New-York tribune., 1921-01-02
Reserve Banks
Cut Holdings
OF " ar Paper
Changes in Condition of
Member Institutions Last
Year Reflect WORKINGS Of
the New Credit Program
Treasury Noies Preferred
Result of Higher Discount
Rates Seen in Retarding
Progress of Borrowings

From The Tr}buuc'a Wdshinntor Burcou
WASHINGTON,- Jan. 1.-Changes in
the condition Of the Federal Reserve
banks during the year just passed re-
fleet to a large extent the changes in
the credit policy originated about the
close Of 1919 and continued during the
year under review
Preferential rates on paper secured
by Liberty bonds and Victory notes
were abrogated by some Reserve banks
and raised by others to a level more
nearly approXimating the rate level for
ordinary commercial paper. In the
case of paper secured by Treasury GER
tiiicates the rates adopted were in most
cases, Identical with the higher coupon
rates fixed by the government. thus
holding out no inducement to the mem
Der banks to carry these securities
among their own investments and use
them as collateral for loans at the
Federal Reserve banks. but rather pro-
viding stimulus to place them in the
hands of ultimate investors.
The results are seen in the gradual
decrease of the amounts Of war paper
he'd during the year by the Reserve
banks. From nearly 81 500 900 900 at
the opening Of the year the holdings
of paper secured by government war
Obligations declined to 1,141 millions
on December 80. OF the latter total
lSS millions, or 16.5 per cent, we're Sc
cured by Treasury certificates, COM
pared with 46l.5 Millions or over 81
per cent, held at the opening of the
year, this decrease c3rresp nding in
a general way to the reduction in the
amount of certificates held by the
member banks.
Much Smaller Reductions
Much smaller reductions are shown
in the Reserve banks holdings Of paper
secured by Liberty bonds and Victory
notes, the December 80 total 953 mil
lions, being only 10 millions less than
the amount reported at the beginning
OF the ycar On the other hand, hold
ings Of other discounted paper, which
at the opening of the year tota ed 746
mil ions, show steady growth, being in
excess of 500 millions at the end of
September. and huctuating between
about 500 and 1000 millions during
the last three months of the year.
At the end Of the year, out of total
Of 1871 millions of discounted bills
about AZ per cent was composed Of
paper secured by United States war OBJ
legations. against 81 per cent OF total
of , PSI. q millions on the first Friday o.
the year.
Early in the year the Federal Reserve
banks raised their discount rates on
COMMERCIAL paper. but the influence OF
the higher rates is seen in retardine
the progress of borrowings rather than
in restricting them. In fact. total Fed
eral Reserve bank holdings of dis
counted bills, 2,2312 millions at the be-
ginning of the wear. inc eascd hv over
200 mi lions up to the end of April, and
by another 200 millions during the next
four months. The peak of ? 80 8 N l.
lions was reached on November ), while
the total held on December 30. 2.7lS.1
millions, is 1879 millions larger than
at the beginning of the year.
Open Market Transactions FAN
holdings of bills purchased in open
market show an most unintcrrupte ted
decline for the period under review
{ rom i total OF 57t.G millions at The
'cgirning Of the ear q decline OF
255.7 m Mons on December 80 is shown
The decrease Of 3io.9 millions was due
argely TO the incIvased demand for
this class Of bills by savings banks
trust companies and corporate and in
dividual investors. No appreciate e
changes are shown in the am UNITS and
classes of United States bonds held
Fluctuations in the holdings OF
Treasury certificates during the veal
re largely the result of the issuance
BY the government from mo to time
Of temporary certificates pending col
.ection Of funds from depositary insti-
tuti ms. The largest figures are shown
for the four Fridays following the
quarterly income tax datce. when tenn
orary advances to the government by
The Kcser.e banks for the redemption
+ taN cortii Gates were It their mani
mum. Total earning assets Of the Fed
cral Reserve banks, which stood at 8.
1918 millions on January 2, reached
the high point Of 1922 millions on Oc-