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The Federal Reserve System operates under the provisions of the act of December 23, 1913, known as the Federal Reserve Act (38 Stat. 251), as amended.

Program. To carry out its responsibilities under the act, the Board determines general monetary, credit, and operating policies for the System as a whole and formulates the rules and regulations necessary to carry out the purposes of the Federal Reserve Act. The Board's principal duties consist of exerting an influence over credit conditions and supervising the Federal Reserve Banks and member banks.

Invested capital..
Retained earnings..

Total equity...

Total liabilities and equity..

Unobligated balance..

Invested capital and retained earnings..
Total equity..

Computation of fund balances: Cash in bank.
Obligated balances, net:
Current liabilities...
Accounts receivable, net.

Financing.-Under the provisions of section 10 of the Federal Reserve Act, the Board of Governors levies upon the Federal Reserve banks, in proportion to their capital and surplus, an assessment sufficient to pay its estimated expenses. The Board, under the act, determines and prescribes the manner in which its obligations are incurred and its expenses paid. Funds derived from the assessments are deposited in the Federal Reserve Bank of Richmond, and the act provides that such funds "shall not be construed to be Government funds or appropriated moneys." No Government appropriation is required to Unobligated balance... support operations of the Board.

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Analysis of Equity

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Balance Sheet (in thousands of dollars)

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Obligated balance, net.

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The banks for cooperatives, of which there are 13, are under the general supervision of the Farm Credit Administration. They finance the operations of farmers' cooperatives. During 1964, the banks extended credit totaling $1,061 million. The funds to finance these loans are obtained from (1) sales of debentures to the public, (2) notes payable, and (3) their own capital. The debentures which the banks issue are not guaranteed by the U.S. Government either as to principal or interest. The banks' capital funds consist of capital stock owned by the U.S. Government, equities of borrowing cooperatives and retained earnings.

The Farm Credit Act of 1955 provides for eventual ownership of the banks by farmers' cooperatives and the retirement of the U.S. Government's investment. At the time the 1955 act was passed the U.S. Government had an investment in the banks of $150 million. By June 30, 1964, this investment had been reduced to $67 million while the equities of borrowing cooperatives had reached. nearly $114 million. It is expected that additional repayments of Government capital of $13,500 thousand and $14 million will be made in 1965 and 1966, respectively. All expenses, including administrative costs, are paid from the banks' own resources and thus in no way do they affect the Budget of the United States.

Revenue, Expense, and Retained Earnings (in thousands of dollars)

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Unobligated balance.

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43,816 43,998 44,735 Invested capital and earnings, net.. 224,959 225,421 225,765 Total net equity.....

45,335

225,265 268,775 269,419 270,500 270,600

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Interest expense.

79,637

6,135 93,382

6,483 101,847

Other costs:

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3,401

3,619

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13

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41

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102,972 111,949

1 Balances of selected resources are identified in the statement of financial condition.

The Federal intermediate credit banks, of which there are 12, are under the general supervision of the Farm Credit Administration. They serve as banks of discount for agriculture, discounting agricultural and livestock paper for local financing institutions, such as production credit associations, agricultural credit corporations, 5,065,156 5,478,301 livestock loan companies, and commercial banks. They also provide the production credit associations with necessary supervision and services. During the fiscal year 1964, the banks extended credit totaling $4.7 billion.

5,065,156 5,478,301

20

5,057,684

97

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5,057,781

5,168,280

101

The banks' lending funds are obtained primarily from the sale of debentures to the public and from their own capital funds. The debentures are not guaranteed by the U.S. Government either as to principal or interest.

The banks were originally wholly-owned Government 5,590,351 corporations set up exclusively as banks of discount; however, pursuant to the Farm Credit Act of 1956, the banks became mixed-ownership corporations and were made responsible for supervising the production credit associations and assisting them to make sound credit available to farmers.

-4,754,515 -4,831,047 -5,229,416
-102,827 -118,366 -128,960

10

Total obligations...

Financing:

14

Receipts and reimbursements from non-Federal sources: Loans repaid..--.

Revenue and other receipts...
Capital advances from Treas-
ury..

start of year....

-122,570

end of year.

124,245

-5,600 -7,000
-124,245 -123,578
123.578 122,653

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All of the capital stock of the Federal intermediate credit banks from organization in 1923 to December 31, 1956, was held by the U.S. Government. The 1956 act provided a long-range plan for the eventual ownership of the credit banks by the production credit associations and the gradual retirement of the Government's investment in the banks. However, because of the increased credit demands placed upon the Federal intermediate credit. 3,820,400 banks, it has been necessary for the Government to invest additional capital in the banks in order to keep the debtto-capital ratios within the 10 to 1 maximum permitted by law. At June 30, 1964, the U.S. Government's investment in the capital stock of the banks was $120 million and that of private interests was $60 million.

231,050

5,590,351

-4,862,942 -4,956,413-5,358,376

194,839
-160
299

194,978

211,867 -299 -200 211,368

231,975
200

232,175

5,161,128 5,586,051
5,049,318
-4,854,340 -4,949,760 -5,353,876

All expenses, including administrative costs, are paid from the banks' own resources and thus in no way affect the Budget of the United States.

The Farm Credit Administration expects to transmit to Congress in January 1965 proposed legislation which, among other things, will broaden the legal maximum debt-to-capital ratios of the banks. Assuming no drastic changes in agricultural conditions, enactment of this legislation will make it unnecessary for the banks to draw on the Short-Term Credit Investment Fund for additional purchases of their capital stock after 1965. The estimates for 1966 were prepared on this basis.

ANNEXED BUDGETS

Revenue, Expense, and Retained Earnings (in thousands of dollars)

Object Classification (in thousands of dollars)

1964 1965 1966 actual estimate estimate

1964 actual

1965 1966 estimate estimate

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