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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® VViC* ^REDEMPTION ♦FUND &:♦♦♦WTHER CASH wJv O « * » . »:♦:»;. > *♦ i /) V u> I 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. - 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 - 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 -