-examined sidiary banks in the making of loans and held in the light of Applicant's exceptions and argu- that in all four instances the banks could be rements in the present case. The Board has again garded as "joining at the outset" in the making of concluded that the distinction drawn is a sound such loans and that, therefore, they did not inone and that Bancredit is not exempt under Sec- volve a "purchase" or a "discount." The Applition 4(c)(l) as a company engaged solely in cant contends that in the present case there is a furnishing "services" to affiliated banks. previous contractual arrangement under which the Applicant has filed several exceptions with re- affiliated banks participate in the paper purchased by Bancredit. (Oral argument, p. 15) How- * Not reprinted, see reference indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 923 ever, the Board's September 1958 opinion related in the General Contract case was an 1891 decionly to transactions between banks in which the sion under a different type of statute; and that prior agreement for participation covered "a spe- other courts have held that "discount" does not cific loan or line of credit and a specific bor- include purchases without recourse. rower" and not "a mere block of unidentified 5. That nonrecourse purchases and sales of paper." That opinion depended not only upon paper are extremely common between banks and the specific commitments for specific loans but that Section 6(a) (4) could not have been inalso upon non-interest-bearing deposits owing tended to interfere with such an established from one bank to another, which are expressly banking practice. Applicant places particular exempted by Section 6. Both those aspects of stress on this point. the situations covered by the September 1958 Notwithstanding the careful consideration that opinion are missing in the present case. Their was given to the "discount" question in the Genabsence distinguishes the present case from those eral Contract case, the question has been thordealt with in the earlier opinion. oughly reconsidered in the light of the argu- Finally, as to the basic validity of the Board's ments of Applicant in the present case. Each previous position on the "discount" question, Ap- phase of Applicant's argument as well as all other plicant urges that the Board give "de novo" con- relevant aspects of the question have been caresideration to this question solely on the basis of fully weighed and re-examined. the record made in the present case. Applicant As a result of that careful reconsideration and submitted a comprehensive brief amicus curiae in re-examination the Board has again reached the the General Contract case and the arguments it conclusion that the term "discount" as used in offers now are substantially those urged upon the Section 6(a) (4) includes nonrecourse purchases Board in that case. Briefly, the principal argu- of paper. The reasons for the Board's concluments are as follows: sion are substantially as set forth in the portions 1. That the word "discount" has several mean- of the Board's statement in the General Contract ings and, in construing this word in a penal statute, case at Federal Reserve BULLETIN, March 1958, the Board should not adopt the meaning that it pp. 262-269, which are attached* hereto and did in the General Contract case; and that the made a part of this statement. The conclusion Board should instead give the word either its follows from a careful analysis of applicable "narrowest" meaning as covering a two-party- judicial utterances on the subject, from the conpaper discount transaction where interest is de- text in which the term "discount" is used, and ducted from the face of the note, or at least its from the legislative history of the provision. Each meaning as covering a purchase of paper with of those three considerations separately, and all recourse. three together, lead to the same conclusion. As 2. That the language of the statute does not the Board stated in the General Contract case, support the Board's view in the General Contract supra, p. 266: case that the "broader aim" of Section 6(a) was "The Board is mindful of the facts, stressed by to prevent a holding company from misusing Applicant, that violations of Section 6 are misthe resources of a subsidiary, and that when Sec- demeanors; that criminal statutes are to be strictly tion 6(a)(3) prohibits purchases of securities construed in favor of the defendant; and that, therefore, their language cannot be enlarged to encompass and assets only "under repurchase agreement" it prohibitions beyond its ordinary meaning. As inshows an intention to permit other purchases. dicated above, however, the usual meaning of the word 'discount' appears to include nonrecourse pur- 3. That the word "discount" in Section 6(a) (4) chases of paper. As the Supreme Court of the is used in conjunction with "loan" and "exten- United States said in United States v. Brown, 333 sion of credit" and, by such association, should U.S. 18, 25-26: be read as referring only to transactions in which "'. . . The canon in favor of strict construction is not an inexorable command reliance is placed on the credit or worth of the to override common sense and evident holding company or a fellow subsidiary—in other statutory purpose. It does not require magwords, a "borrowing" as indicated by the head- nified emphasis upon a single ambiguous word in order to give it a meaning contraing of Section 6. 4. That the Danforth case cited by the Board * Not reprinted, see reference indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

924 FEDERAL RESERVE BULLETIN • AUGUST 1959 dictory to the fair import of the whole re- business conducted by FBSC could otherwise meet maining language. As was said in United the "proper incident" and "purposes of the Act" States v. Gaskin, 320 U.S. 527, 530, the canon "does not require distortion or nullifi- requirements of Section 4(c)(6). On this point cation of the evident meaning and purpose the Hearing Examiner stated (p. 940) in part: of the legislation." Nor does it demand that a statute be given the "narrowest mean- "As more fully appears from the factual findings ing"; it is satisfied if the words are given made above, the installment paper that Bancredit their fair meaning in accord with the mani- originates and funnels into FBSC banks is acquired fest intent of the lawmakers.'" by it mainly through branch offices it maintains in various metropolitan centers located outside the Applicant points out that after the Board's de- Ninth Federal Reserve District where all FBSC cision in the General Contract case, the Board, banking subsidiaries are situated. At present, Bancredit has 10 branch offices, all but two of which as required by Section 5(d) of the Bank Holding are located outside that district. At each of the Company Act, recommended to the Congress cities where Bancredit maintains branches, it comchanges in the law which in the opinion of the petes with independent banks for the acquisition of installment paper. At one time Bancredit had as Board would be desirable, and that, among others, many as 20 branch offices simultaneously in operathe Board recommended that nonrecourse pur- tion. If the exemption application for Bancredit is allowed, there is no assurance that Bancredit will chases of paper between banks be exempted from not in the future again expand its operations to the prohibitions of Section 6 of the Act. How- reach into additional areas in which FBSC affiliated ever, these views of the Board as to the desir- banks are not themselves permitted to maintain branch offices; certainly, there is nothing in the law ability of such a change in the law do not alter that would prevent this. the meaning of the law as it now stands. As "The circumstances mentioned above may raise pointed out in the Board's statement in the Gen- a serious question as to whether FBSC's retention of Bancredit would accord with the purposes of the eral Contract case, supra, p. 268: Act. The statute was pointed, inter alia, at pre- "When the Bank Holding Company Act was being venting unfair competition and minimizing the danger considered by Congress, the Board of Governors of undue concentration of banking activities thought of the Federal Reserve System recommended that all to be inherent in uncontrolled expansions of bank of the provisions that became Section 6 be omitted holding company systems.25 It was also incidentally from the bill as 'unnecessarily restrictive* . . .. aimed at curbing the use of the holding company "Such considerations of policy relate more to the device as a means of evading restrictions imposed on advisability or inadvisability of legislation than to banks by Federal and State laws.26 Congress imits interpretation. Having weighed these considera- plemented the aforesaid purposes in part by restricttions, Congress included Section 6 in the Act; and ing bank holding companies from expanding their even under the narrow interpretation of 'discount' banking interests, except under controlled conditions urged by Applicant, the section clearly imposes sub- as set out in Section 3 of the Act. The regulatory stantial prohibitions on the movement of funds provisions thus limiting a bank holding company's within bank holding company groups. . . ." freedom to expand are, however, limited in their reach. They do not specifically apply to restrict For the reasons outlined above and more fully a bank holding company from utilizing the medium explained in the attached excerpt from the Board's of a nonbanking subsidiary, granted exemption under 4(c)(6), to enter additional areas where, in com- Statement in the General Contract case, the Board petition with independent banks serving such areas, feels constrained to agree with the Examiner's offices may be maintained for the purpose of soliciting business to be funneled into the holding comconclusion that the term "discount" in Section pany's banking affiliates. It may be argued, I think 6(a)(4) of the Bank Holding Company Act in- with considerable reason, that for the Board to grant cludes nonrecourse purchases of paper and that, the nonbanking subsidiary a 4(c)(6) exemption under such circumstances, would be for the Board accordingly, Bancredit cannot qualify for exemp- to sanction a device enabling a bank holding comtion under Section 4(c)(6) of the Act. pany to evade restrictions imposed upon it and upon its banking subsidiaries in contravention of the statu- Other Aspects of "Proper Incident" and tory purposes noted above. Evidence is not wanting that a bank holding company's utilization of a non- "Purposes of the Act" banking subsidiary to compete for business against Examiner's views. After setting forth his con- 25 See, e.g., S. Rep. 1095, 84th Cong., 1st Sess., p. 8; H. clusion that Bancredit should be denied exemp- Rep. No. 609, 84th Cong., 1st Sess., pp. 6, 11; 101 Cong. Rec. 8020, 8030, 8032; 102 Cong. Rec. 6750, 6853. tion because its activities conflict with Section so See e.g., 101 Cong. Rec. 8032, 8035. See also 102 Cong. Rec. 6853, and particularly the following colloquy between 6(a) (4) of the Act, the Hearing Examiner stated Senators Capehart and Robertson: "Mr. Capehart: Is the object of the bill not to make certain that, in addition to the discount question under that bank holding companies do not expand, and that bank that section, there is a further question as to holding companies shall not be permitted to do that which banks cannot do? Broadly speaking, is not that what is whether Bancredit's relationship to the banking sought to be done? "Mr. Robertson: That is absolutely correct. . . ." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

925 LAW DEPARTMENT independent banks in areas closed to its banking Applicant's principal arguments can be sumsubsidiaries was looked upon as an evil to be guarded marized substantially as follows: against, not only by proponents of the bank holding company legislation,27 but also by at least one respon- 1. That stockholders of any nonholding comsible national banking official and by the House pany bank are legally free to organize and own a Committee on Banking and Currency as well.28 company like Bancredit, "have it operate just like The Examiner indicated that a possible argu- Bancredit anywhere they may choose, and funnel ment on the other side might be made on the basis the acquired paper into such nonholding company of the opinion of the Board in Federal Reserve bank." BULLETIN, April 1958, p. 431, mentioned above at 2. That any bank could establish offices, and p. 922. As already indicated, that opinion was to purchase paper at them, over several States as the effect that the solicitation of installment paper Bancredit does. business (as distinguished from the actual pur- 3. That Bancredit's activities affirmatively serve chase of such paper) by a nonbanking subsidiary the "purposes of the Act" by contributing to comof a holding company through offices located in petition in the various places where it buys paper. several States constituted an exempted "servicing" 4. That Bancredit's activities are limited to activity under Section 4(c) (1) of the Act. meeting the investment needs of its affiliated banks, The Examiner then stated that on the general and therefore could not be inconsistent with the discretionary question he had discussed he would "purposes of the Act." "express no judgment and make no recommenda- 5. That any bank "could lawfully purchase . . . tion" and that he had "raised the question only to paper directly from the dealers and contractors at indicate that more may be involved in the Ban- Chicago, Tulsa, or anywhere else in the United credit case than just the 'discount' question." States, and could lawfully send its agents to any Exceptions and arguments of Applicant. Appli- and all such locations to effect such purchases cant takes strong exception to the above views of directly by the bank." the Examiner that, even aside from the "discount" 6. That Bancredit's activities are essentially the question, the "proper incident" and "purposes of same as those of the company in the "Company the Act" requirements of Section 4(c)(6) may Y" case mentioned above (Federal Reserve BULbar exemption of Bancredit. LETIN, April 1958, p. 431) in which the Board held that a nonbanking affiliate that solicits in- 27 "See, e.g., statement of Harry J. Harding, President of stallment paper business is exempt under Section Independent Bankers Association, 12th Federal Reserve District, before the Senate Committee on Banking and Currency. 4(c)(l) as a "servicing" company. Hearings on S. 880, S. 2350, and H.R. 6227, 84th Cong., 1st Sess., p. 122. After carefully considering the question of <<28 See H. Rep. 609, p. 16, where the House Committee, whether, aside from the "discount" question, Banexplaining its opposition to a provision granting the Board unrestricted discretionary authority to exempt 'closely related' credit's activities satisfy the "proper incident" and businesses, stated: "Your committee finds itself in full accord with the views "purposes of the Act" requirements of Section expressed by former Comptroller of the Currency Preston Delano, when he testified before the Senate Banking and Cur- 4(c)(6), the Board has concluded that they fail rency Committee in 1950 on the Board's proposal. He stated: "Under this provision, a holding company could engage to meet the test, and that Bancredit should be through its subsidiaries in any other business which the Board, in its discretion, determines to be a 'proper incident' to the denied exemption under Section 4(c) (6) even if business of managing, operating and controlling banks. the "discount" provision of Section 6(a)(4) were "By way of illustrating the possible effect of this sweeping discretionary power, it might be pointed out that if the Board not contained in the Act. In reaching this concluof Governors considered the business of acquiring consumer paper by purchase or otherwise and the servicing and sale sion the Board has carefully weighed all aspects of that paper to be a 'proper incident' to the business of ... banking, a large bank holding company would be in a position of the question, including all arguments offered by to organize and control subsidiary companies in every city of the nation to engage in this business in competition with Applicant. independent banks operating in their respective business areas, and such subsidiary companies could funnel this business into There are discussed below the reasons which the banks of the holding company system. led to the Board's conclusion and persuaded the "Freedom to engage in such activities would give the bank holding company systems a tremendous competitive advantage Board that Applicant's arguments could not be acover independent banks, which cannot engage in similar activities away from their home offices except through duly cepted. authorized branches, which in no case can be established beyond State lines." As stated before, Section 4(c)(6) requires the "It is to be noted that the House ultimately acquiesced in the 'closely related' exemption that was added by the Senate. Board to determine whether or not all the activi- But, that is a matter which goes to the power of the Board ties of Bancredit are "so closely related to the to grant the exemption, not to the question of whether the exemption ought to be granted by the Board in the exercise business of banking or of managing or controlling of its allowable discretion." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

926 FEDERAL RESERVE BULLETIN • AUGUST 1959 banks as to be a proper incident thereto and as to under the national banking laws, a bank may lawmake it unnecessary for the prohibitions of this fully maintain additional offices anywhere for any section to apply in order to carry out the purposes purpose other than (1) receiving deposits, (2) of this Act." The section does not permit the paying checks, or (3) lending money. Purchase Board to limit its inquiry to the narrow question and servicing of third-party paper is not one of of whether the activities at issue are directly for- those three activities. . . ." bidden by law or would be an evasion of law. Putting to one side Applicant's questionable con- Rather, the section requires the Board to reach a tention that operations by a bank like those at considered judgment on the question of whether Bancredit's offices would not be one of the three in the particular circumstance, viewed in the light activities specifically enumerated in the provision, of the purposes of the Act, Bancredit should be Applicant's argument is subject to the even more granted exemption from the general prohibition of basic defect that it misreads the word "include" Section 4 against the ownership of nonbank assets as if it were "mean." As the Supreme Court said by a bank holding company. in American Surety Co. of New York v. Marotta, The extensive geographic spread of Ban- 287 U.S. 513, 516 (1933): credit's operations at the present time, as well as "In definitive provisions of statutes and other writthe even broader scope of those operations in the ings, Include' is frequently, if not generally, used past and their possible extension in the future, ap- as a word of extension or enlargement rather than as one of limitation or enumeration." pear in practice to be largely unavailable to banks Thus, the Office of the Comptroller of the Curwhich are outside a holding company group. Alrency, which charters and supervises national though there appears to be no legal prohibition banks, treats as a branch an office where a naagainst the stockholders of a nonholding company bank establishing an affiliate operation like that of tional bank only exercises trust powers, a func- Bancredit, the record discloses no instance of such tion clearly not one of the three stated in the an operation or relationship of a nonholding com- branch provision quoted above. To the same effect pany bank. This contrasts sharply with the rec- is Boatmen's National Bank of St. Louis v. Hughes ord in FBSC's companion case of First Service (111., 1944) 53 N.E. 2d 403. Applicant's argu- Agencies, Inc., discussed below on p. 928, which ment that establishment by a bank of offices like shows that the insurance agency activities there in those of Bancredit would not amount to the estabquestion are widely prevalent among nonholding lishment of branches cannot be accepted. company banks in the area. The difference prob- Through its wide geographic coverage Bancredit ably is not accidental. Only negligible funds are and its affiliated banks can actively acquire inneeded to establish an insurance agency operation; stallment paper over much wider areas than would but sizable amounts of capital, such as are more be feasible for nonholding company banks. This readily marshaled through a holding company, are can give FBSC banks a competitive advantage and needed for an operation like that of Bancredit. tend toward a concentration of banking activities Bancredit argues that any bank could establish in a manner which is not readily attainable by nonits own offices in several States and purchase paper holding company banks. There can be undeat those offices as Bancredit does. However, this sirable effects not only on banks that compete with contention appears to be based on a misreading FBSC banks, but also upon FBSC banks. of the branch banking laws. Bancredit as a part of its operation necessarily The statute applicable to branches of national has a substantial investment in equipment, a body banks (R.S. 5155; 12 USC 36) states in part: of highly competent personnel, and considerable "overhead" expense. The natural momentum of "The term 'branch' as used in this section shall be held to include any branch bank, branch office, such an organization cannot fail to afford sigbranch agency, additional office, or any branch place nificant attractions for the funds of its affiliated of business located in any State or Territory of the banks. Without deviating in the slightest from the United States or in the District of Columbia at which deposits are received, or checks paid, or money lent" highest business standards, affiliation of such a (Italics supplied.) company with a group of banks is likely to have Applicant quotes this provision and then asserts subtle but important effects on the banks' credit (Applicant's Exceptions and Brief, p. 33): "Thus, judgment and policies. There is inevitably some Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

927 LAW DEPARTMENT tendency for affiliated banks to invest their funds It was doubtless with such considerations in through the established far-flung organization, and mind that the Congress in ordering the divestment a somewhat lessened tendency to seek outlets for of nonbanking assets did not make the requiretheir funds in and around their respective com- ment depend upon whether or not a particular munities. nonbanking business had resulted in actual evils. Banking is of necessity heavily dependent on the As the Board said in Matter of Transamerica, judgment exercised by individual bankers and bank supra, p. 1016: officers in passing upon particular loans and in ". . . The language and history of the Act make allocating the funds entrusted to their care. Factors it clear that Congress intended to eliminate potential which tend even indirectly, and perhaps almost im- evils by correcting what it considered to be unsound corporate structures in bank holding company perceptibly, to influence that judgment in one systems, and that it did not wish to require proof direction or another can be of vital importance of the existence of actual evil in each particular over a period of time in the functioning of par- situation. . . ." ticular banks and the banking system. For the reasons outlined above, "potential evils" The primary credit function of a bank has of the kind against which the Act was directed are traditionally been to serve the credit needs of its present here, in view of such aspects as the incenlocal community, with outside investments play- tives inherent in the arrangement, the lack of ing a definitely secondary role. The Bank Hold- arm's length dealing and the multi-State operaing Company Act was intended, among other tion. things, to prevent undue dilution of this traditional Finance companies and other nonbanking oremphasis on the meeting of local credit needs, and ganizations unaffiliated with banks or bank holdto prevent bank holding companies from having ing companies operate over even wider areas than nonbank affiliations that might undesirably in- does Bancredit. However, as the Hearing Exfluence the credit judgment of bank officers in the aminer pointed out (p. 935), banks predominate holding company group. As the Board said in in the field of repair and modernization loans in Matter of Transamerica Corporation (Federal Re- which Bancredit specializes. Moreover, unaffiliserve BULLETIN, September 1957, pp. 1014, ated nonbanking organizations are not investing 1016): depositors' funds, and the fact that they are not affiliated with banks tends to prevent any effect "To put the matter another way, Congress has recognized that banking is a unique business, with on the investment judgment of banks. unique economic power and responsibilities. Banks Nonholding company banks may acquire paper hold the current funds of the economy and the demand deposits that serve as the nation's principal over wide geographic areas through arrangements medium of exchange. The public interest requires with dealers and contractors, correspondent banks, that decisions as to whether or not a bank extends or through agents. However, such operations are credit in a particular case should be based, as far as possible, solely on creditworthiness. Congress ap- not the same as those through an affiliated comparently felt that this objective could be furthered by pany. Common control is absent; the operations laying down a general rule, subject to only limited exceptions, that no company should own or control are less centralized, more subject to change, more both banks and nonbanking enterprises." nearly at arm's length, and less likely to influence The record in the present case indicates that the credit judgment or policies of the bank supplythe operations of Bancredit have tended to adjust ing the funds. Likewise, the operations of a nonto the investment needs of affiliated banks, and banking company which confines its activities to there is no evidence that the affiliated banks have "servicing," as discussed in the Federal Reserve in fact altered their lending policies in order to BULLETIN, April 1958, p. 431, are different from invest funds through Bancredit. But the kinds of those of a company like Bancredit which actually influences upon judgment that are here at issue purchases paper and resells it to affiliated banks. are intangible, psychological, and often not clearly Among other differences, the purely "servicing" recognized even by the persons directly concerned. operation is apt to be less elaborate, have less Moreover, they may become of great importance "overhead" expense, and involve less marshalling in a particular situation or at a particular time of funds; it is less likely to develop the kind of even though they may be of considerably less organization or relationship that can influence the significance in other circumstances. credit judgment or policies of affiliated banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

928 FEDERAL RESERVE BULLETIN • AUGUST 1959 Accordingly, the Board is convinced that none While the language of Section 4(c)(6) is of Applicant's arguments based on operations couched in the present tense, it does not, in the bearing some resemblance to those of Bancredit Board's opinion, preclude consideration of a reare sufficient to alter the fact that the activities quest for exemption with respect to a corporation conducted by Bancredit fail to meet the "proper in which the Applicant proposes to acquire stock incident" and "purposes of the Act" requirements where, as here, the nature of the activities to be of Section 4(c)(6). carried on by that corporation is susceptible of determination. In the present case those activities Conclusions will comprise substantially the same activities as For the reasons outlined above, the Board has those now carried on by the 19 unincorporated reached the conclusions that: insurance agencies, along with the insurance ac- 1. The activities of Bancredit meet the prelimi- tivities of First Service. Accordingly, it is appronary test under Section 4(c)(6) of being entirely priate to consider the present request as though all "of a financial, fiduciary, or insurance nature." such activities were presently being carried on by Agencies, Inc. Thus, the activities of the 19 in- 2. However, those activities fail to meet the surance agencies must be considered, not as they further test under the section of being a "proper relate to the business of each of the banks with incident" to the business of banking or of manwhich they are connected, but as they relate in aging or controlling banks and of being consistent the aggregate to the business of banking as conwith the "purposes of the Act." They fail to meet ducted by the Applicant and its subsidiary banks. the test both (a) because they conflict with the "discount" provisions of Section 6(a)(4) of the Turning first to the insurance activities of First Act, and (b) because they represent a type of Service, those activities are confined to group life corporate structure, readily available to a holding and hospitalization insurance written for the Apcompany and relatively inaccessible to nonholding plicant and its affiliates; blanket policies for dealers company banks, which is likely to have effects of and affiliated banks covering automobiles and other a kind which the Bank Holding Company Act was merchandise financed on a "floor plan" basis; and intended to prevent. miscellaneous fire and automobile policies written 3. Applicant's exceptions to the Hearing Ex- for employees of the Applicant and its affiliates. aminer's Report and Recommended Decision are The blanket policies are obtained from a nonaffiliated insurance company; commissions are hereby sustained to the extent that they are conpaid to a countersigning insurance agent who may sistent with the foregoing Statement and rejected or may not be connected with a lending subto the extent that they are inconsistent therewith. sidiary bank; but such commissions find their way 4. The request of FBSC for exemption of Banback to the lending banks in the form of compencredit under Section 4(c)(6) should be denied, sation for services rendered. All of these insurand IT IS SO ORDERED. ance activities would be transferred to Agencies, II. First Service Agencies, Inc. Inc. if this request is granted. First Service would continue to perform certain advisory and adminis- Factual summary trative services for the Applicant's banking sub- Agencies, Inc. was organized on August 7, 1957, sidiaries—services which would be of a type under the laws of Minnesota. It presently exists that would render the Applicant's ownership of only on a standby basis and engages in no busi- shares of that corporation exempt under Section ness; none of its stock is owned by the Applicant. 4(c)(l) of the Act. However, if the present request is granted, it is The nature of the activities of the 19 unincontemplated that Agencies, Inc. would take over corporated insurance agencies which would be the business now carried on by 19 unincorporated taken over by Agencies, Inc. requires more deinsurance agencies and also the insurance activi- tailed consideration, since those activities, unlike ties of First Service Corporation ("First Service"), the insurance business of First Service, include a wholly owned subsidiary of the Applicant. At dealings with the general public unrelated to the that time all of the stock of Agencies, Inc. would business of the Applicant's subsidiary banks. be acquired by the Applicant. Within the holding company group there are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 929 52 unincorporated insurance agencies associated represented premiums on life insurance securing with 51 banking subsidiaries of the Applicant. Of loans by such banks. these agencies, 33 are connected with national As of August 31, 1957, about 80 per cent of the banks in places of less than 5,000 population outstanding loans of the subsidiary banks with which, under provisions of Federal law to be which the 19 insurance agencies are connected mentioned later, may directly act as insurance were secured loans; and of these secured loans agents, or with State banks in Minnesota, North 25.4 per cent in dollar amount ($11,604,728) Dakota, and South Dakota where the banking were insured through the connected agencies. Of authorities interpose no objection to the operation those loans as to which security was required, of such agencies for the direct benefit and in effect about 35 per cent carried insurance placed through as departments of State banks. These 33 agen- such agencies. cies are not involved in this proceeding. The re- A final fact of special significance is that the maining 19—those involved in this proceeding— operation of insurance agencies in connection with are connected with 17 national banks in places of banks is a practice that has prevailed for many over 5,000, and with 2 State banks in Montana years in the 4-State area here involved, without where the State banking authorities apparently evidence of objection on the part of the bank supervisory authorities. From a survey made by disapprove of the operation of such agencies the Applicant and relied upon by the Hearing directly for the benefit of State banks. Examiner, it appears that a very large majority of Each of the 19 insurance agencies here invloved all banking offices in this area have bank-conis a partnership with one or more of the principal nected insurance agencies, as indicated by the folofficers of the "connected" bank among its memlowing: bership. Each operates under the direct supervision of the principal officer of the connected Percentage of banking offices with connected bank; and personnel of the bank are utilized in State insurance agencies the operations of the agency. Sixteen of the agen- Minnesota 87 North Dakota. 84 cies occupy space in the banking premises of the South Dakota. 89 Montana 65 connected banks; the other 3 are located in the For offices of State banks, the percentages in places building that houses the bank or in an adjoining of less than and over 5,000 are so follows: building. By virtue of outstanding agreements, the busi- Places under Places over State 5,000 5,000 ness of 16 of the agencies is in effect owned by Minnesota.... 97 70 First Service; in one instance the business is owned North Dakota. 88 50 South Dakota. 93 67 by the Applicant directly; and in the remaining 2 Montana 87 20 cases, the business is carried on for the benefit Comparable percentages for national bank offices of the stockholders of the respective connected that have connected insurance agencies are as folbanks, both of which are majority-owned by the lows: Applicant. Places under Places over The 19 agencies are engaged in a general in- State 5,000 5,000 Minnesota.... 92 48 surance agency business and actively solicit busi- North Dakota. 94 64 South Dakota. 95 57 ness from the public at large. However, 76.8 per Montana 79 11 cent of their customers are also customers of the Thus, it seems clear that the practice of mainconnected banks, i.e., borrowers, depositors, or taining insurance agencies in close connection with safe deposit box renters; and, in dollar volume, banks is fairly widespread in the area involved. about 75 per cent of the premiums are on insur- That it is more common in small towns than in ance written for such bank customers. large cities is not surprising; but even in larger As of December 31, 1956, about 26.4 per cent cities and even among national banks in such cities of the aggregate premiums received by the agen- the practice is not unusual. cies were from policies covering property securing While the practice varies, it appears that in loans made, or paper purchased, by the connected many instances the net income of a bank-consubsidiary banks, and an additional .014 per cent nected insurance agency is paid over directly to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

930 FEDERAL RESERVE BULLETIN • AUGUST 1959 the connected bank, and that in other instances cumstances disclosed by the record of the hearing the insurance agency pays the connected bank for in determining whether, in its judgment, the activirent and services and turns over the remainder of ties of Agencies, Inc. have a relationship to the its income to stockholders of the bank or to a non- business of the Applicant's subsidiary banks sufbanking corporation owned by the bank's stock- ficient to justify granting an exemption in this case. holders. The latter practice appears to prevail In general, it may be said that both Federal and in the present case; after payments to the con- State laws implicitly recognize that insurance has nected banks for rent and services, the income of some general relation to the business of banking. the agencies is distributed to First Service or, in Thus, Section 13 of the Federal Reserve Act, as two instances, to stockholders of such banks. amended in 1916, specifically authorizes national banks located in places of a population of not Compliance with Preliminary Requirements more than 5,000 to act directly as insurance as to Nature of Activities agents. A number of States similarly authorize Since all of the activities of Agencies, Inc. would State banks to act as insurance agents; and in be related to the conduct of an insurance agency many other States, although there is no specific business, it is clear that they meet the preliminary statutory language on the subject, State banks requirement for exemption under Section 4(c)(6) either engage directly in the insurance business or of the Act—that all the activities of the company are associated with insurance agencies in a manner involved be "of a financial, fiduciary, or insurance similar to that involved in the present case. nature." The fact that insurance may be considered as Relation to Banking Business generally related to the banking business and in many respects similar to that business would not Although of an insurance nature, the activities alone be sufficient to justify an exemption under of Agencies, Inc. do not warrant exemption under Section 4(c)(6) of the Holding Company Act. In the statute and the Board's Regulation Y unless view of the language of the statute and of the they are determined by the Board to be "so closely Board's Regulation Y, it is essential that the activrelated" to the business of banking or of managing ities of the company involved—the contemplated or controlling banks, as conducted by the Appliinsurance activities of Agencies, Inc. in the present cant and its banking subsidiaries, as to be a case—must have some direct and significant con- "proper incident" to such business and as to make nection with the business of banking or of manit unnecessary for the prohibitions of Section 4 aging and controlling banks as conducted by the of the Act to apply in order to carry out the pur- Applicant or its banking subsidiaries. poses of the Act. The close physical and personnel connection be- The law prescribes no specific standards to tween the 19 insurance agencies here involved and guide the Board in making such determinations; it the respectively connected subsidiary banks candoes not, for example, require that a majority or not be regarded as decisive, since obviously the even a substantial part of the business of the comstatute was not designed to provide exemption for pany involved be directly connected with transnonbanking organizations that may happen to be actions of subsidiary banks. In effect, it leaves the located in or near the premises of subsidiary banks determination to be made by the Board on the or that may happen to have personnel connections basis of the record of the hearing held in each with such banks. The Board agrees with the Hearcase. As stated by the Senate Banking and Curing Examiner that "such organizational and physirency Committee's Report on the Holding Com- cal integration, while a factor to be considered, pany Act, it was deemed advisable "to provide a does not in itself satisfy the 'closely related' reforum before an appropriate Federal authority quirements of Section 4(c)(6)." (Hearing Exin which decisions concerning the relationship of aminer's Report, p. 949) At the same time, such such activities to banking can be determined in physical and personnel relationships may be reeach case on its merits." garded as giving rise to a presumption that the ac- For the reasons just indicated, the Board re- tivities of the insurance agencies are "related" or gards the statute as imposing upon it a respon- incidental to the business of the subsidiary banks. sibility to consider all of the relevant facts and cir- As has been indicated, approximately one quar- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

931 LAW DEPARTMENT ter of the business of the insurance agencies is tween the activities of a nonbanking company and directly connected with the business of the sub- the business of a bank. Again, however, the Board sidiary banks, and also approximately one quarter feels that the existence of such common customof the secured loans made by the banks are cov- ers should not be completely ignored, but may be ered by insurance obtained through such agencies. given significance as a cumulative factor if other The Hearing Examiner conceded that it is not circumstances suggest the existence of the required necessary for all of the activities of a nonbanking relationship. company to be "closely related" to the business of In this connection, it appears from the record banking, but felt that the statute carries an im- that, except in two places in which there are no plication that there should be "a predominant competing banks, each of the subsidiary banks measure of substantiality" in the relationship. with which the 19 agencies are connected is in (Hearing Examiner's Report, p. 949) He con- competition with one or more other banks in its cluded that, in the absence of special circum- trade area which have connected insurance agenstances, the requirement of "substantiality" is not cies of their own. The Applicant urges that, with met where, as here, the insurance agencies are en- the possible exception of the larger communities, gaged in the general business of selling all kinds of it has become a recognized competitive factor in insurance to the public with only a "minor part" the 4-State area for banks to be in a position to of their activities directly related to banking opera- offer their customers insurance services and advice tions of the affiliate banks. as a part of a well-rounded financial service. This While the Hearing Examiner's views have been contention finds support in the practice heretofore given careful consideration, the Board believes mentioned that sanctions the relationship of inthat, on the basis of the percentages above indi- surance agencies with a great majority of banks in cated, there is reasonable ground for concluding the area concerned. In other words, area practice that a substantial and not merely a minor part of may properly be regarded in the present case as an the activities of the insurance agencies have a important factor suggesting that the activities of direct functional connection with the business of the insurance agencies in question are a proper inthe subsidiary banks. Standing alone, the degree cident to the business of banking in that area. of direct and functional connection found to exist Effect of Authority of National Banks to Act in the present case might not be sufficient in all as Insurance Agents cases to warrant the conclusion that a company's activities are so closely related to the business of In his Report, the Hearing Examiner concluded, subsidiary banks as to be a "proper incident" as previously indicated, that, without regard to thereto and as to be consistent with the purposes area practice, the over-all business that would be of the Act. Nevertheless, it is the Board's judg- conducted by Agencies, Inc. would fall short of ment that the direct connection in the present case meeting the requirements of Section 4(c) (6). He is sufficiently great to be given strong weight, along conceded that it may be proper in certain circumwith other pertinent factors, as suggesting the close stances to give weight to established customs and relationship required by the statute. practices to which the supervisory authorities have The Hearing Examiner concluded that no sig- not objected; but in the present case he felt that, nificance should be attached to the fact that a even if the relationship here involved might be substantial portion of the customers of the insur- viewed as an "incident" to the business of the subance agencies are also bank customers in one form sidiary banks, it should not be regarded as a or another. (Hearing Examiner's Report, p. 949) "proper" incident. (Hearing Examiner's Report, He properly pointed out that, where an insurance p. 951) agency operates in the premises of a bank, it may The consideration which the Hearing Examiner be expected to attract a large proportion of its cus- felt must "control decision" in this case is the fact tomers from persons doing business with that bank. that Federal law empowers national banks to act Again, as in the case of physical and personnel as insurance agents only if located in places having integration, the Board agrees that the existence of a population of less than 5,000. Since 17 of the common customers cannot be given decisive weight 19 banks involved in the present case are national as suggesting the requisite close relationship be- banks located in places of over 5,000, the Hearing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

932 FEDERAL RESERVE BULLETIN • AUGUST 1959 Examiner expressed the view that granting of the without objection by the bank supervisory aurequest for exemption of Agencies, Inc. would thorities. It could also mean that a holding comhave the effect of perpetuating a "subterfuge" and pany controlling only State banks could make use of placing the Board's stamp of approval upon a of bank-connected insurance agencies, while a clear evasion of the law. competing holding company controlling national If the activities of a nonbanking company or banks could not do likewise. their relation to the business of subsidiary banks would involve a violation of the Holding Com- Avoidance of "Potential Evils" pany Act or of some other law, they could not, of In reaching his conclusion—with which the course, be regarded as a "proper" incident to the Board disagrees for the reasons just indicated— business of banking. The Board is not persuaded, that the business of connected insurance agencies however, that the relationship between the insur- is not a "proper" incident to the business of the ance agencies and national banks in places of over Applicant's banks, the Hearing Examiner stated 5,000 that exists in the present case involves either that he had not relied upon certain dicta in the a violation of law or a subterfuge to evade the Board's decision in the Transamerica case (Matter law. of Transamerica Corporation, Federal Reserve None of the Applicant's subsidiary national BULLETIN, September 1957, p. 1014) to the effect banks acts as an insurance agent. Indeed, it ap- that the words "proper incident" and "purposes pears that in Minnesota, North Dakota, and South of this Act," as used in Section 4(c)(6), "limit Dakota no corporation may be licensed as an in- the exemption of the statute to situations which surance agent. Nor does it appear that any of the substantially escape the 'potential sources of evil insurance agencies here involved operate directly against which the general prohibition was difor the benefit of connected national banks in the rected.' " He expressed doubt as to his interpresense that net income of such agencies is included tation of this language in a previous case, apin the income of such banks. Consequently, it parently with the feeling that, if rigidly applied, seems clear that the relationships in question do the so-called "potential evils" principle would not violate the language of the provision of Fed- make it virtually impossible for any company to eral law regarding national banks acting as insur- qualify for a Section 4(c)(6) exemption. He sugance agents. gested that the Board might wish "to clarify its That provision of Federal law does not pro- views on this subject for the guidance of interhibit the operation of insurance agencies in con- ested persons in future cases." (Hearing Exnection with national banks in the manner in aminer's Report, p. 952) which they operate in this case. If such operation As stated by the Board in its decision in the involves a subterfuge or evasion of Federal law, Transamerica case, the purpose of Section 4 of the it is one that has existed for many years and one Act, namely, "to remove * * * potential * * * that, according to the record, has been known to sources of evil," provides "a helpful guide in the Comptroller of the Currency. In these circum- applying the requirements of Section 4(c)(6)." stances, it would be inappropriate for the Board However, Section 4 was clearly not intended to to rest its determination in the present case upon remove all potential sources of evil in the bankthe assumption that the operation of the insurance ing field; it was directed at those that may be said agencies in conjunction with national banks con- to arise from, or be accentuated by, the operastitutes an evasion of statutory provisions admin- tion of bank holding companies. Accordingly, it istered by the Comptroller of the Currency. is important to determine whether a particular It may be noted that adoption of the Hearing type of relationship is peculiar to banks in hold- Examiner's position on this point could mean that ing company groups, or, on the other hand, is a national bank in a holding company group, if prevalent among both holding company and nonlocated in a city of more than 5,000, could not holding company banks. If the latter circumavail itself of the services of a connected insur- stance prevails, it suggests that any "potential ance agency, while a competing State bank in the evils" that may be inherent in the relationship are same place or even a non-holding company na- not of the kind against which Section 4 of the tional bank could have such a connected agency Holding Company Act was directed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

933 LAW DEPARTMENT In the present case, the record indicates that However, for the reasons set forth in the disthe operation of insurance agencies in connection senting statement in the General Contract case with banks—unlike the operation of an affiliated (Federal Reserve BULLETIN, March 1958, p. 270) insurance company as in the Transamerica case— the prohibition in Section 6(a)(4) of the Act is widely prevalent in the area involved, not only against a bank making a "discount" for a fellow among banks in holding company groups but subsidiary is not believed to apply to a nonreamong non-holding company banks as well. The course purchase of paper. Accordingly, that porexistence of such an "area practice" tends to tion of the Board's statement dealing with the negative the potentiality of evils of the type con- "discount" question is not concurred in. On the templated by the Act or by the dicta contained in other hand, the conclusion that Bancredit fails in the Board's statement in the Transamerica case. other respects to meet the exemption requirements of Section 4(c)(6) seems entirely correct. Conclusion Section 4(c) (6) of the Bank Holding Company After careful consideration of all the circum- Act exempts a company from the nonbank diveststances—physical and personnel integration, the ment requirements of the Act only if the comdegree of direct connection between the activities pany meets several tests. One test, which Banof the insurance agencies and the Applicant's credit clearly meets, is that all activities be "of subsidiary banks, the existence of common cus- a financial, fiduciary, or insurance nature." tomers, and particularly the fact that the opera- Another test is that all the activities must be tion of bank-connected insurance agencies is determined by this Board "to be so closely related sanctioned by long-established practice in the area to the business of banking or of managing or conhere involved—the Board has determined that the trolling banks as to be a proper incident thereto activities of Agencies, Inc. would be so closely and as to make it unnecessary for the prohibitions related to the business of banking, as conducted of this section to apply in order to carry out the purposes of this Act." Bancredit fails to meet by the Applicant's subsidiary banks, as to be a this latter test of being a "proper incident" and proper incident thereto and as to make it unof being consistent with "the purposes of this Act." necessary for the prohibitions of Section 4 of the Act to apply in order to carry out the purposes As indicated by its name, a "bank holding comof the Act. To the extent that they are consistent pany" is a form of holding company organization whose principal activity is to engage in the bankwith the foregoing statement, the Applicant's exing business through the vehicle of subsidiary ceptions to the Hearing Examiner's Report and banks. The spirit and letter of the Bank Holding Recommended Decision are hereby sustained. Company Act of 1956 must be construed as limit- Accordingly, for the reasons herein set forth, it ing a bank holding company's operations to the is the Board's judgment that the requested sphere of strictly banking activities, subject to exemption with respect to Agencies, Inc. should only limited exceptions. be granted; and IT IS SO ORDERED. A bank holding company subsidiary such as As indicated in the Board's Order, its approval Bancredit that engages in a form of interstate of this request is based solely on the facts disclosed financial business (that is of itself suspect in view by the record; and if the facts should substantially of the prohibitions that exist against interstate change in the future in such manner as to make branch banking), and by way of credit arrangethe reasons for the Board's conclusion no longer ments that are capable of putting a non-holding applicable, the statutory exemption resulting from company bank competing in the same trade area at the Board's present determination would, of a disadvantage in developing comparable types of course, cease to obtain. earning assets, is not entitled to the divestment exemptions of an Act that is intended in part to SEPARATE STATEMENT BY GOVERNOR MILLS preserve competition between non-holding com- The conclusions of the Board that the request pany and holding company banks. Beyond a berelating to First Bancredit Corporation should be lief that the character of the operations engaged denied and the one relating to First Service Agen- in by Bancredit are contrary to the purposes of cies, Inc. should be granted are concurred in. the Act because of being too far outside of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

934 FEDERAL RESERVE BULLETIN • AUGUST 1959 purview of the closely related supervisory and The Applicant and the Board—the latter in a nonadversary capacity—were represented at the hearing service functions that are the principal ones perby counsel, and were afforded full opportunity to be missible to a nonbanking subsidiary under the heard, to examine and cross-examine witnesses, to terms of the Act, looms the shadow of the prin- introduce evidence bearing on the issues, and to file briefs and proposed findings. Orders correcting ciple of "potential evil." Objection as a "poerrors in the transcript were entered on April 14, tential evil" must be raised to practices like those 1958, and on May 9, 1958. On May 26, 1958, the Applicant submitted proposed findings of fact and followed by Bancredit in originating loans and conclusions of law, along with a brief in support farming them out to subsidiary banks of its parent thereof, all of which have been considered.2 bank holding company that under unscrupulous Upon the entire record in the case and from my observation of the witnesses, I make the following: sponsorship conceivably could expose the subsidiary banks to a kind of exploitation that might FINDINGS OF FACT eventualy threaten their financial stability. All cir* cumstances considered, a Section 4(c)(6) divest- I. Introduction ment exemption of Bancredit is not consistent with 1. First Bank Stock Corporation, a Delaware corporation with its principal office and place of business the provisions of the Bank Holding Company Act at Minneapolis, Minnesota, is a bank holding comof 1956. The application for exemption must pany as defined in Section 2(a) of the Act, and therefore be denied. is duly registered with the Board as such. As of December 31, 1957, the outstanding capital stock of FBSC consisted of 3,493,127 shares of common stock, par value $10 per share, entitled to one vote REPORT AND RECOMMENDED DECISION per share. The shares were registered as of No- STATEMENT OF THE CASE vember 1, 1957, in the names of 14,440 shareholders. The assets of FBSC alone as of December 31, 1957, On or about December 5, 1957, First Bank Stock were $128,720,190 and the assets of FBSC and all Corporation, a duly registered bank holding com- its active affiliates on a consolidated basis as of pany, herein called the Applicant and at times also the same date were $1,679,510,994. FBSC, filed with the Board of Governors of the 2. FBSC owns approximately 95.3 per cent of the Federal Reserve System, herein called the Board, aggregate par value of the capital stock of 86 bank afrequests for Board determinations, pursuant to Sec- filiates which maintain 92 offices, including 6 branches, tion 4(c)(6) of the Bank Holding Company Act of in 74 communities situated in the States of Minnesota, 1956, 70 Stat. 133, herein the Act, exempting from Montana, North Dakota, South Dakota and Wisthe prohibitions of Sections 4(a)(l) and (2) of consin, all in the Ninth Federal Reserve District. the Act (1) the Applicant's retention of its snares Eighty-four of the banks conduct a general commerof stock in First Bancredit Corporation and (2) its cial banking business. Of the remaining two banks, proposed acquisition and retention of the shares of one is engaged solely in the general trust business stock of First Service Agencies, Inc.1 On December and the other is engaged principally in the trust 20, 1957, the Board ordered a hearing on the afore- business but also accepts some deposits. Attached said requests. Notice of the requests for such deter- hereto as Appendix A is a list of such banks, their minations and of the order directing a hearing thereon locations, and the deposits in each of them as of was published in the Federal Register on December 28, December 31, 1957. The Appendix also contains 1957. [22 Federal Register 10980] The hearing certain additional information pertinent to the exempwas held at Minneapolis, Minnesota, before the under- tion application relating to First Service Agencies, signed, Arthur Leff, a duly designated hearing exam- Inc. ("Agencies Inc."). iner, on January 14 through January 22, 1958. A 3. For administrative purposes, FBSC divides its reopened hearing was held on April 17 and 18, 1958. banks into three groups. One is the Minneapolis group, made up of the nine FBSC subsidiary banks 1 The particular sections of the Act here applicable are: in the Minneapolis area and headed by the First Sec. 4(a) Except as otherwise provided in this Act, no bank National Bank of Minneapolis which provides the holding company shall— others with management guidance and assistance (1) after the date of enactment of this Act acquire direct and otherwise services their operations in many ways. or indirect ownership or control of any voting shares of any company which is not a bank, or The second group is composed of 7 banks in the (2) after two years from the date of enactment of this St. Paul area and is headed by the First National Act . . . retain direct or indirect ownership or control of any Bank of St. Paul which functions vis-a-vis the others voting shares of any company which is not a bank or a bank in its group in like manner. The third group conholding company. . . . sists of the remaining 70 banks located outside the (c) The prohibitions of this section shall not apply— Twin Cities and their suburbs and is known as the • * * * First Service group. The members of this group (6) to shares of any company all the activities of which receive guidance, assistance and services from First are of a financial, fiduciary, or insurance nature and which the Board after due notice and hearing, and on the basis of the record made at such hearing, by order has determined 2 The proposed findings to the extent they involve matters to be so closely related to the business of banking or that are considered relevant and material to the issues of this of managing or controlling banks as to be a proper incident proceeding are in effect ruled upon by the findings made thereto and as to make it unnecessary for the prohibitions of below; they are adopted where their terms or substance are this section to apply in order to carry out the purposes of this included in or are consistent with the findings made below, and Act; . . .. are otherwise rejected. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 935 Service Corporation, a wholly-owned nonbanking II. First Bancredit Corporation servicing corporation of FBSC. 4. In addition to its bank holdings, FBSC owns A. DESCRIPTION OF BANCREDIT'S OPERATIONS AND THEIR RELATIONSHIP TO AFFILIATED BANK ACTIVITIES all or substantially all of the shares of stock of a number of active nonbanking subsidiaries. Several 1. First Bancredit Corporation is a Delaware corof them—evidently regarded by the Applicant as poration, incorporated in 1928 under the name of exempt from the prohibitions of Section 4(a)(2) of Lumberman's Acceptance Corporation. FBSC purthe Act by virtue of the provisions of Section 4(c)(l) chased all the stock of that corporation in late 1929 thereof—are in no way involved in this proceeding.3 and shortly thereafter by amendment to the certifi- Two other nonbanking subsidiaries are involved in this cate of incorporation changed the corporate name to proceeding, one directly, the other peripherally. They First Bancredit Corporation. Bancredit's outstanding are First Bancredit Corporation ("Bancredit") and capital stock, entirely owned by FBSC, now consists First Service Corporation ("First Service"). of 10,000 shares, all of one class, without nominal or (a) Bancredit, as it will more fully appear below, is par value, and with full voting rights. Bancredit's engaged principally in purchasing and servicing in- principal office and place of business is located in the stallment paper which it sells exclusively to FBSC First National Bank Building, St. Paul, Minnesota. banking subsidiaries. Its only other activity is to Bancredit also maintains branch offices in various provide certain incidental accounting, statistical and parts of the country. advisory services to FBSC affiliated banks. The 2. Bancredit is engaged principally in the business Applicant has taken the position that Bancredit is of purchasing and servicing installment paper of kinds qualified for exemption from the prohibitions of eligible for investment by FBSC affiliated banks. Section 4(a)(2) of the Act, not only under the About 80 per cent of the face amount of the paper provisions of Section 4(c)(6) of the Act, but under it has purchased has been repair and modernization the provisions of Section 4(c)(l) as well. However, paper insured under the provisions of Title I of the on the basis of the allegations contained in the Ap- National Housing Act. The balance, at least in recent plicant's exemption request in Case No. BHC-36, years, has consisted of appliance financing paper acthe Board has heretofore expressed its opinion that quired from dealers through arrangements with pubthe activities of Bancredit are not such as to qualify lic utility or other companies (known as "schedule" it for exemption as a servicing company within the paper) and miscellaneous property improvement meaning of Section 4(c)(l) of the Act. This pro- paper not insured under Title I of the National ceeding is solely concerned with the issue of whether Housing Act.4 Bancredit is the largest single organizaan exemption determination should be made under tion in the nation engaged in originating Title I paper. In the acquisition of installment paper, Bancredit Section 4(c)(6). competes principally with banks, but it also competes (b) First Service is engaged in the business of to some extent with other institutions, such as mortperforming various services for the Applicant and gage servicing companies, building and loan comits subsidiaries. Such services include advice and panies and sales finance companies.5 administrative services with respect to bank operations, investments, taxes, banking premises, auditing, 3. As will be more fully disclosed below, all inand the purchase of supplies and equipment. In stallment paper purchased by Bancredit is acquired addition, First Service is now also engaged in in- for resale to FBSC affiliated banks, and the volume surance agency activities. This it does both directly of such paper is accordingly geared to the investment through certain of its officers and employees who are needs of affiliated banks. Because of the lack of licensed agents, and indirectly through a number large metropolitan areas in the Ninth Federal Reserve District, Bancredit considers it necessary to go of affiliated bank-related insurance agencies in which outside that district to acquire on a practical basis it has a proprietary interest. In the opinion of the Title I and other paper in sufficient volume to meet Applicant, all the activities of First Service, other its affiliated banks' requirements. To assure an adethan its insurance agency activities, are of a bank quate supply of such paper, to achieve the advantages servicing character within the intendment of Section of geographical diversification, and to provide for 4(c)(l). If the Applicant's Section 4(c)(6) exempappropriate servicing facilities at the points of origin, tion request relating to First Service Agencies, Inc., Bancredit maintains a number of branch offices in is granted, the Applicant proposes, inter alia, to have various metropolitan areas scattered through the natransferred to Agencies, Inc. both the insurance tion. In the past, the number of branch offices has agency business which First Service now directly fluctuated according to the volume of paper required. conducts and the assets of the bank-related insurance At one time Bancredit had as many as 20 in operaagencies in which First Service now has an ownertion at one time. As recently as 1947 it had 17 offices. ship interest—as will hereinafter more fully appear. Since then Bancredit has closed 7 offices including With the insurance agency aspects of First Service's offices at Boston, Buffalo, Cleveland and Cincinnati. activities thus out of the way, the Applicant con- It now has 10 branch offices located in the cities of siders that First Service will then automatically qualify for divestiture exemption as a bank servicing * Thus, during 1957 Bancredit purchased installment paper company under Section 4(c)(l) of the Act without in the face amount of $32,566,352, broken down as follows: need for further application to the Board. Title I paper—$25,933,080 (79.6 per cent); "schedule" paper— $4,478,860 (13.7 per cent); uninsured property improvement— $2,154,411 (6.7 per cent). 3 These include three companies (First Building Corporation, 5 The extent to which banks predominate in this field is First Building Corporation of Montana, and First Building revealed by the following figures. At the end of October Corporation of North Dakota, Inc.) which own properties 1957, the total of outstanding repair and modernization loans occupied in whole or in part by various banking subsidiaries in the nation amounted to $1,988,000,000. Of that amount, of the Applicant, and one (First Minneapolis Company) which $1,531,000,000 was held by commercial banks, $23,000,000 by is engaged in liquidating assets acquired from FBSC banking sales financing companies, and $434,000,000 by other financial subsidiaries and in managing certain real estate owned by institutions. See Federal Reserve BULLETIN, December 1957, First National Bank of Minneapolis. at pp. 1400-01. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

936 FEDERAL RESERVE BULLETIN • AUGUST 1959 Chicago, Corpus Christi, Dallas, Houston, Indian- nature may also be agreed upon in the case of other apolis, Kansas City, Minneapolis, St. Louis, St. Paul noninsured paper acquired by Bancredit. and Tulsa. The number of items and face amount 6. In purchasing the installment paper, Bancredit of installment paper, outstanding as of December 31, pays the dealer or contractor the cash price charged 1957, that originated at each such office, and the the customer for the appliance sold or the improvenumber of Bancredit's regular employees at each ment made. This is less than the face amount of the such office is shown by the following table: loan as reflected by the installment note drawn by Outstanding Accounts December 31, 1957 customer. In computing the face amount of the note Number there is added on to the cash price the carrying or Number Face regular interest charges for the term of the loan. Office of items amount employees Chicago 12,508 $4,907,650 7 7. Bancredit does not retain in its own portfolio Corpus Christi 5,404 1,784,105 3 any of the installment paper it acquires, but sells all Dallas 24,950 7,567,767 15 of it shortly after acquisition to or for the account of Houston 16,423 6,149,573 10 Indianapolis 14,530 5,324,293 9 FBSC affiliated banks. That has been Bancredit's Kansas City 10,490 3,765,772 6 consistent policy since 1933.9 And it is the policy Minneapolis 18,477 6,475,572 8 St. Louis 11,080 3,759,873 7 which both the Applicant and Bancredit state they St. Paul 16,296 5,216,901 6 intend to maintain in the future if the instant divesti- St. Paul—Home Offices 10,659 2,152,376 160 Tulsa 15,869 5,036,328 10 ture exemption application is granted. At present, Bancredit sells all its paper directly to the affiliated Total 156,681 $52,140,210 241 First National Bank of St. Paul, which in turn sells 4. Bancredit's board of directors, which establishes participation or undivided interests in pools of acits policies and determines the scope of its operations, quired paper to other FBSC affiliated banks in the is composed of principal officers of FBSC, of Ban- manner to be more fully described below. Bancredit credit, of First National Bank of Minneapolis, of has never sold any paper to anyone other than an First National Bank of St. Paul, and of First Service affiliated bank. Corporation. The composition of this board is such 8. Sales made by Bancredit are on a nonrecourse as to provide representation by the top management basis and at a price equal to the cost of the paper to not only of Bancredit and the holding company, but Bancredit (i.e., the amount actually disbursed by Banof each of the three divisions in which the FBSC credit to the dealer or contractor from whom the banks are administratively grouped. At least once a paper was purchased.) The price paid Bancredit is year, and sometimes more often, estimates are made thus less than the face amount of the paper sold. at board meetings as to the FBSC banks' investment In other words, the paper is negotiated at a discount. requirements for installment paper of the types origi- 9. Notwithstanding the sale, Bancredit continues to nated by Bancredit, and Bancredit's acquisition operaservice all installment paper sold. Title I paper sold tions are then tailored to fit such estimates. to the First National Bank of St. Paul is now serviced 5. As indicated above, the types of installment paper pursuant to a service agreement between that bank acquired by Bancredit fall into three general categories—(a) Title I insured paper; (b) so-called and Bancredit, dated December 1, 1948.10 All paper "schedule" paper covering sales by dealers of gas other than Title I paper is referred to as "agency" and electric appliances pursuant to contractual ar- paper and is serviced by Bancredit under a separate rangements made between Bancredit and utility com- servicing agreement, dated August 1, 1955, made panies; 7 and (c) other paper covering home improve- between Bancredit and the First National Bank of ments of a type similar to Title I paper but not St. Paul as agent. Under the servicing agreements, insured. Bancredit handles all details in connection Bancredit makes all collections, arranges for Title I with the acquisition of such paper, including the insurance on behalf of the purchasing bank, files investigation and approval of the credit of the obli- claims under Title I insurance where necessary, engors. The installment notes are drawn to the order forces guaranties, and performs all other operational of the dealer or contractor selling the appliance or details from the inception to the consummation of the making the home improvement, and are endorsed by paper. Collections on the paper are remitted to the him to the order of Bancredit. The dealer endorse- First National Bank of St. Paul daily as received, acments are on a nonrecourse basis, except in certain companied by detailed reports. Account and other situations, not applicable to Title I paper, where recourse is provided for in the event of an obligor's records covering the transactions involved are maindefault in the early installments of a note. In the case tained by Bancredit. Bancredit computes the monthly of the "schedule" paper, provision is customarily made earnings on the paper for the affiliated participating for setting aside a small percentage of the discount banks, and also provides suitable accounting for as a reserve fund against which losses are charged and out of which the utility company is compensated for its collection services.8 Dealer reserves of like lea 9 s P t ri p o a r r t to o f 19 th 3 e 3 , in B s a ta n l c l r m ed en it t r p e a ta p i e n r e d i t in a cq it u s i re o d w , n an p d o rtf f o in l a io n ce a d t its operations by borrowing against such paper from banks, including FBSC affiliated banks. That practice was, however, 8 Outstanding balance of closed offices. completely discontinued with the enactment that year of Section 7 The arrangements provide for monthly billing by the utility 23A of the Federal Reserve Act which imposed limitations on customers of installments payable by the customers. loans or extensions of credit that might be made by member 8 The reserve arrangements typically provide for payment banks to affiliates. (U.S.C. Title 12, Sec. 371c.) to the utility of the excess over a stipulated percentage of the 10 An identical agreement was made as of the same date outstanding balance of all accounts being serviced by the between First National Bank of Minneapolis and Bancredit. utility company, as well as for payment to the utility com- Though this agreement has never been canceled, no installpany of any balance remaining in the reserve fund after all ment paper has been directly sold under it to the First accounts have been liquidated. National Bank of Minneapolis since October 1954. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 937 dealer reserves and other loss reserves.11 In sum, the remitted to Bancredit as compensation for its services. affiliated banks, apart from the auditing of reports The following table shows the average bank investand the receipt of earnings and other remittances, ments in Bancredit paper during the past five-year have little if any work to do in connection with their period and the distribution of gross earnings realized investments in Bancredit paper. Their gross earnings thereon: on such paper therefore represent the equivalent of Provision a net yield. Average Banks' for FHA 10. Earnings on Bancredit paper are determined and bank Gross earnings insurance Bancredit are distributed to the participating banks and to investment discount on and service Year for year earned investments reserves fees Bancredit, respectively, in the following manner: 1953 $65,403,846 $5,775,936 $3,252,295 $782,319 $1,741,322 Bancredit prepares and submits each month to the 1954 62,175,512 5,713,887 3,135,563 864,781 1,713,543 First National Bank of St. Paul computations show- 1955 56,104,926 5,503,619 2,788,459 845,928 1,869,232 ing the discount earnings during the previous calen- 1956 56,407,716 5,525,576 2,820,386 841,970 1,863,220 1957 50,039,471 4,946,806 2,627,072 690,496 1,629,238 dar month on all outstanding paper purchased from Bancredit. (Separate computations are prepared and 12. Participations in Bancredit installment paper are submitted for the Title I paper and for the "agency" sold by the First National Bank of St. Paul to other paper.) From the earnings thus shown there are FBSC affiliated banks at original cost adjusted for colfirst deducted the FHA insurance costs and coin- lections applied and discounts earned through the date surance contributions, in the case of Title I paper, of purchase of the participation. The sales are on a and the required reserve contributions, in the case of nonrecourse basis. the "agency" paper. There is then set aside an agreed In the case of Title I paper, the First National Bank upon percentage of the average investment during of St. Paul grants to affiliated banks undivided perthe month of all participating banks in all paper sub- centage participations in a liquidating block of paper ject to the computation. The amount so set aside is that has been built up and segregated by the First Naretained as a profit on the paper by the First Na- tional Bank of St. Paul for that purpose. The segretional Bank of St. Paul for its own account and for gated block is reduced daily by collections received on distribution to the other participating affiliated banks, paper contained in the block, the collections being disaccording to their respective interests. Whatever re- tributed to participants according to their respective mains is then paid over to Bancredit as its earned shares in the entire block. At the end of each month compensation for servicing the paper.12 Thus, prac- the participants are given the opportunity to increase tically speaking, both the affiliated banks and Ban- their investments by taking a larger percentage of the credit share in the earnings on the installment paper, total block, thereby reducing pro tanto the shares of although the banks' yield is net, while that of Ban- First National Bank of St. Paul in that block.14 If a credit is, of course, reduced by its operating costs participating bank does not purchase additional particiin acquiring and servicing the paper. pations, its investment in the pool continues to be re- 11. The banks' rate of return on their average in- duced by collections as they are received. While a vestment in Bancredit paper is revised by agreement segregated block is thus being liquidated, the First Nafrom time to time, fluctuating with prevailing money tional Bank of St. Paul builds up by purchases from rates. At the time of the hearing the banks' yield Bancredit for its own account an additional block of was at the rate of SlA per cent per annum. That Title I paper. When the previously segregated block was the high point of the banks' yield to date. At has been reduced to a point where it is insufficient to times in the past the yield has been as low as 2Vi permit the sale of additional participations, the newly per cent.13 Since the discount rate on the installment built-up block is combined with the outstanding balpaper normally remains stable, the return to Bancredit ances in the old block to form a new segregated liquidiminishes as the banks' yield increases, and vice dating block out of which percentage participations versa. During the five-year period from 1952 through are offered. 1956, the affiliated banks' share of gross earnings on Participations in so-called "agency" paper—that is, Bancredit paper came to 53 per cent, insurance pre- all paper other than Title I insured paper—are handled miums and loss reserves absorbed 14.4 per cent, and somewhat differently. Such participations are govthe balance of 32.6 per cent represented the earnings erned by an agreement between the First National Bank of St. Paul, as agent, and such First Bank Stock 11 In the underlying agreement relating to "agency" paper, Corporation affiliated banks, including the First Naprovision is made for the deduction of stipulated percentages tional Bank of St. Paul, as elect from time to time to of the earnings thereon to be held by Bancredit in an escrow fund against which all net losses on agency paper, after participate as principals under that agreement. application of all guaranties or other reserves, are to be charged. This reserve is in addition to the collection fee and 14 Bancredit at the end of each month consults with and dealer reserves which in the case of some of the agency paper advises representatives of each of First Bank Stock Corare set up at the source, as adverted to above. The under- poration's banking groups of the availability of additional Banlying agreement relating to Title 1 paper makes provision for credit investments and of the amount of additional purchases deduction of a stipulated percentage of the net earned dis- required to be made by their affiliates if they would maintain count on such paper to be held by the First National Bank their outstanding investments as of the beginning of the month of St. Paul as a coinsurance reserve against which the dif- or otherwise meet their investment needs. The banks in the ference between any loss on insured paper and the 90 per cent St. Paul group are individually contacted by the investment thereof recoverable under FHA insurance may be charged. officer of the First National Bank of St. Paul. The banks in 12 As additional compensation, Bancredit retains, without the Minneapolis group are directly contacted by an official accounting therefor to the First National Bank of St. Paul, of Bancredit who must, however, obtain approval as to new all late charges, collection charges, extension fees, reinstate- commitments from an officer of the First National Bank of ment fees and attorneys' fees that may be collected from Minneapolis with supervisory functions over Minneapolis the maker of any paper in default. This comes to a sub- affiliates. All other banks are contacted by the First Service stantial sum, amounting in 1957, to $213,953. It also retains Corporation by letters containing specific suggestions as to for its own account credits allowed it under a group credit additional allotments of Title I paper to be taken by each life insurance policy, to be described below. participant in the First Service group. Although there have 13 The banks' rate of return on Bancredit paper has usually been occasions where affiliated banks have refused to purchase been above their average rate of return on total loans and additional allotments so suggested, most commonly they adopt discounts. the suggestions made. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

938 FEDERAL RESERVE BULLETIN • AUGUST 1959 "Agency" participants invest fixed amounts in a re- stallment loans.13 The ratio was, of course, much volving fund from which the Agent buys uninsured higher in the case of some of the individual bank affil- Bancredit paper. Principal collections on the "agency" iates. For example, at the end of 1957, the investment paper are not normally distributed but are used by the in Bancredit paper of First National Bank of St. Paul Agent to repurchase like paper. Each participating accounted for approximately 13 per cent of its total bank has an undivided interest in all paper and undis- net loans and discounts and for approximately 60 per tributed principal funds held by the First National cent of its total installment loans. Bank of St. Paul, as agent, in a fraction equal to that 16. In terms of relative yields, Bancredit paper has portion which its net investment in the revolving fund proved a desirable form of investment for FBSC banks. bears at the time to the aggregate at the same time of Except for the years 1946 and 1947, the rate of yield the investments therein by all participating banks.16 on Bancredit papers (which is net) has been at least 1 13. Among the FBSC affiliated banks, the First Na- per cent above the gross rate on prime commercial tional Bank of St. Paul has consistently been the largest loans. It has always been substantially higher than the investor in Bancredit paper. For several years preced- average rate of earnings on bonds and securities. In ing the end of World War II, its investments in Ban- each of the years from 1952 through 1957, the affilcredit paper constituted from 35 to 65 per cent of its iated banks' net return on Bancredit paper has extotal loans and discounts. That percentage has since ceeded $2,500,000, and has accounted (in the years declined, but its investment in Bancredit paper has con- 1952-1956) for from 8.1 per cent to 13.9 per cent of tinued during the past ten years to average about $35,- the total interest earned on loans held by all affiliated 000,000. For a period of years from about 1948 until banks.19 about 1955, the First National Bank of Minneapolis 17. The purchase of Bancredit paper, or participaalso had substantial investments in Bancredit paper. tions therein, has to date proved a safe investment for But in more recent years the Minneapolis bank has FBSC affiliated banks. Between 1934 and the end of been able to meet its needs through its own direct in- 1956, the loss on all paper purchased from Bancredit stallment lending operations, and as a result its acquisi- totaled $153,527 or 1/55 of 1 per cent of the cumulation of Bancredit paper or participations therein has tive total volume ($839,866,581) purchased from Banappreciably fallen off. However, as the acquisitions credit. Moreover, the loss reserves have been more of the First National Bank of Minneapolis has de- than sufficient to absorb this relatively small loss. clined, the slack has been taken up by increased partici- Thus, out of the total of gross earnings on all paper pations of other affiliated banks. As of the end of sold to affiliated banks, provision was made for loss 1957, 75 of the 86 banks in the First Bank Stock Cor- reserves in the amount of $801,693, or $648,165 in poration holding company family had outstanding in- excess of the actual losses incurred to December 31, vestments in Bancredit paper—including 7 banks in the 1956. St. Paul group, 8 banks in the Minneapolis group, and 18. Bancredit's activities relating to the acquisition 60 banks in the First Service Corporation group. The and servicing of installment paper, as described above, following table shows the amount of such investments are clearly of a financial nature. In conjunction thereas of December 31, 1957, by the banks in each such with, however, Bancredit engages in certain additional group as well as their earnings for the year 1957: activities, not heretofore described, which may also be characterized as of an insurance nature. Bancredit Investment Earnings offers credit life insurance to obligors on paper pur- Banking group at for Dec. 31, 1957 year 1957 chased by Bancredit. The insurance is offered under St. Paul 16523,568,880 $1,484,232 group credit life insurance policies which Bancredit Minneapolis 172,729,083 121,655 has with an insurance carrier. The premiums on the First Service 20,140,164 1,019,185 insurance certificates are paid by the obligors to Ban- Total $46,438,127 $2,627,072 credit which in turn makes monthly remittances to the agent, after deducting and retaining for itself 15 per 14. Apart from the paper acquired from Bancredit, cent of the amount of the premiums as a "predeterthe FBSC banks hold substantial amounts of similar mined advance rate credit." The obligors on Banpaper which they originate directly. Thus, as of Au- credit paper have the option to elect whether or not gust 1957, the banks held FHA Title I insured paper they desire to be covered by such insurance. The (exclusive of Bancredit paper) in the unpaid face amounts payable by the obligors for credit life insuramount of $14,809,421, distributed among the three ance are not added as a carrying charge on the installbanking groups as follows: ment paper sold to affiliated banks, but are handled as a separate charge payable to Bancredit. Of the paper St. Paul group . . $2,672,535 purchased by Bancredit in 1957, 35.3 per cent of the Minneapolis group $5,968,991 total number of items purchased, and 43.8 per cent of First Service group $6,167,895 the total face amount of the obligations, were covered by the credit life insurance policy. 15. At the end of 1957, Bancredit paper accounted 19. Bancredit's only other activity is to provide for approximately 6V£ per cent of the total net loans certain accounting, statistical and advisory services and discounts of all bank affiliates and for approxi- to affiliated banks. In conducting its business of purmately 25 per cent of the aggregate of individual in- MThe ratio of investments in Bancredit paper to total loans 15 Under the agency agreement any participating bank may and discounts has gradually declined since 1952, both because give notice at any time of its desire to withdraw from further of a decline in the dollar volume of Bancredit paper and participation. In that event, the agreement provides for because of an increase of approximately 50 per cent in other liquidation or purchase by other participating banks of the forms of loans. Thus, at the end of 1952, the unpaid balance interest of the withdrawing bank. on Bancredit paper was $73,172,707, or 15.6 per cent of the 16 Of this, $20,864,894 represented the investment of the total amount of loans of all affiliated banks. First National Bank of St. Paul. w No percentage ratio has been computed for 1957, be- 17 Of this, $1,048,844 represented the investment of the cause the record does not show the affiliated banks' total First National Bank of Minneapolis. interest earnings on all loans for that year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 939 chasing, selling and servicing installment paper, are of a kind that banks must either provide them- Bancredit has acquired an extensive installation of selves or have provided for them by others. I am IBM tabulating machines and has developed a staff unable to agree that activities, in themselves of a trained in providing the services facilitated by the servicing nature, acquire a financial character within use of such equipment. Bancredit makes its equip- the meaning of Section 4(c)(6) simply because they ment and trained personnel available to affiliated are performed for a financial institution which could, if banks. More specifically, Bancredit handles the ac- it chose, do the same thing itself. But, though of that counting for the installment loan departments and opinion, I do not think it matters in this case. If Banpension fund of the First National Bank of St. Paul credit were engaged solely in furnishing accounting, and its St. Paul affiliates; supplies accounting services statistical and advisory services to FBSC affiliated for the pension fund, school division and payrolls banks, it would be exempted from the Act's divestiture of such affiliated banks; acts as statistical consultant requirements by virtue of Section ^(cMl).28 To the for all affiliates where needed; and assists bank extent that Bancredit's total activities spill over the affiliates in the preparation of plans and contracts "financial, fiduciary or insurance" lines of Section related to the installment loan field. All of these 4(c)(6), the overflow is entirely contained within the are services which the banks must either perform borders of Section 4(c)(l). To hold in these cirthemselves or have performed by others in conduct- cumstances that Bancredit may not qualify for exing their normal banking activities. For such services, emption consideration under Section 4(c)(6) because Bancredit charges an amount substantially equal to some of its activities are of a bank servicing rather its costs for the services rendered. During 1957, than of a financial, fiduciary or insurance nature, Bancredit's compensation for such services amounted would, in my view, both offend logic and be at odds to $88,319, and accounted for approximately 4% with the legislative intent. Sections 4(c)(l) and per cent of its operating income. 4(c)(6) are integrated parts of a single statutory 20. As of December 31, 1957, Bancredit's assets scheme, and may not reasonably be read as if each totaled $1,843,578, and its net worth was $1,286,427. were a separate enactment unrelated to the other. Bancredit's gross income for the year 1957 came to The two exemptions are in harmony, not in conflict. $2,004,376, and was made up as follows: service fees, If full scope is to be given to both exemptions, each Title I paper—$1,318,241; service fees, agency paper must be construed as supplementing the other so as —$310,997; compensation for statistical, accounting to allow in an appropriate case for a combined application. I therefore find Bancredit preliminarily and advisory services—$88,319; late charges and exqualified under the first condition of Section 4(c)(6) tension fees collected—$213,953; and miscellaneous other income—$72,865.20 Total operating and other for exemption consideration. 2. The factual findings made above establish clearly expenses amounted to $1,763,287, leaving a net enough that Bancredit's operations are not only subprofit, before provision for profit-sharing and income stantially related to the business of banking, but are taxes, of $241,089. so closely integrated with FBSC banking activities as to be in effect an adjunct or incident thereto. But this B. ANALYSIS AND CONCLUDING FINDINGS AS TO BANCREDIT alone is not sufficient to satisfy the second require- Under the terms of Section 4(c)(6) of the Act the ment of Section 4(c)(6), as outlined above. For, as ownership by a bank holding company of shares of the Board stated in the Transamerica case, supra, at a nonbanking company is exempted from the pro- pp. 1015-1016, hibitions of Section 4 of the Act only if the following "The section requires that a nonbanking business, conditions are met: in order to be exempted under the provision, (1) All of the company's activities must be of a must be not merely an 'incident', but a 'proper financial, fiduciary or insurance nature, and incident' to banking or managing or controlling (2) The company must be determined by the Board banks." to be so closely related to the business of banking It is in the respect just noted that Bancredit falls short or of managing or controlling banks (a) as to be of the statutory mark. a proper incident thereto and (b) as to make it un- The finding that Bancredit sustains a close relanecessary for the prohibitions of Section 4 of the tionship to FBSC banking operations is predicated Act to apply in order to carry out the purposes of mainly upon Bancredit's origination of various types the Act.21 of installment paper for resale to FBSC banking 1. It is clear, of course, that Bancredit's principal affiliates. In its business relations with FBSC affiliated activities, which consist of the acquisition, sale, and banks, Bancredit acts as an independent contractor. servicing of installment paper, are of a financial na- It initially acquires the installment paper in its own ture. Bancredit, however, is also engaged in an addi- name and then negotiates it with the FBSC affiliated tional activity, involving the rendering of various First National Bank of St. Paul which acts for its accounting, statistical and advisory services to affili- own account and on behalf of other participating ated banks. The Applicant contends that this activity FBSC banking affiliates. The First National Bank of is also "financial", since the services rendered are St. Paul purchases the paper from Bancredit at a disintegrated with banking administrative operations and count, and without recourse. 30 The miscellaneous items were made up largely of dividends 22 Section 4(c)(l) exempts nonbanking companies which on group life insurance coverage, earned credits on credit life are engaged, inter alia, "solely in the business of furnishing insurance accruing to Bancredit under its master credit life services" for a parent bank holding company or its banking insurance policy, and certain recoveries on items previously subsidiaries. For a general description of the type of services charged off. considered by Congress to be of a servicing character, see S. 21 Matter of Transamerica Corp., Federal Reserve BULLETIN, Rep. 1095, p. 12, 84th Cong.; S. Rep. 1095, Part 2, p. 3, 84th September 1957, pp. 1014, 1015. Cong. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

940 FEDERAL RESERVE BULLETIN • AUGUST 1959 The transactions which give rise to the present close it mainly through branch offices it maintains in various relationship between Bancredit and FBSC banking af- metropolitan centers located outside the Ninth Fedfiliates are bottomed on a form of self-dealing the Act eral Reserve District where all FBSC banking subcondemns. Section 6(a)(4) of the Act makes it unlaw- sidiaries are situated. At present, Bancredit has 10 ful for a bank branch offices, all but two of which are located outside that district. At each of the cities where Bancredit ". . . to make any loan, discount or extension of maintains branches, it competes with independent credit to a bank holding company of which it is banks for the acquisition of installment paper. At one a subsidiary or to any other subsidiary of such time Bancredit had as many as 20 branch offices simulbank holding company." taneously in operation. If the exemption application In the General Contract Corporation case,28 the Board for Bancredit is allowed, there is no assurance that construed the term "discount" as used in Section Bancredit will not in the future again expand its opera- 6(a)(4) to include within its compass transactions iden- tions to reach into additional areas in which FBSC tical to those present here, involving the purchase with- affiliated banks are not themselves permitted to mainout recourse of third-party paper by a banking sub- tain branch offices; certainly, there is nothing in the sidiary of a bank holding company from a nonbanking law that would prevent this. affiliate of the same holding company. In view of the The circumstances mentioned above may raise a statutory proscription against this form of self-dealing, serious question as to whether FBSC's retention of it follows virtually as a matter of law, and it is found, Bancredit would accord with the purposes of the Act. that the relationship between Bancredit and the FBSC The statute was pointed, inter alia, at preventing unbanking operations is not such as to constitute a fair competition and minimizing the danger of undue "proper incident" to the business of banking as con- concentration of banking activities thought to be inducted by FBSC and its banking subsidiaries. herent in uncontrolled expansions of bank holding The General Contract case provides square author- company systems.25 It was also incidentally aimed at ity for the finding just made. The Applicant does not curbing the use of the holding company device as a dispute that the factual situation presented here is in- means of evading restrictions imposed on banks by distinguishable from that ruled upon by the Board in Federal and State laws.2>i Congress implemented the the cited case. It contends, however, that the Board aforesaid purposes in part by restricting bank holding was wrong in its statutory construction of the breadth companies from expanding their banking interests, exof the term "discount" as used in 6(a)(4). In effect, the cept under controlled conditions as set out in Section Applicant asks for reconsideration and reversal of the 3 of the Act. The regulatory provisions thus limiting Board's views on that subject as earlier declared. The a bank holding company's freedom to expand are, arguments the Applicant advances to support its posi- however, limited in their reach. They do not specifition, though perhaps more fully elaborated, are basi- cally apply to restrict a bank holding company from cally the same as those which were presented to the utilizing the medium of a nonbanking subsidiary, Board in the Applicant's and amicus curiae briefs filed granted exemption under 4(c)(6), to enter additional in the General Contract case. It would serve no useful areas where, in competition with independent banks purpose to detail them here as they have already been serving such areas, offices may be maintained for the noted and ruled upon by the Board in its carefully con- purpose of soliciting business to be funneled into the sidered opinion in that case.24 I am persuaded that holding company's banking affiliates. It may be the Board's holding in the General Contract case rests argued, I think with considerable reason, that for the on a solid foundation, but even if I thought otherwise, Board to grant the nonbanking subsidiary a 4(c)(6) ex- I would be obliged to follow the precedent there estab- emption under such circumstances, would be for the lished. If the reasoning in that case is to be re-ex- Board to sanction a device enabling a bank holding amined, it must be done at a higher level than mine. company to evade restrictions imposed upon it and For the reasons stated, I shall recommend denial of upon its banking subsidiaries in contravention of the the Applicant's exemption request relating to Ban- statutory purposes noted above. Evidence is not credit. wanting that a bank holding company's utilization of 3. The finding made above is, of course, dispositive a nonbanking subsidiary to compete for business of the exemption application relating to Bancredit. It against independent banks in areas closed to its bankmay be noted, however, that even if a "proper inci- ing subsidiaries was looked upon as an evil to be dent" finding were not precluded by Section 6(a)(4), guarded against, not only by proponents of the bank there would still remain the question of whether the holding company legislation,27 but also by at least one Board in the exercise of its discretionary authority should determine that Bancredit's relationship to the banking business conducted by FBSC is otherwise such 25 See, e.g., S. Rep. 1095, 84th Cong., 1st Sess., p. 8; H. as to meet the "proper incident" and "purposes of the Rep. 609, 84th Cong., 1st Sess., pp. 6, 11; 101 Cong. Rec. Act" requirements of Section 4(c)(6). 80 2 2 6 0 S , e 8 e 0 , 3 e 0 .g , ., 8 0 1 3 0 2 1 ; C 10 o 2 n g C . o R n e g c . . R 80 e 3 c 2 . , 6 8 7 0 5 3 0 5 , . 68 S 5 e 3 e . also 102 Cong. As more fully appears from the factual findings Rec. 6853, and particularly the following colloquy between made above, the installment paper that Bancredit Senators Capehart and Robertson: Mr. Capehart: Is the object of the bill not to make certain originates and funnels into FBSC banks is acquired by that bank holding companies do not expand, and that bank holding companies shall not be permitted to do that which banks cannot do? Broadly speaking, is not that what is sought 23 Matter of General Contract Corporation, Federal Reserve to be done? BULLETIN, March 1958, p. 260. Mr. Robertson: That is absolutely correct . . . 24 The Board's opinion in that case as well as the relevant 27 See, e.g., statement of Harry J. Harding, president of portions of the attached hearing examiner's report, to the Independent Bankers Association, 12th Federal Reserve Disextent approved by the Board, are here incorporated by trict, before the Senate Committee on Banking and Currency. reference. See, particularly, Federal Reserve BULLETIN, March Hearings on S. 880, S. 2350, and H.R. 6227, 84th Cong., 1st 1958, p. 260, at pp. 262-269 and at pp. 282-285. Sess., p. 122. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 941 responsible national banking official and by the House cision in this case. Resolution of the additional ques- Committee on Banking and Currency as well.28 tion can become of decisive importance, however, if It is to be noted that the House ultimately ac- the Board's General Contract Corporation interpretaquiesced in the "closely related" exemption that was tion of Section 6(a) (4) is not adhered to or is otheradded by the Senate. But, that is a matter which goes wise overruled. to the power of the Board to grant the exemption, not to the question of whether the exemption ought III. First Service Agencies, Inc. to be granted by the Board in the exercise of its allowable discretion. A. THE SCOPE OF THIS APPLICATION; THE BUSINESS TO BE CONDUCTED BY FIRST SERVICE AGENCIES, INC. On the other side of the coin, attention should be 1. FBSC has within its holding company system directed to the Board's opinion summarized in Fedsome 52 unincorporated bank-connected insurance eral Reserve BULLETIN, April 1958, p. 431, involving agencies. Appendix A hereto attached indicates the a Section 4(c)(l) question. Corporation Y, a non- 51 banks, including two branches of one bank, that banking subsidiary of a bank holding company which have such agencies. In addition, FBSC's nonbanking was also a bank, solicited dealer installment paper subsidiary, First Service Corporation, is engaged business on behalf of its parent bank through offices through certain of its officers and directors in the located in several adjoining or contiguous States. Y operation of an insurance agency for the placement handled the operational details in connection with of certain limited forms of insurance. The First Servsuch paper in much the same manner as Bancredit ice Corporation agency also acts in a supervisory does, except that it did not initially acquire the paper capacity over the 52 bank-connected agencies. and did not itself discount or advance money for the time obligations. The Board, distinguishing the Ban- 2. Thirty-three of the 52 bank-connected agencies credit situation, expressed the opinion that Y was are not involved in this proceeding. As appears from qualified for exemption under Section 4(c)(l) as a Appendix A, they are connected either with national subsidiary engaged "solely in the business of fur- banks located in communities having populations of nishing services to or performing services for" its bank less than 5,000, or with State banks located in holding company. Although not clearly expressed in the States of Minnesota, North Dakota and South the Board's opinion as reported, it seems to have Dakota. The 33 agencies are conducted under partbeen assumed by the Board that it was proper for nership and other agreements providing for the flow the bank in that case to maintain an agency with of the agencies' net earnings to their respective banks. offices outside its State for the purpose of soliciting For all practical purposes they are operated as deand servicing dealer installment paper on the bank's partments of the banks to which they are attached. behalf. If that assumption is a correct one, it can The National Bank Act empowers national banking scarcely be said that what Bancredit does is an associations in localities having populations of less evasion of the banking laws. It is to be noted, more- than 5,000 to act as insurance agents.29 State banks over, that Bancredit confines its activities to the in Minnesota, North Dakota and South Dakota do acquisition of installment paper required by its bank not possess similar corporate power. But the State affiliates, and the extent of the affiliated banks' needs banking authorities in such States apparently interwould thus seem to fix the limits of its possible ex- pose no administrative objection to having the earnpansion. ings of bank-related agencies enure to the benefit of banks under their supervision. FBSC perceives no On the discretionary question here discussed, I ex- legal impediment to having the 33 agencies continue press no judgment and make no recommendations. under their present form of ownership and operation. I have raised the question only to indicate that more Its instant application is in no wise concerned with may be involved in the Bancredit case than just the them. "discount" question. The conclusion stated above 3. Directly involved in this proceeding are the rethat Section 6(a) (4) precludes a "proper incident" maining 19 bank-affiliated insurance agencies, along finding makes it unnecessary to go further for dewith the agency operated by First Service Corpora- 28 See H. Rep. 609, 84th Cong., 1st Sess., p. 16, where the tion. Seventeen of such 19 bank-affiliated agencies House Committee, explaining its opposition to a provision are attached to national banks located in communities granting the Board unrestricted discretionary authority to with populations of over 5,000, and the remaining exempt "closely related" businesses, stated: "Your committee finds itself in full accord with the views two are attached to Montana State banks. In Monexpressed by former Comptroller of the Currency Preston tana—as in Minnesota, North Dakota and South Delano, when he testified before the Senate Banking and Cur- Dakota—it is a common practice to find insurance rency Committee in 1950 on the Board's proposal. He stated: 'Under this provision, a holding company could engage agencies operated in conjunction with State banks. through its subsidiaries in any other business which the Board, But in Montana, unlike the other States mentioned, in its discretion, determines to be a "proper incident" to the the State supervisory authorities apparently disapbusiness of managing, operating and controlling banks. 'By way of illustrating the possible effect of this sweep- prove of having such agencies directly owned by or ing discretionary power, it might be pointed out that if the operated for the benfit of banks.30 Board of Governors considered the business of acquiring con- 4. The following table sets forth the name and sumer paper by purchase or otherwise and the servicing and sale of that paper to be a "proper incident" to the business location of each of the 19 bank-affiliated agencies of ... banking, a large bank holding company would be in herein involved, the name of its related bank, the a position to organize and control subsidiary companies in date of organization of the agency or its predecessor every city of the nation to engage in this business in competition with independent banks operating in their respective business areas, and such subsidiary companies could funnel 29 Act. September 7, 1916, 39 Stat. 753; Federal Reserve this business into the banks of the holding company system. Act § 13; Marshall National Bank v. Corder, 169 Va. 606, 194 'Freedom to engage in such activities would give the bank S.E. 606. holding company systems a tremendous competitive advantage 30 At one time the two bank-related agencies in Montana over independent banks, which cannot engage in similar were owned and operated for the benefit of the banks to which activities away from their home offices except through duly they are related, but on the advice of FBSC attorneys the authorized branches, which in no case can be established ownership of these agencies was transferred to First Service beyond State lines.' " Corporation in 1947. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

942 FEDERAL RESERVE BULLETIN • AUGUST 1959 where known, the date the agency was acquired by affiliated agency (with First Service Corporation being FBSC or its affiliates, and the present owner of the identified as FSC): Name and location of Name of related Date Date affiliated agency affiliated bank organized acquired Owner Douglas County Insurance Agency First Farmers National Alexandria, Minnesota in Alexandria 1901 1929 FSC Austin National Company The First National Bank Prior to Austin, Minnesota of Austin 1929 1929 FBSC Cloquet Northern Insurance Agency The First National Bank Bank Cloquet, Minnesota of Cloquet 1924 1946 stockholders31 East Grand Forks Insurance Agency The Minnesota National Bank East Grand Forks, Minnesota of East Grand Forks 1930 1930 FSC Security Insurance Agency The First National Bank Fairmont, Minnesota of Fairmont 1929 1930 FSC Hepworth Insurance Agency The First National Bank FSC and Hibbing, Minnesota of Hibbing 1925 1957 FBSC Hopkins Insurance Agency The First National Bank 1905 1948 FSC Hopkins, Minnesota of Hopkins Little Falls Insurance Agency The American National Bank 1887 1929 FSC Little Falls, Minnesota in Little Falls Northfield Insurance Agency Northfield National Bank 1904 1929 FSC Northfield, Minnesota Pipestone Insurance Agency The Pipestone National Bank 1879 1929 FSC Pipestone, Minnesota Bank Worthington National Bank Insurance The Worthington National Bank 1925 1956 stockholders 3 2 Agency Worthington, Minnesota Rosebud County Insurance Agency Forsythe State Bank Prior to Forsythe, Montana 1930 1930 FSC Fort Benton Insurance Agency Chouteau County Bank Prior to Fort Benton, Montana 1930 1930 FSC Stutsman County Insurance Agency Jamestown National Bank Jamestown, North Dakota 1950 1950 FSC Union Insurance Agency The Union National Bank Minot, North Dakota in Minot 1930 1930 FSC Peoples Insurance Agency First National Bank Valley City, North Dakota of Valley City 1932 1934 FSC Wahpeton Insurance Agency The Wahpeton National Bank Wahpeton, North Dakota 1926 1953 FSC South Sioux Falls Insurance Agency The National Bank of South Dakota, Sioux Falls, South Dakota South Sioux Falls Branch 1954 1954 FSC Vermillion Insurance Agency The National Bank of South Dakota, Prior to Vermillion, South Dakota Vermillion Branch 1900 1929 FSC 5. Each of the aforesaid 19 affiliated agencies is set FSC's supervision and control; and (6) that all insurup as a partnership, including among its members one ance commissions or fees due or to become due to the or more officers or other employees of its related affil- partnership or any member thereof are assigned to iated bank as well as at least one individual holding FSC. Another agency (Austin National Company) an insurance agent's license. Sixteen of the affiliated now has a substantially similar agreement with FBSC agencies now have agreements with First Service Cor- as the principal. In the case of the two remaining poration ("FSC") named as the "principal". The agencies (Cloquet Northern Insurance Agency and agreements provide (1) that the agency business is the Worthington National Bank Insurance Agency) the property of FSC; (2) that no member of the partner- partners of each have executed written statements deship (with certain exceptions) shall be compensated claring that they will carry on the insurance agency from the insurance business; (3) that all net proceeds business for the benefit of the stockholders of their of the agency business will be paid over to FSC or to respective affiliated banks, that they will hold the partwhomever FSC may direct; (4) that the agency's assets nership assets on behalf and subject to the direction will upon request and without consideration be trans- of the bank stockholders, and that they will account to ferred to, or as directed by, FSC; (5) that the business such stockholders ratably for all sums derived from and affairs of the insurance agency will be subject to the operation of their agency business. 6. FBSC proposes to consolidate into a new sub- 81 First Bank Stock Corporation owns approximately 60 per sidiary corporation the ownership interests now held cen 82 t F o B f S t C h e n s o t w oc k o w o n f s T 9 h 4 e F pe ir r s t c e N n a t ti o o f n a t l h e B a o n u k t st o a f n d C in lo g q u s e to t. ck of by FSC and FBSC in the 19 bank-affiliated insurance this bank, the balance being directors' qualifying shares. agencies referred to above, and also to transfer to that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 943 corporation the ownership of the insurance agency banks, with various degrees of separation from the business now conducted by First Service Corporation. banking quarters. Some are located in a separate Toward that end FBSC caused First Service Agencies, room or alcove off the banking quarters; others are Inc. (hereinafter referred to as Agencies, Inc.) to be divided from the banking quarters by partial partiincorporated on August 7, 1957, under the laws of tions; still others by railings; while some have no Minnesota. Agencies, Inc. now exists on a standby marked separation at all except for an identifying sign on a desk which may or may not also be used for basis; it has not yet issued any of its stock, and its banking purposes. The other three agencies have sepapresent officers and directors are members of the law rate locations, in each instance near or adjacent to the firm representing FBSC. If FBSC's instant applica- premises of its related bank.37 tion for a Section 4(c)(6) exemption determination is granted, FBSC intends to purchase all the shares of Each agency is operated under the direct supervision Agencies, Inc. to be issued and outstanding,83 to lend of a principal officer of the bank to which it is attached. Four of the agencies have no licensed agent that corporation such additional funds as it may rewho is engaged full time in insurance activities, two quire, and simultaneously and upon payment of approhave full time agents only, and all others have both priate consideration therefor to cause to be transfull and part time agents. The part time agents devote ferred to Agencies, Inc., the business, property and most of their time to the banking activities of the afassets of the 19 bank-related insurance agencies along filiated banks, and are compensated for all their time with the insurance agency business now operated at by the banks. The full time agents in some instances the office of First Service Corporation.84 After trans- are paid by the agency and in others by the affiliated fer, the agencies are to be operated as partnerships, bank. just as they now are, except for the changes in bene- 2. The 19 bank-affiliated agencies are each engaged ficial ownership. All of them, except Cloquet North- in a general insurance agency business, writing all ern Insurance Agency, will enter into agreements with kinds of insurance. Although a substantial amount Agencies, Inc. in a form substantially identical to the of their business is derived from customers of their agreement which most of them now have with FSC. affiliated banks, the agencies also actively solicit busi- In the case of Cloquet, the operation of the partner- ness from the public at large. The broad range of the ship will be subject to the same form of statement that types of insurance they write is reflected generally by now governs its relationship to the stockholders of The the following table showing (except in the case of hail First National Bank of Cloquet, except that the state- and auto consumer finance retail insurance) the total ment will be amended to name as principals Agen- live premiums as of December 31, 1957, on policies cies, Inc. and the stockholders of the Cloquet Bank placed by the 19 agencies: ** other than FBSC.35 Total 7. All the activities of Agencies, Inc.—if the present Types of insurance premiums exemption application is granted and Agencies, Inc. Automobile $ 615,560 Automobile, consumer finance blanket policies, retail.. 465,098 is activated—will be of an insurance nature. Fire and extended coverage—city 1,648,727 8. Save for the change in the form of ownership and Fire and extended coverage—farm 193,649 the elimination of certain noninsurance activities now Fire and wind—city 3,788 Fire and wind—farm 32,429 conducted by two of the agencies,3'5 the operations of Hail 269,885 the 19 bank-affiliated agencies will continue virtually Public liability, except automobile 230,344 Personal property floater 31,251 unchanged. For purposes of this proceeding, it is Workmen's compensation 110,630 therefore important to explore in greater detail the Fidelity and surety 76,847 manner in which they now function and to examine Burglary and robbery 37,179 Boiler and machinery 26,439 the relationship of their activities to the business of Business interruption 175,114 banking as conducted by the FBSC bank affiliates. Marine 46,989 Health and accident (group) 240,788 This will be done in the succeeding sections of this Life 2,304 Report. Miscellaneous 38,846 Total $4,245,867 B. THE BUSINESS AND METHODS OF OPERATION OF THE INSURANCE AGENCIES HERE INVOLVED 3. The foregoing table is exclusive of the writings 1. Sixteen of the 19 affiliated agencies occupy space of the insurance agency operated by First Service Coron the banking premises of their related affiliated 37 Thus, the agency at Austin, Minnesota, is in a separate 33 At present the authorized number of shares of Agencies, building separated by an alley from the First National Bank Inc. is 25,000 shares, all of one class, of the par value of $1 of Austin, the legend on its door and window making no per share, with full voting rights. However, if the instant identifying reference to its affiliated bank. At Hibbing, Minneapplication is granted, FBSC proposes to have the authorized sota, the agency is located in the building housing the bank, capital stock increased to 50,000 shares, all to be acquired by but has no inside access to the bank; the entrance to the FBSC. agency being from the street at a point about 50 feet or more 34 In the case of Cloquet Northern Insurance Agency, removed from the entrance to the bank. At Minot, Minne- Agencies, Inc. would acquire the majority interest in that busi- sota, the insurance agency was formerly situated within the ness now owned by FBSC by virtue of its majority share- banking premises, but because of a shortage of space was holding in the affiliated bank. moved out some years ago and is now located in a building 35 In the case of Worthington Agency, it is proposed to have adjacent to the banking premises. Agencies, Inc. substituted for the bank stockholders as prin- 38 Live premiums of a given date are defined as including all cipal. All shares of stock at that bank, like that of all other premiums paid during the year on policies in force on that banks herein involved (except Cloquet), are now owned or date, except that in the case of term policies the entire premium controlled by FBSC. for the term whether paid in the past or payable in the future 89 Two of the agencies—Austin National Company and is included. The figures given for hail and automobile finance Union Insurance Agency—now conduct a travel bureau busi- insurance set out in the table include all premiums paid on such ness in addition to their insurance activities. The travel bureau policies during 1957, regardless of whether the policies were operations will not, however, be taken over by Agencies, Inc. still in force at the end of the year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

944 FEDERAL RESERVE BULLETIN • AUGUST 1959 poration. That agency, unlike the bank-affiliated agen- Bank (one of the 33 agencies not involved in this procies, does not conduct a general insurance agency ceeding). Thus, too, by way of further example, all business. It confines its agency writings to group life FBSC Montana banking subsidiaries making use of the and hospitalization insurance for FBSC and its affil- master policy have their certificates countersigned iates, to blanket insurance policies covering the inter- through the Rosebud County Insurance Agency, the ests of dealers and affiliated banks in automobiles or agency connected with the Forsythe State Bank in other merchandise being financed on a floor plan basis, Montana. and to miscellaneous fire and automobile policies writ- (c) Under FBSC's arrangements with the insurance ten exclusively for employees of FBSC and its af- carrier, commissions on all certificates of coverage filiates. The following table shows that agency's pre- issued under the master policy are payable to the agenmium volume in 1957: cies through which they are countersigned. In point of fact, however, such commissions are paid directly Types of insurance Premiums to First Service Corporation rather than to the coun- Group life and hospitalization insurance for FBSC and tersigning agencies. This is done by virtue of asits affiliates $196,281 Blanket policies covering automobile and merchandise signments which the agencies have executed in favor being financed by FBSC affiliated banks on a floor of FSC on this class of insurance.39 But the money plan basis 70,929 thus received as commissions is not retained by FSC Miscellaneous 11,010 either. Most of the commission earnings find their Total $278,223 way back in ratable shares to the banks originating the 4. Most of the policies written through the 19 bank- finance business. To illustrate, in 1956 FSC reaffiliated agencies are placed on an individual applica- ceived $105,139, as a result of the retail certificate tion basis for customers making application therefor commission assignments. Of that amount, FSC paid at the office of the respective agencies. The commis- $75,553 to the banks originating the contracts and sions earned on such insurance are received directly withheld $26,282 in a special fund out of which addiby the agencies, and the agencies' net earnings there- tional distribution would later be made to the origifrom—after deductions for operating expenses and nating banks, the exact pro rata amount payable to charges made by related banks for rent and/or ad- each bank to depend in part on the loss ratios appliministrative expenses, as will more fully appear be- cable to the certificates written on its particular busilow—are accounted for by the agencies to their bene- ness. The balance, amounting to $3,304, or roughly ficial owners in accordance with the agreements men- only 3 per cent of the total commissions, was remitted tioned above. to the respective agencies which had countersigned 5. What has just been said is not true, however, as the policies. Nominally, the distributions made to the to the insurance classified above as "Automobile, con- originating banks are to compensate them for their sumer finance blanket policies, retail." That class of clerical services in preparing the certificates. But insurance and the operating procedures with respect to actually, it would appear, the real purpose of the disit require special discussion, which follows: tribution is to allow the originating banks to receive (a) FBSC has a master policy with St. Paul Fire and most of the insurance commission earnings their busi- Marine Insurance Company, an unaffiliated company, ness produces as an added return on their automobile providing for physical damage and related insurance retail financing transactions. coverage on automobiles sold by dealers under sales (d) Of the 19 bank-related agencies here involved, financing arrangements with FBSC affiliated banks. 10 were active in 1957 in writing certificates under the The policy automatically insures all automobiles en- consumer finance retail master policy. So, too, were cumbered by acquired finance dealer paper, except a number of the 33 other bank-related agencies which in those situations where insurance arrangements satis- are not here involved. During the 12-month period factory to the financing bank have otherwise been ending in December 1957, all FBSC subsidiary banks made by the dealer or customer himself. The policy purchased from dealers 44,148 automobile contracts provides for double interest coverage, protecting the in the face amount of $64,733,111. Of the total numinterests of both the purchaser and the bank from the ber of contracts so purchased, 7,689, or 17.42 per cent, moment the financing transaction is cleared by the were insured under certificates issued pursuant to the bank, without any need for advance notification or master retail policy. Twenty-five of the FBSC banks approval by the insurance company. The premium utilized the facilities of the 10 herein involved affilfor such insurance coverage is paid by the purchaser iated agencies which write certificates under the master at the manual rate when he makes his financing ar- policy. The 25 banks purchased 25,631 contracts, and rangement through the dealer, and the purchaser automobiles covered by 5,012, or 19.55 per cent, of thereafter receives from the agent a certificate to evi- such contracts were insured by master policy certidence coverage of his interest under the master policy, ficates countersigned through agencies here involved. (b) Certificates of coverage under the master policy 6. Much of what has been said with regard to the are actually prepared at the office of the financing automobile retail consumer blanket policies applies bank. Before transmittal to the purchaser, however, equally to the blanket policies covering floor plan the bank sends the certificates to an FBSC bank-affinancing that are now written through the insurance filiated agency for the required countersignature of an agency operated by First Service Corporation. FBSC authorized insurance agent. The agency to which the has two master policies with St. Paul Fire and Marine certificates are sent for countersignature is not neces- Insurance Company covering both its banks and dealsarily attached to the bank which acquires the autoers against physical damage losses to dealer inventory mobile paper. Many FBSC banks utilizing the master that is subject to bank lien under wholesale floor plan policy have* no affiliated agency of their own. Thus, financing arrangements. Under these policies, FSC for example, the First National Bank of Minneapolis, which is the largest purchaser of automobile dealer paper, has its certificates countersigned through the 30 It is contemplated that if the application herein is granted and Agencies, Inc., is activated, such commissions would flow insurance agency attached to the First Hennepin State in the first instance to Agencies, Inc. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 945 acts directly as the agency through which the insur- affiliated bank a substantial part or all of the agency's ance is written and commissions are payable directly net earnings. Indeed, the Applicant substantially conto it without need of assignment from others. As in ceded as much at the hearing. Its principal witness the case of the commissions received under the retail on this phase of its case agreed while testifying that in automobile finance policy, however, the monies FSC effect it is a policy of FBSC "that the earnings of these receives as commissions are not retained by it, but agencies shall accrue in the main to the affiliated are distributed ratably by FSC to the banks originating bank". the wholesale plan finance business. As of December 31, 1957, fifty of the 86 affiliated banks held floor C. THE EXTENT TO WHICH THE INSURANCE AGENCIES' plan loans in the aggregate amount of $14,986,389. ACTIVITIES ARE RELATED TO LENDING AND OTHER ACTIVITIES OF AFFILIATED BANKS The security on $8,761,323, or 58.46 per cent of the 1. As found above, the 19 bank-connected insurance total of such loans, was insured under the blanket agencies here involved are each engaged in a general policies. insurance agency business. Except for their operations 7. During 1957, the commission earnings of the 19 under the consumer finance blanket policy, they solicit bank-affiliated agencies here involved aggregated business from the public at large without regard to $472,231.40 Against such earnings they had total ex- whether or not such business is related to banking acpenses of $436,100, consisting of salaries paid ($143,- tivities. On the other hand, the insurance agency busi- 138); rent for quarters paid to related affiliated banks ness conducted by First Service Corporation possesses ($62,406); payments to related affiliated banks for "ad- more nearly a bank servicing character, since that busiministrative services rendered" ($147,131); and other ness is restricted almost entirely to the writing of inexpenses ($83,425). Their net consolidated earnings surance that is related to the needs of the FBSC bankafter such deductions amounted to $36,351. In addi- ing subsidiaries and their employees. tion, the FSC agency earned during 1957, $13,777. 2. Though the 19 bank-affiliated insurance agencies 8. The figures just stated do not, however, provide solicit and accept business from all sources, a substana completely clear picture of how the commissions tial proportion of their business is derived from cusearned are disposed of. The individual earnings state- tomers who also have business contacts with affiliated ments of the 19 bank-affiliated agencies here involved banks. Thus, as of August 31, 1957, the 19 agencies show that only 4 of them had significant net earnings together had 20,035 customers, counting as customers during the year—Austin National Company, the all those who then had outstanding policies obtained agency owned by FBSC (gross commissions, $93,236; through the agencies. Of the 20,035 agency customnet earnings $18,432);41 the two Montana agencies, ers, 11,383, or 56 per cent of the total, were on the Rosebud County Insurance Agency (gross commis- same date also customers of related affiliated banks— sions, $13,068; net earnings, $7,049) and Fort Benton counting as "bank customers" all demand and time Insurance Agency (gross commissions $15,041; net depositors, safe deposit renters, borrowers, and obliearnings, $8,537)42 and Stutsman Company Insurance gors on obligations held by the related affiliated banks. Agency (gross commissions, $8,473; net earnings, In addition, among the 20,035 agency customers, there $2,761). In the cases of the other agencies the net were 4,009 others who, while not customers of the earnings were nominal—less than $100 in the case of related affiliated banks, had dealings with other FBSC 6 agencies, and in no case more than $690. It ap- affiliated banks. The group of 4,009 was composed pears that most of the earnings of the agencies, after mainly of obligors on automobile dealer paper acdeduction of other expenses, find their way back to the quired by FBSC affiliated banks which had no related affiliated banks either in the form of rent for quarters insurance agency of their own, but which utilized one used or in the form of payments for "administrative or more of the 19 related agencies for countersignature services rendered".43 purposes on certificates issued under the master retail The charge for "administrative services rendered" consumer policy. If the total of 11,383 and 4,009 is theoretically is supposed to compensate the affiliated taken as the figure reflecting the number of bank cusbank for supervising the agency, auditing, providing tomers using related agency facilities, the percentage extra help, and paying the salaries of individuals who of agency customers to affiliated bank customers is perform services for the agency. It would seem, how- enlarged to 76.8 per cent. ever, that this item, as well as the rent item to some ex- 3. Stated in terms of dollar volume, the record tent, is utilized to absorb for the benefit of the related shows the following relationship between total premiums written by the 19 bank-affiliated agencies and the premiums written for bank customers (with the 40 Of this amount $13,709 represented commissions on travel term customers given its broadest definition as above ticket sales. The balance was in the form of insurance commissions. stated):44 41 The evidence reflects that in the case of this agency, FBSC Per cent of periodically withdraws profits in round amounts. 42 There is evidence indicating that in the case of the 2 Mon- Amount all premiums tana agencies (both affiliated with State banks) the policy is Total premiums $3,271,349 100 not to remit net earnings to the owner, First Service Cor- Total premiums on insurance written poration, but to add such net earnings to agency assets. for FBSC bank customers 4 52,466,802 75.4 43 To illustrate, Security Insurance Agency in 1957 earned Total premiums on insurance written $46,518 in commissions. It paid salaries of $20,214 and had for nonbank customers 804,547 24.6 miscellaneous expenses of $9,042, thereby reducing its earnings to $17,262. Out of that amount, it paid the First National Bank of Fairmont $11,000 for rent and $5,916 for adminis- 4* The premiums given are the "live premiums" as of trative expenses, leaving it with net earnings of $346. Douglas December 31, 1956, except that hail and automobile consumer County Insurance Agency earned $38,068 in commissions, had finance premiums are based on total premiums received in no salaries, paid rent of $1,200 and had miscellaneous exnenses 1956. So, too, are all the premiums of one agency (Austin of $5,766. It paid First Farmers National Bank $31,042 for National Company) which reported on this basis only. administrative expenses, leaving it with net earnings of $60. 45 Includes premiums on retail master policy certificates Worthington National Bank Agency received $17,868 and paid insuring automobiles securing dealer paper purchased by those that precise amount to its affiliated bank for "administrative FBSC banks which are not directly related to the 19 insurance services rendered", leaving it with no net earnings. agencies here involved. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

946 FEDERAL RESERVE BULLETIN • AUGUST 1959 The following table shows the premium distribution part of the financing package. The needs of the FBSC among various classes of bank customers of the banks for such coverage are now met through the $2,466,802 in premiums on insurance written for master policies which FBSC has with St. Paul Fire and FBSC bank customers: Marine Insurance Company. Insurance of this type is not readily obtainable with any assurance of conti- Per cent of premiums nuity on a local basis through independent agents. Exon perience has shown that insurance carriers are often insurance reluctant to handle this type of business unless they are Per cent written Amount of of all for bank assured of a sufficient diversification of risks. FBSC Class premium premiums customers has been able to maintain a steadfast connection for Insurance on property its banks with the St. Paul Fire and Marine Insurance securing FBSC bank loans Company largely because of the wide area of coverage or purchased paper «6$864,207 26.4 35 Life insurance securing under its master policies. affiliated bank loans 468 0.014 0.019 (b) The Applicant does not dispute that it might Insurance for other bor- be possible for it to form through an outside insurance rowers (unsecured loans)... 632,685 19.3 25.6 Insurance for nonborrowing agency the same kind of stable insurance connection depositors or safe-deposit with St. Paul Fire and Marine Insurance or some combox renters of affiliated parable insurance carrier. But it points out that this banks 969,442 29.6 39.3 would be only a partial solution to its problem. Ac- $2,466,802 75.4 100 cording to the Applicant, if the FBSC banks are to engage successfully in automobile sales financing, they 4. As of August 31, 1957, the banks directly related must be in a position to offer dealers the same favorto 19 insurance agencies had outstanding loans aggreable terms as are offered by sales finance companies. gating $57,284,011, of which $11,601,560 (20.2 per The leading national sales finance companies which cent) were unsecured and $45,682,451 (79.8 per cent) have insurance carrier affiliates of their own are able were secured. The following table shows the extent to take into account their insurance profits on dealer to which policies issued by the affiliated insurance business in computing the reserve to be offered the agencies were related to such secured loans: dealers, or, as an alternative, to offer dealers who are Per cent of Per cent of also licensed agents commissions on the insurance secured of premiums their business produces. The insurance com- Amount loans all loans missions which the FBSC affiliated insurance agencies Secured loans where se- now earn on master policy certificates provide a means curity insured through affiliated agency $11,604,728 25.4 20.3 for offsetting the advantage the national sales finance Secured loans where se- companies would otherwise have. As found above, curity insured through such commissions are not retained by the agencies but other agencies 21,577,226 47.2 37.7 Secured loans where in- are almost entirely distributed to the banks originating surance of security not the finance business. The banks are thus also able to required 12,500,497 27.4 21.8 take such insurance profits into account in determin- Totals $45,682,451 100 79.8 ing the amount of the reserve to be offered dealers. Without an affiliated insurance agency, through which It may further be noted that of the secured loans re- the flow of commission earnings could be directed quiring insurance, 35 per cent carried insurance placed back to FBSC banks, the banks would be noncomthrough the affiliated agencies. petitive with finance companies for dealer business, 5. Insurance of the types written through the 19 according to the Applicant. bank-affiliated agencies is in the main readily obtain- 6. (a) As noted above, national banks in communiable through other and competing independent agents ties of over 5,000 population may not engage in the or agencies that are now engaged in business in the insurance agency business. Moreover, Montana does localities where the 19 bank-affiliated agencies are lonot allow insurance agencies to be owned by or opercated. The only insurance coverage supplied through ated for the benefit of its State banks—according to affiliated agencies that is not readily obtainable through legal advice received by FBSC. Disallowance of competing local agents under arrangements suitable FBSC's instant application relating to First Service to the needs of FBSC banks is that now provided by Agencies, Inc., would, therefore, preclude the Apthe master policies to which reference was made above, plicant from retaining within its holding company sysand this for the reasons that follow: tem ownership and control of the 19 bank-related (a) Experience in the consumer installment financing agencies here involved. This would mean a loss to the field has demonstrated the importance of having a holding company system of the earnings now derived reliable and constant source of physical damage insurfrom the insurance written through such agencies on ance that would provide continuous protection for the an individual application basis—earnings which, as financing institution, the dealer, and the purchaser of noted above, find their way back in substantial part to financed automobiles from the time automobiles leave agency-related banks through charges for "administrathe factory until they reach the dealer's place of busitive services rendered" or the like. ness, while they are on the dealer's floor, and from the (b) It would not necessarily mean, however—except moment they are driven from the dealer's place of busipossibly in Montana—that the related banks would be ness by the purchaser. There are many dealers without precluded from the benefits and advantages of the insurance connections of their own who expect the master policies they now enjoy and which are of imfinancing institution to arrange for such insurance; inportance to them in the consumer finance field. As deed, it is standard procedure for the major national found above, those FBSC banks which have no related sales finance companies, most of whom have their own insurance agencies of their own are nevertheless now insurance company affiliates, to offer such insurance as able to share in such benefits and advantages by having «Ibid. master policy certificates issued through related Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 947 agencies of other FBSC banks. At the hearing, the not to have related insurance agencies, though even a Applicant indicated that if the instant exemption ap- city as large as Minneapolis contains a few that do. plication is denied and it is forced to abandon the 19 2(a). A survey made by the Applicant, based on insurance agencies here involved, it could and probably certain assumptions admittedly open to inaccuracies, would apply a similar procedure in the case of the 17 but which nevertheless seems to provide reasonably national banks located in communities of over 5,000 reliable approximations, shows the following as to the population that now have related insurance agencies number of State banking offices (including branches) of their own. That procedure could be applied readily, in the area mentioned that have bank connected agents though perhaps with some greater inconvenience, by arranging in each State to have one or more of the or agencies: 33 not-here-inyolved affiliated insurance agencies issue the master policy certificates. Total number of Offices with bank-connected (c) Montana, however, presents a special problem, State banking agents or agencies as the Applicant sees it. Montana does not allow its offices Number Per cent of total banks beneficially to own insurance agencies, and all FBSC's national banks in that State are located in cities I. Communities with population under 5,000 with populations of over 5,000. FBSC's Montana banks Minn 434 423 97 could not utilize the agency facilities of any of the 33 N. D 138 121 88 unaffected agencies which are attached to FBSC banks S. D 156 145 93 in other States, because Montana requires the signature Mont 60 52 87 of a resident agent on each policy or certificate there- II. Communities with population 5,000 and over under issued in its State. Nor would it provide a ready solution to the problem to have one of the unaffected Minn 71 50 70 N. D 4 2 50 33 agencies employ a resident agent in that State. For S. D 12 8 67 each of such agencies is now operated for all practical Mont 15 3 20 purposes as a department of the bank to which it is attached, and to do so might lay the related bank open to the charge that it is maintaining a branch office out- (b). The same survey shows the following with side its State. It would, of course, be possible for the regard to national banks located in the same States: Montana banks to have master policy certificates issued through an independent agency having a Montana Total number of Offices with bank-connected resident agent. But the Applicant regards this as ob- State banking agents or agencies jectionable, both because it would involve a counter- offices Number Per cent of total signature fee, and because it would not allow FBSC to control commissions in the same manner that it does I. Communities with population under 5,000 now. The only other solution—suggested in the Ap- Minn 96 87 92 plicant's brief—would be to convert the two banks to N. D 16 15 94 which the Montana agencies are attached—both lo- S. D 37 35 95 cated in communities with a population of less than Mont 24 19 79 5,000—from State banks to national banks. II. Communities with population 5,000 and over Minn 89 43 48 N. D 22 14 64 D. AREA PRACTICES WITH REGARD TO BANK RELATED S. D 21 12 57 INSURANCE AGENCIES Mont 18 2 11 1. It is quite common in Minnesota, North Dakota, South Dakota and Montana, for insurance agencies to (c) With regard to all banking offices, national be operated on bank premises or to be otherwise iden- and State, in the four States, the survey shows the tified with banks. National banking associations following: located in communities of 5,000 inhabitants or less are specifically authorized by statute to act as insur- Total ance agents, and in the States mentioned almost all number of Offices with bank-connected such banks have related insurance agencies. A sub- State banking agents or agencies stantial number of national banks located in cities of offices Number Per cent of total over 5,000 in such States also appear to have related Minn 690 603 87 insurance agencies which, while not owned directly N. D 180 152 84 by the banks, are held out to the public as identified S. D 226 200 89 Mont 117 76 65 with them. This is not uncommon in the smaller of such cities, rare in the larger metropolitan areas. 3. Where insurance agency operations are con- State banks in the States referred to are not expressly empowered to engage in the insurance agency busi- ducted in conjunction with bank operations, it is usual ness. But the operation of insurance agencies in con- to have one or more officers or employees of a bank junction with State banks is well known to the State licensed by the State insurance authority, but beyond banking officials of such States, and is apparently ac- that the specific arrangement made takes a variety quiesced in by them as a proper practice. Substan- of different forms. In some instances banks allow the tially all state banks in the smaller communities have officer who holds the agent's license to conduct an bank-connected insurance agents or agencies. The insurance agency business on bank premises for his proportion thins out somewhat in the larger commu- own benefit, without accounting to the bank for the nities, and banks in the largest of them are more apt earnings therefrom. In others, those operating the in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

948 FEDERAL RESERVE BULLETIN • AUGUST 1959 surance agency business pay rent to the bank for use placing the FBSC banks at a competitive disadvanof its quarters, this being the only source of income to tage.48 the bank from the operation of that business. In still 3. The Applicant also points to the fact that the others, arrangements are made to have the net earn- insurance agencies, through payment of rent and fees ings of the insurance agency paid directly to the stock- for administrative services, help carry the overhead holders of the bank. This is accomplished at times and contribute to the income of the banks to which they are related. It believes it should not be deprived through the separate incorporation of the insurance of this added source of income which is available to agency business coupled with a stock tie-in agreement competing banks or their stockholders. which would assure continued common ownership of ratable shares of the stock of both the agency and F. ANALYSIS AND CONCLUSIONS AS TO FIRST SERVICE the bank. Arrangements are also sometimes made to AGENCIES, INC. have the insurance agency pay part of the salary of 1. All the proposed activities of Agencies, Inc., the bank officer who operates or supervises the in- are of an insurance nature, and so the preliminary surance agency business. In the States of Minnesota, requirement of Section 4(c)(6) presents no problem. North Dakota and South Dakota—but not in Montana The question to be determined is whether Agencies, —it is not unusual to arrange for the State banks to Inc., if activated, will meet the remaining requirereceive all or at least a percentage of the profits ments of the section. That question may approrealized from the insurance agency business. The priately be considered in the light of the cumulative same is true of national banks in communities under present activities of the 19-bank affiliated agencies 5,000. and the First Service agency which are to be taken over by Agencies, Inc., if the instant application is 4. Insurance agency activities, even where congranted. For, as found above, save for the change ducted on bank premises and for the direct benefit of in the form of ownership, the activities of the aforethe related bank, are regarded as distinct from banksaid agencies, their methods of doing business and ing activities. Under the laws of Minnesota, North their relationship to FBSC banking operations are to Dakota and South Dakota, an agent's license may be remain virtually the same as they are now. issued only in the name of an individual.47 As a result, 2. The points stressed by the Applicant to support no license may be issued to a bank, even where, as its "closely related" contention, in broad outline, are in the case of a national bank in a place of less than (1) that the activities of the agencies are identified, 5,000, the bank is itself expressly empowered to act organizationally, physically, and operationally, with as an insurance agent. Although Montana allows the FBSC banking subsidiaries; (2) that the agencies prolicensing of corporations, Montana State banks may vide insurance coverages required in connection with not qualify for agents' licenses, both because it is bank loans; (3) that insurance written through the outside the banks' corporate powers and because Mon- agencies in connection with consumer finance and tana disapproves of a bank directly owning an in- floor plan loans is essential to the affiliated banks to surance agency or having it operated for its direct enable them to compete with finance companies for benefit. Unlike Montana, the other States here in- such loans; (4) that the agencies provide an added volved do not object to having insurance agency service for the benefit of bank customers; (5) that the earnings flow directly to a bank. But even those agencies are of value to the affiliated banks in that States look upon insurance agency activities as separate they provide trained personnel who are able to advise and apart from banking activities, and therefore not and aid the banks on insurance matters related to subject to examination or supervision by State bank- banking transactions; and (6) that in the area in ing authorities. which FBSC banks operate the offering of insurance services in conjunction with banking operations is a traditional and accepted practice and a recognized E. COMPETITIVE FACTORS competitive factor in the conduct of a banking busi- 1. With two exceptions, each of the 19 FBSC bank- ness. The point last mentioned is the one most ing offices with affiliated agencies herein involved has strongly emphasized. in the trade area where it does business one or more There can be no doubt, of course, that the affiliated competing banks with connected insurance agencies of insurance agencies are closely identified with FBSC their own. The two exceptions concern banks which banking subsidiaries. Except for the First Service have no competing banks at all in their respective agency which now functions as part of a system-wide trade areas. servicing subsidiary, each of the insurance agencies is operated as a venture specifically associated with the 2. The Applicant urges that, except perhaps for the particular bank to which it is attached. The agencies larger communities, it has become a recognized com- are housed in the banking quarters of their related petitive factor in the four States in question for banks bank or closely adjacent thereto; include among their to be in a position to offer their customers insurance partners one or more officers of their related bank; services and advice, as part of a well-rounded financial utilize to a substantial measure bank personnel in the counseling service. It expresses the fear that at least conduct of their operations; and are under the direct some of its bank customers, if deprived of access to such services and advice, may tend to gravitate toward 43 Apropos of this argument, it is to be noted that 36 banks competing banks with insurance agency facilities, thus and four branches of banks affiliated with FBSC banks do not have insurance agencies operated in conjunction with them or for their benefit. As appears from Appendix A, many of 47 It is, however, a common practice, and one not dis- Y su e c t h th 3 e 6 y b a a r n e k s a p a p r a e r en lo tl c y a te a d b le i n t o r e w la i t t i h v s e t l a y n d s m c a o l m l p c e o ti m tio m n u n f i r t o ie m s. approved by the State insurance authorities, for licensed other banks. According to the Applicant, many of the banks agents to enter into employment or other relationships with without related insurance agencies have as important cusincorporated or unincorporated insurance agencies to which tomers insurance agents with whom as a matter of policy they they assign their commissions. do not desire to compete for insurance business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

949 LAW DEPARTMENT management of a partner who is also an officer of the per cent of the business done by the agencies may related bank. But such organizational and physical reasonably be found to be thus directly related. Moreintegration, while a factor to be considered, does not over, I am unpersuaded that the primary purpose for itself satisfy the "closely related" requirements of which the agencies were established was to serve the Section 4(c)(6). As the statute itself makes clear, convenience of bank customers. I believe that the and as the Board ruled in the Transamerica case,49 it is larger purpose was to create an additional source of not every type of relationship that will pass muster income through the operation of an added business under that section. The statute speaks not in terms catering to the public at large. I do not attach sigof a close relationship to a banking organization, but nificance to the point stressed by the Applicant, that in terms of a close relationship to the business of a substantial proportion of the agencies' customers banking.. The close relationship, moreover, must be are also bank customers in one form or another.50 of a special kind; it must be such as to make the busi- It is to be expected that an insurance agency operating ness of the nonbanking subsidiary a "proper incident" on a bank floor will attract a large proportion of its to the banking business, and it must be such as to customers from those doing business with the bank. make it unnecessary for the prohibition of Section 4 But this has no material bearing on the question of to apply in order to carry out the purposes of the Act. whether the insurance agencies are related to the busi- Only one of the agencies here involved—the First ness of banking as an incident thereto. Service agency—confines its operations to activities It is undoubtedly true, as the Applicant further that are related in a functional or servicing sense to contends, that the proximity of an insurance agency the business of banking or bank management as con- is of some value to a related bank because of the aid ducted by FBSC or its banking subsidiaries. The and advice the trained insurance agency personnel are remaining 19 agencies—all bank connected—are each able to render the bank on insurance matters relating engaged in a general insurance business, involving the to banking transactions. It is also true that the servwriting of all kinds of insurance and the solicitation ice thus provided may be classified as related to the of business from the public at large without regard business of banking. But the rendering of that service to whether or not such insurance is required in con- is but an incidental aspect of the business in which nection with bank lending or other activities. In the agencies are engaged. Moreover, as the Applicant terms of premium volume—by the last count—only concedes, it is not essential that those providing such 26.4 per cent of the total writings of such agencies advice themselves be insurance agents or affiliated was referable to insurance on property securing FBSC with insurance agencies. Bank personnel may be bank loans or purchased paper. Except to a limited similarly trained, as indeed they are both at those extent, all insurance written through the bank-con- FBSC banks that have no affiliated agencies of their nected agencies is readily available through outside own and at those that do. As has been shown, the agents or agencies with whom the bank-connected work of the agencies is handled largely and in the agencies compete for business in the localities where case of some exclusively by bank personnel. The they are situated. Applicant argues in its brief that, without the related The only insurance written through any of the agencies, the banks would not be "able to permit such agencies for which the Applicant has shown a special persons to produce income through the sale of insurneed for an agency of its own is that provided by the ance". The Applicant's desire for an added source of blanket policies relating to consumer finance and floor income to compensate it for a service requirement is plan loans. The consumer finance insurance accounts an understandable one, but the profit factor is in itself for only about 10 per cent of the agencies' total of no materiality in determining whether the business premium volume, and the floor plan insurance—ad- producing the income meets the statutory standards ministered exclusively by the First Service Agency— for exemption. accounts for less than 2 per cent. The bank-related On the basis of what has been stated thus far, it is agencies do not themselves arrange for the placement clear that the activities of the 19 bank-affiliated agenof the master policy relating to consumer finance cies, although pertaining in part to the business of loans. Their only function is to act as countersigna- banking as conducted by affiliated banks, extend in taries of policy certificates and to serve as a conduit their totality, far beyond what is reasonably required for commissions in the manner described in the fac- for, or even connected with, affiliated banking operatual findings made above. Though the record shows tions. Section 4(c)(6) by its terms does not require a need for such consumer finance insurance, it does that all the activities of a nonbanking business be not persuasively establish that there is likewise a need "closely related" in the statutory sense to the business for a separate general insurance agency at each bank of banking. But it does imply that there at least be a to administer the blanket policy; if anything, it indi- predominant measure of substantiality in that relacates the contrary. Significantly, a single agency— tionship. This is evident from the additional requirethe First Service Agency—handles all insurance cer- ments circumscribing the "closely related" provision. tificates issued under the comparable blanket policies Thus, the section requires that the relationship be such providing coverage for automobiles and merchandise as to make the nonbanking company as a whole— financed by FBSC banks on a floor plan basis. not simply some of its activities—a "proper incident" A general insurance agency operating on a banking to the business of banking. Thus, too, the section floor may be viewed as providing banking customers requires that the relationship be such "as to make it with an added service, but this does not prove that unnecessary for the prohibitions of [Section 4] to apply the service is a banking service or one integrated with in order to carry out the purposes of this Act." A the business of banking as such, save to the extent that it is otherwise functionally related to actual bank- 50 As found above, the figure is 56 per cent—counting as ing operations. And, as noted above, only about 26 "bank customers" all those who deal with related affiliated banks as depositors, borrowers, safe deposit renters, or obligors on purchased paper—and 76 per cent, if there is added cus- 49 Matter of Transamerica Corporation, Federal Reserve tomers of other FBSC banks, mainly obligors on acquired auto- BULLETIN, September 1957, p. 1014. mobile dealer paper. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

950 FEDERAL RESERVE BULLETIN • AUGUST 1959 primary purpose of the Act was to confine bank hold- relates to real property fire and extended coverage ing companies to activities connected with the man- and automobile physical damage insurance. Moreagement and control of banks, on the theory that it over, the protection of bank loans is not the only or is in the public interest to keep bank ventures in a even the primary purpose for which such insurance is field of their own, separate and apart from nonbank- needed. From the fact alone that banks require ining enterprises.51 Divestiture exemption of nonbanking surance protection on their interest in property securcompanies can be reconciled with that statutory ob- ing bank loans, it does not follow that the business of jective and the public interest only where their overall selling insurance is one that "naturally" or "usually" activities are so substantially integrated with, required depends upon or appertains to the business of banking. for, or otherwise associated with banking operations Should it make a difference that as a result of long as to make them in effect part and parcel of such established custom and usage, apparently acquiesced operations—but not otherwise. Absent special cir- in and approved by the State banking authorities, the cumstances, I do not believe that the requirement of offering of general insurance agency services has besubstantiality is met where, as here, a bank-connected come a rather usual appurtenance to the conduct of insurance agency is engaged in the general business banking businesses in the area in which the FBSC of selling all kinds of insurance to the public at large, banks are located? Perhaps under certain circumwith only a minor part of its total activities directly stances it should. What is a proper incident to bankrelated to the banking operations of its affiliated bank. ing is basically a question of fact that the Board has In the Transamerica case, the Board, construing been charged to determine in each case upon the the "proper incident" requirement of Section 4(c)(6), record made in that case. The principle that a Fedstated: eral law must be uniformly applied does not preclude "It is clear that Section 4(c)(6) is intended to deviations in application based upon valid factual exempt only those nonbanking businesses distinctions. Thus, it is arguable that where banks of that 'usually' or 'naturally' 'depend upon' or a given class are authorized expressly or by reason- 'appertain to' the business of banking or of able implication themselves to own or operate general managing or controlling banks. The section insurance agencies in conjunction with their banking requires that a nonbanking business, in order activities, the insurance agency operations must be to be exempted under the provision, must be regarded as an incident to the business of banking as not merely an 'incident' but a 'proper inci- conducted by such banks. And as a corollary propodent' to banking or managing or controlling sition, it may be urged that where a bank holding banks." company owns banks of the same class, its operation through a separate subsidiary corporation of general But for the area practices to be considered below, insurance agencies at such banks must likewise be there could be no doubt that the overall business to regarded as an incident to "the business of banking be conducted by Agencies, Inc., would fall short of or of managing or controlling banks, as conducted that standard. The type of general insurance business by such bank holding company or its banking subengaged in by the 19 bank-connected agencies is not sidiaries,".™ In determining whether specific banks one which, characteristically or by its nature, is iden- have incidental power to operate insurance agencies, tified with the business of banking.52 The sale of genit may be permissible in certain circumstances to refer eral insurance is normally regarded as a business to established customs and practices and the attitude separate and distinct from the business of banking, of the supervisory authorities concerning them. Such and it is generally conducted independently of the reference may be appropriate where the statutory or banking business and without any particular reliance other grant of power to the banks in question is upon it. The only activity of the 19 agencies that ambiguous as to their incidental authority to operate may be regarded as singularly pertaining to the busiinsurance agencies. In that situation the rule of ness of banking is that connected with the issuance statutory construction urged here by the Applicant of certificates under the consumer finance blanket policies—a very minor percentage of their total activi- might be applicable, namely, that long, continued, ties. Otherwise, the agencies do nothing that is not contemporaneous and practical construction of a commonly done by independently operated businesses statute by the administrative officers charged with its of the same kind. The fact that about 26 per cent administration and enforcement is of great imporof the insurance sold by the 19 agencies carries loss tance in arriving at the proper construction of the payable clauses running to related banks does not statute.54 But that is not the situation in this case. particularly set the agencies apart from others en- Significantly, the Applicant has not considered it gaged in the same business. It is to be expected that necessary to arrange for separate corporate ownership an appreciable proportion of the writings of any in- of its bank-related agencies in those instances where, surance agency in the general insurance field will according to its understanding, the related banks carry similar loss payable clauses, particularly where, themselves possess incidental power to own and operor here, a substantial part of the agency's business ate insurance agencies in association with their banking businesses. The affiliated banks which it proposes to have Agencies, Inc. acquire are all related to banks si H. Rep. 602, pp. 1, 11, 16, 84th Cong.; S. Rep. 1095, pp. 1, which it admits may not own or control insurance 25, 84th Cong. 52 It is therefore unlike the examples given in the Senate agencies of their own; hence the need for a corporate Report to illustrate the type of operations Congress thought affiliate. the exemption provisions of Section 4(c)(6) ought to reach— What has just been said suggests a further con- "the operation of si credit life insurance program in connection with bank loans", or "the operation of an insurance program [to] retire the outstanding balance of a [bank held] mortgage 58 See Section 5(b) of Regulation Y, issued pursuant to the upon the death of a mortgagor" (S. Rep. 1095, p. 13, 84th Act. Cong.). Such operations usually and characteristically are 5*2 Sutherland. Sftutorv Construction, Sees. 5103. 5105. tied in with lending transactions; outside the field of lending and 5107 (3rd Ed. 1943); United States v. American Trucking or credit there is no occasion for their use. Association, 310 U.S. 534. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 951 sideration, not heretofore discussed, which I believe and the Board's responsibilities under it—reaches must control decision in this case in any event. To bank holding companies and their subsidiaries; it qualify a nonbanking company for exemption under does not reach others. Section 4(c)(6) the Board must determine that the For the reasons stated above, I conclude that the company is not only an "incident" to the banking record does not support a "closely related" deterbusiness to which it is specifically related, but a mination within the meaning of Section 4(c)(6) as "proper incident" thereto. Seventeen of 19 affiliated to First Service Agencies, Inc. agencies which it is planned to have Agencies, Inc. 3. The conclusion stated above has been reached take over are related to national banks located in without reliance upon certain dicta contained in the places with a population of over 5,000. As to such Board's decision in the Transamerica case, supra. In agencies at least, I am persuaded that even if what that case the Board explained that the phrases they do might be viewed as an "incident" to the busi- "proper incident" and "purposes of the Act" as used ness conducted by their related banks, the Board in Section 4(c)(6) must be considered both with ought not to determine that it is a "proper" one— reference to the term "incident" as ordinarily underand this for the reasons that follow. stood and with a view to the potential sources of As noted above, the National Bank Act empowers evil which Congress sought to remove through the only those national banks that do business in places general prohibitions of Section 4. The Board then having a population of under 5,000 to act as insurance stated: agents, but not others. The fact that the 17 national "This clear purpose of Section 4, namely 'to banks here involved lack corporate power to act as remove . . . potential . . . sources of evil,' insurance agents would not alone be determinative, provides a helpful guide in applying the for the exemption of4(c)(6) was clearly not intended to be applicable only to companies that engaged in requirements of Section 4(c)(6). If a nonactivities of a kind in which their related banks were banking business is a 'proper incident' to empowered also to engage. But the dichotomy based banking or to managing or controlling upon population figures drawn by Congress in the banks, that is, if it properly and 'naturally National Bank Act reflects more. It clearly indicates appertains' thereto, it is less likely to cause that Congress considered it improper as a matter of a bank to be influenced by the 'unnatural' or national banking policy for national banks to engage extraneous considerations or temptations in general insurance agency activities along with their that are 'potential sources of evil'. Hence banking operations, save in limited situations where it is more likely to accord with the purposes Congress apparently considered that other circum- of the Act. stances attendant upon the small size of a banking "In other words, when Section 4 (c) (6) locality justified a departure from the general rule. refers to 'proper incident' and to 'the pur- It is substantially conceded by the Applicant that poses of this Act', it uses the terms jointly to the separate corporate ownership of the insurance limit the exemption of the statute to situaagencies affiliated with FBSC national banks in locali- tions which substantially escape the 'potenties of over 5,000 was conceived as a device to circum- tial sources of evil against which the general vent restrictions imposed upon such banks by law. prohibition was directed.' " (Emphasis sup- As the record reflects, the separate ownership is more plied.) a matter of form than of substance. For substantially all practical purposes, the agencies are operated by In the Transamerica case, the Board recited some and for the profit of their related banks, and as of the potential evils which it stated Congress condepartments thereof, in much the same manner as are sidered to be inherent in common corporate control the 33 FBSC bank-related agencies which are not of banks and nonbanking organizations. One of them involved in this proceeding.55 If the instant applica- was: tion is granted and Agencies, Inc. is activated, Agencies, Inc. will serve to perpetuate a subterfuge. ". . . . that a holding company in extending And for the Board to make a "proper incident" find- credit, might exert pressure on borrowers to ing in this case would be for it in effect to place its do business with the lending banks' affiliated stamp of approval on what appears to me a clear corporations rather than with their comevasion of the law. The legislative history of the petitors, thus denying those borrowers an Act discloses that the Act was intended in part to appropriate freedom of choice." curb the use of the holding company device as a The foregoing extracts from Transamerica, conmeans of evading restrictions imposed on banks by Federal and State laws.56 I believe that purpose sidered together, may be interpreted as precluding a Section 4(c)(6) exemption in the case of any inwould be thwarted by a favorable determination of surance agency subsidiary which deals in insurance the application in this case. It is beside the point that also available through other sources. For the very other national banks in the area serviced by FBSC existence of such an insurance agency in a bank holdmay also be chargeable with like evasions. This Act— ing company family creates the potentiality of the type of "evil" specifically quoted above. And the 55 Thus, as the record shows, the agencies related to the more closely the agency is related functionally to 17 national banks occupy space in or adjacent to bank quarters; they are supervised by bank officers; their operatoins bank lending operations—in other words, the more are handled largely and sometimes entirely by bank person- nearly it is an "incident" to banking operations— nel; and their commission earnings, after the deduction of the greater is that potentiality and the smaller the other expenses, are substantially drawn off by their related banks, nominally as charges for "rent" or for "administrative possibility that the agency would present a situation services rendered", but actually, as was conceded, in effec- which "substantially escape[s] the potential sources tuation of an FBSC policy to have the agencies' earnings of evil against which the prohibition was directed." acrrue in the main to their affiliated banks. 66 See Footnote 26—supra. In my Report and Recommended Decision in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

952 FEDERAL RESERVE BULLETIN • AUGUST 1959 General Contract Corporation case,57 I read the CONCLUSIONS OF LAW emphasized language of Transamerica quoted above as spelling out a statutory construction requiring 1. All the activities of First Bancredit Corporation as the touchstone for 4(c)(6) exemption a showing —other than certain activities limited to furnishing of substantial "escape" from the "potential sources services to or performing services for the Applicant of evil", including the specific "potential evil" ad- and its subsidiary banks—are of a financial nature. verted to above.58 That interpretation strictly applied 2. First Bancredit Corporation is not—within the would be sufficient, without more, to rule out Agen- meaning of Section 4(c)(6) of the Act—so closely cies, Inc. as a company qualified for exemption. related to the business of banking or of managing After considerable further reflection, I am no longer or controlling banks as to be a proper incident thereto entirely persuaded that my previous interpretation and as to make it unnecessary for the prohibitions of of the Transamerica language precisely mirrored Section 4(a)(2) of the Act to apply in order to carry the Board's actual intent, or in any event, that if out the purposes of the Act. rigidly applied as a rule of law in all insurance agency 3. All of the proposed activities of First Service situations, it would not be more exacting than Con- Agencies, Inc., are of an insurance nature. gress intended. As the Applicant persuasively points 4. First Service Agencies, Inc., if activated, will out in its brief, wherein it vigorously attacks the not be—within the meaning of Section 4(c)(6) of "potential evils" approach in Transamerica, the indi- the Act—so closely related to the business of bankcated construction, strictly applied, would make it ing or of managing or controlling banks as to be a virtually impossible for any company to qualify for proper incident thereto and as to make it unnecessary a Section 4(c)(6) exemption, and would thus have for the prohibitions of Section 4(a)(l) of the Act the practical effect of reading that section out of the to apply in order to carry out the purposes of this statute. Act. Since this case has been disposed of on other grounds, I find it unnecessary to decide one way or RECOMMENDATIONS another whether the Transamerica dicta here specifically considered presents an additional basis for It is recommended that the Board of Governors of denial of the application relating to Agencies, Inc. the Federal Reserve System: The question has been raised here because it may 1. Enter an order determining the issues in this become of importance if the conclusions I have consolidated proceeding in accordance with the findindependently reached are not adopted by the Board, ings of fact and conclusions made above. and also with the thought that the Board may wish 2. Deny the requests of First Bank Stock Corporato clarify its views on this subject for the guidance tion, numbered BHC 36 and 37, for orders determinof interested persons in future cases. ing that its retention of voting shares of First Ban- Upon the basis of the foregoing findings of fact credit Corporation and its proposed acquisition of and upon the entire record in the case, I make the voting shares of First Service Agencies, Inc. are following: exempt from the prohibitions of Section 4 of the Act. 57 Federal Reserve BULLETIN, March 1958, p. 260. Dated at Washington, D. C, this 23rd day of 58 Ibid, pp. 290-292, 295. The Board in its decision in the July 1958. General Contract case did not pass on the correctness or incorrectness of my interpretation and application of the (Signed) ARTHUR LEFF, Transamerica language, as no exceptions were taken by the Applicant in that case to the related findings and conclusions Hearing Examiner. in my Report. {Appendix A follows) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 953 Appendix A FIRST BANK STOCK CORPORATION BANK AFFILIATES * Indicates banks that have related insurance agencies involved in this proceeding. # Indicates banks that have insurance agency departments not involved in this proceeding. NOTE: Figures in parenthesis indicate population according to 1950 census. City and population Name of bank Deposits Dec. 31, 1957 Minnesota Minneapolis (521,718) First National Bank: $405,215,711 North Side Office St. Anthony Falls Office West Broadway Office First Bloomington Lake National Bank 14,428,488 #First Hennepin State Bank 6,362,157 First Minnehaha National Bank 17,713,933 First Produce State Bank 9,259,480 First Edina National Bank 13,674,599 First Southdale National Bank, Edina (9,744) 2,419,882 * First National Bank, Hopkins (7,595) 8,520,504 #First Robbinsdale State Bank, Robbinsdale (11,289). 7,492,184 Total for Minneapolis group $485,086,898 St. Paul (311,349) First National Bank , $342,594,171 First Trust Company 2,309,556 #First Grand Avenue State Bank 9,621,283 #First Merchants State Bank 12,611,790 #First Security State Bank , 13,127,894 #First State Bank 11,966,537 #First State Bank of White Bear Lake. 4,544,771 Total for St. Paul group. $396,776,002 Albert Lea (13,545) Freeborn National Bank $6,769,641 Alexandria (6,319) •First Farmers National Bank 5,847,137 Austin (23,100) •First National Bank 19,769,837 Babbitt (2,300) #First State Bank 580,507 Benson (3,398) #First State Bank 2,546,323 Blue Earth (3,843) #First and Farmers National Bank 3,144,594 Brainerd (12,637) First National Bank 6,954,156 Cloquet (7,685) •First National Bank 10,199,460 Duluth (104,511) Duluth National Bank 9,689,392 Northern City National Bank 70,295,023 East Grand Forks (5,049) •Minnesota National Bank 6,430,360 Fairmont (8,193) •First National Bank 5,128,512 Hibbing (16,276) •First National Bank 13,872,836 Ivanhoe (682) #First National Bank 2,727,278 Lakefield (1,651) #Farmers State Bank 2,583,089 Litchfield (4,608) #First State Bank 3,484,704 Little Falls (6,717) •American National Bank 5,380,295 Luverne (3,650) #First National Bank 4,506,184 Mankato (18,809) First National Bank 14,323,825 Minneota (1,274) #Farmers and Merchants State Bank 4,525,419 Northfield (7,487) •Northfield National Bank 2,407,815 Owatonna (10,191) First National Bank 7,363,894 Paynesville (1,503) #First State Bank 2,045,407 Pipestone (5,269) •Pipestone National Bank 2,806,726 Rochester (29,885) First National Bank 20,385,496 Sauk Centre (3,140) #First National Bank 2,419,013 Spring Valley (2,467) #First National Bank 2,146,382 Virginia (12,486) First National Bank 12,644,490 Waseca (4,942) #Farmers National Bank 4,027,917 Wheaton (1,948) #First State Bank 2,002,870 Willmar (9,410) First National Bank 5,382,251 Windom (3,165) #First National Bank 4,320,955 Worthington (7,923) •Worthington National Bank 7,059,752 Total for Minnesota other than Minneapolis and St. Paul groups. $273,771,540 Montana Billings (31,834) Midland National Bank $31,357,682 Bozeman (11,325) First National Bank 11,926,063 Butte (33,251) Metals Bank and Trust Company 39,771,636 Forsythe (1,906) •Forsythe State Bank 4,526,234 Fort Benton (1,522) •Chouteau County Bank 4,781,770 Great Falls (39,214) First National Bank 43,144,327 Great Falls First Westside National Bank 3,786,088 Havre (8,086) First National Bank 8,846,140 Helena (17,581) First National Bank and Trust Company. 35,042,186 Helena First Trust Company of Montana Lewistown (6,573) First National Bank 10,208,022 Livingston (7,683) First National Park Bank 7,930,304 Miles City (9,243) First National Bank 15,289,462 Missoula (22,485) Western Montana National Bank 18,131,713 Missoula Southside National Bank 82b,331 Total for Montana. $235,567,958 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

954 FEDERAL RESERVE BULLETIN • AUGUST 1959 City and population Name of bank Deposits Dec. 31, 1957 North Dakota Bismarck (18,640) First National Bank $19,741,254 Cando (1,530) #First State Bank 4,424,953 Cavalier (1,459) #Merchants and Farmers Bank 3,104,837 Cooperstown (1,189) #First State Bank 2,697,592 Fargo (38,256) Merchants National Bank and Trust Company 20,059,895 Grand Forks (26,836) Red River National Bank 13,060,750 Jamestown (10,697) •Jamestown National Bank 8,720,622 Langdon (1,838) #Northwestern Bank 4,835,142 Lidgerwood (1,147) #First National Bank 1,969,904 Minot (22,032) •Union National Bank 9,469,340 Park River (1,692) #First State Bank 2,721,944 Rolla (1,176) #Rolette County Bank 3,349,507 Valley City (6,851) •First National Bank 5,764,432 Wahpeton (5,125) •Wahpeton National Bank 5,543,246 Total for North Dakota $105,463,418 South Dakota Aberdeen (21,051) Aberdeen National Bank $11,217,250 Clark (1,471) #Clark County National Bank 1,917,376 Gettysburg (1,555) #Potter County Bank 4,481,132 Highmore (1,158) #First State Bank 2,876,338 Huron (12,788) Branch of National Bank of South Dakota, Sioux Falls Lemmon (2,760) #First National Bank 4,932,369 Miller (1,916) #First National Bank 4,686,715 Sioux Falls (52,696) National Bank of South Dakota with Branches at Huron, Vermillion and South Sioux Falls 24,594,714 Sioux Falls •South Branch of National Bank of South Dakota Vermillion (5,337) •Branch of National Bank of South Dakota, Sioux Falls Total for South Dakota $54,705,894 Wisconsin La Crosse (47,535) Batonian National Bank $13,860,191 Total for all bank affiliates $1,565,231,901 BANK SHARES, INCORPORATED Chicago-Lake Agency, Incorporated (BHC-38) In the Matter of the Requests of Bank Shares, Columbia Heights Agency, Incorporated For Determinations under Section Incorporated (BHC-39) 4(c)(6) of the Bank Holding Company Act of Marquette Insurance Agency, 1956. Docket Numbers BHC-38, BHC-39, BHC- Incorporated (BHC-40) 40, BHC-41. University National Agency, ORDER Incorporated (BHC-41) Bank Shares, Incorporated, Minneapolis, Min- A hearing having been held pursuant to Secnesota, a bank holding company within the mean- tion 4(c)(6) of the Bank Holding Company Act ing of Section 2(a) of the Bank Holding Company of 1956 and in accordance with Sections 5(b) Act of 1956, has filed requests for determinations and 7(a) of the Board's Regulation Y (12 CFR by the Board of Governors of the Federal Reserve 222.5(b) and 222.7(a)); the Hearing Examiner System that the corporations hereinafter named having filed his Report and Recommended Deand their activities are of the kind described in cision wherein he recommended that the above Section 4(c)(6) of the Bank Holding Company requests be denied; Applicant having filed Ex- Act of 1956 (12 U.S.C. § 1843) and Section 5(b) ceptions and Brief with respect to each request; of the Board's Regulation Y (12 CFR 222.5(b)), oral argument having been heard before the so as to make it unnecessary for the prohibitions Board; the Board having given due consideration of Section 4 of the Act with respect to retention to all relevant aspects of the matter; and all such of shares in nonbanking organizations to apply steps having been in accordance with the Board's in order to carry out the purposes of the Act. Rules of Practice for Formal Hearings (12 CFR The corporations with respect to which the re- 263): quests were filed, with the hearing docket number IT IS HEREBY ORDERED, for the reasons set of each, are: forth in the Board's Statement of this date and on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 955 the basis of the record made at the hearing in The subsidiaries involved consist of four insurthis matter, that the activities of the four above- ance agencies: named corporations are determined to be so Chicago-Lake Agency, Incorporated ("Chiclosely related to the business of banking or of cago-Lake") managing or controlling banks as to be a proper Columbia Heights Agency, Incorporated incident thereto and as to make it unnecessary ("Columbia") for the prohibitions of Section 4 of the Bank Marquette Insurance Agency, Incorporated Holding Company Act of 1956 to apply in order ("Marquette") to carry out the purposes of that Act, and, there- University National Agency, Incorporated fore, Applicant's requests with respect to the said ("University") four corporations shall be, and hereby are, The attached copy of the Hearing Examiner's granted. Report and Recommended Decision describes the Dated at Washington, D. C, this 21st day of activities of Bank Shares, Incorporated, as well July, 1959. as of these subsidiaries. By order of the Board of Governors. As required by the statute, a formal hearing was held on all four of these requests on June Voting for this action: Chairman Martin, Vice Chairman Balderston and Governors Szymczak, Mills, 3, 4, and 5, 1958, pursuant to the regulations Robertson, Shepardson, and King. of the Board and the Administrative Procedure (Signed) MERRITT SHERMAN, Act. The hearing in this matter was held after (SEAL) Secretary. due notice before a duly selected and qualified hearing examiner at which opportunity was pro- STATEMENT vided for presentation of evidence by the Appli- BACKGROUND OF THE CASE cant and others. Thereafter, Applicant submitted On April 17, 1958, Bank Shares, Incorporated, to the Hearing Examiner proposed findings of Minneapolis, Minnesota, a bank holding com- fact and conclusions of law. pany herein sometimes called "Applicant," filed The Hearing Examiner's Report and Recomwith the Board of Governors requests for deter- mended Decision was filed with the Board on minations that four of its nonbanking subsidiaries December 19, 1958. The Hearing Examiner are of such a nature as to be exempt from the recommended that all four requests be denied. He divestment requirements of the Bank Holding concluded that, while the activities of the four Company Act of 1956 (the "Act"), pursuant to subsidiaries are of an insurance nature, such Section 4(c)(6) of the Act and Section 5(b) activities are not so closely related to the business of the Board's Regulation Y promulgated pur- of banking or of managing or controlling banks suant to the Act (12 CFR 222.5(b)).1 as to be a proper incident thereto and as to make it unnecessary for the prohibitions of Section 1 The particular sections of the Act here applicable are: "Sec. 4(a) Except as otherwise provided in this Act, no 4(a)(2) of the Act to apply in order to carry out bank holding company shall— the purposes of the Act. Accordingly, he rec- * * * "(2) after two years from the date of enactment of this ommended denial of the Applicant's requests. Act . . . retain direct or indirect ownership or control of any voting shares of any company which is not a bank or a bank On March 10, 1959, Applicant filed with the holding company. . . . Board exceptions and brief in support thereof to * * • "(c) The prohibitions of this section shall not apply— the Hearing Examiner's Report and Recom- * * * mended Decision, and on May 11, 1959, counsel "(6) to shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which for Applicant presented before the Board an oral the Board after due notice and hearing, and on the basis of the record made at such hearing, by order has determined to argument with respect to the pending requests and be so closely related to the business of banking or of managing or controlling banks as to be a proper incident thereto and as to make it unnecessary for the prohibitions of this section for the prohibitions of Section 4 of the Act to apply in order to apply in order to carry out the purposes of this Act. . . ." to carry out the purposes of the Act, may request the Board for such a determination pursuant to Section 4(c)(6) of the Section 5(b) of th * e Board's • Regulatio * n Y is as follows: Act. Any such request shall be filed in duplicate with the "(b) Shares of financial, fiduciary, or insurance companies. Federal Reserve Bank. After receipt of any such request, the —Any bank holding company which is of the opinion that a Board will notify the bank holding company of the place and company all the activities of which are of a financial, fiduciary, time fixed for a hearing on the requested determination; and, or insurance nature is so closely related to the business of after the conclusion of such hearing and on the basis of the banking or of managing or controlling banks, as conducted by record made at the hearing, the Board will by order make or such bank holding company or its banking subsidiaries, as to decline to make the requested determination." be a proper incident thereto and as to make it unnecessary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

956 FEDERAL RESERVE BULLETIN • AUGUST 1959 the Hearing Examiner's Report and Recom- Discussion mended Decision. Preliminary requirement as to nature of activi- Since all of the organizations involved are inties. To qualify for exemption under Section surance agencies, and since substantially the same 4(c)(6) of the Act it is first necessary that all considerations are applicable, they may conof the activities of a company be of a "financial, veniently be discussed together. fiduciary, or insurance nature." Chicago-Lake, Marquette, and University clearly meet this pre- Factual Summary liminary requirement since all of their activities Chicago-Lake, a Minnesota corporation, was are of an insurance nature. organized in 1942. Its office is located at 823 With respect to Columbia, that agency, as pre- East Lake Street, Minneapolis, Minnesota, on the viously noted, owns real estate in addition to its premises of the Chicago-Lake State Bank. Prior primary activities which are clearly of an insurto 1942 the bank operated an insurance business ance nature. Since the connected bank's occuas a department of the bank; the insurance de- pancy of the real estate owned by Columbia is partment was discontinued upon incorporation of substantial, the ownership of such real estate the agency. would be, in the Board's opinion, exempt under The activities of Chicago-Lake are confined to Section 4(c)(l) if carried on by a company enthe writing of a general line of insurance, chiefly gaged solely in such activities. Therefore, for the fire and extended coverage insurance, casualty reasons set forth in Part I of the Board's Stateinsurance and credit life insurance. ment of this date in the matter of the requests Columbia, a Minnesota corporation organized of First Bank Stock Corporation, the ownership in 1948, is located at 3982 Central Avenue, by Columbia of the aforementioned real estate Columbia Heights (adjacent to Minneapolis), and does not, in the Board's opinion, preclude exempon the banking floor of the Columbia Heights tion of its activities under Section 4(c)(6). State Bank. In addition, Columbia owns real Closeness of relationship. Although meeting the estate, a substantial portion of which is used by statutory requirement as to the nature of their Columbia Heights State Bank as part of its bank- activities, the subsidiaries here involved must be ing premises. found to be "so closely related" to the business Columbia's insurance activities consist prima- of the Applicant's subsidiary banks as to be a rily of fire, extended coverage insurance, casualty proper incident thereto and as to make it unnecesinsurance, credit life insurance, and accident and sary for the prohibitions of Section 4 of the Act health insurance. to apply in order to carry out the purposes of the Marquette, a Minnesota corporation, was or- Act. ganized on October 9, 1923. Its office is on the Each of the insurance agencies operates on the banking floor of the Marquette National Bank at banking floor of the related subsidiary bank. In 7th Street and Marquette Avenue, Minneapolis, two cases (Chicago-Lake and Columbia) all of Minnesota. the clerical work of the agency is performed by Marquette's insurance activities consist princi- employees of the related bank. In the other two pally of fire and extended coverage insurance, (Marquette and University) the agencies have a casualty insurance and credit life insurance. few full-time employees, but the related bank University, a Minnesota corporation organized also provides clerical help. The operations of all in 1942, maintains its office in the lobby of the four agencies are supervised by the manager of University National Bank at 718 Washington Marquette. While these facts do not necessarily Avenue, S. E., Minneapolis, Minnesota. The establish a close integration with the banking agency is engaged in writing insurance which con- functions of the banks, they suggest at least that sists primarily of fire and extended coverage, the operations of the insurance agencies are incasualty insurance and credit life insurance. timately related to the operations of the respective In connection with their respective insurance banks. activities, all of the four insurance agencies do a The agencies do a general insurance business, nominal amount of advertising. dealing with the general public as well as the re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 957 lated banks. Nevertheless, the business of the transactions sufficient to warrant an exemption. agencies is primarily with customers of the related Statements made by the Hearing Examiner seem banks, that is, depositors, borrowers, box holders, to suggest that a substantial portion of an organitrust department clients, and other persons having zation's activities must be directly connected with dealings with the banks. bank transactions in order to justify an exception In the aggregate, according to the Hearing and that anything less than a majority should not Examiner, about 34.8 per cent of the net pre- be considered "substantial". (Hearing Examiner's miums of the four agencies are derived from in- Report, pp. 961 and 962). It is the Board's view surance directly connected with bank transactions. that Section 4(c)(6) does not make it necessary The percentage of premiums of each agency re- as a prerequisite to an exemption that a majority lated to transactions of its associated bank is of a company's activities be directly connected indicated below: with bank transactions. At the same time, the Chicago-Lake 61.6 Board believes that there must be some direct and Columbia 21.8 significant connection between a company's activi- Marquette 44.1 ties and the business conducted by the related University 16.1 subsidiary banks in order to justify a conclusion that the requisite close relationship exists. What From the point of view of the subsidiary banks, constitutes such a connection must, it is believed, it appears that, as of May 14, 1958, 25.8 per depend upon all the facts of a particular case. cent in dollar amount of their secured loans was Mere percentages alone should not be given concovered by insurance obtained from the affiliated trolling weight. They must be considered along agencies. As to the individual banks, the perwith other pertinent factors suggesting a close centages of total loans covered by insurance obrelationship. tained from the respective agencies are as follows: In the judgment of the Board the percentages Chicago-Lake State Bank 14.5 (61.6 and 44.1) of the business of Chicago-Lake Columbia Heights State Bank 10.7 and Marquette directly connected with bank Marquette National Bank 12.6 transactions are clearly substantial; and, as to University National Bank 22.1 Columbia and University, the comparable percentages, although lower (21.8 and 16.1), are Since these percentages are based on total loans, sufficiently substantial to be entitled to weight the percentages of loans covered by insurance along with other factors in determining whether would be somewhat higher. the requisite close relationship exists. Similarly, In connection with the percentages set forth the percentages of the loan transactions of the above, it may be noted that Applicant asserts that four subsidiary banks directly connected with inthe aggregate amount of the net premiums of the surance activities of the four agencies are relafour agencies derived from insurance directly contively substantial and are entitled to some weight nected with transactions of related banks should be 37.3 per cent in lieu of 34.8 per cent; that the when considered along with the other factors bearpercentage of premiums for Marquette should be ing on the closeness of the relationship required 49 per cent in lieu of 44.1 per cent; and that the by the statute. percentage for Columbia should be 23.8 per cent The Applicant stresses not only the direct funcin lieu of 21.8 per cent. (Exceptions to Certain tional relation of the activities of the agencies but Findings of Fact of Hearing Examiner, p. 1). also their value to the related banks. Thus, the For reasons hereafter indicated, these differences agencies review insurance policies for adequacy between the percentages used by the Hearing and compliance with requirements, see that they Examiner and those advanced by the Applicant do not lapse, and provide interim coverage where are not significant in arriving at the decision herein necessary. The banks would need additional perreached. sonnel if these services were not provided. (Brief The Hearing Examiner concluded in his Report in support of Findings of Fact and Conclusions (p. 962) that the percentages listed above do not of Law, p. 4). Moreover, it is asserted that most, establish a substantial connection with bank although not all, banks in the area concerned Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

958 FEDERAL RESERVE BULLETIN • AUGUST 1959 provide such insurance services to customers and banking business; that they are not "substantially" that the subsidiary banks would suffer competi- related to banking transactions of the connected tively if they did not do so. (Brief, supra, p. 7) subsidiary banks; and that, therefore, they do not The Hearing Examiner held that these qualita- escape the so-called "potential evils" doctrine tive aspects of the relationship could not be con- stated in the Transamerica case. He concluded sidered as substantially identifying the business also that "area practice"—the fact that about twoof the agencies with that of the banks. (Hearing thirds of the banks in the area concerned have Examiner's Report, p. 962) In the Board's similar connections with insurance agencies—canopinion, such qualitative factors, while not con- not be given weight "in the face of the supervenclusive in themselves, may be given some cumula- ing" Bank Holding Company Act. (Hearing tive weight along with all other factors in reach- Examiner's Report, p. 961) ing an over-all judgment as to whether the The activities of an insurance agency may not, necessary close relationship exists between the of course, be regarded as "inherent" in the bankagencies and the banks. ing business. It is not necessary, however, that Propriety of relationship. In his Report the the activities of a nonbanking organization have Hearing Examiner noted that, if the Federal such an inherent relation to banking in order to statute (Section 13 of the Federal Reserve Act) warrant an exemption under Section 4(c)(6). empowering national banks in places of less than The law requires only a determination that they 5,000 to act as insurance agents is regarded, as are "closely related" to the banking business in argued by the Applicant, as indicating general the manner there set forth. Similarly, the law recognition that insurance is a proper incident does not expressly require a "substantial" conto banking, this fact could imply that in places nection between a company's activities and the of over 5,000—like Minneapolis—the insurance business of banking. As previously indicated, agency business is not a. "proper" incident to however, the Board believes that a significant banking. However, the Hearing Examiner did functional connection must exist in order to justify not pass on this question. (Hearing Examiner's a finding of the requisite close relationship, and Report, p. 961) For the reasons set forth in Part that in the present case the activities of the in- II of the Board's Statement of this date in the surance agencies are "substantially" related to the Matter of Requests by First Bank Stock Corpora- business of the Applicant's subsidiary banks. tion, the Board believes that the national bank As explained in Part II of the Board's Statelimitations should not be given decisive weight in ment of this date in the Matter of Requests by the present case. First Bank Stock Corporation, the statements in In the instant case, the Hearing Examiner ap- the Transamerica case referred to by the Hearing parently based his adverse recommendation pri- Examiner were intended to refer to those "potenmarily on a strict construction of certain statetial evils" that may result from the existence of ments by the Board in the Transamerica case common control of banks and nonbanking organiregarding avoidance of "potential evils."2 The zations by bank holding companies, not to all Hearing Examiner interpreted the Board's stateevils that may arise from relationships between ments in that case as meaning that potential evils banks and other organizations. In the present are avoided only where an organization's activicase, the fact that nonholding company banks as ties are either: well as holding company banks in the area in- "(1) . . . inherently so closely related to the business volved have related insurance agencies indicates of banking or of managing or controlling banks as that, // there are any potential evils in such renaturally to appertain thereto; or (2) so directly, aplationships, they are not evils peculiar to holding propriately and substantially related to bank transactions in the particular case as to be considered an company groups. aspect of the banking operation." (Hearing Examiner's Report, p. 961) While area practice alone may not be sufficient to justify finding that an organization's activities He concluded that the activities of the insurance are such as to warrant an exemption under Secagencies here involved are not "inherent" in the tion 4(c)(6) of the Act, it may, in the Board's 2 Transamerica Corporation, Federal Reserve BULLETIN, opinion, be given considerable weight as suggest- September 1957, p 1014. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 959 ing, not only that such activities are an "incident" of the Act should be approved; and IT IS SO to the banking business, but that they are a proper ORDERED. incident to such business, particularly where, as As indicated in the Board's Order, its approval here, such relationships have apparently been of these requests is based solely on the facts disknown to the bank supervisory authorities and closed by the record; and if the facts should subhave not been objected to by them. stantially change in the future in such manner Giving such weight to area practice might, it as to make the reasons for the Board's conclusion is true, lead to exemption of a nonbanking sub- no longer applicable, the statutory exemption residiary in one part of the country and to denial sulting from the Board's present determinations of exemption as to a similar organization in an- would, of course, cease to obtain. other part of the country. Such a result, however, REPORT AND RECOMMENDED DECISION would not seem contrary to the purposes of Section 4(c)(6) or the Board's Regulation Y. The STATEMENT OF THE CASE Regulation specifically refers to activities that are Bank Shares, Incorporated, a duly registered bank holding company, herein called the Applicant, hava "proper incident" to the business of banking as ing filed with the Board of Governors of the Federal conducted by the subsidiary banks involved. This Reserve System requests for exemption from the provision lends strong support to the right to con- prohibitions of Section 4(c)(6) of the Bank Holding Company Act of 1956, 70 Stat. 133, with respect sider the manner in which banks operate in a to four subsidiary companies hereafter described, particular area, either because of local laws or the Board, in accordance with the requirements of the statute, duly provided for a hearing thereon. Upon because of banking practices carried on without appropriate notice the hearing was held in Minobjection by the bank supervisory authorities. neapolis, Minnesota, on 3, 4 and 5 June, 1958, before On the basis of the record in the present case, the undersigned Charles W. Schneider, duly designated as Hearing Examiner. The Applicant and the the Board concludes that the long-established Board—the latter in a nonadversary capacity—were practice by banks in the area—nonholding com- represented at the hearing by counsel, and were afforded full opportunity to be heard, to examine pany as well as holding company banks—of mainwitnesses, to introduce evidence, and to file briefs taining connected insurance agencies, without ob- and proposed findings. Orders correcting the tranjection by the bank supervisory authorities, may script of record and closing the hearing were entered on 19 December 1958. On 1 December 1958 the be considered as indicating that such connections Applicant filed a brief and proposed findings which are a "proper" incident to the banking business have been considered. To the extent consistent with the findings made below the Applicant's proposed as conducted by the subsidiary banks involved. findings are accepted. Upon the entire record in the case and from my Conclusions observation of the witnesses, I make the following In the light of all the circumstances and factors FINDINGS OF FACT I. Introduction involved—particularly the substantial integration The particular sections of the Act here applicable of their activities with the business of the subare as follows: sidiary banks and the effect of area practice, it is Sec. 4. (a) Except as otherwise provided in this Act, no the Board's view that the insurance activities of bank holding company shall— (1) after the date of enactment of this Act acquire direct the four organizations here involved may prop- or indirect ownership or control of any voting shares of any erly be regarded as so closely related to the busi- company which is not a bank, or (2) after two years from the date of enactment of this ness of banking as conducted by the Applicant's Act . . . retain direct or indirect ownership or control of any voting shares of any company which is not a bank or a bank subsidiary banks as to be a proper incident thereto holding company. . . . * * * and as not to be inconsistent with the purposes (c) The prohibitions in this section shall not apply— of the Act. To the extent that they are consistent • * * with the foregoing statement, the Applicant's ex- (6) to shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which the ceptions to the Hearing Examiner's Report and Board after due notice and hearing, and on the basis of the record made at such hearing, by order has determined to be Recommended Decision are hereby sustained. so closely related to the business of banking or of managing or controlling banks as to be a proper incident thereto and as Accordingly, for the reasons stated above, it is to make it unnecessary for the prohibitions of this section to apply in order to carry out the purposes of this Act;. . . . the Board's judgment that the requests of Bank Shares, Incorporated, numbered BHC-38, 39, 40 Pursuant to Section 4(c)(6) Bank Shares, Incorporated seeks a determination that all the activities and 41 for determinations under Section 4(c)(6) of four subsidiaries—Chicago-Lake Agency, Incor- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

960 FEDERAL RESERVE BULLETIN • AUGUST 1959 porated, Columbia Heights Agency, Incorporated, amount of advertising. The Agency has five per- Marquette Insurance Agency, Incorporated, and manent employees, the salaries of which it pays. University National Agency, Incorporated—are of However, some Bank employees also do work for an insurance nature, and so closely related to the the Agency for which they are compensated by the business of banking or of managing or controlling Agency. banks as to make it unnecessary for the prohibitions University National Agency, Incorporated is a Minof Section 4(a)(2) of the Act to apply in order to nesota corporation organized in 1942. It maintains carry out the purposes of the statute. its office in the lobby of the University National Bank at 718 Washington Avenue, S. E., Minneapolis, Min- II. The Companies nesota. The Agency does a minimum amount of advertising. The Agency pays rent to the Bank in Bank Shares, Incorporated, the Applicant herein, the amount of $100 per month. The Agency has is a Minnesota corporation and a bank holding com- two full-time employees whose wages it pays. Howpany under the Bank Holding Company Act of 1956. ever, in return for payment of a sum equal to the It also holds a general voting permit under the Bank- Agency's commissions on credit life insurance the ing Act of 1933. Bank Shares, Incorporated owns Bank provides the Agency with the clerical help the majority of shares of voting stock in each of the required for writing such insurance. four subsidiaries here involved, all of them insurance The operations of all four agencies are supervised agencies. by the manager of the Marquette Agency, who co- Each of the agencies operates in relation to a bank ordinates their activities in the interest of uniformity. controlled by the Applicant, two of them national Generally the Applicant's banks require insurance banks, two being state banks. Three of the banks on collateral securing bank loans, principally in conare located in the city of Minneapolis, Minnesota, the nection with real estate mortgage or automobile fourth in Columbia Heights, Minnesota—adjacent loans. Some of the banks may require credit life to Minneapolis. The banks are as follows: Chicago- insurance in connection with certain unsecured loans. Lake State Bank, Columbia Heights State Bank, The agencies are available as a ready and convenient Marquette National Bank, and University National source of insurance where needed in connection with Bank. a loan or desired by customers generally. Some Each agency operates from the premises of the customers prefer to purchase insurance from a bankrelated bank, occupying space on the banking floor. related agency, or to secure their loans and connected Overall the agencies write a general line of insurance insurance in a single package and in a single transconsisting primarily of fire, extended coverage, action. No compulsion is exercised upon borrowers casualty, credit life, and accident and health insur- by any of the banks to place insurance with any parance. The business of the agencies is primarily with ticular agency. Such action is contrary to law in customers of the related bank—defining customers Minnesota in connection with secured loans. (Minas depositors, borrowers, box holders, trust depart- nesota Statutes Annotated § 123A) The agencies ment clients, and persons having other relations with provide a service of value to the banks by reviewing the bank. insurance policies for adequacy and compliance with Chicago-Lake Agency, Incorporated is a Minne- requirements, and by seeing that they do not lapse, sota corporation organized in 1942 and located in and by providing interim coverage where necessary. the premises of the Chicago-Lake State Bank at 823 They also advise the bank with respect to insurance. East Lake Street, Minneapolis, Minnesota. Prior The banks would require additional personnel if reto 1942 the Bank operated an insurance business as quired to provide these services themselves, which a department of the Bank. When the corporation other insurance agencies are presumably in a position was established the insurance department was dis- to supply. Most banks and lending agencies in the continued. The Agency pays the Bank $50 per Minneapolis-St. Paul area competitive with the Applimonth rental for the space which the Agency cant's banks have affiliated insurance agencies or occupies. The clerical work of the Agency is per- other related sources of insurance. Not all do, howformed by employees of the Bank—the Agency pay- ever. ing no salaries directly. However, it contributes RELATION BETWEEN THE AGENCIES' BUSINESS towards the compensation of Bank officers. Thus AND BANK TRANSACTIONS in 1957 the Agency paid a total of $1,625 to three of the Bank's principal officers. In addition the Agency A minority of the total business of the agencies is permits the Bank to use the Agency's automobile at connected with bank transactions. As nearly as can a nominal charge. The Agency does a limited amount be determined, the total net premiums received by of advertising. the agencies in the first 11 months of 1957 were Columbia Heights Agency, Incorporated is a Min- approximately $487,849. Of this amount approxinesota corporation organized in 1948. The office mately $169,782—or about 34.8%—was connected of the Agency is located at 3982 Central Avenue, with banking transactions.1 With respect to the indi- Columbia Heights, Minnesota, on the banking floor vidual agencies the ratios are given in the following of the Columbia Heights State Bank. The Bank table. It will be noted that the majority of the prefurnishes the Agency with clerical assistance and mium income of one agency, Chicago-Lake, is derived pays the salary of the Agency manager. In return from insurance in connection with bank transactions. the Agency provides certain building and parking space for the Bank. 1The data is drawn from Applicant's Exhibits 11 to 14, in- Marquette Insurance Agency, Incorporated is a clusive. I deem the following types of premiums to be con- Minnesota corporation organized in 1923. Its office nected with banking transactions: (1) premiums from insuris located on the banking floor of The Marquette ance on collateral pledged to banks; (2) credit life insurance premiums; (3) premiums from insurance originating in the National Bank at Seventh and Marquette Avenue, trust department of the banks; and (4) premiums from cover- Minneapolis, Minnesota. The Agency does a nominal age on property of banks or of the Applicant. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 961 Mar- Chi- Colum- Univer- It would seem unnecessary to demonstrate that the quette cago bia sity Totals business of selling a general line of insurance is not Agency Agency Agency Agency an activity inherently related to banking or the man- (1) Total premiums $232,326 $51,292 $48,281 $155,950 $487,849 (2) Premiums con- agement or control of banks. If the instant comnected with panies are to be exempted from the prohibitions of bank transac- Section 4 of the Act it will therefore have to be on tions $102,468 $31,640 $10,520 $ 25,154 $169,782 (3) Per cent of (2) the basis of their involvement in bank transactions. to(l) 44.1 61.6 21.8 16.1 34.8 The basic position of the Applicant is that in the State of Minnesota custom, practice and law make A minority of the business of the banks is related the business of selling insurance a proper incident of to insurance provided by the agencies. As of 14 May banking. 1958, 53% of the total loans of the four banks, in dollar value, was covered by insurance. Of the total Minnesota State laws do not permit the issuance loans 13.6% was protected by insurance acquired of insurance licenses to corporations; hence a bank through an affiliated agency; 38.7 involved insurance which is a corporation cannot be licensed to be an acquired from other sources. Of the insured loans insurance agent. Section 11 of the Federal Reserve 25.8% in dollar amount was covered by insurance Act (Act of 7 September 1916, 39 Stat. 753, 12 secured from an affiliated agency; the remaining U.S.C. § 92) empowers national banks in places of 74.2% of insurance was acquired from other sources. under 5,000 population to act as agents for insurance This is illustrated by the following table taken from companies, in conformity with regulations of the data in Applicant's Exhibit 17: Comptroller of the Currency. This provision is not of substantial effect in Minnesota, however, since [In thousands of dollars] banks there cannot secure licenses as agents. Not- (1) (2) (3) (4) withstanding this, in Minnesota—and elsewhere in Total loans Loans Insurance Insurance the region—most State and national banks in places of all covered by acquired through acquired from both larger and smaller than 5,000 may conduct, have 4 banks insurance affiliated agency other sources $37,517 $19,820 $5,126 $14,537 an interest in, or operate in conjunction with, insur- (53% of (13.6% of (38.7% of ance agencies, either in the form of a related partnercolumn (1)) column (1)) column (1)) ship or corporation or through officers or employees (25.8% of (74.2% of column (2)) column (2)) of the bank. In the larger cities this manner of operation is less frequent—though still substantial. With respect to the individual banks the ratios, The State banking and insurance authorities are aware similarly derived, are as follows: of the practice, and the Comptroller of the Currency presumptively so. The evidence discloses that the Amount Per cent of loans Per cent of loans of loans covered by insur- covered by insur- State authorities have no objection thereto. There is (In ance acquired ance acquired no indication as to the Comptroller's position, other thousands) through agency through others Marquette than what may be inferred from what has been Nat. Bank $26,940 12.6 36.3 stated. University The Applicant urges that the provision of the law Nat. Bank $ 3,637 22.1 50.5 Chicago-Lake empowering national banks in places under 5,000 State Bank $4,735 14.5 47.9 population to be insurance agents constitutes a gen- Columbia Hts. eral recognition by Congress of the fact that the State Bank $2,203 10.7 36.7 business of insurance is a proper incident of banking. III. Concluding Findings However, if that statute is to be construed as declaring what is a proper banking incident, it would per- All of the activities of the agencies here involved, haps be necessary to conclude by implication that in so far as disclosed, are of an insurance nature, hence the case poses no problem in that respect. The ques- towns over 5,000—such as Minneapolis—the business tion to be determined is whether the insurance agen- of insurance is not a proper incident of national cies are so closely related to the business of banking banking. In view of the basis for my decision, stated or of managing or controlling banks as to be a proper hereinafter, I do not find it necessary to reach that incident thereto and as to make it unnecessary for question.3 the prohibitions of Section 4 of the Act to apply in The Applicant relies in large measure on the foreorder to carry out the purposes of the statute. going history as establishing that the activities of the The case is controlled by the decision of the Board agencies here are closely related to and a proper in the Transamerica proceeding.2 As I interpret that incident of banking. Custom, however, cannot be case, subject to limited exceptions engagement by dispositive in the face of the supervening statute. A bank holding companies in nonbanking businesses determination of relationship and incidence sufficient presents possibility of potential harm or evil to the to warrant exemption is not to be inferred merely banking structure and to the public welfare. Such from evidence of existence of practices. The statute possibility is avoided where the activity is a proper places inhibitions upon bank holding companies with incident of banking. The activity may be such a respect to their ownership of shares of subsidiary proper incident when either (1) it is inherently so closely related to the business of banking or of managing or controlling banks as naturally to appertain 3 According to data supplied by the Applicant there are 74 banks and offices—31 national and 43 state—in the Minthereto; or (2) so directly, appropriately and sub- neapolis-St. Paul area. Of these it is said that all but 21 stantially related to bank transactions in the particular operate with insurance agencies of some description on the case as to be considered an aspect of the banking premises. The evidence does not disclose the ownership of these agencies, their form of organization, or the operating operation. arrangements. Of the 53 banks or offices having agencies 12 are national and 41 are State Banks. The smaller proportion 2 Transamerica Corporation, Federal Reserve BULLETIN, of national banks having agencies perhaps reflects interpretative September 1957, p. 1014. opinion of 12 U.S.C. § 92. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

962 FEDERAL RESERVE BULLETIN • AUGUST 1959 companies. It is now the general policy of Congress, purpose was to eliminate potential for evil in the use as it was not heretofore, to limit bank holding com- of banking resources. That potential is not eliminated pany systems to banking activities, subject to limited by private or local prohibitions against coercion of exception. To be exempt the affected companies and borrowers. their activities must be related to banking, not merely The Applicant suggests that the instant record lacks to banks. The history establishes the latter, but not evidence "indicating the present existence of sources the former. Familial relationship is not a substitute of potential evil" (Brief 8) and, since the Board is aufor required identification of activity. thorized by Section 4(c)(6) to issue orders only "on None of the other characteristics of the insurance the basis of the record made at the hearing" (Senate agency business, as conducted by the Applicant or its Report No. 1095, 84th Cong., 1st Sess. page 13) no banking subsidiaries, serve to impress upon the agen- finding can be made that such potential exists here. cies inherent relationship to or incidence of banking. That contention takes too limited a view of the statute. Various considerations advanced in this respect fall Potentiality for evil is apparent in the situation disshort of fulfilling the statutory standard. Thus, it is closed by the record, namely, the possibility of missaid that the agencies are of assistance to the banks; use of banking resources in order to gain advantage in that the arrangement is a convenience to, is desired the conduct of nonbanking activities. This is not to by and attracts bank customers; and that competitive suggest the likelihood of such conduct by the Appliinstitutions in the area provide package arrangements cant or its banks. But proof of actual abuse is not and that failure of the Applicant's banks to do the required. The intent of Congress was to eliminate sitsame will harm them competitively. These conten- uations from which abuse could eventuate. As the tions may be accepted, but they do not tend substan- Board said in the Transamerica case (page 1016): tially to identify the relationship of insurance sales "It is noteworthy that Congress, in ordering this closely with banking. The cited services or advanseparation of functions, did not make the requirement tages do not require the maintenance of an agency depend upon whether or not a particular nonbanking controlled by the Applicant. Almost one-third of the business of a particular bank holding company had rebanks in the area apparently do not find it comsulted in actual abuses. The language and history of petitively disadvantageous not to maintain affiliated the Act make it clear that Congress intended to elimiinsurance agencies. The Applicant's banks are doubtnate potential evils by correcting what it considered less as resourceful. In sum, none of the stressed conto be unsound corporate structures in bank holding siderations tend substantially to establish the agencies company systems, and that it did not wish to require as inherently related to banking. proof of the existence of actual evil in each particular Nor are the direct relations between banks and the situation." agencies sufficient to warrant exemption. As has been seen, with the exception of the Chicago-Lake Agency, The Applicant also appears to question the authorbank transactions accounted for less than 50% of the ity of the Board to establish what the Applicant refers premium income of the agencies in the period ending to as a standard of "kind of closeness" for securing 30 November 1957. For the agencies as a whole the exemption. (Brief 10) It is not within the province proportion of premiums so connected was 34.8%. It of the Board's hearing examiner to review principles may be assumed that not all the activities of the sub- established by the Board. Such proposals must be disidiary need be related to bank transactions in order rected to the Board itself. But in any event I perto merit exemption under Section 4(c)(6). Where the ceive no unwarranted exercise of authority. As I innon-related activities are merely incidental to the terpret the Transamerica decision, there is scope on major involvement it would seem that they ought not the basis of the principles there stated for the proper to defeat an exemption otherwise appropriate. Here, operation of insurance agencies affiliated with bank however, the agencies are engaged in the general sale holding companies. If that latitude is insufficient the of insurance and make no attempt to restrict their grievance must be addressed to Congress. activities to banking transactions. The proportion of Upon the basis of the foregoing findings of fact, the non-bank-connected-business of the Chicago-Lake and upon the entire record in the case, I make the Agency—38.4%—is more than incidental to its bank following: matters. That the business of the agencies is pri- IV. Conclusions of Law marily with customers of the bank—in the inclusive 1. All the activities of Chicago-Lake Agency, Insense in which the term has been defined, supra— corporated, Columbia Heights Agency, Incorporated, does not connect the agencies' business with banking Marquette Insurance Agency, Incorporated, and Unior banking transactions in the manner which the versity National Agency, Incorporated, are of an statute requires. insurance nature. Other points raised do not affect the conclusions 2. The aforesaid companies are not—within the here reached. meaning of Section 4(c)(6) of the Act—so closely Thus, that Minnesota Law (Minnisota Statutes related to the business of banking or of managing or Annotated § 60.68) prohibits the licensing of insurcontrolling banks as to be a proper incident thereto ance agents if the licensee's "sole purpose" is the and as to make it unnecessary for the prohibitions of writing of insurance upon "his own life or property" Section 4(a)(2) of the Act to apply in order to carry is not dispositive. Since the Applicant's banks cannot out the purposes of the Act. be licensed as insurance agents the provision cannot be applicable here. Other reasons for inapplicability V. Recommendation seem apparent from the wording of the prohibition and do not require comment. That the Applicant's It is recommended that the Board of Governors of policies and Minnesota law forbid the exercise of the Federal Reserve System: coercion upon borrowers in the placing of insurance 1. Enter an order determining the issues in this on secured loans is also not dispositive. As the Board proceeding in accordance with the findings of fact indicated in the Transamerica case, Congressional and conclusions made above. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

963 LAW DEPARTMENT 2. Deny the request of Bank Shares, Incorporated, been in accordance with the Board's Rules of for an order under Section 4(c)(6) of the Act de- Practice for Formal Hearings (12 CFR 263): termining that the shares of Chicago-Lake Agency, Incorporated, Columbia Heights Agency, Incorpo- IT IS HEREBY ORDERED, for the reasons set forth rated, Marquette Insurance Agency, Incorporated, and University National Agency, Incorporated are in the Board's Statement of this date and on the exempt from application of the prohibitions of Sec- basis of the record made at the hearing in this tion 4(a)(2) of the Act. matter, that: Dated at Washington, D. C, this 22nd day of December, 1958. 1. The activities of Northwestern Mortgage (Signed) CHARLES W. SCHNEIDER Company are determined not to be so closely re- Hearing Examiner. lated to the business of banking or of managing or controlling banks as to be a proper incident NORTHWEST BANCORPORATION thereto and as to make it unnecessary for the pro- In the Matter of the Requests of Northwest Ban- hibitions of Section 4 of the Bank Holding Comcorporation for Determination under Section pany Act of 1956 to apply in order to carry out 4(c)(6) of the Bank Holding Company Act of the purposes of that Act, and, therefore, Appli- 1956. Docket Numbers BHC-42, BHC-43, cant's request with respect to Northwestern Mort- BHC-44. gage Company shall be, and hereby is, denied; and ORDER 2. The activities of South Side Insurance Agency, Inc., and of Union Investment Company Northwest Bancorporation, Minneapolis, Minare determined to be so closely related to the nesota, a bank holding company within the meanbusiness of banking or of managing or controlling ing of Section 2(a) of the Bank Holding Company banks as to be a proper incident thereto and as Act of 1956 (12 U.S.C § 1843), has filed requests to make it unnecessary for the prohibitions of for determinations by the Board of Governors of Section 4 of the Bank Holding Company Act of the Federal Reserve System that the corporations 1956 to apply in order to carry out the purposes hereinafter named and their activities are of the of that Act, and, therefore, Applicant's requests kind described in Section 4(c)(6) of the Act and with respect to South Side Insurance Agency, Inc., section 5(b) of the Board's Regulation Y (12 CFR and Union Investment Company shall be, and 222.5(b)), so as to make it unnecessary for the hereby are, granted. prohibitions of Section 4 of the Act with respect Dated at Washington, D. C, this 21st day of to retention of shares in nonbanking organizations July, 1959. to apply in order to carry out the purposes of the By order of the Board of Governors. Act. The corporations with respect to which the requests were filed, with the hearing docket num- Voting for this action: Chairman Martin, Vice Chairman Balderston and Governors Szymczak, Mills, ber of each, are: Robertson, Shepardson and King. Northwestern Mortgage Company (BHC-42) (Signed) MERRITT SHERMAN, Secretary. South Side Insurance Agency, Inc. (BHC-43) Union Investment Company (BHC-44) (SEAL) A hearing having been held pursuant to Section STATEMENT 4(c)(6) of the Act and in accordance with Sec- BACKGROUND OF THE CASE tions 5(b) and 7(a) of the Board's Regulation Y (12 CFR 222.5(b) and 222.7(a)); the Hearing On March 14, 1958, Northwest Boncorporation, Examiner having filed his Report and Recom- (hereafter sometimes called the "Applicant")? a mended Decision wherein he recommended that Delaware Corporation with its principal office and all three of the above requests be denied; Ap- place of business in Minneapolis, Minnesota, and a plicant having filed Exceptions and Brief with bank holding company as defined in Section 2(a) respect to all of the said requests; oral argument of the Bank Holding Company Act of 1956 (the having been heard before the Board; the Board "Act"), filed with the Board of Governors of the having given due consideration to all relevant Federal Reserve System (the "Board") requests aspects of the matter; and all such steps having for determinations that three of its nonbanking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

964 FEDERAL RESERVE BULLETIN • AUGUST 1959 subsidiaries are of such a nature as to be exempt As required by the statute, the Board, on May 8, under Section 4(c)(6) of the Act from the pro- 1958, ordered that a hearing be held on the Applihibitions of Section 4(a) of the Act. The non- cant's requests; and such a hearing was held at banking subsidiaries involved are Northwestern Minneapolis, Minnesota, before a duly designated Mortgage Company ("Mortgage"), South Side Hearing Examiner on July 14, 15, 16 and 17, Insurance Agency, Inc. ("South Side") and Union 1958. Following the conclusion of that hearing, Investment Company ("Union"). the Applicant on September 15, 1958, submitted Section 4 (a) of the Act makes it unlawful, sub- proposed findings with an accompanying brief. ject to certain exceptions, for a bank holding com- In his Report and Recommended Decision, filed pany (1) to acquire direct or indirect ownership with the Board on November 18, 1958, the Hearor control of voting shares of any company that ing Examiner recommended denial of all three of it not a bank, or (2) to retain direct or indirect the Applicant's requests. Subsequently the Apownership or control of voting shares of any such plicant filed with the Board exceptions to the Hearcompany after two years from the date of enact- ing Examiner's Report and Recommended Deciment (May 9, 1956) of the Act. All three of the sion; and on May 11, 1959, the Applicant prenonbanking subsidiaries are companies a majority sented oral arguments before the Board. of all of the voting shares of which were owned The salient relevant facts with respect to Mortby the Applicant on the date of the Act and are gage, South Side and Union are set forth hereafter presently so owned pending determination of the in this Statement. Additional facts with respect present matter. The time allowed for divestment to their activities are contained in the Hearing by the Applicant of its ownership of such stock Examiner's Report and Recommended Decision has been extended by the Board pursuant to the attached hereto; and, to the extent not inconsistent provisions of the Act allowing such extensions. with this Statement, the findings of fact made by The Applicant's retention of stock of Mortgage, the Hearing Examiner are hereby adopted. South Side, and Union escapes the prohibitions of In determining whether or not the pending rethe Act only if it falls within one of the exceptions quests should be granted, the Board has conprovided by the Act. Section 4(c) (6) of the Act sidered solely the facts embraced in the record excepts shares of a nonbanking company if two of the hearing held in this matter. In addition, requirements are met: (1) if all the activities of however, the Board has considered arguments prethe company are of a financial, fiduciary or insur- sented in the Applicant's proposed findings, the ance nature, and (2) if the Board determines, on Hearing Examiner's Report and Recommended the basis of the record made at a hearing, that the activities of the company are so closely related to • * * the business of banking or of managing or con- "(c) The prohibitions of this section shall not apply— trolling banks as to be a proper incident thereto • * * "(6) to shares of any company all the activities of which and as to make it unnecessary for the prohibitions are of a financial, fiduciary, or insurance nature and which the Board after due notice and hearing, and on the basis of of Section 4 to apply in order to carry out the the record made at such hearing, by order has determined purposes of the Act. Section 5(b) of the Board's to be so closely related to the business of banking or of managing or controlling banks as to be a proper incident Regulation Y, issued pursuant to the Act, para- thereto and as to make it unnecessary for the prohibitions of this section to apply in order to carry out the purposes of phrases the language of the Act, but requires that this Act. . . ." * * * the activities of a company must be closely related "Section 5(b) of the Board's Regulation Y is as follows: to the business of banking or of managing or con- "(b) Shares of financial, fiduciary, or insurance companies. trolling banks "as conducted by such bank holding —Any bank holding company which is of the opinion that a company all of the activities of which are of a financial, company or by its banking subsidiaries."l fiduciary, or insurance nature is so closely related to the business of banking or of managing or controlling banks, as conducted by such bank holding company or its banking sub- The relevant language of the Act and the regulation is as sidiaries, as to be a proper incident thereto and as to make follows: it unnecessary for the prohibitions of Section 4 of the Act to apply in order to carry out the purposes of the Act, may "Sec. 4(a) Except as otherwise provided in this Act, no request the Board for such a determination pursuant to bank holding company shall— Section 4(c)(6) of the Act. Any such request shall be filed in duplicate with the Federal Reserve Bank. After receipt of * * • any such request, the Board will notify the bank holding com- "(2) after two years from the date of enactment of this pany of the place and time fixed for a hearing on the requested Act . . . retain direct or indirect ownership or control of any determination; and, after the conclusion of such hearing and voting shares of any company which is not a bank or a bank on the basis of the record made at the hearing, the Board will holding company. . . . by order make or decline to make the requested determination." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 965 Decision, the Applicant's exceptions thereto, and obtain automobile insurance policies under this the transcript of the record of the oral argument plan in connection with automobile loans, and can before the Board. The Board's findings and con- thus compete with finance companies specializing clusions are hereafter set forth with respect to in loans of this type. each of the companies involved. The second activity of Mortgage, producing 71.6 per cent of its gross income, comprises the I. Northwestern Mortgage Company management, rental and sale of city and farm (BHC-42) properties and farm livestock as agent or broker for private individuals—almost all customers of Factual Summary Northwest banks—and for the trust department Northwestern Mortgage Company ("Mort- of Bank and other Northwest banking affiliates. gage") was incorporated under the laws of Min- The third activity, brokerage and servicing of nesota on June 27, 1927, under the name of the city real estate loans, produces 23 per cent of the Central Company, to take over the insurance gross income of Mortgage. When various Northagency business of the insurance department of west banking affiliates are approached by customthe Minnesota Loan and Trust Company. In 1934, ers for mortgage loans which they do not wish when the Minnesota Loan and Trust Company to make because money is generally tight, or bewas merged with the Northwestern National Bank cause the term of the loan is too long or the under the name of Northwestern National Bank amount is outside the bank's lending limit, or for & Trust Company ("Bank"), the property man- any other reason, they refer these customers to agement department which had been built up by Mortgage which arranges the loan with any one the former was transferred to the renamed in- of a number of insurance companies. Mortgage surance agency. There are 250 shares of common also arranges loans of this kind for banks in the stock of Mortgage outstanding, all of which are Northwest system that have excess loanable funds. owned or controlled by the Applicant. Mortgage In the aggregate, 17.7 per cent of the gross is authorized to do business in a six-State area income of Mortgage derives from transactions on also served by the Applicant. behalf of Northwest banking subsidiaries, particu- Mortgage has offices in the Northwestern Bank larly of Bank. The proportion varies among the Building in Minneapolis, the building which also three categories of business listed above. Brokerhouses Bank, the largest banking subsidiary in the ing mortgage loans for the affiliated banks ac- Northwest system, as well as the home offices of counts for only 8.6 per cent of the portion of the the Applicant. Mortgage and the Applicant have gross income deriving from this activity. Since several directors in common, and several officers this type of loan is made only upon request by of the Applicant are directors of Mortgage. an affiliated bank (or by the borrower), volume Mortgage is more closely related to Bank than varies with the amount of excess loanable funds to any of the other banking subsidiaries of the which the banks have on hand. In periods when Applicant, although it performs miscellaneous credit was easier, the total amount of these loans, services for many of them. However, it is finan- and presumably income from them, bulked much larger than at present. When money is tight, busicially independent of Bank and has its own highly ness done for the banks diminishes. specialized personnel. Activities of Mortgage may be classified gen- A more significant connection appears in the erally under three headings. The first, insurance, property management area. Forty-five per cent is the least important, producing only 1.9 per cent of gross income of Mortgage derives from city of Mortgage's gross income, and falls into two real estate and property management and 15.3 per entirely separate parts. One part represents com- cent of this is attributable to banking subsidiaries missions on policies written as part of the mort- of the Applicant. The proportion of gross income deriving from farm loans, management and sales gage loan and real estate management and sales is 26.6 per cent, and 33 per cent of this is simiactivities of Mortgage. The other part represents larly attributable to banking subsidiaries of Appliblanket coverage under the so-called "Stuyvesant cant. Taking farm management alone, the Appliplan." Affiliated banks of Northwest can and do Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

966 FEDERAL RESERVE BULLETIN • AUGUST 1959 cant's figures show that 14.5 per cent2 of the banking affiliates of the Applicant have similar farm properties managed by Mortgage in 1957 relationships to separately incorporated agencies were managed for the affiliated banks and that of the kind represented by Mortgage. The Appli- 11 per cent of its income from farm management cant did lay considerable stress upon the high derived from fees for managing farm properties quality of the services rendered by Mortgage, and for these banks. Looking at the relationship from the Hearing Examiner found that it would cost the side of the Bank, it appears from the Hearing Bank many times the amount paid Mortgage in Examiner's Report (although he made no direct fees annually to establish a comparable property finding on this point) and from the record of the management division within its own trust departhearing that Mortgage handles almost all of the ment. Testimony in the record tends to prove that property management business generated by the the Minnesota Loan and Trust Company had untrust department of Bank, although very little of satisfactory experiences with independent agents that arising with the other affiliated banks. which it employed to manage its properties, and In order to have these services available to that the department whose functions were trans- Bank at all times, wherever needed, Mortgage ferred to Mortgage was founded because indehas further built up the staff of experts which it pendent agents did not provide satisfactory took over from the Minnesota Loan and Trust service. Company. These experts are trained in farm Preliminary Requirement as to Nature management and specialize in the diverse types of of Activities farming practiced over the large area served by The Hearing Examiner found, and the Board Bank. Similarly, Mortgage has a staff of city real agrees, that "the business of managing, renting estate management experts. It has not been posand selling property as an agent is fiduciary in sible to maintain an organization on this scale for nature" and that "the brokerage and servicing of the benefit of trust business generated by the real estate loans . . . are financial in character." Northwest banks alone. In order to keep the Accordingly, since its remaining activities are of organization functioning on an economical basis, an insurance nature, Mortgage meets the preit has been found necessary to accept business liminary requirement of Section 4(c)(6) of the from outside sources. However, outside business Act that all of a company's activities must be "of in respect to property management is done almost a financial, fiduciary, or insurance nature." without exception for customers of Bank and of the other banking affiliates of the Applicant. In Relation to Banking Business addition, it appears that these banking affiliates Even though Mortgage complies with this prefrequently make use of advisory services which liminary requirement of the law, the statute and Mortgage is in a position to render, in connection the Board's Regulation Y further require that an with properties they handle in their trust depart- exemption shall be granted only if the Board dements. termines, after a hearing, that the activities of Only a small fraction of the insurance income Mortgage are "so closely related" to the business of Mortgage, 3.2 per cent, is attributable to busi- of banking or of managing or controlling banks, ness done for the banking affiliates. The Stuy- as conducted by the Applicant and its banking vesant plan aspect of the insurance activity is en- subsidiaries, as to be a "proper incident" to such tirely related to the business of these affiliates, but business and as to make it unnecessary for the because little or no testimony was offered tending prohibitions of Section 4 of the Act to apply in to prove the amount of business done under the order to carry out the purposes of the Act. As plan, the Hearing Examiner was unable to make the Board pointed out in its Statement of this date a finding on the proportionate importance of that with reference to the application of First Bank segment of the insurance business. Stock Corporation for exemption of First Service No evidence was adduced at the hearing, and Agencies, Inc., this determination is to be made no finding was made by the Hearing Examiner, on the basis of all the relevant facts and circumas to whether other banks in the area served by stances disclosed by the record of the hearing. The Hearing Examiner in the present case ex- 2 The figure found by the Hearing Examiner, to which the Applicant took exception, was 8.7 per cent. pressed the view that the propriety of the incident Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 967 may be established in either of two ways: (1) lish the propriety of the connection, and to avoid by a showing that it is "inherently" so closely the possibility that evils of the kind foreseen by related to the business of banking in general as Congress might arise. naturally to appertain thereto; or (2) by a show- The Transamerica decision dealt with a case ing that the activities are so "directly, appropri- in which the relationship was qualitative only, ately, and substantially related to banking trans- being limited to a mere similarity of function beactions in the particular case as to be considered tween banking and the business of an insurance an aspect of the banking operation." Thus, his company which was a holding company subsidfirst test is qualitative, relating to the nature of the iary. The Board held that this was not sufficient activity; and his second test is quantitative, relat- to justify granting an exception under the statute. ing to the proportion of total transactions of the On the other hand, in its Statement of the present subsidiary banks and of Mortgage that are directly date with respect to the application of First Bank connected with each other. Stock Corporation, the Board held that, where Having laid down these tests, the Hearing Ex- insurance agencies are commonly operated in aminer found that property managing and loan connection with banks in the area involved, and brokering, "though activities of a kind sometimes where there is a significant quantitative connecperformed by a bank in connection with its tion between the business of agencies owned by operations, are not thereby inherently related to a holding company subsidiary and the business of banking." As to the substantial nature of the individual banking subsidiaries related to those connection, he believed that "at least the word agencies, shares of the nonbanking subsidiary may [substantial] embraces 'major part'." He felt that be exempted from the divestment requirements such a substantial relationship must exist both as of Section 4. In that case, the area practice served to the proportion of the nonbanking subsidiary's to establish a proper qualitative relationship, i.e., business that is related to the affiliated banks or that independent organizations of a particular bank holding company and as to the proportion kind are commonly operated in connection with of the relevant business of the bank or banks (or banks in the area in question and that such operabank holding company) that is related to the non- tion is a proper incident of the banking business. banking subsidiary. Since less than one-fifth of The area practice in that case also tended to the business of Mortgage is done for the affiliated overcome the presumption of a potentiality for banks (or for the Applicant), he concluded that evil envisaged by the statute where there is comexemption should be denied. mon control of banking and nonbanking organiza- While not necessarily adopting these tests, the tions. The potential evils against which the Act Board agrees with the Hearing Examiner that the is directed are evils which may be said to arise decision on the present application is governed from, or be accentuated by, the operation of bank by the Board's decision in the case of Trans- holding companies. Since area practice, acquiesced america Corporation, Federal Reserve BULLETIN, in by the Comptroller of the Currency and by September 1957, p. 1014. In that decision, the State supervisory authorities, sanctions the opera- Board stated that tion of insurance agencies in connection with both ". . . it seems evident that Congress was of nonholding company and holding company banks, the view that, in general and subject to only the evils, if any, incident to such relationships canlimited exceptions, bank holding company not be said to be causally connected with the operasystems should be restricted to banking ac- tion of bank holding companies. tivities and should not engage in other types While stronger than the mere similarity between of business for the reason that common conbanking and the business of the insurance subtrol of banks and nonbanking organizations sidiary in the Transamerica case, the qualitative could give rise to evils of several kinds." relationship in the case of Mortgage is limited to Id. at 1016. the fact that property management and mortgage These limited exceptions are available only where loan brokering are functions that are frequently the relationship between the banking and the non- performed by banks. The Applicant made no banking organizations is sufficiently close to estab- showing that it is common for banks in the area Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

968 FEDERAL RESERVE BULLETIN • AUGUST 1959 in question to have related or affiliated corpora- it is the Board's judgment that the requested extions which carry on a business of this kind. emption with respect to Mortgage should be de- Nor is the relationship between the business nied; and IT IS SO ORDERED. of Mortgage and the business of the Applicant's subsidiary banks of a kind that would tend to II. South Side Insurance Agency, Inc. negate the potential sources of evil with which (BHC-43) Congress was concerned. On the contrary, on the Applicant's own showing, the business of Factual Summary Mortgage was developed to its present size and South Side Insurance Agency, Inc. ("South efficiency largely because of the ample resources, Side") was organized in 1922 under the laws of the volume of business to be tapped, and the Minnesota to take over the insurance business planning and managerial talent made available formerly conducted by an unincorporated agency through the holding company form of organizarelated to the bank which in 1927 became the tion. In addition, the extensive geographic spread Fourth Northwestern National Bank of Minneof Mortgage's operations appears in practice to apolis ("Fourth"). The Applicant acquired stock be largely unavailable to banks which are outside in both South Side and Fourth in 1929, and now a holding company group. Thus, any potentiality owns all but two of the 50 outstanding shares for evil in that relationship would appear to be of the first, and 92.5 per cent of the stock of peculiar to holding company operation. This is the second. not to say that such evils exist at present, or that Since the bank was founded in 1899, there has they are imminent. Congress did not, as the Hearalways been an insurance agency operated in coning Examiner pointed out, "condition its prohibijunction with Fourth and its predecessors. Despite tions upon the occurrence of abuses. Congresseparate incorporation, the manner of operating sional purpose . . . was to eliminate any possithe agency remains substantially similar and the bility of such occurrence." Hearing Examiner found that because of the his- While a substantial quantitative connection may torical connection "many Bank customers associbe regarded as existing between Mortgage and the ate the Agency with the Bank, expect insurance Applicant's subsidiary banks, nevertheless, for the as a part of bank services, and place insurance reasons heretofore indicated, it is the Board's with the Agency." South Side has offices on the judgment that the activities of Mortgage are not second floor of the building which houses Fourth, related to the business of such banks in such a and one of the two entrances to the agency is manner as clearly to be a "proper" incident therethrough the bank lobby. While personnel of the to or as to be consistent with the purposes of the two are separate, they have some common direc- Act. tors and officers, including the president and vice- Conclusion president of each. After carefully considering all the relevant facts South Side is engaged in a general insurance and circumstances developed at the hearing and business but sells no life or credit life insurance. discussed at the oral argument before the Board, A relatively small proportion of the insurance sold as well as the Report and Recommended Decision by the agency is related directly to banking transof the Hearing Examiner, and the Applicant's actions of Fourth. Of the premiums written in exceptions and brief in support thereof, the Board 1957, only 5.9 per cent represented insurance on has determined, for the reasons set forth above, real estate or personal property involved in loans that the activities of Northwestern Mortgage by Fourth, and .8 per cent policies in which the Company are not so closely related to the business bank was the named insured. An analysis from of banking, as conducted by the Applicant's sub- the side of the bank gives a more significant residiary banks, as to be a proper incident thereto sult. Of the $4,039,236 of loans outstanding on and as to make it unnecessary for the prohibitions June 21, 1958 on which Fourth required insurof Section 4 of the Act to apply in order to carry ance of security, 20.3 per cent was insured out the purposes of the Act. through South Side. Of this figure, $2,145,812 Accordingly, for the reasons set forth herein, represented real estate mortgages purchased by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 969 the bank, on which the agency presumably had no determination is to be made on the basis of all prior opportunity to write the insurance. Accord- of the relevant facts and circumstances disclosed ingly, the proportion of secured loans on which at a hearing held in the case. insurance was required which were insured The weight which the Board believes should be through South Side, to the total of such loans given these factors and circumstances is discussed which could have been so insured, was substan- at length in its Statement in the First Bank Stock tially in excess of 20 per cent. Corporation matter referred to above. For the Defining "customers" to include depositors, reasons there set forth, it is the Board's judgment borrowers, deposit box renters, or persons whose that the direct connection between the activities of obligations are held by the bank, about 50 per South Side and the activities of Fourth, concent of the customers of the Agency were also sidered in the light of the historical, physical, and customers of the bank in 1957. Premiums on in- personnel connection between the two, is suffisurance written for customers of Fourth, how- ciently great as to be given strong weight, along ever, represented 87.7 per cent of total premiums with other pertinent factors, as suggesting the reqwritten by the agency in that year. uisite close relationship required by the statute. Finally, as pointed out in the Board's statement The degree to which common customers make use accompanying its order of this date with refer- of facilities offered by both is a cumulative factor ence to the application of First Bank Stock Cor- entitled to be considered in this respect. Area poration for exemption of First Service Agencies, practice, prevalent in Minneapolis as elsewhere Inc., it is a fact of special significance that the throughout the region in which the Applicant opoperation of insurance agencies in connection erates, under which banks in these localities parwith banks is a practice that has prevailed for ticipate in insurance arrangements of the kind demany years in Minnesota, without evidence of scribed in this Statement, as the Hearing Exobjection on the part of the bank supervisory aminer points out, is a weighty circumstance when authorities. From a survey made by the Appli- considered apart from the enactment of the Bank cant and relied on by the Hearing Examiner, 48 Holding Company Act. In the opinion of the per cent of the Minnesota banks in the classifica- Board, the enactment of that statute does not tion to which Fourth belongs, i.e., national banks diminish the weight to be accorded such area in places of over 5,000 population, have con- practice. nected insurance agencies. Propriety of the Relationship and the Preliminary Requirements as to Nature of Avoidance of Potential Evil Activities Since South side confines itself to selling in- In the language of the Hearing Examiner, surance (other than life insurance) there is no "In general, and subject to limited exceptions, enquestion but that it meets the preliminary require- gagement by bank holding companies in nonbanking ment for exemption under Section 4(c)(6) of businesses presents possibility of potential harm or evil. Such possibility is avoided only where—and the Act—that all the activities of the company in- Congress so provided—the activities of a financial, volved be of a "financial, fiduciary, or insurance fiduciary, or insurance subsidiary of a bank holding nature". company are reasonably required for and appropriate to the discharge of an associated banking func- Relation to Banking Business tion. ... If there remains potential for evil [after the activities of such a subsidiary are shown to be so The statute and the Board's Regulation Y re- reasonably required and appropriate] it is a potential quire that, after passing the preliminary test, the inherent in the business of banking, and—unless prohibited by Section 6 of the Act [citation omitted]— company's activities must be determined by the not within the reach of this statute." Board to be "so closely related" to the business of banking or of managing or controlling banks, It was the belief of the Hearing Examiner that the as conducted by the Applicant and its banking propriety of the incident might be established subsidiaries, as to be a "proper incident" to such either by showing that it is "inherently so closely business and as to make it unnecessary for the related to the business of banking in general as prohibitions of Section 4 of the Act to apply in naturally to appertain thereto" or "by a showing order to carry out the purposes of the Act. This that the activities are so directly, appropriately, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

970 FEDERAL RESERVE BULLETIN • AUGUST 1959 and substantially related to banking transactions agency and the Applicant's related subsidiary bank, in the particular case as to be considered an aspect the degree to which common customers are enof the banking operation." Applying these tests joyed by both, and particularly the sanction given to the case before him, he concluded that the by long-established practice in the area concerned prevalent area practice of having insurance agencies to the operation of bank-connected insurance operated in connection with banks does not, be- agencies—the Board has determined that the accause of the supervening policy expressed by the tivities of South Side Insurance Agency are so Bank Holding Company Act, support the pro- closely related to the business of banking as conpriety of the relationship. As to the substantiality ducted by Fourth Northwestern National Bank of of the direct connection between the two, he felt Minneapolis as to be a proper incident thereto, that the word "substantial" embraces at least and as to make it unnecessary for the prohibitions "major part." Since connected transactions of Section 4 of the Act to apply in order to carry formed only 6.7 per cent of the business of the out the purposes of the Act. To the extent that agency and less than a half, although more than they are consistent with the foregoing statement, a fifth, of the relevant business of the bank, he the Applicant's exceptions to the Hearing Exfound that South Side failed to meet this test as aminer's Report and Recommended Decision are well. hereby sustained. The applicant took exception to the use of both Accordingly, for the reasons herein set forth, it tests. While not necessarily adopting these as ex- is the Board's judgment that the requested exempcluding alternative analyses, the Board differs with tion with respect to South Side should be granted; the Hearing Examiner as to their application. For and IT IS SO ORDERED. the reasons set forth in its statement previously As indicated in the Board's Order, its approval cited, the Board believes that the Act was directed of this request is based solely on the facts diclosed at potential sources of evil that may be said to by the record; and if the facts should substantially arise from, or be accentuated by, the operation of change in the future in such manner as to make bank holding companies. If there is a potential the reasons for the Board's conclusion no longer for evil in the association between individual banks applicable, the statutory exemption resulting from and related insurance agencies, this is "a potential the Board's present determination would, of inherent in the business of banking and . . . not course, cease to obtain. within the reach of" the statute. Accordingly, the area practice may be viewed as supporting the con- III. Union Investment Company (BHC-44) clusion that there is an inherent relationship be- Factual Summary tween the insurance agency business and the busi- Union Investment Company ("Union") owns ness of banking as conducted in this area by this seven insurance agencies, each of which is op- Applicant and its subsidiary banks, and that the erated in connection with a banking subsidiary business of South Side is a proper incident to the of the Applicant. It has offices in the Northbanking business of Fourth. western Bank Building in Minneapolis. All the Turning to the Hearing Examiner's second test, outstanding voting stock in Union is owned by after carefully considering his recommendation, the Applicant. the Board nevertheless believes that the percent- Union was organized under the laws of Delaages and other factors mentioned above are suffiware on October 29, 1903 and existed for many ciently significant to warrant the conclusion, in the years as an independent bank holding company. light of the area practice just discussed, that the In 1929, when it was acquired by the Applicant, close relationship required by the statute may Union owned stock in 31 banks in Minnesota, properly be regarded as existing in the present North Dakota, and Wisconsin. These stocks were case. gradually transferred to the Applicant in exchange Conclusion for stocks in nonbanking subsidiaries of banks On the basis of all the circumstances—historical, brought into the system, so that Union could physical, and personnel relationship, the extent of liquidate these subsidiaries, or, if thought suitable direct connection between the activities of the for holding company ownership, retain and man- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 971 age them. The seven agencies involved in the 1.1 per cent derived from insurance where the present application comprise all of those which bank was the named insured), while 21.2 per cent were finally retained. In recent year Union's of their gross commissions derived from insurance liquidation activities have been of minor impor- so related. Viewing the related transaction in the tance and confined to the disposition of assets of same year from the side of the related banks, 37.5 questionable banking value or character. The per cent of the secured loans made by the banks Company is in a position to participate at any time on which insurance was required were insured in the liquidation of assets, however; and it now through the related agencies. holds $58,000 in Government securities available Defining "customers" to include depositors, for such purpose. borrowers, deposit box renters, or persons whose As in the case of the application by First Bank obligations are held by the related banks, more Stock Corporation with respect to First Service than 60 per cent of the customers of the agencies Agencies, Inc., decided by the Board as of this were also customers of the related banks. The date, the issue here must depend, not upon the services offered by the two stockyard agencies are relationship of the business of each insurance particularly valuable to their related banks since agency to that of the bank with which it is con- the banks finance the livestock and packing indusnected, but upon the relationship of the activities tries and this financing requires several highly of all of the insurance agencies in the aggregate specialized types of insurance which the agencies to the business of banking as conducted by the are peculiarly qualified to supply. Applicant and its subsidiary banks. Finally, as was pointed out in the Board's State- Each of the seven insurance agencies has been ment accompanying its order of this date with operated for a long time in connection with its reference to the application of First Bank Stock related bank. Some, at least, were originally in- Corporation for exemption of First Service Agensurance departments of their banks, and became cies, Inc., it is a fact of special significance that the separate agencies, or were incorporated, at a later operation of insurance agencies in connection with date. All the agencies are located on, or close to, banks is a practice that has prevailed for many bank premises. Five are directly accessible from years in the area concerned, without evidence of the banking room during regular banking hours. objection on the part of the bank supervisory au- The other two, both associated with stockyard thorities. Each of the seven agencies is connected banks and specializing in livestock transit insur- with a national bank which is located in a town ance, must be reached by a public corridor or of over 5,000 population. According to a survey general building entrance and stairway. made by the Applicant and relied on by the Hear- Financial and organizational arrangements be- ing Examiner, 48 per cent, 64 per cent and 31 per tween the agencies and the connected banks vary; cent, respectively, of banks falling into this classisome agencies have their own employees, some fication in the States of Minnesota, North Dakota use bank employees. In some cases, the licensed and Iowa, where the seven banks are located, have agents are bank officers, in other they are not. related insurance agencies. Two of the agencies, including one of the stock- Preliminary Requirements as to Nature of yard agencies, are self-sufficient financially. Others Activities have varying arrangements under which a stated small percentage (one-half to one per cent) of Except for its liquidating activities, all of the net premium income goes to Union, while the functions of Union are clearly of an insurance nabalance is paid out to the bank in the form of rent ture and therefore meet the preliminary requireand charges for personnel and supervision. ment of Section 4(c)(6). The liquidating activi- The agencies do a general insurance business, ties of Union would be exempted under another except that they write little or no life insurance. subsection of the statute. For the reasons set forth Two of the seven write a substantial amount of in the Statements accompanying the Board's decicredit life insurance. Taking aggregate figures, sions of this date with respect to requests by First 15.5 per cent of the agencies' premium income in Bank Stock Corporation, Bank Shares, Inc., and 1957 derived from insurance related to transac- Otto Bremer Company, the Board agrees with the tions connected with the related banks (including Hearing Examiner that the fact that part of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

972 FEDERAL RESERVE BULLETIN • AUGUST 1959 Union's activities may be entitled to exemption the Act. To the extent that they are consistent under one section of the Act and part under an- with the foregoing statement, the Applicant's exother creates no barrier to a favorable decision on ceptions to the Hearing Examiner's Report and the application. The Board agrees with the finding Recommended Decision are hereby sustained. of the Hearing Examiner that the liquidating ac- Accordingly, for the reasons herein set forth, tivities of Union would not bar exemption under it is the Board's judgment that the requested ex- Section 4(c)(6). emption with respect to Union Investment Company should be granted; and IT IS SO ORDERED. Closeness and Propriety of Relationship As indicated in the Board's Order, its approval On the basis of the record and particularly the of this request is based solely on the facts disclosed facts heretofore stated, it is the Board's view that by the record; and if the facts should substantially the activities of Union bear a direct and substantial change in the future in such manner as to make relationship to the business of the Applicant's sub- the reasons for the Board's conclusion no longer sidiary banks. For reasons set forth in the Board's applicable, the statutory exemption resulting from Statement of this date with respect to the request the Board's present determination would, of of First Bank Stock Corporation for exemption as course, cease to obtain. to First Service Agencies, Inc., the Board believes that the activities of Union should not be regarded REPORT AND RECOMMENDED DECISION as an "improper" incident to the business of such STATEMENT OF THE CASE subsidiary banks merely because those banks are Northwest Bancorporation, a duly registered bank holding company, herein called the Applicant, having national banks which may not themselves act as filed with the Board of Governors of the Federal insurance agents. Also for reasons set forth in that Reserve System a request for exemption from the Statement, the Board concludes that the prevalence prohibitions of Section 4(c)(6) of the Bank Holding Company Act of 1956, 70 Stat. 133, with respect to in the area concerned of bank-connected insurance three subsidiary companies hereafter described, the agencies with respect to nonholding company as Board, in accordance with the requirements of the well as holding company banks negatives the exist- statute, duly provided for a hearing thereon. Upon appropriate notice the hearing was held in Minneence of the potential sources of evil contemplated apolis, Minnesota on 14, 15, 16, and 17 July 1958, by the Bank Holding Company Act, and that, before the undersigned Charles W. Schneider, duly designated as Hearing Examiner. The Applicant and therefore, the relation of Union's activities to the the Board—the latter in a non-adversary capacity— business of the Applicant's banks is not inconsistent were represented at the hearing by counsel, and were with the purposes of the Act. afforded full opportunity to be heard, to examine witnesses, to introduce evidence, and to file briefs and proposed findings. Orders correcting the tran- Conclusion script of record and closing the hearing were entered After carefully considering all the circumstances on 18 November 1958. The Applicant has filed a brief and proposed findings which have been con- —historical, physical, and personnel relationship, sidered. To the extent consistent with the findings the extent of direct connection between the activi- made below the Applicant's proposed findings are accepted. ties of Union's insurance agencies and the Appli- Upon the entire record in the case and from my cant's related subsidiary banks, the degree to which observation of the witnesses, I make the following common customers are enjoyed by both, the FINDINGS OF FACT peculiar importance of the two stockyard agencies I. Introduction to their respective related banks, and particularly The particular sections of the Act here applicable the sanction given by long-established practice in are as folliws: Minnesota, North Dakota and Iowa to the opera- "Sec. 4. (a) Except as otherwise provided in this Act, no tion of bank-connected insurance agencies—the bank holding company shall— "(1) after the date of enactment of this Act acquire direct Board has determined that the activities of Union or indirect ownership or control of any voting shares of any Investment Company are so closely related to the company which is not a bank, or "(2) after two years from the date of enactment of this business of banking as conducted by the seven Act . . . retain direct or indirect ownership or control of any voting shares of any company which is not a bank or a bank related banking subsidiaries of the Applicant as to holding company. . . . * * • be a proper incident thereto and as to make it un- "(c) The prohibitions in this section shall not apply— necessary for the prohibitions of Section 4 of the * • * Act to apply in order to carry out the purposes of "(6) to shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 973 the Board after due notice and hearing, and on the basis of maintains supervision over the affiliated banks and the record made at such hearing, by order has determined to be so closely related to the business of banking or of managing offers them a variety of services, including furnishing or controlling banks as to be a proper incident thereto and bank capital when needed, and advice on banking, as to make it unnecessary for the prohibitions of this section insurance, credit analysis, operating methods, investto apply in order to carry out the purposes of this Act; . . ." ment management, advertising, personnel, consumer Pursuant to Section 4(c)(6) Northwest Bancor- credit and other related matters. Some of the insurporation here seeks a determination that all the ance services are furnished through subsidiaries inactivities of three of its subsidiaries, Northwestern volved in this proceeding. Mortgage Company, South Side Insurance Agency, Northwest Bancorporation conducts regular ex- Inc., and Union Investment Company, are of a finan- amination of the operations and books of the subsidicial, fiduciary or insurance nature, and so are so aries. The affiliated banks are also subject to examclosely related to the business of banking or of manag- ination by the proper Federal and State authorities. ing or controlling the banks as to make it unnecessary All affiliated banks are members of the Federal Defor the prohibitions of Section 4(a)(2) of the Act to posit Insurance Corporation. All the national banks apply in order to carry out the purposes of the statute. and many of the State banks are members of the Federal Reserve System. II. The Companies All the banks associated with the operations of the instant subsidiaries are national banks. Other banks 1. Northwest Bancorp oration is a registered bank in the system of Northwest Bancorporation maintain holding company operating in the States of Minneaffiliated insurance agencies, but these are not involved sota, Wisconsin, Iowa, North Dakota, South Dakota, in the present application. In general the banks in Nebraska, and Montana. Northwest Bancorporation such cases are either national banks in towns of less owns the controlling stock interest in 50 national than 5,000 population, or else they are State banks. banks and 26 State banks located in those States. Sub- National banks in places not exceeding 5,000 populaject to policies established by Northwest Bancorporation are authorized by Section 11 of the Federal Retion and with appropriate supervision of operations, serve Act to be insurance agents or real estate loan the affiliated banks are in large measure autonomous. brokers, subject to certain conditions.2 A number of From time to time Northwest Bancorporation has the national banks in the Applicant's system maintainacquired or organized corporations which are not ing affiliated insurance agencies are in towns over banks or bank holding companies. Its stated policy, 5,000. This is apparently the consequence of comhowever, is not to retain such enterprises unless munity growth since the establishment of the agency. considered of value to Northwest Bancorporation or The record suggests that the Applicant's general to affiliated banks in the performance of functions policy is not to have its national banks in towns over closely related to banking. Thus at the present time 5,000 population own an associated insurance agency. Northwest Bancorporation has a direct stock inter- 2. South Side Insurance Agency, Inc., is a Minneest in only four subsidiaries which are not banks sota corporation having its office on the second floor or bank holding companies: the three here involved, of a building located at 401 Cedar Avenue, Minneand a bank building company which holds title to apolis, Minnesota, one mile from the downtown busithe building in which the affiliated bank at Rochester, ness district of Minneapolis, in a somewhat closely Minnesota does its business. Northwest Bancorporaknit and self-sufficient area known as South Minnetion owns all the stock in that company. No applicaapolis. The first floor of the building, and part of tion for exemption has been filed on behalf of the the second floor, are occupied by the Fourth Northbuilding company for the reason that the Applicant western National Bank of Minneapolis, a subsidiary considers it exempt by operation of Section 4(c)(l) of the Act from the prohibitions of Section 4.1 of Northwest Bancorporation. Northwest Bancorporation owns all but two of 50 outstanding shares of The carrying value of the three involved substock of the Agency and owns 92Vi% of the stock sidiaries is as follows: of the Bank. Neither the Bank nor the Agency owns South Side Insurance Agency, Inc. $ 18,499 any of the other's stock. However they have some Union Investment Company 148,452 common directors and officers. Thus, Clyde M. Northwestern Mortgage Company 195,077 2 The section is as follows: ". . . national banking associations organized under the Total $362,028 laws of the United States . . . located and doing business in any place the population of which does not exceed five thousand Northwest Bancorporation's assets on 31 December inhabitants, as shown by the last preceding decennial census, 1957 were $128,796,851; those of Northwest Ban- may, under such rules and regulations as may be prescribed corporation and its affiliates on a consolidated basis, by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the au- $1,806,265,799. thorities of the State in which said bank is located to do The income of Northwest Bancorporation is derived business in said State, by soliciting and selling insurance and from interest on investments, dividends from affiliates, collecting premiums on policies issued by such company; and may receive for such services so rendered, such fees or comand service fees from affiliated banks. In considera- missions as may be agreed upon between the said association tion of the service fee Northwest Bancorporation and the insurance company for which it may act as agent; and may also act as the broker or agent for others in making or 1 Section 4(c)(l) of the Act exempts from divestment, procuring loans on real estate located within one hundred ". . . shares owned or acquired by a bank holding company miles of the place in which said bank may be located, receiving in any company engaged solely in holding or operating prop- for such services a reasonable fee or commission: Provided, erties used wholly or substantially by any bank with respect however, That no such bank shall in any case guarantee either to which it is a bank holding company in its operations or the principal or interest of any such loans or assume or guaracquired for such future use or engaged solely in conducting antee the payment of any premiums on insurance policies a safe deposit business, or solely in the business of furnishing issued through its agency by its principal: And provided services to or performing services for such holding company further, That the bank shall not guarantee the truth of any and banks with respect to which it is a bank holding company, statement made by an assured in filing his application for or in liquidating assets acquired from such bank holding com- insurance." (12 U.S.C. 92; Act of September 7, 1916, 39 pany and such banks;" Stat. 753) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

974 FEDERAL RESERVE BULLETIN • AUGUST 1959 Jorgenson and F. 0. Glascoe are, respectively, presi- Bank and the Agency goes back many years. Partly dent and vice-president of both the Bank and the because of this, many Bank customers associate the Agency, and directors of both organizations. R. E. Agency with the Bank, expect insurance as a part of Myhre is treasurer of the Agency and assistant cashier bank services, and place insurance with the Agency. of the Bank. O. H. Grettum is secretary of the The Agency advises the Bank on insurance matters in Agency and an officer of the Bank. connection with bank loans. The Agency is of value The Agency is engaged in a general insurance busi- to the Bank in these respects. ness but sells no life or credit life insurance. The Bank 3. Northwestern Mortgage Company is a Mindoes not require credit life insurance in connection nesota corporation having its office in the Northwestwith loans. The Agency has six employees, three of ern Bank Building in Minneapolis, which also houses whom hold insurance licenses. They are on straight the Northwestern National Bank, the largest banking salaries, and the commissions they receive are turned affiliate of Northwestern Bancorporation. All outover to the Agency. The Bank provides office space, standing stock of Northwestern Mortgage Company furniture and essential services for the Agency, and is owned by Northwest Bancorporation. The Northpays all the Agency's salaries, and is recompensed western Mortgage Company engages in three general by the Agency for these services and disbursements. types of business: (1) the sale of insurance other than In 1957 premiums on insurance written by South life insurance; (2) the management, rental and sale Side Insurance Agency amounted to $239,456. Of of city and farm properties and farm livestock as this amount 5.9% represented insurance on real es- agent or broker, and (3) the brokerage and servicing tate or personal property involved in loans by Fourth of real estate loans. Northwestern National Bank. An additional .8% rep- The Northwestern Mortgage Company dates back resented premiums where the Bank was the named to 1927. At that time the Company was an insurinsured. The remainder concerned insurance where ance agency operating under another name. It acthe insured was either not a customer of the Bank, quired its real estate and mortgage loan department or was a customer as defined hereafter. This is shown functions in 1934 as the result of a merger of the Minby the table below. The term "customer" therein nesota Loan and Trust Company with the Northwestmeans a depositor, borrower, deposit box renter, or ern National Bank. In addition to its trust and deperson whose obligation is held by the Bank. posit operations, Minnesota Loan and Trust Company maintained a real estate and mortgage loan depart- Volume of Premiums by Source of Business ment which made real estate loans and managed real 1957 estate, both farm and city. When the merger oc- Amount of Per cent of total curred these functions were transferred to the Northpremiums premiums western Mortgage Company. Prior to the merger Written where Bank'is named insured.. $ 1,832 .8 Northwestern Mortgage Company relied largely on Written for customers on real estate outside sources for advice, operation and sale of real and personal property in connection with securing Bank loans 14,055 5.9 estate. Depressed conditions in the 1930's and con- Written for customers not included sequent accumulation of property problems necesabove 195,936 81.8 sitated the expansion and specialization of the prop- Written for Agency customers who are not presently Bank customers 27,630 11.5 erty staff of the Northwestern Mortgage Company and the broadening of its activities in the States in Total. ... . $239,456 100.0 which it operated: Montana, North Dakota, South As of 21 June 1958 the amount of loans which Dakota, Minnesota, Iowa, and Wisconsin. Thereafter the Fourth Northwestern National Bank had outstand- the Company maintained its own skilled staff of agriing on which it required insurance of security was cultural and real estate experts to handle the large $4,039,236. Of this amount 20.3% was insured volume of property accumulated. through South Side Insurance Agency—whether in As of 31 December 1957 Northwestern Mortgage connection with the loan or otherwise is not clear. Company had total assets of $391,884, and its net in- The remaining 79.7% of insurance was provided by come for 1957 was $9,877. The gross income of other sources. Of the $4 million figure given above, Northwestern Mortgage Company in 1957 amounted $2,145,812 represented real estate mortgages pur- to $321,824, of which 17.7% represented transactions chased by the Bank, on which the Agency presum- with or on behalf of Northwest Bancorporation and ably had no prior opportunity to write the insurance. affiliated banks. The following table is illustrative: The data is given in the following table. (1) (2) (3) (4) (5) Per cent Per cent Insurance Per cent Gross of (2) Gross income of (4) Total of of security Activity income to total attributable to (2) bank security loans insured income to affiliates loans required through agency City mortgage loan Instalment $1,194,831 $ 700,855 21.8 department $73,110.84 23 $6,305.22 8.6 Real estate mortgages.. 3,264,811 3,264,811 19.2 City real estate and Others 1,850,124 73,570 53.9 property management department... 145,571.07 45 22,265.60 15.3 Totals $6,309,766 $4,039,236 20.3 Farm loan, management and sales de- In 1957 about 50% of the South Side Insurance partment 85,595.62 26.6 28,203.93 33 Insurance department. 6,140.98 1.9 200.75 3.2 Agency's customers were also customers of the Fourth Interest on invest- Northwestern National Bank, as the term customers ments 11,406.10 3.5 is defined above. No pressure is exerted by the Bank Totals $321,824.61 .... $56,975.50 17/7 to compel its customers to place their insurance with the South Side Agency. There are a few other insur- The services performed at the present time by ance agencies located in the area served by the Bank, Northwestern Mortgage Company for Northwest Bannone of them large. The historical connection of the corporation and its affiliated banks are insufficient in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 975 volume to engage the time of the entire staff of North- nually, as compared with the $15,201 which it acwestern Mortgage Company. Northwestern Mort- tually paid in 1957. Apart from cost, the Applicant gage Company is able to maintain its staff and to also considers the Mortgage Company's services of operate profitably only by performing property man- especial value because of their high quality.3 agement services for persons or organizations other than Banco affiliates or customers. (b) Mortgage Loans. We turn now to a description of the various func- The Mortgage Loan Department of Northwestern tions of Northwestern Mortgage Company. Mortgage Company, acting as a broker, makes commitments upon authorization by the lender for loans (a) Property Management. secured by mortgages on real estate. Northwestern In this field Northwestern Mortgage Company Mortgage Company formerly acted in such capacity rents, manages, and sells city and farm real estate. on behalf of banks affiliated with Northwest Bancor- In connection with management operations it may poration, but no longer does so, that practice having also supervise the production and sale of farm prod- been discontinued in accordance with Northwest Banucts and livestock. corporation policy. The item of $6,305.22 given in City management: In the area of city property man- the table above as City Mortgage Loan Department agement approximately one third of the properties income attributable to Banco affiliates may represent which Northwestern Mortgage Company manages has fees for servicing such loans—the explanation is not in recent years been held in a fiduciary capacity by clear. The affiliated banks refer mortgage customers the Trust Department of the Northwestern National to Northwestern Mortgage Company when unable to Bank—although in the nineteen-forties this percent- satisfy such demands themselves. The Applicant conage was as high as 57%. These management facilities siders these referrals of value in acquiring and retainof Northwestern Mortgage Company are available to ing bank customers. the trust departments of other banks affiliated with Northwest Bancorporation, but are infrequently uti- (c) Real Estate Sales. lized because, for business reasons, those trust depart- During the year 1957 Northwestern Mortgage ments prefer to utilize the services of real estate man- Company made 147 sales of real estate, city and agers who may be customers of the particular bank. farm, valued at $2,868,265, for which it received In the last full year, 1957, Northwestern Mortgage commissions of $125,401. Of these commissions Company managed a total of 102 city properties, 37 $34,368—approximately 27%—were commissions on of which were for the Trust Department of the North- 25 sales of $801,850 in value of property on behalf western National Bank, and one was for another af- of the Trust Department of the Northwestern Nafiliated bank. Management fees from the affiliated tional Bank and another affiliated bank—principally banks amounted to $12,121; about 19% of total city the former. The bulk of the sales, 121 in number management income and about 3.8% of total income representing $90,473 in commissions and $2,055,215 from all sources. in property value, were for Bank customers. Farm management: During the nineteen-thirties banks, both affiliated and nonaffiliated, were substan- (d) Insurance. tial sources of farm management accounts for North- The Insurance Department of Northwestern Mortwestern Mortgage Company. Since then the percentgage Company has 4 employees and conducts a genage of farm management business from such sources eral insurance agency business—other than life inhas generally declined. In 1957, of a total of 424 surance. During 1957 it received premiums (excludfarm properties managed by the Mortgage Company, ing the Stuyvesant Plan explained below) amounting 36, or about 8.7%, were for affiliated banks and 8, to $38,580. or about 2%, for unaffiliated banks. Bank customers Excluding the Stuyvesant plan, Northwestern Mortand insurance companies were the source of the regage Company writes no insurance for banks, affiliated mainder. In 1957 the affiliated banks paid Northor otherwise. Nor—except in infrequent instances western Mortgage Company $3,604 as fees for manwhere the Mortgage Company is servicing a mortgage agement of farm property; representing about 11% for an affiliated bank and the borrower requests the of the Mortgage Company's income from farm man- Mortgage Company to write the insurance—does agement, and about 1% of its total income from all Northwestern Mortgage Company provide insurance sources. on any properties which it manages for the Trust It will be seen from the above that in 1957 affiliated Department of the Northwestern National Bank, or banks paid Northwestern Mortgage Company a total on which the Bank has a creditor interest. The Bank's of $15,725 for the management of properties, city and policy is to secure through outside agents insurance farm, in the custody of the banks. By far the larger on properties in which it is interested. The following part of this amount—$15,201—was paid by North- table contains a breakdown of the source of 1957 prewestern National Bank. Other than the Northwest- mium income of Northwestern Mortgage Company. ern National Bank few banks affiliated with North- The term "borrower" therein means persons who at west Bancorporation have occasion to utilize the farm some time were debtors on loans which Northwestern management services of Northwestern Mortgage, since few have farm properties in their trust accounts. 3 From time to time, with fluctuation in volume of business, And, as has been seen, the tendency in the other the Farm Department has incurred substantial losses—from banks is to refer management properties to bank cus- 1947 to 1953 the sum of $50,000. Consideration was given to discontinuance of the operation. However, a check revealed tomers. substantial farm properties involved in wills on deposit with The Applicant estimates that for Northwestern Na- the Northwestern National Bank and, further, that in many tional Bank to establish its own organization to pro- instances the availability of Northwestern Mortgage Company's Farm Department was the factor responsible for namvide the management services supplied by the Mort- ing of the bank as executor. It was consequently decided to gage Company would cost approximately $72,000 an- continue the department. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

976 FEDERAL RESERVE BULLETIN • AUGUST 1959 Mortgage Company either owned or serviced. "In- million. In recent years Union Investment Comdividuals" comprehends all sources other than bor- pany's liquidation activities have been of minor rowers or property management accounts. importance and confined to the disposition of assets of questionable banking value or character acquired Source of Premium Income, 1957 in bank acquisitions or mergers. The Company is in Property a position to participate at any time in the liquidation Borrowers Per management Per Individuals Per Total of assets, holding $58,000 in Government securities cent accounts cent cent available for such purpose. Because of its experience $9,012.19 23.4 $16,106.83 41.7 $13,461.49 34.9 $38,580.51 Union Investment Company can carry out such opera- No pressure is exerted on borrowers to place in- tions efficiently and economically. surance with the Insurance Department, but it is At the present time all but a minor percentage necessary to have such a department to take care of the income of Union Investment Company is deof insurance requirements, particularly binders, where rived from the operation of seven insurance agencies. loans are being completed and the borrower lacks As of 31 December 1957 Union Investment Company or has inadequate insurance coverage on the security had assets of $240,607. Its net earnings for that year for the loan. The Insurance Department is also of were $11,772 on gross income of $284,554.31, pracvalue to the Bank where the Bank holds a secured tically all from insurance sources as is shown below. loan, by following up insurance renewals, paying balances from escrow funds for premiums written, Income 1957 keeping expiration records, and adjusting losses. Insurance departments $278,808.11 98.00% The Stuyvesant Plan is a program devised to pro- Oil and gas leases 2,636.60 .9 Interest 2,286.00 .8 vide insurance coverage in connection with automobile Farm rentals 472.60 .2 dealer financing. In this connection Northwestern Dividends on securities 351.00 .1 Mortgage Company acts as general agent of the Stuy- Totals $284,554.31 100.00% vesant Insurance Company of New York. Briefly, the program provides affiliated banks with an insur- Principal direct expenses of Union Investment ance arrangement which they can offer to automobile Company for 1957 were the following: retailer dealers in connection with automobile financing. The banks can thus be competitive to sales Salaries $ 81,017 finance companies and other institutions in the auto Fees to affiliated banks 127,104 finance field. Under the plan the dealer is licensed Rent 12,942 as the insurance agent and receives commissions on Other expenses 45,695 insurance on the financed property. Northwestern Mortgage Company acts as general agent, providing Each of the seven insurance agencies operates in necessary supplies. At present Northwestern Mort- connection with a national bank affiliated with Northgage Company realizes no profit from this operation. west Bancorporation. The agencies, their location, and the related bank are as follows: (e) Miscellaneous. Agency Bank City In addition to the foregoing, Nortfiwestern Mort- Minneapolis National Lake St. office Minneapolis, Co. Northwestern National Minnesota. gage Company renders other services for affiliated Bank of Minneapolis banks and their customers. These may include the Central National Central Northwestern Minneapolis, following: appraisal of property, inspection and ad- Agency National Bank of Minnesota. vice on real estate investments, advice as to leasing, Minneapolis rental terms and other rental problems, long term Security Insurance American National Bank Valley City, financing of real estate, information as to neighbor- Agency of Valley City North Dakota. James River Insurance First James River Jamestown, hood trends and advice as to business or residential Agency National Bank of North Dakota. locations for incoming bank customers. The record Jamestown affords no basis, however, for a determination that First National Com- First National Bank of Grand Rapids, these services are of substantial significance in rela- pany Agency Grand Rapids Minnesota. tion to total volume of such activity, either of the Stock Yards Insurance Stock Yards National South St. Paul, Morgage Company or of the banks. Agency Bank of South St. Paul Minnesota. 4. Union Investment Company is a Delaware Cor- Stock Yards Insurance Live Stock National Bank Sioux City, poration whose office is located at 1215 Northwestern Agency of Sioux City Iowa. Bank Building in Minneapolis. Union Investment Five of the seven agencies are located in the bank- Company, incorporated in 1903, was originally a ing premises of their related bank in space substanbank holding company. It was acquired by Northwest tially directly accessible from the banking room dur- Bancorporation in 1929, at which time Union Invest- ing regular banking hours. The two agencies not ment Company owned stock in 31 banks in Minne- located in the banking premises are the stockyards sota, North Dakota, and Wisconsin. In 1932 the bank agencies. In these 2 cases the banks and the agenstock was transferred to Northwest Bancorporation. cies occupy space in the same structure, which is Thereafter Union Investment Company was utilized primarily an office building occupied by commission primarily as a liquidation company and in the opera- merchants and other livestock interests at the stocktion of insurance agencies. All its outstanding voting yards. Here the agencies are some distance removed stock is owned by Northwest Bancorporation. from the banking rooms, with no access thereto ex- During the depression years Union Investment cept through a public corridor or general building Company was active in the liquidation field, partici- entrance and stairway. pating in the disposition of over 36 nonbanking cor- All types of insurance are written by the agencies porations acquired by Northwest Bancorporation at except that the writing of life insurance is confined various times, and of bank assets valued at nearly $8 to two agencies, First National Company Agency and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 977 James River Insurance Agency, and is in negligible Ail the affiliated banks are in competition with amount. other banks operating in their particular areas. In Union Investment Company has differing arrange- most cases—but not in all—these competing banks ments with the affiliated banks with respect to the have an insurance department or associated insurance manner of operating the agencies. In some cases the agency. In South St. Paul and in Sioux City the afagency has its own employees; in others the work of filiated banks finance livestock and packing industries the agency is done by bank employees. In some cases requiring specialized types of insurance which the the licensed agents are bank officers; in others they affiliated agencies in those cities can provide. Those are not. There are also varying arrangements with agencies are in a position to supply such insurance respect to the payment of expenses of the agencies. because of their experience and long-standing con- Central National Agency pays all its own salaries and nections with the companies which write such coverexpenses and the associated bank receives only rent ages. None of the banks require credit life insurance for the space which the agency occupies. The Stock in connection with loans. Yards Insurance Agency of Sioux City makes no payments of any kind to the Live Stock National Bank III. Concluding Findings and the bank pays no part of the expenses or furnishes any services or facilities to the agency. In the (1) Section 4(c)(6) case of the other five banks the arrangement, though In effect, Section 4(c)(6) of the Bank Holding not uniform, results in payment to the bank of most Company Act of 1956 permits a bank holding comof the earnings of the agency in the form of rent and pany to retain ownership of shares of a nonbanking charges for personnel and supervision. More specifi- company if, cally, the banks in these cases generally receive all (1) All the activities of the nonbanking company net earnings of the agency in excess of a stated per- are of a financial, fiduciary, or insurance nature, and centage (varying from Vi to 1%) of total net pre- (2) The company is determined by the Board to be mium income. The excepted percentage goes to Union so closely related to the business of banking or of Investment Company. All working funds required managing or controlling banks as to be a proper by the agencies are supplied by Union Investment incident thereto and as to make it unnecessary for Company which, subject to the cooperation of the the prohibitions of Section 4 of the Act to apply in related bank, controls the agencies and determines order to carry out the purposes of the Act. their policies. The agencies write insurance generally. They do (2) Nature of the Activities not confine themselves to selling insurance only to The first question is whether all the activities of bank customers, or for use in connection with bank the three subsidiaries here involved are of a financial, loans. In connection with bank-required insurance fiduciary, or insurance nature. bank officers ma*y call in the agency to discuss the South Side Insurance Agency, Inc., presents no matter with the customer with a view to securing the problem in this respect. It is engaged exclusively in business for the agency. However, no pressure is the sale of insurance. exerted upon the bank customer to place his insur- Northwestern Mortgage Company, as we have seen, ance with the agency. In Minnesota it is unlawful engages in three general types of business: (1) the for a bank to condition the granting of a loan on sale of insurance, (2) management, rental, and sale secured property upon the purchase of insurance from of property—principally real estate—as agent or a particular source. (Minnesota Statutes Annotated broker, and (3) brokerage and servicing of real estate § 72.34) The agencies also advise the bank with loans. The Applicant asserts, and I find correctly, regard to policies submitted to the bank in connection that the business of managing, renting and selling with bank transactions and assist in the keeping of property as an agent is fiduciary in nature. Black's records relative to such insurance. Agency agents Law Dictionary, 4th Ed. defines "fiduciary capacity" attend schools and keep abreast of current insurance as follows: developments. All agency employees are on a salaried and not a commission basis. "One is said to act in a 'fiduciary capacity' or to receive money or contract a debt in a 'fiduciary capacity', when the In 1957 aggregate premium income of the agencies business which he transacts, or the money or property which of Union Investment Company was $1,149,642; their he handles, is not his own or for his own benefit, but for the gross commissions earned $278,808; and the amount benefit of another person, as to whom he stands in a relation implying and necessitating great confidence and trust on the of secured loans by the related banks requiring in- one part and a high degree of good faith on the other part." surance on property was $27,225,085. The correla- The management, rental and sale of property as an tion between the business of the agencies and bank agent involves the duty to act primarily for and on transactions is given in the table below. The last behalf of others in dealing with their property or column gives the percentage of bank customers, as property which they seek to acquire. Such an activheretofore defined, doing business with the agencies ity, in my opinion, is fiduciary in nature, irrespective in 1957. of whether the commitment is accompanied by pos- Per cent Per cent Per cent Per cent session of the property. of agencies* of agencies' of secured of agency The Restatement of Agency, § 13, states the fold p e re ri m ve iu d m f r i o n m come c d o e m riv m ed is s f i r o o n m s l b o a a n n k s r w eq h u er i e red c a u ls s o tomers lowing: "An agent is a fiduciary with respect to matinsurance insurance insurance customers ters within the scope of his agency." And though related to bank related to bank and agency of related the agreement in a particular case may be such as not transactions transactions supplied it bank to impose a fiduciary duty, and thus not to create an 415.5 21.2 37.5 63.8 agency relationship, "A real estate broker whose sole function is to find someone who will enter into a *This figure includes 14.4% from insurance on property transaction with the owner of land is ordinarily an securing bank loans, and 1.1% from insurance where the bank was the named insured. agent. . . ." {Id. Comment, b) In § 1, Comment, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

978 FEDERAL RESERVE BULLETIN • AUGUST 1959 d, of the Restatement of Agency it is said: ". . . the the ground that under the circumstances the ownerattorney at law, the broker, the factor, the auctioneer, ship of the life insurance company by Transamerica and other similar persons ... are agents. . . ." The presented a potential source of evil of a kind which Restatement of Trusts, § 2, Comment, b, declares: Congress sought by the Act to eliminate, and conse- ". . . . Fiduciary relations include not only the rela- quently the operation of Occidental was not a proper tion of trustee and beneficiary, but also, among others, incident of banking within the meaning of Section those of guardian and ward, agent and principal, 4(c)(6). The essential findings and conclusions of attorney and client." the Board are as follows. I therefore conclude that the activities of North- The Board said, western Mortgage Company in respect to manage- ". . . it seems evident that Congress was of the view that, ment, rental and sale of property as an agent or in general and subject to only limited exceptions, bank holdbroker are fiduciary in nature within the meaning of ing company systems should be restricted to banking activities and should not engage in other types of business for the Section 4(c)(6). reason that common control of banks and nonbanking organi- With respect to the brokerage and servicing of real zations could give rise to evils of several kinds." {Transestate loans by Northwestern Mortgage Company, america Corporation, supra, at 1016) those functions are financial in character. All of the The basis for this prohibition, the Board indicated, activities of Northwestern Mortgage Company are was a concern on the part of Congress that a bank therefore of a financial, fiduciary, or insurance nature. holding company might misuse or abuse the resources Union Investment Company engages in the insurof a bank in order to gain advantage in its nonbankance business and, in addition, may perform services ing actmties. (See S. Rep. 1095, p. 14, 84th Cong., for Northwest Bancorporation and its affiliated banks the Report of the Senate Committee on the Act) in connection with the liquidation of assets. Under Thus, the Board said, the holding company might Section 4(c)(l) of the Act the prohibitions of Section enter into transactions with a nonbanking affiliate of 4 do not apply with respect to nonbanking subrisky character with consequent undue hazard to the sidiaries engaged {inter alia) "solely" in liquidating bank, its depositors and the public interest; or holding assets acquired from bank holding companies and company banks might deny legitimate credit to comtheir banks. Union Investment Company is not petitors of nonbanking affiliates, thus restricting comsolely engaged in the activities enumerated in Section petition; or such banks might exert pressure on bor- 4(c)(l). However, to the extent that it so committed rowers to do business with affiliates and thus affect solely for Northwest Bancorporation and affiliated the borrowers' freedom of choice. banks, I believe such engagement not incompatible with a determination that Union Investment Com- The Board further stated that Congress did not conpany would be entitled to an exemption under Sec- dition its prohibitions upon the occurrence of abuses. tion 4(c)(6)—provided that such a determination is Congressional purpose, the Board found, was to elimiotherwise appropriate. That is to say, if a company nate any possibility of such occurrence. In sum, the performs services, solely for a bank holding company legislative intent, the Board concluded, was to "reor its banks, of the kind described in Section 4(c)(l), move potential . . . sources of evil" (emphasis supthose services, even though not financial, fiduciary, or plied) where banking and nonbanking activities were insurance in nature, will not defeat a request, other- commingled within the same bank holding company wise in order, for exemption under Section 4(c)(6). system. That purpose of Congress, the Board went It is believed that such a conclusion accords with on to say, provided a helpful guide in determining statutory intent, expressed in Section 4(c)(l), to per- whether a particular nonbanking activity was a proper mit nonbanking subsidiaries of bank holding com- incident of banking or of managing or controlling panies to carry out the functions there described when banks. performed exclusively for such companies or their The Board then examined the operations of Ocbanks. cidental Life Insurance Company to ascertain the resemblance, if any, between insurance operations and On the basis of the foregoing considerations it is those of banking. Some similarities were found. found that all the activities of South Side Insurance However, upon analysis the Board concluded that Agency, Inc., Northwestern Mortgage Company, and mere similarity of function was not enough to elimi- Union Investment Company are of a financial, fidunate potential source of evil. ciary or insurance nature within the meaning of Sec- Since similarity of function alone was insufficient tion 4(c)(6) of the Act. to justify exemption, the Board next considered the (3) The Applicable Principles extent of Occidental's direct relations with banks. It found these, however, "a relatively insignificant part The next question is whether the three subsidiaries of Occidental's business" and in the circumstances are so closely related in their activities to the busi- "not sufficient to justify an exemption under Section ness of banking or of managing or controlling banks 4(c)(6), either in their own right or when considered as to be proper incidents thereto and as to make it in connection with the general similarities between unnecessary for the prohibitions of Section 4 to apply banking and insurance. . . ." (Id. 1018, 1015) in order to carry out the purposes of the Act. These I consider the essentials of the Transamerica Determination of that question is controlled by the decision. If I have correctly analyzed it, the ap- Board's decision in the case of Transamerica Cor- plicable controlling principles may be stated as folporation, Federal Reserve BULLETIN, September 1957, lows. p. 1014, involving an application by Transamerica In general, and subject to limited exceptions, en- Corporation, a bank holding company, for an exemp- gagement by bank holding companies in nonbanking tion under Section 4(c)(6) with respect to the shares businesses presents possibility of potential harm or owned by Transamerica in Occidental Life Insurance evil. Such possibility is avoided only where—and Company, an insurer. Congress so provided—the activities of a financial, The Board denied the application in that case on fiduciary, or insurance subsidiary of a bank holding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 979 company are reasonably required for and appropriate tion with bank acquisitions or mergers. Items 2 and to the discharge of an associated banking function. 3 are engaged in by Northwestern Mortgage Com- The propriety of the incident may be established in pany; item 4 by Union Investment Company, and either of two ways: (1) by showing that it is in- in recent years only to a minor extent. herently so closely related to the business of banking The position of the Applicant is that the activities in general as naturally to appertain thereto; (2) by of the various subsidiaries involved are so closely a showing that the activities are so directly, appro- related to the operation of banks or bank holding priately, and substantially related to banking transac- companies as to be proper incidents thereto. Its tions in the particular case as to be considered an contentions in that respect I believe are fairly sumaspect of the banking operation. If either of these marized in the following discussion. conclusions is warranted the nonbanking activities are (a) Inherent relationship. The first question with subsumed and absorbed in the banking operation. If which we are presented is whether the nonbanking there remains potential for evil it is a potential in- companies are inherently related to banking. We herent in the business of banking, and—unless pro- turn initially to their insurance functions. hibited by Section 6 of the Act (see General Contract Except in the case of Northwestern Mortgage Com- Corporation, a decision by the Board, Federal Re- pany the insurance activities of each of the three subserve BULLETIN, March 1958 p. 260)—not within the sidiaries are identified with a particular bank—though reach of this statute. Thus the nonbanking activity the activities are not necessarily related to the busineed not be strictly essential to banking, if it is so ness of the bank. The Stuyvesant plan aside— "related" to the operation of banks or bank holding Northwestern Mortgage Company writes no insurance companies "as to be a proper incident thereto." But for banks, affiliated or otherwise, except in rare inthe required integration is of activities, not of orstances. The Applicant's basic proposition is that in ganization. It is relationship to banking or bank manthe geographical area here involved custom, practice agement which is of importance, not mere relationand law have operated to make the business of sellship to banks or bank holding companies. ing insurance a proper incident of banking. The The Transamerica opinion does not expressly state facts in that regard are as follows. a substantiality test. Such a holding seems implicit, In the States of Minnesota, Iowa, and North however. Anything less would eliminate potential Dakota—where the involved subsidiaries and their evil only partially; anything more would require that related banks are located—State laws do not permit all the activities of the nonbanking affiliates be con- the issuance of insurance licenses to corporations; nected with banking transactions—a requisite which hence a bank cannot be licensed to be an insurance the opinion does not seem to suggest. It is conse- agent. Section 11 of the Federal Reserve Act (the quently concluded that either inherent relationship Act of 7 September 1916, 39 Stat. 753, 12 U.S.C. to banking or substantial and appropriate connection § 92) inter alia empowers national banks in places with banking transactions may warrant exemption under 5,000 population, in conformance with rules and under Section 4(c)(6). regulations established by the Comptroller of the In the Transamerica case the activities of Occiden- Currency, to act as agents for insurance companies. tal Life Insurance Company, though having some But in those three States most banks, State and nasimilarity to banking, were not of a type inherently tional, in cities both larger and smaller than 5,000 so kindred thereto as naturally to appertain to bank- operate or have an interest in insurance agencies, ing. Occidental therefore was unable to qualify in either in the form of a related partnership or corporathat regard. And with respect to direct relations tion or through officers or employees of the bank, in with banks, Occidental's participation in bank transac- manner similar to that here. In the larger cities this tions by way of providing credit life and employee practice is less frequently encountered. The approxigroup insurance, and joining in investment and lend- mate percentages of banks in the three States having ing activities were insignificant, the Board found, in such an arrangement are as follows: relation to the total amount of Transamerica's banks. Exemption was consequently denied.5 Min- North We turn then to the application of those principles nesota Dakota Iowa to the instant case. All banks 87 84 71 National banks, 5,000 or less (4) Relationship to the Business of Banking population 90 94 69 National banks, over 5,000 population 48 64 31 As we have seen, the nonbanking activities here are the following: (1) the operation of insurance agen- The state banking and insurance authorities are cies. All three subsidiaries engage in this activity: aware of these practices, and the Comptroller of the South Side Insurance Agency exclusively so, and Currency presumptively so. The evidence indicates Union Investment Company largely so, but Norththat the State authorities have no objection thereto western Mortgage Company—in terms of 1957 in- As to the Comptroller, there is no indication as to come—only to a minimal extent, (2) property manhis position, other than what may be inferred from agement, including the supervision, sale, and leasing the situation as stated. of properties, (3) brokerage and servicing of real estate loans, (4) liquidation of property in connec- The Applicant is of the view that in the light of this historical practice the business of selling insur- 5 Less than 2% of Occidental's premium income in 1956 ance in Minnesota, Iowa, and North Dakota usually, was derived from business originating with Transamerica legitimately, and naturally appertains to the business banks. Credit life insurance held by Occidental in connection of banking. More specifically, the Applicant stresses with loans by Transamerica banks accounted for six-tenths of one per cent of total life insurance in force by Occidental the following points with regard to the relationship at the end of 1956. Less than 3% of the total loans of Trans- between insurance activities and banking activities, america banks were covered by credit life insurance sunplied by Occidental. {Transamerica Corporation, supra, at 1025-26) as here carried on. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

980 FEDERAL RESERVE BULLETIN • AUGUST 1959 The agencies provide a valuable service to the are different in quality—from services regularly ofbanks. Being readily at hand they make insurance fered by independent insurance agencies. That underor insurance advice immediately available when writers and customers prefer bank-related agencies needed by the bank, or by the customer in connection may be helpful to the agencies, but it scarcely tends with a bank transaction. The agencies also advise to establish that insurance is an incident of banking. the bank in connection with bank transactions and The services offered by the affiliated agencies are also assist in keeping records relative to such insurance. of value and convenience to the public, but again, Agents of the Union Investment Company attend that fact does not relate the function closely to bankinsurance schools and keep abreast of current insur- ing. As to competitive considerations, it has been ance trends. The agents specialize to an extent im- noted that not all of the competing banks here have practicable for bank officers. The public associates insurance departments or associated agencies. Hence the sale of insurance with banking in the three States competitive disadvantage would not seem to be a and has grown accustomed to the practice. Insur- decisive consideration. In any event it is not of subance underwriters and bank customers prefer bank- stantial pertinence to the issue of propriety. It can related agencies because, it is said, they are regarded be assumed that some competitive relationships will as more responsible and provide better and more be altered by the statute. But if competition is an complete insurance service than independent agencies. element of importance, there is nothing to prevent an Bank-related agencies supply a needed public service association from being maintained under some other in small towns or in certain other areas because of form of organization, if in conformance with Federal the lack or inadequacy of such facilities in the partic- and State law. If this is not possible it would seem ular area. The Applicant considers that the avail- difficult to conclude that the activities are actually ability of these services attracts customers to the bank. proper incidents of banking. The abandonment of the insurance activities would I conclude from the foregoing that the business of therefore, in its view, place the related banks at a operating insurance agencies is not, either in its own competitive disadvantage with other banks in the right or when considered in the historical and factual area. context described above, inherently so closely related to the business of banking in general or of managing and controlling banks as naturally to appertain It seems manifestly correct that bank customers thereto. are attracted by the services which a bank has to offer. The same must be said of the other functions of the Any necessity or convenience which a bank may agencies. Property management, brokering, and make available at its location, whether it be deposit asset liquidation, though activities of a kind somebox facilities, insurance, the sale of cigarettes, or times performed by a bank in connection with its public parking, will tend in some degree to draw operations, are not thereby inherently related to bankpotential customers to the bank premises. A bank, ing. That a bank may, in the course of performing however, is not a super-market. Whether the sale a banking function, have occasion to handle property of insurance is a proper incident of banking is to be does not make the business of handling property determined from its relation to banking operations, an inherent incident of banking. and not from its ability to attract persons to a partic- We turn now to the question of the substantiality ular location. of the direct relations between the subsidiaries and That banks in the areas involved have for many banks. years participated in insurance arrangements as de- (b) Direct relations with banks. Despite the conscribed might be a weighty circumstance if the ques- clusion reached above, the companies and their function of continuance of the practice involved only the tions might still be deemed proper incidents of bankprior state of the law. We are presented here, how- ing if appropriate to and directly, significantly, and ever, with a new circumstance, namely, that it is now substantially connected with banking transactions. the declared policy of Congress, as it was not hereto- But here too, though appropriate, the companies fall fore, that in general and subject to limited excep- short of meeting the statutory standard. To qualify tions bank holding systems should be restricted to under this exception the nonbanking activities must banking activities and should not engage in other constitute both a substantial part of the subsidiary's types of business. The probity of the instant rela- business, and also a substantial part of the business tionships is to be resolved, therefore, in accordance of the bank which falls into such category. What with the policy enunciated in the Act and not on the precise percentage is encompassed by "substantial" basis of what was heretofore permitted or tolerated. need not be here decided. At least the word em- Manifestly, practice is entitled to scrutiny, but in the braces "major part." As before, we consider first the light of the supervening statute it can no longer be insurance aspect of the subsidiaries' businesses. considered compelling evidence of propriety. A deter- In the case of South Side Insurance Agency, Inc., mination that the business of selling insurance in- approximately 7% of the agency's premium income herently bears a close relationship to banking must in 1957 was derived from insurance on property intherefore rest, if at all, upon other factors than volved in loans by the affiliated bank, or situations in historical association or local custom. The record which the bank was the named insured. This is not here does not reflect such factors in significant degree. a significant amount. The circumstance that an in- The agencies undoubtedly perform a function of sured may be a customer of the bank in other revalue to the banks in the securing of insurance and spects does not transform his insurance transaction in giving advice in connection with bank transactions with the agency into an incident of relations with the or in maintaining current coverage. Those services, bank. With respect to the extent of the agency's however, are minimal in relation to the total business participation in instances where the bank held a of the agencies. Furthermore, they are no different secured loan requiring insurance the percentage, in kind—and there is no reason to suppose that they though larger, is still not substantial—20.3%. That Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAW DEPARTMENT 981 is to say, the agency insured the security in 20.3% higher cost. However, the continuation of Northof the cases where the bank had loans on which it western Mortgage Company as source of these servrequired insurance on the security. The direct rela- ices does not require retention by Northwest Bantions between South Side Insurance Agency and banks corporation of more than 25% of the Mortgage Comare thus not sufficient to justify an exemption under pany's voting shares. Moreover, unaffiliated organi- Section 4(c) (6). zations are available to provide apparently effective The same conclusion must follow with respect to and satisfactory service. It has been seen that af- Union Investment Company, the major part of whose filiated banks other than Northwestern National Bank business is likewise not related to banking. As we tend to refer their management properties to customhave seen, 98% of the income of Union Investment ers of those banks. In the absence of substantial Company in 1957 was derived from insurance. Of ground to conclude that continued affiliative relations that amount only 15.5% of the premium income and between Northwestern Mortgage Company and 21.2% of the commissions were derived from insur- Northwest Bancorporation banks are essential to the ance related to bank transactions. And of the bank efficient operation of the banks, the fact that Northloans in connection with which insurance was re- western Mortgage Company—or indeed any of the quired by the bank, Union Investment Company sup- companies—may not be able to operate profitably plied 37.5% of the insurance. These amounts are and to maintain its present organization on the volnot adequate to support exemption. ume of business supplied by banks does not tend to The Applicant calls attention to the liquidation establish that the activities performed for other perservices which Union Investment Company is pre- sons are incidents of banking. The exemptions propared to perform and which it has performed in the vided by the statute do not extend to operations repast. Such an activity would be exempt by Section quired for the profitable operation of the subsidiary.6 4(c)(l) if Union Investment Company were engaged We have seen that transactions with Northwest solely in such business. And even if not the com- Bancorporation and affiliated banks in 1957 reprepany's sole engagement, I think the activity may sented only 17.7% of the gross income of Northfairly be considered an exempt function under Section western Mortgage Company. City property manage- 4(c)(6), since performed exclusively for banks and ment fees received from affiliated banks constituted the bank holding company. However, as we have only 19% of income from such source; farm manageseen, in recent years the liquidation activities of Union ment fees similarly derived amounted to about 11%. Investment Company have been of minor importance. With respect to mortgage brokering, Northwestern Hence they are not sufficient, either by themselves Mortgage Company no longer performs such servor in combination with the Company's other business ices for affiliated banks. Income attributable to afwith affiliated banks, to meet the test of substan- filiates which perhaps represents fees for mortgage tiality. servicing is relatively minimal—about 2% of total With respect to the insurance functions of North- income and 8.6% of income from operations of the western Mortgage Company, that organization sells mortgage loan department. In the matter of real no insurance for banks; nor except in rare instances estate brokerage sales for banks provided 27% of on property connected with bank transactions. Its total income of Northwestern Mortgage Company insurance income in 1957 was negligible: 1.9% from such type of activity, and approximately 11% ($6,140) of total gross income, and 3.2% ($200) of of all income. gross income from or through affiliated banks or the Those amounts do not meet the test of substantialholding company. Hence, whether Northwestern ity. Northwestern Mortgage Company is therefore Mortgage Company is entitled to exemption must also not eligible for exemption under Section 4(c)(6). depend, if warranted at all, upon the substantiality This disposes of all the applications. of its other relations with banks. Northwestern Mortgage Company does act as general agent in connection (5) Miscellaneous Considerations with the Stuyvesant plan, in which the automobile For the reasons heretofore stated I reach the condealer is the agent and an affiliated bank the financier. clusion that the principles set forth by the Board in The record affords no basis, however, for a finding the Transamerica decision require the denial of the that the amount of such business is significant, either instant request for exemption. There are, of course, in relation to the business of the agencies or the differences between the situation presented in the business of the banks. Transamerica case and that presented here with re- (c) The other functions. What has been said above spect to the type and degree of evil potential in the is dispositive of the cases of South Side Insurance commingled banking and nonbanking relationships. Agency, Inc., Union Investment Company, and the But they are not in essence differences of conseinsurance activities of Northwestern Mortgage Com- quence. In both cases there exists substantial pospany. That leaves for consideration the property sibility of abuse of the nature envisioned by the management and brokering functions of Northwest- framers of the statute. ern Mortgage Company. It has already been found That the Applicant's policies do not permit its subthat those are not inherently related to banking. sidiaries to exercise coercion upon bank customers to For the management service the record shows a do business with Applicant's subsidiaries, and that genuine need, such as in the case of management of Minnesota law prohibits conditioning the financing property which Northwestern National Bank holds of secured property upon the purchase of insurance in a trust or other fiduciary capacity. To a lesser extent the same is perhaps true of the brokerage func- 6 The Respondent's brief (page 8) suggests that for the tion. The record will support a finding that the man- insurance agencies to confine themselves to selling insurance agement services of Northwestern Mortgage Com- to related banks would be illegal, citing Minnesota Statutes, § 60.68. Assuming that to be so, the fact is not supportive of pany are of high quality and could not be provided the conclusion that the sale of insurance is a proper incident by Northwestern National Bank itself except at much of banking or of managing or controlling banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

982 FEDERAL RESERVE BULLETIN • AUGUST 1959 from a particular source, neither meets the whole of CONCLUSIONS OF LAW the possible evil nor eliminates the potentiality of abuse. For it is quite clear that the intent of Con- 1. All the activities of Northwestern Mortgage gress was to eliminate situations from which evil and Company, South Side Insurance Agency, Inc., and abuse might eventuate; not merely to prohibit un- Union Investment Company, are of a financial, fidudesired action or to punish its occurrence. That the ciary, or insurance nature. particular conduct may be otherwise disapproved or 2. The aforesaid companies are not—within the in some areas unlawful is therefore beside the point. meaning of Section 4(c)(6) of the Act—so closely In view of the foregoing conclusions it will be related to the business of banking or of managing or recommended that the application for exemption of controlling banks as to be a proper incident thereto the three companies be denied. It is consequently and as to make it unnecessary for the prohibitions unnecessary to determine in this case whether the of Section 4(a)(2) of the Act to apply in order to application should be disapproved on the additional carry out the purposes of the Act. ground that the operation of insurance or brokering agencies in close association with national banks in places of over 5,000 population is inconsistent with the RECOMMENDATION Act of 1916, 12 U.S.C. 92, set out supra. It is recommended that the Board of Governors of It is suggested by the Applicant that the denial of the Federal Reserve System: exemption will lead to paradoxical results. Conced- 1. Enter an order determining the issues in this ing this, the observation is not especially helpful, for proceeding in accordance with the findings of fact and no conceivable solution—including the existing situa- conclusions made above. tion itself—is altogether free of anomaly. In any 2. Deny the request of Northwest Bancorporation event Congressional policy is not to be avoided be- for an order under Section 4(c)(6) of the Act detercause of doubts as to its wisdom or efficacy. The mining that the shares of Northwestern Mortgage statute is its own measure of what is lawful in the Company, South Side Insurance Agency, Inc., and ownership of nonbanking companies by bank holding Union Investment Company are exempt from applicompanies. If—as may be expected—some present cation of the prohibitions of Section 4(a) (2) of the practices do not comport with the requirements of the Act. Act, it is the practices and not the statute which must Dated at Washington, D. C, this 18th day of Nogive way. vember, 1958. Upon the basis of the foregoing findings of fact, and upon the entire record in the case, I make the follow- (Signed) CHARLES W. SCHNEIDER ing: Hearing Examiner Current Events and Announcements CHANGES IN THE BOARD'S STAFF for reasons of health, he be relieved of his respon- Because of impairment of his health, Elliott Thurs- sibilities as Director of the Division. The Board ston, Assistant to the Board, requested that he be acceded to Mr. Masters' request, effective July 31, relieved of his duties. The Board acceded to the 1959, and appointed him Associate Director of the request, and Mr. Thurston relinquished his official Division as of August 1, in which capacity his duties on July 31, 1959, prior to his retirement. long and extensive experience in the field of bank Mr. Thurston became a member of the Board's supervision will continue to be available to the staff in 1935, when he was appointed Assistant to Federal Reserve System. the Chairman of the Board. Formerly a news- The Board appointed Frederic Solomon, Assistpaper correspondent, he served as Assistant to the ant General Counsel, to succeed Mr. Masters as Members of the Board and among his duties gave Director of the Division of Examinations, effective special attention to matters relating to the press. August 1, 1959. To succeed Mr. Thurston, the Board appointed Mr. Solomon became a member of the Board's Charles Molony as Assistant to the Board effective legal staff in 1934, and had served as Assistant August 1, 1959. Mr. Molony joined the Board's General Counsel since 1948. In addition, he was staff in 1952 and had been serving as Special As- for several years a member of a staff group studysistant to the Board. Mr. Molony also was ing techniques for measuring the adequacy of bank formerly a newspaper correspondent and his work capital. He also participated in a Federal Reserve with the Board has included various matters hav- System study of foreign operations of American ing to do with press and public relations. banks, as well as in staff missions studying the Robert C. Masters, Director of the Division of banking structures and problems of Puerto Rico Examinations since July 1, 1957, requested that, and the Virgin Islands. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CURRENT EVENTS AND ANNOUNCEMENTS 983 APPOINTMENTS OF BRANCH DIRECTORS and "Security Issues of State and Local Govern- On July 21, 1959, the Board of Governors an- ments," have been added (see pages 1010 and nounced appointment of Mr. H. E. Whitaker, of 1015, respectively). Dayton, Ohio, as a director of the Cincinnati (2) Statistics for weekly reporting member Branch of the Federal Reserve Bank of Cleveland banks have been expanded to show new breakfor the unexpired portion of a term ending Decem- downs of loans and investments and to show some ber 31, 1959. Mr. Whitaker is Chairman of the additional assets and liabilities (see pages 1004- Mead Corporation, Dayton, Ohio. As a director 06). of the Cincinnati Branch he succeeds Mr. Anthony (3) The table on "Money Market Rates" has Haswell, President of the Dayton Malleable Iron been expanded to include rates on 6-month and on Company, Dayton, Ohio, who resigned recently. 9- to 12-month Treasury bills (see page 1008). (4) Tables that appeared on pages 756-68 of On August 6, 1959, the Board of Governors announced the appointment of Mr. Howard W. the BULLETIN for July 1959 have been rearranged. In this rearrangement the table "Principal Assets Price of Salt Lake City as a director of the Salt and Liabilities of Federal Business-Type Activities" Lake City Branch of the Federal Reserve Bank of has been moved to the end of the domestic section. San Francisco for the unexpired portion of a term ending December 31, 1959. Mr. Price is Execu- Henceforth this table will appear in the BULLETIN only when new data are available, but a reference tive Vice President and General Manager, Salt to it will be included in the table on this page that Lake Hardware Company in Salt Lake City. As a director of the Salt Lake City Branch he suc- shows the most recent reference for all BULLETIN tables not published monthly. ceeds Mr. Joseph Rosenblatt, President of the Eimco Corporation in Salt Lake City whose elec- TABLES PUBLISHED ANNUALLY, SEMIANNUALLY, AND tion as a Class B Director of the Federal Reserve QUARTERLY Bank of San Francisco was announced in the June BULLETIN. Latest BULLETIN Reference On August 19, 1959, the Board of Governors Annually Issue Page announced the appointment of Mr. Gerald L. Earnings and expenses: Andrus of New Orleans, Louisiana as a director Federal Reserve Banks Feb. 1959 208-09 Member banks : of the New Orleans Branch of the Federal Reserve Calendar year June 1959 650-58 First half of year Nov. 1958 1346 Bank of Atlanta for the unexpired portion of a Insured commercial banks June 1959 659 Banks and branches, number of, by class term ending December 31, 1961. Mr. Andrus and State Apr. 1959 442-43 is President of New Orleans Public Service, Inc. Operating ratios, member banks July 1959 794-96 Stock Exchange firms, detailed debit and in New Orleans. As a director of the New credit balances Nov. 1958 1347 Banking and monetary statistics, 1958.. j ^. 1959 550I53 Orleans Branch he succeeds Mr. G. H. King, Jr., Bank holding companies, Dec. 31, 1958: Canton, Mississippi who became a member of List of June 1959 660 Banking offices and deposits of group the Board of Governors of the Federal Reserve banks Aug. 1959 1064 System in March of this year. Semiannually Banking offices: Analysis of changes in number of Aug. 1959 1044 CHANGES IN BULLETIN TABLES On, and not on, Federal Reserve Par List, number of Aug. 1959 1045 Beginning with this issue of the BULLETIN, the fol- Quarterly lowing changes have been made in the tables pub- Flow of funds Aug. 1959 1046-62 Principal assets and liabilities of Federal lished regularly in the domestic section: business-type activities Aug. 1959 1063 (1) Two new tables, "Mutual Savings Banks" Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

National Summary of Business Conditions Released for publication August 14 Industrial activity was curtailed by the steel industries was back to the prerecession highs of strike beginning in mid-July. Consumer incomes early 1957. Aircraft and other ordnance lines, and buying were generally maintained and whole- however, were still below 1957 levels. Output of sale commodity prices changed little. Bank credit consumer durable goods reached a new peak as expanded further. Interest rates declined slightly. production of autos and television increased further and furniture output was maintained at record INDUSTRIAL PRODUCTION levels. Industrial production declined 1 per cent in Widespread gains continued in the textile, ap- July to a preliminary figure of 153 per cent of parel, rubber, and chemical products industries the 1947-49 average, two points below the June in July. Output of minerals, however, declined level of 155. The decline reflected the impact of 5 per cent reflecting sharp cutbacks in iron ore the steel strike beginning on July 15 as activity in and coal because of the steel strike. most other durable goods industries increased further and output of nondurable goods rose to CONSTRUCTION a new peak. Utility output was maintained at Private nonfarm dwelling units started in July 267 per cent of the 1947-49 average. changed little at a seasonally adjusted annual rate Steel mill operations in July were 42 per cent of 1.35 million units. The value of new conof capacity as compared with 90 in June. Work struction put in place continued at an annual rate stoppages in the second half of July and the first of nearly $55 billion, somewhat below the March half of August reduced mill operations to 12 per peak. Gains shown in commercial and industrial cent of capacity. Production of most nonferrous building and highway construction slightly exmetals and building materials increased in July. ceeded some decline in public utility and resi- In the second week of August, however, copper dential construction. production was cut sharply by work stoppages. EMPLOYMENT Production of finished durable goods continued to expand in July. Output of trucks and farm Employment in nonagricultural establishments machinery was at record rates and production in increased further in July, before the onset of the most other industrial and commercial machinery steel strike, by 164,000 to a new peak of 52.6 million—110,000 above the previous high two INDUSTRIAL PRODUCTION years earlier. Employment in State and local gov- 1947-49-100 ernment, service and trade reached new highs. Average weekly earnings of factory employees declined somewhat but were 8 per cent larger than a year earlier. Unemployment decreased 240,000 to 3.7 million and was at a seasonally adjusted rate of 5.1 per cent of the labor force. DISTRIBUTION Retail sales in July continued at the record seasonally adjusted rate reached in May and were 9 per cent above a year ago. Sales at department stores showed a less than seasonal decline in July and early August. Sales at auto outlets and in a 80 1955 1957 1959 1955 1957 1959 number of other lines either declined somewhat Federal Reserve indexes, seasonally adjusted. Monthly fig- or changed little in July from earlier advanced ures; latest shown are for July. 984 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NATIONAL SUMMARY OF BUSINESS CONDITIONS 985 rates. Dealer stocks of autos increased to a new BANK CREDIT AND RESERVES high in July, partly reflecting anticipated model Total commercial bank credit increased in July. changeover curtailments. At department stores, Loans showed further rapid expansion and holdnew merchandise orders were sharply above the ings of U. S. Government securities rose slightly. midyear levels in other recent years and stocks The seasonally adjusted money supply increased showed some increase. $1.4 billion following little change in May and June, and at the end of July was 3Y2 per cent AGRICULTURE larger than a year earlier. Another large harvest is in prospect. Crop pro- Member bank borrowings from the Federal Reduction this year was officially forecast as of Au- serve averaged $980 million and excess reserves gust 1 to be only 3 per cent smaller than last year's $480 million in the four weeks ending August 12. record and 8 per cent larger than for any other Over the period reserves were absorbed princiyear. While a decrease of about one-fourth in pally by further gold outflow, a build-up in Treasthe wheat harvest was indicated, the corn crop was ury deposits at the Reserve Banks, and a decrease forecast to be 10 per cent larger and the cotton in Reserve Bank float. Reserves were supplied by crop 29 per cent larger than last year. currency inflow and Federal Reserve purchases of U. S. Government securities. COMMODITY PRICES SECURITY MARKETS Wholesale prices generally showed little change Yields on all marketable Treasury issues have from mid-July to mid-August. Markets for been stable to slightly lower during the past month. copper, rubber, and hides strengthened again after On August 5 the Treasury announced additional a period of weakness. Textile prices increased cash borrowing of $1.7 billion in the bill market. further, although raw cotton prices declined 10 Yields on corporate and State and local governper cent as new Federal support levels became ment bonds declined slightly from peaks reached effective. Prices of some finished consumer prod- in early July. Common stock prices advanced to ucts were reduced. Livestock prices also were a new peak at the beginning of August and then down somewhat further at midyear. declined 3 per cent. RETAIL TRADE INTEREST RATES 1947-49 — 100 TOTAL RETAIL SALES LONG-TERM GOVERNMENT SECURITIES - I ! ! ! DEPARTMENT STORES STOCKS — SALES Federal Reserve indexes, seasonally adjusted; retail sales Weekly average market yields for long-term U. S. Governbased on Department of Commerce data. Monthly figures; ment 2Vi per cent bonds and for longest Treasury bills; latest latest shown for stocks is June, for other series, July. shown are for week ending August 7. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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Financial and Business Statistics * United States * Member bank reserves, Reserve Bank credit, and related items 989 Reserve Bank discount rates; reserve requirements; margin requirements. . 992 Federal Reserve Banks 993 Bank debits; currency in circulation 996 All banks: consolidated statement of monetary system; deposits and currency. 998 All banks, by classes ... 999 Commercial banks, by classes. . . 1002 Weekly reporting member banks. . 1004 Business loans. 1007 Interest rates. . 1008 Security prices; stock market credit; open market paper 1009 Savings institutions. 1010 Business finance. 1012 Security issues. 1014 Federal finance 1015 Federal business-type activities. 1020 Real estate credit 1021 Short- and intermediate-term consumer credit. . 1024 Selected indexes on business activity. . 1028 Production 1029 Employment and earnings. 1036 Department stores 1038 Foreign trade 1039 Wholesale and consumer prices. . . . 1040 National product and income series. . 1042 Changes in number of banking offices in the United States. 1044 Number of banking offices on Federal Reserve par list and not on par list. 1045 Flow of funds, saving, and investment. . . . 1046 Principal assets and liabilities of Federal business-type activities. 1063 Offices and deposits of banks in holding company groups, December 31, 1958 1064 Tables not published each month—list, with latest BULLETIN references 983 Index to statistical tables. 1088 Tables on the following pages include the prin- the basis of material collected by other agencies; cipal statistics of current significance relating figures for gold stock, currency in circulation, to financial and business developments in the Federal finance, and Federal credit agencies are United States. The data relating to Federal obtained from Treasury statements; the remain- Reserve Banks, member banks of the Federal ing data are obtained largely from other sources. Reserve System, and department store trade, Back figures for 1941 and prior years for bankand the consumer credit estimates are derived ing and monetary tables, together with descripfrom regular reports made to the Board; pro- tive text, may be obtained from the Board's duction indexes are compiled by the Board on publication, Banking and Monetary Statistics. 987 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS Weekly averages of daily figures Billions of dollars 25 MEMBER BANK RESERVE BALANCES REQUIRED RESERVES EXCESS RESERVES CURRENCY IN CIRCULATION RESERVE BANK CREDIT GOLD STOCK TREASURY CASH AND DEPOSITS NONMEMBER DEPOSITS U.S. GOVERNMENT SECURITIES 25 20 DISCOUNTS AND ADVANCES FEDERAL RESERVE FLOAT 1953 1954 1955 1956 1957 1958 1959 Latest averages shown are for week ending July 29. See p. 989. 988 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS [In millions of dollars] Reserve Bank credit outstanding Deposits, other than member bank Member bank Treas- Cur- reserves, reserves U. S. Govt. securities ury rency Treas- with F. R. Banks cur- in ury Other Week Dis Gold rency cir- cash F. R. ending Held counts stock out- cula- hold- ac- Bought under and Float Total stand- tion ings counts Total out- repur- ad- ing Treas- For- Other Total Re- Exright chase vances ury eign quired2 cess 2 agreement Averages of daily figures 1958 June 4 24,194 24,194 135 869 25,240 21,594 5,201 30,989 709 411 238 484 ,05718,147 17,574 573 11 24,397 24,391 6 184 815 25,440 21,594 5,203 31,052 709 424 267 370 ,13918,274 17,687 587 18 24,682 24,581 101 175 036 25,939 21,540 5,204 31,070 698 459 331 359 146 18,619 17,984 635 25 25,002 24,891 111 99 024 26,170 21,374 5,204 30,975 698 440 280 229 ,14418,983 18,314 669 July 2 25,422 25,419 97 81526,380 21,349 5,203 31,163 687 446 268 405 ,10518,859 18,204 655 9 25,456 25,456 143 94726,589 21,306 5,202 31,385 677 489 265 377 ,09718,809 18,051 758 16 25,262 25,262 115 979 26,398 21,300 5,202 31,375 686 497 358 371 ,09518,518 17,949 569 23 25,157 25,157 85 1,04!26,328 21,280 5,203 31,217 692 465 293 340 ,09118,712 17,924 788 30 25,035 25,035 108 823 "2"6,005 21,252 5,206 31,086 697 543 300 333 ,04118,462 17,824 638 Aug. 6 25,240 25,240 11 828 26,212 21,195 5,207 31,171 696 662 291 350 18,296 17,738 558 '''''V 2 2 5 5 , , 6 4 4 0 6 6 2 2 5 5 , , 6 4 2 0 6 6 20 2 2 2 1 9 6 1, 7 00 7 8 4 2 2 6 6 , , 6 6 8 6 5 5 2 21 1 , , 0 1 8 5 6 4 5 5 , , 2 2 1 1 0 0 3 3 1 1 , , 2 2 9 9 1 5 6 6 9 9 6 9 5 52 0 8 4 2 3 5 0 9 0 3 3 0 2 1 9 166 1 1 8 8 , , 6 7 4 6 8 0 1 1 8 8 , , 0 0 7 2 3 7 6 62 8 1 7 27 25,257 25,257 271 857 26,417 21,086 5,211 31,249 688 486 234 320 212 18,526 17,953 573 Sept. 3 25,353 25,353 461 79:26,638 21,011 5,211 31,381 691 539 305 324 18,446 17,899 547 10.... 25,233 25,233 514 26,661 21,012 5,213 31,433 694 478 330 319 18,479 17,873 606 17.... 25,001 25,001 56! 1,049 26,644 20,939 5,215 31,393 694 304 397 282 156 18,572 17,935 637 24.... 24,893 24,893 433 1,20326,558 20,895 5,216 31,285 683 508 308 320 ,162 18,404 17,811 593 Oct. 1.... 24,940 24,940 401 904 26,275 20,866 5,219 31,217 690 448 261 387 123 18,234 17,774 460 8 25,143 25,143 434 26,519 20,830 5,219 31,352 691 447 299 343 119 18,318 17,753 565 25,498 25,353 145 47: 922 26,925 20,764 5,220 31,498* 689 386 327 412 12118,475 17,989 486 22 25,242 25,242 369 1,401 27,046 20,724 5,220 31,435 681 464 308 332 117 18,65: 18,086 566 29 25,300 25,300 456 9T 26,767 20,690 5,221 31,299 681 512 270 321 ,08018,515 17,993 522 Nov. 5 25,459 25,380 79 403 796 26,694 20,679 5,222 31,422 681 325 283 391 ,07818,416 18,008 408 12 25,660 25,614 46 470 934 27,100 20,652 5,225 31,660 687 371 297 375 ,078 18,510 17,891 619 19 25,411 25,392 19 45 ',087 20,680 5,225 31,754 692 475 316 341 074 18,340 17,900 440 26 25,734 25,578 156 430 199 27,399 20,616 5,225 31,825 686 455 243 337 ,06318,631 18,225 406 TVr 1 3 0 2 2 6 6 , , 1 2 4 8 3 2 2 2 6 6 , , 0 2 3 5 3 0 1 3 1 : 0 4 5 1 8 5 0 ,,0u8':2 2 7 7 , , 8 8 4 4 4 7 2 20 0 , , 5 6 9 0 3 9 5 5 , , 2 2 2 2 8 9 3 32 2 , , 2 0 1 5 8 7 6 6 9 9 3 6 4 3 6 7 5 6 2 23 2 2 2 4 3 0 2 1 8 1 19 0 1 3 1 18 8 , , 6 7 2 4 9 0 1 1 8 8 , , 2 1 3 6 2 0 4 5 6 0 9 8 17 26,315 26,223 92 519 ,439 2288,311 20,576 5,229 32,394 693 428 263 335 16118,844 18,374 470 24 26,272 26,188 84 631 ,94428,889 20,536 5,231 32,533 684 540 239 328 172 19; 160 18,548 612 31 26,437 26,241 196 808 ,61828,910 20,526 5,232 32,458 692 521 332 333 16519,167 18,511 656 1959 Jan. 7 26,184 26,090 94 644 ,40128,275 20,534 5,234 32,008 701 446 279 356 12219,131 18,588 543 14 25,922 25,817 105 730 ,01127,708 20,526 5,234 31,710 704 390 297 345 ,12118,901 18,340 561 21 25,580 25,580 45' ,28827,368 20,515 5,234 31,385 712 401 357 373 ,11818,769 18,234 535 28 25,471 25,471 50' 074 27,094 20,515 5,235 31,150 714 404 298 343 11818,817 18,424 393 Feb. 4 25,673 25,59: 433 946 27,09: 20,476 5,235 31,120 723 442 278 344 14618,749 18,345 404 11 .. 25,657 25,621 553 887 27,136 20,476 5,236 31,193 727 364 304 333 ,18518,742 18,189 553 18 25,529 25,523 583 96027,112 20,475 5,238 31,205 741 398 313 391 ,21418,562 18,120 442 25 . 25,399 25,394 474 1,05026,965 20,474 5,239 31,111 724 443 308 448 ,25518,389 17,979 410 Mar. 4 25,355 25,294 61 548 95126,892 20,479 5,241 31,129 721 534 298 339 214 18,37! 17,957 418 11 25,366 25,331 35 722 84926,976 20,448 5,242 31,215 716 454 311 336 ,21218,421 17,868 553 18 25,471 25,419 5: 543 1,00027,048 20,442 5,244 31,287 72' 437 290 340 ,221144 18,439 18,051 388 25 25,510 25,461 49 619 96127,123 20,442 5,246 31,231 714 456 295 339 ,21818,558 18,100 458 Apr. 1 25,494 25,46: 3: 629 99827,151 20,442 5,247 31,229 709 523 364 51 ,18118,323 17,855 468 8 25,722 25,484 238 690 91 27,357 20,442 5,250 31,280 709 524 296 348 ,18018,711 18,302 409 15 25,789 25,545 244 721 81627,35^ 20,440 5,253 31,365 71 471 279 34: ,18118,698 18,254 444 22 25,544 25,511 33 767 1,13027,47: 20,409 5,254 31,332 705 456 286 362 ,17818,817 18,307 510 29 25,608 25,608 673 90027,212 20,330 5,257 31,244 705 560 271 333 ,13618,551 18,183 368 Mav 6 25,808 25,706 102 693 89327,424 20,262 5,259 31,368 711 542 256 360 ,13618,571 18,213 358 13. 26,010 25,940 70 726 79527,563 20,251 5,262 31,505 710 521 269 383 ,13918,550 18,096 454 20. 25,935 25,926 870 1,15527,989 20,197 5,264 31,515 710 504 280 36" ,24518,829 18,227 602 27. 25,905 25,905 675 94027,548 20,188 5,268 31,473 708 543 281 363 ,24418,393 18,063 330 June 3. 25,905 25,905 866 85327,650 20,188 5,272 31,645 701 548 297 376 ,21918,324 18,021 303 10. 25,939 25,939 996 77'27,736 20,141 5,275 31,803 716 476 260 364 ,21818,31- 17,886 428 17. 25,944 25,944 993 1,02927,994 20,136 5,281 31,877 715 436 259 361 ,22618,53' 18,081 456 24. 25,970 25,936 894 1,25628,147 20,017 5,287 31,814 626 515 283 349 ,23818,627 18,170 457 July 1. 26,045 26,018 27 938 1,03228,042 19,712 5,289 31,858 407 552 296 353 1,19018,386 18,069 317 8. 26,300 26,255 45 1,044 94828,319 19,704 5,290 32,112 412 516 278 360 1,18318,452 18,017 435 15. 26,494 26,383 111 1,019 92:28,462 19,695 5,290 32,201 419 394 269 338 1,18518,640 18,229 411 22. 26,449 26,390 59 929 1,29928,705 19,669 5,290 32,043 412 460 255 334 1,18318,976*>18,445 P531 29. 26,459 26,408 51 890 99828,374 19,636 5,291 31,890 40 559 271 340 1,13718,702^18,310 P392 * Preliminary. For other notes see following page. 989 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

990 BANK RESERVES AND RELATED ITEMS MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—Continued [In millions of dollars] Reserve Bank credit outstanding Deposits, other than member bank Member bank reserves, reserves P d e o a ri r t o e d T U o . t a S l . G B o r o o i v u g u t h g t . - t h s t ecu r a u c H r e g h n i p t r e a d i e u l e s e d e r s e r - - v c a D o a a n n u i d s c d n - - e t s s Float Total s G to o c ld k T r s o c e t u i r a n u n u e r n g r y c t a - - d y s - - r c C t e c u i i n u i o n l r c a r n - - y - T h c i u o n r a e r l g s y d a h s s - - Tr u w e r a i y t s h - F F . e o i R g r . n - Ba O nk th s er O F. t h R e . r Total qu R ir e e - d2 Exment Averages of daily figures 1958 July 25,218 25,218 109 94226,310 21,285 5,203 31,264 687 498 302 358 1,08118,609 17,953 656 Aug 25,410 25,406 252 85826,554 21,112 5,210 31,268 694 541 274 324 ,19418,580 17,946 634 Sept 25,051 25,051 476 99026,548 20,940 5,215 31,342 691 445 325 325 ,15118,425 17,854 571 Oct 25,296 25,260 425 1,03526,789 20,750 5,220 31,390 685 449 299 352 ,10818,476 17,955 521 Nov 25,650 25,562 488 1,03927,211 20,648 5,225 31,732 688 410 276 369 ,06818,540 18,034 506 Dec 26,312 26,216 564 1,49628,412 20,563 5,230 32,371 691 470 262 337 174 18,899 18,383 516 1959 Jan 25,776 25,723 53 574 1,17027,564 20,518 5,234 31,521 709 415 306 353 1,120 18,893 18,396 497 Feb 25,532 25,503 29 526 96127,059 20,475 5,238 31,158 729 417 303 378 1,21118,577 18,117 460 Mar 25,446 25,400 46 620 95427,055 20,448 5,244 31,227 717 477 312 377 1,20818,429 17,968 461 Apr 25,661 25,538 123 694 93727,323 20,403 5,253 31,304 708 505 283 347 1,16818,664 18,247 417 May 25,920 25,882 38 784 93527,669 20,217 5,265 31,490 708 532 274 369 1,19718,580 18,132 448 June 25,963 25,949 14 938 1,00927,937 20,030 5,282 31,816 632 495 277 359 1,21918,451 18,043 408 July 26,422 26,354 68 969 1,02328,441 19,674 5,290 32,049 411 490 269 344 1,17018,671 Midyear or year-end 1929—June.... 216 148 68 1,037 52 1,400 4,037 2,019 4,459 204 36 6 21 374 2,356 2,333 23 1933—June.... 1,998 1,998 164 4 2,220 4,031 2,286 5,434 264 35 15 151 346 2,292 1,817 475 1939—Dec 2,484 2,484 7 91 2,593 17,644 2,963 7,598 2,409 634 397 256 25111,653 6,444 5,209 1941—Dec 2,254 2,254 3 94 2,361 22,737 3,247 11,160 2,215 867 774 586 29112,450 9,365 3,085 1945—Dec 24,262 24,262 249 57825,091 20,065 4,339 28,515 2,287 977 862 446 49515,915 14,457 1,458 1947—Dec 22,559 22,559 85 53523,181 22,754 4,562 28,868 1,336 870 392 569 56317,899 16,400 1,499 1950—Dec 20,778 20,725 53 67 1,36822,216 22,706 4,636 27,741 1,293 668 895 565 71417,681 16,509 1,172 1955—Dec 24,785 24,391 394 108 1,58526,507 21,690 5,008 31,158 767 394 402 554 92519,005 18,903 102 1956—Dec 24,915 24,610 305 50 1,66526,699 21,949 5,066 31,790 775 441 322 426 90119,059 19,089 -30 1957—June.... 23,035 22,994 41 558 1,19924,816 22,623 5,107 31,082 758 498 449 308 1,07518,376 18,543 -167 Dec 24,238 23,719 519 55 1,42425,784 22,781 5,146 31,834 761 481 356 246 99819,034 19,091 -57 25,438 25,438 41 75826,283 21,356 5,203 31,172 692 410 269 420 1,096 18,784 18,158 626 1958—June.... End of month 1958 24,480 24,480 94 86825,477 21,210 5,207 31,171 685 617 288 329 ,03917,764 17,801 -37 July 25,346 25,346 555 80526,739 21,011 5,211 31,371 684 540 313 332 ,18418,538 17,860 678 Aug 24,986 24,986 255 86026,130 20,874 5,219 31,245 684 371 258 395 ,12218,147 17,785 362 Sept 25,443 25,373 70 407 78826,675 20,690 5,222 31,386 674 363 288 335 ,07918,462 18,009 453 Oct 26,229 26,069 160 717 1,02628,006 20,609 5,228 32,036 694 424 226 430 ,03818,994 18,217 777 Nov 26,347 26,252 95 64 1,29627,755 20,534 5,234 32,193 683 358 272 391 ,12218,504 18,574 -70 Dec 1959 Jan 25,715 25,611 104 462 97927,197 20,476 5,235 31,125 721 447 274 345 1,118 18,878 18,355 523 F M e a b r 2 25 5 , , 4 3 9 5 7 0 2 25 5 , , 4 2 9 9 7 5 55 6 3 3 2 2 7 9 8 9 6 9 2 2 26 7 , , 7 0 1 2 6 0 2 2 0 0 , , 4 4 7 4 9 2 5 5 , , 2 2 4 4 1 7 3 3 1 1 , , 1 2 2 5 9 0 7 6 1 8 8 9 4 3 9 9 2 8 3 3 1 0 0 8 3 3 8 3 8 4 1 1 , , 1 2 8 1 0 5 1 1 8 8 , , 5 1 4 9 0 2 1 1 7 7 , , 8 9 1 7 5 2 5 3 6 7 8 7 Apr 25,703 25,623 80 500 94327,176 20,305 5,257 31,349 711 539 266 341 1,136 18,396 18,201 195 May 25,905 25,905 984 86027,777 20,188 5,273 31,638 694 567 291 369 1,219 18,459 17,975 484 June 26,044 26,025 19 421 84627,337 19,705 5,279 31,914 394 535 294 363 1,181 17,640 18,054 -414 26,543 26,408 135 1,229 77228,569*>19,626 5291n1,901*>405 522 278 337 1,138 18,905 18,265 ^640 July Wednesday 1959 May,f:: 25,940 25,829 111 863 76327,595 20,255 5,260 31,414 723 542 263 391 1,137 18,640 18,188 452 26,085 25,977 108 652 76427,530 20,244 5,263 31,482 717 504 255 387 1,139 18,553 18,296 257 25,905 25,905 376 93327,242 20,188 5,267 31,454 709 468 296 385 1,262 18,123 18,200 -77 20.. 25,905 25,905 554 72127,206 20,188 5,269 31,511 706 525 289 353 1,219 18,062 18,063 -1 27.. June 3. 25,905 25,905 731 81127,473 20,188 5,272 31,687 710 474 354 391 1,218 18,099 18,033 66 10. 25,944 25,944 906 70027,576 20,137 5,279 31,832 717 414 258 352 1,217 18,201 17,914 287 17. 25,944 25,944 1,131 1,24128,344 20,135 5,287 31,837 717 378 278 450 1,237 18,869 18,298 571 24. 25,919 25,919 909 91127,765 19,771 5,288 31,753 412 532 337 364 1,237 18,188 18,053 135 July 1 26,118 26,099 603 27,627 19,704 5,290 31,978 409 567 288 386 1,181 17,812 18,151 -339 8 26,344 26,255 1,032 82428,225 19,705 5,290 32,190 415 461 262 351 1,182 18,358 17,962 396 15 26,418 26,383 780 1,00928,234 19,681 5,290 32,104 421 422 240 335 1,183 18,500 18,233 267 22 26,497 26,408 702 1,06928,294 19,637 5,290 31,942 409 451 264 339 1,182 18,635P18,393 *>242 29 26,459 26,408 631 74527,860 19,636 5,291 31,856 402 630 281 337 1,137 18,145 18,289 -144 * Preliminary. dates in subsequent tables on Federal Reserve Banks. 1 Includes industrial loans and acceptances; these items are not shown 2 These figures are estimated. separately in this table, but are given for end-of-month and Wednesday Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BANK RESERVES AND RELATED ITEMS 991 RESERVES, DEPOSITS, AND BORROWINGS OF MEMBER BANKS, BY CLASSES [Averages of daily figures.* In millions of dollars] Central reserve Central reserve Item and period b m a A b e n e m l k r l s - Ne c w ity ban C ks hi- b s R c a e i n r e t v y k - e s C ba o tr n u y k n s - Item and period b m a b A e n e m l r k l s - Ne c w ity ban C ks hi- b s c R a e i n r e t v y k - e s C ba o tr n u y k n s - York cago York cago Total reserves held: Excess reserves:2 1958—June 18,600 4,214 1,113 7,721 552 1958—June 626 102 481 July 18,609 4,132 1,088 7,772 617 July 656 104 515 Aug 18,580 4,014 1,097 7,820 651 Aug 635 89 516 Sept 18,425 3,951 1,064 7,731 679 Sept 571 65 474 Oct 18,476 3,935 1,061 7,755 724 Oct 521 55 433 Nov 18,540 3,883 1,054 7,819 784 Nov 506 69 420 Dec 18,899 4,033 1,077 7,940 849 Dec 516 57 430 1959_jan 18,893 4,031 1,066 7,929 5,868 1959_jan 497 56 428 Feb 18,577 3,968 1,052 7,777 5,780 Feb 460 55 390 Mar 18,429 3,994 1,029 7,702 5,704 Mar 461 49 381 Apr 18,664 4,008 1,041 7,825 5,790 Apr 417 34 372 May 18,580 3.979 1,037 7,792 5,772 May 448 64 357 June 18,451 3,933 1,009 7,744 5,765 June 408 39 359 Week ending: Week ending: 1959_june 17 18,537 3,949 1,010 7,769 809 1959—June 17 456 12 407 24 18,627 3,953 1,015 7,793 866 24 457 415 July 1 18,386 3,983 1,014 7,766 5,623 July 1 317 2 240 8 18,452 3,894 1,000 7,723 5,835 8 435 3 384 15 18,640 3,936 1,023 7,865 5,814 15 411 -1 391 22 18,976 4,079 1,052 7,926 5,919 22 6 P468 29 18,702 4,013 1,046 7,867 5,776 29 5 ^345 Required reserves: * Borrowings at Federal Reserve Banks 1958—June 17,974 4,186 1,099 7,619 5,070 July 17,953 4,101 1,084 7,667 5,101 1958—June 142 21 2 45 74 Aug 17,946 3,987 1,094 7,731 5,134 July 109 16 1 49 44 Sept 17,854 3,923 1,058 7,667 5,205 Aug 252 48 3 111 90 Oct 17,955 909 1,055 7,700 5,291 Sept 476 106 8 266 96 Nov 18,034 866 1,055 7,750 5,364 Oct 425 35 9 253 128 Dec 18,383 010 1,070 7,883 5,419 Nov 486 60 16 258 152 Dec 557 103 39 254 162 1959—Jan 18,396 4,018 1,065 7,873 5,440 Feb 18,117 3,953 1,051 7,723 5,390 1959—Jan 557 77 54 279 147 Mar 17,968 3,965 1,027 7,653 5,323 Feb 508 43 27 250 188 Apr 18,247 4,001 1,036 7,791 5,418 Mar 601 13 124 277 187 May 18,132 3,955 1,033 7,728 5,415 Apr 676 96 69 317 194 June 18,043 3,926 1,006 7,705 5,406 May 767 75 44 424 224 June 921 22 66 574 259 Week ending: Week ending: 1959—June 17 18,081 3,938 1,009 7,732 5,402 24 18,170 3,954 1,011 7,754 5,451 1959—June 17 976 89 596 270 24 876 45 61 557 213 July 1 18,069 3,965 1,012 7,709 5,383 8 18,017 3,883 997 7,686 5,451 July 1 921 30 41 551 299 15 18,229 3,950 1,024 7,832 5,423 8 1,027 117 74 583 253 22 ^18,445 4,055 1,046 7,893 ^5,451 15 1,002 145 46 525 286 29 ^18,310 4,009 1,041 7,830 *>5,430 22 912 217 37 489 169 29 890 150 38 442 260 June 1958 Free reserves:2 • Deposits: 1958—June , 484 7 57 408 July 546 16 56 471 Gross demand deposits: Aug 383 -22 -22 426 Total 119,866 25,207 6,475 47,008 41,176 Sept 95 -79 -3 -201 378 Interbank 13,505 4,278 1,291 6,609 1,327 Oct 96 -8 -3 -198 305 Other 106,361 20,929 5,184 40,399 39,849 Nov 20 -43 -16 -189 268 Net demand deposits3. .. 102,411 21,793 5,711 39,803 35,105 Dec -41 -80 -31 -198 268 Time deposits 51,891 5,261 1,429 21,029 24,173 Demand balances due 1959—Jan -59 -65 -53 -223 281 from domestic banks. . 6,991 177 123 2,198 4,494 Feb -47 -28 -26 -195 202 Mar -140 16 -122 -228 194 Apr -258 -89 -64 -284 178 June 1959 May -318 -51 -41 -360 133 June -513 -15 -63 -536 101 Gross demand deposits: Week ending: Total 120,579 23,769 6,001 47,729 43,081 Interbank 12,669 4,057 1,124 6,190 1,297 1959—June 17 -520 -9 -559 137 Net d O e t m he a r nd deposits3. .. 1 10 0 2 7 , , 8 9 4 1 7 0 2 1 0 9 , ,7 3 1 8 1 7 4 5, , 1 8 8 7 7 7 4 4 0 1, , 5 0 3 0 9 4 4 3 1 7, , 2 7 6 8 9 4 24 -419 -46 -57 -518 202 Time deposits 54,794 5,129 1,446 22,096 26,123 July 1 -604 -12 -39 -494 -59 Demand balances due 8 -592 -106 -71 -546 131 from domestic banks. . 6,353 74 103 2,090 4,086 15 -591 -159 -47 -491 105 22 *-381 -192 -31 -457 P299 29 P-49S -146 -33 -404 *> Preliminary. banks and of country banks are estimates. 1 Averages of daily closing figures for reserves and borrowings and of 3 Demand deposits subject to reserve requirements, i.e., gross demand daily opening figures for other items, inasmuch as reserves required are deposits minus cash items reported as in process of collection and demand based on deposits at opening of business. balances due from domestic banks. 2 Weekly figures of required, excess, and free reserves of all member * Free reserves are excess reserves less borrowings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

992 DISCOUNT RATES FEDERAL RESERVE BANK DISCOUNT RATES [Per cent per annum] Discounts for and advances to member banks Advances to individuals, partnerships, or corporations other than member Advances secured by Government banks secured by direct obligations and discounts of and Other secured advances obligations of the U. S. Federal Reserve Bank advances secured by eligible paper [Sec. 10(b)] (last par. Sec. 13) (Sees. 13 and 13a)i Rate on In effect Previous Rate on In effect Previous Rate on In effect Previous July 31 beginning— rate July 31 beginning— rate July 31 beginning— rate Boston June 2,1959 June 2,1959 Mar. 10,1959 4 New York... May 29,1959 May 29,1959 May 29,1959 4 Philadelphia.. June 5,1959 June 5,1959 June 5,1959 4 Cleveland June 12,1959 June 12,1959 June 12,1959 r4 Richmond... June 12,1959 June 12,1959 Mar. 13,1959 Atlanta June 2,1959 June 2,1959 Oct. 28,1958 Chicago May 29,1959 May 29,1959 Mar. 6,1959 St. Louis May 29,1959 May 29,1959 May 29,1959 Minneapolis.. May 29,1959 May 29,1959 Mar. 16,1959 Kansas City.. June 5,1959 June 5,1959 Mar. 13,1959 4% Dallas May 29,1959 May 29,1959 Oct. 24,1958 4 San Francisco June 11,1959 June 11,1959 Mar. 12,1959 4 1 Rates shown also apply to advances secured by obligations of Federal months and 9 months, respectively, and advances secured by obligations intermediate credit banks maturing within 6 months. of Federal intermediate credit banks maturing within 6 months are NOTE.—Maximum maturities. Discounts for and advances to member limited to maximum maturities of 15 days; 4 months for advances under banks: 90 days for discounts and advances under Sections 13 and 13a of Section 10(b). Advances to individuals, partnerships, or corporations the Federal Reserve Act except that discounts of certain bankers' accept- under the last paragraph of Section 13: 90 days. ances and of agricultural paper may have maturities not exceeding 6 FEDERAL RESERVE BANK DISCOUNT RATES i MEMBER BANK RESERVE REQUIREMENTS [Per cent per annum] [Per cent of deposits] Range F. R. Range F. R. Net demand depositsl Time deposits Date (or level)— Bank Date (or level)— Bank effective all F. R. of effective all F. R. of Apr 1 . 9 1 5 3 6 . Banks N 2V . A Y. Apr 1 . 95 1 8 8... Banks N. Y. Ef o fe f c t c i h v a e n g d e ate C r b e e c a s n i e n t t r y k r v a s e l R b e c a s i n e ty k rv s e C ba o tr n u y k n s - C r r e e e a c s s n i e n e t t r r d y r v v a e e l C ba o tr n u y k n s - 20. T May 9... banks Aug. 24. Aug. 15... 31. Sept. 12... 1917—June 21 13 10 7 j» 1957 Oct. 24.'.! 3 Nov. 7... 1936—Aug. 16 19Vi 15 f Nov. 15. 3 3V4 1959 1937— M M a a y r. 1 1 2 2 2 6 y4 2 1 0 7% Dec. 2. 3 Mar. 6... 1938—Apr. 16 22Y4 17Vi 12 Mar. 16... 1958 May 29... 1941 Nov. 1 26 20 14 6 6 Jan. 22. k June 12... 1942—Aug. 20 24 24. Sept. 14 22 Mar. 7. In effect Oct. 3 20 13. July 31... 21. 18 1948 Feb. 27 22 June 11 24 Sept. 16,24*.... 26 22 16 i Under Sees. 13 and 13a (as described in table above). For data for 1949—May 1,5* 24 21 15 1941-55, see BULLETIN for January 1959, p. 76. June 30, July 1*. 20 14 6 6 NOTE.—The rate charged by the Federal Reserve Bank of New York on Aug. 1,11*.... 8* 13 5 repurchase contracts against U. S. Goyt. securities was the same as its dis- Aug. 16, 18*.... 12 5 count rate except in the following periods (rates in percentages): 1956— Aug. 25 Aug. 24-29, 2.75; and 1957—Aug. 22, 3.50. Sept. 1 it* 1951—Jan. 11,16*.... 23 13 6 6 Jan. 25, Feb. 1*. 24 14 1953—July 1,9* 22 19 13 MARGIN REQUIREMENTS i 1954—June 16,24*.... 21 20 5 5 July 29, Aug. 1* 20 1189 12 [Per cent of market value] 1958_Feb. 27, Mar. 1* IS* 17Vi HVi Mar. 20, Apr. 1* 17 11 Jan. 16, Aug. 5, Effec- Apr. 17 Prescribed in accordance with 1958- 1958- tive Apr. 24 18 161/i Securities Exchange Act of 1934 Aug. 4, Oct. 15, Oct. 16, 1958 1958 1958 In effect Aug. 1, 1959.. 18 16Vi 11 5 5 Regulation T: Present legal require- For extensions of credit by brokers and ments : dealers on listed securities 50 70 90 Minimum 10 10 7 3 3 For short sales 50 70 90 Maximum 22 22 14 6 6 Regulation U: For loans by banks on stocks 50 70 90 * First-of-month or midmonth dates are changes at country banks, and other dates (usually Thurs.) are at central reserve or reserve city banks. 1 Regulations T and U limit the amount of credit that may be extended i Demand deposits subject to reserve requirements which, beginning on a security by prescribing a maximum loan value, which is a specified Aug. 23, 1935, have been total demand deposits minus cash items in percentage of its market value at the time of extension; margin require- process of collection and demand balances due from domestic banks (also ments are the difference between the market value (100%) and the maxi- minus war loan and Series E bond accounts during the period Apr. 13, mum loan value. 1943-June 30, 1947). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS 993 STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS [In thousands of dollars] Wednesday End of month Item 1959 1959 1958 July 29 July 22 July 15 July 8 July 1 July June July Assets Gold certificate account 18,406,14118,401,144 18,458,14418,485,14318,494,14518,396,14218,494,14119,758,894 Redemption fund for F. R. notes.. 936,862 939,299 932,721 928,753 921,949 936,862 921,950 862,160 Total gold certificate reserves. 19,343,003 19,340,44319,390,86519,413,896 19,416,09419,333,00419,416,09120,621,054 F. R. notes of other Banks 387,985 367,992 308,091 262,432 290,539 378,438 294,676 363,072 Other cash 392,324 386,315 359,160 342,699 361,204 398,780 366,464 379,007 Discounts and advances: For member banks 685,314 758,274 1,014,595 586,422 404,027 94,200 For nonmember banks, etc 631,370 17,000 22,000 17,000 17,000 1,228,628 17,000 Industrial loans 1 1 1 342 Acceptances—Bought outright 25,394 25,396 25,396 25,396 26,005 34,029 Held under repurchase agreement. "25 ,'397 ""25,'i08 U. S. Government securities: Bought outright: Bills 2,406,900 2,406,900 2,381,900 2,253,900 2,097,900 2,406,900 2,024,100 1,569,260 Certificates—Special Other 18,649 649,726 18,649, 18,649,726 18,649,726 18,649,726 18,649,726 19946,105 Notes 2,867 867,565 2,867; 2,867,565 2,867,565 2,867,565 2,867,565 10,000 Bonds 2,483 483,771 2,483! 2,483,771 2,483,771 2,483,771 2,483,771 954,607 Total bought outright 26,407,96226,407,962 26,382, 962 26.254,962 26 098,962 26.407,962 26 025,162 24,479,972 Held under repurchase agreement. 51,000 89,000 35;500 89,000 18,750 135,211 18,750 Total U. S. Government securities. 26,458,962 26,496,962 26,418,462 26,343,962 26,117,712 26,543,173 26,043,912 24,479,972 Total loans and securities 27,115,729 27,224,670 27,224,132 27:400,954 26,746,53127,796,909 26,490,945 24,608,543 Due from foreign banks. 15 15 15 15 15 15 15 15 Uncollected cash items.. 5,020,430 5,718,203 6,409 262 076,824 5,692,133 ,476,035 5,117,737 ,626,824 Bank premises 96,199 96,302 96 381 95,815 95,791 95,985 95,805 89,723 Other assets 240,961 226,806 213,313 199,956 186,155 244,972 183,500 271,744 Total assets. 52,596,646 53,360,746 54,001,219 52,792,59152,788,462 52,724,13851,965,233 50,959,982 Liabilities Federal Reserve notes 27,454,48827,518,810 27,612,207 27,630,17127,459,793 27,499,084 27,401,872 26,802,387 Deposits: Member bank reserves 18,144,92118,635, ,499,62918,357, 17,812,47918,904, 17,640,30117,764,093 U. S. Treasurer—general account. 629,507 450; 421,983 460; 567,039 52i; 534,594 617,002 Foreign 281,150 263; 239,948 262; 288,067 277; 294,040 288,120 Other 336,866 338; 335,154 350; 386,436 337; 362,686 329,289 Total deposits. 19,392,444 19,687,918 19,496,714 19,431,566 19,054,02120,041,561 18,831,621 18,998,504 Deferred availability cash items 4,275,789 4,649 ,399,874 4,252, 4,811,698 3,704, 4,271,540 3,758,868 Other liabilities and accrued dividends 1. 36,018 35; 35,884 33; 30,589 37; 29,493 14,300 Total liabilities 51,158,739 51,891,888 52,544,67951,347,607 51,356,10151,282,834 50,534,526 49,574,059 Capital Accounts Capital paid in 380,820 380,726 380,626 380,519 379,952 380,826 379,882 354,771 Surplus 868,410 868,410 868,410 868,410 868,410 868,410 868,410 2836,741 Other capital accounts 188,677 219,722 207,504 196,055 183,999 192,068 182,415 194,411 Total liabilities and capital accounts. 52,596,646 53,360,746 54,001,219 52,792,591 52,788,462 52,724,138 51,965,233 50,959,982 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined (per cent) 41.3 41.0 41.2 41.3 41.7 40.7 42.0 45.0 Contigent liability on acceptances purchased for foreign correspondents 74,621 73,027 74,093 74,772 75,785 73,853 75,959 107,978 Industrial loan commitments 355 355 355 360 360 355 360 986 Maturity Distribution of Loans and U. S. Government Securities3 I Discounts and advances—total 631, 702,314 780,274 1,031,595 603,422 ,228,628 421,027 94,200 Within 15 days 621; 693,000 770,508 1,019,903 573,494 ,205,622 393,199 91,904 16 days to 90 days 9; 9,111 9,558 ",525 29,738 22,770 27,638 2,296 91 days to 1 year 203 208 167 190 236 190 Industrial loans—total 1 1 1 342 Within 15 days 1 1 170 16 days to 90 days 20 91 days to 1 year 68 Over 1 year to 5 years 84 Acceptances—total 25 397 25,394 25,396 25,396 25,396 25,108 26,005 34,029 Within 15 days 7,246 8,402 8,579 980 7,371 6,068 8,114 12,612 16 days to 90 days 18,151 16,992 16,817 17;416 18,025 19,040 17,891 21,417 U. S. Government securities—Total. 26,458,962 26496,962 26,418,446622 26,343962 26,117,712 26543,173 26,043,912 24,479,972 Within 15 days 8,631,323 667,323 333,300 422 300 311,850 ~ 595,034 253,450 ',612,597 16 days to 90 days 1,174 710 167,910 442,433 9,367033 321,733 1,308,210;9,351,833 ,009,046 91 days to 1 year 11,301 11,310,39311291,39311,20329311,132,79311,288,59311,087,29313,364,558 Over 1 year to 5 years 3,881 3,881,179 881,179 3,881 179 3,881,179 3,881,179 ",881,179 ,023,614 Over 5 years to 10 years 410 410,385 410,385 410 385 410,385 410,385 410,385 83,910 Over 10 years 1,059 059,772 059,772 1,059 772 1,059,772 1,059,772 ,059,772 ,386,247 1 No accrued dividends at end of June. 3 Holdings under repurchase agreements are classified as maturing 2 Includes, prior to Sept. 2, 1958, Section 13b surplus of $27,543,000. within 15 days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

994 FEDERAL RESERVE BANKS STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK ON JULY 31, 1959 [In thousands of dollars] Item Boston Y N o e r w k d P e h lp il h a i - a C l l a e n v d e- m Ri o c n h d - Atlanta Chicago Lo S u t. is M ap in o n li e s - K C an it s y as Dallas F c S i r s a a c n n o - Assets Gold certificate account 850,662 4,865,5871,031,2351,687,801 990,181 859,0013,256,407 690,020 393,585 687,167 707,363 2,377,133 Redemption fund for F. R. notes 56,166 193,648 60,865 84,542 79,702 58,036 176,775 42,964 23,528 44,153 29,789 86,694 Total gold certificate reserves 906,828 5,059,2351,092,100 1,772,3431,069,883 917,0373,433,182 732,984 417,113 731,320 737,152 2,463,827 F. R. notes of other Banks.. 39,311 59,660 34,126 17,046 32,404 61,201 27,280 12,531 22,147 21,917 16,858 33,957 Other cash 28,170 70,719 23,734 36,158 27,244 37,190 60,178 26,705 9,940 16,054 16,031 46,657 Discounts and advances: Secured by U. S. Govt. securities 40,275 321,205 47,425 53,788 106,023 122,245 129,099 57,780 51,064 139,055 63,310 85,500 Other 5,000 394 6,465 Industrial loans Acceptances: Bought outright 25,108 Held under repurchase agreement U. S. Govt. securities: Bought outright 1,431,708 6,645,616 1,505,940 2,286,3491,692,4341,391,805 4,569,9511,074,012 601,494 1,138,3151,054,0473,016,291 Held under repurchase agreement 135,211 Total loans and securities. .. 1,471,983 7,127,140 1,553,3652,340,1371,798,457 519,050 4,699,4441,131,792 659,023 ,277,370 1,117,3573,101,791 Due from foreign banks.... 1 H 1 1 2 1 () 1 1 1 Uncollected cash items 315,311 792,434 280,154 403,060 347,521 356,371 732,648 192,377 126,265 247,545 211,568 470,781 Bank premises 4,463 10,103 4,122 9,338 6,877 9,676 13,214 6,943 5,141 4,701 9,107 12,300 Other assets 13,310 60,046 13,625 21,367 15,501 13,845 41,977 10,056 5,508 11,384 9,758 28,595 Total assets 2,779,37713,179,3413,001,227 4,599,450 3,297,8882,914,3719,007,925 2,113,3891,245,137 2,310,292 2,117,832 6,157,909 Liabilities F. R. notes 1,592,773 6,393,2631,744,4852,531,246 2,062,978 ,497,0715,244,2951,201,573 611,0661,104,771 783,5112,732,052 Deposits: Member bank reserves 766,238 5,334,036 893,4141,526,545 807,404 989,3252,841,605 650,997 461,520 876,4061,008,686 2,748,641 U. S. Treasurer—general account 32,472 60,606 18,378 49,166 40,397 35,932 60,550: 45,320 20,717 52,688 49,066 56,547 Foreign 15,125 379,545 18,150 24,750 13,750 12,925 40,700 10,175 6,600 10,725 14,300 30,800 Other 286,491 2,136 882 2,836 325 522 1,067 38,553 989 1,709 933 917 Total deposits 814,824 5,760,678 932,0781,601,343 864,387 ,039,8912,943,788 706,817 489,359] 940,7361,073,119 2,874,541 Deferred availability cash items 288,459 621,136 227,667 333,679 293,733 305,832 600,230 147,947 108,248 205,357 185,921 386,106 Other liabilities and accrued dividends 2,292 11,016 1,795 3,542 2,067 1,932 5,859 1,352 1,119 1,543 1,334 4,023 Total liabilities 2,698,34812,786,093 2,906,025 4,469,810 3,223,1652,844,726 8,794,172 2,057,6891,209,792 2,252,4072,043,885 5,996,722 Capital Accounts Capital paid in 18,858 109,735 22,751 35,969 17,094 19,634 52,112 12,717 8,669 15,562 21,909 45,816 Surplus 50,116 238,902 59,607 76,643 44,846 39,474 132,159 33,746 20,785 32,935 43,436 95,761 Other capital accounts. 12,055 44,611 12,844 17,028 12,783 10,537 29,482 9,237 5,891 9,388 8,602 19,610 Total liabilities and capital accounts 2,779,37713,179,3413,001,227 4,599,450 3,297,888 2,914,3719,007,925 2,113,3891,245,1372,310,292 2,117,832 6,157,909 Ratio of gold certificate reserves to deposit and F. R. note liabilities combined (per cent) 37.7 41.6 40.8 42.9 36.5 36.1 41.9 38.4 37.9 35.8 39.7 43.9 Contingent liability on acceptances purchased for foreign correspondents 4,103 420,141 4,924 6,714 3,730 3,506 11,041 2,760 1,791 2,909 3,879 8,355 Industrial loan commitments.. 15 340 1 After deducting $11,000 participations of other Federal Reserve Banks. 4 After deducting $53,712,000 participations of other Federal Reserve 2 Less than $500. Banks. 3 After deducting $198,000,000 participations of other Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS 995 FEDERAL RESERVE NOTES—FEDERAL RESERVE AGENTS' ACCOUNTS [In thousands of dollars] FEDERAL RESERVE BANKS COMBINED Wednesday End of month item 1959 1959 1958 July 29 July 22 July 15 July8 July 1 July June July F. R. notes outstanding (issued to Bank) .... ?8 439 603 ?8 464 663 28,511 741 ?8 474,374?8 318 13? ?8 414 500 ?,8,276,429?7 681 938 Collateral held against notes outstanding: Gold certificate account 10 750 000 10 750,00010 750000 10,750,000 10 750 000 10750,000 10,750,000 11 5Q3 000 Eligible paper 960 170,005 148 06? 169 110 145 495 ?41 j?60 149,955 11 011 U. S. Government securities 18,810,000 18,810,00018,710,00018,710,000 18,710,000 18,810, 000 18,710,000 17,420,000 Total collateral 29,681,960 29,730,00529,608,06229,629,11029,605,49529,801,260 29,609,95529,026, 011 EACH FEDERAL RESERVE BANK ON JULY 31, 1959 Item Boston Y N o e r w k d P e h lp il h a i - a C l l a e n v d e- m Ri o c n h d - Atlanta Chicago Lo S u t. is M ap in o n li e s - K C an it s y as Dallas F S ra an n- F. R. notes outstanding (issued to Bank) 1,654,330 6591,2431,800,7532,587,818 2,148,6281,561,9085,348,1781,256,945 626,8841,137,207 833,000 2,867,606 Collateral held: Gold certificate acct.. 580,000 2920,000 640,000 920,000 670,000 500,000 2,000,000 430,000 200,000 300,000 290,000 1,300,000 Eligible paper 44,425 57,780 139,055 U. S. Govt. securities. i,i5o,ooo4,666i6661,200,0001,750,0001,500,0001,100,000 3,500,000 935,000 450,000 850,000 575,0001,800,000 Total collateral.... 1,730,000 6,920,0001,884,4252,670,000 2,170,000 1,600,000 5,500,0001,422,780 650,000 1,289,055865,000 3,100,000 INDUSTRIAL LOANS BY FEDERAL RESERVE BANKS LOANS GUARANTEED UNDER REGULATION [Amounts in thousands of dollars] [Amounts in millions of dollars] y E m e n o a d r n t o o h f r N b u A e m r p ap - t p o p l i r c d o A a a v t t m i e e o d o n u s nt (a b p p m c u l r A e o o t o t p m v e n u - e d - o n d ! t t) ( s a t L a m o o n o u a d u t n i - n n s t g ) 2 ( s C a t m m a o o n m e u o d n t u m i - t n n s i g t t ) - o ( i s a n P p f t t a u m g a a o f n i t r i t u o i i n d t o o n i t u a i c - n s n n n n i t s s g - c t i ) - - 3 y E m e n o a d r n t o o h f r N b u e m r a - u t L t o h o o d a A r a n iz t m s e ed ount am To o t o u a u n l t t L st o a a n n d s g P in u o t g a e rt e r i a d o n n - a u o a A b n v u n o a t d a t d e m s m r i d e e l r t i r e a a o o t n b a n i w u g o g t l d n s e u e n r i t e r a n a t s e r g l o - - 1953 3.765 803,429 1,951 1.900 3,569 3,649 1953 1,294 2,358 805 666 364 1954 3,771 818,224 520 719 1,148 1,027 1954 1,367 2,500 472 368 273 1955 3,778 826,853 305 702 2,293 1,103 1955 1,411 2,575 294 226 170 1956 3,782 832,550 794 2,365 1,129 1956 1,468 2,761 389 289 125 1957 3.786 841.290 524 1,109 1,122 1957 1,503 2,912 395 300 135 1958 1958 June 3,787 843,321 75 343 991 799 June 1,522 3,029 330 254 177 July 3,787 843,321 75 342 986 798 July 1,523 3,033 306 235 194 Aug. . . 3,787 843,321 340 1,037 817 Aug 1,528 3,069 299 229 199 Sept. . . . 3,787 843,321 339 1,032 816 Sept 1,531 3,071 298 228 190 Oct 3,787 843,321 338 1,019 810 Oct 1,538 3,089 304 231 184 Nov. . .. 3,787 843,321 337 1,015 807 Nov 1,540 3,090 303 231 182 Dec 3,787 843,321 335 975 806 Dec 1,543 3,105 310 236 168 1959 1959 Jan 3,787 843,321 334 960 785 Jan 1,548 3,116 324 246 147 Feb 3,787 843,321 333 360 384 Feb 1,549 3,118 329 250 141 Mar. . . 3,787 843,321 332 360 383 Mar 1,550 3,120 335 254 128 Apr 3,787 843,321 330 360 383 Apr 1,552 3,128 314 241 142 May 3,787 843,321 329 360 382 May 1,557 3,169 313 240 151 June 3,787 843,321 328 360 381 June 1,557 3,170 317 240 137 1 Includes applications approved conditionally by the Federal Reserve 1 Loans made by private financing institutions and guaranteed by Gov- Banks and under consideration by applicant. ernment procurement agencies, pursuant to the Defense Production Act 2 Includes industrial loans past due 3 months or more, which are not of 1950. Federal Reserve Banks act as fiscal agents of the guaranteeing included in industrial loans outstanding in weekly statement of condition agencies in these transactions, and the procedure is governed by Regulaof Federal Reserve Banks. tion V of the Board of Governors. 3 Not covered by Federal Reserve Bank commitment to purchase or NOTE.—The difference between guaranteed loans authorized and sum discount. of loans outstanding and additional amounts available to borrowers NOTE.—The difference between amount of applications approved and under guarantee agreements outstanding represents amounts repaid, the sum of the following four columns represents repayments of advances, guarantees authorized but not completed, and authorizations expired or and applications for loans and commitments withdrawn or expired. withdrawn. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

996 BANK DEBITS MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS FEES AND RATES ON LOANS GUARANTEED UNDER REGULATION V* [Per cent per annum] [In effect July 31] Type of deposit D F 1 e e c 9 b . 3 . 5 3 - 1 1 , , D J 1 e a 9 c n . 3 . 6 3 1 - 1 , , E J f a fe n c . ti 1 v , e Fees I P ns a t y i a tu b t l i e o n to o G n u G ar u a a n r t a e n e t i e n e g d A P g o e r n ti c o y n b o y f F L i o n a a n ncing 1935 1956 1957 Guarantee fee Percentage of Percentage of (percentage of any commitment Savings deposits 2i/2 2*/2 3 loan guaranteed interest payable fee charged by borrower) borrower Postal savings deposits 21/2 2V4 3 Other time deposits payable: 70 or less 10 10 I I n n 9 6 0 m d o a n y t s h t s o o 6 r m m o o n re ths 2J/2 2i/2 2 3 */2 7 80 5 2 1 0 5 2 1 0 5 In less than 90 days 1 85 25 25 90 30 30 95 35 35 NOTE.—Maximum rates that may be paid by member banks as estab- Over 95 40-50 40-50 lished 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 Maximum Rates Financing Institution May Charge Borrower on like deposits under the laws of the State in which the member bank is [Per cent per annum] located. Maximum rates that may be paid by insured nonmember banks as established by the F.D.I.C., effective Feb. 1, 1936, are the same as those in effect for member banks. Interest rate Commitment rate. 1 Schedule of fees and rates established by the Board of Governors on loans made by private financing institutions and guaranteed by Government procurement agencies, pursuant to the Defense Production Act of 1950. Federal Reserve Banks act as fiscal agents of the guaranteeing agencies in these transactions, and the procedure is governed by Regulation V of the Board of Governors. BANK DEBITS AND DEPOSIT TURNOVER [Debit in millions of dollars] Annual rate of turnover of demand deposits except Debits to demand deposits accounts, interbank and U. S. Government deposits except interbank and U. S. Government accounts Year or month Without seasonal adjustment Seasonally adjusted3 Total, all New 6 337 other New 6 337 other New 6 337 other reporting York other reporting York other reporting York other reporting centers City centersi centers2 City centers * centers2 City centersl centers2 1951 1,542,554 544,367 336,885 661,302 31.9 24.0 18.4 1952 1,642,853 597,815 349,904 695,133 34.4 24.1 18.4 1953 1,759,069 632,801 385,831 740,436 36.7 25.6 18.9 1954 1,887,366 738,925 390,066 758,375 42.3 25.8 19.2 1955 2,043,548 766,890 431,651 845,007 42.7 27.3 20.4 1956 2,200,643 815,856 462,859 921,928 45.8 28.8 21.8 1957 2,356,768 888,455 489,311 979,002 49.5 30.4 23.0 1958 2,439,754 958,721 487,443 993,590 53.6 30.0 22.9 1958—Apr. 204,126 85,510 39,354 79,262 56.6 30.2 22.1 57.8 29.3 22.7 May 195,116 77,315 38,645 79,156 51.2 28.2 22.0 52.0 28.2 22.1 June, 219,465 95,473 41,228 82,765 65.7 31.4 23.8 62.7 30.7 23.5 July. 206,524 82,214 40,701 83,609 54.8 29.6 22.9 55.9 30.0 22.9 Aug. 185,849 68,620 37,942 79,287 46.4 27.4 21.7 51.6 29.4 22.7 Sept. 195,205 70,887 40,520 83,798 49.4 30.3 23.6 50.1 30.7 23.3 Oct.. 212,894 79,620 43,594 89,680 50.1 29.8 23.1 52.6 31.6 23.7 Nov. 183,092 64,804 38,224 80,064 47.4 30.0 23.8 47.4 29.4 22.6 Dec. 238,975 92,711 48,690 97,573 58.2 33.2 24.9 52.4 32.2 23.8 1959—Jan.. '221,969 86,507 44,505 '90.957 54.0 30.3 23.2 53.1 31.0 23.2 Feb. '195,779 74,346 39,635 '81,798 54.1 31.0 24.1 53.6 31.4 24.2 Mar. '223,383 84,710 47,485 '91,188 54.5 34.2 24.0 53.1 31.6 24.3 Apr. '226,377 88,049 46,955 '91,372 56.2 33.9 23.9 57.3 32.9 24.6 May '216,017 80.725 44,646 '90,645 54.9 32.9 24.8 55.7 32.9 24.9 June '228,615 86^598 46,429 '95.588 56.8 32.7 25.0 54.2 32.0 24.7 July. 235,625 89,600 48,392 97^633 58.4 ^33.6 *>25.4 59.5 ^25.4 p Preliminary. r Revised. 3 These data are compiled by the Federal Reserve Bank of New York. 1 Boston, Philadelphia, Chicago, Detroit, San Francisco, and Los Seasonal adjustment factors have been revised for the period 1943 to date. Angeles. For back figures on the revised basis, see BULLETIN for May 1959, p. 554. 2 Prior to April 1955, 338 centers. NOTE.—For description see BULLETIN for April 1953, pp. 355-57. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CURRENCY 997 DENOMINATIONS OF UNITED STATES CURRENCY IN CIRCULATION [On basis of compilation by United States Treasury. In millions of dollars] Total Coin and smalldenomination currency Large denomination currency End of year or in cirmonth culation1 Total Coin $12 $2 $5 $10 $20 Total $50 $100 $500 $1,000 $5,000 $10,000 1939 7,598 5.553 590 559 36 1,019 1,772 1,576 2,048 460 919 191 425 20 32 1941 11,160 8,120 751 695 44 1,355 2,731 2,545 3,044 724 1,433 262 556 24 46 1945. 28,515 20,683 1,274 ,039 73 2,313 6,782 9,201 7,834 2,327 4,220 454 801 7 24 1947 28,868 20,020 1,404 ,048 65 2,110 6,275 9,119 8,850 2,548 5,070 428 782 5 17 1950 27,741 19,305 1,554 ,113 64 2,049 5,998 8,529 8,438 2,422 5,043 368 588 4 12 1953 30 781 21 636 1,812 249 72 2,119 6 565 9 819 9 146 2 732 5 581 333 486 4 11 1954 30,509 21,374 1,834 ,256 71 2,098 6,450 9,665 9,136 2,720 5,612 321 464 3 15 1955 31 158 22 021 1 927 312 75 2 151 6 617 9 940 9 136 2 736 5 641 307 438 3 12 1956 31,790 22,598 2,027 ,369 78 2,196 6,734 10,194 9,192 2,771 5,704 292 407 3 14 1957 31,834 22,626 2,110 ,398 80 2,188 6,662 10,187 9,208 2,777 5,752 280 384 3 13 1958 June 31,172 22,138 2,101 ,368 81 2,081 6,489 10,019 9,033 2,701 5,669 275 377 3 9 July 31 171 22 134 2 108 I 376 81 2 064 6 450 10 056 9 037 2 705 5 671 274 376 3 8 Aug 31,371 22,296 2,117 ,398 80 2,082 6,502 10,117 9,075 2,711 5,703 274 376 3 8 Sept 31,245 22,154 2,127 1,417 80 2,072 6,433 10,025 9,091 2,704 5,726 274 376 3 8 Oct 31 386 22 264 2 142 426 80 2,091 6 477 10 048 9 122 2 707 5 759 273 371 3 8 Nov 32.036 22,832 2,163 ,457 80 2,154 6,683 10,294 9,205 2,739 5,808 273 373 4 9 Dec 32,193 22,856 2,182 ,494 83 2,186 6,624 10,288 9,337 2,792 5,886 275 373 3 9 1959_jan 31 125 21,926 2,139 1,408 80 2,064 6,340 9 894 9,199 2 733 5 814 272 368 3 8 Feb 31.129 21,975 2,144 1,406 80 2,062 6,378 9,904 9,155 2,714 5,791 271 367 3 8 Mar 31 250 22 111 2 164 I 414 80 2 075 6 410 9 968 9 139 2 704 5 789 270 366 3 8 Apr 31,349 22,209 2,175 1,429 80 2,083 6,452 9,989 9,140 2,710 5,787 269 363 3 8 May 31,638 22,479 2,193 1,447 81 2,112 6,534 10,112 9,158 2,721 5,796 269 361 3 8 June .... 31,914 22,731 2.215 ,449 83 2,117 6,584 10,282 9,184 2,742 5,808 265 357 3 8 1 Outside Treasury and Federal Reserve Banks. Prior to December paper currency shown by denomination by amounts of unassorted cur- 1955 the totals shown as in circulation were less than totals of coin and rency (not shown separately.) 2 Paper currency only; $1 silver coins reported under coin. KINDS OF UNITED STATES CURRENCY OUTSTANDING AND IN CIRCULATION [On basis of compilation by United States Treasury. In millions of dollars] Held in the Treasury Currency in circulation1 Held by Total out- F. R. Kind of currency s J t u a 1 n n 9 e d 5 i 3 9 n 0 g , A g a s o s g l s i d a l e v i c n e a u r s n r t d ity Tr c e a a s s h ury B F a F . a n n o R d k r . s a B g a a e n n n d k t s s Ju 1 n 9 e 5 3 9 0, M 1 a 9 y 5 3 9 1, Ju 1 n 9 e 5 3 8 0, certificates agents Gold 19,705 19,447 2257 Gold certificates 19 447 16 601 2,816 31 31 32 Federal Reserve notes 28,276 79 1,169 27,029 26,761 26,342 Treasury currency—total 5,279 "12,416" 58 366 4,855 4,846 4,798 Standard silver dollars . ... 488 164 30 8 285 283 268 Silver bullion 2,251 2,251 Silver certificates and Treasury notes of 1890.. . . 12,416 260 2,156 2,170 2,201 Subsidiary silver coin ... 1,497 20 1,415 1,400 1,346 Minor coin 527 2 :::::::::: 11 514 510 487 United States notes 347 5 26 316 315 317 Federal Reserve Bank notes 112 1 1 110 111 120 National Bank notes 58 57 58 59 Total—June 30, 1959 D 21 863 394 16 601 4 351 31 914 May 31 1959 22,060 694 16.789 4,351 31,638 June 30, 1958 23,220 692 17,951 4.243 31,172 1 Outside Treasury and Federal Reserve Banks. Includes any paper receipt); (3) as security for outstanding silver certificates—silver in bullion currency held outside the continental limits of the United States. Totals and standard silver dollars of a monetary value equal to the face amount for other end-of-month dates are shown in table above; totals for Wednes- of such silver certificates; and (4) as security for gold certificates—gold day dates, in table on p. 000. bullion of a value at the legal standard equal to the face amount of 2 Includes $156,039,431 held as reserve against United States notes such gold certificates. Federal Reserve notes are obligations of the and Treasury notes of 1890. United States and a first lien on all the assets of the issuing Federal Reserve 3 To avoid duplication, amount of silver dollars and bullion held as Bank. Federal Reserve notes are secured by the deposit with Federal security against silver certificates and Treasury notes of 1890 outstanding Reserve agents of a like amount of gold certificates or of gold certificates is not included in total Treasury currency outstanding. and such discounted or purchased paper as is eligible under the terms of 4 Less than $500,000. the Federal Reserve Act, or of direct obligations of the United States. 5 Because some of the types of currency shown are held as collateral or Each Federal Reserve Bank must maintain a reserve in gold certificates of reserves against other types, a grand total of all types has no special at least 25 per cent against its Federal Reserve notes in actual circulasignificance and is not shown. See NOTE for explanation of duplications. tion. Gold certificates deposited with Federal Reserve agents as collat- NOTE.—There are maintained in the Treasury—(1) as a reserve for eral, and those deposited with the Treasury of the United States as a United States notes and Treasury notes of 1890—$156,039,431 in gold redemption fund, are counted as reserve. Gold certificates, as herein bullion; (2) as security for Treasury notes of 1890—an equal dollar amount used, includes credits with the Treasurer of the United States payable in standard silver dollars (these notes are being canceled and retired on in gold certificates. Federal Reserve Bank notes and national bank notes are in process of retirement. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

998 ALL BANKS CONSOLIDATED CONDITION STATEMENT FOR BANKS AND THE MONETARY SYSTEM 1 [Figures partly estimated except on call dates. In millions of dollars] Assets Liabilities and Capita] Total Bank credit assets, Date Gold T s r t c o e u r i a u n n e u r n a g r y c t d - - s y - - Total Lo n a e n t s, Tot U al . S. G m o C v a e o n r e m c r d i n a - m l en R t F e e o d s b e e l r r i v a g e l ation O s ther O s ri e t t c h ie u e s - r c l n T a i i a e a n p t o n i t b e i e t — d t t i a s a l l - l, c d u e T r a p o r n o e t d s n a i l c t y s C c m o a a n a u p n i c e s n i d - t c t t a . s l , savings Banks banks 1929—June 29. 4,037 2,019 58,642 41,082 5,741 5,499 216 26 11,819 64,698 55,776 8,922 1933—June 30. 4,031 2,286 42,148 21,957 10,328 8,199 1,998 131 9,863 48,465 42,029 6,436 1939—Dec. 30. 17,644 2,963 54,564 22,157 23,105 19,417 2,484 ,204 9,302 75,171 68,359 6,812 1941—Dec. 31. 22,737 3,247 64,653 26,605 29,049 25,511 2,254 ,284 8,999 90,637 82,811 7,826 1945—Dec. 31. 20,065 4,339 167,381 30,387 128,417 101,288 24,262 ,867 8,577 191,785 180,806 10,979 1947—Dec. 31. 22,754 4,562 160,832 43,023 107,086 81,199 22,559 ,328 10,723 188,148 175,348 12,800 1950—Dec. 30. 22,706 4,636 171,667 60,366 96,560 72,894 20,778 ,888 14,741 199,009 184,384 14,624 1955—Dec. 31. 21,690 5,008 217,437 100,031 96,736 70,052 24,785 ,899 20,670 244,135 224,943 19,193 1956—Dec. 31. 21,949 5,066 223,742 110,120 93,161 66,523 24,915 ,723 20,461 250,757 230,510 20,246 1957—Dec. 31. 22,781 5,146 229,470 115,157 91,370 65,792 24,238 ,340 22,943 257,397 236,372 21,023 1958—June 23. 21,356 5,204 240,451 116,842 97,849 71,611 25,000 ,238 25,760 267,011 244,131 22,880 July 30. 21,200 5,200 238,600 115,400 97,800 71,600 24,900 ,300 25,500 265,100 241,900 23,200 Aug. 27. 21,100 5,200 241,100 115,300 100,000 73,500 25,200 ,300 25,800 267,400 243,400 24,100 Sept. 24. 20,900 5,200 240,400 115,900 98,200 72,100 24,900 ,200 26,300 266,500 242,600 23,900 Oct. 29. 20,700 5,200 243,300 117,000 100,100 73,500 25,400 ,200 26,200 269,200 245,100 24,100 Nov. 26. 20,600 5,200 246,200 118,200 102,000 75,000 25,800 ,200 26,000 272,000 248,200 23,800 Dec. 31. 20,534 5,234 249,082 121,602 101,207 73,641 26,347 ,219 26,273 274,850 252,022 22,829 1959—Jan. 28. 20,500 5,200 247,300 119,800 101,500 74,900 25,400 ,200 26,000 273,100 249,600 23,500 Feb. 25. 20,500 200 245,300 119,800 99,400 72,900 25,300 ,200 26,100 271,000 247,100 23,900 Mar. 25. 20,400 200 244,900 121,400 97,200 70,600 25,500 ,100 26,300 270,600 246,700 23,900 Apr. 29* 20,300 300 247,800 123,500 97,700 70,900 25,600 ,200 26,600 273,300 249,700 23,600 May 27* 20,200 300 247,900 124,700 96,800 69,800 25,900 ,200 26,400 273,400 249,200 24,200 June 24* 19,800 300 247,900 126,600 94,900 67,900 25,900 ,200 26,300 273,000 249,100 23,800 July 29P 19,600 5,300 250,200 128,200 95,700 68,100 26,500 1,100 26,400 275,100 251,500 23,700 Details of Deposits and Currency U. S. Govt. balances Deposits adjusted and currency Seasonally adjusted series 5 For- Date p b e o n d a i s e g e n i - t n t k s, T h c i u r o n a e r l g s a y d h s s - - m sa b c e v a a o A r i n n c m n t d k i g a - s s l B F a . A n R t ks . Total Total m T b C e i a m o r n c m k e ia s - l de M p b s o a a u s v n t i i k u t n s s a g 2 3 l s S S P y a o v s s t i t e n a m g l s p m o D d a s e e i n - - t d s4 b r C o s e a i n u u n d c t r k e - - y s c a d d u d e T e r j a p m r u o n o e s t a d n s a t n e i l c t d d y s j p m u D o d a s a e d s e t n - e i - - t d d s b r C o e s a i n u u n d c t r k e - y - s 1929—June 29.. 365 204 381 36 54,790 28,611 19,557 8,905 149 22,540 3,639 1933—June 30.. 50 264 852 35 40,828 21,656 10,849 9,621 186 14,411 4,761 1939—Dec. 30.. 1,217 2,409 846 634 63,253 27,059 15,258 10,523 ,278 29,793 6,401 1941—Dec. 31.. 1,498 2,215 1,895 867 76,336 27,729 15,884 10,532 ,313 38,992 9,615 1945—Dec. 31.. 2,141 2,287 24,608 977 150,793 48,452 30,135 15,385 ,932 75,851 26,490 1947—Dec. 31.. 1,682 1,336 1,452 870 170,008 56,411 35,249 17,746 416 87,121 26,476 111,100 85,200 25,900 1950—Dec. 30.. 2,518 1,293 2,989 668 176,916 59,247 36,314 20,009 ,923 92,272 25,398 114,300 89,800 24,500 1955—Dec. 31.. 3,167 767 4,038 394 216,577 78,378 48,359 28,129 890109,914 28,285 133,200 105,800 27,400 1956—Dec. 31.. 3,306 775 4,038 441 221,950 82,224 50,577 30,000 ,647111,391 28,335 134,400 106,700 27,700 1957—Dec. 31.. 3,270 761 4,179 481 227,681 89,126 56,139 31,662 ,325110,254 28,301 133,200 105,100 28,100 1958—June 23.. 3,953 700 9,471 524 229,483 95,524 61,473 32,837 214106,169 27,790 135,400 107,400 28,000 July 30.. 4,000 700 4,300 600 232,400 96,500 62,300 32,900 ,200108,100 27,900 137,600 109,500 28,100 Aug. 27.. 700 5,800 500 232,500 97,000 62,700 33,100 200107,500 28,000 137,300 109,200 28,100 Sept. 24.. 700 4,500 500 233,100 97,200 62,700 33,300 200108,100 27,900 136,700 108,900 27,800 Oct. 29.. 700 3,700 500 236,400 97,500 62,900 33,400 ,200111,000 28,000 138,100 110,200 27,900 Nov. 26.. 700 5,900 500 237,500 96,800 62,100 33,500 ,100111,900 28,800 138,800 110,600 28,200 Dec. 31.. 3,870 683 4,558 358 242,553 98,306 63,166 34,006 ,134115,507 28,740 139,400 111,300 28,100 1959—Jan. 28.. 3,800 700 4,800 500 239,800 98,400 63,400 33,800 ,100113,800 27,600 138,500 110,700 27,800 Feb. 25.. 3,700 700 4,500 500 237,700 98,700 63,700 34,000 ,100111,300 27,700 139,100 111,200 27,900 Mar. 25.. 3,900 700 3,900 500 237,600 99,500 64,100 34,300 ,100110,300 27,900 140,300 112,200 28,100 Apr. 29* 3,700 700 4,600 500 240,300 99,900 64,500 34,300 100 112,500 27,900 140,700 112,500 28,200 May 27* 3,700 700 5,200 500 239,100100,300 64,900 34,400 100 110,700 28,100 140,900 112,600 28,300 June 24* 3,600 400 4,700 500 239,900100,900 65,300 34,600 100 110,700 28,300 140,900 112,500 28,400 July 29? 3,400 400 5,300 600 241,700101,000 65,300 34,700 ,000112,400 28,300 142.300 113,900 28,400 v Preliminary. * Revised preliminary figures. NOTE.—For description of statement and back figures, see BULLETIN 1 Represents all commercial and savings banks, Federal Reserve Banks, for January 1948, pp. 24-32. The composition of a few items differs Postal Savings System, and Treasury currency funds (the gold account, slightly from the description in the BULLETIN article; stock of Federal Treasury currency account, and Exchange Stabilization Fund). Reserve Banks held by member banks is included in other securities and 2 Excludes interbank time deposits; U. S. Treasurer's time deposits, in capital and miscellaneous accounts, net, and balances of the Postal open account; and deposits of Postal Savings System in banks. Savings System and the Exchange Stabilization Fund with the U. S. 3 Prior to June 30, 1947, includes a small amount of demand deposits. Treasury are netted against capital and miscellaneous accounts, net, 4 Demand deposits other than interbank and U. S. Govt., less cash instead of against U. S. Govt. deposits and Treasury cash. Total deposits items reported as in process of collection. and currency shown in the monthly Chart Book excludes foreign bank de- 5 Seasonally adjusted series begin in 1947 and are available only for posits, net, and Treasury cash. Except on call dates, figures are rounded last Wednesday of the month. For back figures, see BULLETIN for July to nearest $100 million and may not add to the totals. 1957, pp. 828-29. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ALL BANKS 999 PRINCIPAL ASSETS AND LIABILITIES AND NUMBER OF ALL BANKS, BY CLASSES1 [Figures partly estimated except on call dates. Amounts in millions of dollars] Loans and investments Deposits Total ! assets— Cla a s n s d o d f a b te ank Total Loans o G U t b i l o o . i n v g S s t a . . - Other a C ss a e s t h s2 c c b T o a i a l a l u o p i n i c a t n t i - d i - a t t e a l s l s 3 Total2 m D I a n e n t - e d rba T n i k m 2 e U. D S e . ma O n t d her Time r B i o n o w g r s - - c c T a o o p u t i n a ta t l s l N ba b u o n e m f k r s - Govt. Other All banks: 1939—Dec. 30 50,884 22,165 19,417 9,30223. 242 9,874 32,516 25,852 26 194 5,035 1941— Dec. 31 61,126 26.615 25,511 8,99921, 816 10,982 44,355 26,479 23 ,414 4,826 1945—Dec. 31 40,227 30.362 01,288 8,57735,415177,332 612 14,065 105,935 45,613 22710,542 4,553 1947—Dec. 31 4 34,924 43.002 81,199 0,723 38,388175,091 865 ,793 240 1,346 94,38153,105 6611,948 4,714 1950—Dec. 30 48,021 60.386 72,894 4,74141,086191,317 296 ,577 462 2,809101,93656,513 90 13,837 4,650 1956—Dec. 31 197,063 10.079 66,52320,46149,641250,770 227 546 ,133 1,462 3,736125,30880,908 7819,249 4,167 1957—Dec. 31 203,849 15,115 65,79222 943 49,318 257,864233 020 ,636 1,386 3,903 993 88,102 80 20,428 4,090 1958—June 23 215,179 [17,808 71,61125 760 44 237 204 ,789 2,497 9,209 113 94,596 1.13721,359 4,055 July 30 213,100 16,020 71,56025 520 42,730 260^800233;880 ,290 2,390 4,000 620 95,580 810 21 390 4,040 Nov. 26 220,210 119,230 74,95026 030 45,130 180 241,070 ,590 2,360 5,600 61095,910 2,150 21,82014,033 Dec. 31 221,485 121,571 73,64126 273 49,911 \ 430 250,057 ,799 2,374 4,253 i 132 97,498 8121,70514,020 1959—Jan. 28 221,920 121,030 74,85026,040 43,200 270, 100 241,830 110 2,410 4,490 ,240 97,580 1,770 "211,,78014,030 Feb. 25 220,340 121,370 72,88026,090 43,560268,750 239,740.2,850 2,290 4,150 ,520 97,930 2,210 21,860 14,022 Mar. 25 219,690 122.850 70,58026 260 42 240 266,880 238,15013,030 2,340 3,590 ,480 98,710 2,050 211,9,r8" 0' 1"4 ,'"012 Aor. 29* 222,500 124,990 70,92026,59043,340 270,920 242,05012,830 2,360 4,280 ,470 99,110 2,090 222,,110 14,009 May 27* 222,570 126,360 69,78026430 42,630 270,290 240.90012,700 2,230 4,840 ,520 99,610 2,260 222,,25014,000 June 24* 222,710 128,510 67,880 320 42,970 270,770 241 04012,800 2,070 4,400 121,560100,210 2,800 222,,29013,997 July 29^ 224,630 130,180 68,10026,35042,660 272,720 242,92012,670 2,030 5,000122,960 100,260 2,660 222,,53013,994 All commercial banks: 1939—Dec. 30 40,668 17,238 16,316 7,114 22, 9,874 32,513 15,331 26 6. 14,484 1941—Dec. 31 50,746 21,714 21,808 7,22526; 10,982 44,349 15,952 23 7; 14,278 1945—Dec. 31 24,019 26,083 90,606 7,33134;806160,312 14,065 105,921 30,241 219 8; 95014,011 1947—Dec. 3H 116,284 38,057 69,221 9,006 37,502155,377144,10312. 240 1,343 94,36735,360 6510,05914,181 1950—Dec. 30 '26,675 52,249 62,027 12 ',289 168,932155,26513 462 2,806 101,91736,503 90 11,59014,121 1956—Dec. 31 65,123 90,302 58,552 16,269 48,720 217,460197,51516 1,460 3,733 25,282 50,908 7516,30213,640 1957—Dec. 31 70,068 93,899 58,239 17,93048,428222,696 201,32615 1,385 3,898123,96756,440 7717,36813,568 1958—June 23 179,905 95,571 64,194 20,14043,507227,847204,335 13 2,495 9,205 ,086 61,759 1,13618,17813.535 July 30 177,600 93,610 6"4 ,13"0119,86041,880223;970 200 14 2,390 4,000 ,590 62,650 81018,19013,521 Nov. 26 184,050 96,060 67,66020,330 44,310 232700 207 13 2,360 5,600 ,580 62,440 2,15018,55013,514 Dec. 31 185,165 98,214 66,376 20;57548 9'90 238 651 ; 15 2,372 4,250 ,104 63,493 7318,48613,501 1959—Jan. 28 185,620 97,710 67,53020; 380 42400232,470207,960 13J10 2,410 4,490 ,210 63,740 1,77018,57013,512 Feb. 25 183,840 97,890 65,52020430 42 740 ,900 205; 12,850 2,290 4,150 ,490 63,980 2,21018,62013,504 Mar. 25 182,940 99,190 63,16020 590 41 380 710 203; 13,030 2,340 3,590 ,450 64,440 2,05018,73013,494 Apr. 29* 185,630101,190 63,54020 900 42 590232,760207,750 12,830 2,36C 4,280 ,440 64,840 2,09018,87013,491 May 27* 185,500 102,360 62,39020;75041;880 ,910 206! 12,700 2,230 4,840 121,490 65,220 2,26018,97013,482 J Ju u l n y e 2 2 4 9 * ^ 1 1 8 8 5 7 , , 5 3 1 1 0 0 1 1 0 0 4 5 , , 3 8 2 7 0 0 6 6 0 0 , , 5 8 7 1 0 0 2 2 0 0 , , 6 6 2 3 0 0 4 4 2 1 , , 1 9 7 1 0 0234, , 0 2 9 2 0 0 2 2 0 0 6 8 : ,200 1 12 2, , 8 6 0 7 0 0 2 2, , 0 0 3 7 C 0 4 5 , , 4 0 0 0 0 0 , , 5 9 3 3 0 0 6 6 5 5 , , 6 5 2 7 0 0 2 2 , , 8 6 0 6 0 0 1 1 8 9 , , 9 2 9 1 0 01 1 3 3 , , 4 47 7 9 6 All member banks: 1939—Dec. 30 941 13,962 14,328 5,651 19, 49,340 9,257 154 743 27,48911,699 3 5,52: 6,362 1941—Dec. 31 521 18,021 19,539 5,96123; 61, 10,385 140 ,709 37,13612,347 4 5,886 6,619 1945—Dec. 31 183 22,775 78,338 6,07029;845138,304129,67013,576 6422,179 69;640 24,210 208 7,589 6,884 1947—Dec. 31 846 32,628 57,914 7,304 32,845132,060122,52812,353 50 1,176 80,,60928,340 54 8,464 6,923 1 1 9 9 5 5 0 6 — — D D e e c c . . 3 3 0 1 4 7 2 68 4 7 4 8 , , 7 0 0 3 5 4 4 5 7 2 , , 5 3 7 6 5 51 1 0 3 , , 3 1 5 5 5 94 3 2 5 , , 9 5 0 2 6 41 1 4 8 4 4 , , 6 8 6 7 0 4 1 1 3 6 3 7 , , 0 9 8 0 9 6 1 1 3 5 , . 1 5 0 6 6 7 1,2 3 8 4 9 1 2 3; 5 2 2 9 3 2 87, 8 7 5 8 0 3 4 2 0 9 , , 9 3 0 3 9 6 7 4 9 81 9 3 , , 6 6 9 5 5 5 6 6 , , 8 4 7 6 3 2 1957—Dec. 31 ,353 80,950 47,07914,324 42,746188,828 63715;082 1,246 3,472 ,547 45,290 5714,554 6,393 1958— J J u u l n y e 2 3 3 0 , , 5 2 8 8 9 0 8 8 2 0 . , 1 1 4 7 6 9 5 5 3 3 , , 1 0 6 2 5 8 1 16 6 , , 0 2 7 7 3 73 3 8 6 , , 4 8 8 6 9 4 1 1 9 9 4 0 , , 0 1 0 3 3 2170, 9 4 0 2 4 5 1 1 3 3 ; , 7 2 5 7 7 4 2 2, , 1 2 6 6 4 6 8 3 , , 6 6 5 2 8 6 , , 8 2 1 6 2 2 4 5 9 0 , , 8 6 9 1 3 6 1,0 7 7 5 8 5 1 1 1 5 5 , ,1 2 8 0 1 8 6 6 , , 3 3 5 4 7 6 Nov. 26 ,854 82,225 55,32816,30139,140196,851175,26013,026 2,130 5,003 ,777 50,324 2,055 15,498 6,324 Dec. 31 ,865 84,061 54,29916,504 43,188202,017 182,81615,227 2,187 3,822 ,448 51,132 5415,460 6,312 1959—Jan. 28 ,054 83,588 55,13616,33037,336196,333 175,36412,619 2,224 3,979 220 51,322 1,68415,509 6,302 Feb. 25 ,504 83,728 53,40316,37337,681195,014 12,394 2,102 3,716103,74951,498 2,08315,556 6,295 Mar. 25 ,813 84,882 51,39216,53936,382193,065171,78: 12,582 2,15 3,203 110011,; 98851,857 1,94915,642 6,289 Apr. 29* ,150 86,659, 51,66916,82237,533196,711175,32312,371 2,175 3,863 104,68852,226 1,94415,779 6,291 May 27* ,06" 87,660 50,73116,67636,935195,986174,22512,253 2,046 4,365 "10~3,00852,553 2,09715,856 6,292 June 24* ,007 89,301 49,16416,54237,171196,182174,07312,357 1,889 3,943102,99252,892 2,619 15,875 6,279 July 29^ 6:~ 90,745 49,35616,52"36,878197,750175,59012,196 1,842 4,482104,27152,799 2,51216,039 6,271 All mutual savings banks: 1939—Dec. 30 10,216 4,927 3,10 2,188 818 11,852 10,52- 3 |l0,521 1,309 551 1941—Dec. 31 10,379 4,901 3,704 1,774 793 11,804 10,533 6 ilO,527 1,241 548 1945—Dec. 31 16,208 4,279 10,682 1,246 609 17,020 15,385 14 15,371 1.592 542 1947_Dec. 314 18,641 4,944 11,978 1,718 886 19,714 17,763 14 17,745 1,889 533 1950—Dec. 30 21,346 8,137 10,868 2,342 797 22,385 20,03 19 20,00r 2,24- 529 1956—Dec. 31 31,940 19,777 7,97 4,192 920 33,311 30,032 25 30,00 2,947 527 1957—Dec. 31 33,782 21,216 7,552 5,013 890 35,168 31,695 26 31,662 3,059 522 1958 -June 23 35,274 22,237 7,417 5,620 916 36,678 32.869 26 32.837 3,181 520 July 30 35,5OC 22,410 7,430 5,660 850 36,830 32,960 30 32,930 3,200 519 Nov. 26 36,160 23,170 7,290 5,700 820 37,480 33,500 30 33,470 3,270 519 Dec. 31 36,320 23,357 7,265 5,698 921 37,779 34,040 29 34,006 3,219 519 1959_ F ja e n b . . 2 2 8 5 3 36 6 . , 5 3 0 0 0 0 2 2 3 3 , , 4 3 8 2 0 0 7 7 , , 3 3 6 2 0 0 5 5, , 6 6 6 6 0 0 8 8 0 2 0 0 3 3 7 7 , , 8 6 5 3 0 0 3 3 3 3 , , 8 9 7 8 0 0 3 3 0 0 3 3 3 3, , 8 9 4 5 0 0 3 3 , , 2 2 1 4 0 0 5 5 1 1 8 8 Mar. 25 36,750 23,660 7,420 5,670 860 38,170 34,300 30 34,270 3,250 518 Apr. 29* 36,870 23,800 7,380 5,690 750 38,160 34,300 30 34,270 3,240 518 May 27* 37,070 24,000 7,390 5,680 750 38,380 34,420 () 30 34,390 3,280 518 June 24* 37,200 24,190 7,310 5,700 800 38,550 34,620 (5) 30 34,590 3,300 518 July 29^ 37,320 24,310 7,290 5,720 750 38,630 34.720 ( 30 34.690 3.320 518 1 Preliminary. * Revised preliminary figures. Stock savings banks and nondeposit trust companies are included with 1 All banks in the United States. Beginning with January 1959, commercial banks. Number of banks includes a few noninsured banks includes figures for all banks in Alaska (previously one member bank had for which asset and liability data are not available. Comparability of been included). figures for classes of banks is affected somewhat by changes in Federal All banks comprise all commercial banks and all mutual savings banks. Reserve membership, insurance status, and the reserve classifications of All commercial banks comprise (1) all nonmember commercial and cities and individual banks, and by mergers, etc. (2) all member commercial banks. Member banks include (1) seven 2 Beginning June 30, 1942, excludes reciprocal balances, which on national banks in Alaska (one became a member on Apr. 15, 1954, and Dec. 31, 1942, aggregated $513 million at all member banks and $525 six on Apr. 3, 1959); (2) one in the Virgin Islands (May 31, 1957); and (3) million at all insured commercial banks. one in Hawaii (Apr. 13, 1959), and (4) a noninsured nondeposit trust 3 Includes other assets and liabilities not shown separately. company, and (5) three mutual savings banks that became members in 1941 (these banks are excluded from all commerical banks). For other notes see following two pages. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1000 ALL BANKS PRINCIPAL ASSETS AND LIABILITIES AND NUMBER OF ALL BANKS, BY CLASSES i—Continued [Figures partly estimated except on call dates. Amounts in millions of dollars] Loans and investments Deposits Total assets— Cla a s n s d o d f a b te ank Total Loans o G U t b io o l . i S n v g . s t a . - O s ri e t t c h ie u e s - r a C ss a e s t h s2 c c b T o a i a l a l u p o i n i c a t n i t - d i t a - e t a l s s l 3 Total2 m D I a n e n t - e d rba T n i k m 2 e U.S D . ema O n t d her Time r B i o n o w g r s - - c c T a o a o p u c t i - n a ta t l s l N ba b u o n e m f k r s - Govt. Other Central reserve city member banks: New York City: 1939—Dec. 30 9,339 3,296 4,772 1,272 6,703 16,413 14,507 4,231 7 74 9,459 736 1,592 36 1941—Dec. 31 12,896 4,072 7,265 1,559 6,637 19,862 17,932 4,202 6 866 12,051 807 1,648 36 1945—Dec. 31 26,143 7,334 17,574 1,235 6,439 32,887 30,121 4,640 17 6,940 17,287 1,236 195 2,120 37 1947—Dec. 31 20,393 7,179 11,972 1,242 7,261 27,982 25,216 4,453 12 267 19,040 1,445 30 2,259 37 1950—Dec. 30 20,612 9,729 8,993 1,890 7,922 28,954 25,646 4,370 268 451 18,836 1,722 70 2,351 23 1956—Dec. 31 23,809 15,987 6,057 1,765 8,629 33,381 29,149 5,022 965 747 19,940 2,475 2 2,873 18 1957—Dec. 31 23,828 16,102 5,880 1,846 8,984 33,975 29,371 4,869 912 737 19,959 2,893 2 3,136 18 1958— J J u u l n y e 2 3 3 0 2 2 7 5 , , 1 8 4 0 9 3 1 1 6 5 , , 7 5 6 5 4 0 8 7, , 9 0 0 3 5 5 2 2, t3 3 5 4 O 8 7 8 , , 1 2 8 7 5 2 3 3 6 4 , , 6 2 6 4 4 0 2 3 9 1, , 4 1 6 8 9 0 4 4 , , 3 4 4 2 5 7 . ,7 7 1 7 7 4 2, 9 9 3 4 9 6 1 1 8 8 , ,5 8 3 9 9 8 3 3 , , 5 55 06 8 4 2 8 7 3 5 3 3 , ,2 2 3 1 5 4 1 1 8 8 Nov. 26 25,552 15,666 7,694 2,192 7,763 34,501 28,958 4,005 ,677 945 18,956 3,375 736 3,276 18 Dec. 31 25,966 16,165 7,486 2,315 9,298 36,398 31,679 4,786 ,739 968 20,704 3,482 3,282 18 1959—Jan. 28 25,959 16,011 7,650 2,298 7,314 34,447 29,191 3,897 ,764 925 19,130 3,475 543 3,272 18 Feb. 25 25,549 15,864 7,361 2,324 7,624 34,353 28,900 3,964 ,689 815 18,946 3,486 723 281 18 Mar. 25 25,594 16,147 6,997 2,450 7,066 33,808 28,627 4,079 ,773 691 18,479 3,605 513 3,277 18 Apr. 29* 25,886 16,307 6,971 2,608 7,521 34,533 29,410 3,991 ,740 889 19,243 3,547 519 3,290 17 May 27* 25,687 16,580 6,657 2,450 7,114 33,936 28,730 3,999 ,614 1,009 18,553 3,555 530 3,302 17 June 24* 25,488 16,681 6,426 2,381 7,204 33,869 28,415 4,008 ,480 775 18,570 3,582 805 3,292 17 July 29^ 26,112 17,062 6,699 2,351 6,984 34,262 28,688 3,883 ,438 1,250 18,608 3,509 894 3,314 17 Chicago: 1939—Dec. 30 2,105 569 1,203 333 1,446 3,595 3,330 80 1,867 495 250 14 1941—Dec. 31 2,760 954 1,430 376 1,566 4,363 4,057 1,035 127 2,419 476 288 13 1945—Dec. 31 5,931 1,333 4,213 385 1,489 7,459 7,046 ,312 1,552 3,462 719 377 12 1947—Dec. 31 5,088 1,801 2,890 397 1,739 6,866 6,402 1,217 72 4,201 913 426 14 1950—Dec. 30 5,569 2,083 2,911 576 2,034 7,649 7,109 ,225 174 4,604 1,103 490 13 1956—Dec. 31 6,473 3,772 2,113 588 2,171 8,695 7,943 1,364 184 5,069 1,319 4 660 14 1957—Dec. 31 6,446 3,852 2,032 562 2,083 8,595 7,792 1,333 195 4,904 1,345 4 689 14 1958—June 23 6,942 3,594 2,694 654 1,914 8,929 8,022 1,249 705 4,626 1,403 80 708 14 July 30 6,576 3,329 2,611 636 1,938 8,589 7,759 1,344 229 4,751 1,395 2 714 14 Nov. 26 6,727 3,418 2,687 622 2,067 8,874 7,862 1,169 402 4,859 1,401 157 724 14 Dec. 31 6,830 3,637 2,562 631 2,158 9,071 8,214 1,357 249 5,136 1,438 3 733 14 1959—Jan. 28 6,651 3,433 2,611 607 1,881 8,617 7,695 1,138 201 4,913 1,409 68 726 14 Feb. 25 6,637 3,440 2,572 625 1,952 8,667 7,726 1,163 233 4,900 1,397 79 725 14 Mar. 25 6,759 3,551 2,576 632 1,745 8,583 7,438 1,135 223 4,655 1,395 296 728 14 Apr. 29* 6,602 3,575 2,344 683 1,883 8,575 7,616 1,153 306 4,733 1,393 90 738 14 May 27* 6,630 3,637 2,288 705 1,856 8,574 7,582 1.109 304 4,734 1,402 125 739 14 June 24* 6,516 3,687 2,137 692 1,842 8,440 7,423 1,123 259 4,586 1,424 164 740 14 July 29^ 6,631 3,811 2,120 700 1,949 8,661 7,677 1,117 272 4,823 1,433 137 743 14 Reserve city member banks: 1939—Dec. 30 12,272 5,329 5,194 1,749 6,785 19,687 17,741 3,565 120 435 9,004 4,616 1,828 346 1941_Dec. 31 15,347 7,105 6,467 1,776 8,518 24,430 22,313 4,356 104 491 12,557 4,806 1,967 351 1945—Dec. 31 40,108 8,514 29,552 2,04211,286 51,898 49,085 6,418 30 8,221 24,655 9,760 2,566 359 1947—Dec. 31 36,040 13,449 20,196 2,39613,066 49,659 46,467 5,627 22 405 28,99011,423 2,844 353 1950—Dec. 30 40,685 17,906 19,084 3,69513,998 55,369 51,437 6,391 57 976 32,36611,647 3,322 336 1956—Dec. 31 53,915 31,783 17,368 4,76417,716 72,854 66,524 7,584 294 1,201 40,64716,797 21 5,076 289 1957—Dec. 31 55,259 32,805 17,352 5,10217,540 74,196 67,483 7,241 301 1335588 39,96018,623 21 ,370 278 1958—June 23 59,273 32,851 20,436 5,98615,443 76,155 68,672 6,397 416 3,150 38,003 2200,706 350 ,617 280 July 30 58,639 32,336 20,367 93615,207 75,340 67,887 6,665 389 1,349 38,47721,007 335 ,645 279 Nov. 26 60,181 33,393 20,891 89716,276 77,940 69,723 6,476 378 1,944 40,184 2200,741 910 ,729 275 Dec. 31 60,558 34,003 20,645 91017,701 79,781 72,647 7,506 377 1,429 42,25921,075 14 ,760 274 1959_jan. 28 60,698 34,083 20,776 83915,626 77,845 69,800 6,232 382 1,439 40,452 2211,295 832 ,782 273 Feb. 25 60,033 34,279 19,928 826 1155,672 77,155 68,876 6,011 336 1,479 39,70821,342 932 ,802 272 Mar. 25 59,524 34,720 18,946 85815,381 76,360 68,272 6,122 316 1,226 39,23321,375 839 ,845 273 Apr. 29* 60,439 35,490 19,107 5; 84215,708 77,773 69,509 5,969 367 1,457 40,24821,468 909 ,906 273 May 27* 60,550 35,806 18,907 5,83715,672 77,717 69,291 5,918 362 1,680 39,,772222 2211,609 973 5.932 273 June 24* 60,617 36,616 18,224 5,77715,762 77,887 69,448 5,994 341 1,600 39,72121,792 1,140 5,945 273 July 29? 61,132 37,325 18,056 5,75115,476 78,152 69,799 5,r~ 338 1,455 40,45521,652 1,050 5,975 272 Country member banks: 1939—Dec. 30 10,224 4,768 3,159 2,297 4,848 15,666 13,762 572 154 7,158 5,852 3 1,851 5,966 1941—Dec. 31 12,518 5,890 4,377 2,250 6,402 19,466 17,415 792 225 10,109 6,258 4 1,982 6,219 1945—Dec. 31 35,002 5,596 26,999 2,40810,632 46,059 43,418 1,207 5,465 24,23512,494 11 2,525 6,476 1947_Dec. 31 36,324 10,199 22,857 3,26810,778 47,553 44,443 1,056 432 28,37814,560 23 2,934 6,519 1950—Dec. 30 40,558 14,988 21,377 4,19311,571 52,689 48,897 1,121 922 31,97714,865 9 3,532 6,501 1956—Dec. 31 54,571 26,491 22,037 6,04214,390 69,945 64,289 1,597 ,160 41,119944 "20,317 21 5,046 6,141 1957—Dec. 31 56,820 28,191 21,815 6,81414,139 72,062 65,991 1,640 ,181 40,72422,429 30 5,359 6,083 1958—June 23 58,225 28,937 22,000 7,28812,860 72,255 65,741 1,282 ,857 38,286 "2 4,277 164 5.641 6,045 July 30 58,262 28,964 22,145 7 15312,534 71,963 65,599 1,321 ,109 38.49524,656 143 5,614 6,035 Nov. 26 61,394 29,748 24,056 7 590 13,034 75,536 68, ir 1,376 ,712 40,77824,80- 252 5,769 6,017 Dec. 31 61,511 30,257 23,606 7 64814,031 76,767 70,27 1,578 ,175 42,334499 25,13' 37 5,685 6,006 1959—Jan. 28 61,746 30,061 24,099 7 58612,515 75,424 68,678 1,35: ,414 40,72525,143 241 5,729 5,997 Feb. 25 61,285 30,145 23,542 7; 59812,433 74,839 67,957 1,256 ,189 40,19525,273 349 5,748 5,991 Mar. 25 60,936 30,464 22,873 7,59912,190 74,314 67,448 1,246 ,063 39,62125,482 301 5,792 5,984 A M p a r y . 2 2 9 7 * * 6 6 2 2 , . 2 2 2 0 3 0 3 3 1 1 , , 2 6 8 3 7 7 2 22 3 , , 8 2 7 4 9 7 7 7 , , 6 6 8 8 9 4 1 1 2 2 , . 4 2 2 9 1 3 7 75 5 , , 7 8 5 3 9 0 6 6 8 8 , , 7 6 8 2 8 2 1 1 , , 2 2 5 2 8 7 , , 2 37 1 f 1 4 3 0 9 , ,9 4 9 6 ( 4 2 "2 5 ,5 , 8 9 1 8 8 7 4 4 2 6 6 9 5 5 , , 8 8 4 8 5 3 5 5 , , 9 9 8 8 7 8 June 24* 62,386 32,31- 22,377 7,69f12,363 75,986 68,787 1,232 ,309 40,11526,094 510 5,898 5,975 July 29? 62,753 32,54' 22,481 7,72512,469 76,675 69,426 1,297 ,505 40,38526,205 431 6,007 5,968 4 Beginning with Dec. 31, 1947, the all-bank series was revised as an- from noninsured mutual savings to nonmember commercial banks. nounced in November 1947 by the Federal bank supervisory agencies. 5 Less than $5 million. Because preliminary data are rounded to the At that time a net of 115 noninsured nonmember commercial banks nearest $10 million no amount is shown except on call dates. with total loans and investments of about $110 million was added, and For other notes see preceding and opposite pages. 8 banks with total loans and investments of $34 million were transferred Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ALL BANKS 1001 PRINCIPAL ASSETS AND LIABILITIES AND NUMBER OF ALL BANKS, BY CLASSES i Continued [Amounts in millions of dollars] Loans and investments Deposits Total assets— Cla a s n s d o d f a b te ank Total Loans o G U t b i o o l . i n v g S s t a . . - O s ri e t t c h ie u e s - r a C ss a e s t h s2 c c b T o a i a l a l u o p i i n c a n t t i d i - t a - t e a s l s l 3 Total 2 m D I a n e n t - e d rba T n i k m 2 e U. D S e . ma O n t d her Time r B i o n o w g r s - - c c T a o a o p u c t i n - a ta t l s l b N a b u o n e f m k r s - Govt. Other All insured commercial banks: 1941—Dec. 31 49,290 21,259 21.046 6,984 25,788 76,820 69,411 10,654 41,29815,699 10 6,84413.426 1945—Dec. 31 121,809 25,765 88;912 7,13134,292157,544147,775 13.883 80276 2299,876 215 8,67113,297 1947_Dec. 31 114,274 37,583 67,941 8,750 3366,,926152,733141,85112,615 54 92,97534,882 61 9,73413,398 1956—Dec. 31 163,601 89,831 57,83715,933 48,335522 221155,514195,95315,981 1,301 124^346 50,608 5615",98813,195 1957—Dec. 31 168,595 93,430 57,58017,585 48,127 220,865199,87615,489 1,264 123,127 56,137 6617,05113,142 1958—June 23 178,330 95,105 63,489 19,,7 35 43,,2 43 22225,,945202,81913.632 2,288 116.308 61,429 1,12517,85713,121 Dec. 31 183,596 97,730 65,669 20,119988 4488,668899 223366,772244 221144,48515,653 2.209 129,214 63,168 6718:,, 154 13,101 National member banks: 1941—Dec. 31 27,571 11,725 12,039 3, 14,977 43,433 39,458 6,786 1,088 23,262 8.322 4 3,640 5.117 1945—Dec. 31 69,312 13,925 51,250 4,13720,114 90,220 84,939 9.229 14.013 45,473 16,224 78 4.644 5,017 1947—Dec. 31 65,280 21,428 38,674 5,178 2222,024 88,182 82,023 8,375 35 795 53,541 19,278 45 5,409 5,005 1956—Dec. 31 88,477 48,109 31,568 8;800 27,006117,345107,161 9,322 522 2,074 67,434 2""7,810 19 8,450 4,651 1957_Dec. 31 91,201 50,350 31,234 617 26,786120,153109,091 8.958 517 2,166 66,546 30,904 38 9.070 4,620 1958—June 23 95,898 50,744 34,498 656 23,964122,100110,065 7,849 825 4,751 62,886 33,7541 492 9,451 4,599 Dec. 31 99,277 52,627 35,714 936 26,781128,397116,714 9,035 767 2.292 69,808 34,812 43 9,643 4,578 State member banks: 1941—Dec. 31 15,950 6,295 7,500 2,155 8,145 24,688 22,259 3,739 621 13,874 4,025, 1 2,246 1,502 1945—Dec. 31 37,871 8,850 27,089 1,933 9,731 48,084 44,730 4.411 8,166 24,168 7,986 130 945 1.867 1947__Dec. 31 32,566 11,200 19,240 2,125 10,822 43,879 40,505 3,978 15 381 27,068 9,062 9 055 1,918 1956—Dec. 31 50,291 29,924 16,007 4,359 15,900 67,530 60,744 6,245 767 1,218 39,41613.098 29 205 1.811 1957—Dec. 31 51,152 30,600 15,846 4,707 15,960 68,676 61,545 6,124 729 1,306 39,001 14,386 18 483 1,773 1958—June 23 55,691 31,403 18,667 5,621 14,525 71,904 63,839 5,425 1,441 3,907 36,92616.140 586 730 1,758 Dec. 31 55,588 31,435 18,585 5,56816,407 73,620 66,102 6,192 1,420 1,530 40,64016,320 10 5,817 1.734 Insured nonmember commercial banks: 1941—Dec. 31 5.776 3,241 1,509 1,025 2,668 8,708 7,702 129 53: 4,162 3,360 6 959 6,810 1945—Dec. 31 14,639 2,992 10,584 1,063 4,448 19,256 18,119 244 1.560 10,635 5,680 7 1,083 6,416 1947—Dec. 31 16,444 4,958 10,039 1,448 4,083 20,691 19,340 262 149 12,366 6,558 7 1,271 6,478 1956—Dec. 31 24,859 11,808 10,274 2,777 5,448 30,667 28,073 414 425 17,497 9.724 9 2,336 6,737 1957—Dec. 31 26,268 12,493 10,512 3,264 5,383 32,066 29,266 407 388 17.580 10,873 9 2.500 6,753 1958—June 23 26,768 12,972 10,335 3,460 4,756 31.971 28,942 359 504 16^96 11,562 47 2.679 6,768 Dec. 31 28,759 13,682 11,381 3,696 5,504 34,737 31.696 426 419 18.766 12,063 13 2.696 6,793 Noninsured nonmember commercial banks: 1941_Dec. 31 1,457 455 761 241 763 2,283 1,872 329 1,291 253 329 852 1945—Dec. 31 2,211 318 1,693 200 514 2,768 2,452 181 1.905 365 279 714 1947_Dec. 3H 2.009 474 1,280 255 576 2,643 2,251 177 185 1.392 478 325 783 1956—Dec. 31 K521 471 714 336 369 1,946 1,562 152 159 936 300 313 444 1957—Dec. 31 1,473 468 660 345 301 1,831 1,449 147 121 840 303 317 425 1958—June 23 1,575 466 704 405 264 1,902 1,516 157 207 778 330 321 413 Dec. 31 1,568 484 707 377 301 1,927 1,532 146 163 890 325 332 399 All nonmember commercial banks: 1941—Dec. 31 7,233 3.696 2,270 1,266 3,431 10,992 9,573 457 5.504 3,613 18 1,288 662 1945_Dec. 31 16,849 3,310 12,277 1,262 4,962 22,024 20,571 425 14,101 6,045 11 1,362 130 1947—Dec. 3H 18,454 5,432 11,318 1,703 4,659 23,334 21,591 439 190 13,758 7,036 12 1 .596 261 1956—Dec. 31 26.381 12,279 10,989 3,113 5,817 32,613 29,635 566 171 18,43310,024! 27 2.649 181 1957—Dec. 31 27,741 12,961 11,172 3,608 5,684 33,897 30,715 554 138 427 18,442200 11,176| 21 2.817 178 1958—June 23 28,343 13,438 11,040 3,865 5,020 33,873 30,458 515 229 548 17,27411,892 58 3.000 181 Dec. 31 30,327 14,165 12,C 4,074 5,805 36.664 33,227 572 185 428 19,65512,387 X 3,021 7,192 Insured mutual savings banks: 1941__Dec. 31 1,693 642 629 421 151 1,958 1,789 1,789 164 52 1945—Dec. 31 10,846 3,081 7,160 606 429 11,424 10,363 10.351 1,034 192 1947__Dec. 31 12,683 3,560 8,165 958 675 13,499 12,207 12,192 1.252 194 1956—Dec. 31 24,170 15,542 5,518 3,110 739 25,282 22,886 23 22,857i 2,130 223 1957—Dec. 31 26.535 17,194 5,404 3,937 719 27,671 25,022 26 24,991 2,308 239 1958—June 23 27,869 18,132 5,234 4,503 745 29,021 26,082 2626.052 2,433 239 Dec. 31 28,980 19,180 5,215 4,585 752 30,189 27,277 28 27243 2,473 241 Noninsured mutual savings banks: 1941—Dec. 31 8,687 4,259 3,075 1,353 642 9,846 8,744 8,738 1,077 496 1945—Dec. 31 5,361 1,198 3,522 641 180 5,596 5,022 5,020 558 350 1947_Dec. 3H 5,957 1,384 3,813 760 211 6,215 5,556 5,553 637 339 1956—Dec. 31 7,770 4,235 2,453 1,082 182 8,028 7,146 7,143 817 304 1957—Dec. 31 7,246 4,022 2,148 1,076 171 7,497 6,672 6.671 751 283 1958—June 23 7,404 4,104 2,183 1,116 171 7,657 6,787 6J85 748 281 Dec. 31 7,341 4,177 2,050! 1,113 169 7,589 6,763 6,762 746 278 For other notes see preceding two pages. NOTE.—For revisions in series prior to June 30, 1947, see BULLETIN for July 1947, pp. 870-71. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1002 COMMERCIAL BANKS LOANS AND INVESTMENTS OF COMMERCIAL BANKS, BY CLASSES 1 [In millions of dollars] Loans2 Investments Com- Loans for U. S. Government obligations Oblimer- purchasing ga- Total cial, or carrying Other tions Class of bank loans in- securities loans Direct of and and clud- Agri- Real to States Other call date i m nv e e n s t t s - Total* o i p n e g n c tu u r l - - To t e a s t - e i d n i - - O lo t a h n e s r Total Certifi- Guar- p a o n li d t- s ri e t c ie u s mar- al brok- To loans vid- Total cates an- ical p k a e - t a e n rs d o e t r h s - uals Bills o d f e b in t- - Notes Bonds teed s d u iv b i - per deal- ed- sions ers ness All commercial banks3 1947__Dec. 31... 116,28438 8,167 1,660 8301,220 9,393 5,7231,063 78,226 69,2212.193 7.789 6.034 3,191 14 276 3,729 1957—Dec. 31... 170,068,93 899 40,526 44,066 ,6011,620 23,110 20,217 3_,,_5_3_3 76,,1 69 18,239 5,405 4,813 0,60837,406 915 4,014 1958—June 23.., 179,90595 571 T, 886 4,552 3,6991,92523,69320,091 4.,.5..6.2. 84.,334 64,194 4,502 3,883 2,348 43-,456 ,424 Dec. 31... 185,165J98 214 40,425 4.973;2.832 829 25,25520,698 4,156 86,95166,376 6,294 7,399 3,396 39,281 505 4,070 All insured commercial banks: 1941__Dec. 31.. 499,29O;21,259 9,214 1,450 614 662 4,773 4,545 28,03121,046 988 3,159 12,797 4,102 3,651 3,333 1945—Dec. 31... 121,809:25,765 9,461 1,314 3,164 3,606 4,677 2,3611,181 96,043 8888,9122,455 9,071 16,04551,321 22 3,873 3",258 1947—Dec. 31... 114,274 37,583 8,012 1,610 8231,190 9,266 5,6541,028 76,69167,9412,124 7,552 5,918 52,334 14 5, ,621 1956—Dec. 31... 163,60189,83138,5714,1012,565 i1;,666699 22,394 18,7653,325 73,77077,837 ",763 1,981 11,7"2"2 3388,358 1312,675 3,258 1957—Dec. 31.. 168,595,93,43040;380 4,0152,569 1' ,660011 23,000033 20,122 3,513 75,164 7,580 ,290 4,758 10,493 37,031 713,,688 3,897 1958—June 23... 178,33095,10538,750 4,499 3,6771,9"0"7 23,5"8"5 19,981 4,541 83,22463,48! 4,416 3,841 12,213 43,013 515,,457 4,278 Dec. 31... 183,59697,730 40,289 4,913:,797 1810 25,14820,589 4,134 85,86665,6696,159 7,36213,24038,902 616,,266 3,932 Member banks, total: 1941—Dec. 31.. 43,52118,021 8,671 972 594 598 3,494 3,692 25,500 19,539 971 3,00711,729 ,832 3,0902,871 1945—Dec. 31.. 107,183 22,775 8,949 8553,133 ,378 3,455 1,900 104 84,408 78,338 2,27516,98514,271 44,792 16 3,2-5"'4 2",815 1947—Dec. 31.. 97,846J32,628 16,9621,046 811 ,065 7,130 4,662 952 65,218 57,914 1,987 5,816 4,815 45,286 10 4 199 3,105 1957—Dec. 31... 142,353180,95037,8682,4722,448 ,40918,23116,7"7"5 3316 61,403 47,079 3,948 3,534 8 ,031 711,2353,089 1958—June 23... 151,58982,146 36,1252,7"7•4 33,574 ,706 18,71216,544 4;336 69,443 53,165 3,574 2,905 480 36,201 512,7"8"6 33,492 Dec. 31.. 154,865,84,06137,4443,0522,730 1,599 20,01317,0283,920170,804 54,299 4,644 6,143 117 32,390 61"3 4053,100 1959_june 10.. 155,289 88,43138,4693,1322,260 ,669 21,18018,3975,098 66,858 50,225 3,854 3,688 410 31,264 13,8202,813 New York City:* 1941—Dec. 31.. 12,896 4,07: 2,807 412 169 123 554 8,823 7,265 311 1,623 3,652 1,679 729 830 1945—Dec. 31.. 26,143 7,334 3,044 2,453 1,172 80 287 29818,80917,574 All 3,433 3,32510,337 1 606 629 1947—Dec. 31.. 20,393 7,179 5,361 545 267 111 564 33013,21411,972 1,002 640 558 9,771 638 604 1957—Dec. 31.. 23,82816,10211,651 1,280 387 565 1,513 ,053 7,726 5,880 648 214 1,093 3,924 1,435 411 1958—June 23.. 27,14916,76410,978 2,164 420 55' 1,437 ,56610,385 8,0351,023 286 1,729 4,996 1,748 602 Dec. 31.. 25,96616,16510,928 1,652 382 641 1,502 ,424 9,802 7,486 643 1,106 1,602 4,135 1,869 446 1959—June 10.. 25,64816,51410,731 1,556 409 746 1,62511,819 9,134 6,7451,165 350 1,717 3,511 1,978 411 Chicago :4 1941—Dec. 31.. 2,760 954 73: 48 52 22i 95 1,806 1,430 256 153 903 119 182 193 1945—Dec. 31.. 5,931 1,333 760 211 233 36 51 40 4,598 4,213 133 1,467 749 1,864 181 204 1947—Dec. 31.. 5,088 1,801 1,418 73 87 46 149 26 28' 2,890 132 235 248 2,274 213 185 1957—Dec. 31.. 6,446 3,852 2,903 200 97 143 425 180 2,594 2,032 65 126 313 1,528 408 154 1958—June 23.. 6,942 3,59'' 2,618 178 100 143 336 318 3,348 2,694 268 145 490 1,791 495 159 Dec. 31.. 6,830 3,637 2.628 266 97 161 357 220 3,193 2,562 232 361 522 1,446 491 140 1959—June 10.. 6,581 3,643 2,678 16 146 107 181 386 241 2,938 2,235 178 205 439 1,414 564 139 Reserve city banks: 1941—Dec. 31.. 15,347 7,105 3,456 300 114 194 1,527 1,512 8,243 6,467 295 751 4,248 1,173 956 820 1945—Dec. 31.. 40,108 8,514 3,661 205 42' 1,503 1,459 855 40431,59429,5521,034 6,98: 5,65315,878 1,126 916 1947_Dec. 31.. 36,04013,449 7,088 225 170 484 3,147 1,969 366 2222,59120,196 373 2,358 1,90115,560 1,34" ,053 1957—Dec. 31.. 55,25932,805 15,702 494 603 673 7,667 6,893 370 22,45417,3521,009 1,285 3,29711,760 4,027 1,075 1958—June 23.. 59,273 32,851 14,789 611 881 904 7,841 6,741 1^706 26^422 2200,436 874 1,009 4,410 1144,142 4,767 ,218 Dec. 31.. 60,558 34,003 15,808 669 518 851 8,405 6,9301,492 26,55520,6451,293 2,370 4,49712,482 4,8"6"4 1,047 1959—June 10.. 60,81236,315 16,410 753 404 860 8,986 7,513 2>73 24,49718,663 870 1,51" 4,23012,049 4, 949 Country banks: 1941—Dec. 31.. 12,518 5,890 1,676 659 20 183 1,823 1,530 6,628 4,37 110 481 2,926 861 1,222 1,028 1945—Dec. 31.. 35,002 5,596 1,484 648 471 1,881 707 363 29,407 26,999 630 5,102 4,54416,713 9 1,342 1,067 1947_Dec. 31.. 36,32410,199 3,096 818 227 3,827 1,979 229 26,12522,85' 480 2,583 2,10817,681 6 2,006 1,262 1957—Dec. 31.. 56,82028,191 7,613 1,970 365 252 9,856 7,944 71328,662299 21,8152,226 1,909 3,85713,819 4 5,365 1,449 1958—June 23.. 58,225 28,937 7,7392,154 351 28210,172 8,030 746 2299,28822,0001,409 1,465 3,85215,272 5,7751,513 Dec. 31.. 61,51130,257 8,0802,368 294 26810,806 8,239 78431,225544 23,6062,475 2,306 4,49514,327 6,181 1,467 1959—June 10.. 62,248 31,960 8,6502,362 15- 29311,267 8,872 96530,28822,58 1,642 1,622 5,02314,290 6,3921,315 Nonmember commercial banks:3 1947—Dec. 31.. 18,454 5,432 1,205 614 20 156 2,266 1,061 11113,02111,318 206 1,973 1,219 7,916 1,078 625 1956—Dec. 31.. 26,38112,279 2,42- 1,683 143 218 4,708 3,085 19614,10210,9891,541 528 2,330 6,588 2,409 704 1957—Dec. 31.. 27,74112,96' 2,657 1,594 153 211 4,891 3,442 21714,78011,1721,457 1,279 2,049 6,385 2,682 926 1958—June 23.. 28,343 13,438 2,761 1,778 125 219 4,994 3,547 22514,905ll,04C 927 978 1,868 7,266 2,932 933 Dec. 31.. 30,32714,165 2,98 1,921 102 230 5,256 3,671 23516,16'12,0881,651 1,255 2,280 6,901 3,102 971 1 All commercial banks in the United States. These figures exclude banks. Comparability of figures for classes of banks is affected somewhat data for banks in U. S. territories and possessions except for member by changes in Federal Reserve membershio, insurance status, and the banks. During 1941 three mutual savings banks became members of reserve classifications of cities and individual banks, and by mergers, etc. the Federal Reserve System; these banks are included in member banks For other notes see opposite page. but are not included in all insured commercial banks or all commercial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

COMMERCIAL BANKS 1003 RESERVES AND LIABILITIES OF COMMERCIAL BANKS, BY CLASSES 1 [In millions of dollars] Demand deposits Time deposits Reserves Bal- De- Cla c s a s l a l o n d f d a b te ank F w e R d i e e t - h ral C va i a n u s l h t a w n do c it - e h s p m o d a s e n i - t d s In d t e e p r o b s a i n ts k U.S. S a ta n t d es C a f e i n e r d t d i- p v a i I d r n t u d n a i e l - r s - , Inter- G U a o . n v d S t . . S p a t o a n l t i d e t- s p v a I id r n t u d n a i e - l r s - , r B i o n o w g r s - - C a t a a c p - l i- B se a r n v k e s b m a e n s k t s ic 5 ju a st d e - d6 Do- For- Govt. p s o u li b t d ic i a - l c o e ff r i s - ' an sh d i c p o s, r- bank P s o a s v ta - l s i u c b a d l i-an sh d i p co s, r- counts mestics eign visions checks, pora- ings visions poraetc. tions tions AH commercial banks:3 1947_Dec. 31 17,796 2,216 10,216 87,123 11,362 1,430 1,343 6,799 2,581 84,987 240 111 866 34,383 65 10,059 1957—Dec. 31.... 18,972 3,335 12,342110,266 13,867 1,769 3,898 10,693 3,620 109,653 1,385 301 2,773 53,366 77 17,368 1958—June 23.... 18,568 3,017 10,904106,178 12,141 1,648 9,205 10,892 3,741 102,453 2,495 286 4,100 57,3721,136 18,178 Dec. 31.... 18,427 3,249 12,609115,518 14,142 1,657 4,250 10,928 4,043 115,132 2,372 327 3,576 59,590 73 18,486 All insured commercial banks: 1941—Dec. 31.... 12,396 1,358 8,570 37,845 9,823 673 1,762 3,677 1,077 36,544 158 59 492 15,146 10 6,844 1945—Dec. 31 15,810 1,829 11,075 74,722 12,566 ,24823,740 5,098 2,585 72,593 70 103 496 29,277 215 8,671 1947—Dec. 31.... 17,796 2,145 9,736 85,751 11,236 1,379 1,325 6,692 2,559 83,723 54 111 826 33.946 61 9,734 1956—Dec. 31.... 18,706 3,237 12,490110,487 14,226 1,755 3,717 10,350 3,744 110,252 1,301 330 2,329 47,949 56 15,988 1957—Dec. 31.... 18,972 3,311 12,079 109,439 13,752 1,736 3,859 10.594 3,597 108,936 1,264 301 2,717 53.120 66 17,052 1958—June 23.... 18,568 2,997 10,682105,419 12,022 1,610 9,162 10,800 3,715 101,793 2.288 286 4,032 57.1101,125 17,857 Dec. 31.... 18,427 3,227 12,353114,645 14,025 1,629 4,241 10,841 4,001 114,372 2,209 327 3,512 59,329 67 18,154 Member banks, total: 1941—Dec. 31.... 12,396 1,087 6,246 33,754 9,714 671 1,709 3,066 1,009 33,061 140 50 418 11.878 4 5,886 1945_Dec. 31.... 15,811 1,438 7,117 64,184 12,333 1,24322,179 4,240 2,450 62,950 64 99 399 23.712 208 7,589 1947—Dec. 31.... 17,797 1,672 6,270 73,528 10,978 1,375 1,176 5,504 2,401 72,704 50 105 693 27,542 54 8,464 1957—Dec. 31 18,973 2,536 7,806 92,191 13,356 ,726 3,472 8,412 3,331 93,804 1,246 275 2,170 42,845 57 14,554 1958—June 23.... 18,570 2,277 6,913 89,186 11,676 1,597 8,658 8,628 3,482 87,703 2,266 259 3,296 46,339 1,078 15,181 Dec. 31.... 18.428 2,441 7,977 96,218 13,614 ,613 3,822 8,603 3,712 98,133 2.187 300 2.829 48.004 54 15.460 1959—June 10 18,086 2,351 6,375 93,722 11,446 1,499 2,406 8,207 3,110 93,353 1,990 297 2,937 49,5652,686 15,919 New York City:* 1941_Dec. 31 5,105 93 141 10,761 3,595 607 866 319 450 11,282 6 29 778 1,648 1945—Dec. 31.... 4,015 111 78 15,065 3,535 1,105 6,940 237 1,338 15,712 17 10 20 1,206 195 2,120 1947—Dec. 31.... 4,639 151 70 16,653 3,236 1,217 267 290 1,105 17,646 12 12 14 1,418 30 2,259 1957_Dec. 31.... 4,564 158 110 15,849 3,480 1,389 737 299 1,284 18,377 912 24 56 2,813 2 3.136 1958—June 23.... 4,418 145 76 15,305 3,084 1,261 2,946 337 1,645 16,916 1,774 28 249 3,229 483 3,214 Dec. 31.... 4,454 161 92 16,170 3,519 ,267 968 329 1,540 18,835 1.739 36 100 3,345 3,282 1959—June 10 4,090 148 66 16,010 2,888 1,148 479 295 1,259 17,657 1,564 27 140 3,423"809 3,300 Chicago:* 1941 Dec. 31 1 021 43 298 2 215 1 027 8 127 233 34 2 152 476 288 1945—Dec. 31 942 36 200 3,153 1,292 20 1,552 237 66 3'160 719 377 1947_Dec. 31 1,070 30 175 3,737 1,196 21 72 285 63 3,853 2 9 902 426 1957—Dec. 31.... 1,071 39 148 4,084 1,293 40 195 333 77 4,493 15 3 10 1,332 4 689 1958—June 23.... 1,183 31 128 4,089 1,211 38 705 456 75 4,095 39 4 10 1,389 80 708 Dec. 31.... 1,058 36 185 4,271 1,314 43 249 302 88 4.746 34 7 7 1.423 3 733 1959—June 10.... 998 29 105 3,947 1,119 41 120 235 77 4,345 31 8 12 1,387 272 743 Reserve city banks: 1941—Dec. 31 4,060 425 2,590 11,117 4,302 54 491 1,144 286 11,127 104 20 243 4,542 1,967 1945—Dec. 31 6,326 494 2,174 22,372 6,307 110 8,221 1,763 611 22,281 30 38 160 9,563 2 2,566 1947—Dec. 31.... 7,095 562 2,125 25,714 5,497 131 405 2,282 705 26,003 22 45 332 11,045 1 2,844 1957—Dec. 31.... 7,763 790 2,585 33,583 6,962 279 1,358 3,111 943 35,906 301 113 1.175 17.335 21 5,370 1958—June 23 7,576 707 2,277 33,145 6,115 282 3,150 3,065 818 34,119 416 92 1,705 18.910 350 5,617 Dec. 31.... 7.472 768 2,670 35.505 7,217 289 1,429 3,153 1,052 38,054 377 124 t .471 19 480 14 5.760 1959—June 10 7,350 750 2,110 34,625 6,159 291 858 2,959 830 36,201 361 122 1.466 20.136 1.141 5,930 Country banks: 1941—Dec. 31 2,210 526 3,216 9,661 790 2 225 1,370 239 8,500 30 31 146 6,082 4 1,982 1945—Dec. 31 4,527 796 4,665 23,595 1,199 8 5,465 2,004 435 21,797 17 52 219 12,224 11 2,525 1947—Dec. 31.... 4,993 929 3,900 27,424 1,049 7 432 2,647 528 25,203 17 45 337 14.177 23 2,934 1957—Dec. 31 5,576 1,549 4,964 38,676 1,621 18 1,181 4,669 1,027 35,029 18 135 928 21,366 30 5,359 1958—June 23.... 5,392 1,395 4,432 36,648 1,267 15 1,857 4,769 943 32,573 38 135 1,331 22,811 164 5,641 Dec. 31.... 5.444 1,476 5,030 40,272 1,565 13 1,175 4,819 1,032 36.498 36 132 1.250 23,755 37 5,685 1959—June 10.... 5,647 1,423 4,093 39,140 1,281 19 950 4,718 944 35,150 34 140 1,320 24,620 463 5,946 Nonmember commercial banks:3 1947—Dec 31 544 3 947 13,595 385 55 167 1,295 180 12,284 190 6 172 6,858 12 1 596 1956—Dec. 31 774 4,690 18,085 521 45 440 2,238 310 15,885 171 29 546 9.449 27 2.649 1957—Dec 31 799 4 536 18,075 511 43 427 2,282 289 15,849 138 27 603 10 546 21 2 818 1958—June 23 740 3 993 16,992 465 50 548 2 265 260 14.749 229 28 805 11.059 58 3.000 Dec. 31 808 4,633 19,300 528 43 428 2,325 331 16,999 185 27 747 11,613 20 3,027 2 Beginning June 30, 1948, figures for various loan items are shown 4 Central reserve city banks. gross (i.e., before deduction of valuation reserves); they do not add to the 5 Beginning June 30, 1942, excludes reciprocal bank balances, which on total and are not entirely comparable with prior figures. Total loans Dec. 31, 1942, aggregated $513 million at all member banks and $525 continue to be shown net. million at all insured commercial banks. 3 Breakdowns of loan, investment, and deposit classifications are not 6 Demand deposits other than interbank and U. S. Govt., less cash items available prior to 1947; summary figures for earlier dates appear in the reported as in process of collection. preceding table. For other notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1004 WEEKLY REPORTING MEMBER BANKS ASSETS AND LIABILITIES OF BANKS IN LEADING CITIES [In millions of dollars] Loans For purchasing or carrying securities Financial institutions Wednesday i m l T n o a v o e a n e n t n d a s t s t l s - j i L m u n a a s o v e n t d a e n e d - n s t d t s s - 1 j L us o a t d a e - n d s i i C n m t a c r o d n i i e a m u a d r l l s - - - A t c u u g r l r a - i l - G U t l a i T o i o o g . n b o v n a d - S - s t b . . d r e o O a k c t l s u e t i e e e h r r r - s s i e s - r G U t l i o i T o o g . b v n a o - S - s t . . oth O c e t s u t i r e e h r s - s i e - r F ei o g r B n - ank c m m D s c o t i e i e o m a c s r - l - - - p n s c i s a P a o n a N o a n f n e n n i s l m i - e o r d t c e a - i s n - e l s tu , b t a O io n t k n h s er e R st e a a t l e o lo A t a h l n e l s r V se t a r i r e o l v u - n e a s etc. Total— Leading Cities 1958 July 9 103,784 30,374 762 2,530 1,462 1,622 10,652 12,515 ,244 16 103,186 30,196 767 2,421 1,458 1,387 10,698 12,520 ,242 23 102,969 29,899 777 2,456 1,417 1,487 10,705 12,498 ,243 30 102,516 29,779 790 2,323 1,385 1,347 10,744 12,535 ,243 1959 June 3. 96,289 31,005 609 2,111 1,382 1,837 10,099 12,580 ,243 10. 96,494 31,238 618 2,128 1,378 1,794 10,148 12,644 ,245 17. 96,535 32,017 625 2,169 1,361 1,306 10,207 12,762 ,244 24. 96,121 31,989 628 1,984 1,362 1,583 10,246 12,811 ,246 July 1. 96,816 32,012 630 2,157 1,358 2,1 10,247 12,992 ,256 July 1. 104,995 103,476 63,351 28,482 883 293 1,894 157 1,253 596 1,519 3,8321,46212,198 13,640 ,339 8. 105,457 104,383 63,232 28,395 886 428 1,773 165 1,243 593 1,074 3,7491,45412,217 13,671 ,342 15. 106,643 105,457 63,774 28,499 895 614 1,758 165 1,256 609 1,186 3,8501,48512,259 13,730 ,346 22. 105,865 104,671 63,797 28,585 896 455 1,736 165 1,271 618 1,194 3,8731,50212,262 13,781 ,347 29., 105,502 104,187 63,820 28,585 907 401 1,705 164 1,274 610 1,315 3,9111,52812,277 13,812 ,354 New York City 1958 July 9 26,468 10,882 495 1,110 354 814 562 2,183 363 16 26,309 10,784 439 1,072 352 832 573 2,192 362 23 26,233 10,627 519 1,052 347 857 579 2,185 362 30 25,894 10,534 442 1,005 347 857 578 2,193 361 1959 June 3 25,554 10,683 190 ,361 398 1,122 721 2,478 378 10 25,571 10,777 272 ,285 397 958 735 2,487 378 17 25,480 11,153 316 ,268 386 612 760 2,501 378 24 25,404 11,090 190 ,281 383 866 752 2,512 378 July 1 25,871 11,129 236 ,387 379 1,132 759 2,578 379 July 1 26,034 25,285 16,588 9,703 236 ,387 379 382 749 ,339 276 783 2,441 379 8 25,942 25,515 16,386 9,659 318 ,270 380 378 427 ,244 267 779 2,426 379 15 26,531 26,083 16,661 9,670 442 ,282 386 391 448 ,332 275 800 2,424 384 22 26,255 25,720 16,595 9,710 345 1,241 405 391 535 ,322 283 794 2,445 385 29 26,133 25,550 16,575 9,708 303 1,233 407 395 583 ,336 285 794 2,461 392 Outside New York City 1958 July 9 77,316 19,492 761 925 1,026 10,090 10,332 881 16 76,877 19,412 766 910 1,016 555 10,125 10,328 23 76,736 19,272 776 885 977 630 10,126 10,313 881 30 76,622 19,245 789 876 956 490 10,166 10,342 882 1959 June 3 70,735 20,322 608 560 943 715 9,378 10,102 865 10 70,923 20,461 617 571 940 836 9,413 10,157 867 17 71,055 20,864 624 585 934 694 9,447 10,261 866 24 70,717 20,899 627 513 938 717 9,494 10,299 868 July 1 70,945 20,883 629 534 939 979 9,488 10,414 877 July 1 78,961 78,191 46,763 18,779 882 57 507 117 874 214 770 2,493 ,186 11,415 11,199 960 8 79,515 78,868 46,846 18,736 885 110 503 122 863 215 647 2,505i ,187jll,438 11,245 963 15 80,112 79,374 47,113 18,829 894 172 476 123 870 218 738 2,518 ,21011,459 11,306 962 22 79,610 78,951 47,202 18,875 895| 110 495 122 866 227 659 2,551 ,21911,468 11,336 962 29 79,369 78,637 47,245 18,877 906 98 472 120 867 215 732 2,575 ,24311,483 11,351 962 i Exclusive of loans to domestic commercial banks and deduction of LETIN.) The second July 1, 1959 and other July 1959 figures are on valuation reserves; individual loan items are shown gross. the new basis; comparable figures for July 1958 reflect the added coverage NOTE.—June 1959 and the first July 1, 1959 figures are for the old but figures for revised loan classifications or subdivided items are not series. (See description of changes in the series on p. 983 of this BUL- available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

WEEKLY REPORTING MEMBER BANKS 1005 ASSETS AND LIABILITIES OF BANKS IN LEADING CITIES—Continued [In millions of dollars] Cash assets, excluding cash items in process Investments of collection Total U. S. Government obligations assets— All Total Wednesday Bal- Bal- Re- other liabili- Total Bills o c C t f a i e f t i i e r - n - s - Not m es a a tu n r d in b g o : nds O s ri e t t c h ie u e s - r Total d a o w n t m i i c c t e e h s s- a w e f n o i i c g r t e n h - s C va i a n u s l h t B s F w e a . r i n v R t k h e . s s assets a c c a c a t p i o n e i d u s ta n l ts e d d e n b e t s - s W 1 i i n y th r. - 5 1 y t r o s. 5 A f y te r r s. banks banks Total— Leading Cities 1958 July 9 34,999 2,188 1,776 31,035 10,112 18,107 3,092 114 1,144 13,757 2,948 133,987 16 34,814 2,018 1,762 31,034 10,167 18,415 3,154 116 1,130 14,015 2,939 134,761 23 34,723 1,989 30,926 10,250 18,174 3,032 119 1,137 13,886 2,983 133,928 30 34,651 2,015 1^802 30,834 10,205 17,999 3,070 117 1,169 13,643 3,063 132,031 1959 June 3 28,538 2,243 2,224 24,071 9,371 15,895 2,361 951 12,501 2,841 124,562 10 28,453 2,237 2,181 24,035 9,338 16,178 2,404 1,028 12,656 2,875 125,236 17 28,072 2,060 2,103 23,909 9,260 16,792 2,603 1,017 13,082 2,781 127,137 24 27,484 1,623 2,034 23,827 9,280 16,117 2,356 1,050 12,639 2,830 124,484 July 1 27,326 1,652 1,979 23,695 9,239 15,893 2,593 971 12,258 2,932 126,927 July 1. 29,980 1,747 2,157 ,692 17,696 6,688 10,145 17,165 2,981 1,125 12,987 3,142 136,868 30,966 2,850 2,099 ,694 17,618 6,705 10,185 17,299 2,630 1,151 13,442 3,064 135,675 15. 31,502 3,514 2,055 ,650 17,608 6,675 10,181 17,705 2,903 1,174 13,548 3,079 139,704 22. 30,702 3,027 2,020 ,519 17,466 6,670 10,172 17,710 2,738 1,178 13,721 3,028 136,773 29. 30,242 2,753 1,850 ,502 17,482 6,655 10,125 17,209 2,622 1,211 13,294 3,064 135,132 New York City 1958 July 9 8,040 962 309 6,769 2,308 4,358 151 4,116 1,165 34,954 16 8,008 948 292 6,768 2,328 4,199 139 3,963 1,158 34,793 23 7,965 912 323 6,730 2,370 4,343 138 4,103 1,193 35,601 30 7,854 825 325 6,704 2,362 4,321 144 4,079 1,235 34,288 1959 June 3 6,511 1,048 356 5,107 2,426 3,945 135 3,702 1,149 33,897 10 6,610 1,149 347 5,114 2,386 4,326 149 4,076 1,167 34,284 17 6,473 1,035 354 5,084 2,347 4,278 142 4,031 1,120 34,369 24 6,292 857 347 5,088 2,374 4,171 146 3,937 1,162 33,751 July 1 6,268 871 343 5,054 2,341 3,887 143 3,640 1,185 34,889 July 1 6,336 871 345 453 3,313 1,354 2,361 3,917 146 3,661 1,185 35,082 6,743 1,268 331 474 3,320 1,350 2,386 4,132 150 3,881 1,179 34,424 15.... 7,016 1,589 279 480 3,327 1,341 2,406 4,112 138 3,864 1,190 35,704 22.... 6,759 1,409 289 379 3,343 1,339 2,366 4,200 140 3,969 1,160 34,854 29 6,509 1,282 251 357 3,376 1,343 2,366 3,969 146 3,734 1,151 34,275 Outside New York City 1953 July 9 26,959 1,226 1,467 24,266 7,804 13,749 3,042 993 9,641 1,783 99,033 16 26,806 1,070 1,470 24,266 7,839 14,216 3,097 991 10,052 1,781 99,968 23 26,758 1,077 1,485 24,196 7,880 13,831 2,975 999 9,783 1,790 98,327 30 26,797 1,190 1,477 24,130 7,843 13,678 3,013 1,025 9,564 1,828 97,743 1959 June 3 22,027 1,195 ,868 18,964 6,945 11,950 2,296 816 8,799 1,692 90,665 10 21,843 1,088 ,834 18,921 6,95: 11,852 2,350 879 8,580 1,708 90,952 17 21,599 1,025 ,74< 18,825 6,913 12,514 2,549 875 9,051 1,661 92,768 24 21,192 766 ,68' 18,739 6,906 11,946 2,298 904 8,702 1,668 90,733 July 1 21,058 781 ,636 18,641 6,898 12,006 2,521 828 8,618 1,747 92,038 July 1 23,644 876 ,81 1,239 14,383'5,334 7,784 13,248 2,903 979 9,326 1,957 101,786 8 24,223 1,582 ,768 1,220 14,298 5,355 7,799 13,167 2,565 1,001 9,561 1,885 101,251 15 24,486 1,925 ,776 ' 170 14,281 5,334 7,775 13,593 2,829 1,036 9,684 1,889 104,000 22 23,943 1,618 ,731 140 14,123 5,331 7,806 13,510 2,679 1,038 9,752 1,868 101,919 29 23,633 1,471 ,599 1,145 14,106 5,312 7,759 13,240 2,574 1,065 9,560 1,913 100,857 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1006 WEEKLY REPORTING MEMBER BANKS ASSETS AND LIABILITIES OF BANKS IN LEADING CITIES—Continued [In millions of dollars] Deposits Borrowings Demand Time Wednesday d ju e m p D s a a t o d e e n s - d - d i t l s Dom In e t s e - rban F k or- G U o . v S t . . S p s a i t o u c a n l a b t i d e l t - - s C c o a f e e i f n e f r r d i t d s - i ' - p v s a i I d h a r n t n u i d n p d a i e s - l , r s - , I b n a t n er k - P G u a o o n s v d t s a t. l S p s a i t o u c a n l a b t i d e l t - - s p v s a i I d h a r n t u n i d n p d a i e s - l , r s - , B F F a . r o n R m k . s o F t r h o e m rs O li i a t t i b h e i e s l r - C co a a u p c n - it t a s l tic eign divi- checks, corpo- sav- divi- corposions etc. rations sions rations Total— Leading Cities 1958 July 9 58,912 12,290 ,492 4,783 4,697 2,242 61,121 2,262 168 2,200 27,713 100 1,078 3,229 10,612 16 59,735 12,065 ,661 4,170 4,481 2,317 63,158 2,147 166 2,142 27,832 78 712 3,251 10,581 23 60,549 11,551 ,653 3,325 4,544 3,104 62,703 2,154 169 2,139 27,861 27 836 3,268 10,594 30 60,755 11,383 ,634 2,816 4,637 2,249 62,322 2,152 170 2, 136 27,906 63 616 3,326 10,621 1959 June 3 56,054 10,414 ,460 2,685 4,352 2,404 58,835 1,981 174 1 578 25,039 581 1,614 3,074 10,371 10 57,387 10,540 ,452 1,549 4,159 2,317 60,600 1,924 175 1 570 25,084 739 1,685 3,078 10,364 17 57,184 10,822 ,509 2,642 3,867 2,529 61,817 1,905 175 1,548 25,105 999 1,021 2,851 10,347 24 56,540 9,973 ,506 2,853 4,155 2,201 59,600 1,814 177 1 521 25,221 700 1,542 2,866 10,355 July 1 56,407 10,667 ,515 2,942 4,444 2,949 60,300 1,805 174 1,514 25,234 460 1,723 2,794 10,406 July 1 60,835 10,841 ,523 3,056 4,864 3,064 64,473 1,825 178 1,767 29,022 461 1,789 2,949 11,056 8 60,498 11,060 ,540 3,809 4,523 2,547 63,283 1,801 111 1 752 28,984 879 1,350 2,905 11,065 15 61,199 11,272 ,532 4,669 4,539 2,621 66,316 1,794 178 1 742 28,962 635 1,441 2,958 11,045 22 61,973 10,473 ,457 3,874 4,570 2,523 65,050 1,797 177 1 771 28,939 561 1,659 2,939 11,033 62,214 9,998 .431 3,310 4,699 2.333 64.539 1,770 178 1,652 28,924 425 1,826 2,972 11,075 29 New York City 1958 15,117 3,362 ,191 1,755 303 1,125 16,652 1,783 26 275 3,243 562 1,471 3,206 July 9 15,414 3,229 ,335 1,557 340 1,164 17,037 1,698 26 240 3,282 222 1,458 3,205 16 15,729 3,287 ,317 1,179 335 1,971 17,255 1,705 28 238 3,280 309 1,487 3,210 23 15,783 3,147 ,279 937 246 1,169 17,206 1,702 28 240 3,295 274 1,551 3,207 30 1959 June 3 15,246 2,937 ,143 909 294 1,310 16,891 1,585 27 155 3,349 642 ,388 3,267 10 15,994 2,889 ,134 480 313 1.250 17,651 1,529 27 157 3,373 25 790 ,397 3,269 17 15,787 2,937 ,193 674 261 1,266 17,751 1,512 27 153 3,354 92 576 ,307 3,266 24 15,537 2,818 ,189 779 308 1,048 17,195 1,441 27 148 3,379 60 745 ,353 3,261 July 1 15,519 3,040 ,194 902 357 1,661 17,447 1,431 27 147 3,333 48 640 ,379 3,283 July 1 15,655 3,041 ,194 906 368 1,663 17,570 1,431 27 151 3,377 48 640 ,379 3,287 8 15,301 2,966 ,219 1,320 302 1,297 16,873 1,408 27 150 391 170 652 ,359 3,290 15 15,395 3,050 ,209 1,810 380 1,341 17,545 1,411 27 140 3,361 117 648 ,376 3,289 22 15,646 2,924 ,132 1,488 313 1,232 17,340 1,419 27 140 3,335 855 ,359 3,290 29 15,692 2,777 1,105 1,231 274 1.147 17,293 1,399 27 141 3,338 38 860 ,358 3,287 Outside New York City 1958 July 9 43,795 8,928 301 3,028 4,394 1,117 44,469 479 142 1 925 24,470 100 516 1,758 7,406 16 44,321 8,836 326 2,613 4, 141 1,153 46,121 449 140 1 902 24,550 78 490 1,793 7,376 23 44,820 8,264 336 2,146 4,209 1,133 45,448 449 141 1 901 24,581 27 527 1,781 7,384 30 44,972 8,236 355 1,879 4,391 1,080 45.116 450 142 1 896 24,611 56 342 1,775 7,414 1959 June 3 40,808 7,477 317 1,776 4,058 1,094 41,944 396 147 1,423 21,690 581 972 1,686 7,104 10. ... 41,393 7,651 318 1,069 3,846 1,067 42,949 395 148 1,413 21,711 714 895 1,681 7,095 17 41,397 7,885 316 1,968 3,606 1,263 44,066 393 148 1,395 21,751 907 445 1,544 7,081 24 41,003 7,155 317 2,074 3,847 1,153 42,405 373 150 1,373 21,842 640 797 1,513 7,094 July 1.... 40,888 7,627 321 2,040 4,087 1,288 42,853 374 147 1,367 21,901 412 1,083 1,415 7,123 July 1 45,180 7,800 329 2,150 4,496 1,401 46,903 394 151 1,616 25,645 413 1,149 1,570 7,769 8 45,197 8,094 321 2,489 4,221 1,250 46,410 393 150 1,602 25,593 709 698 1,546 7,775 15 45,804 8,222 323 2,859 4,159 ],280 48,771 383 151 1.602 25,601 518 793 1,582 7,756 22 46,327 7,549 325 2,386 4,257 1,291 47,710 378 150 1,581 25,604 561 804 1,580 7,743 29 46,522 7,221 326 2,079 4,425 1,186 47,246 371 151 1,511 25,586 387 966 1,614 7,788 1 Demand deposits other than interbank and U. S. Government, less TIN.) The second July 1, 1959 and other July 1959 figures are on the cash items reported as in process of collection. new basis; comparable figures for July 1958 reflect the added coverage ser N ie O s T . E.— (S J e u e n d e e s 1 c 9 ri 5 p 9 ti o a n n d o f t h c e h a f n ir g s e t s J i u n l y t h 1 e , s e 1 r 9 ie 5 s 9 o f n ig p u . r e 9 s 8 3 a r o e f f t o h r i s t B h U e L o L l E d - b av u a t il f a ig b u le r . es for revised loan classifications or subdivided items are not Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BUSINESS LOANS OF BANKS 1007 CHANGES IN COMMERCIAL AND INDUSTRIAL LOANS OF WEEKLY REPORTING MEMBER BANKS, BY INDUSTRY^ [Net decline, ( —). In millions of dollars] Manufacturing and mining Comm'l Period2 l F iq a o n u o d o d r , , a T p e a p x n a t d i r l e e l s , , M m p a r e e n o t t d a d a l - l s ch P l e c e e m o u t a r m i o l c , , - al, Other ( r T w e s a r h t a n a a o l d d i e l l e e ) - m d C e o o a d l m e it r - y s u P p t t ( t r o i u i i a l n o r b i n c t n t l i s a l i ) e . - c - s s C t t i r o o u n n c - - bu t o y s A t o i p h n l f e e l e s r ss c c h l N f a a i n e s e g d s t i e - s ch r w e a i a e n p n a n e d o l g k d l ' r e l l t y — tobacco leather ucts3 and ing rubber banks 1957—July-Dec 331 -159 -496 150 -161 420 183 -49 58 269 -188 1958—Jan.-June4 -658 84 146 -140 157 5-158 -283 -177 56 69 5-905 5-1,085 July-Dec.4 -232 -454 -14 -121 5162 410 234 50 362 5920 5723 522 1959_jan._july 1... 218 864 -162 188 284 -364 -141 106 145 620 762 -519 1959—May 34 133 45 43 82 29 74 345 451 June6 -6 44 195 -47 32 23 -57 195 55 148 472 499 July6 -117 50 21 6 73 6 44 47 -2 -129 55 103 -60 Week ending: 1959—May 6 2 27 -10 9 12 24 -6 11 -12 17 74 111 13 14 14 69 11 35 9 -14 15 29 13 197 223 20 3 5 42 -8 11 21 -36 20 29 87 112 27 -25 -12 31 -22 -14 -12 -24 35 12 16 -13 5 June 3 -32 2 1 -29 -1 17 -13 -35 16 -1 -80 -84 10 -26 21 34 c 5 3 -14 46 15 39 120 131 17 36 19 115 12 35 16 -3 116 20 91 456 508 24 -36 27 -5 4 10 -18 52 2 5 42 53 July 1... -60 5 20 -20 -12 -23 a 16 1 15 67 25 July 8 -52 18 6 -10 -4 -15 5 17 -14 -58 -107 -87 15 3 25 31 9 16 12 12 12 -68 58 104 22 22 10 -16 3 67 -4 21 55 2 c 110 86 29 11 -2 1 5 2 9 5 -38 3 -5 I 1 Data for a sample of about 210 banks reporting changes in their 6 June figures include changes for week ended July 1; July figures, larger loans; these banks hold about 95 per cent of total commercial changes for July 8-29. and industrial loans of all weekly reporting member banks and about NOTE.—Beginning with the week ended July 8, 1959, changes in com- 75 2 4 3 p J F I e n a i r g n c c l u u u e r a d n e r e t s y s - o f J o m f u r t n a h e c p o h e s i i r n e n i c o e o l d r u f y s d a e o a l s l t n h c d 2 e o 5 r t m r w t a m h n e a e s e n r p k c o s i w ; r a t l e J a e u t b k i l a o y ly n n - D k a s e e r . q c e e u b m ip a b m s e e e d r, n t o 2 . n 7 w w e e e e k k l s y . changes. m s b a e n e e e e d r n c p c i e . a a r l d 9 t j a 8 u a i 3 n s n t ) d e o . d t i h n F o e d i r n g u l u n s y r t o r e n t i s o a b l a f e o n l x o k r c a l e f n u i a s d n r e a li e n e x l c r o c i a a l p u l n e d s c r e o i t o n o l d c o s e s a a r n n l i e s n s s ( t t f o f h o i n e r s a a d l n a l e c e s s e s t c r c t f i w o i p n m t o a io n p c n c a o e n o l i u e f c m s o r . e n m v s p i T s a h i h n o a u i n v e s s e s , , 5 Figures revised; see BULLETIN for February 1959, p. 216, note 4. these data are not strictly comparable with current figures. BANK RATES ON SHORT-TERM BUSINESS LOANS i [Per cent per annum] Size of loan Size of loan p A er r i e o a d lo A a l n l s j_ (thou 1 s 0 a - nds of 1 d 0 o 0 l - lars) 200 p A e a r n r i e d o a d lo A a l n l s (thou 1 s 0 a - nds of 1 d 0 o 0 l - lars) 200 10 100 200 and over 10 100 200 and over Annual averages, Quarterly (cont.), 19 large cities: New York City: 1950 2.7 4.5 3.6 3.0 2.4 1958—June 3 88 5 18 4 72 4 13 3 74 1951 3.1 4.7 4.0 3.4 2.9 Sept 4.00 5.19 4.74 4.28 3.87 1952 3.5 4.9 4.2 3.7 3.3 Dec 4.29 5.38 4.94 4.52 4.18 1953 3 7 5 0 4 4 3.9 3.5 1959—Mar 4 29 5 30 4 93 4 56 4 18 1954 3.6 5.0 4.3 3.9 3.4 June 4.71 5.55 5.24 4.97 4.6J 1955 3 7 5.0 4.4 4.0 3.5 7 Northern and Eastern 1956 4.2 5.2 4.8 4.4 4.0 cities: 1957 4.6 5.5 5.1 4.8 4.5 1958 4.3 5.5 5.0 4.6 4.1 1958—June 4.17 5.48 4.85 4.39 3.99 Sept . 4.21 5.48 4.90 4.42 4.03 Quarterly,2 Dec 4.50 5.53 5.05 4.66 4.36 19 large cities: 1959—Mar 4.49 5.54 5.06 4.71 4.35 June 4.90 5.67 5.33 5.06 4.78 1958 June 4.17 5.45 4.88 4.40 3.95 Sept......... 4.21 5.45 4.90 4.47 4.00 11 Southern and Dec 4.50 5.49 5.06 4.68 4.33 Western cities: 1959_Mar 4.51 5.53 5.09 4.74 4.32 June 4 87 5 68 5 33 5 06 4.72 1958—June 4.58 5.56 4.99 4.57 4.31 Sept 4.54 5.55 4.99 4.63 4.23 Dec 4.79 5.53 5.12 4.79 4.59 1959—Mar 4.84 5.62 5.20 4.87 4.60 June 5.07 5.74 5.37 5.13 4.87 1 For description see BULLETIN for March 1949, pp. 228-37. 214; 1951—Jan. 8, 2%; Oct. 17, 234; Dec. 19, 3; 1953—Apr. 27, 3V4; 2 Based on figures for first 15 days of month. 1954—Mar. 17, 3; 1955—Aug. 4, 3*4; Oct. 14, 3V4; 1956—Apr. 13, 3%; NOTE.—Bank prime rate was 2 per cent Jan. 1-Sept. 21, 1950. Changes Aug. 21, 4; 1957—Aug. 6, 4y2; 1958—Jan. 22, 4; Apr. 21, 3V2; Sept. 11, thereafter (in per cent) occurred on the following dates: 1950—Sept. 22, 4; and 1959—May 18, 4V2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1008 INTEREST RATES MONEY MARKET RATES [Per cent per annum] U. S. Government securities (taxable)2 Finance Prime company Prime com- paper bankers' 3-month bills 6-month bills 9- to 12-month issues Year, month, or week mercial placed acceptpaper, directly, ances, 3- to 5- 4- to 6- 3- to 6- 90 days i Rate Rate Bills year monthsl monthsl on new Market on new Market (market Other 3 issues4 issue yield issue yield yield) 1956 average 3.31 3.06 2.64 2.658 2.62 2.83 3.12 1957 averase 3 81 3 55 3 45 3 267 3 23 3 53 3 62 1958 average 2.46 2.12 2.04 1.839 1.78 2.09 2.90 1958 Julv 1.50 1.31 1.13 .962 .91 1.34 2.54 AuS 1.96 1.52 1 65 1.686 1.69 2.14 3.11 Sept 2.93 2.47 2.39 2.484 2.44 2.84 3.57 Oct . . 3.23 2.87 2.75 2.793 2.63 2.83 3.63 Nov 3.08 2.75 2 75 2.756 2.67 2.92 3.60 Dec 3 33 2 94 2 75 2 814 2 77 3 24 3 65 1959—Jan 3.30 3.05 2.75 2.837 2.82 3.097 3.09 3.26 3.86 Feb 3.26 3.00 2.75 2.712 2.70 3.166 3.12 3.38 3.85 Mar 3.35 3.22 2 88 2.852 2.80 3.159 3.13 3.56 3.88 Apr 3.42 3.36 2.98 2.960 2.95 3.277 3.27 3.66 4.03 M^ay ... 3 56 3 44 3 17 2.851 2.84 3.368 3.32 3.92 4 16 June 3.83 3.66 3.31 3.247 3.21 3.531 3.52 3.97 4.33 July 3.98 3.81 3.45 3.243 3.20 3.885 3.82 4.30 4.40 Week ending: July 4 3.88 3.81 3.38 3,164 3.16 3.703 3.68 4.13 4.40 11 3.98 3.81 3.38 3.266 3.28 3.964 3.89 4.38 4.42 18 4.00 3.81 3.48 3.401 3.37 4.029 3.90 4.33 4.38 25 4.00 3.81 3.50 3.337 3.15 3.869 3.81 4.35 4.32 4.41 Aua 1 3.99 3.81 3.50 3.047 3.01 3.860 3.76 4.23 4.25 4.40 1 Average of daily prevailing rates. 3 Consists of certificates of indebtedness and selected note and bond 2 Except for new bill issues, yields are averages computed from daily issues. closing bid prices. 4 Consists of selected note and bond issues. BOND AND STOCK YIELDS i [Per cent per annum] Corporate bonds3 Stocks 5 G U o .S v . t. S g ta o t v e t . a n b d o n l d o s c 3 al By selected By Dividend / Earnings / Year, month, or week bonds ratings groups price ratio price ratio (longterm^ TotaH Indus- Rail- Public Pre- Com- Com- TotaH Aaa Baa Aaa Baa trial road utility ferred mon mon Number of issues . 4-7 20 5 5 120 30 30 40 40 40 14 500 500 1956 average 3.08 2.94 2.51 3.50 3.57 3.36 3.88 3.50 3.65 3.54 4.25 4.09 7.17 1957 average 3.47 3.56 3.10 4.20 4.21 3.89 4.71 4.12 4.32 4.18 4.63 4.35 8.21 1958 average 3.43 3.36 2.92 3.95 4.16 3.79 4.73 3.98 4.39 4.10 4.45 3.97 5.14 1958 July 3 36 3 23 2 79 3 83 4 02 3.67 4.53 3 81 4 30 3 94 4.36 3 98 Aug 3.60 3.50 3.07 4.07 4.17 3.85 4.67 3.94 4.42 4.16 4.45 3.78 Sept 3.75 3.74 3.28 4.32 4.39 4.09 4.87 4.24 4.52 4.41 4.58 3.69 5.63 Oct . . 3.76 3.69 3.23 4.25 4.42 4.11 4.92 4.25 4.56 4.46 4.64 3.54 Nov 3 70 3 59 3 17 4.11 4 40 4.09 4.87 4 23 4 56 4.40 4.65 3.42 Dec 3.80 3.57 3.12 4.10 4.38 4.08 4.85 4.24 4.52 4.39 4.63 3.33 5.14 1959 Jan 3 90 3.60 3.19 4 It 4 41 4.12 4 87 4 28 4 53 4 43 4 54 3 24 Feb 3.92 3.57 3.16 4.08 4.43 4.14 4.89 4.31 4.51 4.46 4.52 3.32 Mar 3.92 3.44 3.06 3.93 4.40 4.13 4.85 4.28 4.51 4.43 4.48 3.25 5 47 Apr . . . 4.01 3.53 3.12 4.02 4.47 4.23 4.86 4.35 4.56 4.49 4.51 3.26 May 4 08 3.70 3.29 4.20 4 60 4.37 4.96 4 46 4 67 4 67 4 68 3 21 June 4 09 3.80 3.37 4.28 4.69 4.46 5.04 4 55 4 76 4 77 4 79 3 23 July 4.11 3.92 3.51 4.43 4.72 4.47 5.08 4.58 4 79 4.79 4.75 3.11 Week ending: July 4 4 12 3.96 3.54 4 46 4.71 4.48 5.05 4.57 4 79 4 78 4 80 3 15 11 4.13 3.94 3.52 4.45 4.72 4.48 5.07 4.57 4.79 4.79 4.77 3.10 18 4.08 3.93 3.51 4.45 4.72 4.47 5.09 4.59 4.79 4.79 4.74 3.12 25 4.10 3.89 3.48 4.39 4 72 4.46 5.09 4 58 4 79 4 79 4 71 3 12 Aug 1 4.10 3.89 3.48 4.39 4.72 4.45 5.07 4.57 4.80 4.77 4.74 3.07 1 Monthly and weekly yields are averages of daily figures for U. S. * Includes bonds rated Aa and A, data for which are not shown sepa- Govt. and corporate bonds. Yields of State and local govt. bonds are rately. Because of a limited number of suitable issues, the number of based on Thursday figures; dividend/price ratios for preferred and corporate bonds in some groups has varied somewhat. common stocks, on Wednesday figures. Earnings /price ratios for common 5 Standard and Poor's Corporation. Preferred stock ratio is based on stocks are as of end of period. 8 median yields in a sample of noncallable issues—12 industrial and 2 2 Series is based on bonds maturing or callable in 10 years or more. public utility. For common stocks, the dividend/price and the earnings / 3 Moody's Investors Service. State and local govt. bonds include gen- price ratios are now computed for the 500 stocks in the price index, but eral obligations only. figures prior to mid-1957 are based on the 90 stocks formerly included in the daily price index. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SECURITY MARKETS 1009 SECURITY PRICESt Bond prices Common stock prices Vol- Standard and Poor's series Securities and Exchange Commission s ume (index, 1941-43= 10) (index, 1939= 100) of trad- Ye o ar r , w m e o ek nth, t ( G U e lo r o . n m v S g t . ^ . - g n ( r M i h c a i i d g u p e h - a ) - l 3 g ( C r h r p a a i o o g d t r e - h e - ) - • Total d t I r u n ia s - - l R ro a a i d l- P u i l u t t i i y c b l- - Total Tot M al anu r D f a a b u c l - t e urin N r g a d o b u n l - e - T p t r o i a o r n n ta s - - P u l i u i t t c i y b l - - - T n s a a r e i f c n a n r i e - v d d c - e e , , M in i g n- s s t h i h a n a ( o n o i g r n f d e u 4 s s - ) Number of issues. 15 17 500 425 25 50 265 170 98 72 21 29 31 14 1956 average. 98.91 116.3 109.1 46.62 49.80 33.65 32.25 345 439 410 465 327 156 306 358 2,216 1957 average. 93.24 105.8 101.3 44.38 47.66 28.11 32.19 331 422 391 451 275 156 277 342 2,222 1958 average. 94.02 106.4 102.9 46.24 49.36 27.05 37.22 341 426 385 458 270 173 314 314 2,965 1958—July.. 94.78 108.0 104.2 45.98 48.96 26.86 37.82 339 424 376 459 269 173 312 331 3,159 Aug.. 91.51 103.7 102.0 47.70 51.00 28.43 37.50 352 442 399 473 283 174 325 341 2,970 Sept.. 89.51 100.6 98.9 48.96 52.40 29.51 37.97 360 453 413 481 292 178 337 341 3,427 Oct... 89.36 100.9 98.6 50.95 54.55 31.23 39.15 376 474 437 499 311 183 346 344 4,134 Nov.. 90.13 102.3 98.9 52.50 56.11 33.07 40.75 388 487 448 514 327 190 362 341 4,131 Dec... 88.90 102.3 98.7 53.49 57.09 33.70 42.05 393 490 451 516 330 199 375 339 3,615 1959—Jan... 87.54 101.8 98.1 55.82 59.30 35.53 43.96 410 508 474 529 350 213 394 348 3,964 Feb.., 87.38 102.2 98.0 54.77 58.33 35.20 43.71 404 496 466 514 350 215 400 345 3,463 Mar.. 87.37 103.4 98.2 56.15 59.79 35.47 45.06 414 508 475 530 353 221 405 348 3,926 Apr.. 86.21 102.2 97.0 57.10 60.92 35.94 45.12 419 514 481 536 360 226 405 340 3,449 May. 85.31 100.4 95.0 57.96 62.09 36.07 44.30 425 527 495 547 358 221 409 334 3,379 June. 85.16 99.4 94.0 57.46 61.75 36.02 42.58 419 521 496 534 357 213 418 326 2,925 July.. 85.00 99.4 93.8 59.74 64.23 36.86 44.21 434 543 522 551 364 218 429 321 3,222 Week ending: July 4. 84.87 98.6 93.7 58.77 63.18 37.04 43.36 431 538 517 546 367 217 321 3,239 84.67 98.8 93.7 59.91 64.44 37.69 43.95 436 544 528 549 372 219 433 321 3,744 18! 85.29 99.3 93.7 59.43 63.88 36.94 44.04 430 536 516 544 360 217 427 316 3,112 25. 85.07 100.0 93.8 59.45 63.87 36.22 44.48 433 541 523 547 360 218 428 316 2,957 Aug. 1. 85.11 100.4 94.1 60.39 64.99 36.47 44.62 441 554 525 570 362 218 431 333 3,014 1 Monthly and weekly data for (1) U. S. Govt. bond prices, Standard 2 Prices derived from average market yields in preceding table on basis and Poor's common stock indexes, and volume of trading are averages of an assumed 3 per cent, 20-year bond. of daily figures; (2) municipal and corporate bond prices are based on 3 Prices derived from average yields, as computed by Standard and Wednesday closing prices; and (3) the Securities and Exchange Commis- Poor's Corporation, on basis of a 4 per cent, 20-year bond. sion series on common stock prices are based on weekly closing prices. 4 Average daily volume of trading in stocks on the New York Stock Exchange for a 5Vi-hour trading day. STOCK MARKET CREDIT [In millions of dollars] Customer credit Broker and dealer creditl Net debit balances with Bank loans to others (than W En e d d n o e f s d m a o y n t o h f o m r o l n a t s h t o s t T e h c e o u r t r a i t t h l i - e a s n New York f S ir t m oc s k i Exchange ch b a ro si k n e g r s a n a d n d c a d r e ry al i e n r g s ) s e fo c r u r p it u ie r- s2 Money borrowed Cust n o e m t er's U. S. Govt. free o ( b c c l o i o g l. l a . 3 t 5 i o + ) ns U o S b e . c l S i u g . r a e G t d i o o v b n y s t. S s e e c c o u u t r h r e i e d t r i e b s y U ob . l S ig . a G ti o o v ns t. se O cu th ri e ti r es U ob . l S ig O . a G n ti o on v s t. sec o O u th r n i e t r ies ba c l r a e n d c it es 1955—Dec 4,030 34 2,791 32 1.239 51 2,246 894 1956 Dec 3 984 33 2 823 41 1,161 46 2 132 880 1957 Dec 3,576 68 2,482 60 1,094 125 1,706 896 1958—June . .. 4 218 248 2 921 84 1 297 468 1 930 1 047 July 4,252 149 3,021 113 1,231 306 1,903 1,080 Aug 4,199 140 3,013 48 1,186 251 ,751 1,103 Sept 4,308 122 3,109 51 1,199 210 ,865 1,119 Oct 4,369 123 3,188 59 1,181 193 ,832 ,140 Nov . ... 4 423 124 3,245 50 1,178 210 923 148 Dec 4,492 146 3,285 63 1,207 234 >,071 159 1959 Jan 4 554 155 3,297 62 ,257 230 ,990 ,226 Feb 4,527 157 3,253 65 ,274 223 ,963 ,196 Mar 4 597 153 3 305 55 ,292 218 .977 257 Apr 4,721 166 3,401 55 ,320 252 2,156 ,205 May 4,711 163 3.385 58 ,326 252 2,159 ,188 June .. 4,692 158 3,388 58 ,304 237 2,246 094 i Ledger balances of member firms of the New York Stock Exchange 2 Figures are for last Wednesday of month for weekly reporting member carrying margin accounts, as reported to the Exchange. Customers' debit banks, which account for about 70 per cent of all loans for this purpose. and free credit balances exclude balances maintained with the reporting Column 5 includes some loans for purchasing or carrying U. S. Govt. firm by other member firms of national securities exchanges and balances securities (such loans are reported separately only by New York and of the reporting firm and of general partners of the reporting firm. Bal- Chicago banks). On June 30, 1956, reporting banks outside New York ances are net for each customer—i.e., all accounts of one customer are and Chicago held $51 million of such loans. On the same date insured consolidated. Money borrowed includes borrowings from banks and commercial banks not reporting weekly held loans of $28 million for from other lenders except member firms of national securities exchanges. purchasing and carrying U. S. Govt. securities and of $384 million for Data are as of the end of the month, except money borrowed, which is as other securities. Noninsured banks had $33 million of such loans, of the last Wednesday of the month beginning with June 1955. probably mostly for purchasing or carrying other securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1010 OPEN MARKET PAPER; SAVINGS INSTITUTIONS COMMERCIAL AND FINANCE COMPANY PAPER AND BANKERS' ACCEPTANCES OUTSTANDING [In millions of dollars] Dollar acceptances Commercial and finance company paper Held by: Based on: End of year Accepting banks F. R. Goods stored in or or month Placed P di l r a e c c e t d - Total Banks p I o m r - ts p E o x r - ts Dollar ship p p o e i d n ts b e i t n w : een Total through ly Others into from exdealers 1 ( p f a in p a e n r c ) e 2 T ta o l - O bi w ll n s bo B u il g ls ht O ac w ct n . c F e o i o g r r n r - . U S n ta i t t e e s d U St n a i t t e e s d change U S n ta i t t e e s d c F o o u r n e t i r g i n es 1953 1,966 564 1,402 574 172 117 55 24 378 274 154 29 75 43 1954 1,924 733 1,191 873 289 203 86 19 565 285 182 17 300 89 1955 2,020 510 1,510 642 175 126 49 28 33 405 252 210 17 63 100 1956 2,166 506 1,660 967 227 155 72 69 50 621 261 329 2 227 148 1957 2,666 551 2,115 1,307 287 194 94 66 76 878 278 456 46 296 232 1958—June 3,373 965 2,408 1,352 396 292 104 45 113 798 282 375 121 325 248 July 3,627 966 2,661 1,353 426 328 98 34 108 785 269 380 141 313 251 Aug 3,371 981 2,390 1,363 416 340 75 33 91 824 256 385 131 337 254 Sept 3,146 958 2,188 1,281 385 319 65 28 75 792 236 355 136 319 235 Oct 3,294 961 2,333 1,255 347 273 73 36 71 802 246 354 117 296 242 Nov 33,203 940 32,263 1,209 290 234 55 34 75 810 251 348 94 265 251 Dec 2,744 840 1,904 1,194 302 238 64 49 68 775 254 349 83 244 263 1959—Jan 3,076 875 2,201 1,133 276 226 51 40 60 756 251 346 118 168 250 Feb 3,322 897 2,425 1,161 309 232 77 39 62 751 275 339 112 183 252 Mar 3,267 883 2,384 1,054 271 227 44 30 60 692 278 329 111 82 253 Apr 3,334 822 2,512 1,029 269 208 60 30 56 673 292 348 78 48 263 May 3,555 791 2,764 1,038 242 193 49 28 79 689 286 350 103 43 256 June 3,401 729 2,672 983 213 175 38 26 76 668 256 327 111 33 256 1 As reported by dealers; includes finance company paper as well as 3 Beginning with November 1958, series revised to include 270-day other commercial paper sold in the open market. paper. Figures on old basis for November and December, respectively, 2 As reported by finance companies that place their paper directly with were (in millions of dollars): Total, 3,192 and 2,371; placed directly, 2,252 investors. and 1,891. MUTUAL SAVINGS BANKS [National Association of Mutual Savings Banks data. In millions of dollars] Loans Securities Total assets— E o n r d m of o n y t e h ar M ga o g r e t- Other G U m ov . e e n S r t . n- l S o e t c r a n a t l m e g e a o n n v t d - r C a o t t o e h r e p a r o n i - d Cash O as t s h e e ts r p l a l i u a n T s b d o i a l t s i a c t u i l c e r t - s s. Deposits lia O b t i h li e ti r es a S c u c r o p u l n u t s s 1941 4,787 89 3,592 86 829 689 11,772 10,503 38 1.231 1945 4 202 62 10 650 1,257 606 185 16 962 15,332 48 1 582 1951 9,747 129 9,827 140 2,490 883 288 23,504 20,900 154 2,450 1952 . 11,231 144 9,443 336 2,925 917 304 25,300 22,610 163 2 527 1953 12,792 165 9,191 428 3,311 982 330 27,199 24,388 203 2,608 1954 14,845 188 8,755 608 3,548 1,026 380 29,350 26,351 261 2,738 1955 . 17 279 211 8 464 646 3 366 966 414 31 346 28 182 310 2 854 1956 19,559 248 7,982 675 3,549 920 448 33,381 30,026 369 2,986 1957 . . 20 971 253 7,583 685 4,344 889 490 35,215 31,683 427 3 105 1958 23,038 320 7,270 729 4,971 921 535 37,784 34,031 526 3,226 1958—May 21,714 287 7,456 703 4,893 876 521 36,450 32,676 604 3,169 June 21,958 264 7,419 726 4,881 924 540 36,716 32,982 553 3,181 July 22,151 243 7,430 734 4,915 858 537 36,868 33,070 599 3,199 Aug . . . 22,349 267 7,449 736 4,923 853 542 37 119 33 213 675 3 231 Sept 22,530 287 7,422 738 4,957 871 551 37,356 33,480 625 3,251 Oct 22,725 258 7,330 735 4,951 863 534 37,396 33,575 581 3,240 Nov 22,876 280 7,298 734 4,951 825 555 37,519 33,617 634 3,268 Dec 23,038 320 7,270 729 4,971 921 535 37,784 34,031 526 3,226 1959_jan.2 23,107 212 7,327 728 4,928 803 533 37,639 33,861 570 3,208 Feb . . 23,232 239 7,364 724 4,937 821 538 37,855 33,974 641 3,240 Mar 23,407 256 7,426 763 4,908 866 559 38,185 34,287 637 3,261 Apr 23,562 242 7,382 729 4,967 752 541 38,175 34,293 630 3,252 May 23,723 278 7,395 739 4,947 760 550 38,392 34,413 690 3,289 1 Includes securities of foreign governments and international organiza- NOTE.—These data differ somewhat from those shown elsewhere in tions and obligations of Federal agencies not guaranteed by the U. S. the BULLETIN; the latter are for call dates and are based on reports filed Government, as well as corporate securities. with Federal and State bank supervisory agencies. Loans are shown 2 Data reflect absorption of a large mutual savings bank by a com- net of valuation reserves. mercial bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SAVINGS INSTITUTIONS 1011 LIFE INSURANCE COMPANIES 1 [Institute of Life Insurance data. In millions of dollars] Government securities Business securities Total Mort- Real Policy Other Date assets Total U S n ta i t t e e s d S ( ta U lo te . c a S a l . n ) d Foreign 2 Total Bonds Stocks gages estate loans assets End of year:3 1941 32,731 9,478 6,796 1,995 687 10,174 9,573 601 6,442 1,878 2,919 1,840 1945 44,797 22,545 20,583 722 1,240 11,059 10,060 999 6,636 857 1,962 1,738 1952 73,375 12,905 10,252 1,153 1,500 31,515 29,069 2,446 21,251 1,903 2,713 3,088 1953 78,533 12,537 9,829 1,298 1,410 34,438 31,865 2,573 23,322 2,020 2,914 3,302 1954 84,486 12,262 9,070 1,846 1,346 37,300 34,032 3,268 25,976 2,298 3,127 3,523 1955 90,432 11,829 8,576 2,038 1,215 39,545 35,912 3,633 29,445 2,581 3,290 3,743 1956 96,011 11,067 7,555 2,273 1,239 41,543 38,040 3,503 32,989 2,817 3,519 4,076 1957 101,309 10,690 7,029 2,376 1,285 44,057 40,666 3,391 35,236 3,119 3,869 4,338 1958 107.580 11,234 7,183 2,681 1,370 47,108 42,999 4,109 37,062 3,364 4,188 4,624 End of month:4 1956—Dec.. . 95,844 10,989 7,519 2,234 1,236 40,976 38,067 2,909 32,994 2,829 3,505 4,551 1957_Dec... 101,309 10,691 7,028 2,377 1,286 43,750 40,737 3,013 35,271 3,120 3,872 4,605 1958--May 103,508 10,889 7,036 2,502 1,351 44,774 41,656 3,118 35,956 3,241 4,038 4,610 June 104,008 10,976 7,083 2,537 1,356 44,987 41,828 3,159 36,060 3,280 4,067 4,638 July 104,578 11,163 7,258 ,561 1,344 45,198 42,039 3,159 36,183 3,303 4,091 4,640 Aug 105,054 11,244 7,300 2,597 1,347 45,351 42,200 3,151 36,323 3,355 4,114 4,667 Sept 105,493 11,268 7,307 2,616 1,345 45,561 42,370 3,191 36,462 3,368 4,138 4,696 Oct 106,053 11,299 7,319 2,641 1,339 45,876 42,689 3,187 36,648 3,388 4,162 4,680 Nov 106,540 11,355 7,344 2,672 1,339 46,015 42,817 3,198 36,794 3,415 4,183 4,778 Dec 107,419 11,250 7,205 2,685 1,360 46,411 43,052 3,359 37,097 3,349 4,204 5,108 1959—Jan 108,145 11,620 7,485 2,744 1,391 46,602 43.237 3,365 37,211 3,393 4,225 5,094 Feb 108,583 11,596 7,414 2,774 1,408 46,829 43,442 3,387 37,350 3,414 4,253 5,141 Mar 108,945 11,479 7,229 2,840 1,410 47,093 43,672 3,421 37,486 3,450 4,284 5,153 Apr 109,430 11,568 7,251 2,889 1,428 47,343 43,904 3,439 37,602 3,469 4,317 5,131 May 109,928 11,644 7,235 2,968 1,441 47.545 44,086 3,459 37,737 3,493 4,346 5,163 1 Figures are for all life insurance companies in the United States. 4 These represent book value of ledger assets. Adjustments for interest 2 Represents issues of foreign governments and their subdivisions due and accrued and for differences between market and book values and bonds of the International Bank for Reconstruction and Develop- are not made on each item separately, but are included in total, in "Other ment. assets." 3 These represent annual statement asset values, with bonds carried on an amortized basis and stocks at end-of-year market value. SAVINGS AND LOAN ASSOCIATIONS i [Federal Savings and Loan Insurance Corporation data. In millions of dollars] Assets Liabilities Total Mortgage End of year U.S. assets—2 Reserves loan or month g M ag o e rt s - 2 o G b o li v g t a . - Cash Other 3 lia T b o il t i a ti l es S c a a v p i i n ta g l s B m or o r n o e w y e 4 d und a i n v d ided L p o r a o n c s e s i s n Other c m om en m ts i 5 ttions profits 1941 4,578 107 344 775 6,049 4,878 256 475 l40 n.a. 1945 5,376 2,420 450 356 8,747 7,386 336 644 381 n a 1951 15 564 1 603 1,066 899 19 222 16 107 894 1 453 768 n a 1952 18,396 1,787 1,289 1.108 22,660 19,195 944 1,658 863 n.a. 1953 21,962 1,920 1,479 1,297 26,733 22,846 1,027 1,901 959 n.a. 1954r 26 108 2 013 1,971 1,541 31,633 27 252 950 2,187 1 244 n a 1955r 31,408 2,338 2,063 1,847 37,656 32,142 1,546 2,557 1,411 833 1956 35,729 2,782 2,119 2,199 42,875 37,148 1,347 2,950 1,430 843 1957 40 007 3 173 2,146 2,770 48 138 41 912 1,379 3 363 1 484 862 1958 45.599 3,821 2,569 3,125 55,114 47,926 1,451 3,857 1.170 710 1,479 1958_May 41,751 3,248 2,563 3,002 50,564 44,083 867 (6) 979 (6) 1,310 June 42,333 3,329 2,740 2,965 51,367 45,020 1,036 3,561 1,052 698 1,340 July 42,866 3,369 2,443 2,885 51,563 45,082 997 (6) 1,095 (6) 1.407 Aug 43,423 3,480 2,373 2,894 52,170 45,435 1,052 (6) 1,115 (6) 1.432 Sept 43,997 3,627 2,295 2,936 52,855 45,875 1,137 (6) [,162 (6) 1,482 Oct 44,602 3,734 2,187 3,067 53,590 46,376 1,195 (6) 1,184 (6) ,499 Nov 45,067 3,784 2,231 3,169 54,251 46,853 1,236 (6) 1,173 (6) [,541 Dec 45,599 3,821 2,569 3,125 55,114 47,926 1,451 3,857 1,170 710 1,479 1959 Jan 46 009 4 117 2,269 3,072 55,467 48,360 1,270 3,864 1,133 840 1.515 Feb 46 436 4.214 2,243 3,152 56,045 48,768 1,213 3,873 1,175 1,016 1,630 Mar 47,029 4,293 2,244 3,244 56,810 49,297 1,208 3,874 [,290 1,141 1,756 Apr 47,733 4,399 2,061 3,397 57,590 49,717 1,306 3,875 1,388 1.304 1,923 May 48.483 4.422 2,089 3,578 58,572 50,321 1,369 3,886 1,484 i ;5i2 1,976 r Revised. n.a. Not available. declined consistently in recent years and amounted to $42 million at the Da 1 t a F i b g e u g re in s n a in re g fo w r it a h l l s 1 a 9 v 5 i 1 n gs a r a e n d b a l s o e a d n a o s n s o m cia o t n io th n l s y in r e t p h o e r t U s ni o t f e d in S s t u a r te e s d . end 3 I o n f c l 1 u 9 d 5 e 7 s . other loans, stock in the Federal home loan banks and other associations and annual reports of noninsured associations. Data prior investments, real estate owned and sold on contract, and office buildings n i t t o o e m 2 1 d 9 P s e 5 r d 1 i w o u i r c a l l t r i t e o o n n b o 1 a t 9 s fo 5 e a d r 8 d d m e m n o o t t o i r r r t t e g g t l a o a y g g t a e e o l s n p a a a l s r e n s e d e n g t n u s e e a d t l w o r s h e f h i p c a m h o re r o t s i r s . n t . g cl a u g d e e B p e g l g e r i o d n s g n s e i n d m g s o h w r a t i g r th e a s g . J e a s n A u w s a i s r t e y h t and 4 6 5 C N N fi o o o x n t t t u s a a i r s e v t b s a s . a i l l o a a f b n l c F e e . H - s s e h .L p e a . e B r t a . t i e t a e l d y m v . . ances and other borrowing. 1958, no deduction is made for mortgage pledged shares. These have NOTE.—Data for 1958 and 1959 are preliminary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1012 BUSINESS FINANCE CORPORATE PROFITS, TAXES, AND DIVIDENDS NET CHANGE IN OUTSTANDING CORPORATE SECURITIES i [Department of Commerce estimates. In billions [Securities and Exchange Commission estimates. In millions of dollars] of dollars] All types Bonds and notes Stocks Y qu e a a r r te o r r P b t r e a o f x o f e i r s t e s c ta o I x n m e - e s P t a r a f o x t f e e i r t s s d C d e i a n v s d i h - s t U r p i r b n o u d fi t i t e s s d - Y qu e a a r r te o r r New Retire- Net New Retire- Net New Retire- Net issues ments change issues ments change issues ments change 1951 . . 42.2 22.4 19.7 9.0 10.7 1952 36.7 19.5 17.2 9.0 8.3 1951 . 9,048 2,772 6,277 5,682 2,105 3,577 3,366 667 2,700 1953 38.3 20.2 18.1 9.2 8.9 1952 10,679 2,751 7,927 7,344 2,403 4,940 3,335 348 2,987 1954 34.1 17.2 16.8 9.8 7.0 1953 9,550 2,429 7,121 6,651 1,896 4,755 2,898 533 2,366 1955 44.9 21.8 23.0 11.2 11.8 1954 11,694 5,629 6,065 7,832 4,033 3,799 3,862 1,596 2,265 1956r 44.7 21.2 23.5 12.1 11.4 1955 12,474 5,599 6,875 7,571 3,383 4,188 4,903 2,216 2,687 1957' 43.3 21.1 22.2 12.5 9.7 1956 13,201 5,038 8,162 7,934 3,203 4,731 5,267 1,836 3,432 1958r 37.1 18.2 18.9 12.4 6.5 1957 14,350 3,609 10,741 9,638 2,584 7,053 4,712 1,024 3,688 1958 14,710 5,113 9,597 9,694 3,705 5,989 5,016 1,408 3,608 1957—1'- 46.2 22.5 23.7 12.6 11.1 2r 43.5 21.2 22.3 12.7 9.6 1958—1 3,566 852 2,715 2,799 597 2,202 768 255 513 3r 44.0 21.4 22.5 12.8 9.7 2 4,049 1,581 2,468 2,453 1,318 1,135 1,596 264 1,333 4r 39.4 19.2 20.2 12.2 8.0 3 3,575 1,367 2,208 2,294 1,028 1,266 1,281 339 942 4 3,519 1,313 2,207 2,148 762 1,386 1,371 550 821 1958—1 T 32.0 15.7 16.3 12.7 3.6 2r 33.6 16.5 17.1 12.6 4.5 1959—1 3,054 1,165 1,890 1,592 688 903 1,462 476 986 3r 38.3 18.8 19.5 12.6 6.9 4r 44.6 21.9 22.7 12.0 10.7 1 Reflects cash transactions only. As contrasted with data shown on p. 1014, new issues 1959 l 46.5 22.6 23.8 12.8 11.0 exclude foreign and include offerings of open-end investment companies, sales of securities held by affiliated companies or RFC, special offerings to employees, and also new stock issues and cash proceeds connected with conversions of bonds into stocks. Retirements r Revised. include the same types of issues, and also securities retired with internal funds or with NOTE.—Quarterly data are at seasonally adjusted proceeds of issues for that purpose shown on p. 1014. annual rates. CURRENT ASSETS AND LIABILITIES OF CORPORATIONS i [Securities and Exchange Commission estimates. In billions of dollars] Current assets Current liabilities E o n r d q o u f a r y t e e a r r w c o a N p rk e it i t a n l g Total Cash s G U ec o . u v S r t i . . - Not r e e s c e a i n v d a b a l c e cts. I t n o v ri e e n s - Other Total Note p s a a y n a d b le accts. F in e c t d a o e x m ra e l Other ties U.S. Other U. S. Other bi l l i i a ti - es Govt. 2 Govt. 2 1951. 86.5 179.1 30.0 20.7 2.7 58.8 64.9 2.1 92.6 1.3 53.6 21.3 16 5 1952 90.1 186.2 30.8 19.9 2.8 64.6 65.8 2.4 96.1 2.3 57.0 18.1 18.7 1953 . ... 91 8 190.6 31.1 21.5 2.6 65.9 67.2 2.4 98.9 2.2 57.3 18.7 20 7 1954 94.9 194.6 33.4 19.2 2.4 71.2 65.3 3.1 99.7 2.4 59.3 15.5 22.5 1955 103.0 224.0 34.6 23.5 2.3 86.6 72.8 4.2 121.0 2.3 73.8 19.3 25.7 1956 107.4 237.9 34.8 19.1 2.6 95.1 80.4 5.9 130.5 2.4 81.5 17.6 29.0 1957 111.7 242.0 34.7 17.2 2.8 98.3 82.3 6.7 130.2 2.3 81.2 15.7 31.1 1958 1 113 4 234.9 32.3 16.0 2.7 95.4 81.5 7.0 121.5 2.1 76.5 12.4 30 4 2 115.0 232.9 34.2 13.9 2.6 96.6 78.4 7.1 117.9 1.9 75.3 9.8 30.8 3 117 1 237.8 35.2 15.0 2.7 100.5 77.3 7.2 120.7 1.8 76.4 11.4 31.1 4 119 8 243.7 37.1 18.2 2.8 101.0 77.6 7.0 123.8 1.7 77.9 13.3 30.9 1959—1 122.4 247.1 34.3 19.5 2.8 102.6 80.0 7.8 124.7 1.7 78.4 12.8 31.8 1 Excludes banks and insurance companies. 2 Receivables from, and payables to, the U. S. Government exclude amounts offset against each other on corporations' books. BUSINESS EXPENDITURES ON NEW PLANT AND EQUIPMENT i [Department of Commerce and Securities and Exchange Commission estimates. In billions of dollars] Transportation Manu- Year Total M fa i c a n t n u g u r- - M in i g n- Rail- Other P u u t t i b i e l l s i i - c c m C at o u io m n n i - - s Other 2 Quarter Total fa m a i c n n i t n u g d - r- T p t o r i a o r n t n a s - - P u u t t i b i e l l s i i - c ot A h l e l r3 road ing 1951 25.6 10.9 .9 1.5 1.5 3.7 1.3 5.9 1958—1 7.3 3.1 .7 1.2 2.3 1952 26.5 11.6 1.0 1.4 1.5 3.9 1.5 5.6 2 7.8 3.2 .6 1.5 2.5 1953. 28.3 11.9 1.0 1.3 1.6 4.6 1.7 6.3 3 7.4 2.9 .5 1.6 2.4 1954 26.8 11.0 1.0 .9 1.5 4.2 1.7 6.5 4 8.0 3.2 .6 1.7 2.5 1955 28.7 11.4 1.0 .9 1.6 4.3 2.0 7.5 1956. 35.1 15.0 1.2 1.2 1.7 4.9 2.7 8.4 1959—1 6.9 2.7 .6 .2 2.5 1957 37.0 16.0 1.2 1.4 1.8 6.2 3.0 7.4 24 8.3 3.3 .8 1.5 2.7 1958 30.5 11.4 .9 .8 1.5 6.1 2 6 7 2 34 8.3 3.4 .7 6 2.6 19594 32.6 12.4 1.0 .9 2.0 5.9 10.4 1 Corporate and noncorporate business, excluding agriculture. 3 Includes communications and other. 2 Includes trade, service, finance, and construction. 4 Anticipated by business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BUSINESS FINANCE 1013 SALES, PROFITS, AND DIVIDENDS OF LARGE CORPORATIONS [In millions of dollars] Annual totals Quarterly totals Industry 1957 1958 1959 1954 1955 1956 1957 1958 Manufacturing Total (180 corps.): Sales 88,338105,006108,307114,834 105,251 27,931 28,125 25,542 25,620 25,367 28,722 29,538 Profits before taxes 10,640 14,803 13,418 13,349 10,524 2,972 2,966 2,308 2,249 2,436 3,531 3,898 Profits after taxes 5,549 7,564 7,094 7,177 5,737 1,607 1,685 1,243 1,194 1,287 2,013 2,013 Dividends 3,222 3,847 4,068 4,192 4,078 1,026 1,121 1,038 1,011 987 1,042 1,092 Nondurable goods industries (79 corps.): i Sales 33,653 37,462 40,053 42,309 41,820 10,628 10,508 10,012 10,113 10,626 11,069 11,068 Profits before taxes 4,214 5,013 5,146 5,010 4,421 1,237 1,129 987 947 1,191 1,297 1,374 Profits after taxes 2,326 2,814 2,943 2,944 2,572 716 693 574 541 679 778 766 Dividends 1,426 1,588 1,683 1,776 1,785 430 487 452 440 430 463 517 Durable goods industries (101 corps.):2 Sales 54,685 67,544 68,254 72,525 63,430 17,303 17,618 15,530 15,506 14,741 17,653 18,470 Profits before taxes 6.427 9,790 8,272 8,339 6,102 1,735 1,837 1,321 1,303 1,245 2,234 2,524 Profits after taxes 3,223 4,750 4,151 4,233 3,165 891 992 669 652 608 1,235 1,247 Dividends 1,796 2,259 2,385 2,416 2,293 596 634 586 572 557 578 575 Selected industries: Foods and kindred products (25 corps.): Sales 8,886 9,236 9,984 10,592 11,085 2,696 2,703 2,632 2,760 2,828 2,865 2,784 Profits before taxes 816 868 955 1,024 1,151 282 263 250 283 310 308 285 Profits after taxes 388 414 460 497 555 135 132 119 138 149 149 136 Dividends 258 260 277 289 312 67 82 80 72 72 85 Chemicals and allied products (21 corps.): Sales 8,294 9,584 10,199 10,669 10,393 2,739 2,633 2,422 2,533 2,679 2,760 2,770 Profits before taxes 1,525 1,866 1,804 1,823 1,541 463 422 329 339 398 475 493 Profits after taxes 725 955 942 948 831 238 231 174 179 208 271 254 Dividends 582 690 698 737 717 175 213 182 178 172 185 180 Petroleum refining (16 corps.): Sales 10,590 11,515 12,454 13,463 12,790 3,260 3,309 3,194 2,982 3,210 3,404 3,431 Profits before taxes 1,128 1,344 1,444 1,325 941 285 254 247 146 274 274 359 Profits after taxes 851 979 1,068 1,075 788 240 226 199 136 219 234 259 Dividends 413 438 481 512 516 129 131 130 130 127 129 133 Primary metals and products (35 corps.): Sales 16,378 20,744 22,365 22,468 19,100 5,547 5,220 4,382 4,644 4,881 5,193 5,621 Profits before taxes 1.935 3,267 3,331 2,977 2,205 691 588 391 481 562 771 821 Profits after taxes 1.015 1,652 1,727 1,540 1,163 359 323 205 255 294 409 416 Dividends 582 730 880 873 801 218 223 203 201 194 203 201 Machinery (25 corps.): Sales 11,288 12,480 13,908 15,115 14,654 3,740 3,832 3,485 3,669 3,703 3,796 3,853 Profits before taxes 1,191 1,253 1,209 1,457 1,470 329 354 304 344 395 426 423 Profits after taxes 604 637 607 729 741 169 181 151 174 204 212 212 Dividends 345 368 403 416 422 103 106 111 102 104 104 113 Automobiles and equipment (14 corps.): Sales 18,227 24,624 21,217 23,453 18,483 5,151 5,684 5,003 4,472 3,329 5,679 6,259 Profits before taxes 2,276 4,011 2,473 2,701 1,330 406 611 396 234 -15 715 1,012 Profits after taxes 1,089 1,841 1,186 1,354 706 211 340 202 101 -44 446 491 Dividends 629 872 791 805 758 198 207 198 194 183 183 184 Public Utility Railroad: Operating revenue 9,371 10,106 10,551 10,491 9,564 2,676 2,582 2,244 2,299 2,466 2,555 2,390 Profits before taxes 908 1,341 1,268 1,058 844 286 261 62 144 272 366 167 Profits after taxes 682 927 876 737 602 192 200 33 102 195 271 100 Dividends 379 448 462 438 410 83 122 96 79 77 157 120 Electric Power: Operating revenue 7,588 8,360 9,049 9,644 10,205 2,343 2,464 2,704 2,410 2,469 2,623 2,917 Profits before taxes 2,049 2,304 2,462 2,557 2,721 605 631 768 615 650 688 853 Profits after taxes 1.134 1,244 1,326 ^1,413 1,517 328 358 421 349 357 390 469 Dividends 868 942 1,022 1,077 1,134 262 269 281 287 276 290 303 Telephone: Operating revenue 4,902 5,425 5,966 6,467 6,939 ,623 1,673 1,672 1,715 1,745 1 1,825 Profits before taxes 1,050 1,282 1,430 1,562 1,860 387 400 402 454 494 522 Profits after taxes 525 638 715 788 921 195 203 200 226 244 258 Dividends 448 496 552 613 674 155 160 164 166 171 178 c Corrected. Telephone. Revenues and profits are for telephone operations of the 1 Includes 17 companies in groups not shown separately. Bell System Consolidated (including the 20 operating subsidiaries and 2 Includes 27 companies in groups not shown separately. the Long Lines and General departments of American Telephone and NOTE.—Manufacturing corporations. Data are obtained primarily Telegraph Company) and for two affiliated telephone companies, which from published company reports. together represent about 85 per cent of all telephone operations. Dividends are for the 20 operating subsidiaries and the two affiliates. Data Railroads. Figures are for Class I line-haul railroads (which account are obtained from the Federal Communications Commission. for 95 per cent of all railroad operations) and are obtained from reports of the Interstate Commerce Commission. All series. Profits before taxes refer to income after all charges and before Federal income taxes and dividends. For detailed description of Electric power. Figures are for Class A and B electric utilities (which series (but not for figures), see pp. 662-66 of the BULLETIN for June 1949 account for about 95 per cent of all electric power operations) and are (manufacturing); pp. 215-17 of the BULLETIN for March 1942 (public obtained from reports of the Federal Power Commission, except that utilities); and p. 908 of the BULLETIN for September 1944 (electric power). quarterly figures on operating revenue and profits before taxes are partly For back data for manufacturing, see pp. 792-93 of the BULLETIN for estimated by the Federal Reserve to include affiliated nonelectric opera- July 1959; back data for other series are available from the Division of tions. Research and Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1014 SECURITY ISSUES NEW SECURITY ISSUES 1 [Securities and Exchange Commission estimates. In millions of dollars] Proposed uses of net proceeds, Grossproceeds, all issuers2 all corporate issuers6 Noncorporate Corporate New capital Year or Remonth Bonds Mis- Re- tire- Total Fed- State Total cel- tire- ment U.S. eral and Pre- Com- New lane- ment of Govt.3 agen- mu- Others Total Pub- Pri- ferred mon Total money7 ous of secunici- Total licly vately stock stock pur- bank rities pal offered placed poses debt, etc. 8 1951 21,265 9,778 110 3,189 446 7,741 5,691 2,364 3,326 838 1,212 7,607 7,120 6,531 226 153 486 1952 26,929 12,577 459 4,121 237 9,534 7,601 3,645 3,957 564 1,369 9,380 8,716 8,180 537 664 1953 28,824 13,957 106 5,558 306 8,898 7,083 3,856 3,228 489 1,326 8,755 8,495 7,960 535 260 1954 29,765 12,532 458 6,969 289 9,516 7,488 4,003 3,484 816 1,213 9,365 7,490 6,780 709 1,875 1955 26,772 9,628 746 5,977 18? 10,240 7,420 4,119 3,301 635 2,185 10,049 8,821 7,957 864 1,227 1956 22,405 5,517 169 5,446 334 10,939 8,002 4,225 3,777 636 2,301 10,749 10,384 9,663 721 364 1957 30,571 9,601 572 6,958 557 12,884 9,957 6,118 3,839 411 2,516 12,661 12,447 11,784 663 214 1958 34,435 12,063 2,321 7,449 1,047 11,555 9,684 6,333 3,351 551 1,320 11,373 10,790 9,936 854 583 1958—May.... 2,160 368 877 202 714 594 391 203 36 84 699 600 532 68 99 June.... 3,049 1,411 554 122 963 866 370 497 58 38 948 881 709 172 67 July 2,423 418 "164 631 13 1,196 907 735 172 70 219 1,174 1,102 1,026 76 72 Aug 1,340 369 389 9 573 492 209 283 12 70 563 538 518 20 25 Sept.... 2,197 352 647 23 1,175 1,098 851 246 23 55 1,159 1,144 1,038 106 15 Oct 3,076 1,461 220 439 66 890 652 287 365 67 170 873 858 739 119 15 Nov 1,408 324 459 127 497 379 236 143 12 107 489 478 424 54 11 Dec 1,900 370 448 79 1,002 751 266 485 50 201 985 914 845 69 72 1959—Jan 5,780 3,971 199 639 85 885 724 405 319 36 126 869 840 794 46 29 Feb 2,132 420 881 62 770 481 187 294 55 234 754 745 600 145 9 Mar 1,921 443 175 637 11 656 457 195 262 47 151 640 631 539 92 9 Apr 4,449 2,583 940 57 869 561 310 251 92 216 848 826 111 49 22 May.... 1,801 338 569 50 844 640 378 262 37 167 824 806 111 28 18 Proposed uses of net ]proceeds, major groupsof corporate issuers Commercial and Real estate Manufacturing miscellaneous Transportation Public utility Communication and financial Year or month Retire- Retire- Retire- Retire- Retire- Retire- New ment of New ment of New ment of New ment of New ment of New ment of capital1 o secu- capital1 o secu- capital1** secu- capital1*) secu- capital1** secu- capital1** securities rities rities rities rities rities 1951 . 2,846 221 462 56 437 53 2,326 85 600 5 449 66 1952 3,712 261 512 24 758 225 2,539 88 747 6 448 60 1953 2,128 90 502 40 553 36 2,905 67 871 3 1,536 24 1954 2,044 190 831 93 501 270 2,675 990 651 60 788 273 1955 2,397 533 769 51 544 338 2,254 174 1,045 77 1,812 56 1956 3,336 243 682 51 694 20 2,474 14 •1,384 21 1,815 17 1957 4,104 49 579 29 802 14 3,821 51 •1,441 4 1,701 67 1958 3,296 223 882 16 777 39 3,598 139 1,294 117 944 49 1958 May 163 26 24 5 23 303 37 11 30 74 1 June .. 267 49 29 106 390 16 12 78 2 July 519 24 55 49 348 46 101 31 1 122 16 47 2 26 6 281 13 49 1 Sept 485 12 389 2 44 186 13 28 1 Oct 255 10 52 4 81 1 311 45 114 1 Nov 119 3 70 18 127 2 89 55 5 Dec 233 20 53 151 3 262 14 103 112 35 1959 Jan 148 17 61 6 80 2 295 2 34 221 2 Feb 123 5 105 154 3 188 62 113 1 Mar 92 6 46 1 51 1 331 9 102 Apr 267 17 88 3 27 (9) 309 10 126 2 May 214 10 55 39 332 4 4 162 2 1 Estimates of new issues maturing in more than one year sold for cash 6 Estimated net proceeds are equal to estimated gross proceeds less cost in the United States. of flotation, i.e., compensation to underwriters, agents, etc., and expenses. 2 Gross proceeds are derived by multiplying principal amounts or num- 7 Represents proceeds for plant and equipment and working capital. ber of units by offering price. 8 Represents proceeds for the retirement of mortgages and bank debt 3 Includes guaranteed issues. with original maturities of more than one year. Proceeds for retirement of 4 Issues not guaranteed. short-term bank debt are included under the uses for which the bank 5 Represents foreign governments, International Bank of Reconstruc- debt was incurred. tion and Development, and domestic eleemosynary and other nonprofit 9 Less than $500,000. organizations. 10 Represents all issues other than those for retirement of securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SECURITY ISSUES; FEDERAL FINANCE 1015 STATE AND LOCAL GOVERNMENT SECURITY ISSUES 1 [Investment Bankers Association data. Par amounts of long-term issues in millions of dollars] Type of issue Type of issuer New capital j Total Use of proceeds (new Special Total Period c re a i a f n p n u g i d n t ) a d l - G g o a e b a t n i l l o e i- r n - R n e u v e e- A P H u i u i o t t n b y h u g l 2 o s ic - r- F l G o e a o a d n l v e s t r . 3 - State d a s i u t t a s o i a t n t t h r t r y d u y i o c - r t - Other 4 a d e m r e e o li d u v n 5 - t Total c E at d i u o - n b R r a i o d n a g d d e s s W s o u e a t t t a i w n h i e t l d e e s e i- r r r , h R d t o i e e i n u a s n g l s i - - - V a a e n i t s d e ' r- O p p o t u h s r e e - s r 1951 3,278 2,220 730 328 n.a. 668 722 1,889 n.a. 3,188 582 580 640 361 42 983 1952 4,410 2,633 1,463 305 9 718 1,305 2,387 n.a. 4,096 969 938 642 424 100 1,024 1953 . 5,558 3,495 1,558 496 9 767 2,091 2,701 n.a. 5,477 1,320 1,588 803 506 141 1,119 1954 6,969 3,380 3,205 374 9 2,047 1,463 3,459 n.a. 6,789 1,432 2,136 1,270 456 162 1,333 1955 5,976 3,770 1,730 474 2 1,408 1,097 3,472 n.a. 5,911 1,516 1,362 881 570 169 1,414 1956 5,446 3,577 1,626 199 44 800 983 3,664 n.a. 5,383 1,455 698 1,399 258 110 1,464 1957 67,150 4,795 1,964 66 324 1,508 1,279 4,362 6,568 7,099 2,551 1,041 1,524 299 333 1,352 1958 7,832 5,446 1,778 187 420 2,016 1,368 4,448 7,708 7,746 2,644 1,172 1,403 530 339 1,657 1958—July.... 825 428 199 198 183 97 545 700 806 208 62 135 193 100 108 Aug.. . . 408 310 93 c 21 77 310 615 403 169 45 108 81 Sapt 663 462 189 2 12 232 119 312 427 651 203 129 112 2 20 184 Oct 462 334 103 25 52 86 324 626 456 170 57 114 6 6 104 Nov.. . . 476 297 125 47 29 140 307 434 474 162 15 131 47 120 Dec 439 387 39 12 191 27 221 556 435 253 47 44 3 89 1959—Jan 649 300 323 20 6 53 306 291 354 636 158 26 339 23 20 71 Feb 880 490 264 103 23 142 255 483 562 856 161 91 123 124 357 Mar.. . . 646 446 184 1 14 185 139 321 905 645 196 49 141 12 50 197 Apr 939 494 430 15 186 397 356 617 930 263 166 334 10 33 124 May.... 595 368 93 105 29 50 147 397 901 592 190 25 188 121 68 June 985 522 423 40 271 355 359 610 980 215 130 313 29 100 192 n.a. Not available. 3 Beginning with 1957, coverage is considerably broader than earlier. 1 Data prior to 1957 are from the Bond Buyer. Federal Reserve 4 Consists of municipalities, counties, townships, school districts and, classifications as to use of proceeds, type of issue, and type of issuer are prior to 1957, small unclassified issues. based principally on issues of $500,000 or more; smaller issues not classi- 5 Excludes Federal Government loans. These data are based on date fied. As a result some categories, particularly education, are under- of delivery of bonds to purchaser (and of payment to issuer) which occurs stated relative to later data. after date of sale. Other data in table are based on date of sale. 2 Includes only bonds sold pursuant to the Housing Act of 1949. 6 Beginning in 1957 this figure differs from that shown on the opposite These are secured by a contract requiring the Public Housing Administra- page, which is based on Bond Buyer data. The principal difference is in tion to make annual contributions to the local authority. the treatment of Federal Government loans. UNITED STATES GOVERNMENT MARKETABLE AND CONVERTIBLE SECURITIES OUTSTANDING, JULY 31, 19591 [On basis of daily statements of United States Treasury. In millions of dollars] Issue and couponrate Amount Issue and coupon rate Amount Issue and coupon rate Amount Issue and coupon rate Amount Tre A a u s g u ry 6 b ill 1 s 9 2 59 ) 401 Tre J a an su ry 7 b il 1 ls 9 — 60 Cont. 400 Tre M as a u y r y 1 5 n . o 1 te 9 s 6 — 1 Cont •3^8 4 078 Tre D a e s c u . ry 1 5 b o 1 n 9 d 6 s— 3- C 68 o . n . t . .21i 2 819 Aug. 13 1959 1,401 Jan. 14, 1950 401 Aug. 1 1961 4 2,136 Feb. 15 1964 3,854 Aug. 20 1959 1,402 Jan. 15 1960 2,006 Oct. 1 1961 332 June 15, 1964-69... 3,742 Aug. 27, 1959 1,396 Jan. 21 1960 . 400 Feb. 15, 1962 647 Dec. 15, 1964-69... 3,816 Sept. 3, 1959 I 501 Jan. 28, 1960 401 Feb. 15 1962 . 4 1 435 Feb 15 1965 2^4 6 896 Sept. 10 1959 ,600 Mar.22 1960 3,005 Apr. 1, 1962 551 Mar. 15,1965-70... 4,697 Sept. 17 1959 ,601 Apr. 15, 1960 2,003 Aug. 15 1962 2,000 Aug. 15 1966 1,484 Sept.21, 1959* .. I 502 July 15 1960 2,001 Oct. 1, 1962. . .\y 2 590 Mar. 15 1966-71 .. 2 945 Sept.24 1959 1,600 Nov. 15 1962 1,143 June 15, 1967-72...21/2 1,827 Oct. 1, 1959 ,500 Certificates Feb. 15, 1963 3,971 Sept. 15,1967-72...2V2 2,716 O O c c t t . . 1 8 5 1 1 9 9 5 5 9 9 1 1 , , 6 6 0 0 1 0 N Au o g v . . 15 1, 1 1 9 9 5 5 9 9 . 3 iy % 8 1 7 3 , , 7 5 1 0 1 0 A M p a r y . 1 1 5 1 1 9 9 6 6 3 3 . 4 1,7 5 4 3 3 3 D O e c c t. . 15 1 , 1 1 9 9 6 6 9 7-72...2Vi 3 1 , ,2 6 7 8 6 6 O O c c t t . . 2 2 2 9 1 1 9 9 5 5 9 9 1 4 4 0 0 0 6 F M e a b y . 1 1 5 5 1 1 9 9 6 6 0 0 3Y 4 4 1 1 1 , , 2 3 6 6 9 3 A O p ct r . , 1 1 , 1 1 9 9 6 6 3 4 .IV2 5 1 0 5 6 7 N Fe o b v . . 1 1 5 5 , 1 1 9 9 8 7 0 4 3V 4 6 8 5 8 4 4 Nov. 5 1959 400 June 15, 1978-83... 1,602 Nov. 12, 1959.... 400 Treasury notes Treasury Bonds May 15, 1985 fk 1,135 Nov 19 1959 400 Aug 1, 1959 4 473 June 15, 1959-62.. 5,266 Feb 15 1990 1 727 Nov.27, 1959 400 Oct. 1, 1959 \y2 99 Dec. 15, 1959-62.. 3,455 Feb. 15, 1995 2,739 Dec 3 1959 400 Nov. 15, 1959 31/2 1,184 Nov. 15, 1960 3,806 Dec. 10 1959 ... 500 Apr. 1, 1960 W2 198 Dec. 15, 1960-653. 23/4 1,485 Panama Canal Loan . . 50 Dec 17 1959 500 May 15 1960 314 2,738 Sept. 15,1961 2^A 2,239 Dec 22 1959* 1 500 May 15, 1960 31/2 2,406 Nov. 15, 1961 2V> 11,177 Convertible bonds D De ec c. 2 31 4 , 1 19 9 5 5 9 9.... 5 5 0 0 0 0 O A c p t r . . 1 1 , I 1 9 9 6 6 0 1 ...l \ l/ y 2 2 2 1 7 4 8 4 J A u u n g e . 1 1 5 5 , , 1 1 9 9 6 63 2-67.. 2 2 1 1 / / 2 2 2 6 , , 1 7 1 5 1 5 I A n p v r e . stm 1 e , nt 1 9 S 7 e 5 ri - e 8 s 0 B ... 7,639 * Tax anticipation series. 2 Sold on discount basis. For discounts on individual issues, see tables 1 Direct public issues. on Money Market Rates, p. 1008. 3 Partially tax-exempt. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1016 FEDERAL FINANCE UNITED STATES GOVERNMENT DEBT, BY TYPE OF SECURITY [On basis of daily statemsnts of United States Treasury. In billions of dollars] Public issues3 Marketable N onmarketable E m n o d n t o h f d T g e r o o b t s a t s i l d d T g i e r o r o b e t s t a c s 2 l t Total Total Bills c C i e n a d e t d e n r e t s e i b f s o i t s - - f Notes B e b l a l ig e n i k 4 B - on s d t B s r r i a e c n - te k d b C v i o b e o n r l n e d t- - s Totals b S i o n a n g v d s - s n s T i a o n a n a t g v d e x s - s S i p ss e u c e ia s l 1941 Dec 64 3 57 9 50 5 41.6 2.0 6.0 33 6 8.9 6.1 2.5 7 0 1945 Dec 278 7 278 1 255.7 198.8 17.0 38.2 23.0 68.4 52.2 56.9 48.2 8.2 20.0 1947—Dec. . . . 257.0 256.9 225.3 165.8 15.1 21.2 11.4 68.4 49.6 59.5 52.1 5.4 29.0 1951—Dec 259.5 259.4 221.2 142.7 18.1 29.1 18.4 41.0 36.0 12.1 66.4 57.6 7.5 35.9 1952 Dec 267 4 267 4 226.1 148.6 21.7 16.7 30.3 58.9 21.0 12.5 65.0 57.9 5.8 39.2 1953—Dec 275.2 275.2 231.7 154.6 19.5 26.4 31.4 63.9 13.4 12.0 65.1 57.7 6.0 41.2 1954__Dec 278.8 278.8 233.2 157.8 19.5 28.5 28.0 76.1 5.7 11.8 63.6 57.7 4.5 42.6 1955 Dec . . 280.8 280.8 233.9 163.3 22.3 15.7 43.3 81.9 11.4 59.2 57.9 (6) 43.9 1956 Dec 276 7 276 6 228 6 160.4 25.2 19 0 35.3 80 9 10 8 57 4 56.3 45 6 1957 Dec 275.0 274.9 227.1 164.2 26.9 34.6 20.7 82.1 9.5 53.4 52.5 45.8 1958 July 275.6 275.5 228.0 166.4 22.4 32.9 20.5 90.6 8.8 52.8 51.9 45.9 Aug 278 6 278 5 230 6 169 2 22 4 38 5 20.7 87 7 8 6 52 8 51 9 46 3 Sept 276 8 276 7 229 0 167.7 22.7 38.5 20.7 85 8 8 5 52 8 51 8 46 0 Oct 280 3 280.2 233.2 172.2 25.9 38.5 21.9 85.8 8.4 52.7 51.7 45.4 Nov 281.2 283.1 236.3 175.4 29.1 38.5 21.9 85.8 8.4 52.6 51.7 45.1 Dec 283.0 282.9 236.0 175.6 29.7 36.4 26.1 83.4 8.3 52.1 51.2 44.8 1959 Jan 285.9 285.8 239.9 179.8 30.3 36.4 28.9 84.2 8.2 51.9 51.0 43.9 Feb 285.2 285.1 239.4 179.3 31.8 38.0 25.3 84.2 8.1 51.9 51.0 43.9 Mar 282.2 282.0 236.1 176.3 32.2 34.4 25.4 84.2 8.0 51.9 51.0 43.9 Apr 285.5 285.4 240.2 180.7 34.2 34.4 27.2 84.9 7.8 51.7 50.8 43.3 May 286.4 286.3 240.3 181.0 35.0 33.8 27.3 84.9 7.7 51.5 50.7 44.2 June 284.8 284.7 237.1 178.0 32.0 33.8 27.3 84.9 7.7 51.4 50.5 44.8 July 288.8 288.7 241.8 183.1 37.0 33.8 27.3 84.8 7.6 51.1 50.2 44.1 1 Includes some debt not subject to statutory debt limitation (amounting 4 Includes Treasury bonds and minor amounts of Panama Canal and to $417 million on July 31, 1959) and fully guaranteed securities, not Postal Savings bonds. shown separately. 5 Includes Series A investment bonds, depositary bonds, armed forces 2 Includes non-interest-bearing debt, not shown separately. leave bonds, and adjusted service bonds, not shown separately. 3 Includes amounts held by Govt. agencies and trust funds, which 6 Less than $50 million. aggregated $9,862 million on June 30, 1959. OWNERSHIP OF UNITED STATES GOVERNMENT SECURITIES, DIRECT AND FULLY GUARANTEED [Par value in billions of dollars] Total Held by Held by the public gross U. S. Govt. debt agencies and E m n o d n t o h f in ( s a i g n e n t i c c t e g e u l s u u e r ) d a i d - r - - S is p s t e r u c u e i s a s t l fun P i d s u s s b u * l e i s c Total R F B e e a d s n e e r k r v a s e l m b C a e o n r m c k i s a - 2 l M s b a a v u n i t n u k g a s s l p I c a n a o n s n m u c ie e r - - s r c O a o t t r i h o p e n o r s - g S l a o o t n v c a d a t t e ' l s S b a o v n i I n d n g s d s ivid se u O c a u l t s h ri e ti r es i M t n o v r i e s s c s 3 - . 1941—Dec 64.3 7.0 2.6 54.7 2.3 21.4 3.7 8.2 4.0 .7 5.4 8.2 .9 1945_Dec 278.7 20.0 7.0 251.6 24.3 90.8 10.7 24.0 22.2 6.5 42.9 21.2 9.1 1947—Dec 257.0 29.0 5.4 222.6 22.6 68.7 12.0 23.9 14.1 7.3 46.2 19.4 8.4 1951—Dec 259.5 35.9 6.4 217.2 23.8 61.6 9.8 16.5 20.7 9.6 49.1 15.5 10.6 1952—Dec 267.4 39.2 6.7 221.6 24.7 63.4 9.5 16.1 19.9 11.1 49.2 16.0 11.7 1953—Dec 275.2 41.2 7.1 226.9 25.9 63.7 9.2 15.8 21.5 12.7 49.4 15.5 13.2 1954__Dec 278.8 42.6 7.0 229.2 24.9 69.2 8.8 15.0 19.2 14.4 50.0 13.7 13.9 1955—Dec 280.8 43.9 7.8 229.1 24.8 62.0 8.5 14.3 23.5 15.1 50.2 15.1 15.6 1956— Dec 276.7 45.6 8.4 222.7 24.9 '59.5 8.0 12.8 19.1 16.1 50.1 '16.0 16.1 1957—June 270.6 46.8 8.7 215.1 23.0 '56.2 7.9 12.3 16.1 16.9 49.1 '17.7 16.0 Dec 275.0 45.8 9.4 219.8 24.2 '59.5 7.6 12.0 17.2 17.0 48.2 '17.5 16.5 1958—Apr 275.2 45.4 9.7 220.0 23.7 '63.7 7.6 11.8 15.2 17.1 48.1 '17.2 15.7 May 275.7 46.1 9.7 220.0 24.2 '64.0 7.5 11.7 15.3 17.0 48.1 '17.1 15.4 June 276.4 46.2 9.7 220.5 25.4 '65.3 7.4 11.7 13.9 16.9 48.0 '16.7 15.2 July 275.6 45.9 9.7 220.0 24.5 '65.3 7.4 11.8 14.5 17.0 47.9 '16.4 15.0 Aug 278.6 46.3 9.7 222.6 25.3 '66.8 7.5 11.9 15.3 17.0 47.9 '16.0 14.9 Sept 276.8 46.0 9.6 221.2 25.0 '65.8 7.4 11.9 15.0 17.0 47.9 '15.9 15.3 Oct 280.3 45.4 9.7 225.3 25.4 '67.0 7.4 12.1 16.8 17.2 47.8 '15.9 15.8 Nov 283.2 45.1 9.7 228.4 26.2 '68.0 7.3 12.1 18.0 17.2 47.8 '15.7 16.0 Dec 283.0 44.8 9.6 228.6 26.3 '67.5 7.3 12.1 18.2 17.3 47.7 '15.8 16.5 1959_jan 285.9 43.9 9.6 232.4 25.7 '68.2 7.3 12.4 '19.8 17.7 47.7 '16.8 16.7 Feb 285.2 43.9 9.8 231.6 25.3 '66.3 7.4 12.2 '20.2 17.8 47.6 '17.4 17.3 Mar 282.2 43.9 9.8 228.4 25.5 '63.2 7.4 12.0 '19.5 17.9 47.5 '18.2 17.2 Anr 285.5 43 3 9.8 232.4 25.7 64.7 7.4 12.0 20.9 18.2 47.3 18.5 17.8 May 286.4 44.2 10.0 232.2 25.9 63.2 7.4 12.0 21.4 18.2 47.2 18.6 18.2 ' Revised. 3 Includes savings and loan associations, dealers and brokers, foreign 1 Includes the Postal Savings System. accounts, corporate pension funds, and nonprofit institutions. 2 Includes holdings by banks in territories and insular possessions, NOTE.—Reported data for Federal Reserve Banks and U. S. Govt. which amounted to about $293 million on Dec. 31, 1958. agencies and trust funds; Treasury Department estimates for other groups. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL FINANCE 1017 OWNERSHIP OF UNITED STATES GOVERNMENT MARKETABLE AND CONVERTIBLE SECURITIES 1 [On basis of Treasury Survey data. Par value in millions of dollars] Marketable and convertible securities, by type Marketable securities, by maturity class Type of holder and date Total Bills C c e a r t t e if s i- Notes M bo a a n b rk l d e e s t 2 - v b e C o r o t n i n b d - l s e Total W 1 i y th ea in r y 1 e - a 5 rs y 5 e - a 1 r 0 s O y v e e a r r s 10 All holders: 1955—June 30 166,882 19,514 13,836 40,729 81,128 11,676 155,206 49,703 38,188 33,687 33,628 1956—June 30 166,050 20,808 16,303 35,952 81,890 11,098 154,953 58,714 31,997 31,312 32,930 1957—June 30 165,985 23,420 20,473 30,973 80,839 10,280 155,705 71,033 39,184 14,732 30,756 1958—June 30 175,573 22,406 32,920 20,416 90,932 8,898 166,675 67,782 41,071 22,961 34,860 Dec. 31 183,896 29,748 36,364 26,072 83,402 8,309 175,586 72,616 52,318 18,652 31,999 1959—Mar. 31 184,277 32,234 34,390 25,429 84,240 7,984 176,293 68,025 60,631 14,797 32,839 Apr. 30 188,526 34,244 34,390 27,204 84,871 7,816 180,709 70,115 62,326 14.797 33,471 May 31 188,726 35,014 33,843 27,274 84,861 7,734 180,993 75,954 56,780 14,796 33,463 U. S. Govt. agencies and trust funds: 1955—June 30 7,162 40 119 3,556 3,439 3,723 74 199 506 2,944 1956—June 30 8,236 273 355 688 3,575 3,345 4,891 927 500 434 3,030 1957—June 30 8,554 130 416 ,282 3,664 3,063 5,491 1,138 1,210 295 2,848 1958—June 30 9,477 173 599 ,169 4,703 2,833 6,644 899 1,565 913 3,267 Dec. 31 9,379 78 492 ,338 4,711 2,759 6,620 721 1,696 1,179 3,025 1959—Mar. 31 9,586 198 466 ,273 4,927 2,722 6,864 711 1,830 1,189 3,134 Apr. 30 9,624 93 482 ,386 4,959 2,704 6,920 618 1,916 1,192 3,194 May 31 9,806 175 537 ,397 5,005 2,692 7,114 1,019 1,696 1,205 3,194 Federal Reserve Banks: 1955_june 30 23,607 886 8,274 11,646 802 23,607 17,405 3,773 1,014 ,415 1956—June 30 23,758 855 10,944 9,157 802 23,758 20,242 1,087 1,014 ,415 1957__june 30 23,035 287 11,367 8,579 802 23,035 20,246 681 750 ,358 1958—June 30 25,438 2,703 19,946 789 25,438 23,010 1,014 57 ,358 Dec. 31 26,347 2,284 18,704 484 26,347 20,995 3,881 206 ,264 1959—Mar. 31 25,497 1,496 18,650 2,868 2.484 25,497 20,146 3,881 206 ,264 Apr. 30 25,703 1,679 18,665 2,875 2,484 25,703 20,347 3,886 206 ,264 May 31 25,905 1,904 18,650 2,868 2,484 25,905 20,553 3,881 206 ,264 Commercial banks: 1 1 9 9 5 5 6 5 — _ J ju u n n e e 3 3 0 0 4 5 9 5 , , 6 6 7 6 3 7 2,7 1 2 8 1 1 1 1 , , 0 4 0 5 4 5 1 1 1 5, , 3 6 8 2 5 0 3 34 5 , , 7 9 1 4 2 2 1 1 5 6 5 4 4 5 9 5 , , 5 50 1 3 7 7 7, , 4 1 3 8 3 7 2 1 1 8 , , 7 2 1 3 2 4 2 1 1 9 , , 1 1 1 3 0 2 4 5 , , 7 4 1 9 9 4 1957—June 30 48,734 853 2,913 8,984 33,839 144 48,590 12,268 23.500 8,600 4,222 1958—June 30 57,509 796 3,331 11,532 38,720 130 57,379 13,431 24,494 14,259 5,195 Dec. 31 59,048 194 6,686 12,285 34,753 130 58,918 14,380 29,696 10,433 4,409 1959—Mar. 31 55,103 3,699 4,819 12,453 34,007 126 54,977 8,935 34,028 7,591 4,423 Apr. 30 56,432 4,504 4,583 13,197 34,025 123 56.309 9,527 34.592 7,556 4,634 May 31 55,190 4,384 4,208 12,733 33,745 120 55,070 11,371 31,552 7,558 4,589 Mutual savings banks: 1955—June 30 8,069 84 53 289 6,422 1,222 6,848 164 533 ,405 4,746 1956—June 30 7,735 107 37 356 6,074 1,161 6,574 247 540 ,319 4,468 1957_june 30 7,397 163 114 367 655 1,098 6,299 576 1,082 601 4,040 1958—June 30 7,110 89 132 465 493 931 6,179 303 1,106 675 4,094 Dec. 31 6,942 139 115 538 268 882 6,060 300 1,229 958 3,573 1959—Mar. 31 7,149 233 193 602 304 818 6,331 453 1,365 883 3,630 Apr. 30 7.126 197 186 655 292 796 6,329 407 1,413 868 3,641 May 31 7,138 204 201 670 5,268 795 6,343 503 1,356 865 3,620 Insurance companies: 1955—June 30 13,117 630 74 789 8,479 3,145 9,972 810 1,339 2,027 5,796 1956—June 30 11,702 318 44 760 7,789 2,791 8,911 632 1,192 1,802 5,285 1957—June 30 10,936 326 136 648 7,277 2.549 8,387 955 1,775 1,022 4,634 1958—June 30 10,580 254 112 614 398 2,202 8,378 651 1,650 1,004 5,074 Dec. 31 10,984 726 231 731 255 2,042 8,943 1,158 1,976 1,156 4,653 1959_Mar. 31 10,957 615 323 712 320 1,986 8,971 988 2,198 1,091 4,695 Apr. 30 10,973 605 322 755 349 1,942 9,031 984 2,230 1,095 4,722 May 31 10,968 586 333 763 7,352 1,933 9,035 1,157 2,058 1,110 4,710 Other investors: 1955—June 30 59,260 15,153 3,973 12,502 23,927 3,706 55,554 24,062 10,633 7,626 13,233 1956—June 30 64,947 17,074 3,919 13,371 26,896 3,646 61,301 29,233 10,443 7,612 14,013 1957_june 30 67,329 19,661 5,527 11,113 27,602 3,426 63,904 35,850 10,936 3,464 13,654 1958—June 30 65,459 15,392 8,799 6,636 31,829 2,802 62,657 29,489 11,243 6,054 15,872 Dec. 31 71,195 21,326 10,137 8,304 28,931 2,497 68,698 35,062 13,841 4,719 15,076 1959—Mar. 31 75,986 25,993 9,939 7,523 30,198 2,333 73,653 36,794 17,329 3,836 15,694 Apr. 30 78.667 27,166 10,152 8,336 30,763 2,250 76,416 38,231 18,290 3,880 16,016 May 31 79,719 27,761 9,914 8,845 31,006 2,193 77,526 41,351 16,237 3,851 16,086 1 Direct public issues. panies included in the survey account for over 90 per cent of total holdings 2 Includes minor amounts of Panama Canal and Postal Savings bonds. by these institutions. Data are complete for U. S. Govt. agencies and trust funds and Federal Reserve Banks. NOTE.—Commercial banks, mutual savings banks, and insurance com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1018 FEDERAL FINANCE SUMMARY OF FEDERAL FISCAL OPERATIONS [On basis of U. S. Treasury statements and Treasury Bulletin. In millions of dollars] Derivation of Federal Government cash transactions Receipts from the public, Payments to the public, Net Federal cash borrowing or other than debt other than debt repayt. ( —) of borrowing Excess of rects. Period r B e u c N e d e i g p t e t t s re T P f c u r l e u u n i s d s p : t ts t I G L r n a e o t n s r v s s a t : . - . l E p T r f u q e r t o u b o h c a t l m e t a i s l c s l . 2 : B p t u e u e n d r x e d g - s i e - t p T P t f e u u e r l n u r x n u e d s - d s s : i t - A m L d e e j n s u s t s s : t 3 - E p p t T q o u a u o y b a t t t l h a l s i s e l c . : t p p o f u r a t o o h y b ( r e m t l - i s ) c . , & ( c ( c o ~ d r d r r I e a e i e ) n r a g a d , b e - s s e i e c t e n e n - t , .) t a i m r g G n . e v N o f n . u v e . b n t t & . y L d e s ss: O d n c e a t o h b s n t e h - ^ r b E r i o e n q c ( N p r g a u ) r a e s a o y h o t l w s t r . : - Cal. year—1956. . 70,994 12,398 3,023 80,334 67,216 10,339 2,747 74,809 5,525 -3,560 2,481 -136 -5,910 1957.. 72,284 15,368 3,079 84,521 71,692 14,794 3,155 83,328 1,191 467 1,573 64 -1,168 1958.. 68,694 16,797 3,710 81,728 75,782 17,856 4,622 89,014 -7,287 7,533 -717 487 7,762 Fiscal year—1956. 68,165 11,685 2,739 77,088 66,540 9,436 3,358 72,617 4,471 -578 3,166 623 -4,366 1957. 71,029 14,369 3,242 82,107 69,433 12,961 2,386 80,008 2,099 -1,053 2,339 -292 -3,100 1958. 69,117 16,329 3,493 81,893 71,936 16,069 4,592 83,413 -1,520 6,216 657 -200 5,760 68,158 17,067 3,632 81,549 80,699 18,535 4,678 94,556 -13,007 9,656 -1,080 2,160 8,576 Semiannually: 1 1 9 9 5 5 8 7 — __ J ju a l n y . - - D Ju e n c e 2 3 9 9 , , 3 7 2 9 5 2 7 9 , , 1 1 6 6 7 2 2 1 , , 0 41 8 0 3 4 3 6 5 , , 8 0 3 5 6 7 3 35 6 , , 8 0 7 6 6 0 7 8 , , 1 9 3 3 3 6 3 1 , ,2 3 5 3 4 7 4 41 1 , , 4 9 7 3 5 8 -6 5 , , 8 3 8 6 2 2 5,5 6 5 6 6 0 -1 7 2 7 0 7 - - 1 3 6 4 6 5,71 4 1 9 July-Dec 28,902 7,635 1,627 34,892 39,906 8,921 1,285 47,539 -12,649 6,873 -1,494 653 7,713 1959—Jan.-June 39,256 9,432 2,005 46,657 40,793 9,614 3,393 47,017 -358 2,783 414 1,507 863 Monthly: 1958—June 10,785 2,069 1,167 11,685 6,621 1,562 169 8,015 3,670 -150 140 -6 -285 July 2,946 1,111 271 3,784 6,613 1,786 487 7,912 -4,128 -835 -337 70 -569 Aug 4,838 1,956 236 6,554 6,198 1,412 16 7,594 -1,040 3,017 391 51 2,575 Sept 7,208 885 155 7,936 6,633 1,397 -253 8,283 -348 -1,650 -338 63 -1,374 Oct 2,769 1,025 195 3,596 7,144 1,597 713 8,028 -4,432 3,640 -571 183 4,027 Nov 4,962 1,486 214 6,231 6,237 1,310 346 7,200 -969 2,867 -276 141 3,003 Dec 6,180 1,171 556 6,791 7,080 1,419 -24 8,522 -1,732 -166 -363 145 51 1959—Jan 4,528 759 236 5,049 6,776 1,883 1,074 7,585 -2,536 2,801 -846 101 3,546 Feb 6,576 1,637 212 7,998 6,331 1,462 -232 8,025 -28 -434 128 64 -627 Mar 8,426 1,322 162 9,581 6,461 1,451 789 7,124 2,457 -3,016 93 145 -3,253 Apr 4,258 1,302 171 5,384 6,427 1,905 328 8,005 -2,621 3,491 -665 69 4,086 May 5,425 2,479 189 7,708 6,164 1,426 -288 7,879 -171 1,248 1,148 84 15 Junep 10,042 1,933 1,032 10,939 8,632 1,486 1,719 8,399 2,540 -1,306 555 1,042 -2,903 Effects of operations on Treasurer's account Cash balances: Account of Treasurer of United Operating transactions Financing transactions inc., or dec. ( —) States (end of period) Period s B d u u e N r o p f d i e r l g c t u i e t s t , a l c d T a f c e u t r o u f i n u i o r m c d s n i t u t , - t c o R i l c e T i a a c r s t o e i h o n a n - s. i ( m s o a G + s g b N a u e o l ) r a i e n , v k g n t c t a e o c . y - t e f in i & s a n G v e g N c . e o t F . e n r ( v e u t b c — t d s . y y t . ), I d n ( p e d g - c c u i r ) r o r r b o . e e e r l a s c a i i s s c n s t e e , T o r H u e t a e s s l i u d d r e y a T c u c r r e e o a r u ' s s n - t Balance B ( F a D a a . v b n e a l R k p e il . s o - sit T s T a L in u x r o — e r a y a a n s n - d O as n t s h e e t e ts r tions 5 funds 5 debt funds) Accts. Fiscal year—1956.. 1,626 2,250 '320 173 -2,617 -1,623 -202 331 6,546 522 4,633 ,391 1957.. 1,596 1,409 -518 1,085 -2,300 -2,224 5 -956 5,590 498 4,082 ,010 1958.. -2,819 262 670 567 -197 5,816 140 4,159 9,749 410 8,218 ,121 1959^. -12,541 -1,468 57 71 1,131 8,363 12 -4,399 5,350 535 3,744 ,071 Semiannually: 1957—July-Dec, -6,735 34 159 1,007 21 4,371 -160 -984 4,606 481 3,084 ,041 1958—Jan.-June., 3,916 228 511 -440 -218 1,445 300 5,143 9,749 410 8,218 ,121 July-Dec, -11,004 -1,286 -232 -121 1,144 6,579 -131 -4,788 4,961 358 3,468 ,135 1959—Jan.- June? -1,537 -182 289 192 -13 1,784 143 389 5,350 535 3,744 ,071 Monthly: 1958—June 4,164 508 -914 -729 -332 691 -231 3,619 9,749 410 8,218 ,121 July -3,667 -675 225 -31 330 -877 -65 -4,630 5,119 617 3,262 ,240 Aug -1,361 543 -195 10 -470 3,009 288 1,249 6,368 540 4,769 ,059 Sept 575 -511 -284 -3 314 -1,810 -450 -1,269 5,099 371 3,535 ,193 Oct -4,376 -572 511 -32 519 3,546 161 -565 4,534 363 2,916 ,255 Nov -1,274 177 111 -37 212 2,848 46 1,991 6,525 424 4,879 ,222 Dec -900 -248 -601 -28 239 -138 -113 -1,564 4,961 358 3,468 ,135 1959—Jan -2,248 -1,124 462 -4 1,047 2,879 54 957 5,918 447 4,054 ,417 Feb 245 175 -477 57 47 -697 -7 -644 5,274 492 3,454 ,328 Mar 1,965 -130 507 6 -70 -3,069 45 -836 4,438 398 2,787 ,253 Apr -2,169 -603 355 78 491 3,319 -60 1,531 5,969 539 3,844 ,586 May -739 1,053 -432 1 -980 950 -67 -81 5,888 567 4,117 ,204 June? 1,410 447 -125 54 -548 -1,597 178 -538 5,350 535 3,744 ,071 P Preliminary. r Revised. n.a. Not available. Budget expenditures, and payroll deductions for Federal employees re- 1 Consists primarily of interest payments by Treasury to trust accounts tirement funds. and to Treasury by Govt. agencies, transfers to trust accounts representing 2 Small adjustments to arrive at this total are not shown separately. For other notes, see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL FINANCE 1019 DETAILS OF FEDERAL FISCAL OPERATIONS [On basis of Treasury statements and Treasury Bulletin unless otherwise noted. In millions of dollars] Budget receipts Selected excise taxes (Int. Rev. Serv. repts.) Adjustments from total Income and Budget receipts profit taxes Period B c u N e r d i e e p - g t t e s t Old T - rans H fe i r g s h - to R. R. fu R o n e f d - s B c T u e r o d i e p t - g a t e l s t Individual Corpo- t c a E i x x s e e - s t p m a E x lo e m e n y s - t - 7 O ce r t i e h p - e ts r Liquor b T ac o c - o a t M a n i d f l e r r s r e . s ' - ' f t u a r n u g d s e t 6 f t w r u u n a s y d t m t r i e r e e - n - t ce r i e p - ts W he it ld h- Other ration acct. Fiscal year—1956.. 68,165 6,337 634 3,684 78,820 24,012 11,322 21,299 10,004 7,296 4,887 2,921 1,613 3,778 1957.. 71,029 6,634 1,479 616 3,917 83,675 26,728 12,302 21,531 10,638 7,581 4,895 2,973 1,674 4,098 1958.. 69,117 7,733 2,116 575 4,433 83,974 27,041 11,528 20,533 10,814 8,644 5,414 2,946 1,734 4,316 1959* 68,158 8,004 2,171 527 4,934 83,794 28,996 11,733 18,092 10,763 8,855 5,355 n.a. n.a. n.a. Semi annually: 1957_july-Dec.. 29,325 3,135 1,151 305 655 34,571 13,760 2,874 6,273 5,595 3,445 2,625 1,574 848 2,226 1958—Jan.-June 39,792 4,598 965 270 3,778 49,403 13,281 8,654 14,260 5,219 5,199 2,789 1,372 886 2,090 July-Dec.. 28,902 3,383 1,112 265 634 34,296 13,769 2,827 6,174 5,364 3,653 2,509 1,600 931 1,963 1959—Jan.-June 39,256 4,621 1,059 262 4,300 49,498 15,227 8,906 11,918 5,399 5,202 2,846 n.a. n.a. Monthly: 1958—June 10,785 774 161 43 86 11,849 1,941 1,724 5,906 895 818 565 275 161 n.a. July 2,946 338 177 17 147 3,624 1,195 258 479 926 355 411 252 154 Aug 4,838 1,032 206 72 133 6,280 3,476 123 316 908 ,105 352 249 164 1,006 Sept 7,208 504 188 44 175 8,119 2,093 1,815 2,267 912 549 483 265 160 Oct 2,769 365 180 21 112 3,446 1,225 162 374 954 386 344 328 171 Nov 4,962 747 198 68 4 5,979 3,641 94 319 811 816 298 284 147 Dec 6,180 397 164 44 64 6,848 2,139 373 2,419 853 441 623 222 136 957 1959—Jan 4,528 267 172 14 -26 4,956 948 1,996 424 847 321 420 201 155 Feb 6,576 949 182 71 374 8,152 4,356 846 362 906 1,281 401 209 141 Mar 8,426 799 152 43 1,301 10,722 2,213 725 5,459 927 857 540 245 150 •1,194 Apr 4,258 540 148 16 1,412 6,375 969 3,033 477 852 558 486 243 159 May 5,425 1,417 214 70 1,030 8,155 4,196 617 410 1,020 1,488 424 276 156 June1*... 10,042 649 191 47 208 11,137 2,547 1,689 4,786 846 697 572 n.a. n.a. Budget expenditures8 Major national security Agri- Vet- culture Period Total Total & M de i f l e it n a s r e y M a a s il n s i i c t s a e t r - y A en t e o r m gy ic f a i I n f a n f a n a t n d i l r c . s e I In e t s e t r- ic e b s e r e e f s a i r n t n v a s e s - n - ' d w L a a e n b lf d o a r re t a a c u r g u n e r r l - d a - i- l so N u r u r e a r a - t c l - es! h m C o a u o e n s r r d i c n n e - g g m G o e v r e e a e n n l r t - nsources Fiscal year—1955 64,570 40,626 35,532 2,292 1,857 2,181 6,438 4,457 2,575 4,389 1,202 1,504 1,199 1956 66,540 40,641 35,791 2,611 1,651 1,846 6,846 4,756 2,821 4,868 1,104 2,030 1,627 1957 69,433 43,270 38,439 2,352 1,990 1,976 7,308 4,793 3,022 4,526 1,296 1,455 1,787 1958 71,936 44,142 39,062 2,187 2,268 2,234 7,689 5,026 3,447 4,389 1,543 2,109 1,356 Semiannually: 1957—Jan.-June 35,632 22,676 19,892 1,439 1,060 1,043 3,721 2,502 1,545 2,399 560 574 608 July-Dec 36,060 21,724 19,370 1,031 1,080 1,216 3,912 2,400 1,636 2,651 850 1,003 661 1958—Jan.-June 35,876 22,418 19,692 1,156 1,188 1,018 3,777 2,626 1,811 1,738 693 1,106 695 July-Dec 39,906 23,246 20,619 1,145 1,269 1,206 3,686 2,580 2,158 3,922 896 1,438 765 Monthly: 1958—May 5,846 3,653 3,195 212 201 127 603 436 291 235 121 252 132 June 6,621 4,312 3,891 173 208 286 622 431 386 257 162 45 127 July 6,613 3,752 3,196 294 222 222 648 431 356 630 122 298 148 Aug 6,198 3,605 3,205 122 215 233 578 404 368 495 151 233 127 Sept 6,633 3,863 3,489 151 189 158 586 410 345 769 165 212 123 Oct 7,144 4,225 3,802 168 221 220 608 454 436 673 166 233 135 Nov 6,237 3,589 3,169 189 211 175 614 441 343 574 151 238 109 Dec 7,080 4,212 3,758 221 211 198 652 440 310 781 141 224 123 1959—Jan 6,776 3,693 3,298 163 213 212 680 445 432 798 106 310 97 Feb 6,331 3,596 3,218 143 203 176 636 440 -52 610 114 320 500 Mar 6,462 3,864 3,434 195 217 184 657 441 326 394 106 343 147 Apr 6,427 3,898 3,465 209 211 162 656 361 482 351 125 242 150 May 6,164 3,642 3,253 165 214 167 658 433 355 273 122 389 129 3 Consists primarily of (1) intra-Governmental transactions as de- 8 The 1960 Budget document showed certain revisions in fiscal year data. scribed in note 1, (2) net accruals over payments of interest on savings When the revisions were in classification of functions—such as the shift bonds and Treasury bills, (3) Budget expenditures involving issuance of of defense-support activities from military assistance and major national Federal securities, (4) cash transactions between International Monetary security to international affairs—the revisions were made in monthly and Fund and the Treasury, (5) reconciliation items to Treasury cash, and semiannual data. Other fiscal year revisions not available for monthly (6) net operating transactions of Govt. sponsored enterprises. and semiannual periods. 4 Primarily adjustments 2, 3, and 4, described in note 3. For more details, see the 1960 Budget document and the Treasury 5 Excludes net transactions of Govt. sponsored enterprises, which are Bulletin, Table 4. included in the corresponding columns above. 9 Includes stockpiling and defense production expansion not shown 6 Includes transfers to Federal disability insurance trust fund. separately. 7 Represents the sum of taxes for old-age insurance, railroad retire- For other notes, see opposite page. ment, and unemployment insurance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1020 FEDERAL BUSINESS-TYPE ACTIVITIES SELECTED ASSETS AND LIABILITIES OF FEDERAL BUSINESS-TYPE ACTIVITIES [Based on compilation by Treasury Department. In millions of dollars] End of year End of quarter Asset or liability, and activityl 1958 1959 1952 1953 1954 1955 1956 1957 Loans, by purpose and agency: To aid agriculture, total 5,070 6,811 6,929 6,715 6,752 6,681 7,605 6,931 7,402 8,672 9,630 Banks for cooperatives 424 377 367 375 457 454 428 410 473 511 518 Federal intermediate credit banks2 673 590 638 689 734 935 1,040 1,228 1,247 1,169 1,313 Farmers Home Administration 596 648 701 681 724 832 906 903 900 819 935 Rural Electification Administration 1,920 2.096 2,226 2,348 2,488 2,688 2,732 2,774 2,820 2,874 2,919 Commodity Credit Corporation 1,426 3.076 2,981 2,621 2,349 1,778 2,499 1,600 1.962 3,298 3,944 Other agencies 31 23 18 1 (3 (3) (3) To aid home owners, total 2,603 2,930 2,907 3,205 3,680 4,769 4,917 4,628 4,607 4,860 5,352 Federal National Mortgage Association 2,242 2,462 2,461 2,641 3,072 3.998 4.096 3.776 3,716 3,924 4,362 Veterans Administration 362 ' 300 383 480 464 770 820 851 890 936 989 Other agencies 1 168 63 84 145 1 1 1 1 1 1 To industry, total 598 588 431 678 619 674 645 654 658 680 695 Treasury Department... 174 353 306 209 251 224 222 221 216 212 C O o th m e m r a e g rc e e n c D ie e s partment. \ 598 \ 413 79 > 1 2 1 61 2 2 1 1 9 9 1 2 20 1 6 7 2 2 1 0 9 3 2 1 4 9 1 1 2 1 4 9 7 0 2 1 7 8 8 7 3 1 0 8 1 2 To financing institutions 864 952 870 1,419 1,233 1,270 701 931 1,010 1,298 1,087 To aid States, territories, etc., total 1,020 645 272 245 246 264 275 271 294 293 291 Public Housing Administration 894 500 112 90 106 105 107 91 106 106 91 Other agencies 126 145 160 155 140 159 167 180 188 187 200 Foreign, total 7,736 8,043 8,001 7,988 8,223 8,754 8,965 9,022 9,271 9,510 9,712 Export-Import Bank 2,496 2,833 2,806 2,702 2,701 3,040 3.111 3,094 3,239 3,362 3,439 Treasury Department4 3,667 3,620 3,570 3,519 3,470 3,470 3,470 3,470 3.470 3,419 3,419 International Cooperation Administration 51,515 1,537 1,624 1,767 1,995 2,195 2.338 2,412 2,514 2,682 2,782 Other agencies 58 53 1 57 49 46 45 47 46 73 AH other purposes, total 75 119 166 256 213 344 393 449 548 562 Housing and Home Finance Agency 5 29 127 209 156 283 331 383 423 458 497 Other agencies 69 90 39 47 57 62 62 65 66 89 66 Less: Reserves for losses -140 -203 -228 -268 -309 -367 -354 -486 -450 -368 -353 Total loans receivable (net) . 17,826 19,883 19,348 20,238 20,657 22,395 23,147 22,383 23,280 25,493 26,977 Investments: U. S. Government securities, total 2,421 2,602 2,967 3,236 3,739 3,804 4,523 4,467 4,365 4,198 4,533 Federal home loan banks 311 387 641 745 1,018 896 1,456 1,366 1,250 995 1,202 Federal Savings and Loan Insurance Corp 208 217 228 241 256 274 283 293 278 288 296 Federal Housing Administration 316 319 327 381 458 471 533 536 559 567 586 Federal Deposit Insurance Corporation 1,437 1,526 1.624 1,720 1,825 1,937 2,013 2,030 2,034 2,049 2,139 Other agencies 148 152 147 149 181 226 238 242 245 300 310 Investment in international institutions 3,385 3,385 3,385 3,385 3,420 3,420 3,420 3,420 3,420 3,420 3,420 Other securities6 223 219 197 179 249 298 333 3,696 3,703 3,703 3,702 Inventories, total 1,280 2,515 3,852 4,356 21,375 21,628 21,206 21,540 20,743 20,810 20,504 Commodity Credit Corporation.. 978 2,087 3,302 3,747 3,651 3,025 2,636 3.310 3.013 3.036 2,906 Defense Department 11,004 11,136 10,866 10.344 9,730 9,681 9,421 O G t e h n e e r r a a l g e S n e c rv ie i s ces Administration. 303 428 550 609 J \ 6 . 2 5 0 1 1 7 7,2 1 8 85 2 7,5 1 2 7 8 5 7,7 1 0 8 0 6 7,8 1 0 9 9 1 7,9 1 1 7 9 4 7,9 1 8 9 7 1 Land, structures, and equipment, total 3,213 8,062 8,046 7,822 9,985 9,962 10,020 10,459 10,422 10,670 10,753 Commerce Dept. (primarily maritime activities) 4.834 4,798 4,822 4,502 4,535 4,568 4,589 4.550 4,721 4,736 Panama Canal Company 415 363 421 421 398 398 396 396 398 396 402 Tennessee Valley Authority 1,251 1,475 1.739 1,829 1,762 1,801 1,789 1,803 1,790 1,777 1,802 Housing and Home Finance Agency 1,202 1,040 728 450 236 88 77 32 26 25 20 Nat. Aeronautics and Space Administration 276 283 274 280 282 285 289 Bonneville Power Administration 311 342 345 349 371 372 373 General Services Administration 1,298 1,308 1,327 1,341 1,319 1,322 1,237 Post Office Department 590 599 599 637 637 637 637 Other agencies 345 350 360 300 613 608 644 1,033 1,050 1,134 1,257 Bonds, notes, & debentures payable (not guar.), total. .. 1,330 1,182 1,068 2,379 2,711 4,662 4,749 3,812 3,981 4,038 4,212 Banks for cooperatives 181 150 156 185 257 247 224 207 260 303 310 Federal intermediate credit banks 704 619 640 665 721 902 992 1,181 1,211 1,124 1,256 Federal home loan banks 445 414 272 958 963 825 468 455 612 714 699 Federal National Mortgage Association 570 770 3,065 1,968 1,898 1,898 1,947 1 Figures except for trust revolving funds (shown separately on p. 1063 the banks for cooperatives; Treasury compilations prior to 1956 classified of this BULLETIN) exclude interagency items. Loans by purpose and this item as an interagency asset. agency are shown on a gross basis; total loans and all other assets, on a net basis, i.e., after reserve for losses. NOTE.—Coverage has changed in some of the periods shown. Be- 2 Effective Jan. 1, 1957, the production credit corporations were merged ginning 1956, changes reflect the expanded coverage and the new classiin the Federal intermediate credit banks, pursuant to the Farm Credit fication of agencies now reported in the Treasury Bulletin. The revised Act of 1956, approved July 26, 1956 (70 Stat. 659). Thereafter operations statement includes a larger number of agencies, and their activities are of the banks are classified as trust revolving transactions. classified according to the type of fund they represent. Funds are com- 3 Less than $500,000. bined in this table. They are shown separately in a special table at the 4 Figures represent largely the Treasury loan to the United Kingdom, end of the domestic tabular section, whenever quarterly data become and through 1952 are based in part on information not shown in Treasury available. Classifications by supervisory authorities are those in excompilation. istence currently. Where current Treasury compilations do not provide 5 Figure derived by Federal Reserve. a detailed breakdown of loans, these items have been classified by Federal 6 Includes investment of the Agricultural Marketing revolving fund in Reserve on basis of information about the type of lending activity involved. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

REAL ESTATE CREDIT 1021 MORTGAGE DEBT OUTSTANDING, BY TYPE OF PROPERTY MORTGAGED AND TYPE OF MORTGAGE HOLDER [In billions of dollars] All properties Nonfarm Farm Other Multi-family and End of year holders 1- to 4-family houses commercial properties1 or quarter All Finan- All All Finanhold- cial hold- hold- cial Other ers insti- Selected Indi- ers Finan- Other Finan- Other ers insti- holders2 tutions Federal viduals Total cial hold- Total cial hold- tutions agen- and insti- ers insti- ers cies others tutions tutions 1941 37.6 20.7 2.0 14.9 31.2 18.4 11.2 7.2 12.9 8.1 4.8 6.4 1.5 4.9 1945 35.5 21.0 .9 13.7 30.8 18.6 12.2 6.4 12.2 7.4 4.7 4.8 1.3 3.4 1951 82.3 59.5 2.0 20.8 75.6 51.7 41.1 10.7 23.9 15.9 8.0 6.7 2.6 4.1 1952 91.4 66.9 2.4 22.1 84.2 58.5 46.8 11.7 25.7 17.2 8.4 7.3 2.8 4.4 1953 101.3 75.1 2.8 23.5 93.6 66.1 53.6 12.5 27.5 18.5 9.0 7.8 3.0 4.8 1954 r 113.7 85.7 2.8 25.2 105.4 75.7 62.5 13.2 29.7 19.9 9.8 8.3 3.3 5.0 1955r 129.9 99.3 3.1 27.5 120.9 88.2 73.8 14.4 32.6 21.8 10.8 9.1 3.6 5.4 1956 144.5 111.2 3.6 29.7 134.6 99.0 83.4 15.6 35.6 23.9 11.7 9.9 3.9 6.0 1957 156.6 119.7 4.7 32.1 146.1 107.6 89.9 17.7 38.5 25.8 12.7 10.5 4.0 6.5 1958^ 171.4 131.5 35.0 160.2 117.8 98.9 18.9 42.4 28.4 14.0 11.2 4.2 7.0 1957—Sept.. 153.7 117.7 4.5 31.6 143.3 105.7 88.5 17.2 37.5 25.2 12.4 10.4 4.0 6.4 Dec... 156.6 119.7 4.7 32.1 146.1 107.6 89.9 17.7 38.5 25.8 12.7 10.5 4.0 6.5 1958—Mar.?3 159.1 121.5 4.9 32.7 148.5 109.3 91.2 18.1 39.2 26.2 12.9 10.6 4.1 6.6 June*\ 162.6 124.5 4.6 33.5 151.7 111.6 93.5 18.1 40.1 26.9 13.2 10.9 4.1 6.7 Sept.P 166.7 127.9 4.6 34.2 155.7 114.6 96.2 18.4 41.0 27.5 13.5 11.1 4.2 6.9 Dec.P. 171.4 131.5 4.8 35.0 160.2 117.8 98.9 18.9 42.4 28.4 14.0 11.2 4.2 7.0 1959—Mar.^ 175.5 134.3 5.3 35.9 164.0 120.6 101.0 19.6 43.4 29.0 14.4 11.5 4.3 7.2 v Preliminary. r Revised. Federal agencies represent HOLC, FNMA, and VA (the bulk of the 1 Derived figures, which include negligible amount of farm loans held amounts through 1948 held by HOLC, since then by FNMA). Other by savings and loan associations. Federal agencies (amounts small and separate data not readily available 2 Derived figures, which include debt held by Federal land banks and currently) are included with individuals and others. Farmers Home Administration. Sources.—Federal Deposit Insurance Corporation, Federal Home Loan NOTE.—Figures for first three quarters of each year are Federal Reserve Bank Board, Institute of Life Insurance, Departments of Agriculture estimates. Financial institutions represent commercial banks (including and Commerce, Federal National Mortgage Association, Veterans Adnondeposit trust companies but not trust departments), mutual savings ministration, Comptroller of the Currency, and Federal Reserve. banks, life insurance companies, and savings and loan associations. MORTGAGE LOANS HELD BY BANKS' [In millions of dollars] Commercial bank holdings2 Mutual savings bank holdings3 End of year Residential Residential or quarter Other Other Total non- Farm Total non- Farm FHA- VA- Con- farm FHA- VA- Con- farm Total in- guar- ven- Total in- guar- vensured anteed tional sured anteed tional 1941 4,906 3,292 1 048 566 4 812 3 884 900 28 1945 4,772 3,395 856 521 4,208 3,387 797 24 1951 14,732 11,270 3,421 2.921 4,929 2,458 1 .004 9,916 8,595 2,567 1.726 4 303 1 274 47 1952 15 86712 188 3 675 3 012 5 501 2 621 058 11 379 9 883 3 168 2 237 4 477 1 444 53 1953 16,850 12,925 3,912 3,061 5,951 2,843 ,08? 12,943 11,334 3,489 3,053 4 792 1 S56 53 1954 18 573 14,152 4,106 3,350 6 695 3 263 159 15,007 13 211 3 800 4 262 5 149 1 740 56 1955 21,004 15,888 4,560 3,711 7,617 3,819 ,297 17,457 15,568 4,150 5,773 5,645 1,831 58 1956 22,719 17,004 4 803 3 902 8 300 4,379 336 19,745 17,703 4 409 7 139 6 1^5 1 984 59 1957 23,337 17,147 4,823 3,589 8,735 4,823 367 21,169 19,010 4,669 7,790 6,551 2,102 57 1958P 25,523 18,591 5,476 3,335 9,780 5,461 ,471 23,265 20,936 5,501 8,360 7,074 2,276 53 1957 Sept . . . 23,105 17,070 4,750 3,660 8,660 4,660 ,375 20,812 18,687 4,575 7,660 6,452 2,068 57 Dec 23,337 17,147 4,823 3,589 8,735 4,823 ,367 21,169 19,010 4,669 7,790 6,551 2,102 57 1958 Marv 23,400 17,125 4,825 3,485 8,815 4,880 ,395 21,565 19,371 4,810 7,937 6,624 2,137 57 June33 23 960 17 460 4 970 3 405 9 085 5 060 ,440 22,165 19,927 5,047 8,160 6,720 2,181 57 Sept p 24 700 18 055 5 205 3,355 9,495 5,184 ,461 22,746 20,460 5,280 8,276 6,904 2,231 55 Dec P 25,523 18,591 5,476 3,335 9,780 5,461 471 23,265 20,936 5,501 8,360 7,074 2,276 53 1959 Mar p 26,130 19,012 5,660 3,317 10,035 5,633 1,485 23,638 21,282 5,674 8,423 7,185 2,305 51 P Preliminary. based on Federal Reserve preliminary tabulation of a revised series of 1 Represents all banks in the United States and possessions. banking statistics. March and September figures are Federal Reserve 2 Includes loans held by nondeposit trust companies but excludes estimates based in part on data from National Association of Mutual holdings of trust departments of commercial banks. March and Septem- Savings Banks. ber figures are Federal Reserve estimates based on data from Member Sources.—All-bank series prepared by Federal Deposit Insurance Bank Call Report and from weekly reporting member banks. Corporation from data supplied by Federal and State bank supervisory 3 Figures for 1941 and 1945, except for the grand total, are estimates agencies, Comptroller of the Currency, and Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1022 REAL ESTATE CREDIT MORTGAGE ACTIVITY OF LIFE INSURANCE COMPANIES [In millions of dollars] Loans acquired Loans outstanding (end of period) Nonfarm Nonfarm Year or month Total Total FHA- g V u A ar - - Other Farm Total Total FHA- g V u A ar - - Other Farm insured anteed insured anteed 1941 6,442 5 529 815 4 714 913 1945 976 6,636 5,860 1,394 4,466 776 1951 5,134 4,723 1,058 1 294 2,371 411 19,314 17,787 5,257 3,131 9,399 1,527 1952 3,978 3,606 864 429 2 313 372 21,251 19 546 5 681 3 347 10 518 1,705 1953 4,345 3,925 817 455 2,653 420 23,322 21,436 6,012 3,560 11,864 1,886 1954 5,344 4,931 672 1,378 2,881 413 25,976 23,928 6,116 4,643 13,169 2,048 1955 6,623 6,108 971 1 839 3 298 515 29,445 27 172 6,395 6 074 14 703 2,273 1956 6,715 6,201 842 1,652 3,707 514 32,989 30,508 6,627 7,304 16,577 2,481 1957 5,230 4,823 653 831 3,339 407 35,236 32,652 6,751 7,721 18,180 2,584 1958 5,277 4,839 1,301 195 3 343 438 37,062 34,395 7,443 7 433 19,519 2,667 1958—June 368 341 95 20 226 27 36,060 33,409 7,038 7 677 18 694 2,651 July 428 398 103 16 279 30 36,183 33.519 7,076 7,651 18,792 2,664 Aug 437 406 109 5 292 31 36,323 33 645 7 123 7 619 18 903 2 678 Sept 451 421 125 7 289 30 36,472 33,786 7,212 7 561 19,013 2,686 Oct 516 485 141 9 335 31 36,648 33,955 7,282 7,527 19,146 2,693 Nov 429 397 121 8 268 32 36,794 34 093 7 347 7 492 19,254 2,701 Dec 642 592 155 12 425 50 37,097 34,388 7,449 7,455 19,484 2,709 1959—Jan 508 466 139 11 316 42 37,211 34,510 7,528 7,429 19,553 2,701 Feb 420 364 141 9 214 56 37,350 34,635 7,623 7 392 19 620 2,715 Mar 473 410 130 10 270 63 37,486 34,753 7,693 7,347 19,713 2,733 Apr 432 385 120 13 252 47 37,602 34,851 7,758 7,314 19,779 2,751 May 433 386 105 18 263 47 37 737 34 958 7 813 7 286 19 859 2 779 June 469 428 116 17 295 41 37,894 35,094 7,877 7,258 19.959 2,800 NOTE.—For loans acquired, the monthly figures may not add to annual values, and because data for year-end adjustments are more complete. totals, and for loans outstanding, the end-of-December figures may differ Source.—Institute of Life Insurance; end-of-year figures are from from end-of-year figures, because monthly figures represent book value of Life Insurance Fact Book, and end-of-month figures from the Tally of ledger assets whereas year-end figures represent annual statement asset Life Insurance Statistics and Life Insurance News Data. MORTGAGE ACTIVITY OF SAVINGS AND LOAN ASSOCIATIONS NONFARM MORTGAGE RECORDING OF $20,00© OR LESS [In millions of dollars] [In millions of dollars] Loans made Loans outstanding (end of period) Total By type of lender (without seasonal adjustment) Y m e o a n r th or Total i s N c t t i r o e o u n w n c - - H c p h o u a m r s - e e Total 2 F su H in re A - d - a g n V u t A e a e r - - d ti C v o e o n n n a - l - 2 Y m e o a n r t o h r Se a a a l d s ly o - n- s W e a a d it s j h o u o n s u t a - t l in l S o g a a s v n - & I c a n o n s m u ce r - - C m c o i e a m r l - - M i s u n a t g v u s - al justed l ment2 assns. panies banks banks 1941 1,379 437 581 4,578 1945 1,913 181 1,358 5,376 1941 4,732 1,490 404 1,165 218 1945 5,650 2,017 250 1,097 217 1952 6,617 2,105 2,955 18,396 904 3,394 14,098 1953 7,767 2,475 3,488 21,962 1,048 3,979 16,935 1952 18,01'8 6,452 1,420 3,600 1,137 1954 8,969 3,076 3,846 26,108 1,170 4,709 20,229 1953 19,747 7,365 1,480 3,680 1,327 1955 11,432 4,041 5,241 31,408 1,404 5,883 24,121 1954 . . 22,974 8,312 1,768 4,239 1,501 1956 10,545 3,771 4,727 35,729 1,486 6,643 27,600 1955 28,484 10,452 1,932 5,617 1,858 1957 10,402 3,562 4,708 40,007 1,643 7,011 31,353 1956 27,088 9,532 1,799 5,458 1,824 1958 12,346 4,096 5,251 45,599 2,210 7,093 36,296 1957 24,244 9,217 1 472 4,264 1,429 1958 27,388 10,516 1,460 5,204 1,640 1958 1958 June 1,107 379 461 42,333 1,833 6,995 33,505 July 1,180 374 511 42,866 1,901 7,012 33,953 May 2,087 2,151 845 113 418 120 Aug 1,180 373 538 43,423 1,940 7,034 34,449 June 2,192 2,275 910 110 429 140 Sept 1,215 401 537 43,997 2,007 7,031 34,959 July 2,291 2,543 986 125 491 165 Oct 1,290 428 570 44,602 2,084 7,053 35,465 2,413 2,535 995 130 476 169 Nov 1,053 345 469 45,067 2,155 7,062 35,850 Sept 2,488 2,596 1,022 136 493 170 Dec 1,136 376 488 45,599 2,210 7,093 36,296 Oct 2,576 2,857 1,086 150 558 175 Nov 2,652 2,432 932 128 474 154 1959 Dec 2,629 2,629 983 143 508 165 Jan 1,013 317 442 46,009 2,277 7,109 36,623 1959 Feb 1,012 326 429 46,436 2,331 7,127 36,978 Mar 1,257 439 515 47,029 2,392 7,117 37,520 Jan 2,677 2,352 870 121 454 123 Apr 1,359 480 562 47,733 2,466 7,126 38,141 Feb 2,631 2,245 865 106 426 113 May 1,434 522 601 48,483 2,532 7,136 38,815 Mar 2,683 2,586 1,059 116 492 112 June** 1,598 584 674 Apr 2,683 2,776 1,148 115 553 124 May 2,768 1,151 112 534 140 P Preliminary. 1 Includes loans for other purposes (for repair, additions and alterations, 1 Three-month moving average, seasonally adjusted by Federal Rerefinancing, etc.) not shown separately. serve. 2 Beginning 1958 includes shares pledged against mortgage loans. 2 Includes amounts for other lenders, not shown separately. Source.—Federal Home Loan Bank Board. Source.—Federal Home Loan Bank Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

REAL ESTATE CREDIT 1023 GOVERNMENT-UNDERWRITTEN RESIDENTIAL LOANS MADE MORTGAGE DEBT OUTSTANDING ON NONFARM 1- TO 4-FAMILY PROPERTIES [In millions of dollars] [In billions of dollars] FHA-insured loans VA-guaranteed loans Home Home Year or month mortgages P e r c o t j - - P e i r m r o t p y - - mortgages End of G un o d v e e r r w nm rit e t n en t- Con- Total p e N r r t e o i w e p s - p i e s E r r t t o i x i n p e - g s - g m t a y g o p e r e s t- t p lo m r a o e n v n s e t 2 - Total 3 p e N r r t e o i w e p s - p e is E r r t t o i x i n e p - g s - q ye u a a r r t o e r r Total FHA- VA- ti v o e n n a - l Total in- guarsured anteed 1945 665 257 217 20 171 192 1950 4,343 1,637 856 1,157 694 3,072 1,865 1,202 1945 18.6 4.3 4.1 .2 14.3 1951 3,220 1,216 713 582 708 3,614 2,667 942 1952 3,113 969 974 322 848 2,719 1,823 890 1950 45.2 18.9 8.6 10.3 26.3 1953 3,882 1,259 1,030 259 1,334 3,064 2,044 1,014 1951 51.7 22.9 9.7 13.2 28.8 1954 3,066 1,035 907 232 891 4,257 2,686 1,566 1952.. .. 58.5 25.4 10.8 14.6 33.1 1955 3,807 1,269 1,816 76 646 7,156 4,582 2,564 1953 66.1 28.1 12.0 16.1 38.0 1956 3,461 1,133 1,505 130 692 5,868 3,910 1,948 1954 75.7 32.1 12.8 19.3 43.6 1957 3,715 880 1,371 595 869 3,761 2,890 863 1955 88.2 38.9 14.3 24.6 49.3 1958 6,349 1,666 2,885 929 868 1,865 1,311 549 1956 99.0 43.9 15.5 28.4 55.1 1957 .. 107.6 47.2 16.5 30.7 60.4 1958—June. 551 126 217 128 81 97 71 27 1958? 117.8 50.1 19.7 67.7 July. 524 132 236 98 58 127 83 43 Aug. 599 128 243 170 58 156 91 64 1957—Sept 105.7 46.5 16.1 30.4 59.2 Sept 756 160 320 146 130 189 107 82 Dec 107.6 47.2 16.5 30.7 60.4 Oct.. 641 174 327 58 83 239 140 99 Nov. 559 165 292 31 71 216 135 81 1958—MSLT.P. .. 109.3 47.7 17.1 30.6 61.6 Dec.. 624 190 320 24 89 257 174 82 June * .. 111.6 48.3 17.7 30.6 63.3 Sept.p... 114.6 49.1 18.6 30.5 65.5 1959—Jan.. 700 217 369 37 77 276 194 81 117.8 50.1 19.7 30.4 67.7 Feb.. 598 196 311 37 54 238 174 64 Mar 643 211 319 33 81 260 201 59 1959—Mar.P. .. 120.6 51.3 20.9 30.4 69.3 Apr.. 639 196 294 80 69 231 179 52 May. 652 186 291 86 88 211 161 50 June 680 208 312 68 92 221 165 56 P Preliminary. NOTE.—For total debt outstanding, figures for first 1 Monthly figures do not reflect mortgage amendments included in annual totals. three quarters of year are Federal Reserve estimates. 2 These loans are not ordinarily secured by mortgages. For conventional, figures are derived. 3 Includes a small amount of alteration and repair loans, not shown separately; only such Sources.—Federal Home Loan Bank Board, Federal loans in amounts of more than $1,000 need be secured. Housing Administration, Veterans Administration, and NOTE.—FHA-insured loans represent gross amount of insurance written; VA-guaranteed Federal Reserve. loans, gross amount of loans closed. Figures do not take account of principal repayments on previously insured or guaranteed loans. For VA-guaranteed loans, amounts by type are derived from data on number and average amount of loans closed. Sources.—Federal Housing Administration and Veterans Administration. FEDERAL NATIONAL MORTGAGE ASSOCIATION ACTIVITY i FEDERAL HOME LOAN BANK LENDING [In millions of dollars] [In millions of dollars] Mortgage Advances outstanding Mortgage holdings transactions Com- (end of period) End of year ( p d e u r r io in d g ) m m e i n t t - s Year or month Ad- Repayor month Total F su H in re A - d - a g n V u t A a e r e - - d c P ha u s r e - s Sales bu d u r i n s s - e - d Total S te h r o m rt 1 - L t o e n r g m - 2 1945 278 213 195 176 19 1950 1,347 169 1,177 1 044 469 485 1950 675 292 816 547 269 1951 1,850 204 1,646 677 111 239 1951 423 433 806 508 298 1952 2,242 320 1,922 538 56 323 1952 586 528 864 565 299 1953 2,462 621 1,841 542 221 638 1953 728 640 952 634 317 1954 2,434 802 1,632 614 525 476 1954 734 818 867 612 255 1955 2,615 901 1,714 411 62 76 1955 1,251 702 1,417 991 426 1956 3,047 978 2,069 609 5 360 1956 745 934 1,228 798 430 1957 3,974 ,237 2,737 1,119 2 764 1957 1,116 1,079 1,265 731 534 1958 3,901 1,483 2,418 623 482 1.541 1958 1,364 1,331 1,298 685 613 1958—June 3,753 [,309 2,444 22 176 [,142 1958—June, 178 50 929 372 557 Julv 3,703 1,300 2,403 17 51 1,308 July. 108 137 901 392 509 Aug 3,683 1,298 2,385 22 23 1,543 Aug. 100 62 939 427 512 Sept 3,693 ,320 2,373 37 8 1,674 Sept. 119 48 ,010 490 520 Oct . 3,729 1,353 2,376 59 1 1,669 Oct.. 126 52 ,083 545 538 Nov 3,791 1,405 2,386 82 1 ,640 Nov. 86 47 ,123 576 547 Dec 3,901 1,483 2,418 134 1,541 Dec. 229 53 ,298 685 613 1959 Jan 4,032 1,564 2,468 150 1,432 1959—Jan.. 98 251 ,146 599 547 Feb 4 188 1,664 2,523 176 .291 Feb.. 50 94 ,101 559 542 Mar 4,340 ,740 2,600 175 1 1,182 Mar. 83 96 ,087 531 556 Apr .. 4 508 1,831 2,677 193 1,063 Apr., 157 62 ,183 570 612 May . 4 641 .900 2,740 154 982 May 116 53 ,246 596 650 June 4,793 2,000 2,794 177 1 875 June 351 60 1,537 750 786 1 Operations beginning Nov. 1, 1954, are on the basis of FNMA's new 1 Secured or unsecured loans maturing in one year or less. charter, under which it maintains three separate programs: secondary 2 Secured loans, amortized quarterly, having maturities of more than market, special assistance, and management and liquidation. one year but not more than ten years. Source.—Federal National Mortgage Association. Source.—Federal Home Loan Bank Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1024 CONSUMER CREDIT CONSUMER CREDIT, BY MAJOR PARTS [Estimated amounts of short- and intermediate-term credit outstanding, in millions of dollars] Instalment credit Noninstalment credit End of year or month Total Total m p A a o u p b t e o i r l - e 1 co p g O n a o s t p o h u e d e m r r s 1 er e a r n R l n d o i e a z p m n a a s t o i i 2 o r d n - Pe lo rs a o n n s al Total p S a l i y o n m a g n l e s e n - t a C cc h o a u rg n e ts S c e r r e v d i i c t e 1939 7,222 4,503 1,497 1,620 1,088 2,719 787 1,414 518 1941 9,172 6,085 2,458 1,929 376 1,322 3,087 845 1,645 597 1945 5,665 2,462 455 816 182 1,009 3,203 746 1,612 845 1951 22,617 15,294 5,972 4,880 1,085 3,357 7,323 1,934 3,605 1,784 1952 27,401 19,403 7,733 6,174 1,385 4,111 7,998 2,120 4,011 1,867 1953 31,243 23,005 9,835 6,779 1,610 4,781 8,238 2,187 4,124 1,927 1954 32,292 23,568 9,809 6,751 1,616 5,392 8,724 2,408 4,308 2,008 1955 38,670 28,958 13,472 7,634 1,689 6,163 9,712 3,002 4,579 2,131 1956 42,097 31,827 14,459 8,510 1,895 6,963 10,270 3,253 4,735 2,282 1957 44,774 34,095 15,409 8,692 2,091 7,903 10,679 3,365 4,829 2,485 1958 45,065 33,865 14,131 9,007 2,145 8,582 11,200 3,543 5,018 2,639 1958—June 43,079 33,008 14,590 8,190 2,048 8,180 10,071 3,482 4,012 2,577 July 42,923 33,074 14,567 8,197 2,061 8,249 9,849 3,373 3,927 2,549 Aug 43,128 33,165 14,514 8,254 2,091 8,306 9,963 3,453 3,956 2,554 Sept 43,144 33,079 14,332 8,312 2,107 8,328 10,065 3,495 4,033 2,537 Oct 43,164 33,052 14,164 8,411 2,128 8,349 10,112 3,414 4,191 2,507 Nov 43,464 33,126 14,066 8,528 2,146 8,386 10,338 3,499 4,297 2,542 Dec 45,065 33,865 14,131 9,007 2,145 8,582 11,200 3,543 5,018 2,639 1959—Jan 44,415 33,768 14,155 8,881 2,125 8,607 10,647 3,464 4,504 2,679 Feb 44,071 33,751 14,223 8,767 2,116 8,645 10,320 3,563 4,004 2,753 Mar 44,203 33,943 14,375 8,721 ,127 8,720 10,260 3,618 3,883 2,759 Apr 44,916 34,453 14,686 8,777 ,149 8,841 10,463 3,674 3,997 2,792 May 45,790 35,029 14,991 8,911 ,198 8,929 10,761 3,779 4,220 2,762 June 46,716 35,810 15,419 9,077 2,240 9,074 10,906 3,842 4,318 2,746 1 Represents all consumer instalment credit extended for the purpose NOTE.—Monthly figures for the period December 1939 through 1947, of purchasing automobiles and other consumer goods, whether held by and a general description of the series are shown on pp. 336-54 of the retail outlets or financial institutions. Includes credit on purchases by BULLETIN for April 1953; monthly figures for 1948-57, in the BULLETINS individuals of automobiles or other consumer goods that may be used for October 1956, pp. 1035-42, December 1957, pp. 1420-22, and Novemin part for business. ber 1958, pp. 1344-45. A detailed description of the methods used to 2 Represents repair and modernization loans held by financial institu- derive the estimates may be obtained from Division of Research and tions; holdings of retail outlets are included in other consumer goods Statistics. paper. INSTALMENT CREDIT, BY HOLDER [Estimated amounts outstanding, in millions of dollars] Financial institutions Retail outlets Total E o n r d m of o n y t e h ar i c m n r s e e t d n a i l t t - Total m b C e a o r n m c k ia s - l f p i c S n a o a a n m l n i e e c s - s e u C n r i e o d n i s t p f s i C c a u n o n m o a i m n n e e c s - - r e l Other i Total D s m t e o p e r a e n r s t t 2 - F s t t u o u r r r n e e i s - H s a h a t o p o n o u p r c l s l e d e i e s - - d m A ea o u l b e to i r l s - e 3 Other 1939 4,503 3,065 1,079 1,197 132 657 1,438 354 439 183 123 339 1941 6,085 4,480 1,726 1,797 198 759 1,605 320 496 206 188 395 1945 2,462 1,776 745 300 102 629 686 131 240 17 28 270 1951 15,294 12,124 5,771 3,654 635 1,555 509 3,170 924 810 243 290 903 1952 19,403 15,581 7,524 4,711 837 1,866 643 3,822 ,107 943 301 389 ,082 1953 23,005 18,963 8,998 5,927 1,124 2,137 777 4,042 ,064 1,004 377 527 ,070 1954 23,568 19,450 8,796 6,144 1,342 2,257 911 4,118 ,242 984 377 463 ,052 1955 28,958 24,450 10,601 8,443 1,678 2,656 1.072 4,508 ,511 1,044 365 487 ,101 1956 31,827 27,084 11,707 9,100 2,014 3,056 1,207 4,743 ,408 1,187 377 502 ,269 1957 34,095 29,427 12,753 9,573 2,429 3,333 1,339 4,668 ,393 1,210 361 478 ,226 1958 33,865 28,943 12,730 8,740 2,664 3,381 1,428 4,922 ,702 1,220 360 425 ,215 1958—June 33.008 28,774 12,520 9,105 2,510 3,283 1,356 4,234 ,310 1,093 339 444 ,048 July 33;074 28,917 12,606 9,121 2,545 3,292 1,353 4,157 ,241 ,093 338 443 ,042 Aug 33,165 28,983 12,655 9,083 2,578 3,294 1,373 4,182 ,251 ,110 340 440 ,041 Sept 33,079 28,758 12,607 8,891 2,591 3,280 1,389 4,321 ,393 ,110 344 433 ,041 Oct 33,052 28,666 12,612 8,777 2,613 3,274 1,390 4,386 ,426 ,126 346 427 ,061 Nov 33,126 28,648 12,617 8,708 2,628 281 1,414 4,478 ,474 ,149 351 424 ,080 Dec 33,865 28,943 12,730 8,740 2,664 381 1,428 4,922 ,702 ,220 360 425 ,215 1959—Jan 33,768 29,016 12,856 8,733 639 3,374 1,414 4,752 ,615 ,183 356 425 ,173 Feb 33,751 29,070 12,884 8,724 661 3,372 1,429 4,681 ,611 ,166 350 427 ,127 Mar 33,943 29,324 13,028 8,780 2,700 371 1,445 4,619 ,581 ,129 348 430 ,131 Apr 34,453 29,825 13,312 8,921 754 379 1,459 4,628 ,582 ,127 347 439 ,133 May 35,029 30,333 13,568 9,089 802 385 1,489 4,696 ,606 ,128 349 448 ,165 June 35,810 31,032 13.882 9,350 2,881 3,416 1,503 4,778 ,639 ,136 349 461 ,193 1 Consumer finance companies included with "other" financial institu- 3 Represents automobile paper only; other instalment credit held by tions until September 1950. automobile dealers is included with "other" retail outlets. 2 Includes mail-order houses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONSUMER CREDIT 1025 INSTALMENT CREDIT HELD BY COMMERCIAL BANKS, INSTALMENT CREDIT HELD BY SALES FINANCE BY TYPE OF CREDIT COMPANIES, BY TYPE OF CREDIT [Estimated amounts outstanding, in millions of dollars] [Estimated amounts outstanding, in millions of dollars] E o n r d m of o n y t e h ar i c T m n r s o e e t t d a n a i l t l t - ch P A a u s u r e - t p d o a m pe o D r b i i r l e e ct s g O p c u o a t o m o p h n d e e e - r r s r e R m l r t o a e n i o n a p o iz n d d a n a s i - r - l s P o o e a n r n a - s l E o n r d m of o n y t e h ar i c T n r o s e t d a i l l t - m A pa o u p b t e o il r - e g s p O c u o a o t m o p h n d e e e - r s r r m R iz lo o a e a n a d p ti n d e a o s r i n r n- s l P o o a e n r n a - s l 1939 1,197 878 115 148 56 1939 1,079 237 178 166 135 363 1941 1,797 1,363 167 201 66 1941 1,726 447 338 309 161 471 1945 300 164 24 58 54 1945 745 66 143 114 no 312 1951 3,654 2,863 452 63 276 1951 5,771 1,135 1,311 1,315 888 1,122 1952 4,711 3,630 680 60 341 1952 7,524 1,633 1,629 1,751 1,137 1,374 1953 5,927 4,688 816 46 377 1953 8,998 2,215 1,867 2,078 1,317 1,521 1954 6,144 4,870 841 31 402 1954 8,796 2,269 1,668 1,880 1,303 1,676 1955 8,443 6,919 1,034 25 465 1955 10,601 3,243 2,062 2,042 1,338 1,916 1956 9,100 7,283 1,227 23 567 1956 11,707 3,651 2,075 2,394 1,469 2,118 1957 9,573 7,470 1,413 20 670 1957 12,753 4,130 2,225 2,467 1,580 2,351 1958 8,740 6,404 1,567 19 750 1958 12,730 3,938 2,191 2,324 1,613 2,664 1958—June 9,105 6,844 1,532 20 709 1958 June 12,520 3,957 2,223 2,281 1,540 2,519 July. 9,121 6,795 1,592 21 713 July 12,606 3,967 2,228 2,300 1,551 2,560 Aug. 9,083 6,730 1,612 23 718 Aug . . ... 12,655 3,977 2,221 2,304 1,570 2,583 Sept. 8,891 6,601 1,551 20 719 SeDt 12,607 3,948 2,198 2,274 1,583 2,604 Oct.. 8,777 6,477 1,560 19 721 Oct 12,612 3,925 2,178 2,287 1,603 2,619 Nov. 8,708 6,395 1,571 19 723 Nov . 12,617 3,917 2,169 2,296 1,614 2,621 Dec. 8,740 6,404 1,567 19 750 Dec 12 730 3,938 2,191 2,324 1,613 2,664 1959—Jan.. 8,733 6,391 1,566 19 757 1959—jan 12,856 3,962 2,216 2,372 1,605 2,701 Feb.. 8,724 6,394 1,548 19 763 Feb 12,884 3,993 2,239 2,342 1,594 2,716 Mar. 8,780 6,429 1,561 21 769 Mar 13 028 4,049 2,282 2,340 1,598 2,759 Apr. 8,921 6,543 1,582 20 776 Apr 13,312 4,154 2,345 2,361 1,616 2,836 May 9,089 6,679 1,605 22 783 May 13 568 4 244 2,395 2 395 1 649 2 885 June 9,350 6,884 1,647 23 796 June 13,882 4,373 2,443 2,431 1,680 2,955 INSTALMENT CREDIT HELD BY FINANCIAL INSTITUTIONS NONINSTALMENT CREDIT, BY HOLDER OTHER THAN COMMERCIAL BANKS AND SALES FINANCE COMPANIES, BY TYPE OF CREDIT [Estimated amounts outstanding, in millions of dollars] [Estimated amounts outstanding, in millions of dollars] Financial Retail institutions outlets E o n r d m of o n y t e h ar i c T m n r o s e e t t d n a a i l t l t - m A pa o u p b t e o il r - e s g O p c u o a o t m o p h n d e e e - r s r r m i R z l o o a e a n d a p ti n d e a o s r i n r n- s l P o o a e n n r a - s l E o n r d m of o n y t e h ar i c T m n n r o s o e e t t d n n a a i - l t l t - C m m ( o s e m i e r n n - - g t le lo -p a a n y s - ) p D a a e r c ( - t- c c h o a u r n g t e s) S c e r r e v d i i c t e cial Other ment Other 1939 789 81 24 15 669 banks storesl 1941 957 122 36 14 785 1945 731 54 20 14 643 1939 2,719 625 162 236 1,178 518 1951 2,699 373 233 134 1,959 1941 3,087 693 152 275 1,370 597 1952 3,346 452 310 188 2,396 1945 3,203 674 72 290 1,322 845 1953 4,038 538 370 247 2,883 1954 4,510 539 375 282 3,314 1951 7,323 1,684 250 698 2,907 1,784 1955 5,406 761 537 326 3,782 1952 7,998 1,844 276 728 3,283 1,867 1956 6,277 948 648 403 4,278 1953 8,238 1,899 288 772 3,352 1,927 1957 7,101 ,106 622 491 4,882 1954 8,724 2,096 312 793 3,515 2,008 1958 7,473 ,173 619 513 5,168 1955 9,712 2,635 367 862 3,717 2,131 1956 10,270 2,843 410 893 3,842 2,282 1958 June 7,149 ,122 587 488 4,952 1957 10,679 2,937 428 876 3,953 2,485 July 7,190 ,134 591 489 4,976 1958 11,200 3,057 486 907 4,111 2,639 AUK 7,245 ,146 596 498 5,005 Sept 7,260 ,152 599 504 5,005 1958—June 10,071 2,998 484 575 3,437 2,577 Oct 7,277 ,157 605 506 5,009 July 9,849 2,968 405 533 3,394 2,549 Nov 7,323 ,161 607 513 5,042 Aug 9,963 2,980 473 546 3,410 2,554 Dec 7,473 ,173 619 513 5,168 Sept 10,065 2,965 530 600 3,433 2,537 Oct 10,112 2,977 437 623 3,568 2,507 1959 Jan 7,427 ,161 616 501 5,149 Nov 10,338 2,998 501 669 3,628 2,542 Feb 7,462 ,170 623 503 5,166 Dec 11,200 3,057 486 907 4,111 2,639 Mar 7,516 ,185 631 508 5,192 Apr 7,592 .205 645 513 5,229 1959 Jan 10,647 3,030 434 757 3,747 2,679 M!ay 7,676 ,225 663 527 5,261 Feb 10,320 3,075 488 637 3,367 2,753 June. 7,800 258 682 537 5,323 Mar 10,260 3,100 518 608 3,275 2,759 Apr 10,463 3,181 493 601 3,396 2.792 May 10,761 3,222 557 609 3,611 2,762 NOTE.—Institutions represented are consumer finance companies, credit June 10,906 3,299 543 599 3,719 2,746 unions, industrial loan companies, mutual savings banks, savings and loan associations, and other lending institutions holding consumer instalment loans. 1 Includes mail-order houses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1026 CONSUMER CREDIT INSTALMENT CREDIT EXTENDED AND REPAID, BY TYPE OF CREDIT [Estimates of short- and intermediate-term credit, in millions of dollars. The terms "adjusted" and "unadjusted" refer to adjustment of monthly figures for seasonal variation and differences in trading days] Other consumer Repair and Total Automobile paper goods paper modernization loans Personal loans Year or month Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Extensions 1951 23,576 8,956 7,485 841 6,294 1952 29,514 11,764 9,186 1,217 7,347 1953 31,558 12,981 9,227 1,344 8,006 1954 31,051 11,807 9,117 1,261 8,866 1955 39,039 16,745 10,634 1,388 10,272 1956 40,063 15,563 11,590 1,568 11,342 1957 42,426 16,545 11,626 1,662 12,593 1958 40,497 14,154 11,747 1,620 12,976 1958—June 3,262 3,477 1,095 1,257 968 973 135 146 1,064 1,101 July 3,328 3,483 1,151 1,281 965 956 135 146 1,077 1,100 Aug 3,416 3,385 1,142 1,193 1,018 976 142 151 1,114 1,065 Sept 3,326 3,297 1,082 1,105 1,005 993 142 158 1,097 1,041 Oct 3,451 3,475 1,199 1,173 1,005 1,075 143 159 1,104 1,068 Nov 3,594 3,338 1,276 1,091 1,041 1,054 142 141 1,135 1,052 Dec 3,720 4,350 1,420 1,360 1,002 1,435 134 131 1,164 1,424 1959_jan 3,799 3,321 1,437 1,248 1,047 886 146 111 1,169 1,076 Feb 3,816 3,247 1,454 1,258 1,057 839 141 111 1,164 1,039 Mar 3,749 3,786 1,414 1,476 1,058 982 151 141 1,126 1,187 Apr 3,939 4,022 1,502 1,580 1,126 1,074 158 156 1,153 1,212 May 4,045 4,053 1,497 1,568 1,154 1,124 171 178 1,223 1,183 June 3,983 4,432 1,487 1,765 1,121 1,179 160 177 1,215 1,311 Repayments 1951 22,985 9,058 7,404 772 5,751 1952 25,405 10,003 7,892 917 6,593 1953 27,956 10,879 8,622 ,119 7,336 1954 30,488 11,833 9,145 ,255 8,255 1955 33,649 13,082 9,751 ,315 9,501 1956 37,194 14,576 10,714 ,362 10,542 1957 40,158 15,595 11,444 ,466 11,653 1958 40,727 15,432 11,432 ,566 12,297 1958—June 3,391 3,379 ,278 1,280 961 941 138 136 ,014 1,022 July 3,365 3,417 ,275 ',304 948 949 132 133 ,010 1,031 Aug 3,403 3,294 ,276 ,246 947 919 124 121 ,056 1,008 Sept 3,376 3,383 ,246 ,287 949 935 140 142 ,041 ',019 Oct 3,418 3,502 ,281 ,341 964 976 134 138 ,039 ,047 Nov 3,447 3,264 ,243 ,189 1,001 937 124 123 ,079 ,015 Dec 3,414 3,611 ,262 ,295 953 956 129 132 ,070 ,228 1959_Jan 3,412 3,418 ,252 ,224 956 1,012 130 131 ,074 ,051 Feb 3,483 3,264 ,281 ,190 981 953 127 120 ,094 ,001 Mar 3,431 3,594 ,265 ,324 983 1,028 126 130 ,057 ,112 Apr 3,516 3,512 ,282 ,269 1,006 1,018 136 134 ,092 ,091 May 3,602 3,477 ,320 ,263 1,003 990 134 129 ,145 1,095 June 3,531 3,651 1,284 ,337 1,000 1,013 133 135 1,114 1,166 Change in outstanding credit1 1951 +591 -102 +81 +69 +543 1952 +4,109 + 1,761 + 1,294 + 300 +754 1953 + 3,602 +2,102 +605 +225 +670 1954 +563 26 -28 +6 +611 1955 +5,390 + 3,663 + 883 +73 +771 1956 +2,869 +987 + 876 +206 +800 1957 +2,268 +950 + 182 + 196 +940 1958 -230 -1,278 +315 +54 +679 1958—June. -129 +98 -183 -23 +7 +32 -3 + 10 +50 +79 July.. -37 +66 -124 -23 + 17 +7 +3 + 13 +67 +69 Aug.. + 13 +91 -134 -53 +71 +57 + 18 +30 +58 +57 Sept.. -50 -86 -164 -182 +56 +58 XI + 16 +56 +22 Oct.., +33 -27 -82 -168 +41 +99 +21 +65 +21 Nov.. + 147 +74 +33 -98 +40 + 117 + 18 + 18 +56 +37 Dec. +306 +739 + 158 +65 +49 +479 +5 +94 + 196 1959_Jan.. +387 -97 + 185 +24 +91 -126 + 16 -20 +95 +25 Feb.. +333 -17 + 173 +68 +76 -114 + 14 Q +70 +38 Mar.. +318 + 192 + 149 + 152 +75 -46 +25 + 11 +69 +75 Apr.. +423 +510 +220 +311 + 120 +56 +22 +22 +61 + 121 May. +443 +576 + 177 +305 + 151 + 134 + 37 +49 +78 +88 June. +452 +781 +203 +428 + 121 + 166 +27 +42 + 101 + 145 i Obtained by subtracting instalment credit repaid from instalment in the BULLETIN for January 1954, pp. 9-17. Estimates of instalment credit extended. credit extended and repaid are based on information from accounting NOTE.—Monthly figures for 1940-54 are shown on pp. 1043-54 of records of retail outlets and financial institutions and often include charges the BULLETIN for October 1956; for 1955-57, in the BULLETINS for Decem- incurred under the instalment contract. Renewals and refinancing of ber 1957, pp. 1420-22, and November 1958, pp. 1344-45. loans, repurchases and resales of instalment paper, and certain other A discussion of the composition and characteristics of the data and transactions may increase the amount of both credit extended and credit a description of the methods used to derive the estimates are shown repaid without adding to the amount of credit outstanding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONSUMER CREDIT 1027 INSTALMENT CREDIT EXTENDED AND REPAID, BY HOLDER [Estimates of short- and intermediate-term credit, in millions of dollars. The terms "adjusted" and "unadjusted" refer to adjustment of monthly figures for seasonal variation and differences in trading days] Total Commercial banks S c a o le m s p f a in n a ie n s ce Ot i h n e s r t it f u i t n i a o n n c s ial Retailoutlets Year or month Adjusted U ju n st a e d d - Adjusted U ju n s a te d d - Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Adjusted U ju n st a e d d - Extensions 1951 23,576 8,358 5,467 4,788 4,963 1952 29,514 11,123 6,982 5,659 5,750 1953 31,558 12,099 7,560 6,375 5,524 1954 31,051 11,267 7,260 6,983 5,541 1955 39,039 14,109 10,200 8,449 6,281 1956 40,063 14,387 9,600 9,474 6,602 1957 42,426 15,234 10,200 10,497 6,495 1958 40,497 14,645 8,907 10,330 6,615 1958 June 3,262 3,477 1.168 1.278 685 776 841 872 568 551 July 3,328 3,483 1,255 1,320 753 851 853 875 467 437 Aug 3,416 3,385 ,249 ,235 714 756 889 858 564 536 Sept.1 3,326 3,297 [,206 1,209 632 656 873 831 615 601 Oct 3,451 3,475 ,272 ,261 732 738 885 864 562 612 Nov 3,594 3,338 ,321 ,160 758 687 911 857 604 634 Dec 3,720 4,350 1,330 1,357 827 855 935 1,143 628 995 1959 Jan 3,799 3,321 ,443 [,333 883 753 903 803 570 432 Feb i 3,816 3,247 ,395 ,227 865 723 922 824 634 473 Mar 3,749 3,786 ,367 ,426 883 883 900 941 599 536 Apr 3,939 4,022 ,455 1,555 941 933 908 939 635 595 May 4,045 4,053 ,472 ,511 940 940 990 966 643 636 June 3,983 4,432 .424 1.620 914 1,074 987 1,064 658 674 Repayments 1951 22,985 8,385 5,524 4,385 4,691 1952 25,405 9,370 5,925 5,012 5,098 1953 27,956 10,625 6,344 5,683 5,304 1954 30,488 11,469 7,043 6,511 5,465 1955 33,649 12,304 7,901 7,553 5,891 1956 37,194 13,320 8,943 8,603 6,328 1957 40,158 14,259 9,727 9,673 6,499 1958 40,727 14,551 9,774 9,958 6,444 1958 June 3,391 3,379 1.220 1.225 801 800 823 830 547 524 July 3,365 3,417 1,203 1,234 828 835 821 834 513 514 Aug 3,403 3,294 1,220 1,186 806 794 845 803 532 511 Sept l 3,376 3,383 [,197 [,215 806 825 837 816 536 527 Oct 3,418 3,502 1,230 1,256 800 852 841 847 547 547 Nov 3,447 3,264 1,228 1.155 785 756 855 811 579 542 Dec 3,414 3,611 1,196 1,244 782 823 864 993 572 551 1959 Jan 3,412 3,418 ,210 1,207 789 760 870 849 543 602 Feb i 3,483 3,264 ,262 1,175 793 732 857 789 571 568 M^ar .. 3,431 3,594 .238 1,282 781 827 846 887 566 598 Apr 3,516 3,512 1,261 1,271 808 792 865 863 582 586 May 3,602 3,477 1,300 1,255 819 772 915 882 568 568 June . .... 3,531 3,651 1,251 1,306 785 813 900 940 595 592 Change in outstanding credit2 1951 +591 — 27 — 57 +403 +272 1952 +4,109 + 1,753 + 1,057 +647 +652 1953 + 3,602 + 1,474 + 1,216 +692 +220 1954 + 563 — 202 +217 +472 +76 1955 + 5,390 + 1,805 +2,299 + 896 +390 1956 +2,869 + 1,106 +657 +871 +235 1957 +2,268 + 1,046 +473 +824 -75 1958 — 230 —23 — 833 + 372 +254 1958 June -129 +98 -52 +53 -116 -24 + 18 +42 +21 July -37 +66 +52 + 86 -75 + 16 + 32 +41 -46 77 + 13 +91 +29 +49 -92 -38 +44 +55 + 32 +25 Sept. * -50 -86 -33 -48 -197 -192 +36 + 15 + 144 + 139 Oct +33 -27 +42 +5 -68 -114 +44 + 17 + 15 +65 Nov + 147 +74 +93 +5 -27 -69 +56 +46 +25 +92 Dec +306 +739 + 134 + 113 +45 +32 +71 + 150 + 56 +444 1959 Jan +387 -97 +233 + 126 +94 -7 +33 -46 +27 -170 Feb * +333 -17 + 109 +28 +72 -9 +65 +35 +87 -71 Mar +318 + 192 + 129 + 144 + 102 +56 +54 +54 +33 -62 Apr. +423 +510 + 194 +284 + 133 + 141 +43 +76 +53 +9 May +443 +576 + 172 +256 + 121 + 168 +75 +84 +75 + 68 June . +452 +781 + 173 +314 + 129 +261 +87 + 124 + 63 + 82 1 Data on extensions and repayments have been adjusted to avoid A discussion of the composition and characteristics of the data and duplications resulting from large transfers of other consumer goods paper. a description of the methods used to derive the estimates are shown As a result, the differences between extensions and repayments for some in the BULLETIN for January 1954, pp. 9-17. Estimates of instalment types of holders do not equal the changes in outstanding credit. credit extended and repaid are based on information from accounting 2 Obtained by subtracting instalment credit repaid from instalment records of retail outlets and financial institutions and often include charges credit extended, except as indicated in note 1. incurred under the instalment contract. Renewals and refinancing of NOTE.—Monthly figures for 1940-54 are shown on pp. 1043-54 of loans, repurchases and resales of instalment paper, and certain other transactions may increase the amount of both credit extended and credit t b h e e r B 1 U 9 L 5 L 7 E , T p I p N . f 1 o 4 r 2 O 0- c 2 to 2 b , e a r n d 19 N 5 o 6; v e fo m r b 1 e 9 r 5 1 5 9 -5 5 7 8 , , i p n p t . h 1 e 3 B 4 U 4 L -4 L 5 E . TINS for Decem- repaid without adding to the amount of credit outstanding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1028 BUSINESS ACTIVITY SELECTED BUSINESS INDEXES [1947-49= 100, unless otherwise noted. The terms "adjusted" and "unadjusted" refer to adjustment of monthly figures for seasonal variation] In ( d ph u y st s r i i c a a l l p v r o o l d u u m c e t ) i * on aw C a o r c d n o e s n t d t r r u a ( c v c t a t i s l o u n e) * Employment and payrolls2 Depart- Wholeor Y m e o a n r th Total Tot M al an r u D a f b a u l c - e ture N r s a d o b u n l - e - M era in ls - Total R d t e i e a n s l i - - o A th l e l r N p m t a c e u l g o m u o e r r l n a n y i - - - l - t - pr E o M m d m u a p e n c l n t u o i t f o y a n - c t w ur o in r P r k g o a e l y l r s s - F i l r c n o e a g a i r g d s - * h - t v s ( m s r a a t e l l o e e t u a n r s e e i * t ) l p s C r u i o m c n e e - s r 2 m p c r s o o i a c d m l e i e t s - y 2 Ad- Unad- Ad- Ad- Ad- Ad- Unad- Unad- Unad- Ad- Ad- Unad- Unad- Ad- Ad- Unad- Unadjusted justed justed justed justed justed justed justed justed justed justed justed justed justed justed justed justed 1919 39 38 38 37 45 34 26 39 61.3 68.7 31.1 90 27 74.0 1920 41 39 42 36 53 34 18 45 61.9 69.0 37.1 98 32 85.7 1921 31 30 24 34 42 30 27 32 55 2 52 8 24 0 83 30 76 4 1922 39 39 37 40 45 43 41 43 58.5 58.4 25.7 92 30 71.6 1923 47 45 47 44 62 45 49 42 64.3 66.9 32.6 107 34 72.9 1924 44 43 43 42 57 51 57 46 63.5 62.1 30.4 105 34 73.1 1925 49 48 49 46 59 66 75 59 65.2 64.2 32.1 110 36 75.0 1926 51 50 52 48 63 69 73 67 67.5 65.5 33.0 115 37 75 6 65 0 1927 51 50 49 50 64 69 71 68 67.9 64.1 32.4 111 37 74.2 62.0 1928 53 52 53 51 63 73 76 70 67.9 64.2 32.8 112 37 73.3 62.9 1929 59 58 60 56 68 63 52 70 71.0 68.3 35.0 115 38 73.3 61.9 1930 49 48 45 51 59 49 30 62 66.6 59.5 28.3 99 35 71.4 56.1 1931 40 39 31 48 51 34 22 41 60.3 50.2 21.5 79 32 65.0 47.4 1932 31 30 19 42 42 15 8 20 53.4 42.6 14.8 59 24 58.4 42.1 1933 37 36 24 48 48 14 7 18 53.6 47.2 15.9 62 24 55.3 42.8 1934 40 39 30 49 51 17 7 24 58.8 55.1 20 4 67 27 57 2 48 7 1935 47 46 38 55 55 20 13 25 61.3 58.8 23.5 69 29 58 7 52.0 1936 56 55 49 61 63 30 22 35 65.8 63.9 27.2 81 32 59.3 52.5 1937 61 60 55 64 71 32 25 36 70 2 70 1 32 6 84 35 61 4 56 1 1938 48 46 35 57 62 35 27 40 66.1 59.6 25.3 67 32 60 3 51 1 1939 58 57 49 66 68 39 37 40 69.3 66.2 29.9 76 35 59 4 50.1 1940 67 66 63 69 76 44 43 44 73.3 71.2 34.0 83 37 59.9 51.1 1941 87 88 91 84 81 66 54 74 82.8 87.9 49.3 98 44 62.9 56.8 1942 . 106 110 126 93 84 89 49 116 90.9 103.9 72.2 104 49 69.7 64.2 1943 127 133 162 103 87 37 24 45 96.3 121.4 99.0 104 56 74 0 67.0 1944 125 130 159 99 93 22 10 30 95.0 118.1 102.8 106 62 75.2 67.6 1945 . 107 110 123 96 92 36 16 50 91.5 104.0 87.8 102 70 76.9 68.8 1946 90 90 86 95 91 82 87 79 94.4 97.9 81.2 100 90 83.4 78.7 1947 100 100 101 99 100 84 86 83 99.4 103.4 97.7 108 98 95.5 96.4 1948 104 103 104 102 106 102 98 105 101.6 102.8 105.1 104 104 102.8 104.4 1949 . . 97 97 95 99 94 113 116 111 99.0 93.8 97.2 88 99 101.8 99.2 1950 112 113 116 111 105 159 185 142 102.3 99.6 111.7 97 107 102.8 103.1 1951 120 121 128 114 115 171 170 172 108 2 106 4 129 8 101 112 111 0 114 8 1952 124 125 136 114 114 183 183 183 110.4 106.3 136.6 95 114 113.5 111.6 1953 . . 134 136 153 118 116 192 178 201 113.6 111.8 151.4 96 118 114 4 110 1 1954 125 127 137 116 111 215 232 204 110.7 101.8 137.7 86 118 114.8 110.3 1 1 9 9 5 5 5 6 . . .. 1 1 3 4 9 3 1 1 4 4 0 4 1 15 5 9 5 1 12 2 9 6 1 1 2 2 2 9 2 1 6 9 1 9 2 1 8 9 0 9 2 1 4 9 8 9 1 1 1 1 8 4 . . 3 4 1 1 0 0 6 5 . . 7 6 1 1 5 6 2 1 . . 9 4 9 9 7 5 1 1 3 2 5 8 1 1 1 1 6 4 . . 2 5 1 1 1 1 0 4 . . 7 3 1957 143 145 160 130 128 101 101 101 119.2 104.4 162.7 90 135 120.2 117.6 1958 134 136 141 130 117 111 114 108 115.5 94.3 148.8 78 136 119.2 1958 July . . 134 125 136 141 132 116 136 144 130 115.2 93.1 91.8 144.8 70 140 123.9 119.2 Aue 136 136 138 144 133 120 130 134 128 115.6 93.2 94.1 150.0 79 147 123 7 119.1 Sept 137 140 139 145 133 123 121 135 111 116.1 94.8 96.5 155.7 80 135 123.7 119.1 Oct 138 143 140 146 134 122 125 148 109 115.6 93.4 94.8 152.5 83 135 123 7 119 0 Nov 141 144 143 151 135 123 98 112 88 116.3 96.0 96.9 158.4 83 137 123.9 119.2 Dec 142 140 144 152 135 124 86 91 82 116.2 96.1 96.5 160.4 82 143 123.7 119.2 1959 143 142 145 153 137 124 87 95 82 116.8 96 5 95 8 158 2 84 138 123 8 119 5 Feb 145 147 148 157 139 124 87 99 78 117.0 96.8 96.5 160.4 84 140 123.7 119.5 Mar 147 149 150 160 140 123 126 143 114 117.6 98.2 98.0 165.1 85 138 123.7 119.6 Apr 150 r151 153 164 142 124 142 170 123 118.6 99.5 98 4 167 0 87 141 123 9 120 0 May 153 153 156 169 144 126 133 155 118 119.2 100.9 99.4 169.6 89 144 124.0 119.8 155 155 158 172 145 125 138 163 120 119.8 101.8 101.2 174.3 87 2>144 124.5 119.6 July ^153 P144 P157 *169 ^146 2>119 P120.2^102.2^100.7»171.4 73 e147 «Estimated. »Preliminary. r Revised. Research and Statistics. * Average per working day. 2 The indexes of employment and payrolls, wholesale commodity prices, i Indexes beginning 1956 are based on data for 48 States from F. W. and consumer prices are compiled by the Bureau of Labor Statistics. Dodge Corporation, 1956-57= 100. Figures for earlier years are three- Nonagricultural employment covers employees only and excludes personmonth moving averages, based on data for 37 States east of the Rocky nel in the armed forces. The consumer price index is the revised series, Mountains, 1947-49= 100; the data for 1956 on this basis were: Total, reflecting, beginning January 1953, the inclusion of some new series and 268; Residential, 271; and all other, 266. A description of the old index, revised weights; prior to January 1953, indexes are based on the "interim including seasonal adjustments, may be obtained from the Division of adjusted" and "old" indexes converted to the base 1947-49= 100. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PRODUCTION 1029 INDUSTRIAL PRODUCTION [Federal Reserve indexes, 1947-49 average- 100) Industry 19 p p 4 r o 7 o r - - - 49 a A v n e n ra u g a e l 1958 1959 tion 1957 1958 June July Aug. Sept. Oct. Nov. Dec.Jan. Feb. Mar. Apr. May June SEASONALLY ADJUSTED INDUSTRIAL PRODUCTION—TOTAL.... 100.00 143 134 132 134 136 137 138 141 142 143 145 147 150 153 155 MANUFACTURES—TOTAL 90.02 145 136 134 136 138 139 140 143 144 145 148 150 153 156 158 Durable Manufactures—Total 45.17 160 141 139 141 144 145 146 151 152 153 157 160 164 169 172 Primary metals 6.70 131 104 103 102 109 113 122 123 123 125 138 146 149 154 150 Metal fabricating 28.52 176 155 151 154 156 155 156 163 165 755 755 170 775 '•779 184 Fabricated metal products 5.73 139 128 125 129 132 135 133 136 136 136 135 138 142 '148 150 Machinery 13.68 168 145 141 144 147 148 147 150 152 154 158 159 163 '170 178 Nonelectrical machinery 9.04 150 127 125 125 126 129 130 133 132 132 138 142 145 '150 155 Electrical machinery 4.64 204 179 171 181 188 186 180 183 190 199 198 192 198 '209 221 Transportation equipment 7.54 213 187 185 185 186 178 183 203 204 204 204 207 211 '213 216 Autos, trucks, and parts 4.80 128 99 95 96 96 82 91 119 123 124 123 128 132 136 139 Other transportation equipment 2.74 344 319 320 318 321 322 321 327 322 322 322 322 326 '326 326 Instruments and related products 1.29 172 164 160 162 162 166 169 173 175 176 179 181 183 189 197 Clay, glass, and lumber products 5.91 133 129 128 132 755 136 134 757 755 755 757 745 149 '755 757 Stone, clay, and glass products 2.82 155 145 145 152 150 157 149 151 148 147 149 158 166 170 174 Lumber and products 3.09 114 115 113 114 120 118 120 125 125 127 126 129 133 139 130 Furniture and misc. manufactures 4.04 132 127 126 129 130 132 134 134 757 755 755 138 143 747 149 Furniture and fixtures 1.64 120 119 116 119 123 126 127 129 127 133 132 135 138 143 145 Miscellaneous manufactures 2.40 140 133 132 135 134 137 138 137 134 137 137 141 147 150 151 Nondurable Manufactures—Total 44.85 130 130 129 132 133 133 134 135 135 137 139 140 142 144 145 Textiles and apparel 11.87 105 103 102 107 108 109 111 110 110 112 114 115 119 122 123 Textile mill products 6.32 99 98 95 101 103 103 104 104 104 106 108 110 115 118 119 Apparel and allied products 5.55 111 110 110 115 114 116 118 117 116 118 120 121 123 127 128 Rubber and leather products 3.20 118 113 111 114 116 119 77P 126 123 124 128 72P 725 725 134 Rubber products 1.47 135 125 125 125 132 136 133 141 140 142 150 156 135 134 Leather and products. 1.73 104 102 100 104 103 104 108 113 108 109 109 106 112 117 Paper and printing 8.93 148 147 146 148 150 150 153 152 150 755 755 755 755 161 160 Paper and allied products 3.46 158 160 157 163 166 167 171 168 166 167 172 173 176 180 178 Printing and publishing 5.47 141 139 138 138 140 140 142 142 139 144 145 145 147 149 149 Newsprint consumption 1.85 131 126 125 126 128 127 131 130 120 129 131 130 135 135 133 Job printing and periodicals 3.62 146 146 145 145 147 146 148 149 150 152 152 153 153 155 157 Chemical and petroleum products 9.34 172 770 168 171 174 174 175 777 180 182 184 187 188 "190 193 Chemicals and allied products 6.84 184 184 181 184 186 187 189 192 194 196 199 201 204 '208 211 Industrial chemicals 2.54 203 195 187 193 196 204 209 212 214 216 222 226 231 233 Petroleum and coal products 2.50 141 134 131 136 139 135 137 139 142 143 144 149 143 142 Foods, beverages, and tobacco 11.51 112 115 116 116 116 116 775 777 777 118 120 720 727 727 120 Food and beverage manufactures 10.73 112 115 116 116 116 115 115 116 117 118 119 119 120 121 120 Food manufactures 8.49 112 115 116 116 116 116 115 116 116 117 119 120 120 121 120 Beverages 2.24 113 116 116 114 115 114 115 119 121 121 121 117 122 122 Tobacco manufactures .78 111 118 116 121 121 121 120 126 126 121 130 121 134 124 MINERALS—TOTAL 9.98 128 117 112 116 120 123 122 123 124 124 124 123 124 126 125 Mineral fuels 8.35 128 117 112 116 121 123 123 725 124 123 725 727 722 124 124 Coal 2.68 83 68 66 65 68 70 69 72 73 69 74 72 71 73 74 Anthracite .36 49 42 45 38 41 44 39 37 48 45 37 39 38 37 36 Bituminous coal 2.32 88 72 69 69 73 74 74 77 77 73 79 77 77 79 79 Crude oil and natural gas 5.67 150 141 134 141 146 149 148 147 148 149 146 144 147 149 Crude oil 4.12 138 129 122 128 137 140 138 135 135 137 135 133 135 137 Natural gas and gas liquids .70 198 197 191 200 198 198 202 203 205 »203 *206 *208 3>211 Metal, stone, and earth minerals 1.63 129 117 112 113 113 779 120 124 125 129 128 752 ••755 '134 134 Metal mining .82 116 91 80 80 83 90 92 101 108 113 114 115 114 115 112 Stone and earth minerals .81 142 143 145 146 144 149 148 148 142 145 143 148 155 154 155 Preliminary. r Revised. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1030 PRODUCTION INDUSTRIAL PRODUCTION—Continued [Federal Reserve indexes, 1947-49 average — 100] Annual 1947-49 average 1958 1959 Industry proportion 1957 1958 June July Aug. Sept. Oct. Nov. Dec.Jan. Feb. Mar. Apr. May June WITHOUT SEASONAL ADJUSTMENT INDUSTRIAL PRODUCTION—TOTAL 100.00 143 134 131 125 136 140 143 144 140 142 147 149 151 153 155 MANUFACTURES—TOTAL 90.02 145 136 133 127 138 141 145 146 141 144 150 152 155 156 158 Durable Manufactures—Total 45.17 160 141 138 132 140 146 149 155 152 154 160 163 166 169 171 Primary Metals 6.70 131 104 106 90 102 111 123 124 119 127 144 154 155 157 155 Ferrous metals 5.03 130 99 100 85 98 106 117 120 117 125 142 154 156 157 152 Pig iron and steel 3.51 140 105 105 92 105 114 129 129 127 136 156 170 171 170 165 Pig iron .37 137 99 93 87 97 106 119 124 123 127 139 152 155 157 153 Steel 3.05 139 105 105 92 105 114 129 128 127 136 156 170 171 170 164 Carbon steel 2.62 138 104 108 94 106 113 126 127 125 133 151 164 165 165 161 Alloy steel .43 143 106 91 81 101 118 144 138 135 157 191 205 206 203 182 Ferrous castings and forgings 1.52 108 85 87 70 80 87 90 99 93 98 112 118 122 128 123 Iron and steel castings 1.29 107 85 88 72 81 88 91 101 93 98 112 118 122 127 122 Steel forgings .23 113 81 81 58 75 80 85 96 101 111 115 121 133 125 Nonferrous metals 1.67 136 121 124 102 115 125 140 137 126 133 149 153 151 157 163 Primary nonferrous metals .38 164 146 133 126 128 139 150 157 162 163 169 167 169 168 173 Copper smelting .09 129 120 105 90 95 111 138 144 130 132 136 145 144 141 141 Copper refining .06 135 121 110 108 99 110 111 130 144 135 155 138 140 133 140 Lead .04 114 99 102 86 88 99 101 93 98 97 97 87 93 87 Zinc .10 123 97 95 90 86 91 90 93 105 105 108 110 108 106 Aluminum .09 275 268 241 240 254 263 283 295 308 317 318 318 325 332 350 Secondary nonferrous metals .13 111 93 88 74 90 94 111 105 102 98 119 113 123 Nonferrous shapes and castings 1.16 129 116 125 97 114 124 141 133 117 127 145 P153 148 2157 Copper mill shapes .63 104 94 110 74 96 102 128 114 87 103 123 129 117 123 129 Aluminum mill shapes .20 198 193 212 198 190 207 219 202 203 204 225 243 264 305 Nonferrous castings .33 136 110 101 83 103 116 118 130 123 129 140 Metal Fabricating 28.52 176 155 149 144 150 156 158 167 168 168 172 174 176 179 182 Fabricated metal products 5.73 139 128 125 123 133 141 136 136 136 134 135 138 142 146 150 Structural metal parts 2.68 152 140 138 137 143 148 144 144 148 144 144 146 151 155 160 Stampings and misc. metal products 2.12 124 108 101 100 104 115 115 119 125 124 123 128 130 133 136 Tin cans .30 146 150 160 171 232 208 161 130 104 118 125 128 146 158 167 Furnaces, gas ranges, and heaters .63 99 106 110 87 115 132 133 128 104 107 116 109 111 114 116 Machinery 13.68 168 145 138 133 142 151 150 153 152 156 162 164 165 170 175 Nonelectrical machinery 9.04 150 127 125 120 119 128 127 131 133 134 142 147 149 153 155 Farm and industrial machinery 8.13 146 121 117 114 114 119 118 121 125 128 132 137 140 144 147 Farm machinery 1.02 84 79 80 80 77 80 83 65 72 80 99 106 107 116 117 Industrial and commercial machinery. 7.11 155 127 123 119 119 124 124 129 133 135 137 142 144 148 152 Machine tools and presses .68 182 119 114 112 109 114 115 113 116 116 118 125 130 134 138 Laundry and refrigeration appliances. .. .69 151 148 159 131 123 170 163 179 163 155 194 200 196 196 191 Electrical machinery 4.64 204 179 162 158 186 195 194 197 190 199 202 196 196 -203 213 Electrical apparatus and parts 3.23 201 177 168 166 170 178 177 182 192 192 193 195 198 203 209 Radio and television sets .74 205 166 123 115 214 223 221 212 163 193 200 173 166 177 198 Transportation equipment 7.54 213 187 183 175 173 170 184 211 214 211 212 215 217 215 214 Autos, trucks, and parts 4.80 128 99 94 84 77 69 92 132 134 131 133 139 141 139 138 Autos 1.50 146 101 100 87 53 37 71 160 161 154 149 163 164 162 158 Trucks .66 104 90 91 76 78 67 89 112 100 110 133 138 143 148 147 Light trucks .22 100 82 79 68 61 49 75 123 120 114 123 124 130 134 131 Medium trucks .19 50 24 29 23 16 12 12 33 30 28 32 31 36 36 40 Heavy trucks .14 194 203 210 164 189 155 221 221 173 227 308 327 329 343 337 Truck trailers .07 137 116 113 106 120 131 132 135 134 145 163 170 186 187 192 Auto and truck parts 2.58 123 Other transportation equipment 2.74 344 319 316 312 317 322 321 327 329 325 326 325 326 '322 323 Aircraft and parts 1.30 608 572 568 561 573 583 582 591 595 587 587 583 580 '572 573 Shipbuilding and repair .81 129 128 130 128 127 126 129 130 128 131 128 132 135 136 134 Railroad equipment .53 77 39 32 28 30 30 20 29 32 28 35 36 43 42 45 Railroad cars 34 24 36 38 .35 24 19 22 20 15 19 19 26 27 34 Instruments and related products 172 164 176 185 195 1.29 159 157 160 168 171 174 176 179 183 188 Clay, Glass and Lumber Products.... 133 129 126 149 157 5.91 133 126 142 143 143 139 128 134 140 155 Stone, clay, and glass products 155 145 155 145 156 166 171 177 Glass and pottery products 2.82 141 125 148 148 131 160 155 153 124 141 145 143 146 146 151 Flat glass and vitreous products 1.09 161 137 123 123 141 136 122 127 144 125 133 167 166 167 170 H G o l F a m s la s e t c g a o l n n a d s ta s o i w n t a h e r r e e s r a g n la d s s pottery . . . 4 2 6 7 6 0 1 1 9 3 6 2 6 4 1 1 8 3 3 2 5 9 1 1 1 8 4 3 3 1 4 0 2 1 1 1 8 3 3 3 2 5 3 9 1 1 8 4 4 4 6 7 1 1 1 8 6 4 5 4 0 2 4 1 1 1 9 2 4 2 1 3 5 0 1 1 1 4 4 8 3 1 1 6 0 1 1 8 4 1 0 4 6 1 1 1 7 2 4 4 9 6 2 2 1 1 1 8 4 3 4 9 8 8 7 1 1 8 7 3 6 1 7 1 1 7 4 1 9 1 1 7 9 4 1 0 6 1 1 9 5 7 7 5 4 S C t e r B C m u r l c e a i t c n y u k t , r a fi l r e c b la r y ic k p , r o p d ip u e c , t s and tile . . . . . 2 3 3 2 1 3 5 2 0 2 1 1 1 1 2 4 4 1 8 8 0 4 1 1 1 1 5 1 2 1 5 3 3 8 1 1 1 1 2 2 2 8 1 1 3 3 1 1 1 1 7 2 2 2 5 5 2 2 1 1 1 1 8 2 2 2 6 6 6 9 1 1 1 1 9 3 3 3 2 2 4 4 1 1 1 1 9 3 3 3 3 3 3 6 1 1 1 1 2 2 7 3 3 7 0 2 1 1 1 1 3 2 1 2 9 9 0 0 1 1 1 9 0 1 2 6 9 2 6 1 1 1 1 0 0 1 2 1 9 5 7 1 1 1 1 2 1 4 3 1 1 3 0 1 1 1 1 3 7 3 3 1 7 4 2 1 1 1 1 3 2 9 3 9 9 6 4 2 1 0 4 3 5 Concrete and plaster products .48 188 187 195 200 209 209 207 199 187 182 182 192 208 229 Misc. stone and earth manufactures .58 174 157 153 150 157 163 169 169 171 172 175 180 184 189 193 * Preliminary. r Revised. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PRODUCTION 1031 INDUSTRIAL PRODUCTION—Continued [Federal Reserve indexes, 1947-49 average= 100] Industry 9 p 4 r 7 o - - 49 A av n e n ra u g a e l 1958 1959 portion 1957 1958 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June WITHOUT SEASONAL ADJUSTMENT —Continued Lumber and products 3.09 114 115 120 106 130 127 131 126 109 116 124 125 133 140 138 Lumber 2.05 96 94 100 88 107 105 105 101 87 89 98 101 106 113 109 Millwork and plywood. .60 187 202 201 176 235 220 240 234 193 225 243 234 Mfflwork .39 112 110 120 101 141 133 134 133 103 110 120 118 141 162 157 Softwood plywood... .12 312 356 334 301 390 364 416 403 341 419 448 429 Wood containers .29 84 76 79 77 77 80 80 78 77 77 75 78 '79" '83 84 Furniture and Misc. Manufactures. 4.04 132 127 123 121 131 138 141 139 135 132 136 138 139 142 145 Furniture and fixtures 1.64 120 119 113 113 124 130 132 132 132 132 134 135 135 137 140 Household furniture 1.10 120 122 113 115 127 134 138 137 138 137 140 141 140 141 143 Fixtures and office furniture. 120 114 112 108 119 123 120 120 122 120 120 125 '129 135 .54 122 Miscellaneous manufactures 140 133 130 126 135 143 147 144 137 133 137 142 145 148 2.40 139 Nondurable Manufactures—Total. 130 130 128 123 135 137 142 138 130 135 140 143 142 144 44.85 141 Textiles and Apparel 105 103 100 92 110 107 115 112 203 113 120 123 121 11.87 121 Textile mill products 99 98 94 86 103 103 109 107 100 107 113 113 111 119 117 Cotton and synthetic fabrics. 6.32 105 104 100 86 107 111 112 118 106 119 122 122 131 129 121 Cotton consumption 3.72 95 91 88 72 94 96 98 99 86 101 103 102 106 104 97 Synthetic fabrics 2.30 119 115 105 107 117 124 125 137 141 135 138 149 154 156 156 Fabric finishing .97 94 98 107 75 104 109 101 115 87 115 119 108 139 130 107 .45 Wool textiles .97 75 69 82 67 76 75 75 71 62 Wool apparel yarns. .16 78 72 81 71 81 78 73 72 62 79 85 84 95 94 Wool fabrics .75 75 69 83 67 76 75 76 71 63 Knit goods 1.15 104 104 103 98 114 113 116 115 96 109 111 111 116 115 115 Hosiery .65 93 92 86 80 99 97 102 102 75 101 99 94 97 91 86 Full-fashioned hosiery. .45 89 84 79 72 89 86 89 92 66 90 87 83 84 77 69 Seamless hosiery .20 102 108 103 97 123 123 132 127 98 125 127 120 129 123 125 Knit garments .50 118 120 125 122 134 135 134 132 124 120 126 132 140 146 153 Floor coverings *. .48 Woven carpets. .31 71 63 50 36 61 70 79 76 75 76 91 87 90 76 Apparel and allied products... 5.55 111 110 106 99 117 113 121 117 105 120 128 130 128 125 124 Men's outerwear 1.78 102 100 101 77 110 106 108 107 93 119 123 117 139 136 118 Men's suits and coats.... .73 86 75 81 52 91 78 79 84 67 81 82 81 99 98 89 Men's suits .50 87 73 73 47 82 72 76 84 70 87 86 83 95 91 81 Men's outercoats .13 61 66 91 59 104 86 73 62 38 37 46 52 92 99 98 Shirts and work clothing. .99 112 115 113 91 122 123 128 121 109 145 151 142 167 '164 138 Women's outerwear 1.85 112 112 109 107 120 112 120 113 90 119 141 138 133 118 Women's suits and coats. .76 128 129 123 138 153 139 150 138 101 151 175 147 114 122 138 Misc. apparel and allied mfrs.... 1.92 117 117 112 112 121 126 129 128 126 125 130 129 125 '124 129 Rubber and Leather Products. 3.20 118 113 110 97 117 120 125 125 118 129 138 136 125 121 132 Rubber products 1.47 135 125 122 103 127 137 143 145 137 150 158 159 138 132 157 Tires and tubes .70 123 113 117 96 110 117 129 128 128 138 154 155 111 108 Auto tires .40 134 120 131 105 118 122 131 131 132 149 167 171 120 120 Truck and bus tires .30 107 103 99 85 99 109 125 124 122 124 137 133 99 92 Miscellaneous rubber products. .77 147 136 127 108 142 156 156 160 146 161 161 163 163 154 Leather and products.. . 1.73 104 102 99 92 108 105 109 108 102 110 120 116 113 112 Leather .44 89 84 84 68 85 83 91 93 85 90 94 88 89 93 Cattlehide leathers. .29 98 91 90 72 94 92 101 102 94 97 102 95 95 97 Skin leathers .15 72 68 70 61 65 65 72 74 69 75 79 73 77 84 Shoes and slippers * .90 Miscellaneous leather products. .39 94 94 90 92 100 100 105 107 104 99 102 103 98 Paper and Printing. 8.93 148 147 146 137 148 152 160 155 145 150 156 159 164 162 160 Paper and allied products 3.46 158 160 159 145 168 169 181 170 153 166 177 176 185 180 179 Pulp and paper 1.76 154 154 153 137 159 159 171 164 148 161 171 171 179 175 177 Wood pulp .51 176 175 171 156 179 180 199 188 168 187 194 195 203 aoo 203 Paper and board 1.25 145 145 146 129 151 150 160 154 140 150 162 161 169 165 166 Printing paper .22 133 133 138 121 136 131 138 132 127 138 142 145 153 149 151 Fine paper .14 139 142 146 116 143 145 151 152 145 145 160 161 165 462 159 Coarse paper .20 127 125 120 109 129 129 142 139 120 129 140 135 147 r142 139 Miscellaneous paper .18 179 178 175 158 176 174 195 186 175 193 200 194 205 '200 196 Paperboard .41 153 154 154 136 163 164 173 166 146 157 173 172 178 174 178 Building paper and board. .10 124 129 133 130 141 145 145 128 115 124 137 143 157 148 156 Converted paper products. 1.70 163 166 165 154 177 179 192 176 158 171 183 182 190 '186 182 Shipping containers .51 157 157 156 146 173 175 184 168 148 160 172 174 179 181 177 Sanitary paper products. .11 179 191 191 176 185 188 213 199 187 203 213 202 223 '199 196 p Preliminary. r Revised. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1032 PRODUCTION INDUSTRIAL PRODUCTION—Continued [Federal Reserve indexes, 1947-49 average** 100] Annual 947-49 average 1958 1959 Industry proportion 1957 1958 June July Aug. Sept. Oct. Nov. Dec Jan. Feb. Mar. Apr. May June WITHOUT SEASONAL ADJUSTMENT —Continued 5.47 141 139 137 132 136 142 147 146 140 139 142 148 150 150 148 PriNnetiwngsp arnindt pcuobnlsiushminpgti.on 1.85 131 126 125 110 115 128 141 142 119 119 127 136 145 143 133 Job printing and periodicals 3.62 146 146 143 143 147 149 149 149 151 150 150 154 153 154 155 Chemical and Petroleum Products 9.34 172 170 165 163 170 174 179 180 181 184 187 189 190 r188 189 Chemicals and allied products 6.84 184 184 177 VIA 182 187 195 195 195 198 202 204 208 '206 205 Industrial chemicals. . . . .. 2.54 203 195 184 183 190 202 211 214 217 218 226 231 236 235 Basic inorganic chemicals .57 202 198 185 179 182 196 210 219 210 209 223 229 235 232 Industrial organic chemicals 1.97 204 195 183 184 193 204 212 213 219 221 227 231 236 '236 Plastics materials .24 272 284 266 244 276 316 336 328 320 332 350 366 '379 376 Synthetic rubber. .11 245 230 197 199 225 242 260 273 262 280 292 287 289 283 284 Synthetic fibers .59 199 180 164 174 178 189 199 200 215 211 220 222 ^228 ^227 Miscellaneous organic chemicals 1.03 186 178 174 175 178 183 185 187 192 195 196 199 202 '209 217 Vegetable and animal oils .64 130 130 110 108 117 117 162 159 149 157 157 144 138 131 Vegetable oils . .48 121 124 99 98 107 108 161 155 148 156 152 141 129 120 108 Grease and tallow .16 154 149 145 138 148 146 164 171 151 161 174 155 165 165 Soap and allied products .71 112 109 106 88 122 126 120 114 104 117 120 113 117 114 66 Fertilizers .23 132 132 118 102 106 118 126 115 119 134 142 172 212 '192 127 Petroleum and coal products 2.50 141 134 131 133 140 138 137 140 144 146 145 148 138 139 Petroleum refining 1.97 150 145 141 146 149 148 147 151 159 160 157 154 147 146 #152 Gasoline . . 1.04 162 161 162 167 170 166 160 168 173 170 162 166 163 164 v\l\ Automotive gasoline .98 157 156 157 162 163 159 154 161 167 165 156 162 159 162 Aviation gasoline .06 249 249 237 255 293 297 275 286 275 257 268 232 233 215 Fuel oil .56 147 136 126 131 133 138 140 140 153 163 165 153 134 133 Distillate fuel oil .30 194 183 171 175 181 189 193 192 207 226 229 211 184 186 Residual fuel oil . .26 93 82 75 80 79 80 79 80 90 91 92 86 77 74 Kerosene . .10 98 99 76 74 87 93 103 115 123 137 137 100 90 80 Lubricating oil .17 113 104 104 105 109 102 108 106 112 104 104 111 117 113 Coke ,26 105 76 68 66 72 78 85 90 92 94 102 107 107 106 104 Asphalt roofing and siding .15 94 103 137 115 165 130 121 92 49 58 80 149 87 109 121 Foods, Beverages, and Tobacco 11.51 112 115 119 118 127 130 129 120 no 108 HI 110 115 nn 124 Food and beverage manufactures 10.73 112 115 119 119 126 131 129 120 110 107 109 109 114 nn 123 Fo M od e a m t a p n r u o f d a u c c tu ts res 8 1 . . 4 4 9 8 1 12 1 8 2 1 12 1 5 5 1 12 1 1 4 1 1 1 1 5 6 1 1 2 20 7 1 1 3 3 0 4 1 13 3 8 0 1 1 2 3 1 4 1 1 1 33 2 1 1 3 1 9 0 1 14 1 0 0 1 13 0 3 8 1 1 1 36 1 1 12 1 9 3 1 12 1 9 7 Beef .46 148 139 144 141 141 147 150 134 134 141 132 132 141 140 143 Pork .83 110 111 102 94 101 113 123 126 126 130 136 127 127 116 114 Dairy products .69 111 110 146 133 121 103 93 89 87 92 100 109 121 141 146 Butter .14 109 105 137 111 91 79 80 88 92 103 106 110 115 132 123 Natural cheese .07 119 121 165 138 119 109 104 101 103 102 108 119 134 155 158 Concentrated milk .19 102 99 142 117 95 84 77 70 76 83 88 99 115 139 140 Ice cream. . . . . .28 111 112 142 149 149 122 104 94 84 87 99 109 117 136 152 Canned and frozen foods 1.13 126 134 122 163 236 242 175 125 105 92 93 97 110 '110 131 Grain-mill products 1.16 100 103 106 105 109 110 109 104 101 105 102 102 99 '105 106 Wheat flour .46 87 90 87 85 92 93 97 97 88 94 90 89 85 92 88 Cereals and feeds .70 108 112 118 118 120 121 117 110 109 113 111 111 108 '114 119 Bakery products 1.64 100 101 103 104 102 102 103 101 101 98 99 99 99 102 104 Sugar .27 122 131 82 74 72 103 293 311 233 112 72 64 70 '83 84 Cane sugar .11 112 115 125 126 136 125 117 114 107 103 104 113 118 '135 128 Beet sugar .13 125 138 41 23 11 79 439 476 336 114 40 16 23 '32 41 Confectionery .71 112 113 95 86 103 154 140 134 96 121 128 103 108 96 92 Miscellaneous food preparations 1.41 108 115 119 119 120 119 118 118 116 113 116 115 116 119 124 Beverages 2.24 113 116 138 128 122 119 124 113 104 95 105 113 124 131 Bottled soft drinks .54 Alcoholic beverages ... 1.70 103 107 125 107 104 108 124 111 94 91 100 109 119 124 Beer and ale 1.02 101 103 136 127 107 99 90 85 90 85 88 105 119 121 Liquor distilling .17 83 91 58 33 47 116 172 125 109 104 107 106 112 111 Liquor bottling . . .37 111 115 124 91 116 118 166 154 92 92 116 112 116 128 Xobacco manufactures . • .78 111 118 125 109 130 125 130 128 103 121 130 121 129 128 Cigarettes .46 116 124 134 119 138 129 132 128 108 123 127 121 129 132 Cigars .17 106 114 113 92 122 124 137 140 102 129 150 133 140 129 Preliminary. r Revised. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PRODUCTION 1033 INDUSTRIAL PRODUCTION—Continued [Federal Reserve indexes, 1947-49 average = 100] 19 p 4 r 7 o _ - 49 A av n e n ra u g a e l 1958 1959 Industry portion 1957 1958 June July Aug. Sept. Oct. Nov. Dec.Jan. Feb. Mar. Apr. May June WITHOUT SEASONAL ADJUSTMENT —Continued 9.98 128 117 115 110 120 123 124 123 124 124 123 122 124 128 127 MINERALS—TOTAL 8.35 128 117 108 119 122 122 124 127 127 126 123 123 124 122 Mineral Fuels 2.68 68 72 46 70 73 75 75 76 73 74 69 68 72 72 Co A al nthracite 2. . 3 3 2 6 4 7 2 2 4 7 7 5 4 3 8 0 4 7 2 5 4 7 7 7 4 8 3 0 4 8 0 1 5 8 0 0 7 5 6 0 7 3 9 9 7 3 4 4 7 3 4 4 7 3 8 3 7 3 8 8 Cr B O ud i i C N t l e u a r a m o u n t i u d i d l n e r a o a g n l u o a d s s i g l a e n c s x a o t t a r a u n a l r c d a t l i g o g a n s a s liquids 4 4 5 . . . . . 6 1 8 3 7 7 2 2 4 0 2 1 1 1 1 1 5 9 3 4 2 0 8 8 6 2 1 1 1 1 4 1 3 2 9 1 6 9 9 7 1 1 1 1 1 3 8 9 2 3 3 2 8 2 0 1 1 1 1 1 3 3 9 8 2 7 4 7 4 6 1 1 1 1 1 4 4 9 3 8 2 1 5 3 6 2 1 1 1 1 0 4 3 4 9 1 5 6 4 0 1 2 1 1 1 1 4 4 9 3 2 4 3 6 4 1 2 2 1 1 0 3 4 4 3 7 9 0 5 4 2 1 2 1 1 4 5 1 3 4 7 1 9 7 9 1 1 1 5 5 3 2 0 8 *> 1 1 1 2 5 3 5 2 8 0 0 2 '2 1 1 1 1 4 4 3 6 9 9 8 1 1 1 4 4 3 9 9 9 ^ 1 1 2 1 4 0 4 3 9 7 0 8 Oil a N N nd a a t t u u ga r r a a s l l w g g e a a l s s l d li r q i u ll i i d n s g . .8 3 5 6 1 17 8 1 4 1 1 7 5 9 2 1 1 5 6 0 7 1 1 5 7 1 3 1 1 7 4 8 9 1 1 7 5 9 0 1 15 8 4 1 1 1 8 5 8 9 1 1 9 6 3 5 1 16 9 3 2 2 1 0 5 0 2 1 1 4 9 6 6 1 14 9 8 4 1 1 5 9 5 1 161 Metal, Stone, and Earth Minerals 1.63 129 117 125 121 124 132 131 121 110 108 111 114 128 r146 151 Metal mining .82 116 91 100 91 96 107 107 93 81 86 91 91 105 135 141 Iron ore .33 114 73 108 109 110 118 107 53 38 43 52 50 '81 157 \J9 Nonferrous metal mining .49 117 103 94 78 86 101 107 119 110 114 118 118 121 121 115 Copper mining .24 133 121 105 88 100 123 132 145 135 139 141 146 149 151 140 Z L i e n a c d m m i i n n i i n n g g . . 0 0 9 6 8 8 5 4 6 6 8 5 7 6 2 7 6 5 2 4 5 5 7 9 5 5 9 9 6 6 1 2 7 6 3 5 6 6 4 0 6 6 6 9 7 7 5 1 7 6 1 4 7 6 3 5 '6 7 1 3 6 7 5 0 Stone and earth minerals .81 142 143 150 151 153 158 156 151 139 131 130 138 152 157 161 P Preliminary. r Revised. are included in major group totals but not in individual indexes for autos, 1 Publication suspended pending revision. farm machinery, and some other products, as discussed in the BULLETIN NOTE.—A number of groups and subgroups include individual series for December 1953, pp. 1269-71. not published separately, and metal fabricating contains the ordnance For description and back figures, see BULLETIN for December 1953, group in addition to the groups shown. Certain types of combat materiel pp. 1247-93 and pp. 1298-1328, respectively. UTILITY OUTPUT OF ELECTRICITY AND GAS [Seasonally adjusted Federal Reserve indexes, 1947-49 average= 100] 1947-49 A av n e n ra u g a e l 1958 1959 Industry proportion 1957 1958 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June ELECTRICITY AND GAS—TOTAL 100.00 233 243 241 242 245 248 250 249 252 P257 *258 *26d *260 ^265 »267 Residential 41.34 261 282 282 281 285 288 289 285 286 Nonresidential 58 66 213 215 213 214 217 220 223 224 228 76.18 233 243 242 242 247 250 251 248 252 257 257 260 259 265 ^267 Residential • .... 27.48 273 295 296 294 300 304 305 298 300 313 310 312 307 312 23.68 213 208 203 206 210 216 217 216 221 220 224 228 229 235 General industrial 23.49 193 189 184 187 192 197 198 198 202 202 206 209 211 216 Atomic energy .19 2670 2570 2580 2570 2550 2550 2560 2550 2540 2560 2590 2580 2560 2560 Commercial and other 25.02 208 219 220 220 224 224 224 224 228 230 230 234 235 241 Gas 23.82 232 243 239 239 240 242 247 251 253 *256 *259 *>261 *262 ?264 ^266 Residential 13 86 236 256 255 256 257 257 257 258 258 Industrial ••• 6.16 230 231 227 229 231 233 241 245 250 Commercial and other 3.80 218 215 199 196 196 201 222 236 238 9 Preliminary. r Revised. Indexes without seasonal adjustment may be obtained from the Division NOTE.—For description and back figures see BULLETIN for October of Research and Statistics. 1956, pp. 1055-69. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1034 PRODUCTION OUTPUT OF CONSUMER DURABLE GOODS [Federal Reserve indexes, 1947-49 average = 100] Annual 1947-49 average 1958 1959 pro- Product portion 1957 1958 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June SEASONALLY ADJUSTED CONSUMER DURABLES—TOTAL. 100.00 130 113 111 114 115 103 108 133 134 133 132 135 137 141 145 Major Durables 69.72 138 114 111 116 116 99 105 142 143 149 137 141 146 151 155 Autos 32.10 146 101 99 99 95 56 67 139 143 139 130 142 147 153 156 Major household goods 36.13 132 127 123 133 137 138 141 148 144 143 146 142 147 153 156 Furniture and floor coverings. 15.32 114 115 109 116 117 120 124 127 127 132 133 133 135 140 140 Household furniture 11.31 120 122 116 121 126 129 130 133 134 140 140 141 143 148 147 Floor coverings1 4.01 Appliances and heaters 15.60 127 127 125 129 132 137 148 159 156 140 145 139 144 151 145 Major appliances 11.88 133 131 128 133 139 144 157 168 161 141 149 145 150 158 154 Ranges 2.60 89 88 79 81 77 84 98 114 118 99 103 101 99 109 104 Refrigeration appliances., 4.98 140 140 140 145 152 155 173 184 180 150 163 164 171 178 170 Laundry appliances 2.51 180 170 157 174 185 202 208 215 187 188 186 169 176 182 184 Heating apparatus 3.72 104 115 116 115 112 113 123 131 138 137 134 120 125 128 118 Radio and television sets 5.21 205 166 155 191 207 197 166 174 162 181 185 179 189 195 235 Radio sets 3.42 75 61 51 64 75 86 65 75 65 73 72 67 71 71 92 Television sets 1.79 453 365 355 435 459 408 359 363 346 387 400 392 415 432 507 Other Consumer Durables 30.28 111 110 111 111 112 113 114 113 114 118 119 121 115 117 121 Auto parts and tires 14.00 Misc. home and personal goods. 16.28 114 109 106 111 110 114 114 114 113 114 114 117 119 123 124 WITHOUT SEASONAL ADJUSTMENT CONSUMER DURABLES—TOTAL.. 100.00 130 113 109 100 100 103 116 143 137 136 140 144 142 142 143 Major Durables 69.72 138 114 109 97 94 96 113 155 147 145 150 155 154 154 154 Autos 32.10 146 101 100 87 53 37 71 160 161 154 149 163 164 162 158 Major household goods 36.13 132 127 119 108 130 150 151 153 138 14i 154 151 148 149 152 Furniture and floor coverings. 15.32 114 115 105 105 118 126 131 130 130 130 135 136 135 133 135 Household furniture 11.31 120 122 113 115 127 134 138 137 138 137 140 141 140 141 143 Floor coverings * 4.01 Appliances and heaters 15.60 127 127 132 109 114 150 147 156 137 131 158 159 156 155 154 Major appliances 11.88 133 131 135 111 110 150 148 162 146 137 169 173 167 165 163 Ranges 2.60 89 88 84 62 68 92 102 114 108 96 115 117 104 103 111 Refrigeration appliances. , 4.98 140 140 165 134 111 149 138 156 153 145 187 205 201 205 201 Laundry appliances 2.51 180 170 141 124 155 228 229 241 189 183 212 186 182 173 166 Heating apparatus 3.72 104 115 123 102 128 149 145 136 108 112 121 116 120 123 125 Radio and television sets 5.21 205 166 122 114 214 222 221 212 163 193 199 173 166 176 198 Radio sets 3.42 75 61 39 40 64 80 82 99 79 73 73 70 68 69 76 Television sets 1.79 453 365 281 257 500 493 485 429 322 422 440 369 353 380 431 Other Consumer Durables 30.28 111 110 108 107 115 119 123 117 113 115 117 117 113 114 119 Auto parts and tires 14.00 Misc. home and personal goods 16.28 114 109 103 103 112 118 123 122 114 109 114 116 116 118 121 * Preliminary. ' Revised, Individual indexes without seasonal adjustment for woven carpets, i Publication suspended pending revision. appliances, heating apparatus, radio sets, and television sets may be NOTE.—For a description of these indexes, see BULLETIN for May 1954, obtained from the Division of Research and Statistics. pp. 438-47. VALUE OF NEW CONSTRUCTION ACTIVITY [Joint estimates of the Departments of Commerce and Labor.* Seasonally adjusted. In millions of dollars] Private Public Year or month Total Total d R en e t s i i a - l Indu B s u - sine C s o s m- Public O n d re t o e h s n n i e - - - r Total M ta i r l y i- H w ig ay h- s C e ti r o o v n n a - - o A th l e l r Total trial mercial utility tial 1950' 29,947 23,081 14,100 5,807 1.062 1,415 3,330 3,174 6,i 177 2,134 942 3,613 1951' 32,700 23,447 12,529 7,344 2,117 1,498 3,729 3,574 9,253 887 2,353 912 5,101 1952' 34,670 23,889 12,842 7,500 2,320 1,137 4,043 3,547 10,781 1,387 2,679 900 5,815 1953' 37,019 25,783 13,777 8,495 2,229 1,791 4,475 3,511 11,236 1,290 015 892 6,039 1954' 39,362 27,684 15,379 8,531 2,030 2,212 4,289 3,774 11,678 1,003 680 773 6,222 1955' 44,164 32,440 18,705 9,980 2,399 3,218 4,363 3,755 11,724 1,287 861 701 5,875 1956' 45,779 33,067 17,677 11,608 3,084 3,631 4,893 3,782 12,712 1,360 395 826 6,131 1957' 47,795 33,778 17,019 12,535 3,557 3.564 5,414 4,224 14,017 1,287 892 971 6,867 1958 49,109 33,833 18,047 11,326 2,382 5,355 4,460 15,276 1,402 5,364 1,019 7,491 1958—July.. 4,030 2,771 1,470 923 180 307 436 378 1,259 112 432 80 635 Aug.. 4,042 2,789 1,500 911 171 300 440 378 1,253 109 438 80 626 Sept.. 4,105 2,821 1,535 906 167 297 442 380 1,284 124 442 84 634 Oct... 4,198 2,872 1,590 900 165 295 440 382 1,326 134 457 89 646 Nov.. 4,356 2,948 1,653 908 167 298 443 387 1,408 160 510 86 652 Dec. 4,451 3,030 1,733 915 166 300 449 382 1,421 135 524 93 669 1959—Jan.'. 4,557 3,113 1,793 928 160 304 464 392 1,444 127 552 95 670 Feb.' 4,526 3,127 1,812 929 160 308 461 386 1,399 125 500 93 681 Mar.' 4,669 3,181 1,867 928 156 305 467 386 1,488 133 582 98 675 Apr.' 4,654 3,243 1,936 925 153 311 461 382 1,411 135 512 99 665 May? 4,614 3,256 1,937 938 157 334 447 381 1,358 125 472 101 660 June? 4,582 3,249 1,897 957 163 344 450 395 1,333 132 449 98 654 July P. 4,583 3,246 1,881 960 170 351 439 405 1,337 134 455 95 653 > Preliminary. ' Revised. * Beginning with June 1959, data are from Bureau of the Census. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PRODUCTION 1035 CONSTRUCTION CONTRACTS AWARDED, BY TYPE OF OWNERSHIP AND BY TYPE OF CONSTRUCTION [Figures for the 48 States, as reported by the F. W. Dodge Corporation. Value of contracts, in millions of dollars] By type of ownership By type of construction Year or month Total Nonresidential building Public Resi- works Public Private dential and building t F o a ri c e - s m C e o rc m ia - l E ti d o u n c a a l - Other u p t u il b it l i i e c s 1957 32,173 11,238 20,935 13,039 2,168 3,267 2,936 2,922 7,841 1958 35,090 13,427 21,663 14,696 1,400 3,197 2,908 3,444 9,446 1958 June. 3,820 1,720 2,100 1,364 80 235 264 397 1,479 July . . . . .. 3,607 1,550 2,058 1,557 150 282 264 381 974 Aus 3,467 1,233 2,234 1,451 142 356 280 301 937 Sept 3,216 1,049 2,167 1,460 11J 303 240 237 863 Oct 3,309 1,071 2,238 1,595 135 288 248 284 759 Nov 2,594 927 1,667 1,206 96 238 198 243 613 Dec 2,282 887 1,395 981 88 227 206 226 553 1959 Jan 2,319 800 1,519 1,022 105 282 171 261 479 Feb 2,307 800 1,507 1,073 139 198 111 190 530 M^ar 3,340 869 2,471 1,541 128 286 217 283 886 Apr 3,778 1,207 2,571 1,831 189 328 270 400 760 May 3,542 1,094 2,447 1.677 176 326 227 342 793 June 3,659 1,167 2,492 NOTE.—Beginning in 1958, monthly data exceed annual total and are in policy of accounting for negative adjustments in monthly data after not comparable with monthly data for earlier years because of a change original figures have been published. CONSTRUCTION CONTRACTS AWARDED, BY FEDERAL RESERVE DISTRICTS [Figures as reported by the F. W. Dodge Corporation. Value of contracts, in millions of dollars] Federal Reserve district All Month districts Boston Y N o e r w k d P e h lp il h a i - a C l l a e n v d e- m Ri o c n h d - Atlanta Chicago Lo S u t. is M ap in o n li e s - K C an it s y as Dallas F c S i r s a a c n n o - 1958 Apr 2,885 136 281 127 268 182 286 403 130 125 184 212 551 May 3,399 182 361 141 288 233 316 492 190 184 178 208 628 June 3,820 166 562 149 312 262 419 454 174 153 243 288 639 1959—Apr 3,778 233 435 127 308 330 385 544 189 145 224 214 645 May 3,542 163 404 135 254 258 370 535 136 136 233 195 724 June 3,659 176 398 138 292 269 339 543 175 130 202 299 698 PERMANENT NONFARM DWELLING UNITS STARTED [Bureau of Labor Statistics estimates.* In thousands of units] Year or month a ( n s a e n p d T a u r j s i u o a v o l s t a n a te r t a l e a d ll t y e) Total p M a o r e l e i t t a r a o s n - p m N a o r e l o e i t t r n a a o s - n - Total famil P y rivat f e am 2- ily f M am u i l l t y i- Public G T o o v t e a r l nmen F t- H u A nderwri V tt A en i 1951 1.091 111 315 1,020 892 40 88 71 412 264 149 1952 ,127 795 332 1,069 939 46 84 59 421 280 141 1953 ,104 804 300 1,068 933 42 94 36 409 252 157 1954 ,220 897 324 1,202 1,077 34 90 19 >83 276 307 1955 1,329 976 353 1,310 1,190 33 87 19 ^70 277 393 1956 ,118 780 338 1,094 981 31 82 24 463 192 271 1957 ,042 700 342 993 840 33 120 49 313 185 128 1958 .209 827 382 1,142 933 39 17? 68 429 327 102 1958—July 1.174 113 81 32 109 88 3 17 4 43 32 11 1,228 124 83 41 115 96 4 15 9 48 35 13 Sept 1,255 121 85 36 111 93 3 14 10 50 35 14 Oct 1,303 115 79 36 113 94 4 15 2 54 39 15 Nov 1,427 109 74 36 107 85 4 18 2 40 29 11 Dec 1,432 91 64 27 90 70 3 16 2 38 29 9 1959 Jan 1,364 87 62 25 84 64 3 17 3 29 22 7 Feb . .. 1,403 95 62 33 94 75 3 15 1 28 22 6 Mar 1,403 121 81 40 118 93 5 20 3 41 31 10 Apr 1,434 142 97 45 137 109 5 24 5 46 35 11 May 1,370 137 94 43 134 107 5 21 4 47 36 10 June 1,370 H36 91 45 ^131 n.a. n.a. n.a. ^5 47 36 11 July 1,350 H26 86 40 ?125 n.a. n.a. n.a. P2 43 33 11 9 Preliminary. n.a. N01available. sure or guarantee the mortgages. VA figures after June 1950 and all FHA • 1 B D e a g ta in f n r i o n m g J F u e n d e e r 1 a 9 l 5 H 9 o d u a si t n a g a r A < dm fro in m i st t r h a e t i B on u r a e n a d u V o e f t t e h r e a n C s' e A ns d u m s. inistra- e fi a g r u li r e e r s V ar A e f b ig a u se re d s o a n re f e il s e t d im o a f t f e ic s e b a re se p d o r o ts n o lo f a f n i s rs -c t l c o o se m d p l i i n a f n o c r e m a in ti s o p n e . ctions; tion represent units started under commitments of FHA or VA to in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1036 EMPLOYMENT LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT [Bureau of the Census estimates, without seasonal adjustment. In thousands of persons unless otherwise indicated] Civilian labor force Total non- Total Employed * Unemploy- Year or month institutional labor Not in the ment population force Total In n on agri- In U pl n o e y m ed - labor force (per r a c t e e nt)2 Total in c d u u lt s u t r r a ie l s agriculture 1951 111,924 65,832 62,884 61,005 53,951 7,054 1,879 46,092 3.0 1952 113,119 66,410 62,966 61,293 54,488 6,805 1,673 46,710 2.7 1953 115,095 67,362 63,815 62,213 55,651 6,562 1,602 47,732 2.5 1954 116,220 67,818 64,468 61,238 54,734 6,504 3,230 48,402 5.0 1955 117,388 68,896 65,848 63,193 56,464 6,730 2,654 48,492 4.0 1956 118,734 70,387 67,530 64,979 58,394 6,585 2,551 48,348 3.8 19573 120,445 70,746 67,946 65,011 58,789 6,222 2,936 49,699 4.3 1958 121,950 71,284 68,647 63,966 58,122 5,844 4,681 50,666 6.8 1958 Julv 121,993 73,104 70,473 65,179 58,461 6,718 5,294 48,889 7.3 Aug 122,092 72,703 70,067 65,367 58,746 6,621 4,699 49 389 7 6 Sept 122,219 71,375 68,740 64,629 58,438 6,191 4,111 50,844 7.2 Oct 122,361 71,743 69,111 65 306 58 902 6,404 3 805 50 618 7 1 Nov 122,486 71,112 68,485 64,653 58,958 5,695 3,833 51,374 5.9 Dec 122,609 70,701 68,081 63,973 59,102 4,871 4,108 51,909 6.1 1959 Jan 122,724 70,027 67,430 62,706 58,013 4,693 4 724 52 697 6 0 Feb 122,832 70,062 67,471 62,722 58,030 4,692 4,749 52 770 6.1 Mar 122 945 70,768 68,189 63 828 58 625 5 203 4 362 52 177 5 8 Apr 123,059 71,210 68,639 65,012 59,163 5,848 3,627 51 849 5.3 May 123,180 71,955 69,405 66,016 59,608 6,408 3,389 51,225 4.9 June 123 296 73,862 71,324 67 342 60 111 7,231 3 982 49 435 4 9 July 123,422 73,875 71,338 67,594 60,769 6,825 3,744 49,547 5.1 1 Includes self-employed, unpaid family, and domestic service workers. and waiting to start new jobs (previously included as employed) are clas- 2 Per cent of civilian labor force. Monthly data are seasonally sified as not in the labor force. adjusted. NOTE.—Information relating to persons 14 years of age and over is 3 Beginning 1957 persons waiting to start new wage and salary jobs and obtained through interviews of households on a sample basis. Monthly those on temporary layoff, previously considered as employed (with a job data relate to the calendar week that contains the 12th day; annual data but not at work), are classified as unemployed, and a small group in school are averages of monthly figures. EMPLOYMENT IN NONAGRICULTURAL ESTABLISHMENTS, BY INDUSTRY DIVISION [Bureau of Labor Statistics. In thousands of persons] Transporta- Federal Year or month Total M t a u n r u in f g ac- Mining co C n o st n r t u r c a t c io t n ti p o u n b a li n c d Trade Finance Service Sta lo te c a a l nd utilities government 1951 47,347 16,104 916 2,603 4,166 10,012 1,892 5,264 6,389 1952 48,303 16,334 885 2,634 4,185 10,281 1,967 5,411 6,609 1953 49,681 17,238 852 2,622 4,221 10,527 2,038 5,538 6,645 1954 48,431 15,995 777 2,593 4,009 10,520 2,122 5,664 6,751 1955 50,056 16,563 777 2,759 4,062 10,846 2,219 5,916 6,914 1956 51,766 16,903 807 2,929 4,161 11,221 2,308 6,160 7,277 1957 52,162 16,782 809 2,808 4,151 11,302 2,348 6,336 7,626 1958 50,543 15,468 721 2,648 3,903 11,141 2,374 6,395 7,893 SEASONALLY ADJUSTED 1958—July 50,411 15,312 709 2,693 3,877 11,121 2,363 6,433 7,903 Aug 50,570 15,330 701 2,711 3,867 11,175 2,377 6,420 7,989 Sept 50,780 15,529 707 2,698 3,858 11,151 2,392 6,440 8,005 Oct 50,582 15,358 708 2,698 3,887 11,154 2,392 6,399 7,986 Nov 50,877 15,693 708 2,690 3,875 11,119 2,386 6,426 7,980 Dec 50,844 15,701 709 2,550 3,859 11,143 2,385 6,448 8,049 1959—Jan 51,086 15,764 704 2,650 3,894 11,216 2,387 6,443 8,028 Feb 51,194 15,819 693 2,626 3,880 11,279 2,395 6,462 8,040 Mar 51,456 16,006 688 2,719 3,885 11,263 2,398 6,441 8,056 Apr 51,887 16,182 701 2,829 3,886 11,333 2,403 6,479 8,074 May 52,125 16,372 708 2,787 3,917 11,363 2,413 6,486 8,079 June 52,408 16,522 708 2,793 3,927 11,420 2,419 6,519 8,100 July 52,572 16,577 711 2,797 3,914 11,432 2,419 6,568 8,154 WITHOUT SEASONAL ADJUSTMENT 1958—July 50,178 15,161 705 2,882 3,907 10,984 2,410 6,465 7,664 Aug 50,576 15,462 708 2,955 3,897 11,011 2,413 6,452 7,678 Sept 51,237 15,755 711 2,927 886 11,151 2,392 6,472 7,943 Oct 51,136 15,536 708 2,887 897 11,225 2,380 6,463 8,040 Nov 51,432 15,795 712 2,784 885 11,382 2,374 6,426 8,074 Dec 51,935 15,749 713 2,486 881 11,976 2,373 6,384 8,373 1959—Jan 50,310 15,674 704 2,343 836 11,052 2,363 6,314 8,024 Feb 50,315 15,771 693 2,256 835 10,990 2,371 6,333 8,066 Mar 50,878 15,969 688 2.417 865 11,083 2,386 6,377 8,093 Apr 51,430 16,034 694 2,662 3,879 11,136 2,403 6,511 8,111 May 51,982 16,187 701 2,834 3,914 11,234 2,413 6,583 8,116 June 52,580 16,449 712 2,980 3,943 11,347 2,443 6,617 8,089 July 52,354 16,407 707 3,032 3,943 11,292 2,467 6,601 7,905 NOTE.—Data include all full- and part-time employees who worked family workers, and members of the armed forces are excluded. Figures during, or received pay for, the pay period ending nearest the 15th of the for June and July 1959 are preliminary. Back data may be obtained month. Proprietors, self-employed persons, domestic servants, unpaid from the Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

EMPLOYMENT AND EARNINGS 1037 PRODUCTION WORKER EMPLOYMENT IN MANUFACTURING INDUSTRIES [Bureau of Labor Statistics. In thousands of persons] Seasonally adjusted Without seasonal adjustment Industry group 1958 1959 1958 1959 July May June July July May June July Total 11,512 12,481 12,592 12,636 11,353 12,299 12,520 12,456 Durable goods 6,372 7,162 7,239 7,293 6,270 7,139 7,246 7,178 Ordnance and accessories 67 73 73 73 67 73 73 73 Lumber and wood products 561 591 602 611 572 594 623 623 Furniture and fixtures 298 326 330 329 286 318 320 316 Stone, clay, and glass products 426 454 464 472 422 454 466 467 Primary metal industries 861 1,057 1,068 1,049 852 1,052 1,068 1,039 Fabricated metal products 789 857 870 874 765 853 866 848 Machinery except electrical 1,005 1,142 1,154 1,180 990 1,153 1,166 1,162 Electrical machinery 738 822 839 865 712 814 831 835 Transportation equipment 1,063 1,233 1,226 1,221 1,063 1,233 1,226 1,221 Instruments and related products....... 200 220 224 224 196 219 223 220 Miscellaneous manufacturing industries., 364 387 389 395 346 379 383 375 Nondurable goods 5,140 5,319 5,353 5,343 5,083 5,160 5,274 5,278 Food and kindred products 1,030 1,040 1,038 1,022 1,081 974 1,022 1,072 Tobacco manufactures 80 80 80 78 70 69 70 68 Textile-mill products 856 878 883 899 830 874 883 872 Apparel and other finished textiles 1,039 1,111 1,116 1,093 992 1,055 1,071 1,044 Paper and allied products 433 451 453 452 429 446 453 447 Printing, publishing and allied industries 542 556 555 560 537 553 555 554 Chemicals and allied products 506 535 535 536 496 532 527 525 Products of petroleum and coal 154 158 158 158 157 159 160 161 Rubber products 180 173 199 207 175 172 199 201 Leather and leather products 320 337 336 338 317 325 334 335 NOTE.—Data covering production and related workers only (full- and preliminary. Back data may be obtained from the Bureau of Labor part-time) who worked during, or received pay for, the pay period ending Statistics, nearest the 15th of the month. Figures for June and July 1959 are HOURS AND EARNINGS OF PRODUCTION WORKERS IN MANUFACTURING INDUSTRIES [Bureau of Labor Statistics. In unit indicated] Average weekly earnings Average hours worked Average hourly earnings (dollars per week) (per week) (dollars per hour) Industry group 1958 1959 1958 1959 1958 1959 July May June July July May June July July May June July Total 83.50 90.32 91.17 90.09 39.2 40.5 40.7 40.4 2.13 2.23 2.24 2.23 Durable goods 89.83 98.64 99.36 97.51 39.4 41.1 41.4 40.8 2.28 2.40 2.40 2.39 Ordnance and accessories 100.94 105.83 105.73 105.47 40.7 41.5 41.3 41.2 2.48 2.55 2.56 2.56 Lumber and wood products 74.28 80.56 82.40 82.00 39.3 41.1 41.2 41.0 1.89 1.96 2.00 2.00 Furniture and fixtures 68.85 72.76 74.30 73.93 38.9 40.2 40.6 40.4 1.77 1.81 1.83 1.83 Stone, clay, and glass products 84.40 91.94 92.38 91.91 40.0 41.6 41.8 41.4 2.11 2.21 2.21 2.22 Primary metal industries 102.91 117.58 118.43 110.71 38.4 41.4 41.7 39.4 2.68 2.84 2.84 2.81 Fabricated metal products 91.20 98.36 99.96 98.77 40.0 41.5 42.0 41.5 2.28 2.37 2.38 2.38 Machinery except electrical 93.77 104.00 104.75 104.00 39.4 41.6 41.9 41.6 2.38 2.50 2.50 2.50 Electrical machinery 84.50 89.51 90.58 89.91 39.3 40.5 40.8 40.5 2.15 2.21 2.22 2.22 Transportation equipment 100.19 107.98 109.33 108.39 39.6 40.9 41.1 40.9 2.53 2.64 2.66 2.65 Instruments and related products 87.34 91.98 93.71 93.71 39.7 40.7 41.1 41.1 2.20 2.26 2.28 2.28 Miscellaneous manufacturing industries .. 72.13 76.57 77.14 76.95 39.2 40.3 40.6 40.5 1.84 1.90 1.90 1.90 Nondurable goods 75.66 79.40 79.40 80.00 39.0 39.7 39.7 39.8 1.94 2.00 2.00 2.01 Food and kindred products 81.99 85.68 85.89 85.90 41.2 40.8 40.9 41.1 1.99 2.10 2.10 2.09 Tobacco manufactures 65.74 67.51 67.99 68.38 39.6 38.8 39.3 39.3 1.66 1.74 1.73 1.74 Textile-mill products 57.90 63.83 64.62 63.83 38.6 40.4 40.9 40.4 1.50 1.58 1.58 1.58 Apparel and other finished textiles 53.40 55.63 55.42 55.57 35.6 36.6 36.7 36.8 1.50 1.52 1.51 1.51 Paper and allied products 88.83 93.52 93.95 94.16 41.9 42.9 42.9 42.8 2.12 2.18 2.19 2.20 Printing, publishing and allied industries.. 97.38 102.11 102.49 102.76 37.6 38.1 38.1 38.2 2.59 2.68 2.69 2.69 Chemicals and allied products 95.06 99.42 100.43 101.26 40.8 41.6 41.5 41.5 2.33 2.39 2.42 2.44 Products of petroleum and coal 113.16 117.67 118.08 122.06 41.0 41.0 41.0 41.8 2.76 2.87 2.88 2.92 Rubber products 91.89 101.46 93.56 100.94 39.1 42.1 38.5 41.2 2.35 2.41 2.43 2.45 Leather and leather products. 57.97 60.54 61.66 60.90 37.4 37.6 38.3 38.3 1.55 1.61 1.61 1.59 n.a. Not available. June and July 1959 are preliminary. Back data are available from NOTE.—Data are for production and related workers. Figures for the Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1038 DEPARTMENT STORES DEPARTMENT STORE SALES AND STOCKS, BY DISTRICTS [Federal Reserve indexes, based on retail value figures. 1947-49 average= 100] Federal Reserve district United Year or month States Boston Y N o e r w k P a p d h h e i i l a l - - C l l a e n ve d - m Ri o c n h d - l A a t nt - a c C a h g i o - Lo S u t. is M ap i o n l n is e- K C a i n t s y as Dallas F c S i r s a a c n n o - SALESi 1951 112 107 112 114 115 117 110 111 107 117 120 112 1952 114 110 104 113 115 122 127 109 116 109 121 129 120 1953 118 114 105 117 119 127 131 114 120 110 123 132 122 1954 118 117 108 116 112 129 135 112 121 113 129 136 122 1955 128 123 113 125 122 140 149 122 132 117 140 149 132 1956 135 126 120 131 128 146 164 128 138 126 144 158 141 1957 135 122 124 132 129 148 166 128 138 128 142 159 140 1958 136 122 127 133 127 149 167 125 137 128 146 159 142 SEASONALLY ADJUSTED 1958—June 133 115 124 129 122 146 mi 119 133 123 141 '161 '144 July 140 129 133 141 132 153 174 131 139 129 147 162 140 Aug 147 137 137 143 140 163 183 136 151 137 158 172 148 Sept 135 119 125 129 129 145 167 124 144 126 147 162 140 Oct 135 125 128 140 126 151 165 122 131 123 144 159 141 Nov 137 122 125 135 125 149 170 125 133 130 149 166 149 Dec 143 132 133 142 139 156 176 134 148 136 150 160 148 1959—Jan 138 119 129 134 123 160 173 124 138 127 150 168 150 Feb 140 120 127 134 133 159 168 129 141 133 154 162 155 Mar 138 116 123 129 128 146 167 129 144 141 155 166 155 Apr 141 120 126 142 132 156 175 130 138 127 149 169 153 May 144 124 130 139 136 158 182 135 148 '131 157 173 154 June P\44 118 128 140 135 ?158 P1S6 133 140 139 *148 176 160 WITHOUT SEASONAL ADJUSTMENT 1958—June 126 115 120 111 115 135 ns4 117 124 '120 136 147 135 July 112 93 97 103 107 123 144 103 114 103 130 144 124 Aug 129 107 105 115 124 139 165 121 136 130 152 160 144 Sept 137 127 129 135 129 151 160 129 143 135 149 156 140 Oct 141 127 135 143 129 158 173 129 144 142 149 165 142 Nov 166 149 160 179 154 186 197 154 161 150 173 190 173 Dec 251 240 235 251 244 286 305 228 250 227 260 277 262 1959_jan 106 94 104 101 96 113 135 94 105 93 112 133 119 Feb 107 90 100 '102 103 114 138 96 109 99 112 126 119 Mar 125 103 112 124 117 138 167 114 128 119 133 151 132 Apr 130 114 116 128 123 139 165 123 129 122 ;o 157 138 May 141 124 126 138 132 156 175 134 149 '127 154 172 146 June ^136 118 125 132 127 ^147 *>162 130 130 135 160 151 STOCKS i 1951 131 129 127 132 132 129 145 125 130 121 137 135 137 1952 121 117 115 120 115 127 143 112 120 111 130 129 131 1953 131 124 120 129 125 141 155 122 131 123 46 143 140 1954 128 126 117 127 122 138 152 120 125 124 141 140 135 1955 136 132 119 135 124 159 170 127 135 152 153 142 1956 148 141 130 148 133 175 195 138 148 142 164 168 156 1957 152 138 138 154 136 178 203 143 149 146 160 174 158 1958 148 136 136 154 129 171 197 139 140 137 153 165 155 SEASONALLY ADJUSTED 1958—June 147 136 '154 126 '174 191 138 144 136 152 168 156 July 148 140 135 152 131 171 192 142 145 135 149 163 156 Aug 148 137 135 153 128 172 192 144 143 137 152 163 152 ^ept 150 141 137 155 132 175 198 145 136 142 155 164 158 Oct 152 142 142 157 131 176 202 146 136 141 159 170 159 Nov 153 142 140 159 130 180 207 143 137 140 165 172 160 Dec 150 139 141 157 128 172 205 140 134 137 159 163 157 1959—Jan 152 137 141 155 139 177 200 141 144 136 159 168 160 Feb 150 139 138 153 127 172 198 141 138 142 155 168 161 Mar 148 136 137 153 127 171 195 138 138 139 150 169 163 Apr -. 151 138 138 155 127 175 201 142 141 138 151 174 166 May 151 138 136 156 128 172 200 140 143 '140 154 175 167 June 142 141 164 131 183 202 149 147 141 ^168 WITHOUT SEASONAL ADJUSTMENT 1958—June 140 126 127 '143 120 '161 182 134 134 128 146 156 150 July 139 126 122 137 121 156 179 136 135 129 142 155 150 Aug 144 133 132 147 123 167 188 138 141 134 151 163 153 Sept 157 147 144 163 137 181 206 151 143 148 159 174 164 Oct 170 161 160 181 147 201 221 160 153 156 173 187 178 Nov 173 166 161 183 147 205 234 163 153 159 184 190 180 Dec 136 130 130 141 117 157 178 123 121 127 144 152 148 1959_jan 116 124 126 137 123 158 182 129 128 126 143 148 144 Feb I } 131 130 147 122 166 196 133 134 136 148 163 151 Mar lH 138 141 158 131 182 204 139 143 143 156 178 165 Apr 13S 144 143 166 133 184 211 150 149 140 158 181 169 May 153 141 140 '159 132 173 202 145 143 '139 155 174 166 June 134 132 153 125 169 192 145 136 133 P Preliminary. r Revised. NOTE.—For description of the series and for monthly indexes beginning 1 Figures for sales are the average per trading day, while those for stocks 1947, see BULLETIN for December 1957, pp. 1323-52. Figures prior to are as of the end of the month or averages of monthly data. 1947 may be obtained from the Division of Research and Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

DEPARTMENT STORES; FOREIGN TRADE 1039 DEPARTMENT STORE MERCHANDISING DATA [Based on retail value figures] Amounts (In millions of dollars) Ratios to sales* Period m S (t a o f o l o n e t r t a s h l i ) S m t ( o o e o c n n f k t d h s ) i o m ( s e r O t o n d i a n u d n e n g r t t d - s h o - ) f * m c ( e t R o f i o o n p e t r t t a - h s l 2 ) o m ( r N t o d f o o e n e t r w r t a s h l ) 3 Stocks s o O t r i a d n u n e g t d r - s - S o st p o t r i a o d n l u n u c e g t d k s - rs - s ce R i e p - ts Annual average: 1950 376 1,012 495 391 401 2.8 1.4 4.2 l.l 1951 391 ,202 460 390 379 3.2 1.3 4.4 0 1952 397 1,097 435 397 401 2.9 1.2 4. 1.0 1953 406 1,163 421 408 401 3.0 l.l 4. 1.0 1954 409 1,140 388 410 412 3.0 .0 4.() 0 1955 437 ,195 446 444 449 2.9 .1 4.(» 1.0 1956 454 ,286 470 459 458 3.0 .1 4. 1.0 1957 459 1,338 461 461 458 3.1 .1 4. 0 1958 462 120 436 461 463 3.0 .0 4 0 Month: 1958 June r401 r480 r320 r477 3 1 I 2 4 3 0 8 July 366 1,216 563 352 434 3.3 1.5 4.9 1-0 Aue 420 1,276 534 480 451 3.0 .3 4.3 .1 Sept 451 1,395 553 570 589 3.1 1.2 4.3 .3 Oct 502 1,516 545 623 615 3.0 t.l 4.1 .2 Nov 538 1,567 462 589 506 2.9 ().9 3.8 .1 Dec 911 1,231 332 575 445 1.4 ().4 1.7 ( 1959 Jan 379 1,217 412 365 445 3.2 4.3 1.0 Feb 342 1,278 449 403 440 3.7 5.0 ? Mar 434 1,360 423 516 489 3.1 0 4.1 7 Apr 431 ,404 388 475 441 3.3 0.9 4.2 1.1 May 453 . .165 418 414 444 3.0 0.9 3.9 0.9 JuneP 449 1,305 604 389 575 2.9 1.3 4.3 » Preliminary. r Revised. 3 Derived from receipts and reported figures on outstanding orders. 1 These figures are not estimates for all department stores in the United 4 The first three ratios are of stocks and/or orders at the end of the States. They are the actual dollar amounts reported by a group of de- month to sales during the month. The final ratio is based on totals of partment stores located in various cities throughout the country. In 195 8, sales and receipts for the month. sales by these stores accounted for about 45 per cent of estimated total NOTE.—For description and monthly figures for back years, see BULdep 2 a D rt e m ri e v n e t d s f t r o o r m e s t a h l e e s r . eported figures on sales and stocks. LETIN for October 1952, pp. 1098-1102. MERCHANDISE EXPORTS AND IMPORTS [Bureau of the Census. In millions of dollars] Merchandise exports^ Mer m ch il a i n ta d r i y s - e a i e d x p s o h r i t p s m e e x n c t l s u 2 ding Merchandise imports3 Period 1957 1958 1959 1957 1958 1959 1957 1958 1959 Jan 1,681 1,505 1,400 J <»R4 1 286 1 115 1 096 1,154 Feb 1,616 1,345 1,280 ,495 1,245 1,184 001 QS6 1,118 Mar 2,154 1,553 1,456 1,024 1,438 1,375 1,133 1,072 1,301 Apr 1,866 1,530 1,468 1,783 1,408 1,343 1,119 ,057 1,221 May 1,817 1,638 1,552 1,715 1,507 1,411 1,106 ,061 1,264 1,790 1,406 1,426 1,656 1,308 1,348 986 1,031 1,369 Julv 1,697 1,416 1,510 1,287 ,148 1,049 Aue . . . . 1 681 1,396 [ 540 I 283 I 043 950 Seot 1,544 1,361 1,441 1,239 1,007 1,074 Oct . . . . 1,680 1,599 1,606 418 1,148 1,142 Nov 1 688 1 596 I 601 1408 041 I 089 Dec 1,636 1,514 ^41 1,379 l',U2 1,253 10,924 8,977 8,582 10,257 8,302 7,946 6,452 <5,273 7,427 1 Exports of domestic and foreign merchandise. 3 General imports including imports for immediate consumption plus 2 Department of Defense shipments of grant-aid military equipment entries into bonded warehouses. and supplies under Mutual Security Program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1040 PRICES CONSUMER PRICES [Bureau of Labor Statistics index for city wage-earner and clerical-worker families. 1947-49= 100] Housing Read- Other All Ap- Trans- Med- Per- ing goods Year or month items Foods Total Rent e G a l n e a c d s - S f a u o n e li d l d s H n f o u is u r h - s - e- o H h p o o e u l r d a se - - parel p t o i r o t n a- c i a ca re l s c o a n r a e l re t a c i n o re n d a- s a i e c n r e v d s tricity fuel oil ings tion 1929 73.3 65.6 117.4 60.3 1933 55.3 41.6 83.6 45.9 1941 62 9 52.2 88.4 55.6 1945 76.9 68.9 90.9 76.3 1951 111.0 112.6 112.4 113.1 103.1 116.4 111.2 109.0 106.9 118.4 111.1 110.5 106.5 109.7 1952 113.5 114.6 114.6 117.9 104.5 118.7 108.5 111.8 105.8 126.2 117.3 111.8 107.0 115.4 1953 114.4 112.8 117.7 124.1 106.6 123.9 107.9 115.3 104.8 129.7 121.3 112.8 108.0 118.2 1954 114.8 112.6 119.1 128.5 107.9 123.5 106.1 117.4 104.3 128.0 125.2 113.4 107 1 120.1 1955 114.5 110.9 120.0 130.3 110.7 125.2 104.1 119.1 103.7 126.4 128.0 115.3 106.6 120.2 1956 116.2 111.7 121.7 132.7 111.8 130.7 103.0 122.9 105.5 128.7 132.6 120.0 108.1 122.0 1957 120.2 115.4 125.6 135.2 113.0 137.4 104.6 127.5 106.9 136.0 138.0 124 4 112.2 125.5 1958 123.5 120.3 127.7 137.7 117.0 134.9 103.9 131.4 107.0 140.5 144.4 128.6 116.7 127.2 123.7 121.6 127.8 137.7 116.9 131.7 104.1 131.1 106.7 138.9 143.9 128.6 116.7 127.2 July 123.9 121.7 127.7 137.8 117.0 132.3 104.0 131.2 106.7 140.3 144.6 128.9 116.6 127.2 Aug 123.7 120.7 127.9 138.1 117.5 133.6 103.3 132.1 106.6 141.0 145.0 128.9 116.7 127.1 Sept. 123.7 120.3 127.9 138.2 118.0 135.2 103.6 132.2 107.1 141.3 146.1 128.7 116.6 127.1 Oct... 123.7 119.7 127.9 138.3 118.1 135.6 103.4 132.4 107.3 142.7 146.7 128.8 116.6 127.2 Nov 123.9 119.4 128.0 138.4 118.1 135.8 103.5 132.6 107.7 144.5 147.0 129.1 117.0 127.2 Dec 123.7 118.7 128.2 138.7 118.2 137.0 103.6 132.8 107.5 144.3 147.3 129.0 116.9 127.3 1959 Jan 123.8 119.0 128.2 138.8 118.2 138.9 103.2 133.1 106.7 144.1 147.6 129.4 117.0 127.3 Feb 123.7 118.2 128.5 139.0 118.5 140.0 103.8 133.1 106.7 144.3 148.6 129.8 117.1 127.4 Mar 123.7 117.7 128.7 139.1 118.5 140.3 103.8 133.7 107.0 144.9 149.2 129.7 117.3 127.3 Apr 123.9 117.6 128.7 139.3 118.2 138.7 103.8 133.8 107.0 145.3 149.6 130.0 117.7 128.2 May 124.0 117.7 128.8 139.3 118.7 135.3 103.7 133.8 107.3 145.4 150 2 130 7 117 8 128 4 124.5 118.9 128.9 139.5 119.3 133.9 104.1 133.9 107.3 145.7 150.6 131.1 118.1 129.2 NOTE.—Revised index, reflecting, beginning January 1953, the in- vised weights. Prior to January 1953, indexes are based on the "interim clusion of new series (i.e. home purchases and used automobiles) and re- adjusted" and "old" indexes, converted to the base 1947-49= 100. WHOLESALE PRICES, BY GROUPS OF COMMODITIES [Bureau of Labor Statistics index. 1947-49= 100] Other commodities Y m e o a n r t o h r m c t A o i o m e l d s l i - - p F u r a c o r t d m s - f P e o s r o s o e d c d s - Total p p T u a t a r a i e n c p o l r x t e d d - e s - l - l H s e p u k a a r i n t c i d o h n t d d e s e s s - , r ,p l t F o i m a e i g w n u n r h a i g e d e a t - l r - ls ,C p a i u a c h r l n c l a o e i t e l d m d s s d - - p R u a b r u n c o e b t d d r s - - L p w u a b r u o n c o e m o t d d r s d - - p p a P u a a l r l u n c o p ie t l d d e p s d r - ,M p m u a r e e n c o t t t d d a a s l - l s p c M m u a t e h r i n c r v o o i a t n y d d e - s - - - h F d o h t b a o t u u u o h n u l r r e r l e d s n a d s e e r - i - - e s N r t t m t m u a a r o l r l i u s l e n n a i c — - c - l - - b b e m o b a T r a t a e n f c o t r v g l c d - e s e - o . d s n c M e e l o i l s u a - - s 1951 114.8 113.4 111.4 115.9 110.6 120.3 106.7 110.0 148.0 123.9 119.6 122.8 119.0 114 1 113.6 108 1 104.9 1952 111.6 107.0 108.8 113.2 99.8 97.2 106.6 104.5 134.0 120.3 116.5 123.0 121.5 112.0 113.6 110.6 108.3 1953 110.1 97.0 104.6 114.0 97.3 98.5 109.5 105.7 125.0 120.2 116.1 126.9 123 0 114.2 118.2 115 7 97.8 1954 110.3 95.6 105.3 114.5 95.2 94.2 108.1 107.0 126.9 118.0 116.3 128.0 124 6 115 4 120 9 120 6 102 5 1955 110.7 89.6 101.7 117.0 95.3 93.8 107.9 106.6 143.8 123.6 119.3 136.6 128.4 115.9 124.2 121.6 92.0 1956 114.3 88.4 101.7 122.2 95.3 99.3 111.2 107.2 145.8 125.4 127.2 148.4 137 8 119 1 129 6 122 3 91.0 1957 117.6 90.9 105.6 125.6 95.4 99.4 117.2 109.5 145.2 119.0 129.6 151.2 146.1 122.2 134.6 126.1 89.6 1958 119.2 94.9 110.9 126.0 93.5 100.6 112.7 110.4 145.0 117.7 131.0 150.4 149.8 123.2 136.0 128.2 94.2 1958 119.2 95.6 113.5 125.3 93.3 100.3 110.7 110.7 144.2 116.4 130.5 148.8 149 5 123 0 135 5 128 0 93 7 July 119.2 95.0 112.7 125.6 93.3 100.3 111.9 110.4 144.7 116.8 131.0 148.8 149.5 123.2 135.3 128.0 97.2 119.1 93.2 111.3 126.1 93.3 100.5 113.7 110.0 144.4 118 6 131 0 150 8 149 5 123 0 135 2 128 0 95 6 Sept 119.1 93.1 111.1 126.2 93.3 100.2 114.1 109.9 145.2 120.4 131.7 151.3 149 4 123 0 136 7 128 0 192 5 Oct 119.0 92.3 110.0 126.4 93.2 101.4 113.0 110.2 146.1 120.8 131.9 152.2 149.9 123.0 136.7 128.8 91.2 Nov 119.2 92.1 109.5 126.8 93.1 102.3 112.6 110.2 146.6 120 0 131 9 153.0 151 2 122 7 136 7 128 7 93 2 Dec 119.2 90.6 108.8 127.2 93.3 103.6 112.9 110.0 146.3 119.8 131.3 153.0 151.5 122.8 136.9 128.6 100.9 1959 Jan 119.5 91.5 108.7 127.5 93.3 104.1 113.9 110.2 146.0 120.5 131.5 152.9 151.8 123.3 137.2 128.6 100.8 Feb 119.5 91.1 107.6 127.8 93.7 105.4 114.8 109.9 146.1 122.5 131.7 153.4 152 0 123 3 137 5 128 9 98 5 Mar 119.6 90.8 107.2 128.1 93.9 108.5 115.0 109.8 146.7 124.2 132.0 153.6 152.2 123.5 137.7 132.1 97.0 Apr 120.0 92.4 107.2 128.3 94.1 117.8 114.0 110.0 147.5 126 3 132.2 152 8 152 1 123 4 138 3 132 2 98 8 May . . '119.9 90.8 107.7 '128.4 '94.5 '118.5 113.4 110.0 '148.8 '128.2 132.0 '153.0 '152.5 123.5 138.4 132.2 95.2 June 119.6 89.9 108.1 128.1 94.9 118.9 111.2 109.9 147.3 128.7 132.3 153.4 152.8 123.6 137.6 132.2 91.0 r Revised. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PRICES 1041 WHOLESALE PRICES, BY GROUPS OF COMMODITIES—Continued [Bureau of Labor Statistics index, 1947-49= 100] 1958 1959 1958 1959 Subgroup Subgroup June Apr. May June June Apr. May June Farm Products: Pulp, Paper, and Allied Products iCont.): Fresh and dried produce 102.0 114.2 107.0 100.9 Grains 81.3 79.7 78.6 78.2 Paperboard 136.0 136.2 136.2 136.2 Livestock and poultry 98.8 91.9 '90.6 89.6 Converted paper and paperboard 127.9 127.5 127.3 127.6 Plant and animal fibers 101.9 101.0 101.9 101.6 Building paper and board 144.1 145.0 146.7 146.7 Fluid milk 90.2 91.9 r90.2 90.0 Eggs 74.9 54.5 51.1 56.5 Metals and Metal Products: Hay and seeds 79.3 79.5 80.3 78.3 Other farm products 141.4 133.5 133.5 132.8 Iron and steel 166.7 170.8 170.4 171.3 Nonferrous metals 124.8 134.7 136.2 136.4 Processed Foods: Metal containers 155.7 152.9 152.9 152.9 Hardware 171.7 173.0 173.0 173.0 Cereal and bakery products 118.5 118.9 119.5 119.2 Plumbing equipment 122.8 129.8 130.9 130.9 Meats, poultry, and fish 114.1 100.8 101.4 101.9 Heating equipment 121.0 121.7 121.7 121.7 Dairy products and ice cream 110.9 112.0 111.7 111.9 Fabricated structural metal products, 133.7 132.9 132.9 132.9 Canned, frozen fruits, and vegetables 110.3 110.6 110.4 110.9 Fabricated nonstructural metal Sugar and confectionery 116.4 112.1 114.4 115.6 products 145.0 146.0 146.1 146.1 Packaged beverage materials 168.4 145.2 145.2 145.2 Other processed foods 96.9 95.3 95.8 95.4 Machinery and Motive Products: Textile Products and Apparel: Agricultural machinery and equipment 138.3 143.0 143.3 143.3 Cotton products 87.6 90.3 90.8 91.6 Construction machinery and equip- Wool products 101.3 99.5 100.9 101.9 ment 165.5 172.0 171.9 172.1 Synthetic textiles 80.4 80.6 81.0 81.5 Metal working machinery 169.4 172.5 173.1 173.5 Silk products 109.9 113.6 114.0 114.2 General purpose machinery and Apparel 99.1 99.3 r99.6 99.6 equipment 160.0 162.8 162.8 165.8 Other textile products 73.6 75.7 75.7 75.6 Miscellaneous machinery 147.7 149.2 149.2 149.3 Electrical machinery and equip- Hides, Skins, and Leather Products: ment 152.6 153.0 154.1 153.7 Motor vehicles 139.0 143.2 143.2 143.2 Hides and skins 57.0 108.5 98.6 106.7 Leather 91.8 120.4 124.5 120.1 Furniture and Other Household Dura- Footwear 121.8 128.2 129.5 130.2 bles: Other leather products 97.3 110.1 112.4 112.3 Household furniture 122.5 123.4 123.7 124.0 Fuelt Power, and Lighting Materials: C Fl o o m or m c e o r v c e ia r l i n f g urniture 1 1 5 27 4 . . 9 2 1 1 5 27 5 . . 8 0 1 12 5 7 5 . . 8 0 1 1 5 2 5 8 . . 1 0 Coal 120.3 119.3 118.9 119.6 Household appliances 104.9 105.1 105.0 104.9 Coke 161.9 170.4 170.4 170.4 Television, radios, phonographs 93.7 93.4 93.4 93.4 Gas fuels (Jan. 1958= 100) 97.4 108.6 109.9 106.8 Other household durable goods 155.2 156.2 156.5 156.7 Electric power (Jan. 1958= 100) 100.1 100.8 100.9 100.8 Petroleum and products 115.3 119.4 118.3 115.0 NonmetalHc Minerals—Structural Chemicals and Allied Products: Flat glass 135.7 135.2 135.2 135.2 Concrete ingredients 138.9 140.2 140.2 140.2 Industrial chemicals 123.5 123.9 123.8 123.8 Concrete products 128.3 129.4 129.7 129.7 Prepared paint 128.2 128.3 128.3 128.3 Structural clay products 155.6 160.0 160.1 160.2 Paint materials 103.4 101.4 101.4 101.4 Gypsum products 133.1 133.1 133.1 133.1 Drugs, Pharmaceuticals, cosmetics... 94.5 92.9 '93.1 93.4 Prepared asphalt roofing 103.3 126.4 126.4 115.6 Fats and oils, inedible 61.9 60.4 r60.4 58.5 Other nonmetallic minerals 131.2 132.7 132.5 132.5 Mixed fertilizers 111.2 109.6 108.9 108.9 Fertilizer materials 110.3 107.5 107.5 107.6 Tobacco Manufactures and Bottled Other chemicals and products 107.4 106.3 106.4 106.4 Beverages: Rubber and products: Cigarettes 134.8 134.8 134.8 134.8 Cigars 106.6 106.6 106.6 106.6 Crude rubber 129.4 146.9 152.9 148.7 Other tobacco products 139.7 152.8 152.8 152.8 Tires and tubes 152.1 151.9 151.9 150.0 Alcoholic beverages 120.1 121.7 121.7 121.7 Other rubber products 143.0 143.4 143.9 144.0 Nonalcoholic beverages 149.3 171.1 171.1 171.1 Lumber and Wood Products: Miscellaneous: Lumber 116.8 126.8 128.9 130.0 Toys, sporting goods, small arms 119.1 116.9 117.0 117.0 Millwork 127.1 135.4 137.5 137.3 Manufactured animal feeds 73.3 82.9 76.6 69.0 Plywood 94.9 106.6 106.6 105.2 Notions and accessories 97.5 97.5 97.5 97.5 Jewelry, watches, photo equipment... 107.8 108.2 108.1 108.1 Pulp, Paper, and Allied Products: Other miscellaneous 132.6 132.6 132.3 132.0 Woodpulp 121.2 121.2 121.2 121.2 Wastepaper 71.8 115.7 110.5 115.9 Paper 141.8 143.3 143.3 143.3 r Revised. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1042 NATIONAL PRODUCT AND INCOME GROSS NATIONAL PRODUCT OR EXPENDITURE [Department of Commerce estimates. In billions of dollars} Annual totals Seasonally b a y d j q u u st a e r d t er a s nnual rates Item 1958 1959 1929 1933 1941 1950 1954 1955 1956 1957 1958 Gross national product 104.4 56.0 125.8 284.6 363.1 397.5 419.2 442.5 441.7 434.5 444.0 457.1 470.2 484.5 Personal consumption expenditures 79.0 46.4 81.9 195.0 238.0 256.9 269.9 284.8 293.0 290.9 294.4 299.1 303.9 311.2 Durable goods 9.2 3.5 9.7 30.4 32.4 39.6 38.5 40.3 37.6 36.7 37.1 39.8 41.3 44.1 Nondurable goods 37.7 22.3 43.2 99.8 119.3 124.8 131.4 137.7 141.9 141.5 143.1 143.6 145.3 147.7 Services 32.1 20.7 29.0 64.9 86.3 92.5 100.0 106.7 113.4 112.7 114.2 115.7 117.4 119.4 1 i Gross private domestic investment 16.2 1.4 18.1 50.0 48.9 63.8 67.4 66.6 54.9 51.3 54.2 61.3 69.8 77.5 New constructioni 8.7 1.4 6.6 24.2 29.7 34.9 35.5 36.1 35.8 34.6 35. 37.3 39.71 41.0 Residential, nonfarm 3.6 .5 3.5 14.1 15.4 18.7 17.7 17.0 18.0 16.9 18.0 19.9 21.9 23.1 Other 5.1 1.0 3.1 10.1 14.3 16.2 17.8 19.0 17.7 17.7 17.4 17.4 17.8 17.9 Producers' durable equipment 5.9 1.6 6.9 18.9 20.8 23.1 27.2 28.5 22.9 22.6 22.2 23.2 23.9 26.0 Change in business inventories 1.7 -1.6 4.5 6.8 -1.6 5.8 4.7 2 0 -3.8 -5.8 -3.4 .8 6.1 10.4 Nonfarm only -1.4 4.0 6.0 -2.1 5.5 5.1 1.2 -4.9 -7.0 -4.5 -.1 5.4 9.8 Net exports of goods and services 2.8 2.2 21.1 .6 1.0 2.9 4.9 1.2 1.2 1.6 -.9 -1.8 Exports 7.0 2.4 6.0 13.1 17.5 19!4 23.1 26.2 22.6 23.1 21.5 22.1 Imports 6.3 2.3 4.8 12.5 16.5 18.3 20.2 21.3 21.3 21.5| 22.4 23.9 Government purchases of goods and services 8.5 8.0 24.8 39.0 75.3 75.6 79.0 86.2 92.6 91.1 93.8 96 97.4 97.7 Federal 1.3 2.0 16.9 19.3 47.5 45.3 45.7 49.4 52.2 51.3 53.1 54.2 53.8 53.9 N Ot a h ti e o r nal defense3 1.3 2.0 \ 13.8 1 5 4 . . 2 3 4 6 1 . . 7 2 3 6 9 . . 6 1 4 5 0 . . 7 4 4 5 4 . . 5 3 4 8 4 . . 1 5 4 7 4 . . 5 3 4 8 4 . . 9 5 4 9 5 . . 4 3 4 8 5 . . 3 8 4 8 6 . . 0 2 Less: Government sales4 .0 .0 .1 .3 .4 .3 .4 .5 .5 .3 .6 .3, .3 State and local 7.2 6.0 7.8 19.7 27.7 30.3 33.2 36.8 40.5 39.7 40.8 42.2 43.61 43.8 Addendum: Gross national product in constant (1954) dollars 181.8 126.6 238.1 318.1 363.1 392.7 400.9 408.3 399.0 393.1 400.9 410.8 420.6 431.8 1 Includes expenditures for crude petroleum and natural gas drilling. 4 Consists of sales abroad and domestic sales of surplus consumption 2 Net exports of goods and services and net foreign investment have goods and materials. been equated, since foreign net transfers by government were negligible NOTE.—For explanation of series see U. S. Income and Output (a suppleduring the period 1929-45. ment to the Survey of Current Business for 1959) and the July 1959 issue 3 This category corresponds closely to the major national security of the Survey of Current Business. classification in the Budget of the United States Government for the fiscal year ending June 30, 1960. NATIONAL INCOME, BY DISTRIBUTIVE SHARES [Department of Commerce estimates. In billions of dollars] Annual totals Seasonally b a y d j q u u st a e r d te r a s nnual rates Item 1958 1959 1929 1933 1941 1950 1954 1955 1956 1957 1958 2 3 National income 87.8 40.2 104.7 241.9 301.8 330.2 350.8 366.5 366.2 358.9 369.5 380.4 389.4 Compensation of employees 51.1 29.5 64.8 154.2 207.6 223.9 242.5 255.5 256.8 253.2 258.5 262.9 269.9 278.9 Wages and salaries1 50.4 29.0 62.1 146.4 196.3 210.9 227.6 238.5 239.4 236.0 241.1 245.1 250.9 259.4 P M ri i v li a ta te ry 45.5 23.9 51.9 12 5 4 . . 0 161.9 174.9 189.6 198.4 196.2 19 9 3 . . 7 2 1 1 97 0 . . 1 0 200.8 206.2 21 9 4 . . 8 0 Government civilian .3 .3 1.9 17.3 10.0 9.8 9.7 9.6 9.7 33.2 34.0 9.9 9.8 35.6 Supplements to wages and salaries 4.6 4.9 8.3 7.8 24.4 26.2 28.4 30.5 33.5 17.2 17.5 34.4 34.8 19.6 Proprietors' income2 .7 .5 2.7 37.5 11.3 13.0 14.9 17.0 17.4 45.9 46.8 17.8 19.0 46.6 Business and professional 14.8 5.6 17.4 23.5 40.4 42.1 43.7 44.5 46.6 32.0 32.6 47.4 4363..97 34.5 Farm 6 8. . 8 0 2 3 . . 4 2 1 6 0 . . 5 9 14.0 2 1 7 2 . . 8 7 3 1 0 1 . . 4 8 3 1 2 1 . .6 3 1 2 1 . . 7 8 3 1 2 4 . . 4 2 13.9 14.2 3 1 3 4 . . 2 1 13.2 12.1 Rental income of persons 5.4 2.0 3.5 9.0 10.9 10.7 10.9 11.5 11.8 11.8 11.9 11.91 12.0 12.0 Corporate profits and inventory valuation I adjustment 10.1 -2.0 14.5 35.7 33.7 43.1 42.0 41.7 36.7 33.8 38.0 43.5 45.5 Profits before tax 9.6 .2 77.0 40.6 34.1 44.9 44.7 43.3 37.1 33.6 38.3 44.6 46.5 Profits tax liability 1.4 .5 7.6 17.9 17.2 21.8 21.2 21. 18.2 16.5 18.8 21.9 22.6 Profits after tax 8.3 A 9.4 22.8 16.8 23.0 23.5 22.2 18.9 17.1 19.5 23.8 22.7 Inventory valuation adjustment .5 -2.1 -2.5 -5.0 o -1.7 -2.7 -1.5 A .2 -.3 -.9 -1.1 Net interest 6.4 5.0 4.5 5.5 9.1 10.4 11.7 13.3 14.3 14.1 14.4 15.1 15.4 14.7 1 Includes employee contributions to social insurance funds. 2 Includes noncorporate inventory valuation adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

NATIONAL PRODUCT AND INCOME 1043 RELATION OF GROSS NATIONAL PRODUCT, NATIONAL INCOME, PERSONAL INCOME, AND SAVING [Department of Commerce estimates. In billions of dollars] Seasonally adjusted annual rates Annual totals by quarters Item 1958 1959 1929 1933 1941 1950 1954 1955 1956 1957 1958 Gross national product 104.4 56.0 125.8 284.6 363.1 397.5 419.2 442.5 441.7 434.5 444.0 457.1 470.2 484.5 Less: Capital consumption allowances 8.6 7.2 9.0 19.1 28.8 32.0 34.4 36.9 37.9 37.6 38.0 38.5 39.3 39.9 Indirect business tax and nontax liability 7.0 7.1 11.3 23.7 30.2 32.9 35.7 38.1 39.0 38.9 39.1 39.9 40.7 41.7 B St u a s t i i n st e i s c s a l t r d a i n s s c f r e e r p a p n a c y y ments . . 6 3 . . 7 9 . . 5 4 .8 1.3 1 1 . . 5 0 1.6 1. . 7 5 1.7 1.7 -3 1 .3 .7 1.7 1.7 1.7 Plus: e S r u n b m s e id n i t e s e n l t e e s r s p c r u is r e r s ent surplus of gov- -.1 .0 .1 -.7 .9 .0 -2.4 1.1 -2.1 -1.5 1.0 -2.4 .0 .2 -.2 .9 1.0 1.1 1.0 .8 Equals: National income 87.8 40.2 104.7 330.2 366.5 369.5 241.9 301.8 350.8 366.2 358.9 380.4 389.4 Less: Corporate profits and inventory valuation adjustment 10.1 -2 14.5 35.7 33.7 43.1 42.0 41.7 36.7 33.8 38.0 43.5 45.5 Contributions for social insurance..... .2 2.8 6.9 9.7 11.0 12.6 14.6 15.1 14.8 15.3 15.5 17.5 17.9 Excess of wage accruals over disbursements .0 .0 .0 .0 .0 .0 .0 .0 .6 -1.3 .0 .0 .0 Plus: Government transfer payments .9 2.6 14.3 15.0 16.0 17.2 20.0 24.4 24.9 25.4 25.1 24.7 24.8 Net interest paid by government 1.0 1.3 4.8 5.4 5.4 5.7 6.2 6.2 6.2 6.1 6.1 6.3 6.6 Dividends 5.8 4.5 9.2 9.8 11.2 12.1 12.5 12.4 12.6 12.6 12.0 12.8 13.0 Business transfer payments .6 .8 1.3 1.5 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 .5 Equals: Personal income 85.8 228.5 289.8 310.2 332.9 350.6 359.0 355.0 363.4 366.3 371.8 381.1 96.3 Less: Personal tax and nontax payments 2.6 20.8 32.9 35.7 40.0 42.7 42.6 42.1 42.9 43.4 44.4 45.8 3.3 Federal 1.3 2.0 18.2 29.2 31.5 35.2 37.4 36.7 36.3 37.1 37.4 38.2 39.5 1.4 1.3 2.6 3.8 4.2 4.8 5.4 5.8 5.8 5.9 6.0 6.2 6.3 State and local 83.1 93.0 207.7 256.9 274.4 292.9 307.9 316.5 312.9 320.4 322.9 327.4 335.3 Equals: Disposable personal income 79.0 81.9 195.0 238.0 256.9 269.9 284.8 293.0 290.9 294.4 299.1 303.9 311.2 Less: Personal consumption expenditures 4.2 11.1 12.6 18.9 17.5 23.0 23.1 23.5 22.0 26.0 23.7 23.5 24.1 Equals: Personal saving Addendum: Disposable personal income in constant (1954) dollars 134.9 102.1 175.1 231.0 256.9 273.4 286.9 292.9 295.2 291.6 299.2 300.4 304.3 310.7 PERSONAL INCOME [Department of Commerce estimates. In billions of dollars] 1958 1959 Item* 1957 1958 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Juner July?9 Total personal income 350.6 359.0 363.5 362.4 364.2 364.3 367.5 366.9 369.0 371.0 375.4 379.0 381.3 383.8 384.1 Wage and salary disbursements....... 238.5 239.4 243.2 241.3 242.5 242.1 246.1 247.0 248.7 250 A 254.0 257.3 259.8 261.7 261.2 Commodity-producing industries. . 102.2 97.8 97.2 97.9 99.3 98.7 101.8 102.2 102.8 103.5 106.3 108.6 109.8 110.9 109.8 Manufacturing only 80.6 76.7 76.1 76.7 77.9 76.9 79.7 80.6 80.9 81.7 83.8 85.4 86.7 87.7 86.7 Distributive industries 63.4 63.8 63.8 64.3 64.1 64.1 64.7 64.7 65.6 66.0 66.6 66.9 67.5 68.0 68.2 Service industries 32.7 34.6 34.8 35.0 35.0 35.2 35.3 35.6 35.6 36.0 36.4 36.8 37.1 37.2 37.3 Government 40.2 43.2 47.4 44.1 44.1 44.1 44.3 44.4 44.6 44.7 44.8 45.0 45.4 45.6 45.9 Other labor income 9.1 9.3 9.3 9.3 9.3 9.3 9.4 9.4 9.6 9.7 9.8 9.9 9.9 10.0 10.1 Proprietors' income: Business and professional. 32.7 32.4 32.4 32.6 32.8 33.2 33.1 33.4 33.5 33.7 34.0 34.3 34.5 34.7 34.8 Farm 11.8 14. 14.1 14.2 14.3 14.2 14.1 14.2 13.5 13.2 12.9 12.2 12.0 12.1 12.2 Rental income 11.5 11.8 11.8 11.9 11.9 11.9 11.9 11.9 12.0 12.0 12.0 12.0 12.0 12.0 12.0 Dividends 12.5 12.4 12.6 12.6 12.6 12.6 12.6 10.8 12.7 12.8 12. 12.9 13.0 13. 13.3 Personal interest income. 19.5 20.4 20.4 20.5 20.6 20.7 20.8 21.0 21.1 21.3 21.6 21. 22.0 22.2 22.4 Transfer payments2 21.7 26.1 26.8 27.2 27.3 27.4 26.6 26.3 26.1 26.4 26.6 26.9 26.4 26.4 26.5 Less: Personal contributions for social insurance 6.7 7.0 7.2 7.1 7.1 7.1 7. 7.1 8.1 8.1 8.2 8.3 8.3 8.4 8.4 Nonagricultural income 3 335.2 341.1 345.7 344.5 346.1 346.3 349.6 348.8 351.6 353.8 358.5 362.7 365.3 367.8 368.1 Agriculture income 15.3 17.9 17.8 17.9 18.1 18.1 18.0 18.1 17.4 17.2 16.9 16.3 16.0 16.0 16.0 r Revised. * Preliminary. enterprises, farm wages, agricultural net interest, and net dividends paid 1 Monthly data are seasonally adjusted totals at annual rates. by corporations. 2 Mainly social insurance benefits and veterans' payments. NOTE.—For description of series see U. S. Income and Output, a supple- 3 Persenal income exclusive of net income of unincorporated farm ment to the Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1044 BANKING OFFICES CHANGES IN NUMBER OF BANKING OFFICES IN THE UNITED STATES 1 Commercial and stock savings banks and nondeposit trust companies Mutual savings banks Type of office and type of change ba A n l k l s Member banks Nonmember banks Total Total i tio N n a a - l i me S m ta b te er2 Total su In re - d in N s o ur n e - d su I r n e - d2 in N s o ur n e - d Banks (head offices) Dec 31 1934 16 063 15 484 6 442 5 462 980 9,042 7,699 1 343 68 511 Dec 31 1941 . . 14,825 14,277 6,619 5,117 1,502 7,661 6,810 851 52 496 Dec 31 19473 14,714 14,181 6,923 5,005 1,918 7,261 6,478 783 194 339 Dec 31 1951 14,618 14,089 6,840 4,939 1,901 7,252 6 602 650 202 327 Dec 31 1953 14,509 13,981 6,743 4,856 1,887 7,241 6,672 569 219 309 Dec. 31, 1954 14,367 13,840 6,660 4,789 1,871 7,183 6,647 536 218 309 Dec 31 1955 14,243 13,716 6,543 4.692 1,851 7,176 6,677 499 220 307 Dec 31 1956 14,167 13,640 6,462 4,651 1,811 7,181 6,737 444 223 304 Dec 31 1957 14,090 13 568 6 393 4,620 1,773 7,178 6 753 425 239 283 Dec. 31 1958 14,020 13,501 6,312 4,578 1,734 7,192 6,793 399 241 278 June 30 1959 13,993 13,475 6,279 4,559 1,720 7,199 6,815 384 251 267 Branches and additional offices Dec 31 1934 3,133 3,007 2,224 1,243 981 783 83 4]26 Dec 31 1941 . 3,699 3,564 2,580 1,565 1,015 984 932 52 32 103 Dec. 31, 19473 4,332 4,161 3,051 1,870 1,181 ,110 1,043 67 124 47 Dec 31 1951 5,383 5 153 3 837 2 370 1 467 I 316 I 275 41 165 65 Dec. 31 1953 6,096 5,826 4,398 2,746 1,652 ,428 1,387 41 192 78 Dec 31 1954 6,614 6,306 4,787 3,056 1,731 ,519 1,483 36 221 87 Dec 31 1955 7,253 6 923 5 304 3,365 1,939 ,619 I 584 35 234 96 Dec. 31, 1956 7,955 7,589 5,886 3,809 2,077 1,703 1,666 37 257 109 Dec 31 1957 8,609 8,204 6,378 4,178 2,200 ,826 [,789 37 296 109 Dec. 31 1958 9,286 8,861 6,924 4,534 2 390 ,937 I 898 39 305 120 June 30 1959 9,622 9,194 7,197 4,732 2,465 997 956 41 311 117 Changes, Jan. 1-June 30, 1959 Banks: New banks 5 . . .. +47 +47 + 15 + 12 +3 + 32 +28 +4 Suspensions Consolidations and absorptions: Banks converted into branches -80 -80 -47 -36 -11 -33 -32 -1 Other -9 — 8 — 6 —4 2 — 2 — 2 2 V Co o n lu v n e t r a s r i y o n l s iq : uidations 6. . -1 -1 -1 -1 National into State 2 2 +2 +2 State into national +4 -4 Federal Reserve Membership: 7 Admissions of national banks in Alaska.. . +6 +6 +6 + 6 Admission of national bank in Hawaii.... + 1 + 1 + 1 + 1 Admissions of State banks +2 +2 — 2 _2 Withdrawals of State banks 2 +2 +2 Federal Deposit insurance:8 Admissions of State banks +22 -22 + 11 -11 Other (Alaska) + 11 + 11 + 11 + 6 +5 Net increase or decrease -27 -26 -33 -19 -14 +7 +22 -15 + 10 -11 Number of banks, June 30, 1959 13,993 13,475 6,279 4,559 1,720 7,199 6,815 384 251 267 Branches and additional offices except banking facilities:9 De novo branches +239 +225 + 162 + 108 +54 +63 +59 +4 +7 +7 D Ba is n c k o s n c ti o n n u v e e d rted into branches + — 8 3 0 3 + — 8 2 0 2 + — 6 5 15 + — 38 9 + — 27 6 + 15 + — 1 6 4 + 1 — 11 Interclass branch changes: National to State member .. s +5 National to nonmember -3 -3 + 3 + 1 +2 State member to national + 16 -16 Nonmember to national + 5 + 5 5 c Nonmember to State member + 10 + 10 — 10 — 10 Noninsured to insured +4 -4 + 10 -10 Other: Alaska + 15 + 15 + 13 + 13 +2 +2 Hawaii10 +25 +25 +25 +25 Net increase or decrease + 326 + 323 +262 + 188 +74 +61 +59 + 2 +6 -3 Number of branches and additional offices, June 30 1959 9,364 8,936 6,963 4,529 2,434 1,973 1,932 41 311 117 Banking facilities:9 Established +7 +7 + 6 +6 Discontinued -4 — 4 — 2 — 2 — 2 2 Interclass change + 1 Other: Alaska +6 +6 + 6 +6 Hawaii i ° + 1 + 1 + 1 + 1 Net increase or decrease + 10 + 10 + 11 + 10 + 1 _ j -1 Number of facilities, June 30, 1959 258 258 234 203 31 24 24 1 Excludes banks and branches in United States territories and posses- 5 Exclusive of ne w banks organized to succeed operating banks. sions except one national bank in the Virgin Islands, with one branch, 6 Exclusive of liquidations incident to succession, conversion, and that became a member of the Federal Reserve System on May 31, 1957, absorption of banks. and one national bank in Hawaii, with twenty-six branches, that became 7 Exclusive of conversions of State member banks into national banks a member of the System on Apr. 13, 1959. that are shown separately under conversions. 2 State member bank and insured mutual savings bank figures both 8 Exclusive of insured nonmember banks converted into national banks include, since 1941, three member mutual savings banks not included or admitted to Federal Reserve membership, and vice versa in the total for commercial banks. State member bank figures also in- 9 Banking facilities (other than branches) that are provided at military clude, since 1954, one noninsured trust company without deposits. and other Government establishments through arrangements made by 3 Series revised as of June 30, 1947. The revision resulted in a net the Treasury Department. addition of 115 banks and 9 branches. 10 See note 1. 4 Separate figures not available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE PAR LIST 1045 NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST* Total banks on On par list whick checks are Not on oar list drawn, and their (nonmember) Federal Reserve district, branches and offices1 Total Member Nonmember State, or other area Banks a B nd ra n o c ff h ic e e s s Banks a B nd ra n o c ff h ic e e s s Banks a B nd ra n o c ff h ic e e s s Banks a B nd ra n o c ff h ic e e s s Banks a B nd ra n o c ff h ic e e s s Total, including Hawaii, Puerto Rico, and Virgin Islands: 2 Dec 31 19583 13,441 9,042 11,722 8,709 6,306 6,937 5,416 1,772 1,719 333 June 30 1959 13,398 9,354 11,705 9,031 6,273 7,210 5,432 1,821 1,693 323 Districts, June 30, 1959: Boston. 417 681 417 681 282 550 135 131 New York 2 614 1,732 614 1,732 516 1,503 98 229 Philadelphia 656 605 656 605 503 492 153 113 Cleveland 953 853 953 853 583 745 370 108 Richmond . .. 958 1 080 805 931 453 606 352 325 153 149 Atlanta 1,328 461 772 416 402 343 370 73 556 45 Chicago 2,468 1 008 2,468 1 008 1,013 603 1 455 405 St Louis 1,471 289 1,181 214 488 140 693 74 290 75 Minneapolis 1,296 129 698 87 477 39 221 48 598 42 Kansas City . 1,766 67 1,760 67 752 47 1,008 20 6 Dallas 1,102 131 1,020 120 633 86 387 34 82 11 San Francisco 2 . 369 2,318 361 2,317 171 2,056 190 261 8 I State or area, June 30, 1959: Alabama .. 238 65 153 64 93 62 60 2 85 I Alaska 18 20 10 19 7 19 3 8 Arizona 7 140 7 140 4 117 3 23 Arkansas 236 37 128 17 75 13 53 4 108 20 California 115 1,505 115 1,505 67 1,353 48 152 Colorado 160 7 160 7 95 6 65 Connecticut 71 172 71 172 37 135 34 37 Delaware 22 51 22 51 6 24 16 27 District of Columbia 12 62 12 62 9 57 3 5 Florida 277 14 235 13 116 12 119 1 42 1 Georgia 410 80 135 78 64 67 71 11 275 2 Idaho 30 81 30 81 18 75 12 6 Illinois 947 4 946 4 524 4 422 1 Indiana 454 254 454 254 230 170 224 84 670 163 670 163 168 5 502 158 Kansas 594 14 592 14 213 10 379 4 2 359 121 359 121 108 82 251 39 Louisiana 187 160 79 132 53 104 26 28 108 28 54 119 54 119 35 81 19 38 M^arvland 142 220 142 220 65 130 77 90 Massachusetts 166 334 166 334 126 282 40 52 388 509 388 509 223 421 165 M innes o ta 686 6 287 6 209 6 78 399 Mississippi 193 127 54 61 35 35 19 26 139 66 Missouri 613 4 559 4 172 4 387 54 115 I 115 1 86 1 29 Nebraska 418 2 418 2 140 2 278 6 33 6 33 5 29 1 4 New Hamoshire 74 3 74 3 52 2 22 1 254 382 254 382 218 346 36 36 New M^exico 52 46 52 46 35 24 17 22 New York 422 1 257 422 1 257 368 1,190 54 67 North Carolina 190 424 107 281 47 155 60 126 83 143 North Dakota 156 27 58 8 40 2 18 6 98 19 Ohio 598 573 598 573 381 503 217 70 Oklahoma 386 14 380 14 224 12 156 2 6 53 171 53 171 17 152 36 19 724 700 724 700 554 605 170 95 Rhode Island 9 89 9 89 5 67 4 22 South Carolina 145 130 77 124 31 94 46 30 68 6 South Dakota 172 54 71 31 60 24 11 7 101 23 Tennessee 295 191 216 178 83 131 133 47 79 13 Texas 974 26 939 26 577 26 362 35 Utah 48 70 48 70 20 61 28 9 Vermont 56 30 56 30 33 20 23 10 Virginia . .. 309 244 308 244 200 170 108 74 1 87 261 87 261 33 254 54 7 184 183 112 71 1 552 153 552 i53" 159 25 393 128 52 1 52 1 39 1 13 Hawaii2 6 76 6 76 26 5 50 10 123 10 123 13 10 110 2 4 2 4 1 1 1 3 i Comprises all commercial banking offices in the United States, Hawaii, 2 Hawaii assigned to the San Francisco District for purposes of Regula- Puerto Rico, and the Virgin Islands on which checks are drawn, including tion J, "Check Clearing and Collection"; Puerto Rico and the Virgin 263 banking facilities. Number of banks and branches differs from that Islands assigned to the New York District. Member branches in Puerto in the preceding table because this table includes banks in Hawaii, Puerto Rico are branches of New York banks. Rico, and the Virgin Islands, but excludes banks and trust companies 3 Includes commercial banks in the Territory of Alaska. on which no checks are drawn and three mutual savings member banks. See also note 3. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

O TABLE 1. SUMMARY OF FLOW-OF-FUNDS ACCOUNTS FOR FIRST QUARTER, 1959 ON [In billions of dollars] Consumer Nonfinancial business sectors Government sectors2 Financial institutions sectors Sector an s p d e r c o n t f o i o t r n- Farm* cor N po o r n a - te 1 Corporate Federal an S d t a lo te cal C b o a m n m ki e n r g c 3 ial ins S t a it v u i t n i g o s ns4 Insurance5 F n in .e a . n c. c 6 e R s w e e s o c t r t - o l o d r f- se A ct l o l rs c a D r n e i c s p - y - 7 s i N n a a v v n a i e d t n l s . g tment Transaction 2,8 category U S U S U S U S U S U S U S U S U S U S U S U S U 18 7 3 2 2 7 1 5 5 2 7 4 10 6 30.1 -3.6 29.5 A B Capital consumption *2 10.6 1.0 2.0 5 0 * * 18 6 18.6 B C* Net savinc fA.— B) 8.2 — 7 1 2 1 5 _ 5 .2 7 4 _ 1 6 11 5 10.9 C 18 6 .3 2.2 5 3 .5 -1.0 .7 7 .4 * 4 27 9 -1.4 26.1 D E Private capital expenditures 14.5 1.4 3.1 7.4 .1 .1 26 5 26.5 E F Consumer durable goods... 9.4 9 4 9.4 F G Nonfarm resident constr. 1 *. 4.3 * * 4 3 4.3 G H Plant and equipment .9 '"i.2 2.1 5.4 .1 1 9 7 9.7 H 2 9 2 0 3.2 3.2 I T Net financial invest. (K — L). . . 4.1 -1.1 -.9 -2.1 .5 -1.0 .5 .7 .3 * .4 1.4 -1.4 16-.4 J K Net acquis. offinan. assets 6.6 9 j 7 —5 5 2 2 2 2 10 .9 7 8 -.9 K L Net increase in{liahilities^'1 2 5 1.1 .6 2 1 — 4 1 7 —6 1 1 5 I 9 10 .5 6 4 .5 L M Gold and Treas. currency18. * — 1 .1 * -.1 M N Currencv and dem deo 19 — 1 3 .1 -2 9 - 5 — 4 —7 2 — 3 2 1 — 2 -5.5 -7.2 -1.7 .2 N O Fixed-value redeem, claims.. 2.3 * -.2 .9 1.7 .1 2.4 2.4 -.1 O p Time deposits 2o 1 1 * .9 .3 1 1.1 1.1 -.1 P Q Savings shares21 1.4 1.4 1.4 1.4 Q R U. S. savings bonds22 -.2 -.2 2 — 2 R S Saving through life insur.2 3.. .8 * .7 8 8 s T Saving through pen. funds 2 4. 1.6 .1 A 1.1 1 6 1 6 . ... T U Credit and equity mkt. instr.. 4.5 2.5 .7 -.4 -.2 1.0 2.2 .5 -.2 1.0 1.3 -5.4 .1 2.5 -.2 2.3 .9 .9 .2 .2 7.2 7.3 .1 * U V Federal obligations25.... 2.6 1.5 * 6 —5 5 7 1 — 3 2 -.1 .2 -.2 V W State and local obligations. .6 .1 1.3 .2 .1 .3 .1 1 3 1 3 .. W g 3 1.0 .3 * .2 1.1 1.1 .2 X 5 .5 .1 .3 .4 .5 * .1 1.2 1.2 .1 Y Z 1 - to 4-family mortgages. . .2 3.0 -.2 "".2 "".'3 1.6 .2 .1 2.6 2.6 Z a Other mortgages .6 * '".3 .4 .9 .2 .3 .3 .2 1.7 1.7 a c h C Se o c n u s r u it m y e c r re c d re it d 2 i 6 t .1 .29 4 9 .3 4 .1 .1 -.4 -.2 0 — -.2 9 c d Bank loans n.e.c27 .1 .1 -.6 * A * .1 •-:i A -.4 -.1 d e Other loans28 1 .2 '""A .3 .1 -.2 * -.2 1 -.2 .1 .7 .5 L0 1.0 .1 e 2 f Trade credit • 2 92.3 -.1 1 7 2 4 8 ... f g Proprietors' net invest, in 29.2 h M n is o c n c f o in r a p n o c r ia a l t e tr b a u n s s i . n 3^ ess*... -1.4 .2 * -1.5 1.6 '".I 2 .2 .1 .8 . 0 — 1 1 . 0 4— 1 . 4 4 -.6 K k i Sector discrepancies (A—D)31. .1 .6 -.5 1 .2 2.2 2.2 3.4 i 1.9 * Less than $50 million. sectors and of transaction categories are given in notes to tables and in "Technical Notes," on pp. 846-59 NOTE.—U=uses of funds; S= sources of funds. Financial uses of funds represent net acquisitions of this BULLETIN. of assets; financial sources of funds, net changes in liabilities. Details may not add to totals because of rounding. For discussion of saving and investment concepts see pp, 831-43 of this BULLETIN, Descriptions of For other notes see pp. 1047 and 1049, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1047 TABLE 2. SAVING A ND I N V E S T M E NT [In billions of dollars] Quarterly totals Transaction category, Annual totals or sector 1957 1958 1959 1954 1955 1956 1957 1958 A Net national saving2 23.7 39.4 41.3 37.2 18.5 11.7 9.7 11.3 4.6 6.6 2.7 5.3 3.9 10.9 A D B F C E G S C C F F F t i e o o a a n d r n rm t a e e p s n r o u a c a a l r m i n n d a d a l e G t r e l n o s o o a n v e c n o n c e a d l t n c r o f o g n n r i s r o o m n p v n . a e p e n n r r c t2 b o n i f u a m l i s t e i n n b ts e u s s 2. s i 3 n 2. . . e . ss. - - 2 2 2 2 3 2 . . 6 2 . . . 7 6 1 * - 2 1 3 6 3 2 .2 . . . . 6 3 4 4 - 2 2 9 5 3 5 .7 . . . . 2 8 2 8 - 2 3 7 5 3 3 .3 . . . . 6 4 9 6 - - 2 4 8 5 2 3 . . 6 2 . . . 1 4 7 * -2 - 7 5 1 . . 8 4 . . . 6 8 7 - 4 6 .9 . . . ' 2 4 . 3 2 - - 1 1 8 3 1 . . 1 * 4 . . 9 . 4 7 2 - - 5 1 5 2 3 . . 0 3 . . . . 3 4 1 1 - - 3 1 6 3 . . 1 1 . . 6 5 A - - -1 1 1 4 1 . . . 1 1 3 . . . 4 3 4 - -1 5 8 3 1 . . 5 4 ^ . . 3 0 7 o - -7 1 6 3 3 . . 7 6 . . . 0 . 1 8 2 - - 2 8 1 . . 6 5 . . . . 2 1 1 5 C F B E D G H Capital consumption12 57.1 62.3 67.4 72.7 74.9 17.6 18.0 18.4 18.7 18.1 18.5 18.9 19.4 18.6 H I Consumer and nonprofit 31.5 33.9 36.9 40.0 41.6 9.8 10.0 10.1 10.2 10.3 10.4 10.4 10.5 10.6 I J Consumer durable goods 28.3 30.4 33.0 35.8 37.0 8.8 8.9 9.0 9.1 9.2 9.2 9.3 9.3 9.4 J K Owner-occupied homes 2.8 3.1 3.4 3.7 4.0 .9 .9 .9 .9 1.0 1.0 1.0 1.0 1.0 K L Plant and equip, (nonprofit)... .5 .5 .5 .5 .6 .1 .1 .1 .1 .1 .1 .1 .1 L M Farm business 3.6 3.7 3.7 3.9 4.0 1.0 1.0 l!0; 1.0 1.0 1.0 1.0 1.0 1.0 M N Noncorp. nonfinan. business 6.7 7.0 7.5 8.1 8.0 2.0 2.0 2.0 2.1 2.0 2.0 2.0 2.1 2.0 N 0 Corporate nonfinancial business. 15.2 17.6 19.3 20.7 21.4| 4.9 5.1 5.3 5.5 4.9 5.2 5.5 5.8 5.0 O P Gross national saving2 80.8 101.8 108.7 109.9 93.4J 29.2 27.7 29.7! 23.3 24,7 21.2 24.2 23.3 29.5 P Q Consumer and nonprofit 54.2 60.5 66.1 67.7 66.7 17.4 16.3 18.4 15.5 14.8 18.5 16.5 18.7 Q R Farm and noncorp. business 10.4 10.7 11.3 11.9 12.0 .5 2.5 2.9 6.1 1.8 2.2 6.1 2.5 R S Corporate nonfinancial business. 18.0 30. 25.1 26.1 24.1 4.0 5.3 9.0 7.9 1.8 3.9 8.7 9.7 7.1 S T Federal Government2 -2.2 .4 5.8 3.6 -8.2 5.8 4.2 -1.4 -5.0 3.5 1.3 -5.4 -7.6 .5 T U State and local governments2. .. -2.6 -3.2 -2.7 -3.3 -4.6 * -1.1 -1.3 - .4 -1.1 -1.5 -1.6 -.5 U V Financial sectors 3.1 3.3 3.2 3.9 3.4 1.7 1.9 .1 1.0 .4 1.7 1.1 V W Gross national investment2 81.0 103.8 108.0 111.1 92.9 27.2 28.1 28.2 27.6 21.7 21.6 23.0 26.6 26.1 W X Consumer durable goods 32.4 39.6 38.5 40.3 37.6 9.2 10.1 9.7 11.3 8.3 9.1 8.8 11.4 9.4 X Y Other gross private domestic fixed investment 50.5 f58.4 62.7 64.6 58.7 14.2 16.7 16.9 16.7 13.1 14.7 15.1 15.8 14.0 Y Z Consumer and nonprofit 15.5 19.3 18.9 18.2 18.2 4.5 4.1 4.6 4.9 4.4 4.0 4.6 5.2 5.2 Z a Nonfarm residen. constr. 14.. 12.9 16.6 16.1 14.9 14.7 3.8 3.3 3.8 4.0 3.6 3.1 3.6 4.3 4.3 a b Plant and equip, {nonprofit).. 2.6 2.7 2.8 3.3 3.4 .7 .8 .9 .9 .8 .8 .9 .9 .9 b c Farm business 4.2 4.2 3.8 4.0 4.6 .9 1.1 1.1 .8 1.0 1.3 1.2 1.0 1.2 c d Noncorp. nonfinan. business14 8.5 10.1 10.1 9.7 9.2 2.0 2.8 2.6 2.3 1.7 2.5 2.5 2.4 2.1 d e Corp. nonfinan. business14. . . 21.8 f24.1 29.1 32.0 26.1 6.6 8.6 8.4 8.4 5.8 6.7 6.6 7.0 5.4 e f Financial sectors .5 .7 .7 .7 .2 .2 .2 .2 .2 .2 .2 .2 f g Change in inventories 15 -1.6 5.8 4.7 2.0 -3.8 2.3 1 1 -2.4 3.2 g h Farm business .5 .3 A 1.1 .1 .2 '.2 .3 .2 .2 .2 h 1 Noncorp. nonfinan. business.. .6 '.2 -.1 .9 -.3 - .8 .6 -.3 .1 .9 i j Corp. nonfinan. business -U9 4.9 4.9 1.2 -4.8 1.3 c -1.0 -2.4 1 1 2.0 j k N et financial investment16 2.1 4.2 .4 1.4 1.2 .1 .3 .2 -.1 -.4 k 1 Consumer and nonprofit 5.4 12.5 11.0 11.5 4.5 .7 4.0 1.7 4.7 7 5.1 2.4 4.1 1 m Net acquis. of finan. assets. . 20.6 25.8 27.5 22.9 23.6 5.9 4.8 6.8 5.4 5.1 3.1 7.0 8.3 6.6 m n Net increase in liabilities.... 11.8 20.4 15.0 11.8 12.1 1.4 4.1 2.7 3.6 4 3.9 1.9 5.9 2.5 n o Farm and noncorp. business.. -2.7 - 4 .4 -2.5 -2.5 -2.8 -3.5 1 A -1.3 3.6 -1 9 -1.9 -1.9 3.0 -2.0 o p Net acquis. of finan. assets. . .5 .6 .4 .7 1.5 .3 .1 .5 .2 .5 .3 .8 -.3 p q Net increase in liabilities... . 3.2 5.0 2.9 3.2 4.3 3.2 1.7 1.4 -3.1 1.7 2.5 2.2 -2.1 1.7 q r Corp. nonfinan. business -3.4 2 -12.2 -6.9 A -4.1 -2.7 .3 - .3 -4.3 .1 2.6 2.0 -2.1 r s Net acquis. of finan. assets. . 4.5 16.8 4.2\ 2.8 7.4 -2.4 .1 3.6 1.5 -6.2 1.4 6.8 5.4 * s t Net increase in liabilities 7.9 19.6 16.4 9.7 7.0 1.8 2.8 3.3 1.9 -1.9 1.3 4.3 3.4 2.1 t u Federal Government -2.2 A 5.8 3.6 -8.2 5.8 4.2 -1.4 -5.0 3.5 1.3 -5.4 n .5 u v Net acquis. of finan. assets. . .2 .9 1.5 3.2 1.5 4.0 - .9 2.2 -2.1 1.4 3.9 -4.4 [7 ./ v w Net increase in liabilities.... 2.4 .5 -4.3 — .4 9.8 -1. -5.1 3.7 2.8 -2.2 2.6 1.0 8.4 -.4 w x State and local governments. . -1.7 -2.6 -2. -2.8 -3.9 n -1.5 c -1.1 -.6 -2.3 A -1.0 x y Net acquis. of finan. assets. . 3.7 2.2 2.6 3.5 3.6 1.0 1.3 .2 1.0 1.2 1.5 -.5 1.3 •7 y z Net increase in liabilities.... 5.4 4.8 4.6 6.3 7.5 1.7 1.4 1.7 1.5 2.3 2.1 1.8 1.3 1.7 z aa Financial sectors 3.9 3.6 2.5 2.6 3.4 1.2 .3 1.5 -A .5 1.2 2.2 c 1.5 aa bb Net acquis. of finan. assets. . 27.5 26.9 22.4 23.7 35.3 1.0 6.6 7.0 9.0 2.7 16.1 1.5 15.0 - .2 bb cc Net increase in liabilities... . 23.6 23.3 19.9 21.1 31.8 6.3 5.5 9.4 2.2 14.9 -.8 15.5 -i.7cc dd Financial trans, discrep -3.1 .5 -2.0 .2 1.5 -1.2 A .7 -1.4 dd ee Discrepancy (P-W)31 -.2 -2.0 .7 -1.1 .5 2.0 A 1.5 -4.2 3.1 3 1.2 -3.3 3.4 ee * Less than $50 million. f Includes $0.3 billion of NOTE.—Descriptions of sectors and of transaction categories are given existing facilities purchased from Federal Government. in notes to tables and in "Technical Notes," pp. 846-59 of this BULLETIN. For other notes see below and second page following. Notes to Tables 1-3 1 Net saving of, and consumer investment in, unincorporated business 9 For content of sector saving, see transactions in sector statements, discussed on p. 838 of this BULLETIN. See note 32, p. 1049. Table 4, and p. 849 of this BULLETIN; for discussion of saving concepts, 2 For govt. sectors, saving is excess of all nonfinancial receipts over all see p. 833 of this BULLETIN. nonfinancial outlays; investment, changes in financial assets and liabilities 10 Rest-of-world surplus on current transactions with United States. o m n e l n y t . ex G cl o u v d t. es, cu g r o r v e t. nt pu o r u c t h l a a s ys es i o n f c t l a u n d g e, ib a le nd as g s o e v t t. s . (and national) invest- 1 * Discrepancy between total nonfinancial sources and uses of funds 3 Consolidated account for monetary authorities (Federal Reserve (Line A minus line E in "all sectors" column). System, ESF, and Treasury currency accounts) and commercial banks 12 Depreciation, accidental damage to fixed capital, and capital outlays in United States (excluding territories and possessions). charged to current account. Annual data in Table 2 are from Dept. of 4 Mutual savings banks, savings and loan assns., and credit unions. Commerce national income accounts except for F. R. estimates of de- 5 Life and nonlife insurance companies and private pension plans. preciation on consumer durable goods. Depreciation on latter item 6 Finance companies, open-end investment companies, security brokers and on farm assets at current cost; other depreciation, in general, at and dealers, banks in U. S. territories and possessions, and U. S. agencies original cost. Line H in Table 2 includes amounts for financial sectors of foreign banks. not shown separately. See discussion on p. 836 of this BULLETIN. 7 For discussion, see p. 857 of this BULLETIN. 13 Transactions in land excluded from sector investment for statistical 8 Totals for domestic sectors; financial entries are net uses plus items reasons. Such transactions, when recorded as capital flows, affect in discrepancy column. For comparison with national saving and in- sector allocation of investment but not the national total. vestment in national income accounts of Dept. of Commerce, see p. 842 of this BULLETIN. For other notes to Tables 1-3 see second page following. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1048 FLOW OF FUNDS/SAVING TABLE 3. SUMMARY OF PRINCIPAL FINANCIAL FLOWS 3 3 [In billions of dollars] Quarterly totals Annual totals Transaction category, or sector 1957 1958 1959 1954 1955 1956 1957 1958 1 2 3 4 1 2 3 4 1 I. Currency and demand deposits A Net incr. in com. bkg. sys. liab. * 9... 4.5 2.3 1.7 -.8 5.8 -5.2 -.1 1.4 3.1 -5.2 6.4 -3.4 8.0 -7.2 A B Net increase in assets, by sector 6.1 .8 1.8 .3 6.3 -2.9 -.4 2.3 1.4 -3.2 5.7 -2.4 6.3 -5.5 B C* T^ederal Government . * - .3 -.6 -.2 .2 .1 3.2 -1.8 1.5 -2.7 1.5 3.6 -5.0 -.5 C T E " i Ot C h o e n r s d u o m m e e r s t a i n c d s e n c o t n o p r r s o . f * i t #. 2 5. . 7 5 - 1 .8 .5 1 1. 0 7 * 6 2 .5 2 — -2 5 .5 7 -.6 8 1.0 8 4 1 .3 0 — -1 4 .3 4 - 1 .8 8 2 2 .4 7 2 6 .2 1 -1 4 . 3 8 E D F Farm and noncorporate bus.... .4 .3 .1 .5 1.3 .1 .1 .1 3 3 3 3 1 F G Corporate nonfinancial bus 2.0 1.0 .1 2 1.8 -2.8 .6 .7 1.3 3 j 1.3 1.0 2.5 -2.9 G H State and local government.... .4 .4 .2 .2 .2 — .1 4 — 7 6 — '3 6 _ 7 6 4 H T Financial sectors .5 .6 2 3 4 - - 4 3 _ 3 8 1 3 _ 3 4 4 I * .2 .2 * -.4 .5 * * -.3 .2 .3 -.2 J 1.5 -1.1 -.5 -2.3 .3 0 1.7 -1.9 .7 -1.0 1.6 -1.7 K II. Fixed-value redeemable claims 10.9 8.4 8.9 10.1 16.0 2.9 2.9 1.4 2.8 5.5 5.0 2.5 3.1 2.4 A 5.5 2.9 3.6 6.8 10.1 2.5 1.7 1.3 1.4 4.3 3.3 1.6 .9 1.1 B 4.8 5.3 5.4 5.2 6.5 1.0 1.7 .6 1.8 1.3 1.8 1.0 2.3 1.4 C D US savings bonds22 .6 .3 -1.9 -.6 -.5 -.5 -.4 -.1 -.2 -.2 -.2 D E Net increase in liab., by sector34 11.0 8.4 9.0 10.1 16.1 2.9 3.0 1.4 2.9 5.5 5.0 2.5 3.1 2.4 E T*1 Federal Government - .4 * -.3 -2.2 -.7 -.6 -.6 -.6 -.5 -.2 -.2 2 -.2 F 3.8 1.3 2.1 5.5 8.0 2.1 1.3 1.0 1.0 3^6 2.8 1.1 '.5 .9 G xi Savings institutions .. • 6.8 7.1 7.3 6.9 8.8 1.5 2.2 .9 2.3 2.0 2.4 1.5 2.8 1.7 H I Net increase in assets, by sector34... 10.9 8.4 8.9 10.1 16.0 2.9 2.9 1.4 2.8 5.5 5.0 2.5 3.1 2.4 I J K C O o th n e s r u m do e m r e a s n t d ic n s o e n c p to ro rs f 3 it 5 9. . 6 8 - 8 .1 .7 9. . 0 1 9.8 4 1 1 3 .6 3 2.6 2 2.9 1 1.4 2.8 1 3 1 . 3 2 3 1 . 7 2 — 3. 0 4 — 3. 6 6 2.3 * J K L Rest of the world (time deposits). .6 1 -.1 * .9 .1 I ** 4c 1.0 * -.1 * .1 L III. Saving through life insurance and pension funds A "Nt*t increase bv tVDe 7.6 8.4 9.2 8.8 9.9 2.2 2.3 2.0 2.2 2.5 2.2 2.5 2.7 2.4 A 3.1 3.2 3 8 2 8 3 4 7 7 7 7 8 7 9 1 0 8 B 4.5 5.1 5 5 5 9 6 5 1 5 1 6 1 3 1 5 1 8 1 4 1 6 1 7 1 6 C D Net increase in liab., by sector 34 3 6.. 7.6 8.4 9.2 8.8 9.9 2.2 2.3 2.0 2.2 2.5 2.2 2.5 2.7 2.4 D "P Federal Government 1 6 1 0 1 0 1 4 1 2 4 3 1 2 E F State and local government 1.1 1.2 1.3 1.4 1.5 .3 .3 .3 .3 .4 .4 .4 .4 .4 F G Life insurance companies 4.5 4.6 4.8 4.3 4.8 1.0 1.0 1.1 1.2 1.1 1.0 1 3 1 4 1 1 G H Private noninsured pension plans. 1.8 2.0 2.1 2.6 2.6 .8 .6 .5 .6 .9 .4 .6 .8 .8 H IV. Credit and equity market instruments A Net increase bv tVDe 28.4 43.8 30.6 36.7 45.4 5.6 6.5 12.7 11.8 3.0 13.7 5.9 22.7 7.2 A B Federal obligations 1.6 .8 -5.4 1 3 9 1 Q -4.8 4.9 2.0 -2.0 2.6 .9 7.7 — .IB f QT-1 ort-term direct 37 -11.8 -7.1 7.4 5.5 -1.2 -1.6 3.9 1.0 2.2 -1.9 -4.3 1.2 3.8 -4.6 C D Other 13.4 7.9 -12.8 — 4.2 10.3 .8 -8.7 3.9 -.2 — .1 6.9 -.3 3.9 4.5 D E State and local obligations 4.5 3.5 3 2 4 7 5 7 1 3 1 0 1 3 1 9 1 6 1 3 .8 1 3 E F Corporate and foreign bonds 3.7 4.0 5.0 7.5 6.9 1.9 1.8 2.0 1.8 2.4 1.5 1.4 1.6 1.1 F 2.6 3.0 3 8 4 0 4 2 1 l 1 2 7 .9 8 1 4 1 0 1.1 1 2 G H 1- to 4-family mortgages 9.6 12.6 10.8 8.6 10.4 2.1 2.3 2.4 1.9 1.7 2.4 3.1 3.2 2.6 H 2.9 3.6 3 8 3 5 4 2 7 8 .9 1.0 .8 1.1 1.0 1.2 1 7 I T Consumer credit 1.0 6.4 3.4 2.7 .3 -1.2 1.6 .7 -2.3 .6 .1 1.9 -.9 J 2.2 .9 -.4 1.4 -.9 .7 3 2.1 9 1 1.4 -.2 K T Bank loans nee .2 8.0 5.9 2.3 1.4 .4 2.1 -'.2 .1 -1.7 .7 -'.3 2.8 -.4 L * 1.1 .9 2 6 1 8 1 1 — .2 .3 1.4 1.4 - 2 3 .9 1 0 M N Funds raised bv sector34 28.2 44.0 30.9 36.6 45.2 5.6 6.5 12.7 11.9 2.8 13.6 6.1 22.7 7.4 N O Consumer and nonprofit 11.7 20.3 14.9 11.7 12.0 1.3 4.1 2.7 3.6 .4 3.9 1.9 5.9 2.5 O p Farm business 8 1 2 9 1 1 1 4 6 _ 2 4 9 2 7 P Q Noncorporate nonfinancial bus.. . 2.0 4.0 3.4 2.6 4.2 -.85 1.3 .6 1.5 -.8 .9 .2 3.9 -.2 Q R Corporate nonfinancial business.. 5.7 9.0 11.4 11.3 8.5 4.0 3.1 2.5 1.8 2.6 2.0 2.4 1.5 2.2 R S Federal Government 1.5 -.1 -5.4 1.0 9.3 -5.2 4.8 2.3 -2.0 2.2 1 1 7.9 — 2 S T State and local government 4.2 3.5 3.3 4.9 5.9 1.4 1.0 1.3 1.1 2.0 1.7 1.4 .8 1.3 T U Financial sectors 1.9 5.8 1 3 2 6 1 5 _ 2 1 3 5 1 l A 1 5 — 1 7 2 1 8 U V Rest of the world .4 .3 1.0 1.4 2.4 .3 .3 .1 .6 .5 .6 5 .7 2 V W Funds advanced, by sector 28.4 43.8 30.6 36.7 45.4 5.6 6.5 12.7 11.8 3.0 13.7 5.9 22.7 7.2 W X Y C Fa o r n m su a m n e d r n a o n n d c n o o rp n . p r b o u f s i i t ness . . 8 1 8. . 0 2 7.9 3 9. . 7 2 3. . 0 2 4.7 1. . 3 2 3.5 * . . 2 4 - 1 .5 .9 -.6 .2 .5 * 1. . 1 5 - 4 .4 .5 Y X Z Corporate nonfinancial business.. -2.3 5.0 -3.9 -1.2 1.2 A -2.2 .3 1.8 -1.8 -2.3 1.1 4.2 1.0 Z a Federal Government A 1.4 1.1 2.3 1.7 -1.1 .5 .5 .9 * .3 .5 .9 .5 a b State and local government 2!9 1.9 2.3 2.8 2.6 '.9 .7 .9 .4 .9 .2 .6 .9 1.0 b c Commercial banking system 9.3 4.8 4.8 4.3 17.0 -3.2 .8 3.1 3.6 -1.2 10.8 -.6 8.0 -5.4 c d Monetary authorities .. -.3 .3 -.8 2.2 -1.8 -.1 .3 .9 -.6 1.8 -.4 1.4 -.9 d e Commercial banks 10^2 5.0 4^5 5.1 14.9 -1.4 1.0 2.8 2.7 -.5 9.0 -.2 6.6 -4.5 e f Securities 7.2 -7.0 -3.5 1.3 10.4 -1.0 -2.0 2.7 1.6 1.2 6.5 1.0 1.7 -4.5 f g Loons 3 8. 3.0 12.1 8.0 3.8 4.5 — .4 2.9 1.1 -1.7 2.5 -1.2 4.9 * g h Savings institutions 6.7 8.1 7.3 7.2 9.1 2.0 1.9 2 0 1.3 1 7 2 3 2 8 2 3 2.5 h i Insurance sector 8.1 8.1 7.9 8.3 8.8 2.3 1.9 2.0 2.0 2.3 1.7 2.3 2.5 2.3 i j Finance n.e.c 2.5 5.3 1.6 2.3 1.8 -.1 1.3 2 .8 .1 1.7 -2.1 2.1 1.0 j k Rest of the world .6 1.0 1.3 .6 -.1 .1 A .4 e -.6 .8 3 .2 k * Less than $50 million. For other notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1049 Notes to Tables 1-3 (cont.). 14 For consumers, 1- to 4-family dwellings completed and purchases of savings bonds, special notes issued to IMF, and currency items in publis additions and alterations. Investment of nonfarm business sectors debt; includes Federal agency debt and accrued interest on Treasury billo includes work in process on 1- to 4-family dwellings and other private and on savings bonds (other than consumer-held). residential construction. 2 6 Loans from banks for purchasing or carrying securities and cus- 15 After inventory valuation adjustment. tomer debit and net free credit balances on books of security brokers 16 Financial component of national investment equals net lending to and dealers. rest of world; financial flows among domestic sectors cancel out in national 27 Mainly commercial, industrial, and agricultural loans (other than total. (Discrepancies in financial transactions attributed entirely to open market paper and CCC-guaranteed loans); includes loans to foreign domestic transactions.) Differs from U. S. "net foreign investment" banks, loans to individuals (other than consumer credit), and other loans. (net exports minus net unilateral transfers in national income accounts) Gross of valuation reserves. Loans to domestic commercial banks by discrepancy in rest-of-world account, which equals "errors and excluded in consolidated banking statement. omissions" in Dept. of Commerce balance-of-payments statement for 2 8 Mainly Federal Government loans (other than mortgages), CCCthe U. S. guaranteed loans, open market paper, finance company loans to business, 17 "Liabilities" cover equity as well as debt claims. and policy loans on life insurance. 18 For description, see p. 852 of this BULLETIN. 2 9 Trade debt net of trade credit. 19 Demand deposit liabilities of banking system are net of F. R. float 30 For coverage, see p. 856 of this BULLETIN. See also notes for this and cash items in process of collection as reported by commercial banks. category in individual sector statements in Table 4. Sum of sector holdings (partly on holder-record basis) differs from 31 Saving and investment are equal in concept but may differ statistically liability total mainly because of mail float (checks in transit from drawers because of discrepancies. See p. 857 of this BULLETIN. to drawees). See Table 4 (G), lines Y-a, for sector allocation of currency 3 2 Annual figures for farm sector are retained earnings of corporate and demand deposit liability on a net bank-record basis. For further farms; farm and nonfarm unincorporated businesses shown as having discussion, see p. 853 of this BULLETIN. zero annual net saving. Quarterly figures for both sectors include 20 At commercial and mutual savings banks and Postal Savings System. seasonal net saving. See p. 838 of this BULLETIN. 21 Shares in savings and loan associations and credit unions. 3 3 Data for excluded categories—trade credit, proprietors' net investhel 2 2 d 2 3 C b P y o ri n o v s t a u h t m e e r e a s n r- e d h c e t F o l e d rs d o e i r n n a c l l y l u ; G d i o e n v d c e lu i r n n d m e F s e e n d nt e e r t l a i i f l n e t o i e b n r l e s i u s g t r a a a t n i c o c c n e r s . u a c l a E s t . s e t g im S or a a y v t . i e n d g s a s b e o q n u d a s l m bu e s 3 3 n i 4 5 n t , M F e g s o a s o r e i l n s d s , l , e y a c T t n o r t d e i r m a s t s e a r u v a r n i d y n s e g a p c s c o u t s r i i n r i o t e s s n n t s i c t o y u i f n , t i a o S s n n p ta e s d t . c e m i fi i a c s n c i . d n — s l t a o r p u ca p m l e e a g n r o ts i v n , e s T r e n a e m b T l e e n a s b t s l 1 , e s a c n o 1 d r 4 a p . n or d a t 4 e . to changes in reserves against life insurance policies and supplementary 3 6 Includes life insurance issued by fraternal orders not shown sepacontracts and in policy dividend accumulations. rately. Assets in these categories shown as consumer holdings. 24 Private pension plans and railroad and govt. employee retirement 37 Marketable issues maturing within one year and, prior to 1956, funds. Estimated as equal to changes in reserves of pension plans ad- savings notes. ministered by life insurance companies and in assets of other private 3 8 Excludes loans to domestic commercial banks. Consists of mortplans and of railroad and govt. employee retirement funds. gages, consumer credit, security credit, other loans, and bank loans, n.e.c. 2 5 Excludes Federal debt held by Federal agencies, consumer-held Gross of valuation reserves. TABLE 4. SECTOR STATEMENTS OF SOURCES AND USES OF FUNDS [In billions of dollars] Quarterly totals Annual totals Category 1957 1958 1959 1954 1955 1956 1957 1958 (A) Consumer and nonprofit organization sector A Current receipts 272.0 291.9 314.2 330.6 337.8 80.0 82.2 83.8 84.5 81.5 82.7 85.6 87.9 86.3 A B Income receipts1 255.0 273.4 293.5 306.8 309.3 74.5 76.3 77.9 78.1 74.6 75.5 78.5 80.7 79.0 B C Transfer receipts2! 17.0 18.6 20.7 23.8 28.4 5.6 5.9 6.0 6.4 6.9 7.2 7.1 7.2 7.3 C D Income taxes and other deductions.. 35.1 38.3 42.9 46.2 46.0 12.4 13.0 11.4 9.4 12.1 12.5 11.6 9.8 12.4 D E Taxes less tax refunds3 30.5 33.1 37.0 39.4 38.9 10.4 11.0 9.8 8.1 10.1 10.5 9.9 8.4 10.1 E F Pension and OASI deductions4!.. 4.6 5.2 5.9 6.8 7.1 2.0 2.0 1.6 1.3 2.1 2.0 1.6 1.4 2.3 F G Cur. receipts after deduct. (A—D) 237.0 253.6 271.2 284.4 291.7 67.6 69.2 72.5 75.1 69.4 70.2 74.1 78.0 74.0 G H Cur. expend, for goods and serv. 5 . . 187.3 198.3 211.2 222.6 232.1 51.8 54.6 55.3 60.9 54.4 56.9 57.4 63.4 57.1 H I Net life insurance premiums 6f 2.6 2.8 2.7 2.8 2.5 .6 .6 .7 .8 .6 .5 .7 .7 .5 I J Current surplus (G - H -1) 47.0 52.5 57.3 59.0 57.1 15.2 14.1 16.4 13.3 14.5 12.7 16.0 13.9 16.4 J K Insurance and retirement credits 7f. - 7.2 8.0 8.8 8.7 9.6 2.2 2.3 2.0 2.2 2.5 2.1 2.5 2.6 2.3 K L Capital consumption8 31.5 33.9 36.9 40.0 41.6 9.8 10.0 10.1 10.2 10.3 10.4 10.4 10.5 10.6 L M Net saving (J+K-L) 22.6 26.6 29.2 27.6 25.1 7.6 6.4 8.4 5.3 6.6 4.4 8.0 6.0 8.2 M N Gross saving (L+M) 54.2 60.5 66.1 67.7 66.7 17.4 16.3 18.4 15.5 16.9 14.8 18.5 16.5 18.7 N 0 Gross investment (P+T) 56.7 64.3 69.9 69.5 67.3 18.2 14.9 18.4 18.0 17.4 12.3 18.5 19.0 18.6 O P Capital expend, (net of sales). 47.9 58.9 57.4 58.5 55.8 13.7 14.2 14.3 16.2 12.7 13.1 13.4 16.6 24.5 P Q Residential construction 12.9 16.6 16.1 14.9 U.I 3.8 3.3 3.8 4.0 3.6 3.1 3.6 4.3 4.3 Q R Consumer durable goods 32.4 39.6 38.5 40.3 37.6 9.2 10.1 9.7 11.3 8.3 9.1 8.8 11.4 9.4 R S Plant and equip, (nonprofit) 2.6 2.7 2.8 3.3 3.5 .7 .8 .9 .9 .8 .8 .9 .9 .9 S T Net financial investment (U —j) . 8.8 5.4 12.5 11.0 11.5 4.5 .7 4.0 1.7 4.7 -.7 5.1 2.4 4.1 T U Net acquis. offinan. assets9 20.6 25.8 27.5 22.9 23.6 5.9 4.8 6.8 5.4 5.1 3.1 7.0 8.3 6.6 U V Currency and demand deposits. 2.5 -.8 1.0 -.8 2.5 -2.5 -.6 1.0 1.3 -1.3 Q 2.4 2.2 -1.3 V W Fixed-value redeem, claims. . . 9.6 8.7 9.0 9.8 13.6 2.6 2.9 1.4 2.9 3.3 3^7 3.0 3.6 2.3 W X Time deposits 4.2 3.3 3.7 6.5 7.7 2.2 1.6 1.3 1.4 2.1 2.0 2.1 1.5 1.1 X Y Savings shares 4.8 5.2 5.3 5.2 6.5 1.0 1.8 .6 1.8 1.3 1.8 1.0 2.3 1.4 Y Z U.S. savings bonds1 ° .6 .3 -.1 -1.9 s -.6 -.5 c A i i -.2 0 -.2 Z a Saving through life insurance... 3.1 3.2 3.8 2.8 3.4 .7 .7 .7 .7 .8 .7 .9 1.0 b Saving through pension funds. 4.5 5.1 5.5 5.9 6.5 1.5 1.6 1.3 1.5 1.8 1.4 1.6 1.7 1.6 b c Cr. and equity mkt. instr.11... .8 8.0 7.9 9.7 3.0 4.7 1.3 3.5 .2 2.0 -.6 .5 1.1 4.5 c d Federal obligations -2.1 2.2 1.2 2.5 -2.9 2.2 -.3 1.5 -1.0 -.3 -1.6 -1.1 .2 2.6 d e State and local obligations... 1.0 2.1 1.7 2.3 1.5 .8 .3 .8 .4 .7 2 .6 .4 .6 e f Corporate and foreign bonds. -.6 1.1 1.2 1.1 .5 .6 .2 .6 2 .8 -'.3 * -.1 -.1 f g Corporate stock .8 1.4 2.2 1.8 1.7 .5 .6 .1 '.5 .3 .8 .4 .2 .5 g h Mortgages 1.3 1.4 1.6 2.1 1.8 .6 .6 .5 .5 .3 .6 .5 .4 .8 h 1 Net invest, in noncorp. bus .2 1.6 .4 -4.5 -5.5 -1.1 -1.1 -1.1 -1.1 -1.4 -1.4 -1.4 -1.4 -1.4 i j Net increase in liabilities 11.8 20.4 15.0 11.8 12.1 1.4 4.1 2.7 3.6 .4 3.9 1.9 5.9 2.5 j k Mortgages12 9.1 12.4 11.1 8.8 10.1 2.6 2.0 2.1 2.1 2.3 2.1 2.5 3.2 3.0 k 1 Consumer credit 1.0 6.4 3.4 2.7 .3 -1.2 1.6 .7 1.6 -2.3 .6 # 1 1.9 -.9 1 m Security credit 1.2 .7 * -.4 .7 -.2 .3 -.2 -.3 .2 .9 Q .5 .2 m n Other13 .5 .9 .6 .8 .9 .2 .2 .2 .2 .3 .2 '2 .2 .2 n o Discrepancy (N —O) -2.5 -3.8 -3.8 -1.8 -.5 -.9 1.4 .1 -2.4 -.5 2.5 * -2.5 .1 o * Less than $50 million. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1050 FLOW OF FUNDS/SAVING TABLE 4. SECTOR STATEMENTS OF SOURCES AND USES OF FUNDS (Continued) [In billions of dollars] Quarterly totals Annual totals Category 1957 1958 1959 1954 1955 1956 1957 1958 (B) Farm business sector A Net income 9.5 8.7 8.5 8.7 11.0 1.6 1.8 2.6 2.7 2.5 2.1 3.1 3.3 1.8 A B Proprietors' income withdrawals14.. 9.5 8.7 8.5 8.7 11.0 2.2 2.2 2.2 2.1 2.9 2.7 2.7 2.7 2.5 B C Net saving (A — B) 15 * * —.6 —.4 .4 .6 — 3 -.5 .3 .5 -.7 C D Capital consumption 3.6 3 7 3.7 3 9 4 0 1 0 1 0 1 0 1 0 1 0 1 0 1.0 1 0 1.0 D E Current surplus= gross saving (C+D) 3.6 3.7 3.7 3.9 4.0 .4 .6 1.4 1.5 7 .4 1.3 1.5 .3 E F Gross investment (G-f-J) 3.6 3.7 3.7 3.9 4.0 .4 .6 1.4 1.5 7 .4 1.3 1.5 .3 F G Capital expenditures 4.7 4 <? 3.4 4 7 5 6 2 0 r 1 2 0 2. ? 2.6 1.5 2 2.4 G H Construction and equipment16. .. 4.2 4.2 3.8 4.0 4.6 .9 l.1 1.1 .8 1.0 1.3 1.2 .0 1.2 H I Change in inventories .5 3 4 8 1 1 1 ^ 2 2 .2 I J Net financial investment (K— L) 1.1 .8 3 .9 j.7 .7 .8 .A .5 7 -1.1 2 ..? —2.2 J K Net acquis. offinan. assets17 -.1 * — 2 — .4 * * / .1 .1 .7 K L Net increase in liabilities 1.0 8 5 7 J r» 7 j 6 8 1 2 3 ? 1.1 L M Credit market instruments .8 1 Q 1 1 1 4 5 f, 1 z| Q 2 1 .7 M N Mortgages .5 8 8 6 7 ? 1 1 1 1 2 2 1 .3 N O Bank loans n.e.c.18 .2 .4 * .3 .6 .1 .3 * _ .1 1 .4 * * .1 O P Other loans*9 .1 * 1 .2 .2 .2 .2 * _ .1 2 .2 * —.1 .2 P Q Trade debt j -} • 2 Q R Proprietors' net investment.... - .4 -1. 4 - .5 .6 - .1 - .1 - .1 - .1 2 2 .2 2 .2 R (C) Noncorporate nonfinancial business sector A Net income2 ° 33.8 36.1 37.8 38.2 37.5 7.6 9.5 9.1 12.0 8.4 8.7 8.3 12.1 9.9 A B Proprietors' income withdrawals2 33.8 36.1 37.8 38.2 37.5 9.5 9.6 9.6 9.5 9.1 9.3 9.4 9.6 9.7 B C Net saving (A-B) 15 — 1.9 _.l -.5 2.5 -.8 -.6 -1.1 2.5 .1 C D Capital consumption 6.7 7.0 7.5 8.1 8.0 2.0 2.0 2.0 2.1. 2.0 2.0 2.0 2.1 2.0 D E Current surplus = gross saving (C+D) 6.7 7.0 7.5 8.1 8.0 .1 1.9 1.5 4 v .6 i 1.2 1.4 .9 4.6 2.2 E F Gross investment (G+J)... 6.7 7.0 7.5 8.1 8.0 .1 1.9 1.5 1.2 1.4 .9 4.6 2.2 F G Capital expenditures... 8.3 10.7 10.3 9.7 9.1 2.9 2.5 2.9 2.4 2.2 2.6 1.9 3.2 G H Plant and equipment22.. 8.5 10.1 10.1 9.7 9.2 2.0 2.8 2.6 1.7 2.5 2.5 2.4 2.1 H I Change in inventories2 °. 2 .6 .2 * * .9 -.3 .2 2.3: .6 -.3 .1 -.5 .9 I J Net financial investment (K—N) -1.6 -3.7 -2.8 -1.7 -1.1 -2.8 — .6 3.1 -1.2 o -1.8 2.7 K Net acquis. offinan. assets....... .6 .6 .6 .9 1.1 -.2 .4 .7 .6 -.3\ '.4 .2 .7 -.3 K L Currency and demand deposits. .5 .3 .3 .7 .9 .2 .2 .2 .2 .2 .2 2 .1 L M Consumer credit .1 .2 .3 .2 .2 -.4 .2 -.5 .2 * .5 -.4 M N Net increase in liabilities 2.2 4.2 3.4 2.5 2.2 2.6 1.0 1.5 -2.5\ .9 1.3 2.0 -1.9 .6 N O Credit market instruments 2.0 4.0 3.4 2.6 4.2 -.8 1.3 .6 Ml -.8 .9 .2 3.9 -.2 O P Mortgages 1.0 1.0 .8 .9 1.3 -.1 .3 .4 1 .4 .5 .4 .4 P Q Bank loans n.e.c .7 2.1 2.2 1.2 2.8 g 1.0 .1 1.0 -l.'o .7 1 3.2 -.6 Q R Other loans2 3 .3 .8 .4 .5 .1 '.2 -.1 .1 .2 .3 — .2 -.2 .3 .2 R S T P T r r o a p d r e i e d t e o b r t s 2 ' * net investment.... . ' 2 * -1 2 . . 7 0 -1 1 . . 8 8 -4 4 . . 1 0 -6 4 . . 1 1 -1 4 . . 0 4 -1.0 .7 -1 1 . . 0 9 - - 3 1 . . 0 0 -1 3 . . 5 2 -l'.5 --1 3 . . 5 3 - - 4 1 . . 3 5 -1 2 . . 5 3 T S (D) Corporate nonfinancial business sector A Profits2 0 29.1 38.3 36.8 36.1 31.0 9.1 9.6 9.1 8.3 6A 7.1 8.3 9.5 9.1 A B Profits tax payments (net)25 18.8 17.1 21.6 21.1 18.8 7.7 7.2 3.1 3.1 6.8 6.2 2.8 2.9 5.4 B C Net dividend payments26... 7.6 8.8 9.4 9.6 9.5 2.2 2.2 2.3 2.8 2.3 2.3 2.2 2.8 2.4 C D Net saving (A-B-C) 2.7 12.4 5.8 5.4 2.7 0 .2 3.7 2.4 -3.1 -1.3 3.3 3.8 1.3 D E Capital consumption. 15 2 17 6 19.3 20 7 21 4 4 9 5 1 5 3 5 5 4 9 5 2 5.5 5.8 5.8 E F Current surplus = gross saving (D+E) 18.0 30.1 25.1 26.1 24.1 4.0 5.3 9.0 7.9 1.8 3.9 8.7 9.7 7.1 F G Gross investment (H+M).. 16.4 26.2 21.8 26.3 21.6 3.8 5.9 9.0 7.6 .4 4.4 8.0 8.7 5.3 G H Capital expenditures. . . 19.8 29.0 34.0 33.2 21.2 7.9 8.6 8.7 7.9 4.7 4.4 5.5 6.6 7.4 H I Fixed investment 21.8 24.1 29.1 32.0 26.1 6.6 8.6 8.4 8.4 5.8 6.7 6.6 7.0 5.4 I J Plant and equipment.. 20.5 23.1 28.4 30.9 24.4 6.8 8.1 7.9 8.2 5.9 6.2 5.8 6.5 5.4 J K Other 1.2 1.0 .8 1.1 1.7 -.2 .5 .5 .2 -.1 .6 .7 .5 * K L Change in inventories 2 °. -1.9 4.9 4.9 1.2 -4.8 1.3 * .3 5 -1.0 -2.4 -1.1 -.4 2.0 L M Net financial investment (N-V) -3.4 -2.9 -12.2 -6.9 .4 -4.1 -2.7 .3 -.3 -4.3 .2 2.6 2.0 -2.1 M N Net acquis. offinan. assets 4.5 16.8 4.2 2.8 7.4 -2.4 .1 3.6 1.5 -6.2 1.4 6.8 5.4 * N O Currency and demand deposits. 2.0 1.0 .1 -.2 1.8 -2.8 .6 .7 1.3 -3.1 1.3 1.0 2.5 -2.9 O P Credit market instruments2 7... -2.3 5.0 -3.9 -1.2 1.2 -1.1 -2.2 .3 1.8 -1.8 -2.3 1.1 4.2 1.0 P Q Federal obligations -2.3 4.4 -4.3 -1.5 .7 -.6 -2.2 .4 .9 -1.3 -2.4 1.2 3.2 1.5 Q R Consumer credit .2 .6 .3 .4 -1.0 .2 1 1.0 -1.0 .2 .1 1.2 -.9 R S Other loans (finance paper).. 2 .1 .3 .1 .5 1 * * .6 -.1 -.2 2 .4 S T Trade credit 3!9 10.2 6.2 2.1 2.6 1.1 '.1 2.3 -1.9 -2.1 1.4 4.5 -\.2 1.6 T U Other financial assets2 8 .9 .6 1.8 1.9 1.7 .4 1.0 .3 .3 .7 .9 .2 1 .3 U V Net increase in liabilities29 7.9 19.6 16.4 9.7 7.0 1.8 2.8 3.3 1.9 -1.9 1.3 4.3 3.4 2.1 V w Credit and equity market instr. 5.7 9.0 11.4 11.3 8.5 4.0 3.1 2.5 1.8 2.6 2.0 2.4 1.5 2.2 W X Corporate bonds 3.5 2.8 3.7 6.3 5.9 1.5 1.5 1.6 1.7 1.9 1.2 1.5 1.3 .6 X zY C M o o r r p tg o a ra g t e e s stock 1 1. . 8 6 2 2 . . 0 0 2 1 . . 3 8 2 1 . . 4 8 2 2. . 5 3 .8 . . 5 9 . . 3 7 . . 5 6 . . 3 2 . . 9 7 . . 6 9 . . 5 8 . . 7 5 Z Y a Bank loans n.e.c -1.2 1.8 3.6 .2 -2.2 1.4 .1 1 -1.1 -.2 -.6 -.2 -1.3 * a b Other Ioans3o * .3 .1 .5 * .3 * * .2 .4 -.1 -.3 .3 b Trade debt 2.1 10.5 4.8 -1.7 -1.5 -2.3 -3 .8 * -4.5 -.7 1.9 l!9 -.1 c Discrepancy (F — G) 1.5 3.9 3.2 1 2.5 .2 -.7 * .3 1.4 -.6 .7 1.0 1.9 d Memo: Profits tax accruals2 5. 15.4 20.2 19.5 19^0 15.7 4.9 5.0 4.8 4.4 3.1 3.5 4.2 5.0 5.3 e * Less than $50 million. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1051 TABLE 4. SECTOR STATEMENTS OF SOURCES AND USES OF FUNDS (Continued) [In billions of dollars] Quarterly totals Annual totals Category 1957 1958 1959 1954 1955 1956 1957 1958 1 2 3 4 1 2 3 4 1 (E) Federal Government sector A Tax receipts (net of refunds) 58.8 59.7 69.1 71.5 67.7 21.4 20.9 15.5 13.8 20.1 18.9 14.9 13.8 19.0 A B Individual income 28.4 30.0 34.1 36.1 34 6 10 0 9 9 8 9 7 4 9 5 8 9 8 7 7 6 9 7 B C Corporate profits 19.6 18.1 22.4 21.8 19.9 8.2 7.6 3.1 3.0 7.3 6.7 2.9 3.0 6.0 C D So O ci t a h l e i r n 3 s 1 urance programs32 10.9 11.6 12.6 13.6 13.2 3.3 3.4 3.6 3.4 3.3 3.3 3.4 3.2 3.3 D E Premiums received 6.6 7.5 8.0 9.5 10.4 2.3 3.0 2.3 1.8 2.5 3.4 2.5 2.0 2.6 E F Benefits paid 5.9 6.5 7.2 9 3 12 4 2 2 2 4 2 3 2 5 3 1 3 3 3 1 2 9 3 3 F Life insurance and retirement programs 3 3-j- G Premiums received 1 5 1 5 1 7 1 8 1 7 5 4 4 4 4 4 4 4 4 G H Benefits paid 1.6 1.6 1 8 2 0 2 1 5 5 5 5 5 6 5 5 .6 H [ Net grants and donations paid34. . . 8.9 9.6 10.0 11.4 13.2 2 6 2 9 3 0 3 0 3.2 3 6 3.7 3.4 I J Net interest paid 3 5 4 9 4 8 5 3 5 7 5 4 1 4 1 4 1 4 1 5 1 5 1 4 1 3 1 3 1 4 J K Other net purchases of goods and services 3 6 47.6 45.3 47.6 50.2 53.8 11.7 12.6 12.5 13.5 11.5 12.6 14.4 15.3 12.7 K L Construction expenditures 3.4 2.8 2.7 3.0 3.4 .6 .7 .9 .8 .6 .8 1.0 1.0 .8 L M Other 44.2 42 5 44 9 47.2 50 4 11 1 11 9 11 6 12 7 10 9 11 8 13.5 14.2 11.9 M N Current surplus (A, E, and G, less F and H through K) -2.1 1.0 6.9 4.1 -7 2 5 8 4 6 — 1 4 — 4 9 3.7 1.7 -5.1 -7.5 .7 N O Credits imputed to consumers37 j-,,, .1 .6 1.0 .6 1.0 .1 .4 .1 .4 .3 .1 .2 O P Gross and net saving (N —O) -2.2 .4 5.8 3.6 -8.2 5.8 4.2 -1.4 -5.0 3.5 1.3 -5.4 -7.6 .5 P Q ISetfinan. investment (R — X) . . -2.2 .4 5.8 3 6 -8.2 5.8 4.2 -1.4 -5.0 3.5 1.3 -5.4 -7.6 .5 Q R Net acquis. offinan. assets .2 9 1.5 3.2 1 5 4.0 — 9 2.2 —2.1 1.4 3.9 -4.4 .7 .7 R S Currency and demand deposits. .3 -.6 - .2 .1 3.2 -1.8 1.5 -2.7 1.5 3.6 -5.0 * -.5 S T Credit market instruments — 4 1 4 1 1 2 3 1 7 5 5 5 9 * 3 5 .9 .5 T U Mortgages 3 8 .5 .8 1 .4 .3 .5 .3 A .3 .2 -.2 .3 .4 U V Other loans3 9 -.5 .9 .3 .9 1.4 * .2 .1 .6 2 .5 .5 .6 .1 V W Other financial assets4 ° .3 .6 .6 2 .3 4 .2 i — .1 .1 i .1 W X Net increase in liabilities 2.4 .5 -4.3 — .4 9.8 -1.8 -5.7 3.7 2 8 -2.2 2.6 1.0 8.4 -.4 X Y Fixed-value redeemable claims.. A -.3 -2.2 n -.6 -.6 -.6 c -.1 - .2 - .2 -.2 -.2 Y Z Postal saving deposits 2 -.2 -.2 -.3 -'.2 * i f * -.1 -.1 * Z a b Co C n o su n m su e m r e s r a -h v e in ld g s t v h g r s o . u b g o h n d l s i fe i o .6 .3 -J -1.9 -.5 -.6 « -.1 -.1 -.2 2 -.2 a insurance and retir funds. . .6 1.0 .6 1.0 .1 .1 .2 .4 .3 .1 .2 b c Federal obligations41 1..51 1.0 -5.1 1.4 9.0 .1n -4.8.4 4.9 2.1 -2.2 2.5 1.1 7.6 * c d Short-term direct42 — 11.8 — 7 1 7 4 5 5 -1 2 — 16 3 9 1 0 2.2 -1.9 -4.3 1.2 3.8 -4.6 d e Other direct and guaranteed.. 13.3 6.6 -13.0 -6.2 10.7 .4 -9.2 3.7 -1.1 -.3 7.7 A 3.7 4.4 e f g Oth N e o r n l g o u a a n r s a 4 n 4 teed43 * — 1 1 .5 1 — .6 3 — 2. 1 4 4 c — . 3 1 — 4 6 — 2 2 1 2 0 .1 2 - — .9 3 '.2 1 .1 3 — .2 2 f g h Other liabilities45 .41 * .3 3 .1 — 3 3 -.6 .9 -.3 .2 -.3 .5 -!2 h Memo: Assets of OASI fund 1.9 1.1 .9 * .5 -.2 — .4 -.2 .7 -.5 -.5 -.5 i (F) State and local government sector A Tax receipts4^ 22 5 24 5 27.3 29.4 30.9 7.1 7.5 7.3 7.4 7.5 7.9 7.7 7.8 8.0 A B Net insurance and grants 2 .2 A .9 1.4 .4 1 2 2 4 3 3 .4 .7 B C Net interest paid 4 5 5 6 6 1 1 1 1 2 2 2 2 C D Other net purchases of goods and services 3 6 23 8 26 2 28 5 31 5 34 4 7 1 7 9 8 1 8 4 7 7 8 6 8 9 9 2 8.5 D E F C O o th n e s r t r b u y c t g io o n v t a n e d n t l e a r n p d rises 9 1 .1 A 10 j .C f- — 11 1 .1 .7 — 12 1 .1 9 -2 1 3. 1 1 — 2. 3 .5 — 3. 1 5 — 3. 6 5 3.1 c — 2. 4 5 3.3 3.9 « 3.5 5 - 2 .6 .7 F E G Other by general government.... 16.2 17.8 19.1 21.2 23.4 5.3 5.3 4.9 5.8 5.8 5.9 5.5 6.2 6.3 G H Current surplus (A+B —C —D).... -1.5 -2.0 -1.4 -1.7 -2.7 .3 H -.9 .1 -.6 -1.0 -1.1 .1 H I Credits imputed to consumers 4^"f 1.1 1.2 1.4 1 6 1.9 4 4 4 4 4 5 .5 5 .5 I J Gross and net saving (H —I) -2.6 -3.2 -2.7 -3.3 -4.6 * -.9 -1.1 -1.3 -.4 -1.1 -1.5 -1.6 -.5 J K Netfinan. investment (L — S)... -1 7 -2.6 —2.1 -2.8 -3.9 2 -.1 -1.5 -.5 -2.Z -.6 -2.3 -1.0 K L Net acquis. offinan. assets 3.7 2.6 3.5 3.6 1.0 1.3 2 7.0 7.2 1.5 -.5 l'.3 .7 L M Currency and demand deposits A A 2 2 .2 — .1 A — 1 .6 — 3 .6 — .7 .6 -.4 M N Time deposits .5 i * A .8 .2 .1 * .6 .7 -.4 -.1 N O Credit market instruments 2 9 19 2.3 2.8 2.6 .9 .7 .9 .4 .9 .2 .6 .9 1.0 O P Federal obligations 1.7 .8 1.1 1.0 .3 .5 .3 .3 2 .3 -.4 .1 .3 .6 P Q State and local obligations... .3 .4 .5 .5 .5 .1 .1 .1 .1 .2 .1 .1 .1 Q R Other4^ .9 .7 .7 1.3 1.8 .2 .2 .4 !4 .4 .4 A .4 .4 R S Net increase in liabilities 5.4 4.8 4.6 6.3 7.5 1.7 1.4 1.7 7.5 2.3 2.7 1.8 7.3 1.7 S T State and local obligations 4.5 3.5 3.2 4.7 5.7 1.3 1.0 1.3 1.1 1.9 1.6 1.3 .8 1.3 T V W U Co O S n h s th u o e m r r t- e t r e r s m aving through 4. . 4 1 3.1 2 - 3 .1 .3 4. . 3 4 5. . 2 4 1. . 0 3 r.2 2 . . 3 9 r.2 i 1. . 6 3 1. . 5 1 1. . 1 3 2 1. . 2 1 V U X Ot r h e e t r ir f l i m ab s i n li t t ie fu s n s d o s . - 1 .2 .1 1. . 2 1 1. . 3 2 1. . 4 3 1. . 5 4 . . 1 3 .3 * . . 3 1 . . 3 1 .4 * A .1 . . 1 4 .4 .4 * W X Y Discrepancy (J — K) -.9 -.6 -.6 -.5 -.7 .7 -.8 .4 -.8 .7 -.5 .8 -1.7 .6 Y * Less than $50 million. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1052 FLOW OF FUNDS/SAVING TABLE 4. SECTOR STATEMENTS OF SOURCES AND USES OF FUNDS (Continued) [In billions of dollars] Quarterly totals Annual totals Category 1957 1958 1959 1954 1955 1956 1957 1958 12 3 4 1 2 3 (G) Commercial banking and monetary authorities sector A Net operating surplus 2.4 2.5 3.0 3.5 3.5 1.0 .8 1.0 .8 .9 .8 .9 .9 .9 A B Profits tax & net div. pymts.51 1.6 1.7 1.8 2.2 2.4 .6 .6 .5 .4 .7 .7 .5 .5 .7 B C Current surplus = gross saving (A-B)52 8 .8 1.2 1.3 1.1 .3 .1 .5 .4 .2 .1 .4 4 .2 C Gross investment (E+F) 1 0 1.4 1.3 1.1 1.3 .4 .1 .7 .7 1.3 — 5 .7 D Capital expenditures J? .3 .4 .4 .4 .1 .1 .1 .1 .1 .1 .1 .1 E F Net financial invest. (G-W) . .7 1.1 1.0 .7 .9 .3 * .6 -.2 o .6 1.2 -.6 .5 F G Ne G t o a ld cquis. of finan. assets^3. . 9.2 2 4.7 * 5. . 1 3 5. . 4 8 - 1 2 4 .3 .7 -2.8 .3 7. . 2 3 3.1 * 3. A 9 - - 7 . > 4 -1 9 . . 1 9 -7.7 - 7 .3 .7 - - 5 . . 1 5 H G J I K Cr F ed e M d it e o m r n a e a t l a r o r k y b e l t i g in at s io t a r n u u s t m ho e ri n ti t e s s. . . . . . . -1 4 9 .0 ^ .6 3 - - 7 4 . . 7 . 1 8 -3 4 . . 1 . 8 2 - — 4 .6 . 3 .7 1 1 2 7 0 . . . 2 0 0 - - -1 3 2 . . 8 . 9 2 - - 2 . . 7 . 4 8 2 3 . . . 7 1 3 2 3 . . . 0 6 9 - - 1 -. . 6 . 1 2 1 7 1 0 . . . 8 0 8 -.6 .2 8 3 7 . . 0 0 4 - - - 5 5 .9 . . 5 4 J I K L Commercial banks 5.6 -6.9 -3.3 .2 7.8 -1.2 -2.3 2.5 1.1 .5 5.2 .6 7.6 -4.7 L M Short-term direct42. . . -10.7 -8.5 4.8 1.9 .9 j 2 2.2 .3 .8 A -A .3 .9 -6.0 M N Other direct and guar.. 16 ? 1.1 -7.8 -2.2 6.8 '.2 -4.5 2.2 -.1 A 5.9 .1 .7 1.5 N O NonguaranteecH3 .5 2 .5 .1 * .1 .4 .3 2 .2 -.2 O P State and local obligations. 1.8 .1 '.2 1.0 2.6 .2 .2 .2 .4 .6 l!3 .5 !2 .2 P g s C C M Se o o o c r n r u p s t r g . u i a t m a y g n e e d l r o s a f c o n r r e s e d i i g t n bonds. . - 1 .2 . . 7 9 * - 2 2 .2 . . . 4 3 6 - - A 1 1 .8 . . 7 3 1. . . 1 1 6 2. ' 1 A -.6 * * * . . . 1 7 5 * -.2 . . 3 3 * . . . . 1 2 1 3 - - . A 5 A * 1. . . . 2 1 6 3 -1. ! 7 .1 7 1. ! . 0 2 8 -.4 . . 6 3 T S R Q T U B O a th n e k r l l o o a a n n s s n 54 .e.c . . 2 3 -1 8 . . 3 0 - 5 .2 .9 -. 2 3 .3 1. . 4 4 -.2 .4 - 2 .5 .1 -.2 i . . 1 5 -1.7 .5 -.2 .7 * 2. . 8 2 - -. . 2 4 Y U V Net increase in liabilities 5.5 3.6 4.1 4.7 73.7 -3.7 7.7 2.6 4.1 -7.5 9.3 -2.3 S.3 -6.7 W w Dem. dep. net & currency55. 4.5 2.3 1.7 -.8 5.8 -5.2 -.1 1.4 3.1 -5.2 6.4 -3.4 8.0 -7.2 X X Y b e Z f a c d T O i t m D D D D D he e u u u u u D C r e e e e e d u e l i e t t t t t m r a o o o o o p r b a e o c o i o U r n n s l e o t t i d c i h . s t h t n y S i s t e d s e e . r u o s e r s G 5 m p s f 7 5 o o w e 6 s v r i o s t t s . r 5 , l d 6 net5 5.. - 4 4 . 3 2 1 2 . . . . . . . . 4 1 8 5 3 3 1 1 - - 2 3 1 . . 7 3 . . . . . 6 0 4 3 7 * - 2 2 1 1 .1 . . . . . . . 4 1 1 1 2 4 3 * - -7 1 5 5 . . . . 7 1 . . . 1 5 2 2 3 * * 5 2 5 5 8 . . . . . . . 2 5 5 6 0 2 4 * * -6 2 3 . 1 8 A . . . 0 8 3 p A - - 2 1 1 1 . . 1 . . . . . . 0 4 3 3 5 8 6 • 1 i! . . . o 7 5 i * * * j -2 4 5 1 1 . . . . . . . 3 9 3 0 0 4 1 - - 6 5 - 2 3 . 1 1 A . 7 3 . . . . 2 6 2 4 2 2 2 3 2 1 1 . . . . . . . . 0 8 4 8 5 3 2 4 - - 5 - 1 1 1 . . . 1 5 . . . 0 6 7 1 7 6. . . . . 8 6 1 3 8 c - - - - - 6 5 . . . 8 . . 9 2 1 . . 3 . . 9 9 1 2 Y Z a b g e d c f h g Discrepancy (C—D). .. -.2 -.6 -.1 .3 2 i * .5 .3 -1.0 .9 -.5 h (H) Nonbank financial sectors A Current surplus 58f 8.3 8.7 8.5 9.4 9.5 3.1 1.7 3.1 1.5 2.7 1.7 3.1 2.0 2.8 A B Credits imputed to consumers 5 9f.. 6.0 6.2 6.5 6.8 7.2 1.8 1.6 1.6 1.8 1.9 1.4 1.8 2.1 1.8 B C Gross saving (A —B)52 2.3 2.5 2.0 2.6 2.3 1.3 .1 1.4 -.3 .3 1.3 1.0 C D Gross investment (E+F) 3.5 2.8 1.9 2.3 2.8 .9 .3 1.1 .7 1.1 .2 1.1 D E Capital expend, (insur. sector) .3 .4 .3 .4 .3 .J .1 .1 .1 .1 .J .1 E F Net financial invest. (G-Z) ... 3.2 2.5 1.6 2.0 2.5 .9 .3 1.0 — .1 .6 1.0 .1 1.0 F G Net acquis. of finan. assets 18.3 22.2 17.3 18.3 20.6 3.9 5.4 3.9 5.1 6.3 2.5 7.3 5.4 G By subsector: H Mutual savings banks 2.1 2.0 2.0 2.6 .6 A A A .6 .6 .5 .4 H I S & L assns. & cr. un 5.3 6.3 5.6 5.6 7.1 1.2 1.7 1.1 1.6 1.2 2.0 1.7 2. 1.8 I J Life insurance companies... 5.1 5.2 5.2 4.9 5.2 1.1 1.1 1.3 1.3 1.2 1. 1.3 1.5 1.2 J K Other insurance companies.. 1.2 1.2 .7 1.0 1.2 .2 .2 .3 .3 .1 .2 A .4 .2 K L Noninsured pension plans. . 1.8 2.0 2.1 2.6 2.6 .8 .6 .5 .6 .9 A .6 .8 .8 L M Finance n.e.c 2.7 5.6 1.8 2.5 1.9 -.1 1.4 .3 .9 .1 1.8 -2.1 2.0 1.0 M By type: N Currency and demand dep.. .5 .6 .2 .3 .4 4 .3 -.3 -.1 .3 2 .4 -.4 N O P Q Cr F S . e t a a d n t e e d r a a e l n q d o u b i l t l o y ig c m a a l t k i o o t n . b s l i i n g str 17.5 2 - 1 .6 . . 5 9 - 1 1 6 .1 . . 9 8 17 ' . . 8 2 9 1 1 1 9 . . . 0 1 8 4^ '. 2 2 - 5 .3 . . 1 4 4.4 * 4. ' 2 . j 2 4. . . 1 1 5 5. . . 7 4 3 - 3 .3 ! . o 1 6. . . 9 8 2 5. . • 7 5 4 O P Q R Corp. and foreign bonds.. 3.8 2.4 3.6 5.1 4.7 1.1 1.4 .2 1.7 1.1 1.3 1.0 1.3 .9 R S Corporate stock 1.7 1.5 1.3 2.0 2.5 .5 .6 1.0 .4 .4 .7 .5 .9 .7 S T 1- to 4-family mortgages.. 7.8 10. 8.4 6.2 8.5 1.4 1.7 .6 1.4 1.5 2.2 2.4 2.4 1.9 T U Other mortgages 1.4 1. 1.8 1.5 1.8 .3 .3 1.7 .5 .4 .4 .4 .5 U V Consumer credit .7 3.3 1.6 1.3 4 .5 .4 -.3 -.1 -.1 .1 V w X Y Ot S O h e e t c h r u e f r i r i n t l a y oa n c n c s r i < e a d 5 l i 0 a t ssets6 *. . . . .1 .4 1.4 .4 . . . 1 7 1 . . 2 1 -.1 . . 5 1 i 'A 3 A A • -.2 . . 7 2 -.6 c .7 * * X Y w Net increase in liabilities 75. 79.7 15.8 16.4 18.1 3.0 5. 2.9 5.3 3.7 5.6 1.5 4.4 Z Dep. in mutual svgs. bks 2.0 1.8 1.8 1.7 2.3 4 .4 .7 .6 .3 a Savings shares 4.8 5.3 5.4 5.2 6.5 1.0 1. 1.3 1.8 1.0 2.3 1.4 b Saving through life insurance.. 3. 3.3 3.6 2.7 3.4 .6 .6 9 1.0 .7 c Saving through pension funds. 3.0 3.2 3.3 4 4.1 1.2 1.0 1.2 1.0 1. 1.1 d Cr. and equity mkt. instr. 6 2 1.1 2 1. 1 1.0 -.4 2.1 .7 e Corporate bonds 1. .1 .1 .3 .1 .3 f Corporate stock 1. 1.6 .5 g Security credit 1.0 -.1 -.2 1. -1.2 -.4 h Bank loans n.e.c -.9 -.1 * i Open market paper 6 3 .6 • 5 j FHLB loans to S & L assns. 6 -.6 .1 -.2 k 1 Miscellaneous64 .1 -.1 .1 1 m Discrep. & unident. assets (C—D). -1.2 -.1 m * Less than $50 million. For other notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1053 TABLE 4. SECTOR STATEMENTS OF SOURCES AND USES OF FUNDS (Continued) [In billions of dollars] Quarterly totals Annual totals Category 1957 1958 1959 1954 1955 1956 1957 1958 (I) Rest-of-world sector A Net purch. of goods and ser v. (B — C) 1.5 1.6 3.4 5.3 1.8 1.5 1.6 .9 1.4 .5 .5 .1 .6 -.1 A B Purch. of goods and services66... 17.6 19.5 23.2 26.3 22.8 6.6 6.9 6.2 6.5 5.4 5.8 5.5 6.0 5.3 B C Sales of goods and services 16 1 17.9 19.8 20.9 21.0 5.1 5.3 5.4 5.2 4.9 5.3 5 4 5.4 5.4 C D Net unilateral receipts66 2.0 2.1 1.9 1.9 1.9 .5 .6 .4 .5 .4 .5 .5 .5 .5 D E Current surplus (D-A) .4 .4 -1.5 -3.5 .1 -1.1 -1.0 -.5 g -.1 -.1 .4 -.1 .6 E F Net financial investment (G—N) .3 * -2.1 -4.2 -.4 -1.4 -1.2 o -.7 -.3 -.2 .1 * A F G Net acquis. of Jinan, assets.... 1 5 1 5 — .1 3 5 A .3 .2 .6 1 1 .9 .9 .9 G H Gold .3 .1 -.3 -.8 2.3 -.3 -.3 * -A A 1.1 .5 .3 .1 H I U.S. currency and dem. dep.... .1 * .2 .2 * -.4 .5 -.3 .2 i .3 -.2 I J Time deposits .6 -.1 .9 .1 * 1.0 .1 J K Federal obligations .2 1.1 .2 * -.1 * -.1 A -.7 -.4 '.S .3 .2 K L Other credit market instr.6 7 .3 1 '.5 .4 i .2 .1 .2 .1 2 -A -.1 L M Misc. financial assets68 .2 \l .4 t .3 .1 .2 2 * .1 A -.1 .8 M N Net increase in liabilities 1.5 1.5 3.6 4.1 3.8 1.1 1.6 .5 1.0 .9 1.2 .8 .9 .5 N O Securities .2 * A .5 1.2 .2 .2 A * .4 A .2 .3 .3 O P Loans69 .2 A .6 .9 1.1 .1 .1 A .6 .2 A .4 -.1 P Q Miscellaneous70 1.1 1.2 2.6 2.8 1.4 .8 1.3 A .3 'A .6 .2 .2 .3 Q R Discrepancy (E —F)71 .2 .4 .6 .7 .4 A .2 .3 -.2 .2 .1 .2 -.1 .2 R S Memo: Unilateral transfers in kind 7 2 3.5 2.8 3.0 2.9 2.9 .7 .9 .6 .7 .8 .9 .6 .6 .6 S * Less than $50 million. 39 Mainly loans to business sectors, to foreign and State and local f For treatment of life insurance, pension, and retirement flows, see governments, and to savings and loan associations (by FHLB). Excludes pp. 837 and 849 of this BULLETIN. CCC-guaranteed loans other than those on tobacco. 1 Payrolls; interest; dividends; and income withdrawals from unincor- 4 o Treasury currency assets, time deposits, trade credit, and misporated business. cellaneous (mainly foreign currency and deposits). 2 Grant and donation receipts of consumers and nonprofit organizations 41 See Table 1, note 25. 42 See Table 3, note 37. (net of transfers within the sector), social insurance benefits, and benefits 43 Securities and notes issued by FNMA, Federal land banks, home from private pension and government retirement funds. loans banks, intermediate credit banks, and banks for cooperatives. 3 Federal, State, and local income and estate and gift taxes. 44 CCC-guaranteed bank loans and CCC certificates of interest. 4 Mainly employee contributions to OASI and to private pension and 4 5 Treasury currency liabilities, trade debt, and misc. liabilities (special government retirement funds. IMF notes, misc. deposits, and private equity in Govt. enterprises). 5 Figures include net operating outlays of nonprofit organizations and 4 6 Excludes employment taxes. net transfer payments abroad. 47 Receipts of Federal Government grants; payments of direct relief 6 Net of dividends on and benefits from private life insurance and and other transfers; and receipts and payments in connection with individual annuity policies and Government life insurance. government employee retirement, unemployment insurance, workmen's 7 In connection with consumer saving through life insurance, private compensation, and cash sickness compensation programs. pension funds, railroad retirement, and government employee retirement. 48 In connection with saving through government employee retirement 8 For details, see Table 2, lines J-L. funds. 9 Includes misc. deposits with Federal Govt. not shown separately. 49 Corporate bonds and mortgages. 1 ° Includes net accruals of interest. 50 Trade debt and loans from Federal Government. 1 * Includes net free credit balances with brokers not shown separately. 51 Includes payment to Treasury on F. R. notes outstanding. 12 Mainly consumer debt on 1- to 4-family properties. 52 Net saving is less than line C by the amount of capital consumption, 13 For consumers, loans on insurance policies; for nonprofit organiza- about $0.1 billion a year. tions, bank loans, loans from government, and trade debt. 5 3 Includes misc. and Treasury currency assets not shown separately. 14 Estimated as equal to seasonally adjusted net income of unincor- s4 Open market paper, CCC-guaranteed loans, and CCC certificates of porated farms. Figures include small amounts of dividends and profits interest. taxes paid by corporate farms. 15 See Table 2, note 32. 5 5 Net of Federal Reserve float and cash items in process of collection 16 Includes farm residential construction. as reported by commercial banks. 17 Mainly currency and demand deposits. 56 Bank-record basis, net of bank float; differs from sector currency 18 Excludes CCC-guaranteed loans. See p. 840 of this BULLETIN. and demand deposit assets (shown in Table 3 and in nonbank sector 19 Government loans; excludes CCC loans. accounts in Table 4) principally because of mail float. 2 o After inventory valuation adjustment. 57 Mainly issues of corporate stock and balances due to foreign 2 * Estimated as equal to seasonally adjusted business net income. branches. 22 Includes business residential construction. 5 8 Includes premiums on life insurance and private pension plans, less 23 Mainly REA and other loans from Federal Government and loans benefit payments and policy dividends. fro 2 m 5 F f e in d a e n r c a e l , c S o t m at p e, a n a i n e d s. local taxes on profits. 24 Net of trade receivables. pen 5 s 9 i I o n n c p o la n n n s e . ction with consumer saving through life insurance and 26 Includes profits paid by U. S. branches to foreign parent corporations 6<> Mainly finance company loans to business and insurance policy loans. less profits paid by foreign branches to U. S. parent corporations. 61 Trade credit, time deposits, sayings shares, and miscellaneous assets. 27 Includes State and local obligations not shown separately. 62 Lines /, j, and most of / are liabilities of finance companies; line g, 2 8 Miscellaneous financial assets (direct investments in foreign branches shares of open-end investment companies; and line h, liabilities of security and holdings of foreign cash), and time deposits. brokers and dealers. 29 Includes direct investments from abroad not shown separately. 63 Part of "other loans" category. 30 Mainly commercial paper and loans from finance companies. 64 Deposits of banks in U. S. possessions and agencies of foreign banks, 31 Mainly excise taxes and customs receipts; also includes estate and 6s Consolidated; records only transactions with U. S. gift taxes and payment to Treasury on F. R. notes outstanding. 66 Excludes unilateral transfers in kind, shown in line S. inc 3 l 2 u d O e A s S F I e , d d e i r s a a l b e il m ity p lo in y s m u e ra n n t c t e a , x e a s n d a n u d n e S m ta p te l s o y d m ep e o n s t it p s r i o n g r u a n m e s m . pl L oy in m e en E t 6 6 7 8 C D o i r r p e o ct r at i e n v s e e s c t u m ri e t n ie ts s , , s u e n c i u d r e it n y t i c fi r e e d d it, a s a s n e d ts , c o I m M m F e r h c o ia l l d i p n a g p s er o . f special c a o nd m p S e t n at s e a t w io i n th d tr r u a s w t a f l u s n f d r s o ; m l in th e e F se , t F r e u d st e r f a u l n b d e s n . efit payments to consumers U. 6 S 9 . S n e o c t u e r s i , t y a n c d re m di i t s , c e b l a la n n k e o l u o s a n d s e p n o . s e i . t c s , . and other loans (mainly from 3 3 Veterans' life insurance and Government employee and railroad re- U. 7 S o . D G ir o e v c e t rn i m nv e e n s t t ) m . ents, foreign currency and deposits held by U. S. tire 34 m T en ra t n f s u f n e d r s. p a L y i m ne e n G ts e x ( c o l t u h d e e r s t G h o an v er i n n m su e r n a t n c c e o n b tr e i n b e u f t i i ts o ) n s t o to i t n h d es iv e id fu u n a d ls s , . dom 71 e " s E ti r c r o se rs c to a r n s d , a o n m d i s o s t i h o e n r s " l ia in bi l U it . i e S s. . balance-of-payments statement. plus net cash unilateral transfers to foreign countries, grants-in-aid to 72 Grants in the form of goods and services by U. S. Government and State and local governments, and subsidies to business. private individuals and institutions. 35 Includes net accruals on savings bonds and Treasury bills. NOTE.—"Liabilities" covers equity as well as debt claims. 3 6 Purchases less sales for general govt. and govt. enterprises, including For descriptions of sectors, of capital expenditures, and of financial outlays for tangible capital and (for Federal Govt.) net disbursements to transaction categories, see notes to corresponding items in Tables 1-3, farmers in form of CCC direct and guaranteed loans. pp. 1046-48, and "Technical Notes," pp. 846-59 of this BULLETIN. 3 7 In connection with saving through Government life insurance and For discussion of saving and investment concepts, see p. 833 of this Government employee and railroad retirement funds. BULLETIN. 38 Mainly on 1- to 4-family and farm properties. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLE 5. SUMMARY OF FLOW-OF-FUNDS ACCOUNTS FOR 1958 [In billions of dollars] Consumer Nonfinancial business sectors Government sectors Financial institutions sectors ^ctor an s p d e r c o n t f o o i r t n s - Farm co N rp o o n ra - te Corporate Federal an S d t a lo te cal Co b m an m ki e n rc g ial in S st a i v tu in ti g o s ns Insurance F n in .e a . n c c . e R s w e e s o c t t r - o l o d r f- sec A to ll rs c a D r n e i c s p - y - s i N n a a v v n a i e t d n s l g . tment Transaction category U S U s U S U S U S U S U S U S U S U S U S U S U 66 7 4.0 8.0 24 1 -8 2 4 6 1 1 1 9 3 j 93.5 1.0 93.4 A B Capital consumption . ... 41 6 4.0 8 0 21 4 * * 74.9 74.9 B C Net saving (A — B) 25 1 2 7 -8 2 —4 6 1 l 8 1 9 — 3 1 18 6 18.5 C D Gross investment (E-f J) 67.3 4.0 8 0 21.6 —8 2 —3 9 1 3 3 1 9 2 — 4 92 6 92.9 D E Private capital expenditures (net of sales) 55 8 5.6 9 1 21.2 4. .3 92.5 92.5 E F Consumer durable goods... 37.6 37.6 37.6 F G Nonfarm residential constr.. 14.7 1.7 1.7 18 0 18.0 G H Plant and equipment 3.5 "4.'6 7.5 24.4 4 3 40 7 40.7 H I Change in inventories 1.1 i -4.8 -3.8 -3.8 I J Net financial invest. (K -L). . . 11.5 -1.7 -1.1 .4 -8.3 -3.9 .9 .8 1.6 .2 -.4 * * .4 J K Net acquis. of Jinan, assets 23 6 .4 11 7.4 15 3.6 14.7 9.7 9.0 19 3.5 76.3 -3 5 K L Net increase in liabilities. . 12 1 '' 2.1 '' "2.2 ' 7.0 9.8 '" 7.5 13 7 8 9 '' '7.5 "'i.7 3 8 76 3 3.8 L M Gold and Treas. currency... .1 * -2.2 2.3 .2 * 2.3 M N Currency and dem. dep "2.h ""A "".9 "i.8 .1 .2 '"s.8 '"".I 6.3 5.8 .5 * N O Fixed-value redeem, claims.. 13.6 .6 -.7 .8 8.0 8.8 .9 16.0 16.1 .1 -.9 O p Time deposits 7.7 6 -.2 .8 8.0 * 2.3 .9 10.1 10.1 -.9 P Q Savings shares 6.5 6.5 6.5 6.5 Q R US savings bonds . 5 — 5 — 5 . .. R S Saving through life insur . 3 4 .1 3 4 3.4 3.4 S T Saving through pen. funds.. 6.5 9 ""l.'h 4 1 6 5 6 5 T U Credit and equity mkt. instr.. 3.0 12.0 1.4 .2 4.2 1.2 8.5 1.7 9.3 2.6 5.9 17.0 * 9.1 .1 8.8 1.8 1.4 2 2.4 45.4 45.2 -.2 2.4 U V Federal obligations —2 9 .7 9.0 .3 10.0 .3 .2 .5 * 9.1 9.0 .1 * v W X Y C C St o o a r r t p p e . o a r a n a n d t d e l o f s c o t a o r l e c i o k g b n l ig b a o t n io d n s s .. . 1 1 . . 5 5 7 2 5. . 9 3 1. . 6 5""b.l - 2 .1 .6 1 .6 * 4 1 1 . . 0 0 4 1. . 0 2" " 1 . . 6 ' 1 * * 5 4 6 . . . 7 2 9 5 6 4 . . . 7 9 2 . . 4 8 X Y W Z a O 1- t h to e r 4 - m fam or i t l g y a g m e o s rtgages. . 1. . 2 6 10.1 "".7 '"". 1 2 .1 2. . 3 2 .3 * . . 1 1 1. . 3 8 6. . 9 9 1. . 1 9 .5 * 1 4 0 .4 2 1 4 0 .4 2 Z a b Consumer credit 3 "".'2 ""A .1 .3 -.7 .3 b e c d B O Se a t c h n u e k r r i l t l o y o a a c n n r s s e d n i . t e.c 3 . . 4 4 7 . . 6 2 '"2.' . 8 1 .1 "-2.2 *"\A ""A .2 1. . . 4 4 4 * .1 *'"".2 '"-'.2 .6"" -A !6 0 '"-.1 e 1 1 1 1 . . . 4 4 8 \ 1 1 A . . 4 8 * * . . 7 5 * d e c .1 4.1 2.6 — 1.5 -.6 2 1 2 2 2 9 f g Proprietors' net invest, in h M n is o c n c f o in r a p n o c r i a a t l e tr b a u n s s i nes . s . . . ... -5.5 * .6 -6.1 1.1 .3 .1 -.1 .2 1.4 -5 1. 5 8 -5 1 . . 5 8 1.2 h g i Sector discrepancies (A —D)... 2.5 -.7 * -.5 A .9 .5 i NOTF.—Notes to Table 1 (see pp. 1046, 1047, and 1049 of this BULLETIN) in general apply to this table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLE 6. STRUCTURE OF FINANCIAL ASSETS AND LIABILITIES, DECEMBER 31, 1958 [Amounts outstanding at end of year. In billions of dollars] Consumer Nonfinancial business sectors Government sectors Financial institutions sectors and Rest-of- All Sector nonprofit world sectors sector Farm co N rp o o n r - ate Corporate Federal an S d ta lo te cal Co b m a m nk e i r n c g ial in S st a i v tu in ti g o s ns Insurance F n in .e a . n c c . e sector Transaction category1 A L A L A L A L A L A L A L A L A L A L A L A L K Total of assets below2 867.9 6.3 18.3 164.7 40.9 47.1 238.6 95.4 150.6 43.1 49.0 1721.8 K Hi 4 179 0 262 5 ii4 6 1248.8 L M Gold and Treasury currency2 ... ... .1 2.6 25.7 19.3 45.1 2.6 M Gold2 20 6 19.3 39.9 .1 2 6 5 1 5.2 2.6 N Currency and demand deposits 60.9 6.2 13.1 33.7 5.3 11.0 151.0 2.8 3.2 3.1 4.7 144.0 151.0 N O Fixed-value redeemable claims 191.0 1.6 .3 48.8 3.6 65.8 .8 85.8 2.5 199.8 200.4 O 92 1 1 6 3 1.1 3 6 65 8 2 34 0 2.5 100.3 101.0 P Q Savings shares. . 51 2 .6 51.8 51.8 51.8 Q 47 7 47 7 47.7 47.7 R S Savings in life insurance 83.4 6.2 77.2 83.4 83.4 S T Savings in pension funds 64 8 12 3 i5 7 i 36 8 64.8 64.8 T U Credit and equity market instruments. . . 467.5 169.6 16.9 5.1 42.1 27.6 121.7 27.9 186.5 32.5 59.5 212.8 90.2 1.5 145.8 40.0 19.8 14.1 20.0 1063.5 637.5 U V Federal obligations 16 4 18.4 185.7 17.8 95.0 12.0 16.1 3.1 6.8 185.6 185.7 V W State and local obligations 25.4 6.5 '58^5 16.5 .7 9 1 .3 58.5 58.5 W X Corporate and foreign bonds2 9 6 69.2! 6.7 1.3 3.8 58.4 1.1 7.2 .5 5.0 81.4 81.4 X Y Corporate stock2 386 8 n.a. n.a. n.a. .9 19.4 n.a. 11.8 n.a. 6.0 n.a. 425.0 n.a. Y Z a O 1 t - h t e o r 4 m -f o am rtg il a y g e m s ortgages 1 16 1 .3 6 111.3 9 iii 1 5 3 . 1 7 27 1 .5 5 4 2 .7 8 . . 9 6 1 7 7 .5 7 5 9 9 .3 9 2 1 2 5 . . 9 4 1.5 2 1 5 1 3 8 . . 2 0 1 5 1 3 8 . . 2 0 a Z Multifamily and commercial 12.1 .9 13.7 27.5 .3 .6 6.2 9.9 12.7 2 42.0 42.0 Farm 4.5 2.4 1.5 .1 2.7 * 11.2 11.2 b Consumer credit 45.1 5 1 7.5 15 8 3 5 13 1 45.1 45.1 b c Security credit 1 4 5 5 4 7 3.8 .1 10.0 10.0 c d Bank loans nee 2.0 4.2 16.9 19 8 52 3 21 6 01 2.6 52.3 51.7 d e Other loans 4.8 1.6 6.3 i!7 3.7 20.4 .8 1.0 2.0 .2 1.3 4.5 5.1 2.2 .6 12.2 34.5 34.0 e f Trade credit 1 8 2.1 3.3 75.0 52.3 t .7 2.8 2 0 1 6 78.3 64.4 f 4 1 * 26 7 5 0 5 6 3 2 2 5 1 6 3.7 8.5 32.3 43.1 44.7 g A= Assets, L= Liabilities. 2 Changes based on amounts outstanding for year-end dates do not necessarily agree with corresponding * Less than $50 million. flows for gold assets for rest of the world, corporate and foreign bonds, corporate stock, and miscellaneous n.a. Not available. financial instruments. For discussion see "Technical Notes," pp. 851-59 of this BULLETIN. 1 Lines that are identified alphabetically correspond to categories or groupings shown in Tables 1 and 5; NOTE.—For descriptions of sectors and of transaction categories, see notes to Table 1, pp. 1047 and 1049, unlettered lines indicate categories or detail not shown in those tables because of space limitations or because and "Technical Notes," pp. 846-57 of this BULLETIN. flows are relatively small. Details may not add to totals because of rounding. O Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1056 FLOW OF FUNDS/SAVING TABLE 7. SUMMARY OF PRINCIPAL FINANCIAL ASSETS AND LIABILITIES [Amounts outstanding at end of year. In billions of dollars] Transaction category, or sector 1 1945 1946 1947 1948 1949 1950 1951 1952 1953; 1954 1955 1956 1957 1958 I. Currency and demand deposits A Total liab. of com. bkg. system 130.5 115.9 119.4 118.9 118.9 124.1 130.9 137.4 137.4 141.9 144.2 145.9 145.2 151.0 A B Total assets, by sector 125.9 110.6 113.3 113.1 112.7 117.1 123.7 128.7 128.6 134.7 135.5 137.3 137.7 144.0 B C Federal Government 27.0 4.3 3.7 4.9 5.2 5.0 5. 7.0 5.4 5.7 5.1 4.9 5.2 5.3 C D Other domestic sectors 94.7 102.0 105.1 103.4 102.7 107.3 114.3 117.2 118.9 124.6 126.1 127.9 127.8 134.0 D E Consumer and nonprofit 49.6 53.8 53.5 51.4 49.0 50.9 53.9 55.9 56.6 59.0 58.2 59.2 58.4 60.9 E F Farm and noncorporate bus.... 15.5 16.0 16.3 15.9 15.8 16.0 17.3 16.8 16.7 17.1 17.4 17.5 18.0 19.3 F G Corporate nonfinancial business. 20.1 21.2 23.4 23.6 24.7 26.2 27.9 28.7 28.9 30.9 32.0 32.1 31.9 33.7 G H State and local government.... 5.3 6.2 6.9 7.4 7.6 8.1 8.5 9.0 9.7 10.0 10.4 10.6 10.8 11.0 H I Financial sectors 4.2 4.7 5.0 5.1 5.4 6.1 6.7 6.9 7.2 7.6 8.2 8.4 8.7 9.1 I J Rest of the world 4.2 4.4 4.5 4.8 4.8 4.7 4.3 4.5 4.2 4.3 4.3 4.5 4.7 4.7 J K Discrepancy (A-B) 4.6 5.3 6.1 5.8 6.2 7.0 7.2 8.7 8.8 7.2 8.6 8.6 7.5 7.0 K II. Fixed-value redeemable claims A Total, by type 99.2 107.9 113.8 117.6 121.7 124.2 128.2 136.3 145.4 156.3 164.7 173.6 183.7 199.8 A B Time deposits 48.5 54.2 56.6 57.7 58.9 59.6 61.9 66.5 71.4 77.0 79.9 83.4 90.2 100.3 B C Savings shares 7.8 9.0 10.3 11.6 13.2 14.8 17.2 20.5 24.5 29.4 34.6 40.1 45.3 51.8 C D U. S. savings bonds 42.9 44.8 47.0 48.3 49.6 49.8 49. 49.2 49.4 50.0 50.2 50.1 48.2 47.7 D E Total liabilities, by sector 99.3 108.0 114.0 117.8 121.9 124.5 128.6 136.7 145.8 156.8 165.2 174.2 184.3 200.4 E F Federal Government 45.9 48.0 50.4 51.6 52.8 52.7 51.9 51.8 51.7 52. 52.1 51.8 49.6 48.8 F G Commercial banking 30.3 34. 35.5 36.1 36.6 36.9 38.6 41.7 45.1 48.9 50.3 52.3 57.8 65.8 G H Savings institutions 23.1 25.8 28.0 30.0 32.5 34.9 38. 43.2 48.9 55.7 62.8 70.1 77.0 85.8 H I Total assets, by sector 99.2 107.9 113.8 117.6 121.7 124.2 128.2 136.3 145.4 156.3 164.7 173.6 183.7 199.8 I J Consumer and nonprofit 97.4 105.9 111.7 115.1 118.8 121.1 124.7 132.2 140.4 150.0 158.7 167.6 177.4 191.0 J K Other domestic sectors 1. 2.0 2.2 2.5 2.7 2.8 3.1 3.3 3.7 4.5 4.4 4.4 4.8 6.3 K L Rest of the world (time deposits). .2 .4 .5 .7 1.3 1.8 1.7 1.6 1.6 2.5 L IIT. Savings in life insurance and pension funds A Total, by type 53.0 58.5 63.7 69.0 74.8 80.9 87.4 95.1 102.8 110.6 119.1 128.6 137.7 148.2 A B Life insurance 42.8 46.6 49.8 52.6 55.3 58.0 60.7 63.9 67.1 70.2 73.4 77.2 80.0 83.4 B C Pension funds 10.2 11.9 13.9 16.4 19.5 22.9 26.7 31.2 35.7 40.4 45.7 51.4 57.7 64.8 C D Total liabilities, by sector 53.0 58.5 63.7 69.0 74.8 80.9 87.4 95.1 102.8 110.6 119.1 128.6 137.7 148.2 D E Federal Government 6.5 8.0 9.4 10.5 11.6 12.7 13.6 14.6 15.2 15.3 15.9 17.0 17.5 18.5 E F State and local government 2.5 2.9 3.1 3.6 4.4 5.2 6.0 6.9 8.1 9.3 10.6 12.1 13.8 15.7 F G Life insurance companies 40.6 43.6 46.6 49.7 52.9 56.2 59.7 63.9 68.0 72.5 77. 81.8 86.0 90.7 G H Private noninsured pension plans. 2.3 2.8 3.3 3.9 4.5 5.4 6.7 8.2 9.9 11.8 13.8 16.0 18.6 21.3 H IV. Credit and equity market instruments A Total, by tyoe 445.2 427.0 438.2 450.9 479.2 533.1 580.4 627.3 650.1 754.6 854.4 902.3 896.0 1063.5 A B Federal obligations 210.1 185 175.8 167.6 168.7 168.4 168.6 172.8 177.8 179.4 180.2 174.8 176.1 185.6 B C Short-term direct 79.6 60 55.9 53.4 63.9 66.6 55.6 62.6 79.1 67.3 60.2 67.6 73.1 71.9 C D Other 130.5 124 119.9 114.2 104.8 101.8 113.0 110.2 98.7 112.1 120.0 107.2 103.0 113.7 D E State and local obligations 19.5 19 20.7 22.8 25.2 28.2 30.3 33. 37.0 41.5 45.0 48.2 52.8 58.5 E F Corporate and foreign bonds 26.5 27 30.4 35.2 38.3 40.8 44.8 49.7 54.5 58.0 62.1 67. 74.6 81.4 F G Corporate stock2 119.0 111 109.0 108.0 120.0 146.0 170.0 186.0 179.0 258.0 317.0 338.0 299.0 425.0 G H 1 - to 4-family mortgages 18.6 23.0 28.2 33.3 37.6 45.2 51.7 58.5 66.1 75.7 88.2 99.0 107.6 118.0 H I Other mortgages 16.9 18.7 20.7 22.9 25.1 27.6 30.6 32.9 35.2 38.1 41.7 45.5 49.0 53.2 I J Consumer credit 5.7 8.4 11.6 14.4 17.3 21.4 22.6 27.4 31.2 32.3 38.7 42. 44.8 45.1 J K Security credit 9.1 4.8 3.6 3.8 4.6 5.7 5.3 5.8 6.6 8.8 9.8 9.0 8.6 10.0 K L Bank loans n.e.c 12.0 17.5 22.0 23.7 22.1 28.2 33.0 35.3 34.4 34.6 42.6 48.5 50.9 52.3 L M Other loans 7.9 11.6 16.2 19.2 20.4 21.6 23.5 25.7 28.2 28.2 29.2 30. 32.6 34.5 M N Total liabilities, by sector 3 325.0 314.4 327.8 341.9 358.1 386.1 409.5 440.6 470.5 495.8 536.8 564.0 596.6 637.5 N 0 Consumer and nonprofit 26.6 31.5 39.0 47.1 54.7 66.9 75.1 86.8 99.0 110.7 131.0 145.9 157.6 169.6 O P Farm business 6.4 6.9 7.3 8.0 8.4 9.4 10.7 11.5 11.5 12.3 13.5 14.4 15.5 16.8 P Q Noncorporate nonfinancial bus.. . 11.9 15.2 18.4 19.7 20.6 24.4 25.0 25.1 25.9 27.8 31.8 35.2 37.9 42.1 Q R Corporate nonfinancial business.. 40.0 43.9 50.0 56.0 58. 63.8 73.3 81.8 86.5 90.6 97.6 106.7 115.6 121.7 R S Federal Government 209.4 184.2 174.8 167.9 169.0 168.2 168.6 173.4 180.1 181.6 181.5 176.2 177.1 186.5 S T State and local government 20.0 19.8 21.2 23.4 25.7 28.8 31.1 34.3 37.8 42.0 45.4 48.7 53.6 59.5 T U Financial sectors 6.1 5.1 5.3 6.9 8.2 10.4 10.6 12.3 14.2 15.3 20.3 20.2 21.4 21.3 U V Rest of the world 4.7 7.8 11.7 12.9 13.4 14.3 14.9 15.4 15.5 15.5 15.6 16.6 17.9 20.0 V W Total assets, by sector4 445.2 427.0 438.2 450.9 479.2 533.1 580.4 627.3 650.1 754.6 854.4 902.3 896.0 1063.5 W X Consumer and nonprofit 164.0 155.1 153.4 153.0 163.6 188.6 210.8 226.2 221.3 293.5 354.1 378.8 348.6 467.5 X Y Farm and noncorp. business 1.5 1.9 2.2 2.6 2.8 3.3 3.6 4.0 4.2 4.3 4.5 4.8 5.0 5.1 Y Z Corporate nonfinancial business.. 23.8 17.5 17.0 18.4 21.0 24.7 26.6 26.8 28.8 26.6 31.6 27.6 26.4 27.6 Z a Federal Government 7. 9.8 13.8 15.4 16.7 17.9 19.4 21.0 21.8 21.4 22.7 23.9 26.2 27.9 a b State and local government 9.7 9.3 10.3 11. 12.3 13.8 15.3 17.4 20.0 22.9 24.8 27.1 30.0 32.5 b c Commercial banking system 148.0 137.1 138.5 137.9 139.3 147.7 156.8 166.8 172. 181.5 186.3 191.0 195.3 212.8 c d Monetary authorities 24.3 23.5 22.6 23.5 19.0 20.8 23.8 24.8 26.0 25.1 24.8 25.1 24.3 26.5 d e Commercial banks 123.6 113.6 115.9 114.3 120.4 126.9 133.0 142.0 146. 156.4 161.4 165.9 171.0 186.3 e f Securities 98.1 82.7 77.9 71.5 76.9 74.1 74.5 77.1 77. 84.9 77.8 74.3 75.6 86.4 f g Loans 25.6 30.9 38.0 42.8 43.5 52.9 58.5 65.0 68.5 71.5 83.6 91.6 95.4 99.9 g h Savings institutions 24.3 27.3 29.8 32.0 34.5 37.7 40.7 45.8 51.7 58.4 66.5 73.9 81.1 90.2 h 1 Insurance sector 52.7 56.5 61.0 66. 72.1 78. 84.3 92.0 99.8 109.8 119.0 127.0 134.4 145.8 i j Finance n.e.c 8.3 7.5 8.1 9.9 12.1 14.9 15.8 18.9 21.3 25.4 31.8 33.8 34.9 40.0 j k Rest of the world 5.7 5.0 4.0 4. 4.8 6.5 7.0 8.4 9.0 10.9 13.1 14.5 14. 14.1 k * Less than $50 million. NOTE.—For descriptions of sectors and of transaction categories 1 Alphabetic designations of categories correspond to those in Table 3. see notes to Table I, Dp. 1047 and 1049, and "Technical Notes," pp. 846-59 2 At market value. of this BULLETIN. In general, notes to Table 3 apply to corresponding 3 No amounts included for corporate stock. categories in this table. 4 Includes corporate stock at market value. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1057 TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES [Amounts outstanding at end of year. In billions of dollars] Category1 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (A) Consumer and nonprofit organizations sector Total financial assets2 365.1 373.7 382.7 388.8 406.7 441.8 477.2 509.8 521.4 613.5 690.5 734.6 722.4 867.9 U Currency and demand deposits... 49.6 53.8 53.5 51.4 49.0 50.9 53.9 55.9 56.6 59.0 58.2 59.2 58.4 60.9 V Consumers 47.4 51.3 50.9 48.7 46.2 48.0 50.7 52.6 53.1 55.3 54.5 55.4 54.2 56.7 Nonprofit organizations 2.2 2.5 2.6 2.7 2.8 2.9 3.2 3.3 3.5 3.7 3.7 3.8 4.2 4.2 Fixed-value redeemable claims. . . 97.4 105.9 111.7 115.1 118.8 121.1 124.7 132.2 140.4 150.0 158.7 167.6 177.4 191.0 W Time deposits 46.8 52.3 54.5 55.3 56.1 56.5 58.5 62.7 66.7 71.0 74.2 78.0 84.4 92.1 X Svgs. and loan assn. shares 7.3 8.5 9.7 10.9 12.4 13.9 16.0 19.0 22.6 27.0 31.7 36.6 41.3 47.3 Credit union shares .4 .4 .5 .6 .7 .8 1.1 1.4 1.7 2.0 2.4 2.9 3.4 3.8 U. S. savings bonds 42.9 44.8 47.0 48.3 49.6 49.8 49.2 49.2 49.4 50.0 50.2 50.1 48.2 47.7 Z Savings in life insurance.. 42.8 46.6 49.8 52.6 55 58.0 60.7 63.9 67.1 70.2 73.4 77.2 80.0 83.4 a Private 39.2 41.9 44.4 47.0 49.6 52.0 54.6 57.7 60.9 64.2 67.6 71.1 73.8 77.2 Government 3.6 4.7 5.4 5.6 5.6 6.0 6.1 6.2 6.3 6.0 5.9 6.0 6.2 6.2 Savings in pension funds. 10.2 11.9 13.9 16.4 19.5 22.9 26.7 31.2 35.7 40.4 45.7 51.4 57.7 64.8 b Private 4.8 5.7 6.7 7.9 9.1 11.0 13.3 15.9 18.7 21.8 25.1 28.5 32.6 36.8 Government 5.4 6.2 7.2 8.5 10.4 11.9 13.4 15.3 17.0 18.7 20.7 23.0 25. 28.0 Credit and equity mkt. instr 164.0 155. 153.4 153.0 163.6 188.6 210.8 226.2 221.3 293.5 354.1 378.8 348.6 467.5 c Federal obligations 20.0 19.2 18.8 17.4 17.0 16.5 15.7 15.5 15.6 13.5 15.7 16.8 19.3 16.4 d Direct and guaranteed 19. 19.1 18.6 17.2 16.8 16.3 15.4 15.2 15.3 13.1 14.8 15.6 17.4 14.9 Nonguaranteed .3 .1 .1 .2 .2 .2 .3 .3 .3 .3 .9 1.2 1.9 1.6 State and local obligations 11.1 10.9 11.4 12.4 12.9 13.4 13.8 15.0 16.8 17.8 19.9 21.6 23.9 25.4 e Corporate and foreign bonds... 9.1 7.9 7.1 6.8 6.5 6.4 6.2 6.1 6.3 5.6 6.8 8.1 9.1 9.6 f Corporate stock3 111.3 103.0 100.8 99.8 110.1 134.2 156.2 170.0 162.0 234.4 288.3 307.2 269.1 386.8 g 1- to 4-family mortgages 5.3 6. 6.6 7.1 7.4 7.5 7.8 8.1 8.5 8.9 9.3 9.7 10.7 11.3 O Se t c h u e r r i t m y o c r r t e g d a i g t es 6. . 5 7 7.2 8. . 0 7 8. . 7 7 9. . 1 8 9 1 . . 5 1 1 1 0 . . 0 1 10.6 11.2 12 1 . . 1 2 13 1 . . 1 1 1 1 4 . . 1 2 15 1 . . 4 1 1 1 6 . . 4 6 Total liabilities 27.1 32.1 39.7 47.8 55.5 67.8 76.0 88.0 100.2 112.0 132.4 147.5 159.3 171.4 j Credit market instruments 26.6 31.5 39.0 47.1 54.7 66.9 75.1 86.8 99.0 110.7 131.0 145.9 157.6 169.6 1- to 4-family mortgages 14.4 18.4 22.9 28.0 32.1 39.0 46.0 52.6 60.2 69.2 81.5 92.6 101.3 111.3 Other mortgages (nonprofit). . . .2 .3 .3 .3 .4 .4 .4 .5 .5 .6 .7 .7 .8 .9 Consumer credit 5.7 8.4 11.6 14.4 17.3 21.4 22.6 27.4 31.2 32.3 38.7 42.1 44.8 45.1 1 Security credit 3.3 1 1.8 1.6 2.0 2.7 2.6 2.8 3.3 4.5 5.2 5.2 4.8 5.5 m Bank loans n.e.c. (nonprofit)... .9 .6 .3 .4 .4 .7 .7 .6 .6 .7 1.2 1.3 1.6 2.0 Other loans* 2.2 2.1 2.1 2.3 2.5 2.7 2.9 3.0 3.2 3.5 3.7 4.0 4.4 4.8 Trade credit (nonprofit) .5 .6 .7 1.1 1.2 1.3 1.4 1.6 1.7 1.8 1 Lines that are identified alphabetically correspond to categories or 3 At estimated market price. Annual changes differ from flow figures groupings shown in Table 4 (A); unlettered lines indicate categories or shown in Table 4 (A), which reflect only net funds put into securities. detail not shown in Table 4 because of space limitations or because 4 Predominantly loans on insurance policies. flows are relatively small. NOTE.—Definitions of sectors and transaction categories are given in 2 Includes miscellaneous deposits with Federal Government not shown notes to Table 1, pp. 1047 and 1049, and in "Technical Notes," pp. 846-59 separately; excludes proprietors' net investment in noncorporate business of this BULLETIN. In general, notes to Table 4 (A) apply to corresponding for which no amount outstanding is available. categories in this table. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1058 FLOW OF FUNDS/SAVING TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES (Continued) [Amounts outstanding at end of year. In billions of dollars] Category1 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (B) Farm business sector K Total financial assets 2 6.7 7.2 7.1 6.8 6.4 6.4 6.6 6.5 6.4 6.3 6.3 6.1 5.9 6.3 K Currency and demand deposits... 6.6 7.1 7.0 6.7 6.3 6.3 6.5 6.4 6.3 6.2 6.2 6.0 5.8 6.2 L Total liabilities 3 7.2 7.8 8.5 9.4 10.0 11.2 13.0 13.8 13.6 14.4 15.6 16.5 17.6 18.9 L M Credit market instruments 6.4 6.9 7.3 8.0 8.4 9.4 10.7 11.5 11.5 12.3 13.5 14.4 15.5 16.9 M N Mortgages 4.8 4.9 5.1 5.3 5.6 6.1 6.7 7.3 7.8 8.3 9.1 9.9 10.5 11.2 N O Bank loans n.e.c 1.0 1.3 1.6 1.9 2.0 2.5 3.1 3.2 2.8 2.9 3.3 3.3 3.6 4.2 O P Other loans 7 7 7 8 8 8 1 0 1 0 1 0 1 i 1 i 1 2 1 4 1.6 P Q Trade debt 7 .9 1 1 1.4 1 6 1.8 2.2 2.3 2 1 2.1 2.1 2.1 2.1 2.1 Q Memo: CCC direct and guaranteed loans not included above .4 .1 .1 1.2 1.7 .8 .6 1.2 2.4 2.4 1.9 1.6 1.2 (C) Noncorporate nonfinancial business sector K Total financial assets 10.5 10.8 11.5 11.7 12.3 13.1 14.4 14.4 14.6 15.2 15.7 16.3 17.2 18.3 K L Currency and demand deposits 8.9 8.9 9.3 9.2 9.5 9.7 10.8 10.4 10.4 10.9 11.2 11.5 12.2 13.1 L M Consumer credit 1 5 1.9 2.2 2.6 2 8 3.3 3.6 4.0 4.2 4.3 4.5 4.8 5.0 5.1 M N Total Iiabilities3 12.3 14.1 16.3 17.8 18.5 20.9 22.2 23.4 24.4 26.6 28.8 30.4 37.0 45.4 N O Credit market instruments.... 11.9 15.2 18.4 19.7 20.6 24.4 25.0 25.1 25.9 27.8 31.8 35.2 37.9 42.1 O 1- to 4-family mortgages.... 3.9 4.1 4.4 4.4 4.5 4.9 4.7 4.8 4.8 5.0 5.2 5.0 5.0 5.1 Multifamily and com. mtgs.. 4 5 5 0 5.6 6 2 6 7 7.3 7.9 8.4 9.0 9.7 10.6 11.6 12.6 13.7 Q Bank loans n.e.c 2.6 4.7 6.6 6.8 6.7 9.0 8.7 7.8 7.9 8.6 10.7 12.9 14.1 16.9 Q R Other loans .9 1.4 1.9 2.3 2.6 3.2 3.7 4.0 4.2 4.5 5.3 5.7 6.2 6.3 R S Trade debt, net .4 -1.1 -2.2 -2.0 -2.1 -3.5 -2.8 j y -1.5 -1.3 -3.0 -4.8 -.8 3.3 S Trade debt 3.3 2.4 1.6 2.1 1.8 1.4 2.2 4.0 4.4 4.9 3.3 2.3 6.6 10.6 Trade receivables 3.0 3.5 3.8 4.0 3.9 4.9 4.9 5.7 5.8 6.2 6.3 7.1 7.4 7.3 (D) Corporate nonfinancial business sector N Total financial assets 75.3 74.3 81.3 86.6 91.6 107.7 116.2 122.1 125.1 130.3 148.1 153.4 157.2 164.7 N O Currency and demand deposits 20.1 21.2 23.4 23.6 24.7 26.2 27.9 28.7 28.9 30.9 32.0 32.1 31.9 33.7 O P Credit market instruments.... 23.8 17.5 17.0 18.4 21.0 24.7 26.6 26.8 28.8 26.6 31.6 27.6 26.4 27.6 P Q Federal obligations 22.2 15.3 14.1 14.7 16.7 19.6 20.7 19.9 21.5 19.1 23.5 19.2 17.7 18.4 Q R Consumer credit 1.7 2.2 2.8 3.4 3.8 4.5 5.0 5.8 6.0 6.2 6.8 7.0 7.1 7.5 R S Other loans * .3 .5 .6 .9 1.2 1.4 1.2 1.2 1.4 1.6 1.7 S T Trade credit 22.9 26.0 31A 33.9 34.2 43.9 47.4 50.7 50.0 53.8 64.0 70.2 72.4 75.0 T Time deposits .9 .9 .9 .9 .9 .9 .9 .9 .9 1.1 1.0 1.0 1.0 1.6 Miscellaneous4 7.5 8.6 8.6 9.8 10.9 12.0 13.3 15.0 16.5 17.9 19.5 22.4 25.5 26.7 V Total liabilities 5 61.9 69.6 79.9 87.1 88.5 101.7 113.5 123.5 128.4 134.8 152.6 166.8 174.2 179.0 V W Credit market instruments.... 40.0 43.9 50.0 56.0 58.1 63.8 73.3 81.8 86.5 90.6 97.6 106.7 115.6 121.7 W X Corporate bonds 23.5 24.4 27.2 31.5 34.2 35.7 39.1 43.7 47.1 50.5 53.4 57.0 63.4 69.2 X 1- to 4-family mortgages6. . .3 .5 .8 .8 .9 1.2 1.1 1.2 1.2 1.4 1.5 1.4 1.4 1.5 Multifamily and com. mtgs.. 7.5 8.6 9.8 11.1 12.4 13.9 15.6 16.7 18.0 19.5 21.4 23.3 25.1 27.5 a Bank loans n.e.c 6.2 8.6 10.5 11.0 8.8 10.9 15.4 17.8 17.5 16.3 18.2 21.8 22.0 19.8 a b Other loans 1.1 1.3 1.5 1.6 1.7 2.0 2.2 2.4 2.8 2.8 3.0 3.2 3.7 3.7 b c Trade debt 19.5 23.2 27.3 28.3 27.4 34.8 36.8 38.2 38.1 40.2 50.8 55.6 53.8 52.3 c Miscellaneous 7 2.4 2.5 2.6 2.8 2.9 3.1 3.3 3.5 3.8 4.0 4.3 4.5 4.8 5.0 e Memo: Profits tax liability 10.8 8.9 11.3 12.1 9.9 17.4 22.1 18.9 19.5 16.2 20.3 18.6 16.7 14.2 e * Less than $50 million. 5 Includes the following amounts of security credit not shown separately 1 Lines that are identified alphabetically correspond to categories or (in billions): $1.4 in 1945, $0.5 in 1946, and $0.2 in 1947. groupings shown in Table 4(B)-(D); unlettered lines indicate categories 6 Construction loans. or detail not shown in Table 4 because of space limitations or because flows 7 Direct investments of foreign affiliates. are relatively small. NOTE.—Definitions of sectors and transaction categories are given in 2 Includes small amounts of Federal obligations held by production notes to Table 1, pp. 1047 and 1049, and in "Technical Notes," pp. 846-59 cre 3 d E it x a c s l s u o d c e i s a t p io ro ns p r n ie o t t o s r h s' o w ne n t s in ep v a e r s a tm te e ly n . t for which amounts outstanding o re f s p th o i n s d i B n U g L c L a E t T e I g N o . r ie I s n i n g e th n i e s r a ta l, b l n e o . tes to Table 4(B)-(D) apply to corare 4 n F o o t r e e i s g t n im c a u t r e r d e . ncy and deposits and direct investments abroad. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1059 TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES (Continued) [Amounts outstanding at end of year. In billions of dollars] Category * 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (E) Federal Government sector R Total financial assets2 37.8 16.9 21.5 24.2 26.0 27.4 30.1 34.6 33.7 33.8 34.6 36.2 39 3 drt Q R S Currency and demand deposits.. . 27.0 4.3 3.7 4.9 5.2 5.0 5.1 7.0 5.4 5.7 5.1 4.9 5.2 5.3 S Available funds at F. R. Banks. 1.0 .4 .9 1.1 .8 .7 .3 .4 .3 .6 .4 .4 .5 .4 Tax and loan accounts 24.0 2.6 1.0 1.9 2.6 2.3 2.7 4.4 3.4 3.5 3.0 2.9 3.1 3.5 Currency and other deposits. .. 2.0 1.3 1.9 1.9 1.8 2.0 2.1 2.2 1.7 1.7 1.7 1.6 1.6 1.5 Credit market instruments 7.1 9.8 13.8 15.4 16.7 17.9 19.4 21.0 21.8 21.4 22.7 23.9 26.2 27.9 T 1 - to 4-family mortgages .9 7 .7 8 1.2 1.5 2.1 2 5 2 8 2.7 2.9 3.6 4 7 4.7 Other mortgages3 1.5 1.3 1.2 1.2 1.2 1.2 1.3 1.4 1.6 1.7 2.0 2.2 2.4 2.8 Other loans 4.7 7.8 12.0 13.5 14.2 15.1 16.0 17.1 17.4 17.0 17.8 18.1 19.0 20.4 V To savings and loan assns .2 .3 .4 .5 ,4 .8 .8 .9 .9 .9 1.4 1.2 1.3 1.3 To rest of world 1.6 4.7 8.3 9.5 9.9 10.1 10.3 10.6 10.9 10.7 10.6 10.7 11.0 11.6 To others 2.8 2 8 3 2 3 5 3 9 4.2 5.0 5 6 5.6 5.4 5.7 6.2 6 8 7.5 Time deposits 1 1 1 2 2 3 3 3 4 4 3 3 3 Treasury currency assets4 .2 .1 A .1 .1 A * * .1 .1 Trade credit 5 ,. 9 1 .4 2.3 2.2 2.4 2.3 2.4 2'. 3 1.7 Miscellaneous ^ 2.5 2.5 3.7 3.7 3.8 3.9 3^9 3.9 3.9 3.9 4.1 4.6 5.3 5.6 X Total liabilities 269.6 245.5 240.0 234.9 238.0 239.5 241.9 247.8 255.0 257.4 258.0 253.2 252.7 262.5 X Y Fixed-value redeemable claims. .. 45.9 48.0 50.4 51.6 52.8 52.7 51.9 51.8 51.7 52.1 52.1 51.8 49.6 48.8 Y Z Postal savings deposits 2.9 3.3 3.4 3.3 3.2 2.9 2.7 2.5 2.4 2.1 1.9 1.6 1.3 1.1 Z a Consumer-held svgs. bonds ?. .. 42.9 44.8 47.0 48.3 49.6 49.8 49.2 49.2 49.4 50.0 50.2 50.1 48.2 47.7 a Consumer svgs. in life insurance.. 3.6 4.7 5.4 5.6 5.6 6.0 6.1 6.2 6.3 6.0 5.9 6.0 6.2 6.2 Consumer svgs. in retirement fds.. 2.9 3.3 4.1 4.9 6.0 6.7 7.5 8.4 8.9 9.4 10.0 10.9 11.3 12.3 Credit market instruments 209.4 184.2 174.8 167.9 169.0 168.2 168.6 173.4 180.1 181.6 181.5 176.2 177.1 186.5 c Federal obligations 209.1 184.1 174.7 167.0 168.0 167.8 168.3 172.7 177.9 179.3 180.4 175.3 176.7 185.7 c d Short-term direct % 79.6 60.5 55.9 53.4 63.9 66.6 55.6 62.6 79.1 67.3 60.2 67.6 73.1 71.9 d e Other direct and guaranteed. . 128.3 122.4 117.4 112.0 102.6 99.3 110.6 108.0 96.7 109.9 116.5 103.5 97.3 108.0 e f Nonguaranteed 1.1 1.3 1.4 1.6 1.5 1.9 2.2 2.1 2.1 2.1 3.6 4.2 6.3 5.8 f g Other loans^ 3 1 1 9 1 0 4 .3 .7 2 2 2 3 1.2 .9 .5 .8 g Trade debt1 ° 2 7 .7 1.1 2.7 2.8 2.6 2.4 2.3 2.6 2.8 2.8 Treasury currency liability * * 2.3 2 4 2 4 2 4 2 4 2 4 2 4 2 4 2 5 2 5 2 5 2.5 2 6 2.6 Miscellaneous liabilities 2 9 2 0 3 0 2 5 2 1 2 4 2 8 2 7 3 0 3 5 3.6 3.1 3.1 3.2 Deposits of savings and loan associations at FHLB • .1 .1 .3 .2 .3 .4 .6 .8 .7 .7 .7 .8 Demand notes issued to IMF. . 2 1 5 1 2 1 0 1 3 1 3 1 3 1 3 1 5 1 6 1 1 7 .8 Other i2 2 8 1 7 1 3 1 2 9 ,9 1 2 1 1 1.1 1 2 1.2 1.4 1 7 1.6 Memo: Assets of OASI fund 7.1 8.2 9.4 10.7 11.8 13.7 15.5 17.4 18.7 20.6 21.7 22.5 22.4 21.9 i (F) State and local government sector T Total financial assets 15.5 16.2 18.1 19.9 21.2 23.3 25.4 28.1 31.6 35.3 37.5 40.1 43.5 47.1 L M Currency and demand deposits... 5.3 6.2 6.9 7.4 7.6 8.1 8.5 9.0 9.7 10.0 10.4 10.6 10.8 11.0 M N Time deposits 9 1 1 1 3 1 4 1 5 1.6 2 0 2 4 2.4 2.4 2.8 3.6 N O Credit market instruments 9.75 9.37 10.3 11.3 12.3 13.8 15.3 17.4 20.0 22.9 24.8 27.1 30.0 32.5 O P Federal obligations 6.6 6.4 7.3 7.9 8.1 8.8 9.7 11.3 12.9 14.6 15.4 16.5 17.5 17.8 P Direct and guaranteed 6.6 6.4 7.3 7.9 8.1 8.8 9.6 11.2 12.8 14.5 15.2 16.2 17.1 17.4 .1 .1 .1 .1 .2 .3 .4 .4 Q State and local obligations 2.6 2.4 2.5 2.6 3.1 3.6 3.8 4.0 4.4 4.7 5.1 5.6 6.0 6.5 Q Corporate bonds .4 .4 .5 .7 .9 1.1 1.3 1.6 2.1 2.8 3.4 3.9 5.1 6.7 1- to 4-family mortgages .1 .1 .1 .1 .2 .2 .3 .4 .5 .6 .6 .7 .8 .9 Multifamily and com. mtgs * * • * .1 .2 2 .2 .3 .3 .4 .5 .6 S Total liabilities 23.0 23.4 25.2 28.0 31.2 35.1 38.3 42.5 47.3 52.8 57.8 62.6 69.3 77.2 S Credit market instruments 20.0 19.8 21.2 23.4 25.7 28.8 31.1 34.3 37.8 42.0 45.4 48.7 53.6 59.5 T State and local obligations 19.5 19.4 20.7 22.8 25.2 28.2 30.3 33.1 37.0 41.5 45.0 48.2 52.8 58.5 T Other loans (Federal Govt.) .5 .5 .5 .6 .5 .6 .8 1.1 .8 .5 .5 .6 .8 1.0 Trade debt 6 7 9 1 0 1 1 1 2 1 2 1 3 1.4 1.6 1.7 1.8 1.8 2.0 W Consumer savings in retirement funds 2.5 2.9 3.1 3.6 4.4 5.2 6.0 6.9 8.1 9.3 10.6 12.1 13.8 15.7 W 1 I * Less than $50 million. year; prior to 1951, issues maturing or callable within one year. Include 1 Lines that are identified alphabetically correspond to categories or savings notes prior to their retirement in 1956. groupings shown in Table 4(E) and (F); unlettered lines indicate categories 9CCC certificates of interest and liability for CCC-guaranteed loans. or detail not shown in Table 4 because of space limitations or because See discussion on page 840 of this BULLETIN. flows are relatively small. 1 ° Payable to corporations. 2 Prior to 1950, includes small amounts of savings and loan shares 1 i Seigniorage on silver, deposits with Federal Government for renot shown separately. demption of Federal Reserve Bank notes and national bank notes, and 3 Mainly farm mortgages. liability of Federal Government in connection with minor coin and U. S, 4 Silver bullion held at cost in account of Treasurer of the United notes not backed by gold reserves. States. 12 Private equity in Government enterprises, and miscellaneous trust 5 Prepayments and advances to corporations. and deposit liabilities. 6 Mainly subscriptions to International Monetary Fund and Inter- NOTE.—Definitions of sectors and transaction categories are given in national Bank for Reconstruction and Development; capital stock of notes to Table 1, pp. 1047 and 1049, and in "Technical Notes," pp. 846-59 Exchange Stabilization Fund; and holdings of foreign cash assets. of this BULLETIN. In general, notes to Table 4(E) and (F) apply to 7 Prior to 1954, includes armed forces leave bonds. corresponding categories in this table. 8 Beginning with 1951, direct marketable issues maturing within one Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1060 FLOW OF FUNDS/SAVING TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES (Continued) [Amounts outstanding at end of year. In billions of dollars] Category1 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (G) Commercial banking and monetary authorities sector A Total Financial assets 172.3 162.3 166.0 166.8 168.5 175.3 184.4 194.8 199.1 208.3 213.0 218.1 233.5 238.6 A B Golds 20.1 20.7 22.9 24.4 24.6 22.8 22.9 23.3 22.1 21.8 21.8 22.1 22.9 20.6 B D E C C Tr r F e e a d e s d it u e r a r y a n l d c o u e r b q r l e u i n g it c a y y t i m o 3 n a s r 4 ket instr.., 1 1 4 1 8 4 6 * . . 2 2 O 1 9 3 9 7 . . 5 1 1 9 3 3 8 . . 0 5 1 8 3 7 7 . . 3 9 1 8 3 7 9. . 3 2 1 8 4 4 7 . . 5 7 1 8 5 6 6 . . 9 8 1 8 6 9 6 . . 5 8 1 9 7 0 2 . . 7 2 1 9 8 5 1 . . 3 5 1 8 8 4 8 6 . . . 9 3 2 1 8 9 A4 5 1 . . . yO 2 0 1 8 9 4 J 5 C . . . 6 3 fV\ 2 9 1 5 5 2 . . . 1 0 8 E C D F Monetary authorities 24.3 23.4 22.6 23.4 18.9 20.8 23.8 24.7 25.9 25.0 24.8 25.0 24.3 26.4 F G Short-term direct 5 23.2 22.3 19.9 12.4 12.0 16.0 13.4 14.8 17.0 19.4 20.7 22.1 21 A 21.0 G H Other direct 1.1 1.1 2.7 10.9 6.9 4.8 10.4 10.0 9.0 5.5 4.1 2.9 2.8 5.4 H I Commercial banks* 91.9 76.1 70.5 63.9 68.3 63.7 63.1 64.8 64.8 70.4 63.4 60.2 60.3 68.6 I J Short-term direct5 32.3 18.8 19.2 19.4 26.5 22.2 15.8 19.2 28.2 17.6 9.0 13.8 15.7 16.6 J K Other direct and guar.. . . 58.8 56.2 50.1 43.3 40.5 39.8 45.7 44.1 35.2 51.4 52.6 44.8 42.5 49.7 K L Nonguaranteed 8 1.1 1.2 1.3 1.3 1.7 1.6 1.5 1.3 1.4 1 8 1.6 2.1 2.2 L M State and local obligations..., 4.0 4.4 5.3 5.7 6.5 8.1 9.2 10.2 10.8 12.6 12.7 12.9 13.9 16.5 M N Corp. and foreign bonds 2.2 2.2 2.2 1.9 2.1 2.2 2.2 2.1 2.1 1.9 1.7 1.3 1.4 1.3 N 0 1- to 4-family mortgages. 2.9 4.6 6.3 7.3 7.9 9.4 10.2 11.1 11.9 13.2 14.9 16.1 16.2 17.5 O P Other mortgages 1.9 2.6 3.1 3.5 3.7 4.2 4.4 4.6 4.8 5.2 5.9 6.4 6.9 7.7 P Q Consumer credit 1.4 2.6 3.8 4.8 5.8 7.4 7.5 9.4 10.9 10.9 13.2 14.6 15.7 15.8 Q R Security loans 6.8 3.2 2.1 2.3 2.6 2.9 2.6 3.2 3.6 4.5 5.0 4.3 4.2 4.7 R S Bank loans n.e.c 12.0 17.5 22.0 23.7 22.1 28.2 33.0 35.3 34.4 34.6 42.6 48.5 50.9 52.3 S T To farm business , 1.0 1.3 1.6 1.9 2.0 2.5 3.1 3.2 2.8 2.9 3.3 3.3 3.6 4.1 T U To nonfarm business , 8.8 13.3 17.1 17.7 15.6 20.0 24.1 25.7 25.4 24.9 28.9 34.7 36.2 36.8 U V To nonbank finan. sectors.., 1.0 1.7 2.3 2.7 3.1 4.1 4.0 4.6 4.6 4.6 7.3 7.0 6.8 6.1 V W To other sectors6 1.3 1.2 1.1 1.3 1.4 1.7 1.9 1.8 1.7 2.2 3.1 3.6 4.3 5.2 W X Other loans .6 .6 .7 1.4 1.5 .9 .9 1.5 3.0 3.2 2.0 1.8 1.5 2.0 X Y CCC-guaranteed loans .3 .1 .1 .9 1.0 .4 .3 .7 2.2 2.3 1.2 .9 .5 .8 Y Z Open market paper , ? .5 .6 5 5 5 6 7 8 1 0 8 .9 1.1 1.2 Z a Miscellaneous 7 • .2 .2 .2 .2 A .1 .2 .2 .2 .4 .2 a b Total liabilities 163.5 152.4 155.6 155.7 156.2 161.9 170.5 180.0 183.3 191.5 195.2 199.1 203.5 217.2 b c Demand dep., net, and currency 130.5 115.9 119.4 118.9 118.9 124.1 130.9 137.4 137.4 141.9 144.2 145.9 145.2 151.0 c d Due to U. S. Government 25.8 3.7 3.4 4.6 5.1 4.6 4.7 6.4 5.1 5.4 4.7 4.8 5.0 5.1 d e Monetary authorities 1.3 .7 2.0 2.3 2.0 1.8 1.4 1.5 1.0 1.2 1.0 /./ 1.1 .9 e f Commercial banks 24.5 3.0 1.3 2.3 3.1 2.8 3.4 4.9 4.1 4.2 3.7 3.7 3.9 4.2 f g Due to rest of the world , 4.2 4.4 4.5 4.8 4.8 4.7 4.3 4.5 4.2 4.3 4.3 4.5 4.7 4.7 g h Monetary authorities9' 1.4 1.2 1.4 1.7 1.9 1.7 1.4 1.4 1.3 1.4 1.3 1.2 1.2 1.2 h 1 Commercial banks 2.7 3.2 3.0 3.1 2.9 3.0 2.9 3.1 2.9 3.0 3.0 3.3 3.4 3.5 i j Due to others 100.5 107.8 111.6 109.5 109.0 114.8 121.9 126.4 128.0 132.2 135.2 136.6 135.5 141.1 j k Demand deposits, net 74.4 81.5 85.6 84.0 84.2 90.0 96.2 99.6 100.6 105.0 107.5 108.9 107.9 113.0 k 1 Currency 26.1 26.3 25.9 25.5 24.8 24.8 25.7 26.8 27.4 27.2 27.6 27.7 27.7 28.1 1 m Time deposits 30.3 34.1 35.5 36.1 36.6 36.9 38.6 41.7 45.1 48.9 50.3 52.3 57.8 65.8 m n Due to U. S. Government .1 .1 .1 .1 .2 .2 .3 .3 .3 .4 .4 .3 .3 .3 n o Due to rest of the world * * * * .2 .4 .5 .7 1.3 1.8 1.7 1.6 1.6 2.5 o p Due to State and loc. govts..., .5 .7 .9 1.1 1.3 1.4 1.5 1.6 2.0 2.4 2.4 2.4 2.8 3.6 p q Due to others® 29.6 33.3 34.5 34.9 35.0 34.9 36.3 39.0 41.6 44.3 45.9 48.0 53.2 59.4 q r Other liabilities* o 2.7 2.4 .6 .6 .7 .8 1.0 .9 .8 .7 .8 .8 .6 .5 r (G.I) Monetary authorities subsector1 s Total financial assets 49.4 49.2 50.6 53.0 48.6 49.6 52.5 53.8 53.7 52.5 53.1 53.8 53.9 53.5 s t Incl. in consol. sector acct. i2 48.6 48.6 50.0 52.4 48.0 48.1 51.3 52.7 52.8 51.7 51.4 521 52.4 52.2 t Excl. from consol. sector acct.: u F. R. float .6 .6 5 .5 .5 1.4 1.2 I.0 .9 .8 1.6 1.7 1.4 1.3 u v F. R. loans to domestic banks. .2 * * * * .1 * .1 * .1 * * w Total liabilities 48.9 48.7 50.1 52.4 47.7 48.7 51.7 53.0 52.9 51.7 52.2 529 53.0 52.5 w x Incl. in consol. sector acct.l3.... 30.8 30.1 29.6 29.7 28.9 28.5 28.6 30.0 29.9 30.0 30.2 302 30.2 30.3 x Excl. from consol. sector acct.: y Member bank reserves 15.9 16.1 17.9 20.5 16.6 17.7 20.1 20.0 20.2 18.9 19.0 19 19.0 18.5 y z a a C O u th rr e e r n d c e y p h . e o l f d d b o y m c e o s m tic . b b a a n n k k s s . . 1 . . 1 9 2. . 0 1 2.2 1 2. . 0 1 2 . . 1 0 2. . 2 1 2 . . 1 7 2 . . 8 1 2 % . 1 5 2 . . 1 5 2. , 7 1 33 1 3. . 3 1 3. . 2 1 z aa bb Capital stock of F. R. Banks.. .2 .2 2 .2 .2 .2 .2 .3 .3 .3 .3 3 .3 .4 bb (G.2) Commercial banks subsector1 cc Total financial assets 141.7132.1136.3137.0 139.2147.1 156.1165.0169.2178.2 183.4188.4193.9208.6 cc dd Incl. in consol. sector acct. 14 123.7 113.7 115.9 114.4 120.4 127.1 133.1 142.1 146.3 156.6 161.6 166.0 171.2 186.5 dd Excl. from consol. sector acct.: ee Demand dep. and currency1 s. . 17.8 18.2 20.1 22.5 18.5 19.7 22.7 22.6 22.6 21.3 21.5 22 22.4 21.7 ee ff Capital stock of F. R. Banks... .2 .2 .2 2 .2 2 .2 .3 .3 .3 .3 .3 .3 .4 ff gg Total liabilities 133.4122.9126.5126.6 127.9134.8 143.1151.1154.4162.4166.7170.6174.8188.2 gg hh Incl. in consol. sector acct.l & 132.6 122.3 126.0 126.0 127.3 133.3 141.9 150.0 153.4161.6165.0 168.9 173.4186.9 hh Excl. from consol. sector acct.: ii F. R. float*? .6 .6 .5 5 .5 1.4 1.2 !.0 .9 .8 1.6 1.7 1.4 1.3 ii jj Borrowings at F. R. Banks .2 * * * * 1 * .1 * * .1 * * •Less than $50 million. For other notes see second page following. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FLOW OF FUNDS/SAVING 1061 TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES (Continued) [Amounts outstanding at end of year. In billions of dollars] Category 1 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (H) Nonbank financial sectors—total A Total financial assets 90.2 96.8 105.0 114.5 125.6 138.2 149.2 165.7 182.5 204.2 228.6 246.4 262.6 289.0 A B Currency and demand deposits 4.2 4.7 5.0 5.1 5.4 6.1 6.7 6.9 7.2 7.6 8.2 8.4 8.7 9.1 B C Credit and equity mkt. instr... 85.3 91.2 98.9 108.2 118.7 130.7 140.8 156.7 172.9 193.6 217.4 234.7 250.4 276.0 C D Other 7 .9 1.1 1.2 1.4 1 4 1 7 2 1 2 5 2 9 3 0 3 3 3 5 3.9 D E Total liabilities 74.7 80.0 86.0 93.3 100.9 109.9 118.4 131.0 144.8 159.4 178.3 193.0 208.2 224.8 E F Fixed-value redeemable claims. 23.1 25.8 28.0 30.0 32.5 34.9 38.1 43.2 48.9 55.7 62.8 70.1 77.0 85.8 F G Insurance and pension reserves 44.0 47.6 51.2 54.9 58.8 63.0 67.9 73.6 79.6 86.0 92.6 99.6 106.4 114.0 G H Credit and equity mkt. instr... 5.8 4.9 5.1 6.7 8.1 10.3 10.5 12.2 14.2 15.3 20.3 20.2 21.4 21.3 H I Miscellaneous 1.8 1.7 1.6 1.6 1.6 1.7 1.9 2.0 2.1 2.4 2.6 3.1 3.4 3.7 I (H.I) Savings institutions sector Total financial assets............ 25.7 28.8 31.5 33.9 36.6 39.8 43.2 48.7 55.0 62.4 70.8 78.3 85.7 95.4 A Currency and demand deposits. 1.2 1.2 1.3 1.4 1.4 1.7 1.7 1.8 2.2 2.3 2.5 2.5 2.8 B Fixed-value redeemable claims2 ? .3 .3 3 3 3 5 5 6 7 7 7 .8 C Credit and equity mkt. instr. 3.. 24.3 27.3 29.8 32.0 34.5 37.7 40.7 45.8 51.7 58.4 66.5 73.9 81.1 90.2 D Federal obligations 13.3 14.0 13.9 13.2 13.1 12.5 11.6 11.5 11.4 11.0 11.2 11.3 11.7 12.0 E Direct and guaranteed 13.3 14.0 13.9 13.1 13.0 12.5 11.6 11.3 11.2 10.9 10.9 10.9 10.9 11.2 F Nonguaranteed * • * .1 * * * .1 .2 .1 .3 A .8 .7 G State and local obligations4.. A .1 1 A A .1 .3 .4 .6 .6 .7 .7 .7 H Corporate bonds4 1.0 1.1 t'.5 1.9 2.1 2.0 2^2 2.5 2.8 2.9 2.6 2.6 3.2 3.8 I Corporate stock4 .2 .2 .2 .2 .2 .2 .3 .4 .6 .7 .7 .8 .9 J 1_ to 4-family mortgages. . . . 7.1 8.9 10'.8 12.6 14.6 17.5 20.3 24.0 28.5 34.2 41.3 47.2 52.4 59.3 K Other mortgages 2.7 3.0 3.3 3.8 4.5 5.3 5.9 6.5 7.2 7.8 8.5 9.1 9.9 L Consumer credit.... 2:\ 2 4 .5 .6 .9 .9 1.2 1.6 1.8 2.3 2.7 3.2 3.5 M Miscellaneous5 .1 .2 '.2 .2 .4 .4 .5 .7 .9 1.2 1.2 1.3 1.3 1.6 N Total liabilities 23.51 26.2 28.6 30.6 33.0 35.8 39.0 44.1 50.0 56.7 64.4 71.4 78.4 87.3 O Deposits at mutual svgs. banks. 15.4 16.8 17.8 18.4 19.3 20.0 20.9 22.6 24.4 26.4 28.2 30.0 31.7 34.0 P Savings shares 7.8 9.0 10.3 11.6 13.2 14.8 17.2 20.5 24.5 29.4 34.6 40.1 45.3 51.8 Q Savings and loan assns 7.4J 8.6 9.8 11.0 12.5 14.0 16.1 19.2 22.8 27.3 32.2 37.1 41.9 47.9 R Credit unions .4! .4 .5 .6 .7 .8 1.1 1.4 1.7 2.0 2.4 2.9 3.4 3.8 S Other* .4; .6 .5 .9 .9 .9 1.0 1.0 1.6 1.4 1.4 1.5 T 5 (H.2) Insurance sector A Total financial assets 54.6 58.7 63.8 69.0 75.2 81.4 87.9 95.8 103.9 113.9 123.3 131.4 139.0 150.6 A B Currency and demand deposits 1.5 1.7 2.2 2.2 2.3 2.6 2.7 2.9 3.1 3.0 3.1 3.1 3.1 3.2 B C Credit and equity mkt. instr... 52.7 56.5 61.0 66.2 72.1 78.1 84.3 92.0 99.8 109.8 119.0 127.0 134.4 145.8 C D Federal obligations 25.9 27.0 26.2 23.6 22.8 21.6 19.4 19.1 19.2 18.6 18.3 16.7 15.8 16.1 D E Short-term direct .6 1.2 .8 1.1 1.5 1.8 1.5 7.5 1.9 1.5 .9 1.0 1.4 1.6 E F Other 25.3 25.9 25.4 22.4 21.4 19.8 17.9 17.5 17.3 17.1 17.4 15.7 14.4 14.4 F G State and local obligations.. 1.3 1.2 1.2 1.8 2.3 2.6 2.9 3.3 4.2 5.4 6.3 7.3 8.0 9.1 G H Corporate bonds 13.0 15.1 18.6 23.3 26.0 28.4 32.1 36.5 40.3 43.7 46.4 50.1 54.4 58.4 H I Corporate stock 3.6 3.9 4.1 4.4 5.3 6.4 7.3 8.4 9.2 12.0 14.1 15.2 15.5 19.4 I j 1- to 4-family mortgages... 2.3 2.5 3.5 4.9 6.1 8.5 10.7 11.8 13.3 15.3 17.8 20.4 21.8 22.9 J K Other mortgages 4.5 4.8 5.4 6.1 7.2 8.0 9.2 10.0 10.7 11.5 12.5 13.6 14.6 15.4 K L Other loans 7 2.0 2.0 2.0 2.1 2.3 2.5 2.7 2.8 3.0 3.3 3.6 3.8 4.3 4.5 L M Trade credit8 .4 .5 .6 .7 .7 .7 .8 .9 1.0 1.1 1.2 1.3 1.5 1.6 M N Total liabilities9 44.4 47.6 51.2 54.9 58.8 63.0 67.9 73.6 79.6 86.0 92.6 99.6 106.4 114.0 N O Savings in life insurance 39.2 41.9 44.4 47.0 49.6 52.0 54.6 57.7 60.9 64.2 67.6 71.1 73.8 77.2 O P Savings in pension funds 4.8 5.7 6.7 7.9 9.1 11.0 13.3 15.9 18.7 21.8 25.1 28.5 32.6 36.8 P (H.3) Finance n.e.c. sector A Total financial assets 9.9 9.3 9.7 11.6 13.9 17.0 18.1 21.2 23.6 27.9 34.5 36.7 37.9 43.1 A B Currency and demand deposits. 1.6 1.8 1.6 1.7 1.8 2.1 2.3 2.3 2.3 2.4 2.7 2.9 3.0 3.1 B C Credit and equity mkt. instr 8.3 7.5 8.1 9.9 12.1 14.9 15.8 18.9 21.3 25.4 31.8 33.8 34.9 40.0 C D Federal obligations T 4 2.1 1.4 2.0 1 9 1.8 1 5 2 1 2 0 2.5 2 1 2 4 2 6 3 1 D E State and local obligations... .4 .4 .3 .3 .3 .4 .4 .3 .5 .4 .4 .2 .3 .3 E F Corporate bonds .4 .4 .4 .4 .6 .5 .6 .6 .6 .9 .9 .8 .9 1.1 F G Corporate stock 1.3 1.2 1.4 1.4 1.9 2.2 2.8 3.6 3.8 5.8 7.3 8.0 7.5 11.8 G H Mortgages .2 .3 .3 .4 .7 .6 .7 .8 1.0 1.6 1.5 1.2 1.7 H I Consumer credit ".9 1.5 2.4 3.2 4.3 5.3 5.6 7.1 8.6 9.1 11.9 13.0 13.8 13.1 I J Security credit 1 .4 .7 .7 .7 1.1 1.7 1.6 1.7 2.1 3.0 3.5 3.6 3.2 3.8 J K Other loans .5 1.0 1.3 1.7 1.6 2.2 2.6 2.8 2.9 2.9 4.2 4.4 5.3 5.1 K L Total liabilities 6.8 6.2 6.2 7.8 9.2 11.1 11.5 13.3 15.2 16.7 21.3 22.0 23.4 23.5 L M Credit market instruments. 5.0 4.5 4.6 6.1 7.6 9.4 9.6 11.3 13.1 14.3 18.7 18.9 20.0 19.8 M N Corporate bonds .2 .4 .5 1.0 1.4 1.7 2.0 2.3 3.7 4.0 5.4 6.4 7.1 7.2 N O Security credit 4.0 2.4 1.6 2.1 2.6 3.0 2.7 3.0 3.3 4.3 4.5 3.8 3.8 4.4 O P Bank loans n.e.c .8 1.6 2.2 2.6 3.1 4.0 3.9 4.6 4.5 4.6 7.2 6.8 6.7 6.0 P Q Other loans .2 .4 .6 .7 1.1 1.4 1.6 1.5 1.7 1.9 2.3 2.2 Q R Miscellaneous 1.8 1.6 1.6 1.6 1.7 1.9 2.0 2.1 2.4 2.6 3.1 3.4 3.7 R •Less than $50 million. For other notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1062 FLOW OF FUNDS/SAVING TABLE 8. SECTOR STATEMENTS OF FINANCIAL ASSETS AND LIABILITIES (Continued) [Amounts outstanding at end of year. In billions of dollars] Category1 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 (I) Rest-of-the-world sector G Total financial assets2 27.3 26.5 25.3 24.7 25.7 30.5 31.0 32.9 35.7 39.9 43.2 45.1 44.6 49.0 G H Gold 3 13.7 13.4 11.7 10.5 10.8 13.0 12.8 12.7 14.3 15.3 16.0 16.2 16.1 19.3 H I U. S. currency and demand dep.. 4.2 4.4 4.7 I Deposits of foreign banks.... 2.2 1.9 1.8 2.2 2.1 2.4 1.9 2.0 1.8 2.0 1.9 2.1 2.1 1.9 Other deposits and currency . . 2.0 2.5 2.6 2.6 2.7 2.3 2.3 2.5 2.5 2.3 2.3 2.4 2.5 2.8 Time deposits • * .2 .4 .5 .7 1.3 1.8 1.7 1.6 1.6 2.5 J Credit and equity mkt. instr.. 5.7 5.0 4.0 4.2 4.8 6.5 7.0 8.4 9.0 10.9 13.1 14.5 14.1 14.0 Federal obligations 2.6 1.9 1.2 1.6 1.9 3.1 3.0 4.0 4.5 4.8 5.8 6.6 6.8 6.8 K Corporate stock 4 2.7 2.7 2.5 2.3 2.5 2.9 3.4 3.7 3.6 5.3 6.6 7.0 6.1 6.0 Others .5 4 4 3 4 5 6 6 8 9 7 9 1 2 1.2 Miscellaneous6 3.7 3.7 5.1 5.1 5.2 5.9 6.3 6.6 6.9 7.5 8.1 8.3 8 1 8.5 N Total liabilities7 12.7 16.9 24.0 26.4 28.0 30.2 32.0 34.2 35.7 37.3 39.3 43.6 48.7 52.3 N Credit and equity mkt. instr.8... 4.7 7.8 11.7 12.9 13.4 14.3 14.9 15.4 15.5 15.5 15.6 16.6 17.9 20.0 Bonds4 2.7 2.6 2.7 2.7 2.7 3.3 3.7 3.8 3.7 3.5 3.3 3.7 4.1 5.0 Bank loans n.e.c .3 .5 .6 .6 .7 .7 .8 .8 .7 1.0 1 4 1.7 2.1 2.6 Other loans9 1.6 4.6 8.4 9.5 10.0 10.2 10.4 10.8 11.0 10.9 10.9 11.2 11.7 12.2 Q Miscellaneous 8.0 9.2 12.3 13.5 14.6 15.9 17.1 18.8 20.3 21.8 23.6 26.9 30.7 32.3 Q U. S. subscription to IMF and IBRD .3 3.4 3.4 Other10 8.0 8.8 8.9 10.1 11.2 12.5 13.7 15.5 16.9 18.4 20.2 23.5 27.3 28.9 * Less than $50 million. 5 Commercial paper, corporate bonds, and security credit. 1 Lines that are identified alphabetically correspond to categories or 6 Mainly direct investments in U. S., deposits with U. S. agencies of groupings shown in Table 4(1); unlettered lines indicate categories or foreign banks, and notes of the International Monetary Fund. detail not shown in Table 4 because of space limitations or because flows 7 Excludes amounts for corporate stock and unidentified liabilities (in are relatively small. miscellaneous category) for which estimates of amounts outstanding are 2 Excludes amounts for unidentified assets (in miscellaneous category) not available. for which estimates of amounts outstanding are not available. 8 Includes security credit not shown separately. 3 Holdings of international institutions and foreign central banks and 9 Predominantly U. S. Government loans. governments, excluding U.S.S.R. Reflects net foreign gold production 1 o U. S. direct investment abroad and holdings of foreign currency. (output plus net U.S.S.R. gold exports, less consumption and net increase NOTE.—"Liabilities" cover equity as well as debt claims. Definitions of in private holdings) as well as gold transactions with the U. S. Annual sectors and transaction categories are given in notes on Table 1, pp. 1047 changes differ from corresponding flows, which reflect only transactions and 1049, and in "Technical Notes," pp. 846-59 of this BULLETIN. In with the U. S. general, notes to Table 4(1) apply to corresponding categories in this table. 4 At estimated market value; annual changes thus differ from cor- Details may not add to totals because of rounding. responding flows, which reflect only net funds put into securities. Notes to Table 8 (G), (G.I), and (G.2) on second preceding page. 1 Alphabetic identification of lines does not correspond to that in Treasury gold-account liability) are excluded from assets and liabilities Table 4(G). in monetary authorities subsector, and interbank loans and interbank 2 Monetary gold stock and active gold held by Exchange Stabilization deposits of commercial banks are excluded from assets and liabilities in Fund. commercial banks subsector. Debt and equity relationships between the 3 Silver and claims on Federal Government sector representing backing subsectors, shown under "Excluded from consolidated sector account" in (other than small gold reserve) for U. S. currency other than Federal the stub for each subsector, are eliminated in derivation of consolidated Reserve notes. See note 11 to part E of this table. account for the commercial banking and monetary authorities sector. 4 Change in amount outstanding for 1958 differs from flows due to 12 Lines B, C, and F, small amounts of foreign and industrial loans in valuation adjustment. line S and of acceptances in line Z, and Exchange Stabilization Fund 5 Beginning with 1951, direct marketable issues maturing within one deposits in line a. year; prior to 1951, issues maturing or callable within one year. 13 Lines e, h, and /, and Exchange Stabilization Fund stock component 6 Nonprofit organizations and rest of the world; also contains loans of line r. secured by hypothecated deposits, which are not treated as a bank loan 14 Lines / through a, except as indicated in note 12. liability. 15 Vault cash and reserves and other balances at Federal Reserve Banks; 7 Balances with foreign banks, balances due from foreign branches, differs from sum of lines y, zt and aa because of timing differences in and Exchange Stabilization Fund deposits with U. S. Treasury. recording reserve balances at Federal Reserve Banks and at member banks. 8 Deposits of foreign banks and international organizations at Federal 16 Lines/, i, &, and m; and r, except as indicated in note 13. Reserve Banks, and U. S. currency held abroad. 17 Netted against commercial bank demand deposits in deriving the 9 Mainly consumers and corporate business sector. Includes hypothe- commercial banking and monetary authorities sector. cated deposits not treated as time deposit assets. NOTE.—Definitions of sectors and transaction categories are given in i o Balances due to foreign branches, loans from Federal Government, notes to Table 1, pp. 1047 and 1049, and in "Technical Notes," pp. 846^59 and Exchange Stabilization Fund stock held by U. S. Treasury ($1.8 of this BULLETIN. In general, notes to Table 4(G) apply to corresponding bill 1 i 1 o n E a t c h h r ou s g u h b s 1 e 9 c 4 to 6 r an s d ta $ te 0 m .2 e n b t i lli i o s n c t o he n r s e o a l f id te a r t ) e . d. For example, gold ca D te e g t o a r i i l e s s m in a y t h n is o t t a a b d l d e . to totals because of rounding. certificates held by Federal Reserve (a Federal Reserve asset and a Notes to Table 8 (H), (H.l\ (H.2), and (H.3) on preceding page. 1 Alphabetic identification of lines does not correspond to that in 7 Mainly policy loans; includes small amount of open market paper. Ta 2 b l S e a 4 v ( in H g ) s . deposits held by mutual savings banks and savings and loan 8 Receivables from agents. association shares held by credit unions. 9 Includes $0.4 billion of security credit in 1945 not shown separately. 3 Includes small amount of other loans held by mutual savings banks not shown separately. NOTE.—Definitions of sectors and transaction categories are given in 4 Holdings of mutual savings banks only. notes to Table 1, pp. 1047 and 1049, and in "Technical Notes," pp. 846-59 5 Savings and loan association equity in, and deposits at, Federal home of this BULLETIN. In general, notes to Table 4(H) apply to corresponding loan banks. categores in this table. 6 Bank loans, and advances from Federal home loan banks to savings Details may not add to totals, because of rounding. and loan associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL BUSINESS-TYPE ACTIVITIES 1063 PRINCIPAL ASSETS AND LIABILITIES OF FEDERAL BUSINESS-TYPE ACTIVITIES [Based on compilation by Treasury Department. In millions of dollars] Liabilities, other than Assets, other than interagency items interagency items * Bonds, notes, Date, and fund 01 activity L st a ru n c d - , tu a r n e d s p de a b y e a n b - le tures, and equipment All activities 1954—Dec. 31 41,403 19.348 1955—Dec. 31 45,304 20,238 1956—Dec. 31 69,653 20,657 1958—Mar. 31 72,242 4,15823,147 ,206 4,523 3,753 0,020 5,436 1,183 June 30 72,677 4,79322,383 1,540 4,467 3,731 0,459 5.304 1,204 Sept. 30 73,772 5,87023, ,743 4,365 3,703 0.422 5.389 1,229 Dec. 31 76,494 6,11025, ,810 4,198 3,703 0,670 5.509 1,298 1959—Mar. 31 77,451 5,64426, .504 4.533 3,702 0,753 5.338 1,374 Classification of agencies reporting quarterly. By type of fund and activity, Mar. 31, 1959 Public Enterprise Funds—Total Farm Credit Administration: Federal Farm Mortgage Corporation Agricultural Marketing Act, revolving fund, . . Agricultural Department: Commodity Credit Corporation Disaster loans, etc., revolving fund........... All other Housing and Home Finance Agency: Public Housing Administration. 162 Federal Housing Administration............. 958 Federal National Mortgage Association 2,919 Office of the Administrator 986 Federal Savings and Loan Insurance Corporation 313 Small Business Administration. 537 Export-Import Bank 3,477 Tennessee Valley Authority 2,121 Panama Canal Company. 461 Veterans Administration ,071 General Services Administration 1,535 Treasury Department 204 Post Office Department—postal fund............ 955 Interior Department 341 Allother 1,471 Intragovernmental Funds—Total. .. Defense Department: Army Navy Air Force All other Certain Other Activities—Total General Services Administration . .... Agricultural Department: Farmers Home Administration Rural Electrification Administration Veterans Administration Nat. Aeronautics and Space Administration ....... Interior Department International Cooperation Administration. Treasury Department Commerce Department—maritime activities....... All other ... Certain Deposit Funds—Total....... Banks for cooperatives Federal Deposit Insurance Corporation. Federal home loan banks Federal intermediate credit banks4. Certain Trust Revolving Funds—Total. 5386 Federal National Mortgage Association... 545 Office of Alien Property 5207 All other 5134 1 Figures for trust revolving funds include interagency items. NOTE.—Coverage has changed in some of the years shown. Be- 2 Less than $500,000. ginning 1956, changes reflect the expanded coverage and the new classi- 3 Includes $827 million due under the agreement with Germany signed fication of agencies now reported in the Treasury Bulletin. The revised Feb. 27, 1953, and lend-lease and surplus property balances due the statement includes a larger number of agencies, and their activities are United States in the principal amount of $1,776 million. classified according to the type of fund they represent. 4 Prior to Jan. 1, 1959 was classified as a trust revolving fund. Historical data for loans by purpose and agency and for other selected 5 Figure represents total trust interest. assets and liabilities by agency are shown on p. 1020. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1064 BANK HOLDING COMPANIES BANKING OFFICES AND DEPOSITS OF BANKS IN HOLDING COMPANY GROUPS, DECEMBER 31, 19581 [Holding companies registered pursuant to Bank Holding Company Act of 1956] Details for 33 States Number of banking offices in Deposits of banks in holding company groups holding company groups State, or item Banks and branches c N o u m m p b a e n r i e o s f 2 Banks Branches Total c a c i l A a l e l s n c b t o a a a m g n p e m k e i r o e n - f r g - o m f i d l I l o n io ll n a s rs a c l A c l e d i n s a e c l t p o a a o m b g p s a e m i e n t r s o k e - f roffices Arizona 2 56 58 40.00 395 38.16 California 4 103 107 6.90 1,064 4.67 Colorado 3 3 1.65 87 4.64 Florida 14 14 5.00 510 11.34 Georgia 22 28 50 10.46 949 34.93 Idaho 2 38 40 37.04 255 39.93 Illinois 5 5 .53 146 .87 Indiana 3 5 .71 37 .82 Iowa 13 19 2.28 242 7.68 Kansas 3 3 .50 197 8.74 Kentucky 15 17 3.59 181 8.05 Maine 3 8 11 6.43 30 4.73 Massachusetts 22 130 152 31.02 1,094 20.81 Minnesota 117 6 123 17.77 2,468 60.90 Missouri 12 12 1.95 513 8.60 Montana 31 31 26.96 429 52.74 Nebraska 5 5 1.18 163 9.84 Nevada 2 22 24 64.86 283 75.44 New Hampshire 6 6 7.79 41 10.76 New Mexico 5 'io' 15 16.48 13.18 New York 21 171 192 11.62 2,240 5.27 North Dakota 34 5 39 21.43 293 38.33 Ohio 24 30 54 4.68 657 6.21 Oklahoma 1 1 .25 3 .13 Oregon 1 77 78 35.45 849 43.35 South Dakota 2 11 23 34 15.11 238 32.72 Tennessee 3 11 7 18 3.79 107 3.50 Texas 3 8 8 .82 337 2.92 Utah 2 3 47 50 44.64 482 52.68 Virginia 3 4 1.51 52 1.66 Washington 3 7 45 52 15.48 368 13.87 Wisconsin 4 13 15 28 3.98 1.124 25.75 Wyoming 2 4 4 7.69 76 19.15 Total—33 States 249 1418 1848 11,266 115,998 Summary totals and comparisons 33 States United States— perce H n o ta ld g i e n g o f c a o l m l c p o a m ny m g e r r o ci u a p l s b a a s n k a s in: all comp H a o n l y d in g g roups commer A ci l a l l banks com ba m n e k r s cial 33 States United States Number of banking offices, total 11,266 16,028 22,111 17.90 15.73 Banks 1418 10,386 13,499 Branches 1848 5,642 8,612 Deposits (in millions of dollars). U5,998 167,478 215,995 19.55 17.41 1 The data include: (1) banks of which the bank holding companies trolling banks in the respective States rather than registered bank holding owned or controlled 25 per cent or more of the outstanding stock, and companies whose principal offices are located in such States. Total (2) eight domestic commercial banks that are themselves bank holding does not equal sum of State figures because it has been corrected for companies. The eight banks have 55 branches and deposits aggregating duplications; that is, holding companies that control banks in more than $1,668,952,000. Exclusion of these 63 banking offices and their deposits one State are included in the total only once. from the data in the table would reduce the percentage ratios shown in The 49 bank holding companies included in the total represent only the table as follows: Holding company groups to all commercial banks 43 separate bank groups because in six cases the bank group is controlled in 33 States—number of banking offices, from 7.90 to 7.51; deposits, by a bank holding company that is in turn controlled by another bank from 9.55 to 8.56; holding company groups to all commercial banks in holding company. These groups are located in the following States: United States—number of banking offices, from 5.73 to 5.44; deposits, Florida, one; Georgia, two; Indiana, one; Massachusetts, one; and from 7.41 to 6.63. Virginia, one. 2 Data for individual States represent bank holding companies con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Statistics * International * International capital transactions of the United States. 1066 Net gold purchases and gold stock of the United States. . 1074 Estimated foreign gold reserves and dollar holdings. . 1075 Reported gold reserves of central banks and governments.. 1076 Gold production. 1077 International Bank and Monetary Fund. . 1078 United States balance of payments. . 1079 Money rates in foreign countries.. 1079 Foreign exchange rates. 1081 Index to statistical tables. 1088 Tables on the following pages include the prin- dealers in the United States in accordance with cipal available statistics of current significance the Treasury Regulation of November 12, 1934. relating to international capital transactions of Other data are compiled largely from regularly the United States, foreign gold reserves and dol- published sources such as central bank statelar holdings, and the balance of payments of the ments and official statistical bulletins. Back fig- United States. The figures on international cap- ures for 1941 and prior years, together with deital transactions are collected by the Federal Re- scriptive text, may be obtained from the Board's serve Banks from banks, bankers, brokers, and publication, Banking and Monetary Statistics. 1065 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1066 INT'L CAPITAL TRANSACTIONS OF THE U. S. TABLE 1. SHORT-TERM LIABILITIES TO FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY COUNTRIES 1 [Amounts outstanding, in millions of dollars] Date G T r o a t n a d l t t i i e n I o r n s n n t - a a i- l - Foreign countries m R G F a e e e n d p r y - . . , Italy U K d n i o i n m t g ed - E O u t r h o e p r e E T u o ro ta p l e Canada Am La e t r i i n ca Asia O A th ll er tutions2 Total Official 3 of 1954—Dec. 31 12,919 1,770 11,149 6,770 1,373 579 640 3,030 5,621 1,536 1,906 1,821 265 1955—Dec. 31 13,601 1,881 11,720 6,953 1,454 785 550 3,357 6,147 1,032 2,000 2,181 360 1956—Dec. 31 14,939 1,452 13,487 8,045 1,835 930 [,012 3,089 6,865 1,516 2,346 2,415 346 1957_Dec. 31 15,158 1,517 13,641 7,917 1,557 ,079 1,275 3,231 7,142 1,623 2,575 1,946 355 1958—June 30 15,271 1,454 13,817 7,931 1,468 ,071 1,060 3,353 6,951 2,001 2,506 2,072 288 July 31 15,384 1,463 13,921 8,101 1,590 1,054 1,098 3,392 7,134 1,962 2,407 2,134 285 Aug. 31 15,679 1,437 14,242 8,415 1,675 ,093 1,006 3,652 7,427 2,052 2,390 2,107 266 Sept. 30 15,648 1,483 14,165 8,411 1,733 ,087 1,076 3,664 7,560 1,944 2,291 2,092 277 Oct. 31 15,945 1,436 14,508 8,664 1,761 ,152 945 3,785 7,643 2,060 2,394 2,126 286 Nov. 30 16,052 1,485 14,567 %639 1,755 ,132 977 3,792 7,656 2,071 2,407 2,148 285 Dec. 31 16,159 1,544 14,615 '8,665 1,755 1,121 875 3,960 7,710 2,019 2,401 2,205 279 1959_jan. 31 16,230 1,538 14,693 '8,533 1,693 1,159 1,078 3,784 7,713 2,081 2,381 2,235 282 Feb. 28 16,619 1,541 15,078 r8,757 1,697 1,170 1,133 3,920 7,920 2,142 2,382 2,339 295 Mar. 31 16,657 1,676 14,982 8,622 1,385 1,231 1.125 4,005 7,746 2,087 2.522 2,337 290 Apr. 30 16,799 1,668 15,132 8,435 1,295 1,245 1,228 4,081 7,849 2,171 2,466 2,357 290 Mav 31P 17,143 1,719 15,424 8,797 1,403 1,298 1,096 4,178 7,975 2,094 2,659 2,391 304 June 30*> 18,406 2,756 15,651 8,942 1,459 1,406 1,082 4,273 8,220 2,122 2,548 2,439 322 Table la. Other Europe Other Aus- Bel- Den- Date Europe tria gium mark 1954 Dec 31 3,030 273 100 71 1955—Dec. 31 3,357 261 108 60 1956 Dec 31 3,089 296 117 65 1957 Dec 31 3,231 349 130 112 1958 June 30 3,353 363 109 114 July 31 3 392 377 101 127 Aug. 31 3,652 397 157 149 Sept. 30 3,664 418 106 162 Oct 31 3,785 425 108 162 Nov. 30 3,792 413 107 156 Dec 31 3 960 411 115 169 1959_Jan. 31 3,784 408 109 142 Feb 28 3 920 410 105 129 Mar 31 4,005 417 117 138 Apr. 30 4,081 410 151 May 31* 4,178 409 124 June 30P 4,273 390 118 ooo l F a i n n d - France Greece N la e e n r t d - h s - N w o a r y - t P u o g r a - l Spain S d w en e- S l w a e n r i - t d z- T k u ey r- Y sl u av g i o a - ot A h l e l r4 41 715 113 249 103 91 71 141 672 8 9 371 49 1,081 176 164 82 132 104 153 757 9 13 209 53 626 177 134 67 137 43 217 836 20 17 282 64 354 154 203 93 142 24 260 967 18 11 349 47 298 122 293 108 154 31 254 827 12 6 617 51 314 116 285 101 161 28 268 807 11 9 637 59 357 109 350 98 158 41 281 811 11 11 664 63 413 112 337 101 157 33 292 799 10 11 651 71 468 117 330 108 165 28 281 799 16 9 699 64 492 121 328 113 165 36 281 786 16 9 704 69 532 126 339 130 163 36 303 852 20 9 685 74 518 129 356 112 148 31 280 786 18 8 666 76 637 132 345 114 157 32 280 796 20 6 682 75 644 138 347 108 175 30 294 846 20 6 650 72 649 145 361 104 171 29 321 853 25 7 651 70 853 156 363 108 162 33 322 854 22 6 585 67 981 153 356 112 151 35 350 878 21 7 542 Table lb. Latin America Neth- Date A L m i a c t a e in r- A t r i g n e a n- l B iv o ia - Brazil Chile l C o b m i o a - - Cuba p m i D R c l u i i a o e c b n n - - - - v S a E a d l l o - r G m u a a l t a e- M ic e o x- I l W S a a n e u n n d r e r d d - i s i e s - t s l a p P i R c m u a e n b o a - - - , f Peru U gu r a u y - V zu e e n l e a - A O L i m a t c h t a i e e n r r nam 1954—Dec. 31 1,906 160 29 120 70 222 237 60 30 35 329 49 74 83 90 194 124 1955—Dec. 31 2,000 138 26 143 95 131 253 65 24 45 414 47 86 92 65 26i 112 1956—Dec. 31 2,346 146 29 225 91 153 211 68 25 64 433 69 109 84 73 455 111 1957—Dec. 31 2,575 137 26 132 75 153 235 54 27 65 386 73 136 60 55 835 124 1958—June 30 2,506 140 23 125 86 125 281 53 33 64 332 62 140 73 78 740 150 July 31 2,407 147 21 126 74 129 278 54 30 59 322 67 144 74 78 664 142 Aug. 31 2,390 133 21 159 78 144 292 49 26 54 351 73 139 75 75 580 142 Sept. 30 2,291 131 21 133 84 137 274 48 25 48 370 72 148 72 80 514 136 Oct. 31 2,394 134 22 130 74 170 276 42 26 45 383 76 147 70 82 582 135 Nov. 30 , , 2,407 141 21 132 73 176 280 42 23 43 413 81 145 73 83 542 139 Dec. 31 2,401 150 22 138 100 169 286 40 26 42 418 79 146 77 82 494 131 1959_Jan. 31 2,381 149 22 164 95 178 281 40 31 40 393 72 147 72 92 464 143 Feb. 28 2,382 189 20 166 85 198 267 38 33 43 389 76 155 72 89 410 152 Mar. 31 2,522 180 20 178 95 189 263 41 33 43 401 74 156 74 96 508 170 Apr. 30 2,466 180 20 151 92 199 257 49 38 43 412 79 157 81 84 443 181 May 31* 2,659 211 22 176 102 209 250 46 39 44 445 78 149 82 85 549 172 June 30P 2,548 206 22 154 130 201 242 44 38 42 406 78 147 77 89 500 170 Preliminary. r Revised. For other notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INT'L CAPITAL TRANSACTIONS OF THE U. S. 1067 Table 1. SHORT-TERM LIABILITIES TO FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY COUNTRIES i—Continued [Amounts outstanding, in millions of dollars] Table lc. Asia and All Other Asia All other Ko- Date Total H K o o n n g g India I n n e d s o ia - Iran Israel Japan p r R l u e i e b a c - , - P p i i h p n i - e l- s T w a a i n - T la h n a d i- Other Total A tra u l s i - a C g B o i e n a l n g - o Egypt 5 A S U f o n o r u i i f c o t a h n Other of 1954—Dec. 31 1,821 61 87 100 31 41 721 96 257 34 123 270 265 48 44 47 33 94 1955—Dec. 31 2,181 55 73 174 37 53 893 88 252 39 138 380 360 75 42 72 53 119 1956—Dec. 31 2,415 66 76 186 20 45 1,017 99 272 61 148 425 346 84 44 50 53 114 1957—Dec. 31 1,946 70 82 151 55 52 586 117 175 86 157 417 355 85 39 40 38 153 1958—June 30 2,072 66 81 89 64 48 803 117 164 88 148 403 288 75 34 18 24 137 July 31 2,134 68 80 89 55 51 858 119 168 91 145 411 285 86 35 16 22 126 Aug. 31 2,107 67 76 80 51 46 901 123 172 92 141 357 266 70 36 18 19 123 Sept. 30 2,092 65 73 91 43 40 889 128 177 93 140 353 277 74 31 18 28 126 Oct. 31 2,126 64 76 99 35 45 925 129 159 96 136 361 286 77 31 20 30 128 Nov. 30 2,148 63 75 105 38 52 925 133 158 99 133 367 285 76 31 20 30 127 Dec. 31 2,205 62 77 108 43 56 935 145 176 99 133 371 279 79 30 16 30 125 1959—Jan. 31 2,235 61 78 108 53 54 957 144 156 98 134 391 282 82 31 17 31 121 Feb. 28 2,339 57 86 112 51 60 1,020 147 169 96 139 402 295 80 31 17 37 129 Mar. 31. ... 2,337 62 90 119 55 62 998 147 173 94 138 400 290 83 33 16 28 130 Apr. 30 2,357 57 91 108 54 65 1,028 146 164 91 133 418 290 83 33 15 28 132 May 31*.... 2,391 58 94 81 51 70 1,068 142 175 92 133 427 304 83 33 16 33 139 June 30*> 2,439 57 99 77 39 86 1,101 145 168 90 134 443 322 91 35 16 36 144 Table Id. Supplementary Areas and Countries6 End of year End of year Area or country Area or country 1955 1956 1957 1958 1955 1956 1957 1958 Other Europe: Other Asia (Cont.): Albania .4 .3 .1 n.a. Burma. 19.1 7.0 6.7 n.a. British dependencies. .4 .4 .3 .4 Cambodia 13.1 17.2 20.0 24.9 Bulgaria .7 .2 .6 .3 Ceylon 32.9 41.2 34.2 n.a. Czechoslovakia7. .7 .5 .7 .6 China Mainland7. 36.2 35.5 36.3 36.0 Eastern Germany.. .. 1.3 1.2 3.1 1.4 Iraq 14.7 16.9 19.6 18.0 Estonia 1.8 1.9 7 1.7 Jordan. 1.2 2.0 1.6 2.8 Hungary 1.0 .7 .9 Kuwait 3.5 5.3 5.9 10.3 Iceland 4.8 3.1 2.9 3.5 Laos 23.1 37.3 33.1 n.a. Ireland, Republic of.. 13.7 9.1 9.0 n.a. Lebanon 18.0 22.3 28.2 37.9 Latvia 1.0 .6 .5 .6 Malaya, Fed. of 1.6 1.4 1.6 n.a. Lithuania .3 .4 .5 .7 Pakistan 5.7 20.2 12.8 5.6 Luxembourg 3.1 13.2 16.4 16.1 Portuguese dependencies. 2.0 2.7 3.1 3.1 Monaco 5.6 4.3 5.4 5.9 Ryukyu Islands 34.0 30.6 32.7 15.2 Poland 7 2.5 3.3 3.2 4.9 Saudi Arabia , 79.5 97.4 94.8 60.2 Rumania7 8.1 .9 .9 Syria 5 13.1 17.1 3.5 4.7 Trieste . . . . 1.4 1.4 1.2 .5 Viet-Nam 62.3 50.1 58.5 48.8 U. S. S. R.7 .7 .7 2.2 All other: Other Latin America: British dependencies 2.4 3.8 2.3 1.8 British dependencies 16.6 24.1 24.0 40.9 Ethiopia and Eritrea 23.7 24.2 35.1 27.8 Costa Rica 17.6 14.6 16.4 24.5 French dependencies 8.0 10.5 10.7 6.5 Ecuador 14.9 18.0 22.7 17.4 Liberia 13.1 23.7 23.0 13.0 French West Indies and French Guiana. .6 1.0 .8 .5 Libya 9.9 3.7 10.7 6.4 Haiti 12.1 8.9 11.2 7.7 Morocco: Honduras 9.7 10.2 12.6 6.3 Morocco (excl. Tangier). 14.8 13.6 32.2 25.4 Nicaragua 12.8 11.8 12.7 11.3 Tangier 33.5 22.4 19.2 18.1 Paraguay 3.6 4.0 5.1 3.4 New Zealand 1.9 2.2 1.9 6.9 Portuguese dependencies... 5.3 2.8 4.4 4.0 Other Asia: Somalia .2 .9 1.3 n.a. Afghanistan 4.1 5.3 4.7 n.a. Spanish dependencies .7 .3 .7 .4 Bahrein Islands .5 1.7 .9 .9 Sudan n.a. .4 1.7 5.2 British dependencies. 8.2 7.4 8.0 4.3 Tunisia .7 .5 .3 v Preliminary. n.a. Not available. 5 Part of the United Arab Republic since February 1958. 1 Short-term liabilities reported in these statistics represent principally 6 Except where noted, these data are based on reports by banks in deposits and U. S. Government obligations maturing in not more than the Second (New York) Federal Reserve District. They represent a one year from their date of issue; small amounts of bankers' acceptances partial breakdown of the amounts shown in the "other" categories in and commercial paper and of liabilities payable in foreign currencies tables la-lc. are also included. Banking liabilities to foreigners maturing in more 7 Based on reports by banks in all Federal Reserve districts. than one year (excluded from these statistics) amounted to $32 million NOTE.—Statistics on international capital transactions of the United on June 30, 1959. States are based on reports by U. S. banks, bankers, brokers, and dealers, 2 Includes International Bank for Reconstruction and Development, by branches or agencies of foreign banks, by certain domestic institutions International Monetary Fund, and United Nations and other inter- not classified as banks that maintain deposit or custody accounts for national organizations. foreigners, and by the U. S. Treasury. The term "foreigner" is used to 3 Represents liabilities to foreign central banks and foreign central designate foreign governments, central banks, and other official institugovernments and their agencies (including official purchasing missions, tions, as well as banks, organizations, and individuals domiciled abroad trade and shipping missions, diplomatic and consular establishments, etc.) and the foreign subsidiaries and offices of U. S. banks and commercial, 4 Includes Banks for International Settlements. firms. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1068 INT'L CAPITAL TRANSACTIONS OF THE U. S. TABLE 2. SHORT-TERM LIABILITIES TO FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY TYPES [In millions of dollars] Payable in dollars To banks and official institutions To all other foreigners Payable Date, or area Total in foreign and country U.S. u. s. currencies Total Deposits T bi r l e ls a s a u n r d y Other Total Deposits T b r il e ls a s a u n r d y Other certificates certificates Total amounts outstanding 1954 Dec 31 12,919 11,070 5,479 4,955 637 1,805 1,520 251 34 43 1955 Dec. 31 13,601 11,777 5,451 5,670 656 1,783 1.543 184 56 40 1956 Dec. 31 14,939 12,860 5,979 5,990 891 2,030 1,653 243 134 49 1957 Dec. 31 15,158 12,847 5,875 5,840 1,132 2,252 1,766 278 209 59 1958 June 30 15,271 12,959 7,092 4,731 1.135 2,236 1,919 184 133 77 JUly 31 15,384 13,127 7,110 4,905 1,112 2,189 1,932 135 122 69 Aug. 31 15,679 13,389 7,092 5,209 1,088 2,218 ,889 210 119 72 Sept. 30 15,648 13,312 6,705 5,512 1,095 2,257 1,893 229 135 79 Oct 31 15,945 13,576 6,711 5,767 1,097 2,292 ,897 242 153 77 Nov. 30 16,052 13,606 6,736 5,748 1,122 2,380 ,929 279 172 66 Dec. 31 16,159 13,669 6,772 5,823 1,075 2,430 ,951 306 174 59 1959 Jan. 31 16,230 13,716 6,802 5,826 1,088 2,463 ,946 328 189 52 Feb 28 16,619 14,056 6,797 6,173 1,085 2,501 ,932 373 197 62 Mar. 31 16,657 14,115 6,936 6,079 ,099 2,488 ,970 313 205 54 Apr. 30 16,799 14,191 6,864 6,237 1,090 2,540 ,968 338 234 69 May 31p 17,143 14,559 6 773 6 625 161 2 524 975 307 243 59 June 30p 18,406 15,771 6,685 7,927 1.159 2,561 2,004 313 243 75 Area and country detail, April 30, 1959 Europe: Austria 410 408 391 11 6 2 2 151 105 80 24 46 39 2 6 130 117 64 51 2 13 11 1 $ Finland • ......... 72 70 37 31 2 2 2 m 649 589 233 329 27 60 51 5 4 i Germany, Fed. Rep. of.... 1,295 1,269 214 889 166 24 21 2 1 2 145 133 52 81 12 12 1 Italy 1,245 1,214 140 864 211 30 23 7 o C1) 361 334 141 143 50 27 20 5 1 1 104 63 47 15 1 40 38 2 0) C1) Portucal • 171 125 114 11 45 45 1 (1) 29 12 12 1 17 17 (1) (V) 321 310 72 199 39 11 10 1 0) (1) 853 697 326 164 207 152 100 13 38 3 25 23 23 (i) 2 2 United Kingdom 1,228 788 365 389 34 400 140 205 55 41 7 7 5 Other Europe 651 625 170 338 117 26 22 2 1 (l) Total 7,849 6,890 2,487 3,504 900 910 555 247 108 48 2,171 1,847 1,282 550 15 311 189 70 52 12 Latin America: 180 114 112 1 66 66 0) 0) 0) Brazil 1 2 5 0 1 4 4 5 4 4 0 (i) 5 10 1 6 5 9 1 9 5 (i) (1 7 ) 0) 92 38 38 (i) 54 54 0) (l) (1) Colombia 199 127 123 5 72 71 (1) 1 0) Cuba 257 142 96 44 3 114 107 1 6 (1) 49 20 20 0) 29 29 0) 0) (0 El Salvador 38 18 17 19 19 Guatemala. 43 26 13 7 7 17 17 0) 412 274 245 28 2 138 134 (2 (1) Neth. W. Indies and Suri- 79 40 23 10 7 39 15 5 19 nam Panama Rep. of 157 33 32 0) 0) 124 92 5 27 Peru 81 36 35 46 44 1 1 (1) 84 39 34 (i) 5 45 41 4 Venezuela . 443 282 282 (i) 160 154 3 3 1 Other Latin America 181 91 64 14 13 86 84 1 0) 4 Total 2,466 1,330 1,177 102 50 1,130 1,041 19 70 6 Preliminary. i Less than $500,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INTL CAPITAL TRANSACTIONS OF THE U. S. 1069 TABLE 2. SHORT-TERM LIABILITIES TO FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY TYPES—Continued [In millions of dollars] Payable in dollars Area and Total To banks and official institutions To all other foreigners in P a f y o a re b i l g e n country U.S. U.S. currencies Total Deposits T bi r l e ls a s a u n r d y Other Total Deposits T bi r l e ls a s a u n r d y Other certificates certificates Area and country detail, April 30, 1959—Continued Asia: (J) Hong Kong 57 29 25 4 28 28 C1) C1) India 91 68 63 4 2 23 23 (1) Indonesia . • • .. . 108 106 56 49 2 2 54 50 50 4 4 (1) Israel 65 62 25 22 15 4 4 1,028 1,014 602 373 39 14 13 0) 0) (1) Korea Rep. of 146 143 142 1 1 3 3 164 145 118 16 12 19 19 0) 0) T Th ai a w il a a n n d ... . 1 9 33 1 1 8 31 4 8 66 4 C1 5 ) 7 3 7 3 (1) Other Asia 418 377 290 63 24 40 39 C1) (0 0) Total 2,357 2,211 1,521 588 102 145 143 1 1 1 All other: Australia 83 79 36 39 4 3 3 0) 0) 0) 33 32 13 13 6 1 1 Egypt2 15 14 13 (0 1 1 0) 0) Union of South Africa 28 24 18 6 0) 3 3 0) Other 132 96 79 4 12 35 32 C1) 0) Total 290 245 160 63 22 43 40 (1) 3 2 Total foreign countries. 15,132 12,523 6,627 4,807 1,089 2,540 1,968 338 234 69 International institutions.... 1,668 1,668 238 1,430 0) Grand total 16,799 14,191 6,864 6,237 1,090 2,540 1.968 338 234 69 i Less than $500,000. 2 Part of the United Arab Republic since February 1958. TABLE 3. SHORT-TERM CLAIMS ON FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY COUNTRIES i [Amounts outstanding, in millions of dollars] Date Total France R m G F e a e p e n d . r y - . o , f Italy S l w a e n r i - t d z- U K d n i o i n m t g e - d E O u t r h o e p r e E T u o r t o a p l e C a a d n a - A L m i a c t a e in r- Asia o A th l e l r 1954 Dec 31 1,387 14 70 20 16 173 109 402 76 728 143 37 1955 Dec 31 1,549 12 88 30 26 109 158 423 144 706 233 43 1956 Dec. 31 1,946 18 157 43 29 104 216 568 157 840 337 43 1957 Dec 31 2,199 114 140 56 34 98 211 654 154 956 386 50 1958 June 30 2,446 84 123 44 35 96 263 646 251 1.023 450 77 July 31 2,489 86 117 43 31 103 267 647 271 1,033 463 76 Aug 31 . . .. 2,562 84 111 43 33 126 312 709 265 1,048 462 78 Sept 30 2,540 90 109 39 36 127 315 716 256 1,040 450 79 Oct 31 2,577 93 103 36 38 115 316 700 276 I 078 442 81 Nov 30 .... 2,487 96 88 35 35 120 301 675 232 1,064 438 79 Dec 31 2,542 102 77 36 42 124 315 696 243 1,099 435 69 1959 Jan 31 2,432 102 68 31 38 107 297 644 241 1,072 407 68 Feb 28 2,379 100 68 29 35 102 288 622 218 1,054 422 63 Mar. 31 2,419 102 60 36 39 88 264 589 246 ,068 454 61 Apr 30 2,399 103 58 33 45 94 255 588 242 1,027 481 61 May 31*> 2,428 99 52 34 39 105 236 566 236 1,064 502 61 June 30p . 2,439 94 54 37 34 105 219 544 229 1,081 519 65 v Preliminary. foreigners; drafts drawn against foreigners that are being collected by i Short-term claims reported in these statistics represent principally banks and bankers on behalf of their customers in the United States; the following items payable on demand or with a contractual maturity and foreign currency balances heJf4 abroad by banks and bankers and their of not more than one year: loans made to and acceptances made for customers in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1070 INT'L CAPITAL TRANSACTIONS OF THE U. S. TABLE 3. SHORT-TERM CLAIMS ON FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY COUNTRIES i— Continued [Amounts outstanding, in millions of dollars] Table 3a. Other Europe Date E O u t r h o e p r e A tr u i s a - g B iu e m l- m De a n r - k l F a i n n d - Greece N la e e n r t - d h s - N w o a r y - t P u o g r a - l Spain S d w e e n - T k u e r y - Y sl u av g i o a - o A th l e l r 1954—Dec. 31...... 109 20 10 16 2 4 41 5 1955_Dec. 31 158 16 13 11 9 7 78 7 1956—Dec. 31 216 28 12 21 23 13 88 7 1957—Dec. 31 211 25 11 29 23 10 76 10 1958—June 30 263 16 8 41 26 44 16 78 9 July 31 267 18 7 44 25 44 16 79 11 Aug. 31 312 67 6 43 25 57 14 67 9 Sept. 30 315 63 8 44 22 59 13 72 10 Oct. 31 316 64 7 10 49 20 55 13 72 11 Nov. 30...... 301 68 10 8 53 21 31 15 69 9 Dec. 31 315 65 14 7 56 22 30 24 72 9 1959_Jan. 31 297 66 15 6 58 20 26 18 64 10 Feb. 28 288 64 16 5 59 18 25 16 60 9 Mar. 31 264 63 12 6 52 15 27 16 50 9 Apr. 30 255 62 10 7 40 14 29 14 51 14 May 31* 236 51 9 8 34 11 28 15 51 16 June 30^ 219 50 7 31 10 26 10 49 13 Table 3b. Latin America Neth- Date A L m i a c t e a i r n - A t r i g n e a n- l B iv o i - a Brazil Chile l C o b m o ia - - Cuba m p i D R c l u i i a o e n b c - - n - - v S a E a d l l o - r G m u a a l t a e- M ic e o x- l I W S a a n e u n n r d e r d - d s i i e t - s s l a P p i R c m u a e n b o a - - - f , Peru g U u r a u- y V zu e e n l e a - A O L m i a t c h t e a i e r n r nam 1954—Dec. 31 728 6 3 273 14 107 71 3 10 4 116 1 9 16 7 63 27 1955—Dec. 31 706 7 4 69 14 143 92 5 8 5 154 3 17 29 18 105 34 1956 Dec. 31 840 15 4 72 16 145 90 7 11 7 213 5 12 35 15 144 49 1957—Dec. 31 956 28 3 100 33 103 113 15 8 8 231 2 18 31 42 170 51 1958—June 30 1,023 37 3 189 54 71 105 7 7 8 252 3 25 33 39 136 54 July 31 1,033 49 3 216 49 54 105 11 7 8 240 3 23 30 42 138 55 Aug. 31 1,048 48 3 200 48 54 132 12 7 8 243 3 26 30 45 134 55 Sept. 30 1,040 48 3 183 47 49 127 14 10 9 274 2 24 28 50 125 49 Oct. 31 1,078 35 3 165 47 50 151 19 10 9 290 4 23 31 54 138 49 Nov. 30 1,064 34 3 138 47 51 155 19 11 10 294 6 23 31 54 139 49 Dec. 31....... 1,099 40 3 148 52 51 166 19 10 12 293 6 23 31 52 142 53 1959_jan. 31 1,072 38 4 176 51 49 151 20 6 12 269 4 22 28 50 140 52 Feb. 28 1,054 38 3 176 48 48 150 23 6 11 260 3 24 30 43 139 53 Mar. 31 1,068 38 3 172 50 49 149 25 5 9 263 4 25 34 45 144 53 Apr. 30 1,027 40 3 136 52 50 153 25 5 10 263 4 23 38 33 139 54 May 31 P 1,064 43 3 156 58 50 144 23 5 10 278 3 23 37 34 143 52 June 30^ 1,081 45 3 167 65 53 130 27 6 10 278 3 22 31 38 151 51 Table 3c. Asia and All Other Asia All other Date Total H K o o n n g g India Iran Israel Japan ip P p h i i n l- es Tai- T la h n a d i- Other Total t A ra u l s i - a C g B o ia e n l n g - o Egypt 3 U S n o o u io f t n h Other Africa 1954—Dec. 31.. 143 16 11 50 7 5 6 39 37 14 6 10 1955_Dec. 31.. 233 18 10 103 19 6 8 60 43 11 8 17 1956—Dec. 31.. 337 20 16 170 16 6 9 91 43 11 8 17 1957_Dec. 31.. 386 22 24 146 53 6 14 110 50 13 12 19 1958—June 30.. 450 29 18 229 32 6 17 106 77 14 38 17 July 31.. 463 31 18 224 38 6 16 119 76 12 39 16 Aug. 31.. 462 29 19 222 39 6 14 122 78 12 41 17 Sept. 30.. 450 27 21 209 41 6 14 121 79 13 41 17 Oct. 31.. 442 29 22 196 39 6 14 123 81 14 37 23 Nov. 30.. 438 27 27 186 41 7 16 120 79 13 29 29 Dec. 31. 435 27 23 179 67 6 13 111 69 13 23 27 1959—Jan. 31. 407 29 25 168 38 7 14 116 68 12 24 27 Feb. 28. 422 28 22 175 42 8 13 124 63 12 24 22 Mar. 31. 454 34 19 204 34 8 14 130 61 11 21 24 Apr. 30. 481 34 18 224 29 9 17 137 61 11 19 24 May 31* 502 32 16 242 29 10 17 142 61 12 19 25 June 30*. 519 35 16 260 24 9 20 143 65 15 20 26 * Preliminary. 2 Less than $500,000. 1 See note 1 on preceding page. 3 Part of the United Arab Republic since February 1958. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INFL CAPITAL TRANSACTIONS OF THE U. S. 1071 TABLE 4. CLAIMS ON FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY TYPES [In millions of dollars] Short-term Pa:pable in dollars Payable in foreign currencies Long- Date, or area term— Loans to: and country total* Total Total Ba i o n n f s f k i t c s it i a u a l - nd Others s C ta t o o i n o u l d l n t e i - s n c- g Other Total f D or e e w p ig i o t n h s e it r s s Other tions Total amounts outstanding 1954 Dec. 31 441 1,387 1,176 449 142 301 283 211 173 38 1955 Dec. 31 671 1,549 1,385 489 236 353 307 164 144 20 1956 Dec 31 839 1,946 1,796 582 330 440 444 150 131 19 1957 Dec. 31 rl,174 2,199 2,052 627 303 423 699 147 132 15 1958 June 30 M,263 2,446 2,274 764 348 432 730 172 159 13 July 31 '1,275 2,489 2,308 776 363 430 740 181 166 15 Aug. 31 rl 330 2,562 2,384 871 368 423 720 178 165 13 Sept 30 r1,327 2,540 2,324 862 375 406 680 217 204 13 Oct 31 rl 340 2,577 2,347 859 394 428 666 230 212 18 Nov. 30 rl 378 2,487 2,298 806 418 420 654 189 174 16 Dec 31 1,362 2,542 2,344 840 428 421 656 198 181 16 1959 Jan. 31 1 359 2,432 2,281 780 416 417 667 151 136 15 Feb. 28 1,363 2,379 2,227 744 412 413 658 152 138 13 Mar 31 1,361 2,419 2,258 746 424 428 660 161 146 15 Apr. 30 1,379 2,399 2,247 738 434 427 648 152 136 16 May 3\p .. . 1,401 2,428 2,264 732 423 434 675 164 149 15 June 30? 1,441 2,439 2,278 741 413 455 669 161 144 17 Area and country detail, April 30, 1959 Europe: 24 5 5 2 1 Belgium. 32 62 60 47 6 3 2 (2) 1 10 10 1 4 5 1 1 3 5 5 (2) 1 4 (2) 20 103 100 4 2 7 87 3 •) 1 Germany, Fed. Rep. of.... 9 58 48 9 4 18 17 11 10 (2) Greece 1 7 7 3 4 (2) Italy 25 33 33 7 9 8 1 1 Netherlands 18 40 37 2 20 10 4 3 3 (2) Norway 136 14 14 4 3 6 (2) Portusal 2 3 2 2 Spain 5 29 28 13 2 12 1 Sweden 31 14 13 4 4 4 1 i 3 45 36 18 11 3 4 9 9 Turkey • . 51 51 48 3 United Kinedom 87 94 26 10 2 12 4 68 64 4 1 1 (2) Other Europe 14 13 3 7 (2) (2) (2) Total 407 588 488 166 66 96 160 100 94 6 Canada 108 242 200 15 165 9 10 42 37 6 Latin America: 33 40 40 21 3 11 4 Bolivia (2) 3 3 1 3 (2) Brazil 260 136 135 36 23 18 58 (2) (2) (2) Chile 8 52 52 25 8 12 7 Colombia 23 50 50 6 6 21 16 (2) Cuba 96 153 153 112 12 15 14 (2) (2) (2) Dominican ReDublic 25 25 5 7 3 10 P) p G i u S at a e l m va a d l o a r 1 10 5 10 5 a(2) 2 7 3 2 1 (2) 112 263 260 52 26 88 2 2 (2) Netherlands W. Indies and Surinam 2 4 4 1 2 (2) Panama Reo of 23 23 23 18 3 1 « 14 38 38 5 17 14 (2) 1 33 33 2 4 2 25 (2) (2) Ven#zuela 46 139 136 11 34 46 45 3 1 3 Other Latin America 50 54 53 4 16 26 7 (2) (2) Total 669 1,027 1,020 323 191 212 294 7 3 4 P Preliminary. r Revised. 2 Less than $500,000. i Represents mainly loans with an original maturity of more than one year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1072 INFL CAPITAL TRANSACTIONS OF THE U. S. TABLE 4. CLAIMS ON FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES, BY TYPES—Continued [In millions of dollars] Short-term Payable in dollars Payable in foreign currencies Long- Area and term— Loans to: country total1 Total Collections Deposits Total Banks and out- Other Total with Other i o n f s fi t c it ia u l - Others standing foreigners tions Area and country detail, April 30, 1959—Continued As H ia o : ng Kong 2 8 8 4 3 {2l (2) India 9 6 5 1 3 (2) Indonesia 9 (2) Iran 4 34 1 33 Israel 11 18 18 4 1 2 11 Japan 15 224 224 60 2 27 136 (2) (2) Korea Rep of. .. ..... 2 2 2 Philippines 15 29 29 7 (2) 2 21 (2) (2) (2) Taiwan 9 9 6 (2) 3 Thailand 13 17 17 8 (2) 3 5 Other Asia 12 135 134 122 11 1 1 (2) (2) Total 90 481 480 212 5 85 178 P) All other: Australia 20 11 11 1 (2) 5 5 1 Belgian Congo 2 4 4 4 (2) Egypt 3 2 2 2 (2) (2) Union of South Africa 10 19 19 10 Other 74 24 23 10 4 9 1 (2) 1 Total 105 61 59 22 7 24 6 2 1 1 International institutions.... Grand total . . 1,379 2,399 2,247 738 434 427 648 152 136 16 1 Represents mainly loans with an original maturity of more than 2 Less than $500,000. one year. 3 Part of the United Arab Republic since February 1958. TABLE 5. PURCHASES AND SALES BY FOREIGNERS OF LONG-TERM SECURITIES, BY TYPES i [In millions of dollars] U. S. Govt. bonds & notes U. S. corporate securities2 Foreign bonds Foreign stocks Year or month c P ha u s r e - s Sales c s N a h l a e e s t s e p s ( u , - o r ) - r c P ha u s r e - s Sales c s N a h l a e e s t s e p s ( u , - o r ) - r c P ha u s r e - s Sales c s N a h l a e e s t s e p s ( u , - o r ) - r ch P a u s r e - s Sales c s N a h l a e e s t s e p s ( , u - o r ) - r 1955 1,341 812 529 1,886 1,730 156 693 509 184 664 878 -214 1956 883 1,018 -135 1,907 1,615 291 607 992 -385 749 875 -126 1957 666 718 -52 1,617 1,423 194 699 1,392 -693 593 622 -29 1958 1,224 1,188 36 1,759 1,798 -39 889 1,915 -1,026 467 804 -336 1958—June., 269 323 -53 136 153 -17 149 192 -43 25 42 -17 July. . 162 147 16 168 163 5 69 149 -80 26 47 -22 Aug.. 52 63 -11 138 149 -12 39 89 -50 27 43 -16 Sept.. 38 36 3 154 153 1 43 39 4 49 81 -32 Oct.. , 80 31 49 226 220 6 163 194 -31 44 75 -31 Nov.. 17 51 -34 192 182 11 56 129 -73 37 67 -30 Dec.. 58 53 5 206 203 3 104 231 -127 38 73 -35 1959—Jan... 127 23 104 213 195 18 134 186 -52 45 135 -90 Feb.. 78 86 -7 181 164 17 99 185 -86 41 73 -32 Mar.. 37 18 19 231 224 7 63 89 -26 45 84 -39 Apr.. 59 19 39 226 196 30 49 74 -25 51 76 -25 May2*, 38 23 15 240 203 37 111 169 -57 47 83 -36 J 24 23 1 222 181 41 45 45 49 56 -6 v Preliminary. 2 Includes small amounts of U. S. municipal securities. 1 Includes transactions of international institutions. 3 Less than $500,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BSTL CAPITAL TRANSACTIONS OF THE U. S. 1073 TABLE 6. NET PURCHASES BY FOREIGNERS OF UNITED STATES CORPORATE SECURITIES, BY TYPE OF SECURITY AND BY COUNTRY 1 [Net sales, ( —). In millions of dollars] Type of security Country Year or month Total 2 Stocks Bonds Belgium France N la e e n r t d - h s - S l w a e n r i - t d z- U K d n i o n i m t g e - d E O u t r h o e p r e E T u o ro ta p l e Canada A L m i a c t a e in r- ot A he ll r2 1955 156 128 29 14 9 -21 142 30 10 183 -80 27 26 1956 . 291 256 35 23 23 —7 147 87 7 280 -53 38 27 1957 194 143 51 14 8 35 101 77 20 255 -99 23 15 1958 -39 -56 17 -3 2 -8 19 -1 1 10 -86 23 14 1958 June -17 -2 -15 (3) 1 -3 1 -2 -3 -10 -5 1 July 5 14 -9 (3) 3 -1 3 -9 -3 8 1 A Se u p e t -12 -1 -7 6 4 8 ( ( 3 3 ) ) 1 4 - - 2 1 -4 4 -6 3 -6 2 1 Oct . . 6 3 3 5 1 4 -7 6 Nov 11 1 10 -1 13 -4 1 9 -6 6 Dec 3 -3 6 (3) 4 A 14 -7 -3 3 -6 3 3 1959 Jan 18 19 2 1 1 17 -6 1 13 3 Feb 17 15 2 2 2 7 2 2 15 -1 2 2 Mar 7 2 5 (3) 20 -12 1 8 -6 2 3 Apr 30 25 5 (3) 1 27 -2 4 31 -8 2 4 J M un ay e/ P 1 4 3 1 7 3 3 6 6 5 1 (3) (3) 4 2 2 1 1 4 4 4 5 3 3 3 1 -3 2 2 3 4 5 Preliminary, 2 Includes transactions of international institutions. i Includes small amounts of U. S. municipal securities. 3 Less than $500,000. TABLE 7. NET PURCHASES BY FOREIGNERS OF LONG-TERM TABLE 8. DEPOSITS AND OTHER DOLLAR ASSETS HELD AT FOREIGN SECURITIES, BY AREAS FEDERAL RESERVE BANKS FOR FOREIGN CORRESPONDENTS i [Net sales, (—). In millions of dollars] [In millions of dollars] Y m e o a n r t o h r n t a I u i n n t t i i t s o o e t n i r n - - a s l f c T o t o r r o e i u t e i n a g s l - n Europe C a a d n a - A L i m a c t a e in r- Asia o A th l e l r Date Deposits U. S A . s G se o t v s t . in cus M to i d sc y elsecurities 2 laneous 3 1955 -27 -4 -46 74 24 -49 n 1956 . . . -33 -478 8 -447 17 -40 -16 1957—Dec. 31 356 3,729 353 1957 -384 -338 231 -552 15 -45 13 1958 — 558 — 805 -72 -543 5 -45 -150 1958—July 31 288 3,167 541 Aug. 31 313 3,344 523 1958—June... -91 31 82 -44 2 -3 -5 Sept. 30 258 3,609 493 July.... -17 -84 -26 -55 1 -4 0) Oct. 31 288 3,777 481 Aug -15 -51 -11 -30 -8 — 1 J Nov. 30 226 3,822 487 Sept 3 -31 12 -10 2 2 -33 Dec. 31 272 3,695 480 Oct.... -11 -50 -32 -10 — i 2 -5 Nov.... -6 -97 -3 -67 C1) -6 -22 1959_jan. 31 274 3,681 510 Dec.... -96 -66 a -14 -6 -8 -31 Feb. 28 310 3,857 509 Mar. 31 307 3,593 509 1959_ F ja e n b.... -44 6 -1 -9 2 9 4 - - 3 1 7 4 - - 5 6 9 4 -3 5 - - 4 9 1 2 1 A M p a r y . 3 3 0 1 2 29 6 1 6 3 3 , , 5 7 5 5 9 0 5 52 0 4 4 Mar.... -5 -60 -22 -24 Q o 3 June 30 294 3,900 528 Apr -8 -42 -28 -2 -3 -8 -1 July 31 278 4,131 525 May*3.. -50 -43 18 -61 3 -4 2 June*\ . -8 2 5 C1) 3 -7 2 1 Excludes assets held for international institutions, and earmarked gold. See note 4 at bottom of next page for total gold under earmark p Preliminary. at Federal Reserve Banks for foreign and international accounts. i Less than $500,000. 2 U. S. Treasury bills, certificates of indebtedness, notes and bonds. 3 Consists of bankers' acceptances, commercial paper, and foreign and international bonds. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1074 U. S. GOLD NET GOLD PURCHASES BY THE UNITED STATES, BY COUNTRIES [In millions of dollars at $35 per fine troy ounce. Negative figures indicate net sales by the United States] Quarterly totals Annual totals 1958 1959 Area and country 1951 1952 1953 1954 1955 1956 1957 1958 Jan.- Apr.- July- Oct.- Jan.- Mar. June Sept. Dec. Mar. Continental Western Europe: -6.2 -84.2 25 9 58 3 Belgium 1-18.3 1-5.8 1-94.8 3.4 3.4 -329.4 -14.2 -143.6 -113.4 -58.3 20.0 —67.5 -33.8 Germany (Fed. Rep. of) -10.0 -130.0 -225.6 -10.0 Italy "-348'8 168 8 123 8 56 3 Netherlands -4.5 -ioo.6 -65.0 25.0 -260.9 -41.9 -62.9 -46.4 -109.7 -29.9 Portugal — 34 9 -59.9 -54^9 -5.6 -20.0 —20 0 -32.0 — 5.0 -20.0 -15.0 15.2 -15.0 22.5 -65.0 -15.5 -8.0 -215.2 -5.0 —135.i — 75 1 Bank for Int'l Settlements -30.4 -94.3 -20.0 -178.3 -15.1 -74.4 -60.7 -28.0 -7.0 Other -29.7 -17.3 -17.5 8.8 •••4:6 339 .'3 38.4 -18.5 -2.3 329.2 -1.3 Total -184.8 -115.6 -546.4 -328.3 -78.5 -20.2 67.7 -1,428.3 -76.2 -623.2 -447.5 -281.4 -38.2 Sterling Area: United Kinsdom 469.9 440.0 -480.0 -50.0 100.3 -900.0 -300.0 -450.0 -50.0 -100.0 Union of South Africa 52.1 11.5 Other 3.6 -.3 -.5 -.5 -.1 Total 525.6 451.2 -480.5 -50.5 -.1 100.3 -900.0 -300.0 -450.0 -50.0 -100.0 Canada .. . -10.0 7.2 14.6 5.2 Latin America: Argentina -49.9 -20.0 -84.8 115.3 75.4 67.2 12.0 55.2 -60.2 87.7 -28.1 Venezuela -.9 -30.0 -200.0 Other -15.0 -10.2 -18.8 12.2 14.0 56.4 5.5 1.8 -.1 -.4 -.3 2.6 -.5 Total -126.0 57.5 -131.8 62.5 14.0 -28.3 80.9 69.0 -.1 4 11.7 57.8 c -53.7 -6.7 -5.7 -9.9 -4.9 -.2 18.0 4-27.1 -.6 A —2 74—23 44 — 45 1 AH other -76.0 -.4 1.0 14.1 -.2 -.7 -.5 — .1 _ 1 — 1 Total foreign countries. . 75.2 393.6 -1,164.3 -326.6 -68.5 80.2 171.6 -2,287.1 -377.4 -1,074.1 -488.5 -347.1 -83.8 200.0 600.0 -7.1 — 7 1 -8.8 Grand total. 75.2 393.6 -1,164.3 -326.6 -68.5 280.2 771.6 -2,294.2 -377.4 -1,081.2 -488.5 -347.1 -92.6 1 Includes sales of gold to Belgian Congo as follows (in millions): 1951, 4 Includes sales of gold to Japan as follows (in millions): 1958, $30.1: $8.0; 1952, $2.0; and 1953, $9.9. 2 LeSs than $50,000. and 1959, Jan.-Mar., $49.9. 3 Includes purchases of gold from Spain as follows (in millions): 1957, 5 Figures represent purchase of gold from, or sale to ( —), International $31.5; and 1958, $31.7. Monetary Fund. ANALYSIS OF CHANGES IN GOLD STOCK OF THE UNITED STATES [In millions of dollars] Year T ( r G e e n a o d s l d - o f s T t y o o e c a t k a r) li in c o T s c g r r t r o e o o e d a t l c a a d s e k s l e - e : , i e m g x N ( o o p ) p e r l o o d t r r t t, g m c o c o r E l r a r e d e r a a : a k i r s n s d - e e e - d e , - D p ti r c o t o i m o d g n o u e l c s d - - Month ( T e r u n G e r d a y o s l o d - f m s T to o o c n t k a th l 1 ) in c o s T c g r t r r o o e o e d a t c l a a d s e k s l e - : e, i e m g x N ( o o p ) p e r l o o d t r r t t, g m c o c o r E l r a r e d e r a a : a k i r s n s d e - e e - d e , - D p ti r c o t o i m o g d n o u e l c s d - - 1946 20,529 20,706 623.1 311.5 465.4 51 2 1958—June. 21,356 21,412 -262.4 3.4 -285.0 4.9 1947 22,754 22,868 22,162.11,866.3 210.0 75 8 July. 21,210 21,275 -136.5 18.0 -164.3 6.1 1948 24,244 24,399 1,530.41,680.4 -159.2 70 9 Aug., 21,011 21,082 -193.1 3.7 -196.7 5.4 1949 24,427 24,563 164.6 686.5 -495.7 67 3 Sept. 20,874 20,929 -153.2 71.2 -220.2 6.2 1950 22,706 22,820-1,743.3 -371.3 -1,352.4 80 1 Oct.. 20,690 20,741 -188.4 5.4 -189.0 6.7 Nov. 20,609 20,653 -88.0 11.7 -96.9 5.5 1951 22,695 22,873 52.7-549.0 617.6 66 3 Dec.. 20,534 20,582 -70.7 12.2 -79.3 5.9 1952 23,187 23,252 379.8 684.1 -304.8 67 4 1953 22,030 22,091 -1,161.9 2.0 -1,170.8 69 0 1959—Jan.. 20,476 20,527 -55.5 10.3 -65.6 4.2 1954 21,713 21,793 -297.2 16.1 -325.2 65 1 Feb.. 20,479 20,520 -6.7 9.9 -13.0 4.1 1955 21,690 21,753 -40.9 97.3 -132.4 65 7 Mar. 20,442 20,486 -33.6 18.3 -48.0 3.8 1956 21,949 22,058 305.9 106.1 318.5 65 3 Apr.. 20,305 20,358 -128.6 3.2 -127.5 3.8 1957 22,781 22,857 798.8 104.3 600.1 63 0 May. 20,188 20,227 -130.3 9.6 -136.5 4.1 1958 20,534 20,582-2,275.1 259.6 -2,515.0 63 0 June. 19,705 19,746 3-481.9 15.4 -491.7 July. *>19,626?19,672 »-73.3 5-98.1 * Preliminary. to the International Monetary Fund. 1 Includes gold in Exchange Stabilization Fund. Gold in active portion 3 Includes payment of $343.8 million as increase in United States of this Fund is not included in regular statistics on gold stock (Treasury gold subscription to the International Monetary Fund. gold) used in the Federal Reserve statement "Member Bank Reserves, 4 Not yet available. Reserve Bank Credit, and Related Items" or in the Treasury statement 5 Gold held under earmark at the Federal Reserve Banks for foreign "United States Money, Outstanding and in Circulation, by Kinds." and international accounts amounted to $9,518.1 million on July 31, 1959. 2 Net after payment of $687.5 million as United States gold subscription Gold under earmark is not included in the gold stock of the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

GOLD RESERVES AND DOLLAR HOLDINGS 1075 ESTIMATED GOLD RESERVES AND DOLLAR HOLDINGS OF FOREIGN COUNTRIES AND INTERNATIONAL INSTITUTIONS [In millions of dollars] Dec. 3U 1957 Mar. 31,1958 June 30, 1958 Sept. 30, 1958 Dec. 3I, 1958 Mar. 3 , 1959* Area and country Gold& U. S. Gold& U.S. Gold& U.S. Gold& U.S. Gold& U.S. Gold& U.S. short- Govt. short- Govt. short- Govt. short- Govt. short- Govt. short- Govt. term bonds term bonds term bonds term bonds term bonds term bonds dollars & notes dollars & notes dollars & notes dollars & notes dollars & notes dollars & notes Continental Western Europe: Austria 452 8 458 7 466 7 554 7 605 7 629 7 Belgium-Luxembourg (and Belgian Congo).. 1,184 8 1,259 7 1,390 7 1,471 6 1,522 6 1,489 6 143 6 162 6 145 6 193 6 200 6 169 43 Finland 99 5 96 5 82 5 98 5 104 1 113 1 France (and dependencies) * 946 9 911 10 890 26 1,019 11 1,134 12 1,246 12 Germany (Federal Republic of) 4,099 14 3,971 15 4,043 12 4,330 13 4,394 13 4,063 15 167 167 135 125 139 151 Italy 1,531 2 1,528 2 1,678 1,934 j 2,207 2 2 421 2 Netherlands (and Netherlands West Indies and Surinam) 1,044 14 1,260 14 1,289 13 1,389 13 1,497 15 1 614 17 Norway 138 105 150 95 151 89 144 97 173 120 151 125 Portugal Cand deoendencies) 651 658 678 694 707 728 Spain (and dependencies) 126 3 130 132 3 134 (23> 106 3 100 ^ I Sweden . 479 5 461 8 458 4 496 507 10 498 31 Switzerland 2,685 128 2,620 118 ?,684 88 2,733 88 2,777 76 2,781 80 Turkey 162 S 157 156 154 164 164 Other 3 851 962 6 1,131 5 1,165 6 1,370 3 1,341 16 Total 14,757 319 14,950 296 15,508 269 16,633 259 17,606 274 17,658 358 Sterling Area: United. Kin.2d.on1 2,875 205 3,460 241 3,810 220 3,851 216 3,725 194 3,925 184 U A n u i s t t e ra d l i K a ingdom dependencies 2 1 1 0 1 4 4 2 1 1 0 8 2 4 2 1 2 0 2 1 (7 2 1 2 0 8 0 4 2 1 4 0 1 9 4 2 1 4 1 5 0 4 India 329 326 1 328 320 1 324 (2) 337 (2} Union of South Africa 255 1 231 1 183 1 216 1 241 1 221 Other 228 34 230 37 230 35 233 41 251 43 250 49 Total 4,002 245 4,567 284 4,874 261 4,948 263 4,891 242 5,088 238 Canada 2,738 457 2,722 441 3,087 345 3,032 346 3,097 341 3,159 344 Latin America: 263 270 265 245 203 233 Brazil 456 1 440 1 450 1 458 j 463 504 j 115 1 117 1 126 1 124 1 140 135 (2) 215 (2) 200 192 8 207 241 262 Cuba 3 9 71 2 1 l 54 3 9 71 3 1 1 46 4 9 17 1 1 4 7 09 5 86 3 6 66 9 86 3 7 43 0 86 M^exico . 566 536 485 <>> 517 561 543 Panama Reoublic of 136 148 140 148 1 146 2 156 2 Peru 88 82 93 92 96 93 235 266 258 260 2 262 276 /2\ Venezuela 1,554 2 1,428 2 1,460 2 1,233 2 1,213 2 1.227 2 Other 277 13 300 12 304 12 272 12 248 11 292 13 Total 4 368 176 4 251 168 4,281 108 4,040 108 4,008 106 4 134 107 Asia: Indonesia 190 (2) 128 127 129 145 156 1 Xran 193 (2) 190 (2) 202 (2) 181 (2) 184 (2) 195 Japan 714 2 833 932 1 1,018 1 1,094 1,226 i PhiliDoines 181 5 196 5 175 5 191 3 186 3 180 3 Thailand 269 1 269 I 260 1 252 245 1 250 1 Other 111 8 773 1 765 7 723 7 778 7 824 7 Total 2,324 16 2,389 15 2,461 14 2,494 12 2,632 12 2,831 13 Allother: 228 216 192 192 190 190 ft Other 162 7 171 8 152 136 8 140 8 149 Total 390 7 387 8 344 7 328 8 330 8 339 10 Total foreign countries5 28,579 1,220 29,266 1,212 30,555 1,004 31,475 996 32,564 983 33,209 1,070 International institutions . 2,697 222 2,563 356 2,696 446 2,790 462 2,876 495 3,027 523 Grand total5 31,276 1,442 31,829 1,568 33,251 1,450 34,265 1,458 35,440 1,478 36,236 1,593 v Preliminary. 5 Excludes gold reserves of the U. S. S. R., other Eastern European 1 Excludes gold holdings of French Exchange Stabilization Fund. countries, and China Mainland. 2 Less than $500,000. NOTE.—Gold and short-term dollars include reported and estimated 3 Includes Yugoslavia, Bank for International Settlements (including official gold reserves, and total dollar holdings as shown in Short-term European Payments Union account through December 1958 and Euro- Liabilities to Foreigners Reported by Banks in the United States by pean Fund account thereafter), gold to be distributed by the Tripartite Countries (Tables 1 and la-Id of the preceding section). U. S. Govt. Commission for Restitution of Monetary Gold, and unpublished gold bonds and notes represent estimated holdings with original maturities reserves of certain Western European countries. of more than one year; these estimates are based on a survey of selected * Part of the United Arab Republic since February 1958. U. S. banks and on monthly reports of security transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1076 GOLD RESERVES REPORTED GOLD RESERVES OF CENTRAL BANKS AND GOVERNMENTS [In millions of dollars] Esti- Int'l Esti- Bel- E m n o d n t o h f m to a t t a e l d M ta o r n y e- U S n ta i t t e e s d r m es a t t e o d f A t r i g n e a n- t A ra u l s i - a A tr u i s a - C g o i n an go g B i e u l m - Brazil Canada Chile lo C m o b - ia world i Fund world 1952 Dec 36,000 1.692 23,252 11,055 287 112 52 80 704 320 896 42 76 1953 Dec 36 435 I 702 22 091 12 640 372 117 52 101 776 321 996 42 86 1954 Dec 37,080 ,740 21,793 13,545 372 138 62 115 778 322 1,080 42 86 1955 Dec 37 740 808 21 753 14 180 372 144 71 116 929 323 1,141 44 86 1956—Dec, 38,245 ,692 22,058 14,495 224 107 71 122 925 324 1,113 46 57 1957 Dec 38,970 ,180 22,857 14,935 126 126 103 81 915 324 1,115 40 62 1958 June 39,395 ,242 21,412 16,740 125 147 103 83 1,140 325 1,086 40 67 July ,242 21 275 125 150 107 82 1,182 325 1,096 40 68 Auc 247 21 082 125 153 125 82 1,212 325 1,088 40 69 Sept 39 545 ,307 20,929 17,310 114 154 136 82 1,228 325 1,088 40 70 Oct 307 20 741 74 157 144 83 1,251 325 1 085 40 70 Nov 331 20,653 74 160 155 83 1,270 325 1,089 40 71 Dec 39,865 ,332 20,582 17,950 162 194 83 1,270 325 1,078 40 72 1959 Jan 332 20 527 200 78 1,248 325 1 076 40 72 Feb ,349 20 520 208 69 1,225 326 1,082 40 72 Mar *>40 065 352 20 486 *>18 225 212 69 1 246 326 1 072 40 73 Apr 353 20 358 222 65 1,265 326 1,071 40 73 May S7? 20 227 222 63 1 289 326 1 074 40 74 June . 19 746 255 1,270 326 1,073 40 Ger- Domin- many, E m n o d n t o h f Cuba m De a n rk - Re ic p a u n b- E d c o u r a- Egypt2 E v l a d S o al r - l F a i n n d - France 3 R F e e p d u e b ra li l c Greece G m a a u l t a e- India I n n e d s o ia lic of 1952 Dec 214 31 12 23 174 29 26 573 140 10 27 247 235 1953 Dec . . .. 186 31 12 23 174 29 26 576 328 11 27 247 145 1954 Dec 186 31 12 23 174 29 31 576 626 11 27 247 81 1955 Dec 136 31 12 23 174 28 35 861 920 11 27 247 81 1956 Dec 136 31 11 22 188 28 35 861 1,494 10 27 247 45 1957 Dec 136 31 11 22 188 31 35 575 2,542 13 27 247 39 1958 June 136 31 11 22 174 31 35 575 2,575 27 247 38 July 136 31 11 22 174 31 35 589 2,581 27 247 38 Aug 136 31 11 22 174 31 35 589 2,587 27 247 38 Sept •. 135 31 11 22 174 31 35 589 2,597 27 247 38 Oct 135 31 11 22 174 31 35 589 2,633 27 247 38 Nov 120 31 11 22 174 31 35 589 2,639 27 247 38 Dec 80 31 11 22 174 31 35 589 2,639 27 247 37 1959 Jan 31 11 22 174 31 35 589 2,678 27 247 37 Feb 31 11 22 174 31 38 589 2,678 27 247 37 Mar 31 11 22 174 31 38 589 2,678 27 247 37 Apr 31 11 20 174 31 38 589 2 678 27 247 36 May 31 11 20 174 31 38 589 2 684 247 41 June • . 31 11 20 174 31 38 589 2,704 247 41 Ire- E m n o d n t o h f Iran Iraq R l e a p n u d b , - Italy a L n e o b- n M ic e o x- N l e a t n h d e s r- Ze N a e la w nd N w o a r y - P s a ta k n i- Peru ip P p h i i n l e - s Po g r a t l ulic of 1952 Dec 138 18 346 31 144 544 33 50 38 46 9 286 1953 Dec . . . 137 18 346 35 158 737 33 52 38 36 9 361 1954 Dec 138 18 346 63 62 796 33 45 38 35 9 429 1955 Dec 138 8 18 352 74 142 865 33 45 48 35 16 428 1956 Dec .. . 138 14 18 338 77 167 844 33 50 49 35 22 448 1957—Dec 138 20 18 452 91 180 744 33 45 49 28 6 461 1958 June ... . 138 25 18 607 91 153 910 33 43 49 20 11 474 July 138 25 18 677 91 150 920 33 43 49 20 12 474 Aug • 138 25 18 754 91 148 944 33 43 49 20 13 486 Sept 138 25 18 847 91 147 956 33 43 49 20 14 486 Oct 141 25 18 907 91 146 999 33 43 49 19 15 486 Nov 141 34 18 995 91 144 1,026 33 43 49 19 9 486 Dec 141 34 18 1,086 91 143 1,050 33 43 49 19 10 493 1959—Jan 141 34 18 1,119 91 143 1,125 33 43 49 19 11 498 Feb 141 34 18 1,155 95 143 1,145 33 43 49 19 7 498 Mar 140 34 18 1,190 102 142 1,164 33 43 49 19 7 501 Apr 140 18 102 1,164 33 43 49 19 9 502 May 140 18 102 1,164 33 43 50 19 9 507 18 102 1,164 33 43 50 19 10 Preliminary. For other notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

GOLD RESERVES AND PRODUCTION 1077 REPORTED GOLD RESERVES OF CENTRAL BANKS AND GOVERNMENTS—Continued [In millions of dollars] Bank Euro- E m n o d n t o h f A So fr u ic th a Sweden Sw la i n tz d er- Syria 2 T la h n a d i- Turkey U K d n o i i n m t g e 4 - d U gu r a u y - V zu e e n l e a - Y sl u av g i o a - S I e f n t o t t r l 'l e- m p P e e a a n y n t - s ments Union 1952—Dec 170 184 ,411 14 113 143 1,846 207 373 12 196 158 1953 Dec . 176 218 ,459 14 113 143 2,518 227 373 13 193 153 1954—Dec 199 265 ,513 17 113 144 2 762 227 403 14 196 153 1955 Dec 212 276 ,597 19 112 144 2,120 216 403 16 217 244 1956—Dec 224 266 ,676 19 112 144 2,133 186 603 17 179 268 1957 Dec 217 219 ,718 24 112 144 2,273 180 719 13 165 254 1958 June 159 204 ,857 24 112 144 3,076 180 720 14 200 126 July 167 204 ,907 24 112 144 3 084 180 719 14 167 Aug 180 204 929 24 112 144 3 089 180 719 15 171 Sept . . .. 188 204 ,934 24 112 144 3,120 180 719 15 187 126 Oct 201 204 1,935 24 112 144 3 174 180 719 15 198 Nov 210 204 1,924 24 112 144 3,215 180 719 17 238 Dec 211 204 1,925 24 112 144 3,069 180 719 17 339 126 1959—jan 212 204 1,993 24 112 144 3 111 180 719 17 312 Feb 211 204 1,993 24 112 144 3,156 180 719 17 351 Mar 193 204 1,935 112 144 3,139 180 719 17 378 Apr 190 204 1,931 112 144 3,251 180 719 15 533 May 197 204 1,912 112 144 3,119 180 719 10 479 June 201 205 1,909 144 3,172 180 10 486 1 Excludes U.S.S.R., othsr Eastern Europsan countries, and China 2 Part of the United Arab Republic since February 1958. Mainland. 3 Represents holdings of Bank of France (holdings of French Exchange Represents reported gold holdings of central banks and governments Stabilization Fund are not included). and international institutions, unpublished holdings of various central 4 Beginning with December 1958, represents Exchange Equalization banks and governments, estimated holdings of British Exchange Equaliza- Account gold and convertible currency reserves, as reported by British tion Account based on figures shown for United Kingdom, and esti- Government; prior to that time represents reserves of gold and United mated official holdings of countries from which no reports are received. States and Canadian dollars. GOLD PRODUCTION [In millions of dollars at $35 per fine troy ounce] Production reported monthly Estimated Year or pro w d o u r c ld tion Africa North and South America Other month U.S.S.R.) Total A So fr u ic th a R de h s o i - a Ghana B C e o l n g g ia o n U S n ta i t t e e s d C a a d n a - M ic e o x- r N ag ic u a a - 1 Brazil Chile Co b l i o a m- t A ra u l s i - a India 1951 840.0 763.1 403.1 17.0 22.9 12.3 66.3 153.7 13.8 8.8 4.8 6.1 15.1 31.3 7.9 1952 868.0 785.7 413.7 17.4 23.8 12.9 67.4 156.5 16.1 8.9 4.9 6.2 14.8 34.3 8.9 1953 864.5 780 5 417.9 17.5 25.4 13.0 69.0 142 A 16.9 9.1 4.0 4.6 15.3 37.7 7.8 1954 '910.0 830.4 462.4 18.8 27.5 12.8 65.1 152.8 13.5 8.2 4.2 4.4 13.2 39.1 8.4 1955. r955.5 877 7 510.7 18.4 23.8 13.0 65.7 159.1 13.4 8.1 3.9 4.3 13.3 36.7 7.4 1956 994.0 914.8 556.2 18.8 21.9 13.1 65.3 153.4 12.3 7.6 4.3 3.3 15.3 36.1 7.3 1957 r\,036.0 956 3 596.2 18 8 27.7 13.1 63.0 155.2 12.1 6.9 4.2 3.6 1 4 37.9 6.3 1958 ... . 1,064.0 2981.5 618.0 19.4 29.2 12.8 63.0 158.8 11.6 7.2 3.9 13.0 38.6 6.0 1958 May. .. 81.3 51.6 1.6 2.4 1.0 4.6 13.3 .9 .6 .4 .3 1.1 3.2 .4 June 81.5 50.6 1.6 2.5 1.4 4.9 13.4 .9 .6 .3 .3 .2 3.3 .5 July... . 84.5 52.4 1.5 2.5 .9 6.1 13.2 .7 .7 .4 .5 3 7 5 Aus 83.1 52.6 1.6 2.5 1.2 5.4 12.8 1.0 .7 .3 .7 .9 3.0 .5 O Se c p t. t . . 2 28 8 6 4 .7 7 5 5 3 4 . . 0 0 1 1. . 6 7 2 2 . .4 5 1. . 1 9 6 6. . 7 2 1 1 3 4 . . 1 0 1 1 . . 2 1 . .6 6 . .3 4 9 3 3 3 . .3 5 . . 5 5 Nov 283.3 53.3 1.7 2.5 1.0 5.5 12.9 1.1 .6 .3 1.0 3.1 .5 Dec 283.3 53.1 1.7 2.2 .7 5.9 13.2 .5 .6 .3 0 3.6 .5 1959 Jan 54.1 1.6 2.6 1.2 4.2 13.2 5 3 1.3 2.8 .4 Feb 52.8 1.5 2.6 .9 4.1 12.5 .8 .3 1 3.0 .5 Mar . 55.9 1.7 2.6 1.0 3.8 13 2 .6 .3 7 Apr 57.9 3.8 13.2 .5 .3 1.0 May 4.1 13.3 .7 r Revised. Ghana, Belgian Congo and Brazil, data for which are from American 1 Gold exports, representing about 90 per cent of total production. Bureau of Metal Statistics. For the United States, annual figures through 2 Excluding Chile. 1957 are from the U. S. Bureau of the Mint and figures for 1958 and 1959 Sources.—World production: estimates of the U. S. Bureau of Mines. are from American Bureau of Metal Statistics. Production reported monthly: reports from individual countries except Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1078 INTERNATIONAL INSTITUTIONS INTERNATIONAL BANK FOR RECONSTRUCTION AND INTERNATIONAL MONETARY FUND DEVELOPMENT [End-of-month figures. In millions of dollars] [End-of-month figures. In millions of dollars] 1958 1959 1958 1959 Item Item Apr. July Oct. Jan. Apr. June Sept. Dec. Mar. June Gold 1,238 1,242 1,307 1,332 1,352 O Do th ll e a r r c d u e r p re o n si c t i s e s a n a d n d U s . e S c . u s r e it c i u es r i * ti . e . s . . . 9 7 1 5 7 2 9 7 0 4 0 7 9 6 4 9 3 3 9 6 3 3 7 6 9 65 6 7 6 I C n u v r e r s e tm nc e ie n s t : s 1 9 200 200 200 200 200 Effective loans*. 2,829 2,999 3,275 3,408 3,387 United States 696 664 717 780 951 Other assets* 93 91 101 92 93 Other 6,060 6,119 6,025 5,958 5,807 Gold and currency separate IBRD bonds outstanding 1,658 1,687 1,792 1,840 1,905 accounts: * ° Undisbursed loans 675 753 910 893 839 Gold 1 Other liabilities 27 27 24 28 28 Currency 4 Reserves 350 366 382 401 420 Unpaid member subscriptions 898 873 958 979 944 Capital* 1,881 1,904 1,904 1,911 1,911 Other assets 9 9 9 Member subscriptions.. 9,088 9,08819,193 9,228 9,228 Loans by country, June 30, 1959 Reserves and liabilities. 12 18 23 30 40 Outstanding Quota Cumulative net drawings Area and member country4 on the Fund Prin- Dis- Recipal bursed paid Sold Country Total to Paid 1958 1959 othersS Total in gold May Apr. May Continental Western Europe, total 1,418 1,177 239 937 160 Austria 91 60 60 3 Argentina 150 38 75 94 97 Belgium and Luxembourg.. 173 153 20 133 35 Bolivia 10 3 8 9 9 Denmark 60 42 5 38 4 Brazil 150 38 75 113 113 Finland 102 61 15 46 3 Burma 15 1 15 12 12 France 302 267 26 242 10 Chile 50 9 37 42 42 Italy 258 174 3 171 21 Netherlands 236 236 154 83 81 Colombia 50 13 35 30 25 Norway 75 64 2 62 Cuba 50 13 25 25 Turkey 61 59 6 53 France 525 108 328 394 394 Yugoslavia 61 61 9 52 Haiti 2 1 4 4 Honduras 2 4 1 3 Sterling area, total 1,416 1,179 131 1,048 118 C A e u y s l t o ra n lia 3 2 1 5 8 31 1 8 3 32 28 1 5 3 32 1 I I n n d d i o a nesia 4 1 0 1 0 0 2 1 8 6 2 5 0 5 0 2 5 0 5 0 20 5 0 5 India 532 429 32 397 31 Iran 35 9 17 17 17 Pakistan 126 87 15 72 2 Mexico 90 23 23 23 Union of S. Africa 197 175 42 132 28 United Kingdom 193 142 8 134 25 Paraguay 2 6 6 Other 25 16 1 15 Peru 25 3 15 15 Philippines 15 4 21 21 Latin America, total 934 671 111 560 18 Sudan 10 5 5 Brazil 267 176 26 150 Turkey 43 39 39 Chile 74 48 8 40 Colombia 131 99 29 70 Union of South Ecuador 46 14 1 13 Africa 100 25 25 36 25 El Salvador 32 23 2 21 United Arab Re- Mexico 186 157 15 142 public 60 10 30 30 30 Nicaragua 23 20 6 15 United Kingdom. 1,300 236 562 345 345 Peru 62 41 5 35 United States 2,750 688 n-l,991 n-l,763 n-l,751 Uruguay 64 55 8 47 Yugoslavia 60 23 23 23 Other 50 38 11 27 Asia (excluding Sterling area), 1 Currencies include demand obligations held in lieu of deposits. total 595 322 18 304 20 2 Represents principal of authorized loans, less loans not yet effective, Iran 147 75 75 5 repayments, the net amount outstanding on loans sold or agreed to be Japan 254 174 169 12 sold to others, and exchange adjustment. T L M P O h h e t a b h i a l l e a i i a l p r n y a p n a o i n d nes 1 2 3 0 1 7 6 6 7 9 ( 4 1 6 8 6 6 3 ) ( 4 1 6 1 6 3 ) 7 3 4 5 6 I I L L E n n e o x c c s a c l l s u u n l u d d t s h d e e t a e s s o s n a $ d u l 2 $ s e n 0 5 o p c 9 0 e a e 0 n m f l , f l d 0 e e i e 0 d c ll n t 0 i i o c p . v i n o e e r s l i t o n i a o a r l n n e o s s a i n n a o g c f s l r c u n e a d e o p d e t i d t y t a o e w l t b i s t e u e h f b f s e m o s c c l t d e r i m i v p b e b t u . i e o t r n n . s o . t yet disbursed. * Includes $299 million not guaranteed by the Bank. Afric a a r ea) ( , e t x o c t l a u l ding Sterling 63 27 • I ° U P . a S id . T b r y e a m su e r m y b b e i r ll s p p en u d rc in h g a se in d c r w e i a t s h e p i r n o c q e u e o d t s a f r b o e m co m sa i l n e g o f e g ff o e l c d ti . ve. Ethiopia 24 11 I1 Represents sales of U. S. dollars by the Fund to member countries Sudan 39 16 for local currencies, less repurchases of such currencies with dollars. Total 74,426 3,377 501 2,876 8319 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U. S. BALANCE OF PAYMENTS 1079 UNITED STATES BALANCE OF PAYMENTS [Department of Commerce estimates. Quarterly totals in millions of dollars] 1956 1957 1958 1959 Item Exports of goods and services, total1 5,380 6,009 5,7531 6,563 6,7431 7,010 6,326 6,654 5,566 5,920 5,571 6,142 5,414 Merchandise 3,960 4,420 4,112 4,887 5,108 5,158 4,462 4,662: 4,054 4,191 3,806 4,176 3,789 Services2 1,420 1,589 1,641 1,676 1,635 1,852 1,864 l,992j 1,512 1,729 1,765 1,966 1,625 j Imports of goods and services, total... 4,870 4,997 5,113 4,849 5,092 5,318 5,361 5,152 4,904 5,250 5,372 5,425 5,440 Merchandise 3,255 3,173 3,156 3,220 3,297' 3,344! 3,265 3,385 3,139 3,166 3,124 3,517 3,607 Services 834 1,025 1,263 948' 915 1,124! 1,381 1,047 936 1,176 1,407 1,070 1,028 Military expenditures 781 799 694' 681 880 850! 715 720 829 908 841 838 805 Balance on goods and services1 510 1,012; 640 1,714! 1,651 1,692| 965 l,502i 662 670 199 717 -26 Unilateral transfers (net) * -574 -6351 -544 -645| -576 -6621 -499 -581 -562 -599 -541 -616 -620 Private remittances and pensions... -154 -163 -164 -184 -184 -174j — 164j -180 -178 -170 -173 -186 -187 Government nonmilitary grants... . -420i —472; -380 -461! -392 -488; -335! -401 -384 -429 -368 -430 -433 U.S. long- and short-term capital (net) -554| -899 987-1,1791- 1,070 -1,563! -544 -956 -888 -1,247 -783 -892 -483 Private, total -417\ -690\ 806\-l,077\ -813 -1,364] -4lO\ -588\ -642 -1,025 -451 -726 -394 Direct investment -2881 -353J -524j -694! -402 -993j -339 -324 -155 -411 -156 -372 -242 Portfolio and short-term invest- ! i ment -129J -337! -282j -383! -411 — 371{ -71 -264 -487 -614 -295 -354 -152 Government -137! -2091 -181 -1021 -257 -199| -134 -368 -246 -222 -332 -166 -89 Foreign capital and gold (net) 605 441 647! -195 -381 316 -269 227 585 1,069 907 878 924 Increase in foreign short-term assets and Government securities 498 391 668! -2831 -199 514 -260 275 202 9 450 479 768 Increase in other foreign assets.... 119 153 143| H5i 166 127 18J 50 13 -15 -26 52 60 Gold sales by United States.... -12 -103 -164! -271 -348 -325 -27! -981 370 1,075 483 347 96 I I I Errors and omissions. 13 81 376 217 347| -192 203 107 218 -87 205 *> Preliminary. 2 Including military transactions. 1 Excluding military transfers under grants. 3 Minus sign indicates net outflow. OPEN MARKET RATES [Per cent per annum] Canada United Kingdom France Germany Netherlands Sw la i n tz d er- Month 3 T m re b o a il n s l u t s h ry s * m Da o d y n a - e y t y o 2 - 3 B a a a c m n n c o c e k n e p e t s t r h - s : ' * 3 T r m e b a i o l s l n u s t r h y s D m a d o y a n - y e to y - a B d ll e a o p n o w o k n a s e i n r t s c s ' e m Da o d y n a - y e t y o 3 - Tr d 6 e b 0 a a i - y l s 9 l s u s 0 4 ry D m a o d y n a - y e t y o 5 - T 3 r m e b a i o l s l n u s t r h y s D m a d o y a n - y e to y - d P is r r i c a v o t a e u t n e t 1956—Dec. 3.61 3.18 5.07 4.94 4.15 3.50 3.55 4.75 4.81 3.48 q.23 1.50 1957—Dec 3.65 3.60 6.67 6.43 5.67 5.00 5.72 3.75 3.25 4.64 3.33 2.50 1958—June 1.75 1.72 4.65 4.45 3.95 3.30 7.51 2.75 3.44 2.90 .34 2.50 July 1.31 1.18 4.31 4.15 3.62 3.00 6.85 2.63 2.88 2.88 .49 2.50 Aug 1.29 .67 3.98 3.81 3.36 2.70 6.97 2.50 2.56 2.62 L08 2.50 Sept 2.02 .48 3.82 3.65 3.17 2.50 6.46 2.50 2.88 2.62 >.16 2.50 Oct 2.48 1.51 3.80 3.65 3.19 2.50 5.50 2.38 2.56 2.83 >.5O 2.50 Nov 3.00 2.10 3.67 3.46 2.97 2.32 5.26 2.38 2.88 2.40 .79 2.50 Dec 3.46 2.07 3.34 3.16 2.70 2.00 6.07 2.38 2.63 2.26 .50 2.50 1959—Jan 3.34 2.07 3.28 3.12 2.73 2.00 4.39 2.25 2.38 2.04 .58 2.50 Feb 3.70 2.96 3.23 3.09 C2.73 2.00 4.23 2.25 2.94 1.75 .26 2.50 Mar 4.16 4.00 3.41 3.30 2.67 2.00 4.36 2.25 2.44 1.68 .42 2.25 Apr 4.57 4.41 3.40 3.25 2.69 2.00 4.13 2.00 2.31 1.61 .50 2.00 May 4.98 4.26 3.43 3.33 2.67 2.00 3.88 2.00 2.56 1.63 .34 2.00 June 5.15 4.49 3.54 3.45 2.74 2.00 2.00 2.50 1.82 .46 2.00 c Corrected. figures are averages of rates on government and private securities. 1 Based on average yield of weekly tenders during month. 4 Rate in effect at end of month. 2 Based on weekly averages of daily closing rates. 5 Based on average of lowest and highest quotation during month. 3 Beginning January 1957, rate shown is on private securities. Previous Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1080 MONEY RATES CENTRAL BANK RATES FOR DISCOUNTS AND ADVANCES TO COMMERCIAL BANKS 1 [Per cent per annum] Rate as of Changes during the last 12 months July 31, 1958 Rate Country 1958 1959 as of July 31, Per Month 1959 cent effective Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July 6.0 Dec. 1957 6.0 Austria 5 0 Nov 1955 4.5 4.5 3.75 July 1958 3.5 3 25 3.25 Brazil 10.0 Apr. 1958 10.0 Burma 3.0 Feb. 1948 3.0 Canada3 1.12 July 1958 1.74 2.52 3.08 3.13 3.74 3.53 4.32 4.55 5.01 5.15 5.36 5.72 5.72 Ceylon 2.5 June 1954 2.5 Chile2 6 0 Feb 1957 6.0 Colombia2 4.0 July 1933 4.0 Costa Rica* 3.0 Apr. 1939 3.0 Cuba* 5.5 Dec. 1957 5.5 5.0 Apr. 1958 4.5 4.5 10.0 May 1948 10.0 Egypt 3.0 Nov. 1952 3.0 ElSalvador2 4.0 Apr. 1957 4.0 6.5 Apr. 1956 6 0 6.0 France 5.0 Aug. 1957 4 5 4 25 4 0 4.0 Germany 3.0 June 1958 2 75 2.75 10.0 May 1956 10.0 Honduras4 2.0 Jan. 1953 2.0 Iceland 7.0 Apr. 1952 7.0 India* 4.0 May 1957 4.0 Indonesia2 3.0 Apr. 1946 3.0 Iran 4.0 Aug. 1948 4.0 Ireland 5.0 May 1958 4 5 4 25 4.25 Israel 6 0 Feb 1955 6.0 Italy 3.5 June 1958 3.5 Japan2 7.67 June 1958 7.3 6.94 6.94 Mexico 4.5 June 1942 4.5 Netherlands 3.5 June 1958 3 0 2 75 2.75 New Zealand 7.0 Oct. 1955 7.0 Nicaragua 6.0 Apr. 1954 6.0 Norway 3 5 Feb 1955 3.5 Pakistan 3.0 July 1948 4 0 4.0 Peru2 6 0 Nov 1947 6.0 Philippine Republic2 4.5 Sept. 1957 6.5 6.5 Portugal 2.0 Jan. 1944 2.0 South Africa 4.5 Sept. 1955 4 0 4.0 Spain 5.0 July 1957 5.0 Sweden 4.5 May 1958 4.5 Switzerland 2.5 May 1957 2.0 2.0 Thailand 7.0 Feb. 1945 7.0 Turkey 6.0 June 1956 6.0 United Kingdom 5.0 June 1958 4.5 4 0 4.0 Venezuela 2.0 May 1947 2.e 1 Rates shown represent mainly those at which the central bank either national public securities; El Salvador—3 per cent for agricultural and discounts or makes advances against eligible commercial paper and/or industrial paper and 2 per cent for special cases; Finland—rates ranging government securities for commercial banks or brokers. For countries up to 7.25 per cent for longer term paper (rate shown is for 3 month* with more than one rate applicable to such discounts or advances, the commercial paper); Indonesia—various rates depending on type of paper, rate shown is the one at which the largest proportion of central bank collateral, commodity involved, etc.; Japan—penalty rates (exceeding credit operations is understood to be transacted. In certain cases other the basic rate shown) for borrowings from the Central bank in excess rates for these countries are given in note 2. of an individual bank's quota; Peru—4 per cent for industrial paper and 2 Discounts or advances at other rates include: Argentina—3 and 5 mining paper, and 3 per cent for most agricultural paper; and Philippine per cent for certain rural and industrial paper, depending on type of Republic—4.5 per cent for crop loan paper and 5 per cent for export transaction; Brazil—8 per cent for secured paper and 4 per cent for packing credit paper. certain agricultural paper; Chile—rates of more than 6 per cent for 3 Since Nov. 1, 1956, the discount rate has been set each week at rediscounts in excess of 50 per cent of the rediscounting bank's capital lA of one per cent above the latest average tender rate for Treasury bills; and reserves, and 2 and 4 per cent for certain types of agricultural paper; end-of-month rate shown. Colombia—3 per cent for agricultural paper and for loans on products 4 Rate shown is for advances only. in bonded warehouses; Costa Rica—5 per cent for paper related to com- 5 Since May 16, 1957, this rate applies to advances against commercial mercial transactions (rate shown is for agricultural and industrial paper); paper as well as against government securities and other eligible paper. Cuba—4.5 per cent for sugar loans and 4 per cent for loans secured by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FOREIGN EXCHANGE RATES 1081 FOREIGN EXCHANGE RATES [Average of certified noon buying rates in New York for cable transfers. In cents per unit of foreign currency] Argentina (peso) Aus- Year or month (p tr o a u l n ia d) (s A ch u i s l t l r in ia g) B (f e r l a g n iu c m ) C (d a o n l a la d r a ) ( C r e u y p l e o e n ) ( F m i a n r l k an k d a) Official Free 1953. 7.198 224.12 3.8580 2.0009 101.650 21.046 .4354 1954. 7.198 223.80 3.8580 1.9975 102.724 21.017 .4354 1955. 7.183 222.41 3.8580 1.9905 101.401 20.894 .4354 1956. 5.556 2.835 222.76 3.8580 2.0030 101.600 20.946 .4354 1957. 5.556 2.506 222.57 3.8539 1.9906 104.291 20.913 .3995 1958. 15.556 12.207 223.88 3.8536 2.0044 103.025 21.049 .3118 1958—July.. 5.556 2.352 223.42 3.8536 2.0049 104.162 20.996 .3118 Aug.. 5.556 2.221 223.51 3.8536 2.0050 103.645 21.020 .3118 Sept.. 5.556 2.025 223.37 3.8536 2.0056 102.357 21.016 .3118 Oct.. 5.556 1.656 223.67 3.8536 2.0061 103.005 21.049 .3118 Nov.. 5.556 1.386 223.55 3.8536 2.0056 103.253 21.039 .3118 Dec. 15.556 11.518 223.41 3.8536 2.0057 103.660 21.032 .3118 1959—Jan... 21.5187 223.62 3.8444 2.0003 103.402 21.046 .3115 Feb.. 1.5242 223.85 3.8481 2.0004 102.583 21.063 .3114 Mar.. 1.4703 224.12 3.8484 1.9997 103.117 21.074 .3114 Apr.. 1.3680 224.42 3.8487 2.0037 103.774 21.089 .3114 May. 1.1774 224.27 3.8488 2.0057 103.838 21.081 .3114 June. 1.1091 224.11 3.8510 2.0027 104.278 21.072 .3120 July.. 1.1851 224.04 3.8506 2.0031 104.456 21.062 .3120 Year or month F (f r r a a n n c c e ) ( G d m e e r u a m t r s k a c ) n h y e (r I u n p d e ia e) ( I p re o l u a n n d d ) ( I l t i a r l a y ) J ( a y p e a n n ) ( M do a s l i l l a a a y r - ) M (p e e x s i o c ) o ( e g N r u l e i a l t n d h d e - s r) 1953. 21.049 281.27 32.595 11.607 26.340 1954. 23.838 21.020 280.87 32.641 9.052 26.381 1955. 23.765 20.894 279.13 32.624 8.006 26.230 1956. 23.786 20.934 279.57 .2779 32.582 8.006 26.113 1957. .2376 23.798 20.910 279.32 .2779 32.527 8.006 26.170 1958. 3.2374 23.848 21.048 280.98 .2779 32.767 8.006 26.418 1958—July. .2379 23.856 21.000 280.40 .2779 32.688 8.006 26.391 Aug.. .2382 23.861 21.019 280.51 .2779 32.701 8.006 26.409 Sept.. .2381 23.867 21.003 280.33 .2779 32.672 8.006 26.434 Oct.. .2381 23.892 21.029 280.70 .2779 32.744 8.006 26.508 Nov.. .2381 23.897 21.026 280.55 .2779 32.828 8.006 26.508 Dec. 3.2330 23.907 21.015 280.38 .2779 32.768 8.006 26.506 1959—Jan.., .2037 23.930 21.041 280.65 .2779 32.838 8.006 26.514 Feb... .2037 23.928 21.059 280.93 .2779 32.892 8.006 26.500 Mar.. .2039 23.914 21.073 281.27 4.1610 .2779 32.917 8.006 26.488 Apr.. .2039 23.913 21.101 281.65 .1610 .2779 32.975 8.006 26.501 May. .2039 23.911 21.087 281.45 .1610 .2779 32.951 8.006 26.488 June. .2039 23.931 21.049 281.25 .1611 .2779 32.870 8.006 26.504 July. .2038 23.918 21.032 281.17 .1611 .2779 32.856 8.006 26.515 Year or month Z (p e N o a u e la w n n d d ) N (k o r r o w n a e y ) R P ( e p p h p e i i u n l s i b e o p l ) - ic (e P s o g c r u a t l d u o - ) (p A S o o fr u u i n c th a d) (p S e p s a e i t n a) S (k w ro ed n e a n ) z ( S e fr r w a la n it n c - ) d ( U K p d n o i o i n u m t n g e - d d) 1953 278.48 14.015 49.676 3.4887 280.21 19.323 23.316 281.27 1954 278.09 14.008 49.677 3.4900 279.82 19.333 23.322 280.87 1955 276.36 14.008 49.677 3.4900 278.09 19.333 23.331 279.13 1956 276.80 14.008 49.676 3.4900 278.52 19.333 23.334 279.57 1957 276.56 14.008 49.693 3.4900 278.28 19.331 23.330 279.32 1958 278.19 14.008 49.695 3.4900 279.93 52.3810 19.328 23.328 280.98 1958—July. 277.62 14.008 49.695 3.4900 279.35 2.3810 19.328 23.335 280.40 Aug. 277.73 14.008 49.695 3.4900 279.46 2.3810 19.328 23.335 280.51 Sept. 277.55 14.008 49.695 3.4900 279.28 2.3810 19.328 23.335 280.33 Oct.. 277.93 14.008 49.695 3.4900 279.66 2.3810 19.328 23.300 280.70 Nov. 277.78 14.008 49.695 3.4900 279.51 2.3810 19.328 23.300 280.55 Dec 277.60 14.009 49.695 3.4900 279.33 2.3810 19.329 23.317 280.38 1959_jan.. 277.87 14.012 49.695 3.4917 279.60 2.3810 19.326 23.190 280.65 Feb.. 278.15 14.018 49.695 3.4974 279.88 2.3810 19.327 23.184 280.93 Mar. 278.49 14.029 49.695 3.4980 280.22 2.3810 19.325 23.133 281.27 • Apr., 278.86 14.048 49.695 3.5026 280.60 2.3810 19.330 23.134 281.65 May 278.67 14.041 49.695 3.5019 280.40 2.3810 19.326 23.133 281.45 June 278.47 14.052 49.695 3.5004 280.20 2.3810 19.327 23.194 281.25 July, 278.38 14.050 49.695 3.5001 280.12 62.0679 19.330 23.204 281.17 1 Based on quotations through Dec. 29, 1958. on June 23, 1958, became the official rate. On Dec. 29, 1958, the franc 2 Effective Jan. 12, 1959, the Argentine Government established a was further devalued to 493.706 francs per U. S. dollar. single exchange rate for the peso in place of the former official and free 4 Based on quotations beginning Mar. 2, 1959. rates. 5 Based on quotations beginning Jan. 2, 1958. 3 Effective rate of 420 francs per U. S. dollar, established Aug. 12, 1957, 6 Effective July 20, 1959 the par value for the Spanish peseta was set was extended to all foreign exchange transactions on Oct. 28, 1957, and at 60 pesetas per U.S. dollar. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOARD OF GOVERNORS of the Federal Reserve System WM. MCC. MARTIN, JR., Chairman C. CANBY BALDERSTON, Vice Chairman M. S. SZYMCZAK J. L. ROBERTSON CHAS. N. SHEPARDSON A. L. MILLS, JR. G. H. KING, JR. WINIFIELD W. RIEFLER, Assistant to the WOODLIEF THOMAS, Economic Adviser to the Chairman Board JEROME W. SHAY. Legislative Counsel CHARLES MOLONY, Assistant to the Board OFFICE OF THE SECRETARY DIVISION OF EXAMINATIONS MERRITT SHERMAN, Secretary FREDERIC SOLOMON, Director KENNETH A. KENYON, Assistant Secretary ROBERT C. MASTERS, Associate Director CLARKE L. FAUVER, Assistant Secretary C. C. HOSTRUP, Assistant Director FRED A. NELSON, Assistant Director LEGAL DIVISION GLENN M. GOODMAN, Assistant Director HOWARD H. HACKLEY, General Counsel HENRY BENNER, Assistant Director DAVID B. HEXTER, Assistant General Counsel JAMES C. SMITH, Assistant Director G. HOWLAND CHASE, Assistant General Counsel LLOYD M. SCHAEFFER, Chief Federal Reserve THOMAS J. O'CONNELL, Assistant General Examiner Counsel DIVISION OF RESEARCH AND STATISTICS DIVISION OF PERSONNEL ADMINISTRATION RALPH A. YOUNG, Director EDWIN J. JOHNSON, Director FRANK R. GARFIELD, Adviser GUY E. NOYES, Adviser H. FRANKLIN SPRECHER, JR., Assistant Director ROLAND I. ROBINSON, Adviser SUSAN S. BURR, Associate Adviser DIVISION OF ADMINISTRATIVE SERVICES ALBERT R. KOCH, Associate Adviser KENNETH B. WILLIAMS, Associate Adviser JOSEPH E. KELLEHER, Director LEWIS N. DEMBITZ, Research Associate OFFICE OF DEFENSE LOANS DIVISION OF INTERNATIONAL FINANCE ARTHUR W. MARGET, Director GARDNER L. BOOTHE, II, Administrator J. HERBERT FURTH, Associate Adviser A. B. HERSEY, Associate Adviser OFFICE OF THE CONTROLLER ROBERT L. SAMMONS, Associate Adviser J. J. CONNELL, Controller DIVISION OF BANK OPERATIONS SAMPSON H. BASS, Assistant Controller JOHN R. FARRELL, Director GERALD M. CONKLING, Assistant Director OFFICE OF DEFENSE PLANNING M. B. DANIELS, Assistant Director JOHN N. KILEY, JR., Assistant Director INNIS D. HARRIS, Coordinator 1083 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1084 FEDERAL RESERVE BULLETIN • AUGUST 1959 Federal Open Market Committee WM. MCC. MARTIN, JR., Chairman ALFRED HAYES, Vice Chairman CARL E. ALLEN J. A. ERICKSON J. L. ROBERTSON C. CANBY BALDERSTON DELOS C. JOHNS CHAS. N. SHEPARDSON FREDERICK L. DEMING G. H. KING, JR. M. S. SZYMCZAK A. L. MILLS, JR. WINFIELD W. RIEFLER, Secretary GEORGE W. MITCHELL, Associate Economist MERRITT SHERMAN, Assistant Secretary FRANKLIN L. PARSONS, Associate Economist KENNETH A. KENYON, Assistant Secretary ROBERT V. ROOSA, Associate Economist HOWARD H. HACKLEY, General Counsel PARKER B. WILLIS, Associate Economist FREDERIC SOLOMON, Assistant General Counsel RALPH A. YOUNG, Associate Economist WOODLIEF THOMAS, Economist ROBERT G. ROUSE, Manager, System HOMER JONES, Associate Economist Open Market Account ARTHUR W. MARGET, Associate Economist Federal Advisory Council LLOYD D. BRACE, BOSTON, Vice President HOMER J. LIVINGSTON, CHICAGO, President JOHN J. MCCLOY, NEW YORK WILLIAM A. MCDONNELL, ST. LOUIS CASIMIR A. SlENKIEWICZ, PHILADELPHIA GORDON MURRAY, MINNEAPOLIS REUBEN B. HAYS, CLEVELAND R. OTIS MCCLINTOCK, KANSAS CITY JOHN S. ALFRIEND, RICHMOND WALTER B. JACOBS, DALLAS JOHN A. SIBLEY, ATLANTA CHARLES F. FRANKLAND, SAN FRANCISCO HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Assistant Secretary Federal Reserve Banks and Branches Chairmen and Deputy Chairmen of Boards of Directors FEDERAL RESERVE CHAIRMAN AND BANK OF— FEDERAL RESERVE AGENT DEPUTY CHAIRMAN BOSTON ROBERT C. SPRAOUE NILS Y. WESSELL NEW YORK JOHN E. BIERWIRTH FORREST F. HILL PHILADELPHIA HENDERSON SUPPLEE, JR. LESTER V. CHANDLER CLEVELAND ARTHUR B. VAN BUSKIRK JOSEPH H. THOMPSON RICHMOND ALONZO G. DECKER, JR. D. W. COLVARD ATLANTA WALTER M. MITCHELL HARLLEE BRANCH, JR. CHICAGO BERT R. PRALL J. STUART RUSSELL ST. LOUIS PIERRE B. MCBRIDE J. H. LONGWELL MINNEAPOLIS LESLIE N. PERRIN O. B. JESNESS KANSAS CITY RAYMOND W. HALL JOE W. SEACREST DALLAS ROBERT J. SMITH HAL BOGLE SAN FRANCISCO A. H. BRAWNER Y. FRANK FREEMAN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANKS AND BRANCHES 1085 Presidents and Vice Presidents Federal Vice Presidents Reserve President (Vice Presidents in charge of branches are Bank of First Vice President listed in lower section of this page) Boston J. A. Erickson D. Harry Angney George H. Ellis Dana D. Sawyer E. O. Latham Ansgar R. Berge Benjamin F. Groot O. A. Schlaikjer New York.... Alfred Hayes Harold A. Bilby Robert V. Roosa H. L. Sanford William F. Treiber Charles A. Coombs Robert G. Rouse Todd G. Tiebout Marcus A. Harris Walter H. Rozell, Jr. R. B. Wiltse Herbert H. Kimball Philadelphia.. Karl R. Bopp Joseph R. Campbell Murdoch K. Goodwin James V. Vergari Robert N. Hilkert Wallace M. Catanach Philip M. Poorman Richard G. Wilgus David P. Eastburn Cleveland W. D. Fulton Dwight L. Allen Clyde Harrell Martin Morrison Donald S. Thompson Roger R. Clouse L. Merle Hostetler Paul C. Stetzelberger E. A. Fink Richmond Hugh Leach N. L. Armistead Aubrey N. Heflin Joseph M. Nowlan Edward A. Wayne J. Dewey Daane Upton S. Martin James M. Slay Atlanta Malcolm Bryan J. E. Denmark Harold T. Patterson Earle L. Rauber Lewis M. Clark John L. Liles, Jr. L. B. Raisty S. P. Schuessler J. E. McCorvey Chicago Carl E. Allen Ernest T. Baughman Hugh J. Helmer C. T. Laibly E. C. Harris W. R. Diercks Paul C. Hodge George W. Mitchell A. M. Gustavson Robert C. Holland H. J. Newman St. Louis Delos C. Johns Homer Jones Dale M. Lewis Joseph C. Wotawa Guy S. Freutel George E. Kroner Howard H. Weigel Minneapolis.. Frederick L. Deming C. W. Groth A. W. Johnson A. W. Mills M. B. Holmgren H. G. McConnell M. H. Strothman, Jr. Kansas City.. H. G. Leedy John T. Boysen Joseph S. Handford Henry O. Koppang George H. Clay E. U. Sherman Clarence W. Tow D. W. Woolley Dallas Watrous H. Irons James L. Cauthen G. R. Murff L. G. Pondrom Harry A. Shuford Thomas A. Hardin Thomas W. Plant Morgan H. Rice San Francisco H. N. Mangels J. L. Barbonchielli E. R. Millard John A. O'Kane Eliot J. Swan H. E. Hemmings R. H. Morrill O. P. Wheeler A. B. Merritt Vice Presidents in Charge of Branches of Federal Reserve Banks Federal Reserve Federal Reserve Bank of Branch Vice Presidents Bank of Branch Vice Presidents New York Buffalo I. B. Smith Minneapolis Helena Kyle K. Fossum Cleveland Cincinnati R. G. Johnson Pittsburgh J. W. Kossin Kansas City Denver Cecil Puckett Oklahoma City R. L. Mathes Richmond Baltimore D. F. Hagner Omaha P. A. Debus Charlotte Thomas I. Storrs Atlanta Birmingham H. C. Frazer Dallas El Paso Howard Carrithers Jacksonville T. A. Lanford Houston J. L. Cook Nashville R. E. Moody, Jr. San Antonio Carl H. Moore New Orleans M. L. Shaw Chicago Detroit R. A. Swaney San Francisco... Los Angeles W. F. Volberg St. Louis Little Rock Fred Burton Portland J. A. Randall Louisville Donald L. Henry Salt Lake City E. R. Barglebaugh Memphis Darryl R. Francis Seattle J. M. Leisner Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Board Publications Unless otherwise noted, the material listed may be obtained from the Division of Administrative Services, Board of Governors of the Federal Reserve System, Washington 25, D. C. Where a charge is indicated, remittance should accompany order and be made payable to the order of the Board of Governors of the Federal Reserve System. A more complete list, including periodic releases and additional reprints, appeared on pages 681-84 of the June 1959 Bulletin. THE FEDERAL RESERVE SYSTEM—PURPOSES AND THE FEDERAL FUNDS MARKET—A Study by a FUNCTIONS. April 1954. 208 pages. Federal Reserve System Committee. May 1959. Ill pages. $1.00 per copy; in quanti- ANNUAL REPORT OF THE BOARD OF GOVERNORS ties of 10 or more for single shipment, 85 cents OF THE FEDERAL RESERVE SYSTEM. each. FEDERAL RESERVE BULLETIN. Monthly. Sub- DEBITS AND CLEARINGS STATISTICS AND THEIR scription price in the United States and its pos- USE (rev. ed.). May 1959. 144 pages. $1.00 sessions, Bolivia, Canada, Chile, Colombia, per copy; in quantities of 10 or more for single Costa Rica, Cuba, Dominican Republic, Ecua- shipment, 85 cents each. dor, Guatemala, Haiti, Republic of Honduras, ALL-BANK STATISTICS, 1896-1955. Revised statis- Mexico, Nicaragua, Panama, Paraguay, Peru, tics for all banks in the United States, by class of El Salvador, Uruguay, and Venezuela is $6.00 bank, together with descriptive and explanatory per annum or 60 cents per copy; elsewhere material. Part I, U. S. Summary. Part II, Sum- $7.00 per annum or 70 cents per copy. Group maries by States and other areas. April 1959. subscriptions in the United States for 10 or 1,229 pages. $4.00. more copies to one address, 50 cents per copy THE FEDERAL RESERVE ACT, as amended through per month, or $5.00 for 12 months. December 31, 1956, with an Appendix con- FEDERAL RESERVE CHART BOOK ON FINANCIAL taining provisions of certain other statutes af- AND BUSINESS STATISTICS. Monthly. Annual fecting the Reserve System. 385 pages. $1.00. subscription includes one issue of Historical FLOW OF FUNDS IN THE UNITED STATES, 1939-53. Supplement. Subscription price in the United A new accounting record designed to picture States and the countries listed above is $6.00 the flow of funds through the major sectors of per annum; 60 cents per copy, or 50 cents each the national economy. December 1955. 390 for 10 or more of same issue for single shippages. $2.75. ment; elsewhere $7.00 per annum or 70 cents each. A STATISTICAL STUDY OF REGULATION V LOANS. September 1950. 74 pages. 25 cents per copy; HISTORICAL SUPPLEMENT TO FEDERAL RESERVE in quantities of 10 or more copies for single CHART BOOK. Issued annually in September. shipment, 15 cents each. Annual subscription to monthly chart book in- BANKING AND MONETARY STATISTICS. Statistics of cludes one issue of Supplement. In the United banking, monetary, and other financial develop- States and countries listed above under Federal ments. November 1943. 979 pages. $1.50. Reserve Bulletin, single copies 60 cents each or RULES OF ORGANIZATION AND RULES OF PROCEin quantities of 10 or more for single shipment DURE—Board of Governors of the Federal Re- 50 cents each; elsewhere 70 cents each. serve System. 1946. 31 pages. TREASURY-FEDERAL RESERVE STUDY OF THE GOV- REGULATIONS OF THE BOARD OF GOVERNORS OF ERNMENT SECURITIES MARKET. PART I. 108 THE FEDERAL RESERVE SYSTEM. pages. July 1959. Parts II and III will be issued ADMINISTRATIVE INTERPRETATIONS OF REGULAlater. Individual books $1.00 each; set of 3 TION F—SECTION 17—COMMON TRUST FUNDS. books $2.50. 9 pages. CONSUMER INSTALMENT CREDIT—Six books (Parts I-IV) giving the results of an intensive study of consumer instalment credit, undertaken by the Board on request of the Council of Economic Advisers by direction of the President. Pt. I—Growth and Import, Vol. 1, $1.25, Vol. 2, $1.00; Pt. II—Conference on Regulation, Vol. 1, $1.75, Vol. 2, $.60; Pt. HI—Views on Regulation, $1.00; Pt. TV—Financing New Car Purchases, $.60. Requests and remittances for these six books should be directed to the Superintendent of Documents, Government Printing Office, Washington 25, D. C. 1086 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BOARD PUBLICATIONS 1087 REPRINTS GROWTH AND STRUCTURE OF TIME DEPOSITS. (From Federal Reserve Bulletin unless preceded April 1958. 5 pages. by an asterisk) MONEY AND CREDIT IN THE RECESSION. July 1958. THE MONETARY SYSTEM OF THE UNITED STATES. February 1953. 16 pages. 7 pages. INFLUENCE OF CREDIT AND MONETARY MEASURES INTEREST RATES IN LEADING COUNTRIES. Sep- ON ECONOMIC STABILITY. March 1953. 16 tember 1958. 8 pages. pages. THE 1957-58 RECESSION IN WORLD TRADE. October 1958. 8 pages. FEDERAL FINANCIAL MEASURES FOR ECONOMIC STABILITY. May 1953. 7 pages. OPEN MARKET OPERATIONS IN LONG-TERM SE- * DETAILED DESCRIPTION OF SOURCES AND METH- CURITIES. November 1958. 15 pages. ODS USED IN REVISION OF SHORT- AND INTER- GOLD AND DOLLAR FLOWS IN 1958. March 1959. MEDIATE-TERM CONSUMER CREDIT STATISTICS. 6 pages. April 1953. 25 pages. OWNERSHIP OF DEMAND DEPOSITS. April 1959. DEPARTMENT STORE SALES AND STOCKS, BY 3 pages. MAJOR DEPARTMENTS (Revised Indexes). November 1953. 65 pages. MEMBER BANK TERM LENDING TO BUSINESS, 1955-57. April 1959. 16 pages. FEDERAL RESERVE MONTHLY INDEX OF INDUS- TRIAL PRODUCTION, 1953 Revision. December *PART I, ALL-BANK STATISTICS, 1896-1955. Re- 1953. 96 pages. print of the U. S. Summary containing a description of revised statistics for all banks in the SEASONAL ADJUSTMENT FACTORS FOR DEMAND United States, by class of bank, together with DEPOSITS ADJUSTED AND CURRENCY OUTSIDE BANKS. March 1955. 4 pages. revised statistics. April 1959. 100 pages. A FLOW-OF-FUNDS SYSTEM OF NATIONAL AC- BANKING AND MONETARY STATISTICS, 1958. Se- COUNTS, ANNUAL ESTIMATES, 1939-54. Octo- lected series of banking and monetary statistics ber 1955. 40 pages. for 1958 only. February and May 1959. 12 pages. (Similar reprint of 1957 data, February SURVEY OF BANK LOANS FOR COMMERCIAL AND INDUSTRIAL PURPOSES. Business Loans of and May 1958 BULLETINS.) Member Banks. April 1956. 14 pages. Credit SURVEY OF COMMON TRUST FUNDS, 1958. May Lines and Minimum Balance Requirements. 1959. 6 pages. (Also, similar reprints from June 1956. 7 pages. August 1956, June 1957, and May 1958 BUL- REVISION OF CONSUMER CREDIT STATISTICS. Oc- LETINS.) tober 1956. 24 pages. (Also, similar reprint PUBLIC DEBT MANAGEMENT. June 1959. 5 pages. from April 1953 BULLETIN.) 1959 SURVEY OF CONSUMER FINANCES. Prelimin- INDEX OF ELECTRICITY AND GAS OUTPUT. Oc- ary Findings. March 1959. 4 pages. The Fitober 1956. 15 pages. nancial Position of Consumers. July 1959. 24 AGRICULTURAL LOAN SURVEY. November 1956 pages. (Similar Surveys are available for earlier and January, February, and March 1957 BUL- years from 1952, 1953, 1955, 1956, 1957, and LETINS. 52 pages. 1958 BULLETINS.) UNITED STATES BANKING ORGANIZATION ABROAD. INTEREST RATES IN LEADING COUNTRIES. July December 1956. 16 pages. 1959. 6 pages. SUMMARY FLOW-OF-FUNDS ACCOUNTS 1950-55. MONEY AND CREDIT IN ECONOMIC EXPANSION. April 1957. 20 pages. July 1959. 10 pages. SURVEY OF FINANCE COMPANIES, MID-1955. April 1957. 17 pages. THE BALANCE SHEET OF AGRICULTURE, 1959. July 1959. 9 pages. REVISION OF MONTHLY DEPARTMENT STORE IN- DEXES. December 1957. 30 pages. A QUARTERLY PRESENTATION OF FLOW OF FUNDS, MEMBER BANK LENDING TO SMALL BUSINESS, SAVING, AND INVESTMENT. August 1959. 49 pages. 1955-57. April 1958. 19 pages. REVISED WEEKLY INDEX OF DEPARTMENT STORE THE GOVERMENT SECURITIES MARKET. August SALES. April 1958. 10 pages. 1959. 22 pages. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Statistical Tables Acceptances, bankers', 1008, 1010 Demand deposits—Continued Agricultural loans of commercial banks, 1002, 1004 Adjusted, commercial banks, by classes, 1003 Agriculture, Govt. agency loans, 1020, 1063 Banks, by classes, 999, 1006 Assets and liabilities {See also Foreign liabilities and Type of holder, at commercial banks, 1003 claims reported by banks): Department stores: Banks and the monetary system, consoli- Merchandising data, 1039 dated, 998 Sales and stocks, 1028, 1038 Corporate, current, 1012 Deposits {See also specific types of deposits): Domestic banks, by classes, 999, 1002, 1004, 1010 Adjusted, and currency, 998 Federal business-type activities, Banks, by classes, 999, 1003, 1006, 1010 by fund or activity, 1020, 1063 Federal Reserve Banks, 993, 994, 1073 Federal Reserve Banks, 993, 994 Postal savings, 996, 998 Automobiles: Turnover of, 996 Consumer instalment credit, 1024, 1025, 1026 Deposits, reserves, and borrowings, by class of mem- Production index, 1030, 1034 ber bank, 991 Discount rates, 992, 1080 Bank holding companies, banking offices and deposits Discounts and advances by Federal Reserve of banks in holding company groups, 1064 Banks, 989, 993, 994 Bankers' balances, 1003, 1005 Dividends, corporate, 1012, 1013 {See also Foreign liabilities and claims reported Dollar assets, foreign, 1073, 1075 by banks) Dwelling units started, 1035 Banking offices: Changes in number, 1044 Earnings and hours, manufacturing indus- On, and not on, Par List, number, 1045 tries, 1028, 1037 Banks and the monetary system, consolidated state- Employment, 1028, 1036, 1037 ment, 998 Export-Import Bank, loans, etc., 1020, 1063 Bonds, {See also U. S. Govt. securities): New issues, 1012, 1014, 1015 Farm mortgage loans, 1020, 1021, 1022 Prices and yields, 1008, 1009 Federal business-type activities, assets and liabilities. Brokers and dealers in securities, bank by fund or activity, 1020, 1063 loans to, 1002, 1004 Federal Deposit Insurance Corporation, Business expenditures on new plant and equip- assets, etc., 1020, 1063 ment, 1012 Federal finance: Business indexes, 1028 Cash transactions, 1018 Business loans {See Commercial and industrial loans) Receipts and expenditures, 1019 Treasurer's balance, 1018 Capital accounts: Federal home loan banks, loans, etc., 1020, 1023, 1063 Banks, by classes, 999, 1003, 1005, 1006 Federal Housing Administration, loans, etc., 1020, Federal Reserve Banks, 993, 994 1021, 1022, 1023, 1063 Carloadings, 1028 Federal National Mortgage Association, Central banks, foreign, 1076, 1080 loans, etc., 1020, 1023, 1063 Coins, circulation of, 997 Federal Reserve Banks: Commercial banks: Condition statement, 993, 994 Assets and liabilities, 999, 1002 U. S. Govt. securities held by, 989, 993, 994, Consumer loans held, by type, 1025 1016, 1017 Number, by classes, 999 Federal Reserve credit, 989, 993, 994 Real estate mortgages held, by type, 1021 Federal Reserve notes, 993, 994, 995, 997 Commercial and industrial loans: Finance company paper, 1008, 1010 Commercial banks, 1002 Financial institutions, loans to, 1004 Weekly reporting member banks, 1004, 1007 Flow of funds: Commercial paper, 1008, 1010 Financial assets and liabilities, 1055 Commodity Credit Corporation, loans, etc., 1020, 1063 Saving and financial flows, 1046 Condition statements {See Assets and liabilities) Foreign central banks, 1076, 1080 Construction, 1028, 1034, 1035 Foreien deposits in U. S. banks, 989, 993, 994, 998, Consumer credit: 1003, 1006 Instalment credit, 1024, 1025, 1026, 1027 Foreign exchange rates, 1081 Major parts, 1024, 1026 Foreign liabilities and claims reported by Noninstalment credit, by holder, 1025 banks, 1066, 1068, 1071, 1073 Consumer durable goods outout indexes, 1034 Foreign trade, 1039 Consumer price indexes, 1028. 1040 Consumption expenditures, 1042, 1043 Corporate sales, profits, taxes, and divi- Gold: dends, 1012, 1013 Earmarked, 1074 Corporate security issues, 1012, 1014 Net purchases by U. S., 1074 Corporate security prices and yields, 1008, 1009 Production, 1074, 1077 Cost of living {See Consumer price indexes) Reserves of central banks and governments, 1076 Currency in circulation, 989, 997 Reserves of foreign countries and international Customer credit, stock market, 1009 institutions, 1075 Stock. 989, 998, 1074 Debits to deposit accounts, 996 Gold certificates, 993. 994, 995, 997 Demand deposits: Govt. debt {See U. S. Govt. securities) Adjusted, banks and the monetary system, 998 Gross national product, 1042, 1043 1088 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX TO STATISTICAL TABLES 1089 Home owners, Govt. agency loans, 1020, 1063 Real estate loans: Hours and earnings, manufacturing indus- Banks, by classes, 1002, 1004, 1010, 1021 tries, 1028, 1037 Type of mortgage holder, 1021, 1022, 1023 Type of property mortgaged, 1021, 1022, 1023 Industrial advances by Federal Reserve Banks, 993, Regulation V, loan guarantees, 995, 996 994, 995 Reserve requirements, member banks, 992 Industrial production indexes, 1028, 1029, 1034 Reserves: Instalment loans, 1024, 1025, 1026, 1027 Commercial banks, 1003 Insurance companies, 1011, 1016, 1017, 1022 Federal Reserve Banks, 993, 994 Insured commercial banks, 1001, 1002, 1044 Foreign central banks and governments, 1076 Interbank deposits, 999, 1003, 1006 Foreign countries and international institu- Interest rates: tions, 1075 Bond yields, 1008 Member banks, 989, 991, 993, 994, 1003, Business loans by banks, 1007 1004, 1005 Federal Reserve rates, 992 Residential mortgage loans, 1021, 1022, 1023 Foreign countries, 1079, 1080 Open market, 1008, 1079 Sales finance companies, consumer loans of, 1024, Regulation V loans, 996 1025, 1027 Stock yields, 1008 Saving: Time deposits, maximum rates, 996 Flow-of-funds series, 1046 International capital transactions of the U. S., 1066 National income series, 1043 International financial institutions, 1074, 1075, Savings deposits {See Time deposits) 1076, 1078 Savings institutions, principal assets, 1010, 1011 Inventories, 1042 Savings and loan associations, 1011, 1022 Investments {See also specific types of investments): Securities, international transactions, 1072, 1073 Banks, by classes, 999, 1002, 1005, 1010 Security issues, 1012, 1014, 1015 Federal Reserve Banks, 993, 994 Silver coin and silver certificates, 997 Govt. agencies, etc., 1020, 1063 State member banks, 1001, 1044 Life insurance companies, 1011 State and municipal securities: Savings and loan associations, 1011 New issues, 1014, 1015 Prices and yields, 1008, 1009 Labor force, 1036 States and political subdivisions: Loans {See also specific types of loans): Deposits of, 1003, 1006 Banks, by classes, 999, 1002, 1004, 1010 Holdings of U. S. Govt. securities, 1016 Federal Reserve Banks, 989, 991, 993, 994, 995 Ownership of obligations of, 1002, 1010, 1011 Govt. agencies, etc., 1020, 1063 Stock market credit, 1009 Insurance companies, 1011, 1022 Stocks: Savings and loan associations, 1011, 1022 New issues, 1014 Loans insured or guaranteed, 995, 1021, 1022, 1023 Prices and yields, 1008, 1009 Manufacturers, production indexes, 1028, 1029, 1034 Tax receipts, Federal, 1019 Margin requirements, 992 Time deposits, 991, 996, 998, 999, 1003, 1006 Member banks: Treasurer's account balance, 1018 Assets and liabilities, by classes, 999, 1002 Treasury cash, 989, 997, 998 Banking offices, changes in number, 1044 Treasury currency, 989, 997, 998 Borrowings at Federal Reserve Banks, 989, Treasury deposits, 989, 993, 994, 1018 991, 1006 Unemployment, 1036 Deposits and reserves, by classes, 991 U. S. balance of payments, 1079 Number, by classes, 999 U. S. Govt. balances: Reserve requirements, by classes, 992 Commercial bank holdings, by classes, 1003, 1006 Reserves and related items, 989 Consolidated monetary statement, 998 Weekly reporting series, 1004 Treasury deposits at Federal Reserve Minerals, production indexes, 1028, 1029 Banks, 989, 993, 994, 1018 Money rates {See Interest rates) U. S. Govt. securities: Mortgages {See Real estate loans) Bank holdings, 998, 999, 1002, 1005, 1010, Mutual savings banks, 998, 999, 1001, 1010, 1016, 1016, 1017 1017, 1021, 1044 Federal Reserve Bank holdings, 989, 993, 994. National banks, 1001, 1044 1016, 1017 National income, 1042, 1043 Foreign and international holdings, 1075 National security expenditures, 1019, 1042 International transactions, 1072, 1073 Nonmember banks, 993, 1001, 1002, 1044 New issues, gross proceeds, 1014 Outstanding, by type of security, 1015, Par List, banking offices on, and not on, number, 1045 1016. 1017 Payrolls, manufacturing, index, 1028 Ownership of, 1016, 1017 Personal income, 1043 Prices and yields, 1008, 1009 Postal Savings System, 996, 998 United States notes, outstanding and in circula- Prices: tion, 997 Consumer, 1028, 1040 Utility output index, 1033 Security, 1009 Veterans Administration, loans, etc., 1020, 1021, 1022. Wholesale commodity, 1028, 1040 1023, 1063 Production, 1028, 1029, 1033, 1034 Profits, corporate, 1012, 1013 Yields {See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Alaska was added to the Twelfth Federal Reserve District as of January 3, 1959, and became part of the Seattle Branch Territory of that District. Hawaii was added to the Twelfth Federal Reserve District as of August 21, 1959, and became part of the Head Office Territory of that District. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES -4*0-21,1959 * Co THE FEDERAL RESERVE SYSTEM g) 1 Boundaries of Federal Reserve Districts Boundaries of Federal Reserve Branch Territories © Board of Governors of the Federal Reserve System ® Federal Reserve Bank Cities • Federal Reserve Branch Cities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis