1950 directors frb minneapolis

F E D E R A L R E S E R V E

B A N KOF

MINNEAPOLIS

annua report

to the directors

1950Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

N 0 E X

High Lights of 1950..... 1

Directors and Officers.............. 3

Changes of Directors and Officers...... 8

Assets and Liabilities................ 12

Departmental and Other Comments:

Check Collection................................................. 31Consumer Instalment Credit....................................... 33Currency and Coin................................................ .34-Discount......................................... ................ 38Duplicating.......................................................39Examination....................................................... 4-0Fiscal Agency.................................................... .41Noncash Collection............................................... 47Personnel.........................................................49Planning..........................................................54Protection....................................................... 55Public Services...................................................56Purchasing........................................................ 61Real Estate Credit............................................... 61RFC, CCC, and Other Governmental Agencies........................62Research......................................................... 63Reserves (Member Bank)............................................66Safekeeping...................................................... 68Wire Transfers................................................... 70Miscellaneous.................................................... 71

Capital Accounts.... ...74

Dividends....... ... 78

Bank Premises... ...79

Earnings... ...81

Expenses... ...88

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Capital accounts again reach new all-time high.

Net earnings and profits show decline of $202 thousand.

Check Collection Department again sets new volume record.

Revised check collection availability schedule benefits

member banks.

V Loan and Consumer Credit activities reactivated.

Real estate credit controls established.

Comparative year-end holdings of U.S. Government securities

show 030 million increase over 194-9.

Our daily average holdings of U.S. Government securities

decrease $>62 million.

The new bank movie, The Federal Reserve Bank and You,

is released.

Counterfeit Clinic inaugurated.


Construction of new coin vault was begun.

Reserve bank employees blanketed in Social Security expansion.

Outside office space leased.

Security Files Program developed.

Intensified program on check routing symbol undertaken.

Reduction in recordak costs realized under new system.

New tax remittance procedure placed in effect.

New series of Federal Reserve notes in process of being

printed.

Major RFC fiscal agency activities terminated.


HEAD OFFICE DIRECTORS

AND MEMBER OF FEDERAL ADVISORY COUNCIL

Directors

Roger B. Shepard, Chairman, and Federal Reserve Agent W. D. Cochran, Deputy Chairman

Class A

Charles W. Burges, Vice President & Cashier, SecurityNational Bank of Edgeley, Edgeley, North Dakota

Arthur H. Quay, President, The First National Bank of Minneapolis, Minneapolis, Minnesota

Harold N. Thomson, Vice President, The Farmers &Merchants Bank, Presho, South Dakota

Class B

Ray C. Lange, President, Chippewa Canning Company, Chippewa Falls, Wisconsin

Homer P. Clark, Honorary Chairman of the Board,West Publishing Company, St. Paul, Minnesota

William A. Denecke, Livestock Rancher,Bozeman, Montana

Class C

Paul E. Miller, Director, Agricultural Extension Division, University of Minnesota, Minneapolis, Minnesota

W. D. Cochran, G.M.C. Truck Distributor, Iron Mountain, Michigan

Roger B. Shepard, 322 Endicott Building, St. Paul, Minnesota

Member of Federal Advisory Council

Term Expires December 31

1951

1952

1953

1951

1952

1953

1951

1952

1953

Joseph F. Ringland, President, Northwestern National Bank of Minneapolis, Minneapolis, Minnesota

1951


O F F I C E R S

J. N. Peyton, President

A. W. Mills, First Vice President

H. C. Core, Vice President in Charge of Personnel Personnel:

CafeteriaEducation & Welfare MedicalPersonnel Maintenance Retirement System Social Security

Office Boys & Pages

C. W. Groth, Vice President H. A. Berglund, Assistant Cashier

Assigned to Helena Branch

E. B. Larson, Vice President C. Ries, Assistant Cashier

Fiscal Agency Securities:

Purchase and Sale Federal Taxes

H. G. McConnell, Vice President Bank Examination Securities Exchange Act

Otis R. Preston, Vice President Clement Van Nice, Assistant Vice President

Public Services Announcements Circulars Correspondence Press Relations


OFFICERS (Contd.)

M, H. Strothman, Jr., Vice President George M. Rockwell, Assistant Cashier

Industrial Loans Loans & Discounts Regulation V Loans Regulation W Regulation X

Sigurd Ueland, Vice President, Counsel, & Secretary Legal

A. R. Larson, Assistant Vice President Currency & Coin Noncash Collection Registered Mail Routing Symbol Securities:

Safekeeping

*Kyle K. Fossum, Assistant Cashier Building Duplicating Protection Purchasing

A. W. Johnson, Assistant Cashier Accounting:

ExpendituresGeneral Books and Bank Accounts Transfer of Funds

Foreign Exchange Reports

Win. E. Peterson, Assistant Cashier Accounting Custodianships:

CCC and others

M. 0. Sather, Assistant Cashier Check Collection Equipment Repairs Files & Old Records Ordinary Mail

*As of January 11, 1951


W. H. Turner, Assistant Cashier Telephone Vault

OFFICERS (Contd.)

M. E. Lysen, Operating Research Officer Efficiency Studies Equipment Office Forms Operating Letters Operating Manuals Planning Suggestions

J. Marvin Peterson, Director of ResearchF. L. Parsons, Associate Director of Research

Library Publications Research Statistics

0. W. Ohnstad, Auditor


HELENA BRANCH DIRECTORS

John E. Corette, Jr. Chairman

Term Expires December 31

B. M. Harris, President, The Yellowstone Bank, 1951Columbus, Montana; and President, The Yellowstone Bank, Laurel, Montana

G. R. Milburn, Manager and Part-Owner, N-Bar Ranch, 1951Grass Range, Montana

John E. Corette, Jr., Vice President and Assistant 1952General Manager, Montana Power Company,Butte, Montana

Theodore Jacobs, President, First National Bank, 1952Missoula, Montana

E. D. MacHaffie, Investments, and Collection of Artifacts, 1952Helena, Montana


CHANGES

DIRECTORS AND OFFICERS

In a special election held in November, Arthur H. Quay, President

of The First National Bank of Minneapolis, Minnesota, was elected Class A

director to fill the vacancy created by the death in August of director

Henry E. Atwood. Mr. Quay's term expires December 31, 1952.

Chosen in the regular November election to serve three-year terms

beginning January 1, 1951, were Harold N. Thomson, Vice President of the

Farmers and Merchants Bank of Presho, South Dakota, who was elected Class A

director, and William A. Denecke, Bozeman, Montana, livestock rancher, who

was elected Class B director. Mr. Denecke served during 1950 as a director

of the Helena Branch.

In December the Board of Governors of the Federal Reserve System

reappointed Roger B. Shepard, St. Paul, Minnesota, as Class C director for a

three-year term beginning January 1, 1951, and also redesignated him Chair

man of our Board and Federal Reserve Agent for 1951. W. D. Cochran, Iron

Mountain, Michigan, was redesignated Deputy Chairman for 1951. John E.

Corette, Jr., Vice President and Assistant General Manager, Montana Power

Company, Butte, Montana, was reappointed director of the Helena Branch for

a two-year term beginning January 1, 1951. On January 11, 1951, a new

director for the Helena Branch was appointed to serve out the unexpired

two-year term ending December 31, 1951, which was left by William A.

Denecke, upon his election to the Board of the Head Office. The new direc

tor is G. R. Milburn, Manager and part-owner of N-Bar Ranch, Grass Range,

Montana.


At the December 7 meeting the Board of Directors of our bank

re-elected Theodore Jacobs, President, First National Bank, Missoula,

Montana, and E. D. MacHaffie, Helena, Montana, to two-year terms beginning

January 1, 1951, as directors of the Helena Branch. Joseph F. Ringland,

President of the Northwestern National Bank of Minneapolis, was re-elected

to the Federal Advisory Council for the year 1951.

At the request of Paul G. Hoffman, Administrator of the Economic

Cooperation Administration, Paul E. Miller received a year's leave of ab

sence beginning about midyear 1950 from his position as director of the

Agricultural Extension Division of the University of Minnesota and as a

director of this bank. He is assigned to Dublin with the rank of Ambassa

dor, from where he is directing the distribution of E.C.A. funds.

At the May 5 meeting of our Board of Directors, R. E. Towle,

Vice President assigned to the Helena Branch, was given a leave of absence

until the end of the year. Clarence W. Groth was appointed Vice President

and placed in charge of the Branch.

On June 23, Harold A. Berglund was appointed Assistant Cashier and

assigned to the Helena Branch.

On July 12, 1950, Oliver S. Powell, then First Vice President of

this bank, was appointed to the Board of Governors of the Federal Reserve

System by the President of the United States. His appointment was confirmed

by the Senate on August 9. He assumed his duties as a Board member on

September 1. Mr. Powell is the third person from this district to become

a member of that body.

Upon completion of his education at the University of Minnesota

in 1917, Mr. Powell entered foreign service of the National City Bank of


New York and was assigned to its Petrograd Branch. With the outbreak of

the Bolshevist revolution he escaped through Siberia and returned to this

country.

After serving two years with the Navy he entered the employ of

this bank in 1920 in the Business Research Division. He became head of

the Research Department in June 1927, was appointed Assistant Federal

Reserve Agent in July 1936, and the following November was appointed First

Vice President, which position he held at the time of his appointment to

the Board of Governors.

Albert W. Mills was appointed First Vice President at the Sep

tember 15 meeting of the Board of Directors.

Mr. Mills was born in Ortonville, Minnesota, graduated from high

school at Crookston, and attended Hamline University. Prior to coming tr

this bank in 1933, he had been Cashier of the Pioneer National Bank of

Duluth. He was also formerly associated with the Minnesota State Banking

Department, St. Paul, Minnesota.

He was made Assistant Auditor of this bank in 1938, Auditor in

194-1, Cashier and Secretary in 194-2, and Vice President and Cashier in 1947.

Clayton E. Tillander resigned as Chief Examiner effective Decem

ber 31, 1950. On January 2, 1951, he will assume new duties as Executive

Vice President of the First National Bank of Little Falls, Minnesota. He

entered this bank's employ on August 15, 1939, as an examiner. On Febru

ary 23, 1942, he was made Chief Examiner (an official position as of

December 6, 1949) and continued in that capacity until his resignation.

On January 11, 1951, our Board of Directors made three changes in

the official staff. Maurice H. Strothman, Jr., Assistant Vice President,

- 1 0 -


was advanced to Vice President; Clement A. Van Nice, from Assistant

Cashier to Assistant Vice President; and Kyle K. Fossum was appointed

an Assistant Cashier.

- 1 1 -


D E F E N D I N G T H E D O L L A R

A REVIEW OF MONETARY-FISCAL DEVELOPMENTS IN 1950. CHANGES IN THE BALANCE SHEET OF THE FEDERAL RESERVE BANK OF MINNEAPOLIS.

The Threat of Inflation

America faces one of the toughest jobs in her history--a dual

effort to increase defense production and to stem rising inflation.

Defense of the dollar calls for hard-headed fiscal and monetary

policies--heavier taxation and credit restrictions. It means some direct

controls. It requires self-restraint by consumers, wage earners, and

businessmen.

Inflation today is a threatening reality. At the end of 1950, the

cost of living was at an all-time high, surpassing the peak scaled by 1948's

inflated prices. Wholesale prices--the business cost of living~~had jumped

almost 25% during 1950 to top all previous records. The already gigantic

money supply--bank deposits and currency outside of banks— was swollen by

an additional $6.4 billion during 1950. This meant the public had that many

more dollars to spend. And spend them they did. Moreover, the dollars al

ready in existence turned over at a rapidly increasing pace.

The outlook is for still more money in the hands of consumers and

businessmen in the months ahead, but less goods on the shelves to meet the

demand of the buying public. The battle to hold the line of inflation will

get much tougher before it gets easier.

The year-end picture was not without some bright spots, however.

American factories and workers in 1950 poured out the greatest abundance of


goods in history. Industrial production reached the phenomenal peak of

215$ of 1935-39's output. Gross national product, the dollar value of all

goods and services produced, was $277 billion for the year, B% over 194-9.

That more guns in 1951 will mean less butter is inescapable. Barring all-

out war, however, production of civilian goods during 1951— though well

under 1950's record— can be maintained at very high levels compared with

most recent years.

First Half of 1950— A Booming Peacetime Economy

At the start of 1950, some people were still worried about coming

out of the mild inventory recession of 194-9. For evidence, they pointed to

the rising tide of unemployment. In January, Government aid was marshalled

to relieve unemployment in critical areas. By February, unemployment had

climbed to a nine-year high of 4,684,000.

In spite of the unemployment situation, however, the scales were

heavily weighted on the side of business recovery. In the first quarter of

1950, industrial production had gained considerably over 1949’s midsummer

recession low— and would have risen higher except for the depressing effect

of strikes in several key industries. Increasing backlogs of orders to

manufacturers suggested that the inventory liquidation of '49 had given way

to a new cycle of inventory accumulation. Construction activity hummed at

an unprecedented rate. Consumer instalment credit and real estate credit

mounted steadily, and Uncle Sam's payments of insurance dividends to World

War II veterans swelled the consumers' spending stream.

To the seven men sitting on the Board of Governors of the Federal

Reserve System, the business situation looked inflationary. They pressed

-13-


lightly on the brakes of credit control. Open market operations of the

Federal Reserve were geared to nudge up the price of credit. Around the

first of the year, the Federal Reserve began supplying the market with

long-term restricted bonds. Bond prices began a slow but steady decline,

with yields rising correspondingly. At the same time, the Federal Reserve

permitted yields on short-term Treasury securities to inch upward. In

conjunction with their open market operations, Federal Reserve officials

were using "open-mouth" tactics. They made it known that modest firming

of interest rates was part of their anti-inflation arsenal.

By May, the trend of business activity was clearly up. The chief

support of the growing boom came from consumer spending on automobiles and

on housing and everything that goes with it. Inflation talk— fears of

rising prices and wages and expanding credit--could be heard. One Mew

York banker, Murray Shields, Vice President of the Bank of Manhattan Com

pany, thought he saw the end of the boom in sight. "Unless a powerful new

stimulant is injected into industry", he warned, "the nation may be in the

last phase of the postwar boom."

A Program of Preparedness

But Mr. Shields could not have guessed the powerful "stimulant"

that was to explode on June 25, 1950. On that Sunday the soldiers of North

Korea marched over the 38th parallel into South Korea. The United Nations

immediately came to the defense of the South Koreans in what was at first

called a "police action". In November, with the fighting in Korea undi

minished, the Chinese Communists joined the North Korean forces. The Korean

War was not just another "incident". It was clear that the United States

- 1


must embark on a program of military preparedness to last for an indefinite

time.

Almost overnight our Government was plunged from a defense pro

gram estimated at $13.5 billion in the President's 1950 budget message to

one currently estimated at roughly $42 billion.

When the Korean War erupted, the United States was already riding

the crest of the boom, using just about all the productive capacity at its

disposal. Hitting a record peacetime peak, industrial production in June

had climbed to 199 in the FRB index (1935-39=100), four points higher than

1948's boom-time top. Almost everyone was working, and people were spending

at an ever increasing clip. Business borrowing from banks, which normally

declines in the first half of the year, had fallen much less than the usual

seasonal dip. Demand for real estate and consumer credit had ballooned at

an alarming rate.

Despite the already high level of consumption, the Korean War

touched off a rush of panicky buying. Remembering the shortages of World

War II, the public went on a spree, purchasing everything from sugar and

canned goods to television sets and automobiles. Retailers and manufacturers

stepped up their purchases and production rates, and there was a sharp in

crease in employment. Prices spurted up and a wave of wage increases

spread swiftly.

In September, Thomas B. McCabe, Chairman of the Federal Reserve

Board, said to a meeting of the National Association of Supervisors of

State Banks, ’’Gentlemen, inflation is not around the corner. It is here

right now.”

-15-


A Double-Barreled Challenge

Recognizing the severity of the current crisis, Americans be

came aware of the double-barreled job that must be done.

First, we must build a defense program on top of an economy that

is already bulging at the seams.

Second, we must develop a tough economic program to stop inflation.

The threat to the dollar is clear. Defense production will gener

ate more income for workers and business firms, but it will not put any more

civilian goods into our markets for these incomes to buy. More dollars

bidding for fewer goods puts upward pressure on prices.

The anti-inflation battle can be waged with indirect controls,

mainly fiscal and credit policy designed to mop up excess purchasing power;

or with direct controls, price and wage fixing and rationing of goods; or

with some combination of both.

So far, our first line of defense has been on the monetary and

fiscal front. We have resorted to a minimum of direct controls.

Monetary and fiscal controls restrain inflation at its roots.

They cut back the public's spending power. Moreover, they involve a

minimum of interference with the working of a free economy.

Direct controls, on the other hand, do not go to the heart of

the inflation. They deal with its symptoms rather than its causes. As

a result, the suppressed embers of inflation may break into flames when

the direct controls are lifted. Moreover, price and wage controls have

little chance of effectively holding the line unless excess purchasing

power is being siphoned off through fiscal-monetary controls.

The cornerstone of an effective anti-inflation program is sound

-16-


fiscal policy. As the blueprint for financing the war takes shape,

Beardsley Rurnl's phrase "pay-as-you-go” has become the byword. Business

men, economists, and politicians are generally agreed that it is necessary

to pay for defense out of current income if we are to avoid diluting the

dollar water-thin. Already, at the end of 1950, the dollar in terms of its

1939 value was worth only 57^.

"Pay-as-you-go” spells higher taxes. It also means closing exist

ing tax loopholes and cutting to the bone nonessential Government expenses.

As a start, Congress, in September, voted an increase in corporate and

personal income taxes. Talk of reducing taxes on luxuries died abruptly.

In its place came arguments pro and con for an excess profits tax and plans

for boosting excise levies.

Second to taxation, borrowing from nonbank sources is the least

inflationary means of financing the preparedness program. In World War II,

the sale of Savings bonds contributed a steady stream of dollars into Uncle

Sam's coffers. In recent months, however, Savings bonds have lost some of

their public favor. People became leary of the declining purchasing power

of their Savings bonds dollars.

In January 1951, William R. Kuhns, Editor of the American Bankers

Association magazine Banking. urged bankers to push Savings bonds sales.

"U.S. Savings bonds", Mr, Kuhns wrote, "are an aid to fighting inflation

in two ways--by taking dollars out of circulation and by giving citizens

holding the bonds a greater interest in sound fiscal policy."

A second weapon in the arsenal of indirect controls is restric

tive credit policy. It is essential to limit spending from future income

as well as from current income.


Throughout most of this year, the galloping expansion of consumer

and mortgage credit added fuel to inflationary fires. On September 8, the

President signed the Defense Production Act of 1950 giving the go-ahead sign

to the planners of our defense program. Almost before the ink was dry, the

Federal Reserve Board under the authority granted in the Act swung into

action to curb the mounting tide of consumer and real estate lending. Their

aims to decrease inflationary pressure and also to divert strategic material

to the defense effort.

On September 8, the Board restored Regulation W, control over con

sumer instalment credit, and within a month the initial mild regulation was

tightened. After consultation with the Administrator of the Housing and

Home Finance Agency and with leaders in the private mortgage financing

field, the Federal Reserve Board, on October 10, announced Regulation X,

setting up for the first time machinery controlling mortgage credit on

new homes.

By tightening up instalment and housing credit, the Federal

Reserve cut into the demand for autos, houses, appliances, and other retail

goods. In October and November, the latest months for which estimates are

available, the expansion of consumer credit had slowed almost to a stand

still.

Around midyear, businessmen in increasing numbers began making

calls on the loan officers of commercial banks. Bank loans to business

borrowers started to climb rapidly in what was to become the largest autumn

loan expansion in history. From June 30 to the end of the year, business

loans in the country's banks expanded by a record-smashing total of more

than $5 billion.


A Federal Reserve Board study made just before Thanksgiving showed

that financing of raw farm products— grain, tobacco, cotton, etc.— accounted

for the lion's share of the increase in business loans. Sales finance com

panies and distributors also came in for a slice of the increase. Signif

icantly, little of the growing credit volume was for financing defense

contracts. These credit needs are yet to be fulfilled.

Banks play a strategic role in our semiwar,. inflated economy.

On the one hand, they supply the credit which keeps industry's wheels turn

ing. At the same time, when there is full employment, full use of plants

and machinery, and when all available raw materials are being used, every

dollar of new bank credit adds a dollar to the competition for limited

supplies of goods and services. With credit expansion, the "inflationary

gap” widens.

Voluntary restraints were one of the main bulwarks in the battle

of the bank credit bulge in 1950. Key personalities in the banking world

repeatedly called on banks for a program of austerity in their lending

policies. The American Bankers Association led the way in mid-July with

a statement cautioning their members against the use of bank credit to

stimulate inflation. Close on their heels came a strong appeal from the

52 bank supervisory agencies in the United States and later a personal

letter to member banks from Thomas McCabe, Chairman of the Federal Reserve

Board. In December, the National Credit Conference of the ABA devoted its

meeting to tackling the problem of bank credit expansion.

Hand-in-hand with the campaign of voluntary restraint, the

Federal Reserve was using its arsenal of credit controls to choke off some

of the huge supply of credit which was feeding the boom. For several

-19-


months before the Fed clamped down with Regulations X and W, open market

operations had been geared to making bank reserves less readily available

and to gently boost the price of credit. The Federal Reserve's continued

attempts to increase short-term interest rates set the stage for one of the

most dramatic developments in fiscal-monetary history— the open conflict

over interest rate policy between the Treasury and the Federal Reserve,

which in late August made headlines in financial publications across the

country.

The Interest Rate Controversy

Disagreement between the Treasury and the Federal Reserve has

smoldered during most of the postwar period. Both the fiscal and monetary

managers have the same general objective— to maintain the economy on a

stable course toward ever-increasing prosperity. But disagreement has

existed over the effectiveness of a flexible rate structure as a means of

achieving greater stability in the economy.

The Treasury, being charged with managing the weighty $257 billion

national debt, wants to keep the interest charges as low as possible. The

Federal Reserve, on the other hand, grappling with inflationary dangers is

more keenly aware of the anti-inflation potential of higher short-term

interest rates.

The first round of the current interest rate skirmish took place

in June. On the 21st of that month, Secretary of the Treasury Snyder

announced a refunding offer of 13-month notes paying 1 \/l*% to holders of

the $10.6 billion of maturing certificates. The new rate confirmed the

Treasury's standpat attitude. It was virtually the same as the low rate

already prevailing. The Federal Reserve, which was throwing its weight

-20-


in the open market toward higher short-term rates, had hoped that Uncle

Sam could see his way clear to paying a slightly higher rate.

The next refunding operations were scheduled for September and

October. In these two months, $13.6 billion of Treasury securities came

due for payment. This was to be the largest refunding in history. On

Friday, August 18, Federal Reserve Chairman McCabe and Allan Sproul,

President of the New York Federal Reserve Bank, met with Treasury officials.

The Federal Reserve presented its case: inflation dangers dictated a policy

of gently pressing up the level of interest rates.

A half an hour after Chairman McCabe and President Sproul left

the building, the Treasury announced that it would refund the $13.6 billion

of debt into 13-month notes at 1 1/l$. That is, at the existing rate.

The Federal Reserve hit back. It approved the New York Federal

Reserve's increase in the discount rate from 1 \/2% to 1 3/U%, signaling

to the banking community its concern over low interest rates. At the

same time, it issued a statement underlining the inflation danger and de

claring that the Board of Governors of the Federal Reserve System and the

Federal Open Market Committee are prepared to "use all the means at their

command to restrain further expansion of bank credit consistent with the

policy of maintaining orderly conditions in the Government securities

market".

Then on August 21, the Open Market Committee started buying in

all offerings of issues maturing September 15 and October 1 at prices

equal to the yield of the Treasury's forthcoming offering, 1 1/l$. At

the same time, the Federal Reserve began selling back into the market,

at yields exceeding 1 1fl&t great blocks of Government securities of terms

- 2 1 -


shorter than the forthcoming issue of notes. The result was that holders

of the maturing issues passed up the Treasury refunding offer, sold their

maturing securities to the Federal Reserve, and bought from the Fed other

securities at yields of over 1 1/l&.

By buying at the Treasury's price all the maturing issues offered

for sale, the Federal Reserve fulfilled its obligation of supporting Treasury

operations. But by selling back shorter-term issues at higher rates of

interest, the Federal Reserve effectively shoved the short-term interest

rate toward 1 3/8$. In line with the higher short-term rates for Govern

ment securities, interest rates generally firmed somewhat.

The announcement of terms of the December-January refunding

operations signaled that a measure of agreement had been reached between

Treasury and Federal Reserve officials. On November 22, Secretary Snyder

told holders of $8 billion of bonds and certificates maturing December 15

and January 1 that they would be offered 1 five-year notes in exchange

for their maturing issues. This was an increase of 1/U% in the interest

rate compared with the last five-year note issued by the Treasury on

March 15, 1950, and was a recognition of the uptrend in interest rates.

In a final stab at inflation for the year, the Federal Reserve

on December 29 announced a boost in reserve requirements to the legal

limit for country member and reserve city banks and within two points of

the ceiling for central reserve city banks, effective in January and

February.

Along with announcing the technicalities of the increase in

reserve requirements, the Board of Governors gave a word of explanation.

The increase will raise the required reserves of member banks by a total

- 2 2 -


MILLION D O L L A R S M IL L IO N D O L L A R S

i/V)u>I

1600

1400

1200

1000

800

6 0 0

400

200 b

GOLD C E R T IF IC A TE S , xjsssssss® ^REDEMPTION FUND & OTHER CASH

«*».♦ »:♦: »*; ♦. >:♦♦♦ W

.NVAV.V VViC* wJv

1917 19 2 S 2 3 25 27 29 31 33 35 37 39 4 ! 4 3 45 47 4 9

1600

1400

1200

1000

800

600

400

51 53


C O M P A R A T I V E S T A T E M E N T O F A S S E T S

MINNEAPOLIS AMD HELENA BRANCH COMBINED (Thousands of Dollars)

Change from12-31-50 12-31-49 12-31-49

Assets:Cash Reserves:

Interdistrict Settlement Fund 156,1 H 214,249 - 58,135Gold Certificates with F.R. Agent 210,000 210,000 -

Redemption Fund - F.R. Notes 21.467 22jJ338 - 871Total Gold Certificate Reserves 387,581 446,587 - 59,006

Total Other Cash 6,060 5,907 + 153

Bills Discounted - 50 — 50Foreign Loans on Gold - 1,737 - 1,737Industrial Loans 185 78 + 107U. S. Government Securities:

Bills 38,487 156,337 - 117,850Certificates of Indebtedness 72,218 203,156 - 130,938Notes 387,549 18,200 + 369,34-9Bonds 142.940 233,658 - 90.718

Total U. S. Govt. Securities " 641,194 611,351 + 29,843

Due from Foreign Banks 1 1 -F.R. Notes of other F.R. Banks 5,613 5,154 + A59Uncollected Items:

Transit Items 100,136 73,458 + 26,678Exchanges for Clearinghouse 11,143 4-, 703 + 6,440Other Cash Items 1,766 886 + 880Due from Branches or Head Office 165 193 - - - 3 1

Total Uncollected Items 113,210 79,245 -f 33,965

Bank Premises 2,493 2,493 -

Less Reserve 1J79 1.347 + 32Bank Premises - Net 1,114 1 , J.46 - 32

Miscellaneous Assets:Fiscal Agency expense, reimbursable 91 82 9Interest Accrued 2,838 2,017 -f 821Premium on Securities 680 985 - 305Deferred Charges 28 23 -f 5All Other Assets 8 83 - 75

Total Miscellaneous Assets 3,645 3,190 + 455

Total Assets 1,158,603 1,154,446 + 4,157

- 2 U -


-25-

M ILLIO N D O LLA R S

1600

M ILL IO N D O L L A R S

600

1400

1200

1000

8 0 0

6 0 0

4 0 0

200

1400

200

1000

800

600

400

200


C O M P A R A T I V E S T A T E M E N T O F L I A B I L I T I E S

MINNEAPOLIS AND HELENA BRANCH COMBINED (Thousands of Dollars)

Change from12-31-50 12-31-49 12-31-4C

Liabilities:Federal Reserve Notes in Circulation 610,643 612,217 ~ 1,574

Deposits:Member Bank - Reserve Accounts 391,854 394,920 - 3,066U.S. Treasurer - General Account 22,614 36,733 - 14,119Foreign 22,193 19,015 + 3,178Nonmember Bank - Clearing Accounts 610 1,274 - 664Officers’ Checks 321 345 - 24Due to Other F.R. Banks - Collected Funds 2,511 1,639 + 872Other Deposits 1^67 . i± m - 273

Total Deposits Ml , 570 455,666 - 14,096

Deferred Availability Items:U.S. Treasurer - General Account 5,367 2,662 + 2,705All Other j r t ^ m _ 61JJ3 + 16.255

Total Deferred Availability Items 82,741 63,781 + 18,960

Miscellaneous Liabilities;Discount on Securities Sundry Items PayableTotal Miscellaneous Liabilities

61110171

23022k354

16914

183

Total Liabilities 1,135,125 1,132,018 + 3,107

Capital Accounts:Capital Stock Paid In Surplus Fund - Section 7 Surplus Fund - Section 13b Reserve for Contingencies

Total Capital Accounts

Total Liabilities and Capital Accounts

5,074 4,709 36513,168 12,494 6741,073 1,073 -

____ ^152 + 1123,478 22,428 + 1,050

1,158,603 1,154,446 + 4,157

-26-


of approximately $2 billion, the Board said, reducing the ability of banks

further to expand credit that would add to inflationary pressures. As to

the timing of the reserve boost, the Board said, "The increase is timed so

as to absorb reserves coming into banks from the postholiday return flow

of currency."

As 1951 began, some good signs appeared on the scene. Consumer

credit expansion had slowed. Then in the second week in January, total

bank loans had their first sizeable drop in months, perhaps beginning the

over-due seasonal decline.

But the big job is yet to come. Only a dribble of defense orders

has been placed. The effects of the preparedness program on production and

prices are yet to be felt in 1951 and later years.

Our Balance Sheet Figures

The 12 Federal Reserve banks are the hub of our monetary system.

Among their assets they count the gold reserves upon which the country's

money supply is built. Their liabilities include Federal Reserve notes in

circulation and the reserve balances of the more than 6,800 member banks

in the United States. The Federal Reserve's huge portfolio of Government

securities makes it possible for the money managers to influence the

supply of credit through open market operations. Besides deposits of

member banks, the Federal Reserve banks hold a big portion of Uncle Sam's

bank account.

Thus, the balance sheets of the Federal Reserve banks contain

a dollar-and-cents record of changes in basic credit factors. Monetary

and fiscal policy is reflected as it acts on our money supply.

-27-


In 1950, the gold certificate reserves of the 12 Federal Reserve

banks declined from over $23 billion to $21.5 billion. This outflow of

gold from the United States reflected improved international trade balances

in many foreign countries. In spite of the year's record decline in U.S.

gold holdings, however, this country with its two-thirds of the known gold

supply (there are no estimates available of Russia's gold holdings), con

tinues to be the world's largest holder of the monetary metal.

Gold losses mean an equivalent reduction in bank reserves. Thus

the gold outflow in 1950 provided an anti-inflation antidote to the U.S.

economy.

The gold certificate reserve of the Federal Reserve Bank of

Minneapolis decreased $59,006,000 in 1950. This decline reflected our

share in the outflow of gold from the United States, as well as the net loss

of funds from the Ninth District to other areas within our national boun

daries.

Changes in the Government security portfolios of the Federal

Reserve banks resulted from open market operations of the central banks

and refundings by the Treasury. Here are the year-end holdings of the

12 Federal Reserve banks and of the Federal Reserve Bank of Minneapolis.

U.S. Government Security Holdings

Federal Reserve System (In millions of dollars)

12-27-50 12-31-49 ChangeBills 870 4,829 - 3,959Certificates 2,334 6,275 - 3,941Notes 12,544 562 + 11,982Bonds 7.218 - 2.629

Total 20,337 18,884 + 1,453

-28-


U.S. Government Security Holdings

Federal Reserve Bank of Minneapolis (in millions of dollars)

12-31-50 12^31^9 ChangeBills 38 " 156 - 118Certificates 72 203 - 131Notes 388 18 + 370Bonds 1£2 234 - 91

Total 6£L 611 + 30

In refunding operations, 1950 saw the demise of the certificate of

indebtedness as a public debt instrument. With the certificates maturing on

January 1, 1951, the last outstanding one-year issues were refunded into

Treasury notes. Last year there also was a revival of note financing, a

type of security in the one-to-five year range. Reflecting these develop

ments was a reduction in Federal Reserve holdings of C.I.'s and a rise in

the note portfolio. Federal Reserve’s holding of bonds in 1950 declined as

a result of anti-inflation sales in the open market as well as the refunding

of called bonds with shorter-term issues.

The Federal Reserve Bank of Minneapolis participates on a per

centage basis in the Government security holdings of the Federal Reserve

System. Thus changes in our portfolio follow the pattern set by System

operations.

Reserve accounts of member banks in the nation increased roughly

$606 million from the end of 1949 to the end of 1950, In the Federal Re

serve Bank of Minneapolis year-end figures showed a decrease in reserve

accounts in 1950. This one-day comparison, however, is not as significant

as the comparison of the last halves of December in 1949 and in 1950. It

is over these periods that member banks' reserve requirements are calculated.

These data showed a considerable rise in 1950 over a year ago in the average

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daily reserve balances of District member banks. Thus both locally and

nationally bank reserves, the basis of credit expansion, increased last

year.

At the end of the year, the reserve ratio of the 12 Federal Re

serve banks--the ratio of gold certificate reserves to deposits and Federal

Reserve note liabilities— stood at 50.2$. This was U.8$ under the end of

last year--but more than twice the legal reserve requirement of 25$.

The reserve ratio in the Minneapolis Reserve Bank, while consid

erably below the national average, was still a comfortable margin above

legal requirements. As the year's final balance sheet was drawn up, our

reserve ratio tallied 36.8$, down 5,6$ from a year ago.

-30-


DEPARTMENTAL AND OTHER COMMENTS

CHECK COLLECTION DEPARTMENT

Again in 1950 the volume of checks handled in the Check Collection

Department increased over the previous year. The grand total of 59.3 million

checks handled is an increase of 6% over the 1949 total of 55.8 million. The

dollar volume of checks handled increased 9% over the previous year, or $1.7

billion. The average amount of each check drawn was approximately $341.80.

A new all-time high single day's volume of checks was reached on

March 6, 1950, when 297,168 checks were handled. The previous high total was

281,713 handled on April 6, 1949.

The Country Check Division handled 39 million checks during the

year, which was an increase of 3 million checks, or &%, over 1949, while

dollar volume showed an increase of $638 million, or 10$, over the previous

year.

A new high single day's volume was reached in the Twin City

Clearing Check division on December 18, 1950, when 86,718 items were handled.

This division processed 9,712 thousand checks during the year, an increase

of 5% over the 9,24-9 thousand checks processed the previous year.

Return items totaled 577 thousand during the year, which is an

increase of 8.5 percentage-wise over 1949. As in the previous year, approxi

mately one-half of the return items handled were returned for the reason

they were nonpar or noncash items, with the remaining half returned for

various other reasons.


The total Treasury checks handled increased 1% in volume over

194-9, but decreased 3% in dollar volume. The item volume breakdown of

Treasury checks was as follows: Change1950 194.9 from 1949

Paper Checks 1,168,662 1,111,636 + 57,026Card Checks Payable Through:

Our Bank 6,775,113 6,477,318 + 297,795Other F.R. Banks 2.021.205 2.270.939 - 249.734

9,964,980 9,859,893 + 105,087

As the result of improvements in the collection time of items

payable in other Federal Reserve bank and branch cities, a revised time

schedule, effective February 1, 1950, was prepared to include 15 Federal

Reserve bank and branch cities in the one-day deferment classification, and

20 in the two-day classification. Previously there were 12 cities in a one-

day group, 21 in a two-day group, and two in a three-day group. In addition,

nine states were added to the two-day classification. A new schedule was

simultaneously inaugurated which permitted member banks depositing a daily

average of 300 items or less to forward these items to us without regard to

availability classification for one-day deferment. This schedule also per

mitted banks depositing a daily average of 1,500 items or less to forward

two cash letters - one for immediate credit and one for two-day deferment.

Depositing banks may still elect to sort and list the items according to

the availability schedule for credit on an immediate, one, two, and three

day basis.

Over a period of months, beginning in May 1950, the number of

recordak machines was reduced from 26 to 9. This was made possible by the

installation of an improved automatic feeding device, which permits photo

graphing and endorsing at a rate of 250 to 300 checks per minute, per machine.

In the past each unit was equipped with a recordak machine and each check was

- 32-


hand fed into the machine for endorsing and photographing. This decrease in

the number of machines used has resulted in a saving in rental cost by the

bank. The monthly rental per unit has recently been increased, however.

CONSUMER INSTALMENT CREDIT

Following enactment of the Defense Production Act of 1950, the

Federal Reserve System again entered upon control of consumer instalment

credit under a revised Regulation W which became effective September 18, 1950.

During the last three months of the year, field investigators working

out of the Head Office and Helena Branch called on 3,384- business enterprises

in the Ninth District. Of these, 2,673 were found to be engaged in businesses

subject to the regulation's terms and were investigated as to conformity with

the regulation. Fifty-one firms were found to have violated the regulation

but, with one exception, the violations found were such as to call for no

action other than discussion in the field. One television and appliance dealer

appeared to our investigators to have been willful in his nonobservance of the

requirements and was accordingly requested to appear at a disciplinary con

ference at our bank. The assurances of good faith and future compliance

resulting from that conference have been tentatively accepted as a satisfactory

disposition of the matter, and the violator has been scheduled for re-investiga

tion early in 1951.

At the year's end, 9,675 lenders and vendors in the district had

filed with our bank the registration statements required by the regulation.

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CURRENCY & COIN DEPARTMENT

The total dollar amount of outgoing shipments of currency to member

banks in this district increased $10 million over 1949 and outgoing shipments

of coin increased $943 thousand. A total of 37,080 currency and coin shipments

aggregating $371,554 thousand were made during the year as compared with

36,253 shipments aggregating $360,247 thousand in 1949*

Total incoming currency and coin shipments were slightly less in

number this year than for the previous year. Shipments numbering 26,560 with

a total of $377,419 thousand were received in 1950 as against 26,917 shipments

totaling $383,171 thousand received in 1949• The dollar amount decreased $6

million while actual shipments received were 357 fewer.

The demand for wrapped coin increased substantially this year. We

wrapped 51,784 thousand coins aggregating $3,548 thousand as compared with

39,313 thousand coins aggregating $2,678 thousand in 1949. This is an increase

of 12,471 thousand coins wrapped and $870 thousand. It was necessary to order

$1,786 thousand in coin from the Treasurer of the United States to meet the

demand from banks in this district. This compared with $810 thousand ordered

in 1949, or an increase of $976 thousand this year.

Six million less bills were counted and sorted this year. Total

number of bills counted and sorted numbered 64,154 thousand as compared with

69,810 thousand during the previous year. However, the 96,343 thousand coins

received and counted was an increase of 10 million from the 86,736 thousand

received and counted in 1949. This is accounted for by the increased demand

for wrapped coin.

During the year we sent 35,479 thousand unfit bills to the Treasury

-34-


Department for redemption. This reflects a decrease of 6 million from the

41,353 thousand forwarded last year. We returned to other Federal Reserve

banks $24,843 thousand in fit notes and received from them 038,243 thousand

of our own fit notes.

In the process of sorting and counting fit and unfit currency,

154 counterfeit bills totaling $1,779 were found.

-35-


Currency Paid Out

1950 12^2

l»s and 2‘s $ 33,137,965 $> 32,257,8405*s 52,823,000 52,557,000

10‘s 117,210,000 113,532,00020's 91,524,000 86,630,00050»s 5,697,000 5,476,000

100's 21,567,000 21,774,000500*s 1,172,000 1,395,0001000‘s 2.109.000 1.704.000

£>325,239,965 0315,325,540

Outgoing Shipments for account of member banks

1950 1949Number Amount Number Amount

Currency paid out 21,867 #325,239,965 21,460 #315,325,840 Currency shipped to Helena Branchand for other F.R. banks 461 37,136,500 525 36,691,500

com 14*752 _ % m xm 14*268 „._sx22% m37,080 0371,554,408 36,253 $360,246,649

Incoming Shipments for account of member banks

1950 1949Number Amount Number Amount

Currency 22,§lS $369,290,093 22,496 1374,580,350Coin 3,944 _ 8.128^792 4.421 8.590.480

26,560 $377,418,885 26,917 $383,170,830

Number & Amount of Pieces Handled Currency

Bills received and countedBills rehandledHand verification of bills

________ 1950_________Number Amount

64,154,408 0404,671,050 5,016,998 61,443,900

20.132.711 249.864.820 89,304,117 $715,979,770

______ 1949_________Number Amount

697809,96« $402,412,830 5,660,013 75,141,520

21.2^5.326 268^039^60 96,695,300 0745,593,910

-36-


Number & Amount of Pieces Handled Coin

Coins received & counted Coins rehandled Coins wrapped

Number 96,342,946 2,946,371

51.783.500 151,072,817

1950Amount

0 7,401,903 486,027

3.547.625 $11,435,555

1949Number

86,736,3782,870,26939.313.000

128,919,647

Amount$ 7,518,249

517,089 2.677.850

§10,713,188

Amount of Coin Received from U. S. Mints

1950

$1,786,000

m a .

$810,000

Number of Unfit Bills Forwarded to Treasurer of the United States for Redemption

1950

35,478,732

1949

41,352,590

Return of Federal Reserve Notes to Bank of Issue

Fit-for-use Federal Reserve Notes returned to other F. R. Banks

Our fit-for-use Federal Reserve Notes received from other F. R. Banks

1950

$24,842,500

$38,243,450

1949

$31,454,800

$38,770,150

-37-


DISCOUNT AND CREDIT DEPARTMENT

On August 22, 1950, the rate on discounts and advances under

Sections 13 and 13a of the Federal Reserve Act was increased from 1 l/2 to

1 3/4% and the rate on advances under Section 10b from 2 to 2 l/U%* The rate

of interest for advances to individuals, partnerships, and corporations,

(including nonmember banks) secured by direct obligations of the United

States under the last paragraph of Section 13 of the Federal Reserve Act

remained at 2 3/4$.

A total of 23 banks in Head Office territory borrowed an aggregate

of $881,044 thousand during 1950, all of which was secured by United States

Government obligations. All but $8,194 thousand of this amount was borrowed

by Twin City banks. Aggregate borrowings on governments in 1949 amounted

to $238,199 thousand and was loaned to 23 banks. Montana banks borrowed

$31,810 thousand through the Helena Branch in 1950, an increase of $5,415

thousand over such borrowings in 1949*

Our bank's participation in foreign loans on gold during the year

totaled $1,445 thousand. At year's end there was none.

Twenty-seven applications for industrial loans under Section 13b

of the Federal Reserve Act were received during the year. These applications

aggregated $889 thousand. One application for $20 thousand was pending at

the year's end. Seven applications totaling $210 thousand were approved,

and 23 totaling $478 thousand were declined. Four applications totaling $92

thousand were withdrawn after approval, the applicants being unwilling to

meet the conditions of approval or having found other sources of financing.

Industrial loan disbursements aggregating $233 thousand were made,

$16 thousand of which was provided by participating banks. One approved

-38-


application for 050 thousand was in the process of being closed at the end of

the year. The total amount of industrial advances outstanding on our bank's

books on December 31, 1950, was 0185,300.60. These funds were being utilized

by (l) two farm implement dealers, (2) a paint manufacturer in Michigan, (3)

two dairies in South Dakota, (4-) a builder's hardware and appliance dealer in

the Twin Cities, (5) a soft water service company in rural Minnesota, (6) a

Twin City distributor of heating equipment, (7) a Minnesota cafe, (8) a feed

manufacturer, and (9) a retailer of building material.

In 1950, in order to facilitate the defense effort, a new program

of guaranteed loans patterned after the V-Loan program of World War II was

inaugurated under authority of the Defense Production Act of 1950 and Execu

tive Order No. 10161 of September 9, 1950. The Board of Governors revised

its Regulation V, effective September 27, 1950, to govern the general opera

tions of the renewed program. It is contemplated that guarantees will be

issued by the Departments of the Army, Navy, Air Force, Commerce, Interior,

and Agriculture, and the General Services Administration. Several inquiries

with respect to the program have been received but no applications for

guarantees have been filed with our bank.

As of December 31, 1950, one Regulation V guarantee was outstanding

under the old V-Loan program. It covered 035 thousand of the remaining 04-7

thousand balance due on a loan made by the Reconstruction Finance Corporation,

guaranteed by the Department of the Army.

DUPLICATING DEPARTMENT

In 1950 the Duplicating Department reproduced 5.5 million copies of

5,94-4- different forms, an increase of 1,336 thousand copies over the previous

-39-


year. The major portion of this increase is due to the very extensive use

we have been able to make of our Multilith machine purchased in June of 1949.

The Addressograph section of this department addressed a daily

average of approximately 4,000 envelopes and 4,500 forms, as compared with

2,000 envelopes and 3,800 forms in 1949. The reactivation of Consumer Credit

and establishment of Real Estate Credit are largely responsible for the sub

stantial increase in addressograph work.

The following table reflects a 30% increase over 1949 in the number

of photostats:

1950 1949 Change

(Fiscal Agency Department 687 871 - 184 (Minneapolis Office of the

Reimbursable ( Commodity Credit Corporation 1,450 1,182 + 268(Minneapolis Loan Agency of RFC 692 141 + 551(Miscellaneous 171 73 + 98

3,000 2,267 + 733

Bank Work 1.515 1.195 + 3204,515 3,462 +1,053

EXAMINATION DEPARTMENT

At the close of the year there were 346 national banks and 131

state member banks in this district, which is one less national bank than at

the end of last year. Distribution of these banks by states is as follows:

National StateBanks Banks Total

Michigan 26 15 41Minnesota 178 28 206Montana 39 45 84North Dakota 41 2 43South Dakota 35 27 62Wisconsin 27 14 41

346 131 477


Total membership in this bank was decreased by one bank during

the year when the American Exchange National Bank of Virginia, Minnesota,

went into voluntary liquidation effective October 12, 1950, and its membership

ceased on October 16 when its stock was canceled. The deposit liabilities

v:ere absorbed by the State Bank of Virginia, Minnesota, at the close of

business September 30, 1950.

One application for membership was received from a state bank during

the year, and as of the year end, membership had not yet been completed.

During the year all 131 state member banks were examined by the

Examination Department. As of December 31, twenty-one state member banks

held trust powers. Only eleven were examined inasmuch as ten vfere not exer

cising their trust powers.

Of the three holding company affiliates in this district, only the

Northwest Bancorporation was examined during 1950. Holdings companies are

examined biennially, and the other two had been examined during the previous

year.

FISCAL AGENCY DEPARTMENT (Head Office Only)

There were no cash offerings for new securities made by the

Treasury Department during the year 1950 other than the weekly Treasury

bills. However, there were ten exchange offerings consisting of ten issues

of Treasury notes. A total of 7,34-6 exchange subscriptions were received

for these issues, of which 6,038 were for the account of banks. The ex

change subscriptions received and allotted during 1950 amounted to $690

million as compared with $860 million for 1949, or a decrease this year of

0170 million.


The total public debt as of December 29, 1950, was $256.2 billion

compared with $256.9 billion on December 31, 1949.

During the year we received 1,874 tenders for the weekly Treasury

bills aggregating $295 million, of which $286 million were accepted. These

tenders represented 2,092 subscribers. In 1949, we received 1,714 tenders

totaling $351 million representing 1,881 subscribers, and $330 million were

accepted. This year we received 160 more tenders with 211 more subscribers,

but the dollar amount of tenders received and accepted decreased $56 million

and $44 million respectively.

The average equivalent rate of discount on Treasury bills increased

from 1.087$ for the bills dated December 29, 1949, to 1.382$ for the bills

dated December 28, 1950.

During 1950 this bank issued U. S. Savings bonds of Series E, F

and G amounting to $128 million (issue price) involving 245 thousand pieces,

as compared with $82 million (issue price) involving 255 thousand pieces, or

a total issue price increase of $46 million over 1949 but a decrease of 10

thousand pieces. The Treasury Department conducted an Independence Drive

during the period May 15 through July U to stimulate the sale of U. S. Savings

bonds. The total issue price of all Savings bonds sold in this district

during this drive was $50 million. The national sales quota for the drive

of $650 million was over-subscribed by $66,013 thousand, or 10%.

The Treasury Department made Series F and G Savings bonds available

to banks and other institutional investors during three special offering

periods - October 2 through October 10, November 1 through November 10, and

December 1 through December 11. We issued Series F and G bonds totaling $64

million (issue price) consisting of 8 thousand pieces to banks and other


eligible institutional investors during the three special offering periods.

There were 1,4-09 qualified issuing agents for Series E Savings

bonds in this district as of December 29, 1950, as compared with 1,418

qualified issuing agents on December 31, 1949. Since the Korean situation

has developed, there appears to be a renewed interest in the payroll deduc

tion plan for the purchase of Savings bonds. Several companies have inquired

about insituting the plan and about qualifying as issuing agents, while

several others who had discontinued the plan have reinstated it.

There were 1,075 thousand pieces of Series E Savings bonds shipped

to issuing agents during 1950 compared with 1,222 thousand in 1949, or a

decrease of 147 thousand pieces.

Issuing agents in this district during the past year issued 1,017

thousand pieces of Series E bonds amounting to $129 million (issue price)

compared with 1,162 thousand pieces aggregating 0172 million (issue price)

during the year 1949, or a decrease of 145 thousand pieces and 043 million

(issue price).

The Treasury Department permitted the proceeds of the maturing

Series D-1940 Savings bonds, owned by individuals and guardianship estates,

to be applied to the purchase of Series E-1950 Savings bonds without such

purchases applying against the annual limitation.

The Treasury Department announced on December 28, 1950, that

individual owners of the Series D-1941 Savings bonds that began to mature

on January 1, 1951, may exchange them at maturity for the Series E Savings

bonds at any time without regard to the annual limitation of C>10 thousand

(maturity value) on the Series E bonds. This privilege also applies to

Series D-1941 bonds belonging to individuals who may be under legal guardian-

-43-


ship because of minority or incompetency.

As of December 29, 1950, 1,244 banks with 106 branches and 26

other paying agents in this district were qualified to act as paying agents

for Series A to E Savings bonds and Armed Forces Leave bonds, as compared

with 1,249 incorporated banks with 106 branches and 28 miscellaneous paying

agents on December 31, 1949. The daily average of all Savings bonds paid

by paying agents in this district and direct redemptions by this bank during

the year 1950 was 9,791 pieces as compared with a daily average of 9,326

pieces in 1949, or a daily average increase of 465.

Reimbursement to paying agents in our district for paying Savings

bonds and Armed Forces Leave bonds during the first three quarters of 1950

amounted to $241 thousand for 1,802 thousand pieces, as compared with §233

thousand for 1,729 thousand pieces during the first three quarters of 1949.

During 1950 a monthly average of 1,611 pieces of Savings bonds

were received for safekeeping as compared with 1,802 pieces per month for

1949. The monthly average released from safekeeping during 1950 was 2,728

pieces as compared with 2,474 pieces per month in 1949. On December 29, 1950,

this bank held in safekeeping Savings bonds for individuals, fiduciaries and

organizations other than banks numbering 250 thousand as compared with 263

thousand held on December 31, 1949, or a decrease of 13 thousand bonds.

During the past year, we reissued for all purposes 122 thousand

Savings bonds amounting to 024 million (maturity value) as compared with

132 thousand pieces reissued in 1949 amounting to 026 million.

In this district there are now 1,162 banks qualified as deposi

taries for public moneys, and 996 of these banks have active Treasury Tax

and Loan accounts (formerly known as War Loan Deposit accounts), or an

-44-


increase of 166 qualified depositaries. The total deposits in the Treasury

Tax and Loan accounts of these banks as of December 29, 1950, were $89

million as compared with $68 million on December 31, 1949. The amounts

deposited in these accounts aggregated $531 million for the year, which is

an increase of $93 million from the $438 million deposited in 1949.

Effective January 1, 1950, a new procedure for handling payment

of taxes on wages paid employees by employers in this district subsequent

to January 1, 1950, was put in operation.

Under the new procedure, employers having a tax liability of $100

or more per month for federal taxes withheld from employees' salaries and

the firm's contribution for social security taxes, are required to send

their remittances together with a depositary receipt form direct to a

commercial bank which is qualified as a depositary for federal taxes or

direct to the nearest Federal Reserve bank. The receipt, ?;hen received

by the Federal Reserve bank through a depositary or direct from the employer,

is validated and returned to the employer to be submitted to the tax collec

tor at the end of the quarter with his tax return.

Banks which desired to continue accepting deposits of employers

for 1950 and subsequent federal taxes were required to requalify under the

new procedure.

Under the old procedure 2% Depositary bonds were issued to banks

acting as depositaries for withheld taxes as a means of reimbursement for

their service and v̂ere also permitted to retain withheld tax deposits in a

War Loan account. This procedure was changed when the 2% Depositary bonds

were redeemed as of the close of business February 28, 1950. Banks partic

ipating in the new plan receive benefits only through the holding of govern-


ment deposits of federal taxes in their Treasury Tax and Loan account.

A "special draft" procedure was put into effect under the new plan,

whereby a bank could take credit in its Treasury Tax and Loan account for

employers' remittances made direct to a Federal Reserve bank. However, this

"special draft" procedure was discontinued as of September 1, 1950, by order

of the Treasury Department because of the expense involved.

On December 29, 629 banks in this district were qualified as

depositaries of funds withheld for federal income and social security taxes,

while as of the close of 1949, 264 banks had requalified to act as deposi

taries under the new procedure.

During the year the qualified depositaries accepted and forwarded

to us 109 thousand depositary receipts amounting to £174 million for such

withheld taxes as against 114 thousand receipts received during 1949 which

amounted to C’150 million. Also during the year, we received direct from

employers 43 thousand depositary receipts for federal taxes aggregating

£’22 million.

On November 19, 1950, the divisions of the Fiscal Agency Department

handling withheld taxes, the reissue, issue on reissue, direct redemption

and bank redemptions of Savings bonds were transferred to the third floor

of the Syndicate Building. There are 78 employees in these units. Acquire

ment of 18,600 square feet of office space in the Syndicate Building was made

on a five-year lease basis to take care of an anticipated increase in Fiscal

Agency and other probable emergency activities. As activity increases,

additional units will be moved to this space.

On December 29, 1950, there were 131 employees in the Fiscal Agency

Department as compared with 127 on December 31, 1949.

-46-


NONCASH COLLECTION DEPARTMENT

During 1950 this department handled 84-2 thousand grain drafts

totaling 0712 million. This was an increase over 1949 of 27 thousand items

handled and 024 million, or 3$ in each case.

There was an increase of 63 thousand items in city collections

and a decrease of 23 items in country collections compared with 1949.

Coupon and country security collections showed an increase of

179 thousand items and a dollar value increase of 0533 thousand. The large

increase in the volume figures for city collections and coupon and country

security collections was due to a change in our method of counting. In

1949 when more than one coupon or security of the same corporation and same

place of payment was received in a single coupon envelope or as a single

collection, it was counted as one item. In 1950, when a single coupon

envelope was opened, the transaction was recorded by the actual number of

pieces received. This procedure was also followed on other security col

lections, such as bonds, notes, etc.

Member banks of this district forwarded 2,753 collections direct

to other Reserve banks during 1950 as compared with 3,026 during the

previous year. The dollar value totals were 019 million and 026 million

respectively.

Exclusive of direct-sent collections, the Noncash Collection Depart

ment had an over-all increase in 1950 of 268,177 items handled over 1949.

-47-


In October 1950, activities in connection with the redemption of

Government coupons were transferred from the Fiscal Agency Department to the

Noncash Collection Department.

During the year we redeemed 367 thousand Government coupons aggre

gating $29 million as compared with 4-03 thousand coupons aggregating $31

million in 1949, or a decrease in 1950 of 9% in number of coupons and 6%

in dollar volume from the previous year. Also redeemed during the year were

12 thousand Governmental Agency coupons totaling $473 thousand as compared

with a like number of coupons totaling $385 thousand in 1949*

-48-


PERSONNEL DEPARTMENT

Head Office personnel as of December 31, 1950, totaled 628, an

increase of 40 compared with the same date last year. During the first

eight months of 1950 the employment picture at the Head Office remained

fairly constant with the staff never less than 582 nor more than 593.

However, starting in August, with an increasing rate thereafter, the size

of the staff grew until it reached a peak of 658 in November. This growth,

which included the establishment of a new Credit Control Department, was

primarily due to increased work activity resulting from the Korean War.

Accessions in 1950 numbered 242 as against 153 in 1949. Separations for

the year totaled 202 as compared with 165 in 1949 and 159 in 1948. There

was a sharp rise in resignations during September and October due in a

large part to the influence of defense and related industries.

In order to better indicate the changes in the number of employees,

the chart shown below depicts the monthly accessions and separations in 1950.

70 .ACCESSIONS AND SEP A R A T I O N S


At the close of business December 31, 1950, there were 234 men

and 394 women on our staff. In December 1941, the month of the Pearl

Harbor disaster, we were staffed by 279 men and 276 women. The increased

number of women employees since 1941 is due in a large measure to World

War II when women replaced men who were called into the service. The end

of that war saw women retaining many of the positions for which they had

originally been employed only as a war measure. The present Korean War,

the unrest due to the draft, and the general tightening of labor supply

indicate a future with a still greater percentage of women than men em

ployees .

The effect of the war on the call of employees into military service

began to be felt during the final months of the year when one woman and

four part-time male employees left for the armed forces.

COMPOSITION OF STAFF ON AVERAGE ANNUAL BASIS

1941 to 1950


In February, 18 local high school counselors and coordinators

and the Board of Education Consultant in Work Experience and Placement

attended a luncheon at the bank. This was the third of such luncheons

held about the same time each year for the purpose of renewing acquaintance

ships and discussing employment of high school graduates and other mutual

problems. The guests also premiered the showing of the new bank movie,

"The Federal Reserve Bank and You".

The Personnel Development Program continued its activities aimed

at broadening the bank experience of our employees and developing manpower

from which to draw future department heads and officials. Activities under

the program carried out during the year were as follows:

Twenty men were farmed out to commercial banks for a week's training. In addition nine men made repeat visits to commercial banks for training in different size banks in different sections of the district.

A series of Get-Acquainted luncheon meetings, aimed at helping our men become better acquainted with other Twin City bankers, was continued with two such meetings being held during the year. In addition, one of the local banks reciprocated by inviting seven of our men to a similar luncheon.

Two men were enrolled in the Dale Carnegie course, "Effective Speaking and Human Relations", at the Minnesota School of Business.

The bank subscribed to a biweekly publication "The Supervisors' News Service" which discusses supervisory problems. Copies are circulated among 38 supervisors and all of the officers.

One officer of the bank attended the Graduate School of Banking at Rutgers University, New Brunswick, New Jersey, and five men attended the Central States School of Banking at Madison, Wisconsin.

-51-


In March this department arranged and directed the first of a

series of seven Counterfeit Clinics. The purpose of these meetings was

to acquaint interested Twin City bankers and others with methods of detect

ing counterfeit currency. Approximately 350 persons, including represen

tatives from 34. banks, employees from the U.S. Post Office, and from the

University Hospital, attended these meetings. Thirty-seven bankers

participating in our Short Course sessions when the clinics were held also

attended.

The Vice Fresidont in Charge of Personnel and the Fersonnel

Supervisor attended a two-day conference of the Fersonnel Officers of the

Federal Reserve banks at Philadelphia in April.

In July the Federal Reserve Club sponsored a campaign to offer

group polio insurance to the members of the staff. Thirty-one employees

are covered on an individual basis and 40 on a family basis. This insurance

became effective August 1, 1950.

Beginning in October the entire staff was contacted for necessary

information in anticipation of coverage under the Social Security Act ef

fective January 1, 1951. Thirty-two senior employees and three officers

participated in two meetings held at this bank to discuss the Act and

changes in our retirement system brought about by the integration of the

two benefits.

During 1950, forty of the 182 suggestions submitted were approved

and awards aggregating $>331 were paid therefor. One hundred ei^ht of the

above suggestions and. 21 of those approved were submitter1 in a special

suggestion contest during the last three months of the year. In addition

to the regular award, special awards of C>100, $75, and 050 were paid for

-52-


the first, second and third best suggestions submitted during the contest

period. All awards were net to the recipients, the federal income tax

having been paid by the bank.

In March, three junior officers of the bank were appointed to a

Job Evaluation Committee to review evaluations previously prepared by a

committee composed of employees. After review by the junior officers, the

evaluations are submitted to the Personnel Committee for final approval.

Employees covered by the hospitalization-surgical plan with

Connecticut General Life Insurance Company were paid claims totaling

$12,748.16 for the January to December 4 period. Percentages of reimburse

ment were:

Hospital room 69$Incidental hospital expense 96 Surgical expense 55

At the close of the year, 497 employees (96.7$ of the eligible staff) were

members of the plan.

The attendance record of the employees showed an average percen

tage of daily absence due to illness of 2.8% as compared with 2.2% in 1949

and 2.3% in 1948. Of the total employees, 89 were absent for reasons other

than illness (weddings, funerals, jury, etc.) and 57 were not absent at all

during the year. Sixty-five employees were granted leaves of absence.

In an effort to keep informed on ideas and 'problems in personnel,

representatives of this department attended meetings c" the local chapter

of the Office Management Association; monthly meetings of the personnel

men of the Twin City banks; and seminar meetings at the University of

Minnesota. Various publications and services to which we subscribe have

also been helpful in this regard.

-53-


PLANNING DEPARTMENT

During the year the Planning Department made detailed studies of

the operations in several departments. The dual purpose of these studies

was to determine whether procedures could be improved and whether the space

allotted to each division was beinp used to the best advantage. As a result

of these studies, several recommendations were made which were instrumental

in bringing about improvements.

Assistance was also given to various departments in connection

with rearrangement of equipment for more efficient flow of work, moving of

departments to more desirable locations, and installing new operating pro

cedures.

In addition, considerable work was done in preparing revised

operating letters and supplements.

An extensive study was made of our present and estimated future

space requirements. As a result of this study a recommendation was made to

construct a new coin storage vault at the balcony level on top of our

present vault. The recommendation was approved by the Board of Directors

and work was begun in May 1950. The new vault should be ready for occupancy

about March 1, 1951. One advantage of the new coin vault will be that

space will permit the practice of ‘'first in-first out". Cur improved

method of storing coin will be new to this locality. Coin will be placed

on skids and stored on shelving five shelves high, the top shelf being

10 feet 6 inches from the floor. Stocking or shelving of the skids will

be accomplished by use of an electrically driven fork-lift truck which can

also be used to move skids of coin laterally within the vault. The esti-

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mated cost of the project was |60 thousand, but it is anticipated that

costs will run under this figure.

In addition, considerable research was done in connection with

System Committees dealing with Accounting, Leased Wire, Cash, Check Col

lection, and Fiscal Agency. Several meetings were held with representatives

from other Federal Reserve banks and the Treasury Department to discuss

changes in Fiscal Agency operating procedures.

A preliminary examination and recommendation is made by the

Planning Department on employees' suggestions before they are turned over

to the Fersonnel Committee for acceptance or rejection. During the year

182 suggestions were processed.

At the present time a study is being made in connection with the

Security Files program which will provide a plan of action to be made ef

fective in the event that an air attack or similar disaster disrupts the

work and services of the bank. This plan would provide a means whereby

essential services would be provided from other Federal Reserve offices

until services are re-established at Minneapolis. In this connection, the

bank has leased 1,050 square feet of space in the Wayzata State Bank

Building, Wayzata, Minnesota, to provide safe storage for copies of more

essential records.

PROTECTION DEPARTMENT

Seven guards left the employ of the bank during 1950, and seven

new guards were hired to fill vacancies. At the close of the year the

personnel of this department consisted of one superintendent, four ser

geants, and 23 guards (one acting as chauffeur).

-55-


In October a new sound wave burglar alarm system was installed

on all levels of the main vault, silver and coin vaults, and the guard

office was equipped with a new alarm and signal box. This change neces

sitated the installation of new conduits to house the new alarm cables and

connect the outside burglar alarm.

At the request of the Collection and Bond Departments, 263 guard

escorts (176 singles and 87 doubles) ?;ere furnished during the year. This

is an increase of 84 guard escorts over the previous year. Armed escort

is furnished when security deliveries of $5 thousand or more are made.

During the year, the information clerk issued 2,123 passes to

outsiders for access to the upper floors; 1,984 work cards were issued to

outside Yforkmen, canteen employees, etc. In addition, 263 employees were

admitted after business hours.

On April 30 the Protection Department went from a five-day, 42-hour

work week to a five-day, 40-hour work week, on a shifting employee basis that

provides protection 24 hours daily.

PUBLIC SERVICES DEPARTMENT

The major promotion effort of the Public Services Department was,

undoubtedly, the new movie, "The Federal Reserve Bank and You". Delivery

of the first prints was made in January and their availability was announced

first to banks in this district. Beginning in February, letters were written

to bankers briefly describing the film and suggesting that they make use of

it to foster better public relations in their community. In towns having

more than one bank, joint sponsorship was encouraged. Response to the offer

was immediate; during March, April and May the film was shown 297 times to

- 5 6 -


an estimated audience of 56,507.

With the opening of school in the fall, principals of all high

schools in the district were contacted by letter announcing availability of

the film for showings, and a brochure describing its important features was

enclosed. A "Teacher's Aid" booklet, giving the entire script of the film

together with questions and answers on central banking theory, was printed

in our Duplicating Department and offered to the schools. The initial

printing of 4-50 copies was readily exhausted and a good portion of a second

order of 2,000 copies placed in October has already been distributed to

schools and to other Federal Reserve banks. The announcement to schools

again produced a burst of requests for the film's use. Reports on audiences

bring the grand totals as of December 24- to 769 showings and 102,758 persons

who have viewed the film.

This attendance record of over 100 thousand for less than a year's

time compared with the 15-year total of 54-0 thousand for our original film,

"Back of Banks and Business", would indicate the final audience for the new

film will far surpass that of the original. The increased use of visual

aids in education since 1935 will undoubtedly be a factor in insuring that

such will be the case.

The new film has been made available for showings by other Federal

Reserve banks. No actual attendance figures have as yet been furnished us

by these Reserve banks. The table on the following page shows the number

of prints supplied to other Reserve banks and branches.

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HeadOffice Branches Total

Atlanta 1 4 (l each) 5Boston 6 6Chicago 2 2Cleveland 1 1Dallas 1 1Kansas City 2 2New York 2 2Philadelphia 6 6Richmond 2 2St. Louis 5 5San Francisco 3 8 (2 each) 11

31 12 43

Our Helena Branch has six copies of our film. Our bank has one copy for

showing within the bank and 59 films are at the Midwest Audio Visual Company

for distribution throughout the Ninth District.

The Reserve banks of Atlanta, Boston, Philadelphia, St. Louis and

San Francisco have modified our explanatory brochure to suit their bank.

In addition, we have available for distribution, copies of the

film "The Federal Reserve System" produced for the Board of Governors by the

Encyclopedia Britannica. Those who have viewed this film were very favorably

impressed.

During 1950, tours of the bank were used for the first time to any

extent to introduce the Federal Reserve to groups other than those representing

education and banking. At our invitation the Northwest Daily Press Association,

the Tv/in Cities Chapter of the National Association of Cost Accountants, and

the Minnesota Certified Public Accountants toured our establishment. Other

courtesies extended to some of these special groups included showings of our

new movie, luncheons, discussions, and speeches. Tours for organized educational

and banking groups increased to 94- this year as against 65 for the previous year.

The total number of persons shown our bank during the year was 2,14-5 compared

- 58-


with 1,629 during 194-9.

On June 12 our bank was host at a luncheon held at the Radisson

Hotel in Minneapolis for visiting delegates of other Federal Reserve banks

and branches attending the 50th Annual Convention of the American Institute

of Banking. Total attendance included 96 guests and 25 hosts from our bank.

Visiting delegates also toured the bank and many spent considerable time in

various departments which particularly interested them.

On October 25, along with other business firms in the city, we

participated in the first Business Education Day conducted in Minneapolis.

Twenty-four of the 3,000 teachers from parochial, private and public schools

of Minneapolis and its suburbs toured our bank, were shown our movie and the

newly released Board's film, participated in a discussion of counterfeit

currency and monetary theory, and attended a luncheon in the officers' dining

room.

On October 17, recorded intervievfs with members of our staff con

cerning work of the Federal Reserve Bank were broadcast over the University

of Minnesota radio station KUOM. Special emphasis was placed on the issuance,

retirement and protection of currency.

Seven more five-day sessions of our Short Course in Central Banking

were attended by five groups of men and two groups of women during the spring

of the year. To date, 295 representatives of 194 member banks have attended

the 24. sessions held since the course originated in 1948. Definite plans

were also made for a reopening of the Short Course during 1951.

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As in 1949, meetings sponsored by the bank included the following:

1950 1949Attendance Attendance

Ninth District Conference for Member Banks 960 1,001Forum 282 322Examiners' Conference 103 108Money and Banking Workshop 79 78

Our picture book, "Your Money and the Federal Reserve System", first

released in 194-2, took a new lease on life during 1950. A second printing

of 50 thousand copies was ordered the first part of the year, and 1,500 copies

were furnished in April for a convention of mathematic teachers in Chicago.

Twice as many copies were distributed in 1950 as in 194-9. Comparative

figures show 642 requests for 3,94-9 copies in 1950 and 282 requests for 1,317

copies in 194-9. Including the 1,500, a total of 5,4-49 booklets were sent out

in 1950.

Representatives of our bank continued to be in demand as speakers

before banking, educational, and civic groups throughout the district. In

addition to participating in all programs sponsored by the bank, our economists

and officers addressed 75 outside groups totaling 8,275 persons. This compares

with 69 audiences totaling 7,228 persons addressed during 194-9.

Despite the time and effort devoted to acquainting the general

public with the Federal Reserve, the primary interest of the Public Services

Department remains banks and bankers. To better acquaint our men with local

conditions and to foster a more personal relationship with bankers, the

program of calling on banks, originated in 1933, was continued. This year

the force of field men was increased from 18 to 24-. Our representatives also

attended district group meetings and state conventions.


PURCHASING DEPARTMENT

In 1950 purchase orders were placed with various firms for 2,960

items, an increase of 204. items over 194-9. During the year the departments

of the bank requisitioned from the stockroom a total of 9,653 items, listed

on 4,284 requisitions.

Prices of most supplies were stationary or somewhat lower during

the first six months of 1950. During the remainder of the year, however,

there was a steady upward trend in prices of virtually all supplies needed

to operate the bank.

REAL ESTATE CREDIT

Pursuant to the Defense Production Act of 1950 and a Presidential

order, the Federal Reserve System on October 12, 1950, entered for the first

time upon the control of residential real estate credit under Regulation X,

which became effective on that date. To date, the principal work of our

bank in connection with this regulation has been along educational lines.

Our representatives discussed the regulation with approximately 1,816 lenders,

realtors, home builders, and other interested persons at 18 meetings held

throughout the district. Our work in this field has been materially facili

tated by the appointment of a Real Estate Credit Advisory Committee composed

of leaders in the various businesses affected by residential real estate credit.

Field investigations on Regulation X were scheduled to commence

after the first of the year, an initial force of nine men having been assigned

to training for such duty.

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FISCAL AGENCY OPERATIONS OTHER THAN U. S. TREASURY

RECONSTRUCTION FINANCE CORPORATION

While our contract with the RFC has not been canceled, that

corporation has arranged its programs so that we no longer function as

its fiscal agent. We still handle their cash items, vfhich now, however,

go direct to our Check Collection Department. Our private wire service is

still used, for which we receive compensation at cost. At the present time

arrangements are feeing completed to release to the corporation such of our

files, as they may request, covering transactions we have handled for them.

COMMODITY CREDIT CORPORATION

Our activities for this corporation continue about the same as

last year, except for some variation in volume.

This year the number of items handled as cash items was approxi

mately 69 thousand as against 79 thousand last year, but the dollar volume

was much greater - $173 million as against $68 million last year.

Sight drafts, drawn on CCC by the Production Marketing Administra

tion's State Committees, which we paid were approximately 80 thousand in

number aggregating $4-5 million, as against 103 thousand for $104. million

last year.

We paid approximately 1,700 sight drafts, drawn on CCC by

Production Credit Associations which service CCC loans and by lending

agencies which have agreed to the CCC servicing arrangement, aggregating

$21 million, as against 1,900 for $19 million last year.

This year, we issued approximately 27 thousand checks aggregating

$395 million, as against 16 thousand for $4.88 million last year.


OTHER GOVERNMENT AGENCIES

We perform services for the Housing and Horae Finance Agency and

the Public Housing Administration. The former is successor to the General

Service Administration in so far as housing is concerned; this succession

was effected by Presidential order. Our activity for these agencies is

rather light.

RESEARCH DEPARTMENT

During 1950 the Research Department continued to carry on its dual

function, namely, (l) to assemble, tabulate, and interpret statistical data,

and (2) to engage in public service activities.

The four regularly issued publications of the bank produced in the

Research Department are: The Monthly Review, Farm News, News Review, and

Library Letter. The circulation of the Monthly Review at the close of the

year was 7,874, as compared with 8,136 at the end of the previous year.

Revision in the mailing list accounted for the decrease in circulation. Each

issue of this periodical contained a review of banking, business, and agri

cultural conditions in the Ninth Federal Reserve District, and seven of the

twelve issues contained special articles as follows:

January 1950 Inherits Renewed Vigor of '49 EconomyFebruary Income Payments Versus Price SupportsMay Mortgage Credit Tailored to Family IncomesJune Consumer Buying Propels Economy UpwardJuly District Savings Quadruple in DecadeOctober Construction Boom Fostered by CreditNovember Strong Demand Brightens Farm Outlook

The circulation of the Farm Nev/s at the close of the year was

8 thousand, including bulk shipments ordered by some banks for distribution

-63-


to their customers. This publication has enjoyed widespread popularity among

bankers, reflected by an increase of approximately 1 thousand in its circu

lation over 1949 and 2 thousand over 1948.

The weekly Nev/s Review has continued as a regular library project.

The mailing list is restricted to the executive officers of all member banks

and to all other bankers who request it.

The circulation of the Library Letter has again continued a steady

growth. Last year 42 persons were added to the mailing list to bring it to

a total of 1,700 persons.

The department also participated in the production of the Annual

Report to the Stockholders. This report features an article on one of the

service functions of the bank, which in the last issue was entitled "Money

in a Hurry", a description of the operations of the Check Collection Depart

ment. A total of 6,900 copies of the 1950 Annual Report were sent to a list

of the executive officers of banks in the district, Federal Reserve banks

and branches, the Monthly Review mailing list, press list, employees of

this bank, and a special Annual Report list.

A new statistical project was begun in 1950, namely, the development

of an index of the resort business in Minnesota. A census of all resorts in

Minnesota was taken and work was begun on selecting a sample of respondents.

This work was not completed, but it was carried far enough to permit the

issuance of a comparison of gross receipts of American Plan resorts for 1949

and 1950. Favorable reactions were received from various vacation-business

organizations and encouragement given to extending the scope of this project

in another year.

A project not contemplated at the beginning of the year was that

-64-


occasioned by the reestablishment of Regulation W after the outbreak of war

in Korea. The Research Department was assigned the duty to check the correct

ness of all the operating statistics of lending and selling institutions

registered under Regulation W and preparing the statements for tabulation on

IBM cards. This work entailed tabulating, up to the end of the year, statis

tical data contained in 9,026 of the 9,675 registration statements received.

The reimposition of Regulation W also required the submission of

several reports on the impact of the regulation on the volume of instalment

credit in the district, and the reactions of operators in various lines of

business. It also required, prior to its imposition, numerous contacts with

business firms and conferences on suggested terms of the regulation.

Numerous requests from sources both inside and outside the bank for

statistical information were met by members of the staff during the year.

Members of the department served on 24 System committees. The

Director of Research served as Associate Economist of the Federal Open Market

Committee during the year.

Approximately 5,205 persons made use of library facilities during

the year, as compared with 3,500 during the previous year. In addition to

reference work done in the library, patrons checked out 39,580 books, pamphlets,

periodicals, newspapers, newsletters, maps, theses, clippings, etc. Research

personnel again made heavy demands on the library facilities for assistance in

reference work and in compiling bibliographies.

A project begun by the Library in 194-9 vvas continued in 1950, namely,

sending theses acquired from the Graduate School of Banking at Rutgers to

bankers chosen by the Public Services Department who most likely would be

interested in them. Over three fourths of the bankers who were informed of

-65-


the availability of these theses requested that they be sent to them. After

having served their purpose these papers were placed in the Library for

regular circulation.

MEMBER BANK RESERVES

On October 19, 1949, the Board of Governors revised the rules

governing the waiving of penalties for deficiencies in reserves of member

banks. The purpose of this revision was to liberalize the rules and to

provide means whereby member banks might more easily adjust their reserves

at the end of the reserve computation period so as to avoid deficiencies which

would result in the assessment of penalties.

The effect of the application of these liberalized rules was two

fold. First, the penalties assessed member banks at the Head Office showed

a decrease of 41$ in number and 32$ in dollar amount. The Helena Branch,

however, showed a decrease of 24$ in number but an increase of 90$ in dollar

amount of penalties assessed therefor. The total number of penalties assessed

for both Head Office and Helena Branch showed a decrease of 36$, but a 1$

increase in amount. Nine banks in Montana were responsible for 43$ of the

number of penalties assessed and 80$ of the amount assessed at Helena.

Secondly, penalties waived at the Plead Office and Helena Branch

combined showed an increase of 146$ in number and 334$ in amount. Twenty-

eight percent of the total number of penalties waived in 1950 (and 80$ of

the total dollar amount) were waived under the new rule permitting banks to

adjust deficiencies in reserves for one period (provided that such deficiency

does not exceed 2$ of the member bank's required reserve for the period) by

carrying excess reserves in the immediately succeeding period. Reserve city

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banks took advantage of this rule to a greater extent than country banks.

During 1950, 63 banks wore penalized a total of 113 times, compared

with 95 banks being penalized 176 times in 1949. The following table contains

a comparative report of deficient reserve penalties by states during 1950 and

1949.

Comparative Report of Deficient Reserve Penalties

Banks AffectedPenalties Assessed Penalties Waived_____ Assessed Waived

1950 1949 1950 1949 1950 1949 1950 1949No. Amount No. Amount No.. Amount No. Amount No. No, No. No

Michigan 16 $ 421.34 24 0 655.11 15 0 117.42 9 0 38.24 5 11 8 6Minnesota 39 1,361.75 55 1,484.20 114 4,566.55 45 885.22 24 34 57 31North Dakota 5 198.36 15 711.83 20 205.32 9 69.58 4 11 15 7South Dakota 8 243.35 10 129.86 24 154.53 13 161.06 6 6 17 8Wisconsin 3 139.37 17 503.51 22 83.73 11 92.98 3 11 7 10Head Office

Totals 71 $2,364.17 121 $3,484.51 195 05,127.55 87 $1,247.08 42 73 104 62

Montana 42 2.507.54 55 1.322.40 44 660.78 10 86.57 21 22 23 10

Combined 113 04,871.71 176 04,806.91 239 $5,788.33 97 01,333.65 63 95 127 72

Reserve requirements remained unchanged during 1950. However, on

December 28, 1950, the Board of Governors of the Federal Reserve System in

creased reserve requirements for all member banks by 2% with respect to demand

deposits and 1% with respect to time deposits, to become effective in 1951

as shown by the table on the following page:

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Increase in Reserve Requirements Authorized by the Board on December 28. 1950

Net Demand Deposits Time Deposits

Bank ClassificationEffective

From To DateEffective

From To Date

Country Banks 12% 13% 1/16/51 13 14 2/ 1/51

% 6% 1/16/51

Reserve City Banks IB 19 1/11/51 19 20 1/25/51

1/11/51

Central Reserve City Banks 22 23 1/11/51

23 24 1/25/511/11/51

This action was taken as a further step toward restraining infla

tionary expansion of bank credit, in accordance with the statement issued by

the Board on August 18, 1950, that the Board and Federal Open Market Committee

"are prepared to use all the means at their command to restrain further

expansion of bank credit consistent with the policy of maintaining orderly

conditions in the government securities market." The increase was timed so

as to absorb reserves coming into bank3 from the post-holiday flow of currency.

December 31, 1950, were 01.3 billion, a decrease of 0112 million compared

with the 01.4 billion held a year ago, as reflected by the comparative

figures for 1950 and 1949 shown on the following page:

SAFEKEEPING DEPARTMENT

Securities held for safekeeping and collateral purposes as of


12-31-50 12-31-49 Change(in thousands of dollars)

Government and miscellaneous securities held in safekeepingfor members and nonmembers 816,915 913,885 - 96,970

Securities pledged to securepublic deposits 298,475 337,737 - 39,262

Securities held for U.S. Treas.and Others 4,333 5,787 - 1,454

Securities held for RFC 144 9,337 - 9,193'"'Collateral to Treasury Tax k Loan

Account 173,151 139,174 + 33,977U.S. Depositary Bonds - TimeDeposits - 130 130

Housing & Home Finance Agency 42 75 33^Collateral for Discounts and

Advances 21,445 20,850 595Securities held for Public HousingAuthority 1,718 1,712 6

Collateral to Consignment Account-U.S. Savings Bonds, Series E 45 ... . _18 ..13

1,316,268 1,428,745 -112,477

* Includes $24,125,000 held by commercial and other Federal Reserve banks. **Includes $16,300,000 held by commercial banks.

The Safekeeping Department received 57,768 pieces of securities,

issued 7,029 receipts, and delivered 66,097 pieces in 9,052 transactions,

resulting in a net decrease of 8,329 pieces of securities held during the

year.

This department also made 6,637 transfers of securities from one

account to another, and clipped 273,698 coupons from securities held during

1950.

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The table below shows comparative volume figures for 1950 and

1949:

1950 1949 Change

Receipts issued 7,029 6,559 + 470Pieces received 57,768 48,502 + 9,266Withdrawals handled 9,052 8,249 + 803Pieces delivered 66,097 53,333 + 12,764Transfers from one account

to another 6,637 6,335 + 302Coupons clipped 273,698 264,409 + 9,289Custodian receipts issued 1,063 1,135 - 72

WIRE TRANSFERS

During 1950 the Wire Transfer Division handled a total of $11.3

billion in wire transfers. Again this year a new all-time high in dollar

amount was established which exceeds last year's previous record of $10.3

billion by $1 billion. Of this $11.3 billion, $3*4 billion (or 30$) were

transfers to other Federal Reserve districts! $6.0 billion (or 53$) were

transfers received from other Federal Reserve districts; and the remaining

$1.9 billion (or 17$) were transfers within our own district.

The total number of individual transfers handled in 1950 was

40,206, which is 749 transfers greater than the 39,457 transfers handled

in 1949.

The average dollar amount for each transfer increased to $281

thousand in 1950 from $262 thousand in 1949.

During the year a total of 62,014 telegrams was handled by the

Wire Transfer Division. Of this number, 49,431 were transmitted over our

leased private wire system (an increase of 2,571 over 1949) and the remain

ing 12,583 were transmitted over commercial wire (an increase of 197 over

1949)* The total volume figure of 62,014 is an increase of 2,768 from

59,246 telegrams handled during the year 1949.

-70-


On September 17, 1950, the Western Union Telegraph Company in

stalled a receiving teleprinter in our office which enables us to receive

telegrams direct by wire from Western Union's main office rather than having

the telegrams delivered by messenger from its branch office in the Soo Line

Building.

MISCELLANEOUS

During November a small supply of Federal Reserve notes of a

new design were delivered by the Bureau of Engraving and Printing to the

Federal Reserve Bank of Richmond.

The new 1950 series of Federal Reserve notes will be of a new

design. The identification of the issuing bank, Treasury seal, and serial

numbers are reduced from their former size.

To facilitate the change-over from the 1934 series, the Bureau

of Engraving and Printing expects to print all of the incomplete stock of

the 1934 series in denominations of $5 through $100 in January 1951, and

thereafter no additional notes of the old series will be processed unless

the need appears urgent. This will result in somewhat irregularly low or

high deliveries of notes for some banks in certain denominations for the

first few months of next year.

The Bureau expects to have 1950 series plates available for all

Reserve banks in the near future, at which time monthly deliveries of

Federal Reserve notes will be resumed on the regular basis, with due regard

to total stocks of unissued notes and of aggregate printings which may be

obtained.

-71-


In February 1950, representatives of all Reserve banks and the

American Bankers Association attended a meeting in Dallas for the purpose

of further promoting the Check Routing Symbol Plan on checks. As a result

of this meeting, letters were forwarded by us to all printers who were known

to print checks in this district, together with a list of par banks and an

outline regarding the use of the routing symbol.

An officer and a representative of this bank were assigned to

promote the routing symbol. They called on 215 banks and numerous printers

and county treasurers.

Those in attendance at our Short Course in Central Banking were

given a brief outline of the importance to banks of the routing symbol and

the benefits to their own bank.

Our Public Services men were furnished a card showing the per

centage use of the routing symbol of all par banks on which they called.

They were also provided with sample checks for display purposes and were

instructed to ask the banks' cooperation in having the routing symbol printed

on their checks when new supplies are ordered.

A survey taken as of June 1 determined the percentage of use of

the routing symbol by banks in all states by Federal Reserve banks. The

Ninth District showed UV?° use as compared with 72$ for the nation as a whole.

In a later survey as of December 1, the Ninth District showed a percentage

of 53$ as compared with 76% for the nation - a 12$ increase for our bank

since the previous survey, a 4$ increase by all 12 Reserve banks.

At the present time we are redesigning rural school district

warrants and county treasurers' warrants and checks to accommodate the use

of the routing symbol. The County Treasurers and Auditors Association of

-72


the State of Minnesota is holding a convention in January during which we

will be given program time to briefly outline and stress the importance of

the symbol and request that, when in need of new warrants, they keep the

symbol in mind. A sample copy of a uniform and standardized form will be

submitted to those attending the convention.

President Peyton was elected Chairman of the Presidents' Conference

at its February meeting. In July, Mr. Peyton appointed Clement Van Nice,

Assistant Cashier, as Secretary of the Conference.

-73-


Ml

2 8

24

20

I 6

12

8

4

0I

LION D O L L A R S M I L L I O N D O L L A


C A P I T A L A C C O U N T S

CAPITAL STOCK paid in totaled $5,074- thousand on December 31,

1950, an increase of 1365 thousand during the year.

SURPLUS ACCOUNTS. Surplus (Section 7) was increased £>674 thou

sand on December 31, 1950, which brings the total to $13,168 thousand.

Surplus (Section 13b) remained unchanged at $1,073 thousand.

CONTINGENCIES. No change was made in the reserve of $1 million

set aside for losses in excess of the blanket bond coverage; the reserve

of |500 thousand earmarked for losses not covered by the Loss Sharing

Agreement; or the special reserve for contingencies of $2,476 thousand.

The reserve for registered mail losses totaled $187 thousand as

of December 31, 1950. This is an increase of $11 thousand during the year.

The table below reflects the changes made in this account during

1950.

Reserve for registered mail lossesbeginning of year 1950 ................. §175,706.68

Debits:

Our proportional share of the $1,000 retainer fee for advisory services from Marsh and McLennan,Inc., for 1950 ......................................^>28.04

Our pro rata share of loss sustained by the Federal Reserve Bank of San Francisco on two shipments of currency for $20,000.00 each to the Inland Empire Bank, Umatilla, Oregon, on6/21/50 and 11/29/50 ................................. 566.80

Total Debits - ......................... $594.84

-75-


Credits;

Recovery of loss on shipment of silver dollars to the Citizens Bank & Trust Co., Big Timber,Montana, 5/17/49......................................$ 45.00

Annual addition based on shipments of $579,794,506 during the period December 1, 1949 throughNovember 30, 1950, at 20 per &1,000 ................. 11.595.89

Total Credits ............................... $11,640.89

Net additions during y e a r ......................... - $ 11.046.05

Reserve for Registered Mail Losses,December 31, 1950 - Total .............. $186,752.73

The following table shows currency and coin shipments made during

the fiscal year December 1, 1949 to November 30, 1950, which were the basis

for the addition to the registered mail loss reserve.

New F.R. currency from Washington Fit F.R. notes to bank of issue Currency and coin between Minneapolis

and Helena Other currency & coin outgoing -

Minneapolis and Helena Other currency & coin incoming -

Minneapolis and Helena All Other: (Delivered or picked up by truck)

Other currency & coin outgoing - Helena Other currency & coin incoming - Helena

1950 (000 Omitted)

$100,18029,465

1,160

192,075

249,031

3,323- J u M

$579,795

1949 (000 Omitted)

$ 92,100 39,655

2,068

185,303

250,594

3,712 4 ,,808

$578,240

The following table shows the disposition of 1950 net earnings

and the changes made in the surplus accounts:

Net Earnings - 1950 $7,035,635.36Dividends Faid $ 2?4,n34.00Paid U.S. Treasury (Interest on F.R. Notes) 6.067.40c.22 6.361.442.22 Transferred to Surplus (Section 7) $ 674,193.14

-76-


Surplus (Section 7) December 31, 19-49 ^12,493,856.72Transferred from Earnings 1950 674.193.1'Surplus (Section 7) December 31, 1950 >13,168,051.8

Surplus (Section 13b) December 31, 1950 £> 1,072,621.34-Transferred from Earnings 1950 ______ g______Surplus (Section 13b) December 31, 1950 0 1,072,621.34-

Reserve for Contingencies, December 31, 1950:

Reserve for losses in excess of blanketbond coverage 0 1,000,000.00

Reserve for losses not covered byLoss Sharing Agreement 500,000.00

Reserve for Registered Mail Losses 186,752.73*Special Reserve for Contingencies 2.476.000.00

0 4,162,752.73

*See analysis on Pages 75 and 76.

-77-


D I V I D E N D S

As of December 31, 1950, capital stock held by member banks

totaled 05,073,700, on which accrued dividends totaling 0294,034 were

paid. This year's dividend payment is the largest for any single year in

the history of the bank and when combined with previous year's payments

brings the aggregate total to $6,995,231.

Distribution of 1950 and 1949 Dividends

1950 1949

State

Michigan Minnesota Montana North Dakota South Dakota Wisconsin

No. of Banks

41206 84 43 6241

111

DividendPaid

Si 16,294.65 191,548.64 30,225.5317.343.95 22,844.2715.776.96

,294,034.00

No. of Banks

41207 84 43 62

478

Dividend __Paid__

0 15,635.30 174,936.9429,096.9716.257.30 21,604.4015.300.31

0272,031.22

A

Change

i- 659.35 v 16,611.70 + 1,128.56 + 1,086.65 + 1,239.87 + 476.65 + 21,202.78

TABLE OF DIVIDENDS FAID SINCE ORGANIZATION

1914 1933 0171,563.891915

57,719.87 a/1934 181,117.51

1916 1935 135,448.451917 363,894.19 b/ 1936 179,052.041918 168,102.97 1937 174,057.311919 180,186.21 1938 174,231.271920 195,870.65 1939 174,905.391921 211,657.03 1940 177,400.581922 213,774.01 1941 179,789.681923 212,732.68 1942 183,336.331924 202,827.98 1943 190,924.191925 193,559.46 1944 206,158.741926 187,609.25 1945 221,686.961927 180,726.51 1946 238,372.301928 181,202.86 1947 253,251.301929 184,029.92 1948 262,776.221930 184,445.39 1949 272,831.221931 180,454.53 c/ 1950 294.034.001932 175,494.80 06,995,230.69

a/ For period November 1, 1914 through June 30, 1915. b/ For period July 1, 1915 through December 31, 1917. s/ 0134,649.67 withdrawn from Surplus to pay dividend. -78-


B A N K P R E M I S E S

Improvements made during 1950 to the Head Office building were

charged to Repairs and Alterations. A depreciation of 2% was taken on

both the Helena and Minneapolis buildings while no additions to the book

value of either building were made during the year. Inasmuch as a full

reserve had already been established, the reserve for depreciation on

fixed machinery and equipment of the Head Office was not increased. The

Helena Branch took a normal depreciation of 10$ on fixed machinery and

equipment.

Below are listed the major repairs or alterations to the Head

Office building during 1950:

1. A remodeling program which began in December 194-9,

consisting of installation of a metal pan ceiling,

recessed fluorescent lighting and adjustment of air

ducts on the third floor was completed in February

1950.

2. The construction of the new coin vault on the mezzanine

floor above our present vault which was authorized by

the Board of Directors on May 5, 1950, is nearing

completion. This vault will be used for coin storage

and will provide additional working space for coin

operations. The contracts for construction of this

vault were on the basis of payment upon completion,

and therefore most of the expense will be reflected

in 1951.

-79-


BANK PREMISES

BANK BUILDING:Gross Book Value:Beginning of 1950 .......Additions during year....

Total

$1,384,281.50

HeadOffice

$1,283,281.50

HelenaBranch

$101,000.00

Deductions during year... - - -

End of Year $1,384,281.50 $1,283,281.50 $101,000.00

Allowance for Depreciation* Beginning of 1950 Credits

a. Normal depreciationb. Other..............

1 660,450.24

27,685.56

I 641,640.36

25,665.60

$ 18,809.88

2,019.96

Debits................... - - -

End of Year 1 688,135.80 $ 667,305.96 $ 20,829.84

Net book value December 31, 1950 $ 696,145.70 $ 615,975.54 $ 80,170.16

FIXED MACHINERY AND EQUIPMENT:Gross Book Value:

Beginning of 1950Additions during year..............

$ 698,171.34 $ 660,969.35 $ 37,201.99

Deductions during year-... —

End of Year $ 698,171.34- $ 660,969.35 $ 37,201.99

Allowance for Depreciation:Beginning of 1950........Credits

a. Normal depreciationb. Other..............

$ 686,895.98

3,720.24

$ 660,969.35 $ 25,926.63

3,720.24

Debits ................... - - -

End of Year ... $ 690,616.22 $ 660,969.35 $ 29,646.87

Net book value December 31, 1950 $ 7,555.12 $ - $ 7,555.12

LAND:Net book value December 31, 1950 $ 410,520.66 $ 400,520.66 $ 10,000.00

TOTAL BANK PREMISES:Net book value December 31, 1950 $1,114,221.48 $1,016,496.20 $ 97,725.28

-SO-


MILLION] DO LLARS Li ON D O L L A R S


N E T E A R N I N G S & P R O F I T S

Net earnings and profits for the year 1950 totaled $7,036 thou

sand. This figure is $202 thousand below that of last year's all-time

high, $7,238 thousand.

As compared with the year 1949, total current earnings decreased

$1,642 thousand. Interest from securities held in the Open Market account

decreased $1,664 thousand and interest on foreign loans on gold decreased

$34 thousand, whereas earnings from discounts and advances showed an in

crease of $48 thousand and earnings on industrial loans increased $8 thou

sand.

Current net expenses increased $121 thousand and dividends paid

$21 thousand, whereas interest on Federal Reserve notes decreased $201

thousand.

Additions to current net earnings increased §200 thousand which

was due entirely to increased profit on sale of U. S. Government securities.

Total deductions from current net earnings decreased $1,361 thou

sand. The reasons for this decrease are twofold. Included in the 1949

deductions were special payments: (l) to the Retirement System aggregating

$84 thousand, and (2) $1,277 thousand which represented a transfer to the

special reserve for contingencies.

The difference between additions and deductions to current net

earnings in 1950 was an addition of $1,101 thousand whereas in 1949 the

net was a deduction of $460 thousand.

A statement of net earnings and profits is shown on the following

page.


Net Earnings & Profits

Current Earnings Current Expenses

Current Net Earnings

Additions to Current Net Earnings: Profit on U.S. Government

Securities sold, net All OtherTotal Additions

$1,113,176__ 116*1,1137292

1950

$8,536,8852.602.428

$5,934,457

Change from 1949

$ - 1,642,145 + 121.319

$ - 1,763,464

$ + 200,287

M200,371

Deductions from Current Net Earnings:Charge-offs on Bank PremisesReserve for Registered Mail Losses $ 11,596 $ + 31Reserve for Contingencies - - 1,277,000Special Payment to Retirement System - - 84,292All Other 518 +_______ 160

Total Deductions $ 12,114 & - 1,361,101

Net Additions to Current Net Earnings Si.101.178 $ + 1.561.472

Net Earnings and Profits $7,035,635 $ - 201,992

For disposition of profits see Page 84.

- 83 -


The table below gives a breakdown of the Profit and Loss during 1950.

Head HelenaTotal Office Branch

Additions to Current Net Earnings:Profit on U.S. Government

Securities sold, net $1,113,175.82 $1,113,175.82Recovery of Return Item lost in transit

3/12/48 from Helena Branch's letter toState Bank of Terry, Montana 5.00 .$5.00

One dollar bill found in wastepaper 9/6/49 1.00 1.00Proceeds from sale of overhead heater by

Helena Branch 70.00 70.00Dividend Pondera Valley State Bank, Conrad,

Montana, claim of Great Falls Lumber Co., assigned to Federal Reserve Bank ofMinneapolis ________ 4-0.00__________ AO. 00________

Total Additions $1,113,291.82 $1,113,216.82 $75.00

Deductions from Current Net Earnings:Reserve for registered mail losses $ 11,595.89 $ 11,595.89Discount on foreign currency and coin 25.56 25.56Loss on counterfeits 322.88 322.88Loss on mutilated currency and coin 38.67 3.67 $35.00Difference Account 120.96 116.30 4.66Loss on $10.00 American Express Traveler's

check reported in error as listed, not enclosed in cash letter of Metals Bank & Trust Co., Butte, Montana, for 10/12/49.The item was endorsed by us 10/14/49,however, and we have given credit. ________10.00__________ 10.00________

Total Deductions $ 12,113.96 $ 12,074.30 $39.66

Net Additions to Current Net Earnings $1,101,177.86 $1,101,142.52 $35.34


-S8~ 1917 21 25 29 33 37 41 45 49 53


E A R N I N G S

A decrease during the year of $62 million in our average daily

holdings of U. S. Government securities, together with a decline in the

average yield from 1.60% to 1.48%, resulted in reduced earnings for the

year as compared with 1949* The decrease in earnings on our holdings of

U. S. Government securities, as well as changes in other earnings accounts

is reflected in the following table;Change

Discounts and Advances Foreign Loans on Gold Industrial LoansU.S. Government Securities-System Account Deficient Reserve Penalties Sale of Wastepaper, Money Bags, etc. Commission Earned on Bankers' Acceptances

purchased for Foreign Correspondents Interest on Personal Loans to Employees Clearinghouse Fines

1950 from 1949

$ 72,407 $ * 47,7528,841 34,7028,581 + 8,085

8,441,067 - 1,663,8614,872 + 65

474 + 176

417 + 2527 5

218 + 92$8,536,384 $ - 1,642,146

The average daily holdings of bills discounted for the year 1950

were $4,549 thousand and resulted in earnings of $72,407 as compared with

last year's average of $1,643 thousand and earnings of $24,655. The average

return for the year was 1.59%* The discount rate on discounts and advances

increased in August from 1 l/2% to 1 3/4%. Participation in foreign loans

on gold has reflected no balance since August, reducing our daily average in

1950 to $589 thousand as compared with $2,898 thousand for 1949, and earn

ings decreased to s>8,84l during 1950 from $43,543 in 1949. The yield for

1950 was 1.5%. Our 1950 daily average holdings of industrial loans in

creased to $172 thousand as compared with a daily average of $9 thousand

in 1949* The result was an increase in earnings to $8,581 during 1950 as

-86-


compared with $4-96 in 1949• The average yield was 5$. For the year 1950,

the average yield from loans to Ninth District banks, foreign loans on

gold, U. S. Government securities, and industrial loans was 1.4915$* During

1949 the average yield on these combined holdings was 1.5994$. Our average

daily holdings in participated Open Market securities was $569 million,

whereas one year ago the daily average was $632 million (including bills

held under repurchase option). The average yield was 1.48$ for 1950 against

1.60$ for 1949. Earnings from these securities were $8,441 thousand compared

with $10,105 thousand one year ago.

As of December 31, 1950, the bank's total participation in U. S.

Government securities held increased $30 million. The following table com

pares the bank's holdings as of December 31, 1950 with December 31, 1949,

and shows the dollar increase or decrease;

Change12-31-50 12-31-49 from 1949

(In Thousands of Dollars)

Bonds 142,940 233,658 - 90,713Notes 387,549 18,200 + 369,349Bills 38,487 156,337 - 117,850Certificates 72.218 203.156 - 130.938

641,194 611,351 + 29,843

Although the Board's change of October 1949 liberalized the rules

governing the waiving of penalties for deficiencies in reserves and the

number of penalties decreased from 176 in 1949 to 113 this year, earnings

at the Head Office and Helena Branch from deficient reserve penalties during

1950 totaled $4,872, an increase of $65 from the previous year's earnings

of $4,807.

- 87-


M ILL IO N D O L L A R S M I L L I O N D O L L A R S


COMPARATIVE STATEMENT OF NET CURRENT EXPENSES

HeadOffice

HelenaBranch Combined Combined

1950 1950 1950 1949

Salaries: Officers $ 192,639 $ 17,169 $ 209,808 $ 187,826Employees 1,068,070 118,746 1,186,816 1,158,613

Retirement System Contributions 121,160 12,082 133,242 120,740Directors' Fees and Expenses 10,440 6,554 16,994 17,863Federal Advisory Council 2,019 - 2,019 1,950Traveling Expense 54,785 5,080

46,21659,865 62,117

Postage and Expressage 252,344 298,560 278,462Telephone and Telegraph 11,540 7,690 19,230 20,095Printing, Stationery and Supplies 87,498 7,719 95,217 73,219Insurance on Cy. & Security Shpts. 12 2 10 174Other Insurance 14,449 2,243 16,692 19,217

98,688Taxes on Bank Premises 90,256 4,454 94,710Depreciation on Bank Building 25,666 5,740 31,406 31,406Light, Heat, Power, and Water 23,651 2,325 25,976 26,470Repairs & Alt. to Bank Building 47,369 1,845 49,214

5,38557,226

Rent 5,385 - -Furniture and Equipment 11,607 664 12,271 12,560All Other 130,263 13,620 143,883 156,564Difference between Actual & Estimated

Fiscal Agency Expenses - December 1948 154- December 1949 1,379 - 1,379 1,379- December 1950 615 - 615 -

Total Operating Expenses $2,147,135 $252,149 $2,399,284 $2,324,415

Received from Government Agencies for:Rental of Space 36,3t>8 577 36,94.5 36,969Rental of Furniture & Equipment 3,082 187 3,269 3,398

Net Operating Expenses $2,107,685 $251,385 $2,359,070 $2,284,048

Assessment for Expenses of:Board of Governors 86,300 86,300 80,800

Federal Reserve Currency: Original Cost, including

Shipping Charges 138,749 138,749 98,048Cost of Redemption 16.511 1.798 _ _l8jji09 18.213

Total Net Current Expenses $2,349,245 $253,183 $2,602,428 $2,481,109

- 89-


n o n r e i m b u r s a b l e e x p e n s e

Change 1950 from 1949

Head Office $2,349,245 $ + 101,963Helena Branch 253.183 + 19.356

$2,602,428 $ + 121,319

Head Office expense, after deduction of reimbursable expense,

increased $102 thousand compared with the year 1949* Principal increases

over last year were in salaries; retirement system contributions! postage

and expressage; printing, stationery and supplies; Board assessment; and

cost of Federal Reserve currency. Principal decreases were in travel ex

penses, insurance other than on currency and security shipments, taxes on

bank premises, repairs and alterations, and miscellaneous expense.

Helena Branch expense increased $19 thousand over last year.

The larger increases were in salaries; postage and expressage; printing,

stationery and supplies; and repairs and alterations.

SALARIES


Head Office $1,260,710 $ + 39,288Helena Branch 135.915 + 10.898

$1,396,625 $ + 50,186

Head Office salaries for 1950 totaled $1,261 thousand, an in

crease of $39 thousand over last year. This increase is due primarily to

merit adjustments and additional personnel hired during the last three

months of the year.


RETIREMENT SYSTEM CONTRIBUTIONS


Head Office $121,160 $ + 11,710Helena Branch 12.082 + 792

$133,242 $ + 12,502

Head Office retirement system contributions totaled $121,160, an

increase of $12 thousand compared with 1949* A special contribution of

$8,558 to the Federal Reserve retirement system for credit of R. E. Towle,

in addition to higher salary expense, accounts for this increase.

DIRECTORS' FEES AND EXPENSES


Head Office $10,440 $ - 1,185Helena Branch 6.554 + 317

$16,994 $ - 868

Directors' fees and expenses at the Head Office totaled $10 thou

sand, a decrease of $1,185 from the year 1949* This decrease is primarily

due to the holding of fewer Discount Committee meetings as well as reduced

attendance due to a one-year leave of absence granted Paul E. Miller.

FEDERAL ADVISORY COUNCIL FEES & EXPENSES


Head Office $2,019 $ + 69

Federal Advisory Council fees and expenses totaled $2,019, an

increase of $69 over last year.


TRAVEL


Hsad Office $54,785 $ - 1,662Helena Branch 5.080 - 590

$59,865 $ - 2,252

Travel expense at the Head Office totaled $55 thousand, a decrease

of $1,662 from the year 1949. In the last quarter of 1950 during which

there was activity in Consumer Credit, travel expenses totaled $5,100 as

compared with the first six months of 1949 when travel expenses totaled

$11,600, a decrease of $6,500. Increases for 1950 were $1,300 for bank

examinations and $3,500 in connection with System meetings, special

conferences and other miscellaneous travel.

POSTAGE & EXPRESSAGE


Head Office $252,344 $ + 16,312Helena Branch 46.216 + 3.786

$298,560 $ + 20,098

Postage and expressage for the Head Office totaled $252,344, an

increase of $16 thousand compared with 1949. The largest increases occurred

in postage: ordinary mail $11,500 principally because of the reactivation

of Regulation W on September 18, 1950, and the inauguaration of Regulation X

on October 12, 1950; incoming currency $4,400$ outgoing currency $l,100j

outgoing coin $l,500j and expressage on incoming coin $1,300. Decreases

are shown in expressage on incoming currency $4,100 and postage on incoming

coin $1,000.


Postage and express rates were increased in several instances

during 1950. The principal increases were a result of revisions made in

the schedule of express rates effective April 18 and in the table of air

parcel post rates effective November 1. As the revised air parcel post

rates were in many cases materially greater than air express, some of our

shipments were changed from air parcel post to air express.

The change that went into effect September 1 required us to

increase the declared valuation of shipments of checks by express to $151.

This resulted in an addition of $.22 to the cost of each shipment in order

that we might obtain service on the same basis as previously furnished on

the minimum declared value of $50. Because of these increased rates, our

express shipments in some instances were changed to first class mail.

Air express rates were increased November 15, and in addition

the minimum charge per shipment was increased from $1.00 to $1.50 at that

time. As it is necessary to declare the value of shipments of checks

for preferred handling above the minimum valuation charge, the minimum

charge per shipment of checks by air express is now $1.72.

Frequent changes in mail and express rates has necessitated a con

stant review of our shipping procedures and changes are made to minimize

the effect of the increased rates.

TELEPHONE & TELEGRAPH


Head Office $11,540 $ - 745Helena Branch 7.690 - 120

$19,230 $ - 865

-93-


Telephone and telegraph expense at the Head Office totaled

$11,540, a decrease of $745 compared with the year 1949. During 1949

installation costs of an intercommunication system for the Protection

Department and automatic telephone equipment amounted to $618 and $240

respectively. This expense did not recur in 1950.

PRINTING, STATIONERY & SUPPLIES


Head Office $87,498 $ + 19,082Helena Branch 7.719 + 2.917

$95,217 $ + 21,999

Printing, stationery and supplies expense at the Head Office

totaled $87,498, an increase of $19,082 as compared with a year ago.

Functions showing outstanding increases were Public Services $6,739, of

which $6,007 represents the purchase of 50,000 copies of "Your Money and

The Federal Reserve System"; Consumer Credit $2,889j Real Estate Credit

$2,697j Provision of Space $2,487; and Country Checks $2,363*

OTHER INSURANCE Does not include insurance on currency, coin and securities


Head Office $14,449 $ - 2,376Helena Branch 2.242 - 150

$16,691 $ - 2,526

Other insurance expense for the Head Office in 1950 totaled

$14,449, a decrease of $2,376 as compared with the year 1949* The bulk


of the decrease is reflected in the estimated cost of hospital and surgical

insurance. The 1949 estimates were overstated resulting in a compensating

reduction in the 1950 figures when the actual expense was determined.

TAXES ON RANK PREMISES


Head Office $90,256 $ - 3,824Helena Branch 4.454 154

$94,710 $ - 3,973

Taxes on Head Office bank premises totaled $90,256, a decrease

of $3,824 over the year 1949 due to a decrease in tax rate to 141 mills

for 1950 compared with 147 mills in 1949*

DEPRECIATION ON BANK BUILDING & FIXED MACHINERY & EQUIPMENT


Head Office $25,666 $ -Helena Branch 5.740 -

$31,406 $ -

Depreciation on buildings, including vaults, is at the rate of

2% per annum, and on fixed machinery and equipment at 10$ per annum of the

gross book value.

-95-


LIGHT, HEAT, POWER & WATER


Head Office $23,651 $ - 585Helena Branch 2.325 + 91

$25,976 $ - 494

Light, heat, power and water expense at the Head Office totaled

$23,651, consisting of the following:

Light & Power $17,264Heat 4,501Water 1,376Sewage 510

$23,651

REPAIRS & ALTERATIONS


Head Office $47,369 $ - 8,851Helena Branch 1.84-5 + 839

$49,214 $ - 8,012

Cost of repairs and alterations at the Head Office totaled $4-7,369,

a decrease of $8,851 compared with the previous year. The larger items of

expense during 1950 were:

1. Completion of remodeling program on third floor consisting of

new metal pan ceiling, new recessed fluorescent lighting, and

adjustment of air ducts, $24- thousand.

I. Started construction of new coin vault on the balcony on top of

our present vault, $12 thousand.


Painting, plastering, and washing walls and ceilings for

general maintenance of building, $4- thousand.

4. Repairs to boilers, $2,000.

RENT


Head Office $5,385 $+ 5,-385

The 1950 figure represents rental of approximately 18,500 square

feet of outside office space from November 15 through the end of the year.

FURNITURE & EQUIPMENT


Head Office $11,607 $ - 762Helena Branch 664- + 473

$12,271 $ - 289

Furniture and equipment purchased at the Head Office totaled

$11,607, a decrease of ^762 compared with 1949* The larger purchases dur

ing 1950 were four hydraulic lift trucks and 100 skids for use in the new

coin vault $2,464, desks $1,728, chairs $1,697, Ford truck $985, and mimeo

graph machine $893•

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MISCELLANEOUS NET EXPENSE


Head Office $130,263 $ - 12,835Helena Branch 13.620 + 155

$143,883 $ - 12,680

Miscellaneous net expense at the Head Office totaled £130,263, a

decrease of $13 thousand compared with the year 1949*

The bulk of the decrease resulted from the recovery of $9,900

from the Board of Governors for one-half the cost ($19,800) of producing

a new bank movie in 1949•

BOARD ASSESSMENT


Head Office $86,300 $ + 5,500

The assessment for expenses of the Board of Governors of the

Federal Reserve System totaled $86,300.

The Board of Governors levies semiannually upon the Federal Re

serve banks, in proportion to capital stock and surplus, an assessment

sufficient to pay estimated expenses and salaries of its members and em

ployees for the half-year succeeding the levying of such assessment,

together with any deficit carried forward from the preceding half-year.

The bases for our assessments for the years 1950 and 1949 are

shown on the following page.


First Half 1950 1949

Capital Stock Surplus (Section 7) Surplus (Section 13b)

$ 4,709,650 12,493,859 1.072.621

$18,276,130

$ 4,471,800 11,797,315 1.072.621

$17,341,736

Assessment Rate .00245 .00257

Total Assessment for First Half $ 44,800 $ 44,600

Second Half

Capital Stock Surplus (Section 7) Surplus (Section 13b)

$ 4,896,600 12,493,859 1.072.621

$18,463,080

$ 4,543,650 11,797,315 1.072.621

$17,413,536

Assessment Rate .00225 .00208

Total Assessment for Second Half $ 41,500 $ 36,200

Total Assessment for Year $ 86,300 $ 80,800

COST OF FEDERAL RESERVE CURRENCY

1950Change

from 1949

Original cost (including shipping charges)

Redemptions (including shipping charges)

$138,749

18.309

$ + 40,701

+ 96$157,058 $ + 40,797

The cost of new currency totaled $138,749, an increase of $40,701

compared with the year 1949* Printing costs increased $36,701 while postage

and surcharges increased $4,329*

Redemption costs, including shipping charges, increased $96 com

pared with the previous year.


RENT RECEIVED

Change1950 from 1949

Head Office $39,450 $ + 55Helena Branch 764 -208

$40,214 $ -153

Rent received from government agencies for space, furniture, and

equipment (deducted from total expense) totaled $39,450 during 1950 for the

Head Office, an increase of $55 compared with the previous year.

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R E I M B U R S A B L E E X P E N D I T U R E S

Change1950 from 1949

Public Debt $477,995 11,408Federal Taxes 36,372 + 27,326Currency Reports 21 9Reconstruction Finance Corporation 10,357 - 1,654Federal Farm Mortgage Corporation 39 - 62Federal Land Banks 252 10Federal Intermediate Credit Banks 30 - 37Federal Public Housing Authority 55 + 1Commodity Credit Corporation 11,962 + 1,070War Department 86 101Housing £c Home Finance Agency 56 + UFederal Home Loan Banks 9 - 26Home Owners Loan Corporation 43 - 36Central Bank for Cooperatives - - 2Leased Wire Service 3,047 + 29Photostat Service 44 + 4Coin Wrapping Service 7.714 + 1.182

$548,082 + 39,107

Reimbursable expenditures at the Head Office and Helena Branch

totaled $54-8 thousand, an increase of $39 thousand compared with the year

1949. The agencies showing the greatest increases are Public Debt $11

thousand and Federal Taxes s’27 thousand.

Salary adjustments brought the total salary expense to $338,948

from $324,455 in 1949 and accounted for the bulk of the increase in Public

Debt expense.

A breakdown of expense for the Federal Taxes Division is shown

below:

1950 1949 Change

Salaries $21,707 $7,095 $ + 14,612Retirement System 2,012 683 + 1,329Furniture & Equipment Rental 5,114 - + 5,114Postage 4,506 301 + 4,205

Number of Employees 8.05 2.84 5.21

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A change in the procedure for handling federal taxes necessitated

the increase in the number of employees charging time to this function. As

a result, salary expense and retirement system contributions increased.

Previously, the processing of receipts was handled manually, but the new

procedure which became effective January 1 is operated on an IBM system

necessitating IBM equipment rental costs of $5,114 for the year 1950. The

increase in postage expense is also the result of the new procedure whereby

validated depositary receipts and subsequent payment receipts are forwarded

to employers, whereas this was not done previously.

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1950 directors frb minneapolis

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