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annua
report
to the directors

FEDERAL
R E SERVE
BANK
OF

MINNEAPOLIS




1950

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................................................. 31
Consumer Instalment Credit....................................... 33
Currency and Coin................................................ . 4
3Discount......................................... ................ 38
Duplicating.......................................................39
Examination....................................................... 4-0
Fiscal Agency.................................................... .41
Noncash Collection............................................... 47
Personnel......................................................... 49
Planning.......................................................... 54
Protection....................................................... 55
Public Services...................................................56
Purchasing........................................................ 61
Real Estate Credit............................................... 61
RFC, CCC, and Other Governmental Agencies........................62
Research......................................................... 63
Reserves (Member Bank)............................................66
Safekeeping...................................................... 68
Wire Transfers................................................... 70
Miscellaneous.................................................... 71
Capital Accounts....

...74

Dividends.......

.. 78
.

Bank Premises...

...79

Earnings...

...81

Expenses...

...88







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
Term Expires
December 31
Class A
Charles W. Burges, Vice President & Cashier, Security
National Bank of Edgeley, Edgeley, North Dakota

1951

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

1952

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

1953

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

1951

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

1952

William A. Denecke, Livestock Rancher,
Bozeman, Montana

1953

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

1951

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

1952

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

1953

Member of Federal Advisory Council
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:
Cafeteria
Education & Welfare
Medical
Personnel 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:
Expenditures
General 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




OFFICERS

(Contd.)

W. H. Turner, Assistant Cashier
Telephone
Vault
M. E. Lysen, Operating Research Officer
Efficiency Studies
Equipment
Office Forms
Operating Letters
Operating Manuals
Planning
Suggestions

J. Marvin Peterson, Director of Research
F. 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,
Columbus, Montana; and President, The
Yellowstone Bank, Laurel, Montana

1951

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

1951

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

1952

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

1952

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

1952




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.
by the Senate on August 9.
September 1.

His appointment was confirmed

He assumed his duties as a Board member on

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

He

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

THE

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.
controls.

It means some direct

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.
more dollars to spend.

This meant the public had that many

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.
the rising tide of unemployment.

For evidence, they pointed to

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’ midsummer
s
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.
an unprecedented rate.

Construction activity hummed at

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.
stimulant is injected into industry",

"Unless a powerful new

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.
War was not just another "incident".




The Korean

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.
aims

Their

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.
Treasury's standpat attitude.
already prevailing.




The new rate confirmed the

It was virtually the same as the low rate

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 $13.6 billion
of debt into 13-month notes at 1 1/l$.
The Federal Reserve hit back.

That is, at the existing rate.
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
for their maturing issues.

five-year notes in exchange

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

1600

1600

1400

1400

1200

1200

1000

1000

800

800

600

6 00

400

400

200 b
.NVAV.V
GOLD C E R T I F I C A T E S , xjsssssss®
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^REDEMPTION ♦FUND &:♦♦♦WTHER CASH wJv
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« * » . »:♦:»;. >
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1917




19

2S

23

25

27

29

31

33

35

37

39

4!

43

45

47

49

51

53

C O M P A R A T I V E

S T A T E M E N T

OF

A S S E T S

MINNEAPOLIS AMD HELENA BRANCH COMBINED
(Thousands of Dollars)
Change from
12-31-49

12-31-50

12-31-49

156,1 H
210,000
21.467
387,581

214,249
210,000
22jJ338
446,587

-

58,135

-

871
59,006

6,060

5,907

+

153

185

50
1,737
78

—
+

50
1,737
107

38,487
72,218
387,549
142.940
" 641,194

156,337
203,156
18,200
233,658
611,351

1
5,613

1
5,154

100,136
11,143
1,766
165
113,210

73,458
4 ,703
886
193
79,245

+ 26,678
+
6,440
+
880
-- -31
- 33,965
f

Bank Premises
Less Reserve
Bank Premises - Net

2,493
1J79
1,114

2,493
1.347
1 ,J.46

-

+
-

32
32

Miscellaneous Assets:
Fiscal Agency expense, reimbursable
Interest Accrued
Premium on Securities
Deferred Charges
All Other Assets
Total Miscellaneous Assets

91
2,838
680
28
8
3,645

82
2,017
985
23
83
3,190

f
f
+

9
821
305
5
75
455

1,158,603

1,154,446

+

4,157

Assets:
Cash Reserves:
Interdistrict Settlement Fund
Gold Certificates with F.R. Agent
Redemption Fund - F.R. Notes
Total Gold Certificate Reserves
Total Other Cash
Bills Discounted
Foreign Loans on Gold
Industrial Loans
U. S. Government Securities:
Bills
Certificates of Indebtedness
Notes
Bonds
Total U. S. Govt. Securities
Due from Foreign Banks
F.R. Notes of other F.R. Banks
Uncollected Items:
Transit Items
Exchanges for Clearinghouse
Other Cash Items
Due from Branches or Head Office
Total Uncollected Items

Total Assets




-

- 117,850
- 130,938
+ 369,34-9
- 90.718
+ 29,843
+

A59

-2U-

M ILL IO N D O L L A R S

M IL L IO N

D O LLARS

1600

600

1400

1400

1200

200

1000

1000

800

800

600

600

400

400

200

2 00

-25


C O M P A R A T I V E

S T A T E M E N T

OF

L I A B I L I T I E S

MINNEAPOLIS AND HELENA BRANCH COMBINED
(Thousands of Dollars)
12-31-50

12-31-49

Liabilities:
Federal Reserve Notes in Circulation

610,643

612,217

Deposits:
Member Bank - Reserve Accounts
U.S. Treasurer - General Account
Foreign
Nonmember Bank - Clearing Accounts
Officers’Checks
Due to Other F.R. Banks - Collected Funds
Other Deposits
Total Deposits

391,854
22,614
22,193
610
321
2,511
1^67
M l , 570

394,920
36,733
19,015
1,274
345
1,639
i± m
455,666

Deferred Availability Items:
U.S. Treasurer - General Account
All Other
Total Deferred Availability Items

5,367
jrt^m
82,741

Miscellaneous Liabilities;
Discount on Securities
Sundry Items Payable
Total Miscellaneous Liabilities
Total Liabilities

Capital
Capital
Surplus
Surplus
Reserve
Total

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

Total Liabilities and Capital Accounts




61
110

.

Change from
12-31-4C
~ 1,574
-

+
-

+
-

-

3,066
14,119
3,178
664
24
872
273
14,096

+ 2,705
+ 16.255
+ 18,960

230

_

2,662
61JJ3
63,781

169
14
183

171

22k
354

1,135,125

1,132,018

5,074
13,168
1,073

+

3,107

23,478

4,709
12,494
1,073
____ ^ 1 5 2
22,428

+
+

365
674
11
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.
credit expansion had slowed.

Consumer

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.
has been placed.

Only a dribble of defense orders

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)
Bills
Certificates
Notes
Bonds
Total

12-27-50
870
2,334
12,544
20,337

12-31-49
4,829
6,275
562
7.218
18,884

Change
- 3,959
- 3,941
+ 11,982
- 2.629
+ 1,453

-28-

U.S. Government Security Holdings
Federal Reserve Bank of Minneapolis
(in millions of dollars)
Bills
Certificates
Notes
Bonds
Total

12-31-50
38
72
388
1£2
6£L

12^31^9
" 156
203
18
234
611

Change
- 118
- 131
+ 370
- 91
+ 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’ holding of bonds in 1950 declined as
s

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




-29-

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:
1950
Paper Checks
Card Checks Payable Through:
Our Bank
Other F.R. Banks

194.9

Change
from 1949

1,168,662

1,111,636

+

57,026

6,775,113
2.021.205
9,964,980

6,477,318
2.270.939
9,859,893

+ 297,795
- 249.734
+ 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.
nine states were added to the two-day classification.

In addition,

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.




-33-

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.
of 12,471 thousand coins wrapped and $870 thousand.

This is an increase

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
l»s and 2 ‘
s
5*s
10‘
s
20's
50»s
100's
500*s
1000‘
s

12^2

$ 33,137,965
52,823,000
117,210,000
91,524,000
5,697,000
21,567,000
1,172,000
2.109.000
£>325,239,965

$ 32,257,840
>
52,557,000
113,532,000
86,630,000
5,476,000
21,774,000
1,395,000
1.704.000
0315,325,540

Outgoing Shipments
for account of member banks
1950
Currency paid out
Currency shipped to Helena Branch
and for other F.R. banks

com

Number
21,867

461

14*752

37,080

1949
Amount Number
Amount
#325,239,965 21,460 #315,325,840
37,136,500

_ % m xm

525

36,691,500

14*268 „._sx22% m

0371,554,408 36,253 $360,246,649

Incoming Shipments
for account of member banks
1950
Number
22,§lS
3,944
26,560

Currency
Coin

1949

Amount Number
Amount
$369,290,093 22,496 1374,580,350
_ 8.128^792 4.421
8.590.480
$377,418,885 26,917 $383,170,830

Number & Amount of Pieces Handled
Currency

Bills received and counted
Bills rehandled
Hand verification of bills




________ 1950_________
______ 1949_________
Number
Amount
Number
Amount
64,154,408 0404,671,050 697809,96« $402,412,830
5,016,998 61,443,900 5,660,013 75,141,520
20.132.711 249.864.820 21.2^5.326 268^039^60
89,304,117 $715,979,770 96,695,300 0745,593,910

-36-

Number & Amount of Pieces Handled
Coin

Coins received & counted
Coins rehandled
Coins wrapped

1950
Amount
Number
0 7,401,903
96,342,946
486,027
2,946,371
51.783.500
3.547.625
151,072,817 $11,435,555

Number
86,736,378
2,870,269
39.313.000
128,919,647

1949

Amount
$ 7,518,249
517,089
2.677.850
§10,713,188

Amount of Coin Received from
U. S. Mints
1950

ma.

$1,786,000

$810,000

Number of Unfit Bills Forwarded to Treasurer
of the United States for Redemption
1950

1949

35,478,732

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

1949

$24,842,500

$31,454,800

$38,243,450

$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.
by Twin City banks.

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

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.
aggregated $889 thousand.
the year's end.

These applications

One application for $20 thousand was pending at

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:

Bank Work

1949
871

1,450
692
171
3,000

1,182
141
73
2,267

+
+
+
+

1.515
4,515

(Fiscal Agency Department
(Minneapolis Office of the
Reimbursable ( Commodity Credit Corporation
(Minneapolis Loan Agency of RFC
(Miscellaneous

1950
687

Change
- 184

1.195
3,462

+ 320
+1,053

268
551
98
733

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
Banks

Michigan
Minnesota
Montana
North Dakota
South Dakota
Wisconsin

State
Banks

Total

26
178
39
41
35
27
346

15
28
45
2
27
14
131

41
206
84
43
62
41
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.
held trust powers.

As of December 31, twenty-one state member banks

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.
tenders represented 2,092 subscribers.

These

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 ^vere 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’ million.
150

Also during the year, we received direct from

employers 43 thousand depositary receipts for federal taxes aggregating
£’ million.
22
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 SEPARATIONS

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 addi­
tion, 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 Bruns­
wick, 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
Incidental hospital expense
Surgical expense

69$
96
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.
about March 1, 1951.

The new vault should be ready for occupancy

One advantage of the new coin vault will be that

space will permit the practice of ‘
'first in-first out".
method of storing coin will be new to this locality.

Cur improved

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-

-54-

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

This

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.
more than one bank, joint sponsorship was encouraged.

In towns having

Response to the offer

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




-56-

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.




-57-

Head
Office
Atlanta
Boston
Chicago
Cleveland
Dallas
Kansas City
New York
Philadelphia
Richmond
St. Louis
San Francisco

1
6
2
1
1
2
2
6
2
5
3
31

Branches
4 (l each)

8 (2 each)
12

Our Helena Branch has six copies of our film.

Total
5
6
2
1
1
2
2
6
2
5
11
43

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 the year.

of men and two groups of women during the spring

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.




-59-

As in 1949, meetings sponsored by the bank included the following:
1950

Attendance
Ninth District Conference for Member Banks
Forum
Examiners' Conference
Money and Banking Workshop

960
282
103
79

1949

Attendance
1,001
322
108
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.
the force of field men was increased from 18 to 24-.

Our representatives also

attended district group meetings and state conventions.




This year

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.




-61-

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:
Library Letter.

The Monthly Review, Farm News, News Review, and

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
February
May
June
July
October
November

1950 Inherits Renewed Vigor of '49 Economy
Income Payments Versus Price Supports
Mortgage Credit Tailored to Family Incomes
Consumer Buying Propels Economy Upward
District Savings Quadruple in Decade
Construction Boom Fostered by Credit
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

-66-

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
Penalties Assessed
No.

1950
Amount

No.

1949
Amount

Michigan
16 $ 421.34 24 0 655.11
Minnesota
39 1,361.75 55 1,484.20
198.36 15
North Dakota 5
711.83
129.86
South Dakota 8
243.35 10
Wisconsin
3
139.37 17
503.51
Head Office
Totals
71 $2,364.17 121 $3 ,484 .51
Montana

42

2.507.54

55

1.322.40

Combined 113 04,871.71 176 04,806.91

Penalties Waived_____
1950
No.. Amount

No.

1949
Amount

Banks Affected
Assessed
Waived
1950 1949 1950 1949
No. No, No. No
11
34
11
6
11

8
57
15
17
7

6
31
7
8
10

42

73

104

62

86.57

21

22

23

10

239 $5,788.33 97 01,333.65

63

95

127

72

15 0 117.42
114 4,566.55
20
205.32
24
154.53
22
83.73

9 0
45
9
13
11

38.24
885.22
69.58
161.06
92.98

195 05,127.55 87 $1,247.08
44

660.78 10

Reserve requirements remained unchanged during 1950.

5
24
4
6
3

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:




-67-

Increase in Reserve Requirements
Authorized by the Board on December 28. 1950
Time Deposits

Net Demand Deposits
Bank Classification

From

To

Effective
Date

%

Effective
Date

6%

1/16/51

From

To

Country Banks

12%
13

13%
14

1/16/51
2/ 1/51

Reserve City Banks

IB
19

19
20

1/11/51
1/25/51

1/11/51

22
23

23
24

1/11/51
1/25/51

1/11/51

Central Reserve City
Banks

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.
SAFEKEEPING DEPARTMENT
Securities held for safekeeping and collateral purposes as of
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:




12-31-50
12-31-49
Change
(in thousands of dollars)
Government and miscellaneous
securities held in safekeeping
for members and nonmembers
Securities pledged to secure
public deposits
Securities held for U.S. Treas.
and Others
Securities held for RFC
'"'Collateral to Treasury Tax k Loan
Account
U.S. Depositary Bonds - Time
Deposits
Housing & Home Finance Agency
^Collateral for Discounts and
Advances
Securities held for Public Housing
Authority
Collateral to Consignment AccountU.S. Savings Bonds, Series E

816,915

913,885

- 96,970

298,475

337,737

- 39,262

4,333
144

5,787
9,337

173,151

139,174

+ 33,977

42

130
75

130
33

21,445

20,850

595

1,718

1,712

6

45
1,316,268

... . _18
1,428,745

.. 13
-112,477

-

-

1,454
9,193

* 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.




-69-

The table below shows comparative volume figures for 1950 and
1949:
Receipts issued
Pieces received
Withdrawals handled
Pieces delivered
Transfers from one account
to another
Coupons clipped
Custodian receipts issued

1950
7,029
57,768
9,052
66,097

1949
6,559
48,502
8,249
53,333

+
+
+
+

Change
470
9,266
803
12,764

6,637
273,698
1,063

6,335
264,409
1,135

+
+
-

302
9,289
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 U ? use as compared with 72$ for the nation as a whole.
V°
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

LION D O L L A R S

28

24

20

I6

12

8

4

0
I



M ILLION DOLLA

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 losses
beginning 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, on
6/21/50 and 11/29/50 .................................




Total Debits

566.80

- ......................... $594.84

-75-

Credits;
Recovery of loss on shipment of silver dollars
to the Citizens Bank & Trust Co., Big Timber,
Montana, 5 / 1 7 / 4 9 ......................................$
Annual addition based on shipments of $579,794,506
during the period December 1, 1949 through
November 30, 1950, at 20 per &1,000 .................
Total Credits

...............................

45.00

11.595.89
$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)
$100,180
29,465

1949
(000 Omitted)
$ 92,100
39,655

1,160

2,068

192,075

185,303

249,031

250,594

3,323
- J u M
$579,795

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
Dividends Faid
Paid U.S. Treasury (Interest on F.R. Notes)
Transferred to Surplus (Section 7)




$7,035,635.36
$

2?4,n34.00
6.067.40c.22
$

6.361.442.22
674,193.14

-76-

Surplus (Section 7) December 31, 19-49
Transferred from Earnings 1950
Surplus (Section 7) December 31, 1950

^12,493,856.72
674.193.1'
>13,168,051.8

Surplus (Section 13b) December 31, 1950
Transferred from Earnings 1950
Surplus (Section 13b) December 31, 1950

£ 1,072,621.34>
______ g______
0 1,072,621.34-

Reserve for Contingencies, December 31, 1950:
Reserve for losses in excess of blanket
bond coverage
Reserve for losses not covered by
Loss Sharing Agreement
Reserve for Registered Mail Losses
Special Reserve for Contingencies

0 1,000,000.00
500,000.00
186,752.73*
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
State

No. of Banks

Michigan
Minnesota
Montana
North Dakota
South Dakota
Wisconsin

41

206
84
43
62
41

111

1949
Dividend
Paid

S 16,294.65
i
191,548.64
30,225.53
17.343.95
22,844.27
15.776.96
,294,034.00

Dividend
__Paid__

No. of Banks
41
207
84
43

62

478

0 15,635.30
174,936.94
29,096.97
16.257.30
21,604.40
15.300.31
0272,031.22

Change
A

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
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932

57,719.87 a/
363,894.19 b/
168,102.97
180,186.21
195,870.65
211,657.03
213,774.01
212,732.68
202,827.98
193,559.46
187,609.25
180,726.51
181,202.86
184,029.92
184,445.39
180,454.53 c/
175,494.80

1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950

0171,563.89
181,117.51
135,448.45
179,052.04
174,057.31
174,231.27
174,905.39
177,400.58
179,789.68
183,336.33
190,924.19
206,158.74
221,686.96
238,372.30
253,251.30
262,776.22
272,831.22
294.034.00
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
Head
Office

Helena
Branch

$1,283,281.50

$101,000.00

Total

BANK BUILDING:
Gross Book Value:
Beginning of 1950 .......
Additions during year....
Deductions during year...

$1,384,281.50
-

End of Year

-

-

$1,384,281.50

$101,000.00

1

Allowance for Depreciation*
Beginning of 1950
Credits
a. Normal depreciation
b. Other..............
Debits...................

$1,283,281.50

I

641,640.36

$ 18,809.88

25,665.60

2,019.96

660,450.24
27,685.56
-

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 1950
Additions during year..............
Deductions during year-...

$

698,171.34

$

660,969.35

$ 37,201.99

—

End of Year

$

End of Year

$

660,969.35

$ 37,201.99

$

Allowance for Depreciation:
Beginning of 1950........
Credits
a. Normal depreciation
b. Other..............
Debits ...................

698,171.34-

686,895.98

$

660,969.35

$ 25,926.63

3,720.24

3,720.24

-

-

$

690,616.22

$

Net book value December 31, 1950

$

7,555.12

$

LAND:
Net book value December 31, 1950

$

410,520.66

$

TOTAL BANK PREMISES:
Net book value December 31, 1950

$1,114,221.48




...

660,969.35

-

-

$ 29,646.87
$

7,555.12

400,520.66

$ 10,000.00

$1,016,496.20

$ 97,725.28

-SO-

MILLION] DO LLARS




Li ON D O L L A R S

NET

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.

deductions were special payments:

Included in the 1949

(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
1950
Current Earnings
Current Expenses
Current Net Earnings
Additions to Current Net Earnings:
Profit on U.S. Government
Securities sold, net
All Other
Total Additions

Deductions from Current Net Earnings:
Charge-offs on Bank Premises
Reserve for Registered Mail Losses
Reserve for Contingencies
Special Payment to Retirement System
All Other
Total Deductions

$8,536,885
2 .602.428
$5,934,457

Change
from 1949
$ - 1,642,145
+
121.319
$ - 1,763,464

200,287
M
200,371

$1,113,176
_
_
116
*1,1137292

$ +

$

$ +
31
- 1,277,000
84,292
+_______ 160
& - 1,361,101

$

11,596
518
12,114

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
Office

Total
Additions to Current Net Earnings:
Profit on U.S. Government
Securities sold, net
Recovery of Return Item lost in transit
3/12/48 from Helena Branch's letter to
State Bank of Terry, Montana
One dollar bill found in wastepaper 9/6/49
Proceeds from sale of overhead heater by
Helena Branch
Dividend Pondera Valley State Bank, Conrad,
Montana, claim of Great Falls Lumber Co.,
assigned to Federal Reserve Bank of
Minneapolis
Total Additions

Deductions from Current Net Earnings:
Reserve for registered mail losses
Discount on foreign currency and coin
Loss on counterfeits
Loss on mutilated currency and coin
Difference Account
Loss 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.
Total Deductions
Net Additions to Current Net Earnings




Helena
Branch

$1,113,175.82

$1,113,175.82

5.00
1.00

1.00

.$5.00

70.00

70.00

________ 4-0.00__________ AO. 00________
$1,113,291.82

$1,113,216.82

$

$

11,595.89
25.56
322.88
38.67
120.96

11,595.89
25.56
322.88
3.67
116.30

$75.00

$35.00
4.66

________ 10.00__________ 10.00________
$

12,113.96

$1,101,177.86

$

12,074.30

$39.66

$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;

1950
Discounts and Advances
$
72,407
Foreign Loans on Gold
8,841
8,581
Industrial Loans
U.S. Government Securities-System Account 8,441,067
4,872
Deficient Reserve Penalties
Sale of Wastepaper, Money Bags, etc.
474
Commission Earned on Bankers' Acceptances
purchased for Foreign Correspondents
417
Interest on Personal Loans to Employees
7
218
Clearinghouse Fines
$8,536,384

Change
from 1949
$ *
47,752
34,702
+
8,085
- 1,663,861
+
65
+
176
+

252
5
+
92
$ - 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.
return for the year was 1.59%*

The average

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.
1950 was 1.5%.

The yield for

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$*
1949 the average yield on these combined holdings was 1.5994$.

During

Our average

daily holdings in participated Open Market securities was $569 million,
whereas one year ago the daily average was $632 million (including bills
held under repurchase option).
1.60$ for 1949.

The average yield was 1.48$ for 1950 against

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;
Change
12-31-50
12-31-49
from 1949
(In Thousands of Dollars)
Bonds
Notes
Bills
Certificates

142,940
387,549
38,487
72.218
641,194

233,658
18,200
156,337
203.156
611,351

- 90,713
+ 369,349
- 117,850
- 130.938
+ 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.




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87

-

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




M ILLION D O L L A R S

COMPARATIVE STATEMENT OF NET CURRENT EXPENSES

Head
Office
1950
Salaries:

Officers
Employees
Retirement System Contributions
Directors' Fees and Expenses
Federal Advisory Council
Traveling Expense
Postage and Expressage
Telephone and Telegraph
Printing, Stationery and Supplies
Insurance on Cy. & Security Shpts.
Other Insurance
Taxes on Bank Premises
Depreciation on Bank Building
Light, Heat, Power, and Water
Repairs & Alt. to Bank Building
Rent
Furniture and Equipment
All Other
Difference between Actual & Estimated
Fiscal Agency Expenses - December 1948
- December 1949
- December 1950
Total Operating Expenses

1,379
615
$2,147,135

Received from Government Agencies for:
Rental of Space
Rental of Furniture & Equipment
Net Operating Expenses

36,3t>8
3,082
$2,107,685

$

192,639
1,068,070
121,160
10,440
2,019
54,785
252,344
11,540
87,498
12
14,449
90,256
25,666
23,651
47,369
5,385
11,607
130,263

Helena
Branch
1950
$ 17,169
118,746
12,082
6,554
-

5,080
46,216
7,690
7,719
2
2,243
4,454
5,740
2,325
1,845
-

664
13,620

Combined
1949

Combined
1950
$

209,808
1,186,816
133,242
16,994
2,019
59,865
298,560
19,230
95,217
10
16,692
94,710
31,406
25,976
49,214
5,385
12,271
143,883

$

187,826
1,158,613
120,740
17,863
1,950
62,117
278,462
20,095
73,219
174
19,217
98,688
31,406
26,470
57,226
12,560
156,564
154
1,379

$252,149

1,379
615
$2,399,284

$2,324,415

577
187
$251,385

36,94.5
3,269
$2,359,070

36,969
3,398
$2,284,048

86,300

80,800

138,749

-

-

Assessment for Expenses of:
Board of Governors

86,300

Federal Reserve Currency:
Original Cost, including
Shipping Charges
Cost of Redemption

138,749
16.511

1.798

_ _l8jji09

98,048
18.213

$2,349,245

$253,183

$2,602,428

$2,481,109

Total Net Current Expenses




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89

-

n o n r e i m b u r s a b l e

e x p e n s e

1950
Head Office
Helena Branch

$2,349,245
253.183
$2,602,428

Change
from 1949
$ + 101,963
+ 19.356
$ + 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
Helena Branch

1950
$1,260,710
135.915
$1,396,625

Change
from 1949
$ + 39,288
+ 10.898
$ + 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
Helena Branch

1950
$121,160
12.082
$133,242

Change
from 1949
$ + 11,710
+
792
$ + 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
Helena Branch

1950
$10,440
6.554
$16,994

Change
from 1949
$ - 1,185
+
317
$ 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

1950
$2,019

Change
from 1949
$ + 69

Federal Advisory Council fees and expenses totaled $2,019, an
increase of $69 over last year.




TRAVEL

1950
$54,785
5.080
$59,865

Hsad Office
Helena Branch

Change
from 1949
$ - 1,662
590
$ - 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
Helena Branch

1950
$252,344
46.216
$ 298,560

Change
from 1949
$ + 16,312
+ 3.786
$ + 20,098

Postage and expressage for the Head Office totaled $252,344, an
increase of $16 thousand compared with 1949.
in postage:

The largest increases occurred

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
Helena Branch

1950
$11,540
7.690
$19,230

Change
from 1949
$ - 745
- 120
$ - 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
Helena Branch

1950
$87,498
7.719
$95,217

Change
from 1949
$ + 19,082
+ 2.917
$ + 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
Helena Branch

1950
$14,449
2.242
$16,691

Change
from 1949
$ - 2,376
150
$ - 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
Helena Branch

1950
$90,256
4.454
$94,710

Change
from 1949
$ - 3,824
154
$ - 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
Helena Branch

1950
$25,666
5.740
$31,406

Change
from 1949
$
$
-

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
Helena Branch

1950
$23,651
2.325
$25,976

Change
from 1949
$ - 585
+ 91
$ - 494

Light, heat, power and water expense at the Head Office totaled
$23,651, consisting of the following:
Light & Power
Heat
Water
Sewage

$17,264
4,501
1,376
510
$23,651

REPAIRS & ALTERATIONS

Head Office
Helena Branch

1950
$47,369
1.84-5
$49,214

Change
from 1949
$ - 8,851
+
839
$ - 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

1950
$5,385

Change
from 1949
$+ 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
Helena Branch

1950
$11,607
664$12,271

Change
from 1949
$ - 762
+ 473
$ - 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•




-

97

-

MISCELLANEOUS NET EXPENSE

Head Office
Helena Branch

1950
$130,263
13.620
$143,883

Change
from 1949
$ - 12,835
+
155
$ - 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

1950
$86,300

Change
from 1949
$ + 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
$ 4,709,650
12,493,859
1.072.621
$18,276,130
.00245

Capital Stock
Surplus (Section 7)
Surplus (Section 13b)

1949
$ 4,471,800
11,797,315
1.072.621
$17,341,736
.00257

Assessment Rate
Total Assessment for
First Half

Second Half
Capital Stock
Surplus (Section 7)
Surplus (Section 13b)

$

44,800

$

44,600

$ 4,896,600
12,493,859
1.072.621
$18,463,080

$ 4,543,650
11,797,315
1.072.621
$17,413,536

.00225

.00208

Assessment Rate
Total Assessment for
Second Half

$

41,500

$

36,200

Total Assessment for Year

$

86,300

$

80,800

COST OF FEDERAL RESERVE CURRENCY

1950
Original cost (including
shipping charges)
Redemptions (including
shipping charges)

Change
from 1949

$138,749

$ + 40,701

18.309
$157,058

+
96
$ + 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

Head Office
Helena Branch

1950
$39,450
764
$40,214

Change
from 1949
$ + 55
-208
$ -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.




-

100

-

R E I M B U R S A B L E

E X P E N D I T U R E S

1950
Public Debt
$477,995
Federal Taxes
36,372
Currency Reports
21
Reconstruction Finance Corporation 10,357
Federal Farm Mortgage Corporation
39
252
Federal Land Banks
Federal Intermediate Credit Banks
30
Federal Public Housing Authority
55
Commodity Credit Corporation
11,962
86
War Department
56
Housing £ Home Finance Agency
c
Federal Home Loan Banks
9
Home Owners Loan Corporation
43
Central Bank for Cooperatives
Leased Wire Service
3,047
Photostat Service
44
Coin Wrapping Service
7.714
$548,082

Change
from 1949
11,408
+ 27,326
9
- 1,654
62
10
37
+
1
+ 1,070
101
+
U
26
36
2
+
29
+
4
+ 1.182
+ 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:




Salaries
Retirement System
Furniture & Equipment Rental
Postage
Number of Employees

1950
$ 21,707
2,012
5,114
4,506

1949
$7,095
683
301

Change
$ + 14,612
+ 1,329
+ 5,114
+ 4,205

8.05

2.84

5.21

-

-

101

-

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.




-

102

-


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102