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SCHEDULE 26.Gold settlement fund operations, Jan. 1, 1918, to Dec. 31, 1918.

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Boston.
$337, 860,000 $249, 539,000 $88,321,000

$7,000.000 $694,000 New York. 2,779, 820,000 1,650, 226,000 1,129, 591,000

438,000,000 1,014,000,000 Philadelphia. 385, 846,000 361, 268,000 24,578,000

6,000,000 13,000,000 Cleveland. 621, 410,000 850, 809,000

$229, 399,000 18,000,000 Richmond 111,850,000 105,050,000 6,800,000

14,100.000 Atlanta... 116, 277,000 118, 187,000

1,910,000

7960,000
.000

58,955, 000 St. Louis. 788, 411,000 709, 850,000 78,555,000

8, Minneapolis. 465, 234, 000 582, 292,000

117,058,000 6,000,000 Kansas City. 462, 114,000 766,350,000

304, 236,000 22,000,000 4,000,000 Dallas. 115,333,000 95,588,000 19,745,000

9,671,000 23,500,000 San Francisco... 219,806,000 265, 103,000

45, 297,000 5,000,000 Total...... 6,403,961,000 5,754,268,000 1,347, 859,000 697, 900,000 594,625,000 1,128, 249,00 Excess..

649,693, 000

533,564,000

Gain through settlement.
Net loss through transfers...

Net gain through transfers and settlement..

$649,693,000 533, 561,000 116, 129,000

DISTRICT NO. 8-ST LOUIS.

WILLIAM McC. MARTIN, Chairman and Federal Reserve Agent.

FINANCIAL RESULTS OF OPERATION.

The gross earnings of the Federal Reserve Bank of St.Louis for the year 1918 amounted to $2,676,828.35, and the current expenses were $726,021.11, including the charging off of all furniture and fixtures amounting to $102,030.55. This left net earnings of $1,950,807.24, which was an increase of $1,448,651.20 over the net earnings for 1917. Out of the net earnings the bank paid dividends for the years 1917 and 1918, amounting to $404,837.60; set aside a reserve of $172,997 for depreciation in United States securities, and also a reserve of $801,655.61 for the franchise tax. The balance of $571,317.03 was transferred to surplus, together with the balance of $230,338.58 of undivided profits at the close of 1917, making $801,655.61 in that account on December 31, 1918.

The principal source of revenue during 1918 was bills discounted for member banks. Of the $2,676.828.35 of gross earnings, $2,197,795.40 was derived from this source. During 1917 the earnings from bills discounted amounted to only $347,871.10. The percentage of earnings derived from each source during 1917 and 1918 is as follows:

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Attached hereto as Schedule 1 is a comparative profit and loss statement, covering the years 1917 and 1918.

The total resources of the Federal Reserve Bank of St. Louis increased from $159,619,896.96 on December 31, 1917, to $229,496,229.05 on December 31, 1918. Its earning assets increased from $45,066,896.64 to $85,717,141.81 within that time. The greatest increase in the earning assets was the paper discounted for member banks, which amounted to $70,702,653.85 on December 31, 1918, as compared to $28,584,397.60 on December 31, 1917.

The total cash reserve increased from $59,136.094 on December 31, 1917, to $89,256,994.89 on December 31, 1918. The reserve deposits of member banks also increased, due in great measure to the admission of State banks and trust companies into the System.

Attached hereto as Schedule 2 are comparative balance sheets as of December 31, 1917 and 1918.

GENERAL BUSINESS AND BANKING CONDITIONS.

The beginning of 1918 found industries in this district busy, especially those contributing articles necessary for the prosecution of the war. This activity continued with increasing vigor until the termination of hostilities in November. The needs of the Government received first consideration, and the production of nonessentials gave way to those things necessary in carrying on the war. Many concerns worked almost exclusively on Government contracts.

The signing of the armistice on November 11 resulted in the cancellation of many war contracts in this district, and business men have since been engaged in restoring their enterprises to a peace basis. It is believed that the resumption of normal demands, the production of those articles heretofore designated as nonessential, and the development of foreign trade, will largely offset the suspension of war work.

Business men as a rule are optimistic regarding the future, but are acting cautiously and buying only for their immediate needs, anticipating a readjustment of prices.

Since the termination of the war, general business has been greatly helped by the lifting of Government restrictions, and many industries are preparing for increased activity. This is especially true of the building, construction, and engineering industries, whose activities were greatly curtailed during the war.

The wholesale and retail trade has been good in this district, and merchants generally have enjoyed a prosperous year. Some lines of business were hampered by Government restrictions, while practically all suffered on account of the extraordinarily high prices and the scarcity of merchandise. Collections, as a rule, have been good, except in some of the southern portions of the district where cotton has moved slowly.

Business has been greatly helped by the high wages paid to labor in the cities and the bountiful returns to the farmer during the past year. The crop of winter and spring wheat in this district was considerably larger than that of last year, and also larger than the average for the five years previous. The production of cotton also exceeded that of last year and the five year average. The corn crop

ras a good deal below the record crop of 1917, but only slightly less han the average for the previous five years. The corn in this district ras greatly damaged during the summer by dry and excessive temperature, accompanied by hot winds.

Until the termination of the war, there was a strong demand for both skilled and unskilled workmen in the district. This demand brought about competition among employers, which resulted in a migratory tendency on the part of labor. However, this situation was helped by the work of the United States Employment Service Committee. The shortage of workmen was greatly relieved by the employment of women, who entered munition plants and filled many other places formerly occupied by men. Farmers also experienced difficulty in obtaining sufficient help, but many overcame the problem to a great extent by purchasing tractors and other labor-saving machinery. Toward the close of the year the supply of labor became more ample, due to the release of soldiers from the Army and the release of many employees who had been engaged in the manufacture of munitions, etc. The labor situation in this district was seriously affected by the influenza epidemic, which became severe about October, and did not let up until the close of the year. There were a number of strikes and threats to strike during the past year. However, these were settled, and outside of some labor demands which were being arbitrated, there were very few disturbances in this district at the close of the year. Much credit is due to the Federal mediators who assisted in settling the strikes that arose.

During the past year, the demand for money has continued good in this district, and there has been little variance in the bank rate to customers. In the large cities it has remained at about 6 per cent and in the country districts somewhat higher. However, toward the close of the year an easier tone became apparent. The banks have liberally supported the Government in the flotation of the Liberty loans and certificates of indebtedness, and have also taken care of their commercial requirements. This has been accomplished without disturbance to the money market, due to the service rendered by the Federal Reserve Bank.

The commercial paper business has been considerably below normal throughout the year. The rate was practically 6 per cent until December, when it ranged from 54 per cent to 6 per cent. Brokers have encouraged the issuance of short maturities, so they would be readily available for rediscount at the Federal Reserve Bank.

An open market for bankers' acceptances is being gradually developed, which will be of benefit to business interests.

As the year closes there is a conservative tone of optimism in business and financial circles in the district.

DISCOUNT OPERATIONS.

The total amount of paper discounted for member banks by the Federal Reserve Bank of St. Louis during the year 1918 was $1,085,137,254, exclusive of bankers' acceptances. Of this amount $303,792,122 was commercial, or single-name paper, $15,681,201 consisted of trade acceptances, or two-name paper, and $765,663,931 consisted of member banks' 15-day collateral notes. Of the $303,792,122 of commercial paper discounted, $13,765,838 was secured by Liberty bonds and certificates of indebtedness, and of the $765,663,931 of member banks' collateral notes $764,216,431 was secured by such Government obligations.

During the year 1917, the total paper discounted for member banks amounted to $181,117,651.14. Thus there was an increase of $904,019,603 in the amount of paper discounted by the Federal Reserve Bank of St. Louis during 1918 over the previous year.

Of the 513 member banks, 278 different member banks rediscounted with this bank during 1918. The number for 1917 was 149, showing an increase of 129 in the number of different member banks accommodated.

Attached hereto as Schedule 3 is a table showing the volume of the different classes of paper discounted by the Federal Reserve Bank of St. Louis and by each branch during each month of the year, and attached as Schedule 4 is a table showing the volume of paper accepted from each State during each month of the year, and the number of different banks in each State discounting during the year.

Attached hereto as Exhibit A is a table and chart showing (1) paper secured by Liberty bonds and Treasury certificates; (2) other discounted paper; (3) total discounts; (4) bills bought in open market; (5) total bills discounted and purchased; (6) ratio of paper secured by Government war obligations to total discounted and purchased bills; and (7) total earning assets, including United States securities.

On December 5 the Federal Reserve Bank of St. Louis rediscounted $2,000,000 of paper for the Federal Reserve Bank of Philadelphia, and on December 11, it rediscounted $2,500,000 of paper for the Federal Reserve Bank of Dallas. On July 2 the Federal Reserve Bank of Boston rediscounted $5,000,006.91 of paper for the Federal Reserve Bank of St. Louis, and on July 9 the Federal Reserve Bank of Cleveland rediscounted $7,500,001.62 of paper for this bank.

Only two changes were made in the discount rates of this bank throughout the year. These were on April 8, when practically all the

8 rates were slightly raised, and on October 5, when a special rate of 4 per cent instead of 4} per cent was established for paper maturing within 16 to 90 days secured by fourth Liberty bonds, provided such paper was taken by the member bank at a rate not in excess of the fourth Liberty loan coupon rate of 47 per cent.

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