It will be noted that of the total of $897,151,000 bills discounted and bought, as shown by the statement of January 4, 1918, $285,919,000, or 31.9 per cent, consisted of paper secured by Government war obligations, the balance being other notes and bills rediscounted for member banks $339,894,000, and bills and acceptances purchased in the open market $271,338,000. While the total of paper secured by Government war obligations shows occasional temporary reductions brought about by payments of Treasury certificates, the general trend has been steadily upward, the total of such paper held by the Federal Reserve Banks on December 27, being $1,400,371,000.

As to the proportion of paper held by the Federal Reserve Banks secured by Government war obligations, it will be noted that beginning with 31.9 per cent on January 4, 1918, there were unimportant variations until March 15, when the minimum for the year was reached, 30.6 per cent, after which there was an almost constant increase until on December 27, 69.8 per cent of the paper held by the Federal Reserve Banks was secured by Government obligations.

All other discounts carried at the close of the year amounted to $302,567,000, as compared with $339,894,000 on January 4: During the early part of the year these holdings declined to less than $250,000,000. During the summer months, owing, no doubt, to seasonal loan demands, there were considerable increases, the maximum holdings of $628,920,000 occurring about the end of July. Of these a reduced proportion was composed of member banks' collateral notes secured by eligible paper. Of this class of paper the banks carried a total of $21,616,000 on December 27, 1918, compared with $61,110,000 at the beginning of the year. Agricultural paper of all maturities held on the last Friday in 1918 aggregated $29,384,000, as against $7,901,000 on the first Friday in the year. The amount of live-stock paper increased from $8,601,000 on January 4, 1918, to $27,334,000 on December 27, 1918. Maximum holdings of all three classes of paper were reported about the end of July. Holdings of agricultural and live-stock paper are concentrated mainly at the Kansas City, Dallas, and Minneapolis banks.

But little change is shown in the holdings of discounted trade acceptances, the end of the year figures, $15,986,000, exceeding only by about $1,217,000 the figures reported at the beginning of the year. These acceptances were based mainly on domestic trade transactions, while acceptances covering foreign trade operations figured somewhat more prominently among the open-market purchases of the banks.

Of these purchases, by far the larger part is made up of bankers' acceptances, the holdings of which show an increase for the year from $265,326,000 on January 4 to $296,451,000 on December 27. It is atable that while the holdings of bankers' domestic acceptances in

It will be noted that of the total of $897,151,000 bills discounted and bought, as shown by the statement of January 4, 1918, $285,919,000, or 31.9 per cent, consisted of paper secured by Government war obligations, the balance being other notes and bills rediscounted for member banks $339,894,000, and bills and acceptances purchased in the open market $271,338,000. While the total of paper secured by Government war obligations shows occasional temporary reductions brought about by payments of Treasury certificates, the general trend has been steadily upward, the total of such paper held by the Federal Reserve Banks on December 27, being $1,400,371,000.

As to the proportion of paper held by the Federal Reserve Banks secured by Government war obligations, it will be noted that beginning with 31.9 per cent on January 4, 1918, there were unimportant variations until March 15, when the minimum for the year was reached, 30.6 per cent, after which there was an almost constant increase until on December 27, 69.8 per cent of the paper held by the Federal Reserve Banks was secured by Government obligations.

All other discounts carried at the close of the year amounted to $302,567,000, as compared with $339,894,000 on January 4: During the early part of the year these holdings declined to less than $250,000,000. During the summer months, owing, no doubt, to seasonal loan demands, there were considerable increases, the maximum holdings of $628,920,000 occurring about the end of July. Of these a reduced proportion was composed of member banks' collateral notes secured by eligible paper. Of this class of paper the banks carried a total of $21,616,000 on December 27, 1918, compared with $61,110,000 at the beginning of the year. Agricultural paper of all maturities held on the last Friday in 1918 aggregated $29,384,000, as against $7,901,000 on the first Friday in the year. The amount of live-stock paper increased from $8,601,000 on January 4, 1918, to $27,334,000 on December 27, 1918. Maximum holdings of all three classes of paper were reported about the end of July. Holdings of agricultural and live-stock paper are concentrated mainly at the Kansas City, Dallas, and Minneapolis banks.

But little change is shown in the holdings of discounted trade acceptances, the end of the year figures, $15,986,000, exceeding only by about $1,217,000 the figures reported at the beginning of the year. These acceptances were based mainly on domestic trade transactions, while acceptances covering foreign trade operations figured somewhat more prominently among the open-market purchases of the banks.

Of these purchases, by far the larger part is made up of bankers' acceptances, the holdings of which show an increase for the year from $265,326,000 on January 4 to $296,451,000 on December 27. It is notable that while the holdings of bankers' domestic acceptances in

creased during the year from $82,867,000 to $166,493,000, the amount of bankers' foreign acceptances decreased from $180,609,000 at the beginning of the year to $129,162,000 toward its close. Dollar exchange bills on hand aggregated $1,850,000 on January 4 as against $796,000 at the close of the year, holdings of purchased foreign trade acceptances show a decline from $5,516,000 to $3,843,000, while those of purchased domestic trade acceptances, all with bankers' indorsements, increased from $496,000 to $3,379,000. Aggregate holdings of purchased bills, including both bankers' and trade acceptances, because of the substantial increase in the amounts of bankers' domestic acceptances show an increase from $271,338,000 on January 4 to $303,673,000 at the end of the year.

Owing to the redemption by the Treasury of about $7,500,000 3 per cent bonds held by the banks, and through the disposal of Liberty bonds held temporarily for the accommodation of member and nonmember banks, the Federal Reserve Bank holdings of Government long-term securities show a decline from $51,167,000 to $28,869,000. An increase from $92,058,000 to $282,677,000 in the holdings of Government short-term securities is mainly accounted for by Treasury certificates held by the Federal Reserve Bank of New York to cover temporary advances to the Government, and to a slighter degree by investments in one-year 2 per cent Treasury certificates to secure Federal Reserve bank notes. Other earning assets, composed of bill of lading drafts and municipal warrants which at the beginning of the year amounted to $5,167,000 have declined to $13,000, due to the inclusion of the drafts with the other discounts and to the practical suspension of purchases of warrants.

In the following table are shown changes in the several classes of earning assets held by the Federal Reserve Banks on the first and last Fridays of the past year:

RESERVE POSITION OF THE FEDERAL RESERVE BANKS.

The general expansion which has taken place during the year is reflected to a limited extent in the increase in member banks' reserve deposits of $138,088,000 from $1,449,230,000 on January 4 to $1,587,318,000 on December 27, but in a much greater degree in the volume. of Federal Reserve notes in circulation, the amount of these notes in circulation on January 4 having been $1,251,205,000, against $2,685,244,000 on December 27, an increase of $1,434,039,000. Other deposits, including those of the United States and of foreign governments, increased between these dates $18,759,000, while the increase in net deposit and note liabilities during the year has been $1,540,703,000, as against an increase of gold reserves of $402,554,000.

In its report for the year 1917 the Board called attention to the changes in the reserve position of the Federal Reserve Banks during the year and pointed out the effect upon their reserves of the flotation of the two Liberty loans. After payments for subscriptions to the first Liberty loan were made there was a notable strengthening of the reserve position, but, as stated in the report, a similar recovery subsequent to the close of the second Liberty loan had not taken place up to December 31, 1917, which was commented upon as indicating that the process of distributing the second Liberty loan was still uncompleted. On January 4, 1918, the combined reserves of all the banks stood at 64.2 per cent. There was a gradual improvement in the reserve position until February 15 when the combined percentage was 67.7 per cent, which proved to be the highest for the year 1918. Treasury certificates of indebtedness were sold in anticipation of the two Liberty loan issues of 1918, and also in anticipation of tax payments, and since February the tendency of reserve percentages has