BILLS DISCOUNTED- -MEMBERS.

Bills discounted for members constituted the major part of the loan operations, the amount of such discounts increasing throughout the year. The maximum loans in any one month were made in December, the total being $511,014,436.

The number of banks rediscounting commercial paper was relatively small. By far the largest amount of borrowing was on notes secured by Government obligations, as this was more convenient, the rates of discount were less, and much of the necessity for borrowing arose out of the subscriptions to Government bonds and certificates of indebtedness.

The amount of trade acceptances discounted was $5,650,053, compared with $726,078 the preceding year. Many inquiries were received regarding the use of these acceptances, and an increasing number of concerns is employing them. The movement toward their use, however, has apparently not yet made marked progress in this district, although the advantages of their adoption are recognized.

Bills discounted during each month, distributed by classes of paper.

Bankers' acceptances purchased amount to $120,008,026, compared with $85,913,796 the preceding year. Most of the bills were purchased for our account by the Federal Reserve Bank of New York.

As yet there is no real market for bankers' bills in Philadelphia outside of the Federal Reserve Bank, and until the present urgent demand for money subsides and the banks have funds for investment in such paper it will be hard to establish one. It is hoped that ultimately such a market will be established and that all banks will invest a certain portion of their funds in bankers' acceptances, which will serve the double purpose of giving them an asset of the greatest

liquidity and at the same time further the development of international commerce and banking.

This bank has purchased from its members all bills offered by them, and has at times made large purchases in the New York market when bills of the banks in this district were offered there.

Acceptances bought in the open market and from other Federal Reserve Banks.

Federal Reserve notes supplied satisfactorily the currency needs of the community. The establishment throughout the district of large shipyards and munitions plants necessitated huge pay rolls and demands for currency were incessant. Notes of the denomination of $20 were especially in demand and seemed to disappear from circulation. The bank has rendered a distinct service to its members in the matter of furnishing currency, which had formerly been done by the Subtreasury.

The amount of money shipped to the bank by members and nonmembers averaged $1,750,000 daily and required the services of 30 employees to assort and count it.

Federal Reserve notes outstanding reached the high mark of $243,142,700 on December 26. The act now provides for the. issue of Federal Reserve notes in the denominations of $500, $1,000, $5,000, and $10,000, but so far none have been issued. The required gold reserve of 40 per cent against Federal Reserve notes in actual circulation was maintained throughout the year.

Schedules 13 to 16 give a comparative statement of condition of the Federal Reserve agent's accounts, notes in circulation, denominations issued, notes outstanding at close of each month, and interdistrict movement of notes.

FEDERAL RESERVE BANK NOTES.

The Pittman bill, which became law on April 23, 1918, provided for the issuance of Federal Reserve bank notes of the denominations of $1 and $2. These notes took the place of silver certificates, which were retired from circulation, and the coin securing them was melted down and disposed of as bullion.

At the close of the year, $8,926,163 of these notes were in actual circulation. These were secured by $825,000 one-year Treasury notes, and $8,855,000 United States certificates of indebtedness deposited with the Treasurer of the United States.

As the purpose of issuing Federal Reserve bank notes was their substitution for silver certificates in order that the silver might be used in supplying the urgent demand for silver bullion, efforts were made to obtain all the silver certificates possible, and a considerable amount of such certificates was shipped through this bank for cancellation.

Tables showing denominations issued and amount outstanding at end of each month are given in Schedules 17 and 18.

INTERNAL MANAGEMENT OF THE BANK.

OFFICERS AND DIRECTORS.

Richard L. Austin, Chairman and Federal Reserve Agent; Henry B. Thompson, Deputy Chairman; E. Pusey Passmore, Governor; Edwin S. Stuart, Deputy Governor; William H. Hutt, Deputy Governor.

C..

Rosemont, Pa..

Philadelphia, Pa..
Camden, N. J..

Do.
Dec. 31, 1920
Dec. 31, 1921

(Richard L. Austin..

Philadelphia, Pa.

Dec. 31, 1920

Henry B. Thompson, president U. S. Finishing Co., Wilmington, Del..

Dec. 31, 1919

New York City.

(Charles C. Harrison.

Mr. Levi L. Rue, president of the Philadelphia National Bank, was reelected a member of the Federal Advisory Council to represent the Third Federal Reserve District for the year 1918.

Mr. Charles J. Rhoads, who had been governor since the organization of the bank, resigned on February 8, 1918, to undertake war work with the Y. M. C. A. The following minute relative to his withdrawal was adopted by the board of directors:

The directors of the Federal Reserve Bank of Philadelphia desire to record their appreciation of the services rendered this bank by Mr. Rhoads as its governor, since organization, and the great reluctance with which they have accepted his resignation.

In their judgment, no one could have filled the office more capably than he has filled it, or have secured for the Federal Reserve system greater support, cooperation and confidence on the part of the banks and trust companies in this district. Since his resignation was presented on December 19, 1917, the directors have hoped that he might be induced to withdraw it. His decision, however, has been unalterable. His purpose in resigning to devote his abilities to the humanitarian work incident to the war deserves the particular admiration of all who know those abilities, as the directors of this bank have learned to know them. While regretting the termination of Mr. Rhoads's association with this bank, the directors appreciate the serious conviction and sense of duty which led to his resignation. They also recognize what he will contribute to the work upon which he enters, needing as it does just such ability, character, and purposes as Mr. Rhoads will bring to it.

Mr. E. Pusey Passmore, then vice president of the Franklin National Bank, Philadelphia, was elected to succeed Mr. Rhoads, on February 8, 1918. Mr. Frank M. Hardt, deputy governor and cashier of the bank, resigned on June 30, to accept the position of vice president and treasurer of the Philadelphia Trust Co. Upon motion duly made and seconded, a minute reading in part as follows was unanimously adopted by the board of directors:

It is the desire of the board that this record be made of the regret with which Mr. Hardt's resignation has been accepted and of the appreciation with which his valuable services will be remembered. Absolutely unsparing of self, the bank's interests were at all times foremost with him. To its organization, its accomplishment, its service to its members and to the Nation, he has constantly given his every effort, and all have borne the mark of rare ability.

Mr. William A. Dyer, then vice president and treasurer of the Cambridge Trust Co., Chester, Pa., a member of the Reserve system, was elected cashier on May 29, 1918. The office of deputy governor being vacant, Mr. William H. Hutt, treasurer of the University of Pennsylvania, was elected to the position on May 29, 1918. Mr. James M. Toy, an employee of the bank, was elected an assistant cashier on May 29, 1918.

A vacancy in the board of directors was caused by the death on September 24, 1918, of Hon. George W. F. Gaunt, a class B director, whose term would have expired on December 31, 1918. A minute reading in part as follows was adopted by the board of directors on October 2, 1918:

The directors of the Federal Reserve Bank of Philadelphia have learned with sorrow of the death on September 24, 1918, of George W. F. Gaunt, a director of this bank since its organization. His fellow directors have decided by this minute to express their admiration of his useful and honored life, as well as their appreciation of the service he has rendered this institution. They also desire to express their deep sympathy for his family.

Mr. Charles K. Haddon, of Camden, N. J., was elected by group 3 banks to succeed Mr. Gaunt. Mr. William H. Peck, president of the Third National Bank, Scranton, Pa., a class A director, whose term expired on December 31, 1918, was made ineligible for reelection by

an amendment to the Federal Reserve Act. Mr Peck was one of the original directors of the bank. Mr. Francis Douglas, of Wilkes-Barre, Pa., was elected by group 2 banks to succeed Mr. Peck.

The results of the regular election for a class A and a class B director, held from November 19 to December 3, are shown in Schedule 19. At the end of 1917 the bank had 6 officers and 186 clerks and other employees, compared with 11 officers and 419 clerks and other employees at the end of 1918.

The bank secured early in the year the building at 925 Chestnut Street, formerly occupied by the Penn Mutual Life Insurance Co. The building is centrally located and is very near the city's main post office.

DEPARTMENT OF EXAMINATION.

The large increase in the number of State bank and trust company members made it necessary to arrange for keeping informed about them and to provide for such examinations and inspections as might be necessary. Mr. W. W. Paddock, a national-bank examiner in this district, was engaged as Federal Reserve examiner and put in charge of this work. On August 15 he resigned to accept a position as bank examiner for the Federal Reserve Board, and Mr. Walter T. Grosscup, a bank examiner under the Commissioner of Banking of New Jersey, was engaged to fill the position.

COLLECTION DEPARTMENT.

For several months after the institution of the collection department, the greater portion of its business was received from other Federal Reserve Banks. At the present time only a comparatively small part is received from that source. The service charge of 10