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Horace A. Shepard, Willis J. Winn, Albert G. Clay

To the Banks in the Fourth Federal Reserve District:
Change and the need to respond to change are primary elements in almost all
aspects of our lives: political, economic and social. The Federal Reserve System and the
commercial banks were challenged in many areas during the year 1972, particularly monetary
policy, banking structure and regulation, and bank operations. This Annual Report focuses on
the evolutionary developments underway in the payments mechanism-a concern of both the
Federal Reserve and the banks. The ever increasing volume of checks, rising costs of operations,
and the developing computer-based communications technology are all factors generating the
movement toward an electronic payments system
During 1972, the Federal Reserve Bank of Cleveland began operation of its first
Regional Check Processing Center in Columbus as part of this evolutionary process. In addition,
other actions were taken regarding the development and implementation of other RCPCs in
Cleveland, Pittsburgh, and Cincinnati; the former two were operating in early 1973, and
Cincinnati will be in operation in early April.
This Report is a tribute to the many individuals whose efforts made RCPCs a
reality. In particular, we are grateful for the assistance and cooperation of the member banks in
the Fourth District.
These acknowledgements would be incomplete without a special mention of Albert
G. Clay, who concluded five years of service as Chairman of the Board of Directors at the Main
Office on December 31, 1972, and a total of nine years as a member of the Board. Albert's
distinguished record of public service exemplifies the dedication of the Federal Reserve Bank

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CHAIRMAN OF THE BOARD

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P.a~11i11
Il:h

10lala1

aad
The institutional

means by which payments are made

today are the result of a continuing evolutionary

process

that has been going on for centuries. From the early days of

banking system and the Federal Reserve to that problem
are discussed with emphasis on the role of regional check
processing centers in the Fourth District.

barter, to the use of commodities as a medium of exchange,
to the adoption of bank notes and deposits, the process has

TWENTY-FIVE BILLION AND RISING

been driven by the search for more economically efficiertt

Today in the United States, the check is a major element

means of facilitating exchange. The advance of technology

in the payments mechanism. In 1972, the number of checks

has also played an important

written was in the neighborhood

role. The discovery of new

of 25,000,000,000.

Each

methods and the acquisition of skills resulted in formerly

of these pieces of paper passed through an average of two

efficient arrangements

to three banks and was handled many times. The magnitude

being superseded by economically

more appropriate ones. As literacy became almost universal

of the task facing the commercial banks of this country in

in some countries,

carrying out their demand deposit activity can be given

the attractiveness

of the checking
of the

some perspective by noting that, if the checks written in

telegraph, the wire transfer became feasible.
However, the evolutionary changes in the payments

one year were placed end-to-end, they would extend to the
moon and back five times. And the flow of checks is not

mechanism

in recent years.

diminishing. Check volume, stimulated by economic growth

costs, improved

and the advent of "free" checking, is growing at a rate of

account

was enhanced.

appear to have accelerated

Rising check volume,
communications
computer,

With the development

increasing

equipment

labor

and the technology

of the

with its promised economies, are in large part

responsible. In addition,

the Federal Reserve System has

been active in restructuring
especially

inter-bank

the payments

settlements.

The

mechanism,

Fourth

Federal

Reserve District has not been immune to these changes.
Indeed,

the District has been a center for much recent

experimentation
Report

examines

mechanism

in the payments mechanism. This Annual
some aspects

of the U. S. payments

in the throes of change. The nature of the

current problem and the response of the U. S. commercial

2

six to seven percent each year. If this pace is maintained,
volume will rise to 42 billion items by 1980 (see Chart).
One might think that all these pieces of paper are no
cause for concern. However, even with modern technology,
check processing is a labor-intensive,

costly operation. As

check volume increases, total processing costs go up and,
for some banks, per item cost also rises. It is predictable
then that these rising costs and competition
the banks of this country

will motivate

to seek out more economical

ways of effecting payments. Such a search is already well
under way.

electronic check processing equipment.

GROWTH OF CHECK VOLUME
IN UNITED STATES

This development

was given an enormous boost by the adoption of a common
machine language for check handling, Magnetic Ink Char-

Billions of Checks

acter Recognition

50

(MICR), under the aegis of the Bank

Management Commission of the American Bankers Association. The standardized electronic coding permits a bank's

40

processing equipment to handle encoded checks.
While expanded regional clearing arrangements reduce

30

and the associated electronic processing equipment decrease

the number of times checks have to be handled, and MICR
the cost of each handling, the final answer to processing all
those little pieces of paper may be to do away with all (or

20

at least some) checks. This view has been taken by a
number of studies on the future of the payments mecha10

nism. Of the various means by which the number of checks
may

be reduced,

authorized

o
1945 '50 '55 '60 '65 '70 '75
Sources: Banking; Arthur D. Little Inc.; and
Federal Reserve Bank of Cleveland

'80

From Chart 1, it is clear that rising check volume is not a
Each year's increase in volume has been

accompanied by rising total processing costs and in some
cases strained processing facilities. An early industry study
of the check collection system, the Wurts Report! of 1954,
the established2

concept

of regional check

clearing facilities. Since most items received by a bank are
drawn on other banks located within 50 miles, multiple
handlings and circuitous routings of checks can be reduced
if all banks within a trade area agree to a central exchange
of checks, such as that used by members of city clearinghouses.

This concept

figures very strongly

in present

attempts to improve check collection procedures.
Another

transfer,

the

pre-

use of the bank

The

Point-of-Sale

Transfer.

Under

this arrangement

computer terminals are located in stores with a high volume

EARLY RESPONSES TO THE PROBLEM

reendorsed

point-of-sale

and the expanded

credit card have received the most attention.

of transactions.

new phenomenon.

the

payment,

response by the banking system to the rising

costs of manual check processing has been the adoption of

2Walter E. Spahr, The Clearing and Collection of Checks (New
York: Bankers Publishing Co.), pp. 119-130.

are linked to a bank's

computer. Through the use of some type of identification
device, the point-of-sale terminal may be used to check a
potential
transfer

customer's

credit and to effect an immediate

of funds from the buyer's to the seller's bank

account. All this is done without the necessity of writing a
check.
A pilot

project

preliminary

form of the point-of-sale system under field

in the

Fourth

District

to test a

conditions was conducted from October 1971 through June
1972. Dubbed POST, for "Point-of-Sale Terminal" system,
the project was conducted

by The City National Bank &

Trust Company of Columbus, Ohio, in conjunction
International
Americard,

with

Business Machines, Inc. and National BankInc.

in

Arlington.
Thirty merchants

the

Columbus

participated

suburb

of Upper

in the test,

and 60

terminals were placed in two shopping centers. Twenty
thousand

1Officially , Report of the Joint Committee on the Check Collection
System to the American Bankers Association, the Association of
Reserve City Bankers and the Conference of Presidents of the
Federal Reserve Banks.

These terminals

magnetically

striped cards were issued to cus-

tomers for use in their retail shopping.
Under this system, customers charged purchases with the
card at the point of sale. Sales were electronically authorized and entered directly into the credit card accounting
system of the bank. At the end of each day, the merchant's

3

total sales were automatically credited to his account with
the bank. At the end of each month, the customer was

their credit card balance within 25 days. Indeed, at least
one major Ohio bank has proposed a test of such a credit

billed by the bank, and he paid for his purchases with one

card-demand deposit link. The significance of this is that

check.
The Columbus

for transferring demand balances. Such a demand deposit-

the credit card thereby replaces the check as an instrument
POST system reduced the number of

checks but did not eliminate
however,

established

of-sale transfer.
Preauthorized

them. This pilot project,

the technical

feasibility

of point-

towards

the

technologically

more

complex

(and

expensive) point-of-sale terminal system.
Payments.

For some time, a number of

banks have offered to au toma tically pay regular recurring
bills, such as those of utilities and insurance companies, for
their customers.

credit card system would seem to be a logical intermediate
step

Now the rising costs of checks provide

commercial banks with an incentive to greatly expand the

OTHER APPROACHES

TO RISING

CHECK VOLUME
Other notable efforts by the banking system to deal with

scope of these less costly transfers. Moreover, preauthorized

the problem of the rising tide of checks by reducing their

payments are now often included in a complete financial

number include the Special Committee on Paperless Entries

management package of services that includes an automatic

(SCOPE), in California, and the Committee on Paperless

line of credi t.

Entries (COPE), in metropolitan

Bank Credit Cards. Since 1967, bank credit cards have
become a significant part of the payments mechanism. For

Atlanta,

Georgia. One

basic objective of both is to substitute electronic impulses
for checks as a means of transferring money balances.

example, in December 1967 there were only 390 insured
commercial

banks

in the U. S. providing

credit

card

services. Four years later, the number had risen to 1,535.

SCOPE
The California

SCOPE project

started

operating

on

Similarly, consumer credit outstanding under various bank

October 16, 1972. The nation's first Special Committee on

credit card plans amounted

Paperless Entries established two automated clearinghouses,

to $0.8 billion in December

one in San Francisco and the other in Los Angeles. They

1967 and almost $4.5 billion in June 1972.
At present, most bank credit card arrangements are a

are the heart of a network permitting electronic exchanges

hybrid of monthly billing and instalment credit. That is,

of preauthorized

bank credit cards may be used to make purchases during a

banks. Communications

debits and credits among all California

billing period with a single check issued for the cumulative

bank exchanges are being subjected to rigorous testing in

total within a 25-day grace period. Alternatively,

standards

and formats for inter-

option of the cardholder, payments may be deferred over a

these new operations.
The California SCOPE project is based on transactions

longer period by conversion of the unpaid balance into an

that are similar to the check, such as automatic deposit of

instalment loan.
There is some evidence.f however, that the banks have

payrolls and payment

incentives to link credit card transactions

rization. The transactions

at the

immediately

to

of utility services. Both types of

payment under the SCOPE arrangement require preauthoare recorded on magnetic tape,

the customer's demand deposit. If, for example, a demand

rather than on paper documents, and the impulses on the

deposit were debited as soon as the credit card sales ticket

tapes are then sorted in a way similar to checks. Thus,

was received, the bank would spare itself what is in effect

SCOPE eliminates the high-cost, labor-intensive check for a

an interest-free loan now being made to those who payoff

significant number of transactions.

COPE
Development
3"The Profitability of Bank Credit Card Operations: An FCA
Summary of U. S. and Ohio Banks in 1971," Economic
Commentary, Federal Reserve Bank of Cleveland, December 4,
1972.

4

of the Atlanta Committee

on Paperless

Entries (COPE) was an outgrowth of the Atlanta Payments
Project, a technical research study begun in 1969. The five
major Atlanta commercial banks represented on COPE, in

conjunction

with the Federal Reserve Bank of Atlanta,

complement

concentrated

on the feasibility of implementing the funds

published statements of policy:

transfer system developed in the study.
COPE now has an automated clearinghouse planned and
is directing marketing efforts at gaining public acceptance
for two of the research study's recommendations.
One is Bill-Check, a paper authorization
to a merchant to pay bills electronically.
of such payment authorizations

by a customer
A magnetic tape

is prepared by the retailer,

turned over to a bank, and processed through the auto-

private initiative. This has been made clear in

Increasing the speed and efficiency with which
the rapidly mounting volume of checks is
handled is becoming a matter of urgency .... The
Federal Reserve Board therefore' states as a
matter of policy that it places high priority
upon efforts by the Federal Reserve System to
improve the nation's means of making payments, initially along the following lines:

mated clearinghouse at the Federal Reserve.
The other is direct deposit of payroll, similar to that
developed

by the California

SCOPE project,

approval of business-industrial

employers

requiring

and their em-

ployees.
A final proposal of COPE is a point-of-sale system that
would

give the customer

three

electronically

operated

1. Extending present clearing arrangements, in
cities with Federal Reserve offices, into
larger zones of immediate payment.. ..
2. Establishing other regional clearing facilities,
in which settlements are made in immediately available funds ....

options in paying for purchases: check verification to assure
that sufficient

funds are in an account; a cash card to

transfer funds from a checking account to the merchant's
account;

and a bank credit card with the privilege of

deferred payment. A switching and processing center would
connect terminals in stores throughout

the city with major

banks.

THE ROLE OF THE FEDERAL RESERVE
IN THE EVOLVING PAYMENTS MECHANISM
The Federal Reserve has been an interested
cerned

observer

and participant

and con-

in the multiplicity

of

studies, tests, and innovations that characterize banking's
response to the constantly
the nation's

payments

changing conditions affecting

mechanism. This concern derives

from the Federal Reserve's responsibility
central bank to insure a compatability

as the nation's

of changes in the

payments mechanism introduced by individual banks.
The Federal

Reserve System Steering Committee

on

Improving the Payments Mechanism, headed by Governor
George W. Mitchell, has taken responsibility
direction

in this area. The Steering Committee

Board of Governors

have taken the position

for policy
and the
that the

Federal Reserve can no longer merely respond to evolutionary change but must act to coordinate and accelerate
changes. At the same time, the System's actions seek to

3. (a) Encouraging banks and their customers to
make greater use of the expanded capabilities of the Federal Reserve wire transfer system.
(b) Removing restrictions on third party
transfers of demand deposits, and extending the time period in which the wire
transfer system can be used.
(c) Expanding
offices ...

facilities

at .Reserve

Bank

Plans for making these basic changes in the
present money transfer system should be pursued actively, to achieve as soon as possible an
accelerated flow of funds along more optimal
routing patterns. These initiatives are generally
intended to supplement those efficient direct
check exchange programs that are now in
existence.
The first objective should be expansion of
the geographic area of existing immediate payment zones. This should be accomplished as
soon as necessary arrangements can be made.
Meantime, studies looking to the establishment
of new clearing centers, wherever warranted,
should be undertaken promptly by each Federal Reserve Bank, and submitted to the Board
for review. Expansion of facilities at Federal
Reserve offices for increased access to the
Reserve System's wire network should be con-

5

eluded at the earliest practicable time .... 4
In general, the [se] giudelines [for Regional
Check Processing and Collection Centers]
adopted by the Steering Committee would limit
the Federal Reserve's check collection role to
(1) facilitating the local exchange of checks
when the checks are drawn on and paid to
banks located in the same community, metropolitan area, or region, and (2) assuming greater
responsibility for providing a more efficient
system for handling inter-regional checks and
doing so on as uniform a basis as feasible. The
guidelines are not regarded as imposing constraints upon the continued use and development of check handling facilities of the
commercial banking systern.P
The Federal Reserve System will need for
some time to continue to devote significant
resources to the development of the Nation's
payments mechanlsm.P
In pursuit of an improved payments

mechanism,

REGIONAL CHECK PROCESSING CENTERS
The basic idea of an RCPC is to extend the established
clearinghouse

of more inter-regional

intra-RCPC zone checks, are now being established in some
40 trade centers including Columbus, Cincinnati, Cleveland
and Pittsburgh in the Fourth District (see Map). "Additionally, it is anticipated

which inter-regional settlements
tions will be made.,,7

the

in funds collectable one or
regulation

requires all banks to pay in immediately available funds on
Regula tion D pertaining

The Board simultaneously

revised

to reserve requirements and, in

doing so, generally lowered those requirements. However,
the most visible effort of the Federal Reserve has been the
establishment

that the Federal Reserve will install

and manage a national communications

designated immediate payment areas had paid the Federal

the day of presentment.

network instead of

passing paper. RCPCs, providing for overnight settlement of

to the revision in Regulation J, banks located outside of

The amended

pro-

items in the payments mechanism

through a nationwide communications

cities with Federal Reserve Banks and branches and other

presentation.

with electronic

goals of the RCPC is to set up the computer and electronic

in November 1972 to promote faster check collection. Prior

more days after

augmented

to large geographical areas. One of the

mechanism that in future years will permit the processing

Board of Governors revised its check collection regulations

Reserve for checks presented

concept,

cessing equipment,

of a number of regional check processing

centers (RCPCs).

4

network through

between financial institu-

RCPCs in the Fourth Federal Reserve District
In compliance
ments

mechanism

with guidelines for improving the payissued by the Board of Governors,

officials of the Federal Reserve Bank of Cleveland have set
four major goals to be accomplished:
Goal No. I-Providing

next-day presentment

to member and nonmember banks throughout

of checks
the Fourth

District. Any bank in the District should be able to collect a
check drawn on any other Fourth District bank within one
day, compared
present.

to a maximum of three days required at

This goal of next-day

presentment

can be aided by

establishing an air transportation

network linking RCPCs in

the Main Office and Cincinnati

and Pittsburgh

branches

with the Columbus Regional Center, which will serve as the
center of the Fourth District system. Aircraft will also be
used to move shipments of checks to and from remote areas
in an RCPC zone.8

Board of Governors of the Federal Reserve System, "Statement of
Policy on the Payments Mechanism," June 17, 1971.

5Board of Governors of the Federal Reserve System, "Statement by
the System Steering Committee on Improving the Payments
Mechanism," February 2, 1972.
6"Evolution of the Payments Mechanism." Statement by the
System Steering Committee on Improving the Payments Mechanism,
Federal Reserve Bulletin, December 1972.

6

7"Evolution of the Payments Mechanism,"
Bulletin, December 1972, p. 1010.

Federal

Reserve

81n addition to the Fourth District aircraft network, checks are also
being moved by aircraft between Federal Reserve Districts to
achieve overnight collection of checks.

CINCINNATI AREA

e

e
e

PITTSBURGH AREA

CLEVELAND AREA
COLUMBUS AREA

NOTE: Arrows denote existing and proposed air transport network.

7

Goal No. 2- Eliminating
reducing

intermediate

circuitous

handlings

routing

and

of items in the present

of dishonored items. In addition, bankers in the Columbus
RCPC area have shown interest in exploring just what kind

collection stream, resulting in cutting the cost and burden

of role the Center might play in any future improvements

of check clearing for all commercial banks.

in the payments mechanism.

Goal No.3-Expediting

the return

of unpaid items,

Operation of the Columbus Regional Center was started

thereby reducing or eliminating losses to the public and

in mid-October 1972, processing 25,000 checks a day from

banks from check frauds by speeding check presentment

Cleveland.

and return of dishonored items to the collecting bank and

operation

its deposi tor.

personnel. The test phase lasted for 30 days. In November,

Goal No.4-Providing

the basis for a future automated

The main

objective

was to test computer

of

this

phase

equipment

of the

and to train

the Center began accepting work from three major banks in
the City of Columbus. In the second week of December,

clearinghouse with electronic money settlements.

the remaining 123 banks were added. Early in January of

Columbus RCPC
Early in 1970, a request was sent to the Board of

1973, the Center entered the last phase, that of accepting
checks for presentment from banks across the nation.

Governors of the Federal Reserve System to establish a
Federal Reserve facility in Columbus, the State's capital
and second largest city. The regional center was said to be

Cleveland RCPC
In

April

1971,

the Cleveland

Reserve Bank began

vital to keep pace with the rapid growth of commerce and

planning the establishment

industry in the Columbus area, and to meet the needs of

the main office. It was determined that the Cleveland RCPC

the business and banking communities.

would serve 249 banks in 39 counties across the northern

The facility was to serve 126 banks and their 220 branch
offices

third of Ohio. Because of the diverse geographical area

as the

served, each evening an aircraft brings checks from North-

RCPC area. About 71 percent of the checks

western Ohio banks into Cleveland for processing. The next

in the 27 counties

Columbus

of a regional clearing center in

that

were defined

handled by these banks were to be paid one day following

morning, a plane departs for the northwestern

portion of

receipt by the bank of first deposit, as opposed to as many

Ohio with checks drawn on banks in that area. The other

as three days before the RCPC was completed.

banks are served by ground transportation

A building

shell in Busch Corporate

Center,

965

from Cleveland.

The Cleveland RCPC began operations January 15.

Kingsmill Parkway, on the northern outskirts of Columbus
was selected. The 20,500 square feet of floor space were
divided into three areas: computer room, clerical area, and
administrative area. Operating and administrative personnel
moved 'in as soon as the computer and work areas were
completed early in October.
The Center is primarily a night operation.
thirds of the 60 persons employed

Fully two-

at the Center work

nights. It is a five-day-a-week operation, compared with the
former Federal Reserve check operation of six days a week.
Work that would normally be received on a Friday night
and Saturday

under the old system comes in on Sunday

night, thus making that a peak volume night for the Center.
Goals of the Columbus Regional Center are the same as
for such centers generally: next-day presentment

for the

great majority of banks; elimination of circuitous routing
and many intermediate

8

handlings; and speeding the return

Sorter room at Cleveland RCPC

Pittsburgh RCPC

They were chosen by bankers' association groups within the

Planning for the Pittsburgh RCPC began in May 1971.

RCPC boundaries and clearinghouse associations in larger

After study of several alternatives, the decision was made to

towns.

offer overnight presentment

Reserve

branch territory.

to all banks in the existing

Staffing, equipment,

and planning were

geared to starting the Pittsburgh RCPC on January 2, 1973.

These

bankers

officials

to

meet
discuss

periodically
operations,

with

Federal

concepts,

and

services.
One of the main responsibilities

of these groups is to

keep the Centers advised on problems being experienced by

This target date was met.
Future expansion of the Pittsburgh RCPC will include
five counties in central Pennsylvania presently served by the
Federal Reserve Bank of Philadelphia,

as well as seven

commercial banks, so that appropriate action can be taken
to minimize the impact of procedural changes.
Feedback from the Advisory Committees was extremely

counties in Northern West Virginia now being served by the

helpful

Federal Reserve Bank of Richmond. In addition, three Ohio

provided

counties

banking community that were instrumental in the selection

bordering

the Ohio River and West Virginia,

previously served by Cleveland, will be transferred

to the

Pittsburgh RCPC.

in identifying

problem

communications

areas. The Committees

channels

to the commercial

of sites for satellite pickup points. Through the efforts of
these committees, the Federal Reserve office in each RCPC
zone has been able to serve the commercial banks in its
territory more efficiently.

Cincinnati RCPC
After

consultation

with area bank representatives,

a

decision was made to have a center at Cincinnati to cover
the territory currently served by the Reserve branch office.
The Cincinnati RCPC will serve 19 counties in Ohio and
56 counties in Kentucky,

for a total of 270 banks. Nine

Ohio counties previously serviced by the Cincinnati office
were incorporated

in the territory of the Columbus RCPC.

Check collection

for three counties

Mercer and Shelby-will

in Ohio-Auglaize,

be transferred from the Cleveland

main office territory to the Cincinnati RCPC.
The Cincinnati branch moved its operations into a new
building in September
the implementation
adequate

1972. Although this move slowed

of the Cincinnati RCPC, there is now

space for the facility and provision for con-

siderable expansion, if required. At the same time as the
move, more advanced check processing equipment
installed. This equipment

was

greatly expands the check pro-

cessing capability of this office and lends itself to further
enlargement

without

disrupting

operations.

Start-up

of

RCPC operations is set for late spring of 1973.

BEYOND RCPCs
No one can clearly foresee the future, but a system that
will subsitute electronic movements of funds for checks is
now being put in place. The transition however will be, at
best, a gradual process. It will take time for the system to
evolve and to link the local and regional systems into a
national network. In addition, there is some question as to
whether the public is ready to accept all of the implications
of electronic funds transfer. Moreover, the cost of establishing and operating such a system is far from a trivial
matter.

In

consideration

particular,

it

is

necessary

that

careful

be given to the level and distribution

of

benefits that will result from this expenditure of public and
private funds.
It is certain though that the future will be an exciting
time for everyone involved in the payments mechanism-a
time of challenge, response, and adaptation.
The great mathematician

and philosopher,

Bertrand

Russell, was once asked how he could continue to make
drama tic discoveries in a field such as ma therna tics that

ADVISORY COMMITTEES
Officers of commercial banks in each RCPC zone have
been appointed to Advisory Commi ttees to provide liaison
between

participating

banks and the Regional Centers.

seemed an already completely explored and fixed science.
His deceptively simple answer: "I challenge the axioms."
The Federal Reserve and the banking system might well
ponder this approach.

9

Check delivery at Columbus Center.

Check classification for machine processing.

Logging of incoming checks.
Items being prepared for high speed processing.

10

Processed checks leaving the sorting room.

High speed reader-sorter.

Hand sorting batches of checks.
Computer room.

Sorted checks at loading bay.

11

CDMPIlRIlYIVE

"IE Eli OFC
Dec. 31,1972

ASSETS

Dec. 31,1971

Gold Certificate Reserves

.

$ 884,658,767

$ 973,576,773

Special Drawing Rights Certificates
Federal Reserve Notes of Other Banks
Other Cash

.
.
.

33,000,000
76,473,234
39,446,403

33,000,000
68,968,775
26,968,862

Loans to Member Banks
Federal Agency Obligations - Bought Outright
U. S. Government Securities:
Bills
Notes
Bonds

.
.
.
.
.
.

193,500,000
98,156,000

38,609,000

2,220,402,000
2,745,605,000
259,158,000

2,400,494,000
2,830,231,000
261 ,605,000

Total U. S. Government Securities

.

5,225,165,000

5,492,330,000

Total Loans and Securities

.

5,516,821,000

5,530,939,000

.
.
.

596,580,121
27,181,035
87,526,594

980,806,076
24,256,207
55,860,563

.

$7,261,687,154

$7,694,376,256

Federal Reserve Notes

.

$4,751,683,430

$4,473,426,148

Deposits:
Member Bank - Reserve Accounts
U. S. Treasurer - General Account
Foreign
Other Deposits

.
.
.
.

1,552,285,985
143,680,513
26,390,000
20,487,802

1,968,530,381
163,751,169
25,200,000
34,049,712

.

1,742,844,300

2,191,531,262

.
.

582,343,838
41,226,086

846,792,417
46,862,629

.

$7,118,097,654

$7,558,612,456

.
.

71,794,750
71,794,750

67,881,900
67,881,900

$7,261,687,154

$7,694,376,256

$

$

Cash Items in Process of Collection
Bank Premises
Other Assets
Total Assets

-0-

LIABILITIES

Total Deposits
Deferred Availability Cash Items
Other Liabilities
Total Liabilities

CAPITAL ACCOUNTS
Capital Paid In
Surplus
Total Liabilities and Capital Accounts
Contingent Liability on Acceptances
Purchased for Foreign Correspondents

12

.

16,289,000

22,941,000

CCMPIlRliCJI CFE"RJlIJllii "JlD
.
.

$ 290,750,352
28,094,398

$ 285,002,026
23,925,582

.

262,655,954

261,076,444

.

229,761
97,522

7,866,249
470,646

.

327,283

8,336,895

.
.

4,716,952
2,917

736,336
96,102

.

4,719,869

832,438

NET DEDUCTIONS
NET ADDITIONS

.
.

4,392,586

Net Earnings before Payments to U. S. Treasury

.

$ 258,263,368

$

268,580,901

Dividends Paid
~
Payments to U. S. Treasury (Interest on F. R. Notes)
Transferred to Surplus

.
.
.

$

$

3,957,512
259,851,139
4,772,250

.

$ 258,263,368

Total Current Earnings
Net Expenses
Current Net Earnings
Additions to Current Net Earnings:
Profit on Sales of U. S. Government Securities (Net)
All Other
Total Additions
Deductions from Current Net Earnings:
Loss on Foreign Exchange Transactions (Net)
All Other
Total Deductions

Total

DISPOSITION

-0-

-0-

7,504,457

4,205,725
250,144,793
3,912,850

$ 268,580,901

OF GROSS EARNINGS

1971

TO U. S. TREASURY
DIVIDENDS
OPERATING
SURPLUS

88.8%
1.4

EXPENSES

8.2
1.6

13

~EDERIlLRESERVE BIlIX DFC VELIlIlD

FEDERAL RESERVE
AGENT

H. A. Shepard

w. H. Hendricks
Senior
Vice President

1. M. Selby
Vice Pres. &
Secretary
I

I
I

I
I

I
I

I

I
R. Van
Valkenburg
Asst. Vice
President
Accounting

Data Services

Operations
Research

Data Systems
Support
Data Processing

Communi-

cations

Check-Day
Noncash
Collection
Mail

Check-Night

D. A. Trubica
Asst. Vice
President
Columbus
R C PC

Fiscal
Credit & Loans
Securities

Cash
Secretary

Building
Emergency
Preparedness
Protection

BOARD OF DIRECTORS
H. A. Shepard, Chairman
1. W. Keener, Deputy Chairman
D. L. Brumback, lr.
1. L. Cushman
R. C. McPherson

E. W. Baker
A. B. Bowden

D. E. Noble
O. A. Singletary

BRANCH

BOARDS

OF DIRECTORS

BRANCH
OPERATIONS
W. H. MacDonald

First Vice

H. W. Huning

Vice President

A. J. Erste
Asst. Vice
President

F. B. Kehres
Chief

General
Services

Bank Supervision

Regulations

Community
Relations

1. J. Erceg
Asst. Vice
President

Bank
Relations

R. G. Coury
Ass t. General
Counsel

M. A. Beekel
Asst. Vice
President

Research
Library

Special
Studies
Vault

Legal

T. J. Callahan
Asst. Vice

D. J. Weitzel
Asst. General

Personnel
Benefits

Auditing
Main Office
& Branches

FEDERAL RESERVE BANK OF CLEVELAND
DIRECTORS
Chairman
HORACE A. SHEPARD
Chairman of the Board and Chief Executive Officer
TRW Inc., Cleveland, Ohio
Deputy Chairman
J. WARD KEENER, Chairman of the Executive Committee
The B. F Goodrich Company, Akron, Ohio
EDWARD W. BARKER
Chairman of the Board
and Chief Executive Officer
First National Bank of Middletown
Middletown, Ohio

DAVID L. BRUMBACK, JR.
President
Van Wert National Bank
Van Wert, Ohio

RENE C. McPHERSON
Chairman of the Board
and Chief Executive Officer
Dana Corporation
Toledo, Ohio

A. BRUCE BOWDEN
Vice Chairman of the Board
Mellon Bank, N. A.
Pittsburgh, Pennsylvania

JOHN L. GUSHMAN
Chairman of the Board
and Chief Executive Officer
Anchor Hocking Corporation
Lancaster, Ohio

DONALD E. NOBLE
President
and Chief Executive Officer
Rubbermaid Incorporated
Wooster, Ohio

OTIS A. SINGLETARY
President
University of Kentucky
Lexington, Kentucky

MEMBER, FEDERAL ADVISORY COUNCIL
CLAIR E. FULTZ, President
Huntington Bancshares Incorporated, Columbus, Ohio

OFFICERS
WILLIS J. WINN, President
WALTER H. MacDONALD, First Vice President
WILLIAM H. HENDRICKS
Senior Vice President

R. THOMAS KING
Vice President

FRED O. KIEL
Senior Vice President

ELFER B. MILLER
General Auditor

JOHN E.' BIRKY
Vice President

THOMAS E. ORMISTON, JR.
Vice President

GEORGE E. BOOTH, JR.
Vice President and Cashier

ROBERT E. SHOWALTER
Vice President

PAUL BREIDENBACH
Vice President and General Counsel

LESTER M. SELBY
Vice President and Secretary

JAMES H. CAMPBELL
Vice President

DONALD G. VINCEL
Vice President

R. JOSEPH GINNANE
Vice President

OSCAR H. BEACH, JR.
Assistant Vice President

WILLIAM J. HOCTER
Vice President and Economist

MARGRET A. BEEKEL
Assistant Vice President and Economist

HARRY W. HUNING
Vice President

THOMAS J. CALLAHAN
Assistant Vice President

FRED S. KELLY
Vice President

GEORGE E. COE
Assistant Vice President

16

PATRICK V. COST
Assistant Vice President
ROBERT G. COURY
Assistant General Counsel
JOHN J. ERCEG
Assistant Vice President
and Economist
ANNE J. ERSTE
Assistant Vice President
FRANK B. KEHRES
Chief Examiner
HAROLD J. SWART
Assistant Vice President
and Assistant Secretary
DAVID A. TRUBICA
Assistant Vice President
ROBERT VAN VALKENBURG
Assistant Vice President
DAVID J. WEITZEL
Assistant General Auditor
VIRGINIA L. WHITMER
Assistant Vice President

CIICIIJlIITI BRill
DIRECTORS

Chairman
GRAHAM E. MARX, President and General Manager
The G. A. Gray Company, Cincinnati, Ohio
PAUL W. CHRISTENSEN, JR.
President
The Cincinnati Gear Company
Cincinnati, Ohio

PHILLIP R. SHRIVER,
President
Miami University
Oxford, Ohio

ROBERT E. HALL
President
The First National Bank
and Trust Company
Troy, Ohio

CLAIR F. VOUGH
Vice President
Office Products Division
IBM Corp.
Lexington, Kentucky

WILLIAM S. ROWE
President
The Fifth Third Bank
Cincinnat, Ohio

E. PAUL WILLIAMS
President
The Second National Bank of Ashland
Ashland, Kentucky
OFFICERS

FREDO.

KIEL

Senior Vice President

ROBERT D. DUGGAN
Vice President and Cashier

DONALD G. BENJAMIN

CHARLES A. CERINO

JERRY S. WILSON

Assistant Vice President

Assistant Vice President

Assistant Vice President

5BUR&H BRRICH
DIRECTORS

Chairman
ROBERT E. KIRBY, President
Westinghouse Electric Corporation, Industry and Defense Company, Pittsburgh, Pennsylvania
ROBINSON F. BARKER
Chairman of the Board and
Chief Executive Officer
PPG Industries, Inc.
Pittsburgh, Pennsyvania

DOUGLAS GRYMES
President
Koppers Company, Inc.
Pittsburgh, Pennsylvania

RICHARD M. CYERT
President
Carnegie-Mellon University
Pittsburgh, Pennsylvania

JERRY A. HALVERSON
President
The First National Bank and Trust
Company of Wheeling
Wheeling, West Virginia

MERLE E. GILLIAND
Chairman of the Board and
Chief Executive Officer
Pittsburgh National Bank
Pittsburgh, Pennsylvania

CHARLES F. WARD
President
Gallatin National Bank
Uniontown, Pennsylvania
OFFICERS

JAMES H. CAMPBELL
Vice President

CHARLES E. HOUPT
Vice President and Cashier

PAUL E. ANDERSON

J. ROBERT AUFDERHEIDE

SAMUEL G. CAMPBELL

Assistant Vice President

Assistant Vice President

Assistant Vice President

COLUMBUS REGIONAL CHECK PROCESSING CENTER
PITTSBURGH BRANCH

CINCINNATI BRANCH

CLEVELAND FEDERAL RESERVE BANK

19

ERRATA
Board of Directors:

E. W. Baker should read E. W. Barker

E. B. Miller, General Auditor, reports directly to the Audit
Review Committee of the Board of Directors.

f

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