Total Borrowed.Borrowed, F.R.B.
Dec. 31, 1914$4,738,416$105,000
Mar. 4, 19154,047,708234,531
May 1, 19153,969,796410,723
June 23, 19154,284,445270,441
Sept. 2, 19153,398,856190,849
Nov. 10, 19152,985,406131,725

The officials of the city banks on the other hand are apparently satisfied with the progress made in the development of this bank's functions. While but few of the Boston banks have rediscounted with us, almost all have intimated that should occasion arise they would do so. Furthermore, several Boston banks have entered into the acceptance business to a large extent, and the assistance that this bank has given in the matter of rates and market for acceptances has done much to bring it into favor with those banks. The Boston banks have also used this bank to a large extent in exchange transactions, and the services offered by the gold settlement fund have been used almost exclusively by those banks.

Thus far Boston banks have received more benefits from this bank than have the other banks in this district. A possible exception to this is in Aroostook County, Me., where, owing to an unusual situation surrounding the principal industry, the potato crop, banks have relied on this bank to a considerable extent to carry them through a trying period. The moral effect of having the Federal Reserve Bank of Boston stand behind them was not only appreciated by those banks, but enabled them to handle their business much more satisfactorily and to finance themselves without having to call upon this bank to an undue extent for rediscounts or without embarrassing their customers.

Federal Reserve Banks and the Acceptance Market

[306]The right to accept drafts was conferred on New York State banking institutions by the act of April 16, 1914. Shortly afterwards a few acceptances were reported, principally against securities. It was not until the derangement of international credit facilities at the opening of the European war that American bankers' acceptances, especially those relating to foreign commerce, came into existence in substantial volume. At that time some of the trust companies with foreign connections extended credits freely to their customers to replace credits formerly granted by European banks which had been either withdrawn or reduced; they also accepted drafts in large volume. On and after May 18, 1914, member banks were authorized also to accept drafts drawn upon them involving the importation or exportation of goods....

The monthly purchases of acceptances by this bank [the Federal Reserve Bank of New York] in the New York market have been:

1915Number of pieces.Amount.Number of pieces.Amount.
For itself.For other reserve banks.
February411,659,740.21861,263,871.25
March1403,343,143.172503,799,809.42
April861,272,694.36841,700,396.57
May46867,420.18481,305,873.80
June1323,083,261.7534602,558.89
July1062,496,865.671472,348,050.89
August1031,597,630.63891,910,417.47
September891,769,880.501721,948,243.05
October682,199,679.951632,028,098.36
November1151,899,606.562462,594,951.04
December3105,648,708.783132,809,823.59
Total1,23625,833,631.761,63222,312,094.33

The policy pursued by this bank thus far has been to purchase good acceptances whether or not the acceptor was a member bank....

The reserve bank and the market rate for the discount of such bills in New York has been for nearly a year, and is now, lower than the rate for similar bills in London. The relatively small volume of such credits which American banks have succeeded in making operative even under the unusually favorable opportunity which the war presents for their extension, is evidence of the difficulty which will be encountered in developing the acceptance business in the United States. Some of the fundamental difficulties are:

(1) The disinclination to break old banking connections.