SECOND ANNUAL REPORT OF THE FEDERAL RESERVE BOARD FOR THE YEAR ENDING DECEMBER 31 1915 WASHINGTON GOVERNMENT PRINTING OFFICE 1916 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis TABLE OF CONTENTS. Page. PART I.—REPORT OF THE FEDERAL RESERVE BOARD 1-120 Letter of transmittal 1 General condition of money market 1 Growth of export trade 2 Definition of paper 3 Discount policy 5 Federal Reserve Banks as fiscal agents C Cotton crop movement 7 Currency movement 8 Foreign borrowing 9 Standardization of commercial paper 10 Unification of banking 11 Clearings and collections 14 Issue of Federal Reserve notes 17 Branches and agencies 18 Changes in Federal Reserve districts 18 Operation and expenses of Federal Reserve Banks 19 Operations of the Federal Reserve Board 21 Proposed amendments to the Federal Reserve Act 21 EXHIBITS. Exhibit A.—Discount rates 27 Exhibit B.—Federal Reserve notes 30 Exhibit C.—Statements of condition of Federal Reserve Banks 45 Exhibit D.—Discount and other investment operations of Federal Reserve Banks 66 Exhibit E.—Gold settlement fund 77 Exhibit F.—Intradistrict clearings 82 Exhibit G.—Receipts and disbursements of the Federal Reserve Board .. 83 Exhibit H.—Earnings and expenses of Federal Reserve Banks 87 Exhibit I.—Estimated expense and dividend requirements of Reserve Banks 96 Exhibit J.—Personnel and salaries: (1) Salaries paid by Federal Reserve Banks 97 (2) Salaries of officers and employees of the Federal Re- serve Board 100 (3) Salaries paid national-bank examiners ]01 Exhibit K.—Procedure in passing upon applications of national banks for fiduciary powers under section 11 (k) of the Federal Reserve Act 103 Exhibit L.—Reserve requirements for State banks and trust companies.. 104 Exhibit M.—Changes in Federal Reserve districts 114 in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis IV CONTENTS. Page. Part II.—REPORTS OF FEDERAL RESERVE AGENTS TO FEDERAL RESERVE BOARD 121-388 District No. 1—Boston 123 District No. 2—New York 151 District No. 3—Philadelphia 211 District No. 4—Cleveland 231 District No. 5—Richmond 241 District No. 6—Atlanta 271 District No. 7—Chicago 281 District No. 8—St. Louis 291 District No. 9—Minneapolis 313 District No. 10—Kansas City 335 District No. 11—Dallas 351 District No. 12—San Francisco 357 Directory of the Federal Reserve Board and officers and directors of Federal Reserve Banks 389 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis PART I. REPORT OF THE FEDERAL RESERVE BOARD, WITH EXHIBITS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis AMUAL REPORT OF THE FEDERAL RESERVE BOARD. FEDERAL RESERVE BOARD, Washington, February 1, 1916. The SPEAKER OF THE HOUSE OF REPRESENTATIVES: SIR: The first annual report of the Federal Reserve Board, rendered in accordance with the requirements of section 10 of the Federal Re- serve Act, was transmitted under date of January 15, 1915, at a time when the Federal Reserve Banks had barely begun active business operations. The Board herewith submits its second report, the first that permits a review of the actual operation of the new system. In order to provide a complete account of the working of the Federal Reserve System, the Board has called upon each Federal Reserve Agent for a detailed report of the operations and problems of his bank during the year 1915. The various Federal Reserve Agents have responded fully, and their reports are published as part 2 of this report. Owing to the similarity of problems and experiences in the various districts, it is inevitable that these reports to a certain extent should all cover the same ground, and repetitions were therefore unavoidable, both in the body of the reports and in the statistical material furnished. The Board has, however, deemed it best to present them in some- what condensed form, in the belief that such publication will furnish very desirable information and will be welcome in this form, par- ticularly to member banks desiring information concerning con- ditions and operations in any particular district. GENERAL CONDITION OF MONEY MARKET. A condition of remarkable ease has been the outstanding feature of the money market of the country during the first year of operation under the Federal Reserve Act. Whatever other causes may have contributed to this result, much of it is due to the stability es- tablished and the feeling of security inspired, by the new banking "system; so much of it, indeed, as to afford a striking vindication of the wisdom of the law and the efficiency of the agencies of its admin- istration even in advance of the fuller development of their activi- ties. The test of a banking and financial system is its operation. More than a year will be needed for an adequate test of our new banking system. The year which has passed, however, has, owing 1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 2 ANNUAL REPORT OF THE FEDERAL RESERVE BOARD. to the continuance of the economic disturbances and financial uncer- tainties engendered by the European war, been of more than ordinary significance in supplying experience of the kind that tests the strength of a financial and credit system, and deserves, therefore, extended notice as a period of importance in the history and working of the Federal Reserve Act. The year 1915 has been a period of marked and sudden transition. In almost every department of financial life conditions have been completely altered. At the close of 1914 foreign commerce was uncertain, business conditions depressed, manufacturing conducted upon a somewhat restricted basis, a considerable floating indebted- ness to foreign countries had still to be liquidated, the commodity exchanges of the country were either closed or operating under very great limitations. To-day the export trade of the country has reached the high-water mark, manufacturing is active in nearly all lines and in nearly all sections of the country. Demand for practi- cally all agricultural products is strong, the commodity exchanges of the country are open, depression in business life has given way to a condition of extreme activity. The change has been most notable in certain special industries, where the transformation of conditions has been so great as to be startling. In this funda- mental change affecting the whole basis of business and commer- cial life throughout the country, it has been the part of wisdom that Federal Reserve Banks should conserve their resources and hold themselves in readiness to meet any unexpected developments in the situation. This object has been constantly held in view both by the Federal Reserve Banks themselves and by the Federal Reserve Board. Preparedness and efficiency have, indeed, been the impor- tant elements in the Board's policy, and this policy, together with the disturbed conditions abroad which have prevented the reserve banks from engaging in certain classes of operations open to them under the Act, have naturally limited the scope of the operations for the first year of their existence. GROWTH OF EXPORT TRADE. The financial history of the year has been to an unprecedented extent founded upon development of the export trade of the United States. That trade, which had been in many departments almost pros- trate immediately after the opening of the European war, promptly recovered its vigor in many branches, so that during the early stages of the year's operations, terminating about February, 1915, a surplus of exports, largely of agricultural products, was used to liquidate floating indebtedness existing at the opening of the war. This debt the Board soon after its organization estimated at about $500,000,000. Since then large surpluses of exports have been paid for to a consid- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis ANNUAL REPORT OF THE FEDEEAL RESERVE BOARD. 3 erable extent through the return of American securities held by foreign owners. Still later, the international balances resulting from con- tinued purchase of goods were settled largely upon a credit basis, aided by sales and transfers of securities sent by foreign owners to the United States. It has been only within the past few months that there can be said to have been restoration of general activity resulting in the development of conditions likely to be ultimately reflected in demands upon the Federal Reserve Banks. There has been within the past few months a very great expansion of loans and deposits by member banks, as is shown by the fact that, whereas the combined loans of national banks were $6,347,636,570.27 at the end of 1914, they were, on November 10, 1915, $7,233,928,973.15; while total deposits between the said dates have increased from $8,236,468,374.36 to $10,157,472,691.86. These facts would seem to indicate that it is prudent to be prepared for a time when the reserve resources of the country will be subjected to a severe test and when the leadership and the operations of the Federal Reserve Banks will become correspondingly more influential. DEFINITION OF PAPER. The Board has devoted itself to a definition of different classes of paper which, under the terms of the Federal Reserve Act, may be considered eligible for discount at Federal Reserve Banks, seeking to classify and describe the various kinds, and to fix the qualifications of eligibility upon a reasonable and unmistakable basis which should make clear to the commercial world the conditions to be observed in dealings with Federal Reserve Banks. It has prepared with great care regulations fixing conditions under which banks other than national may be admitted to the system, in order that State institu- tions may have adequate opportunity to join and ample notice regard- ing the conditions under which they may be admitted to membership.