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in Review

The 39th

A n n u a l Report

of the President

to Member Banks

Federal Reserve Bank of Chicago

1953

Contents

5

The year in brief

7

The industrial sector — production achievement
meets defense and civilian needs

13

Agriculture — a "soft" spot; there were signs
of stability at year-end

16

A good year for consumers

24

Credit markets and credit policy

28

Midwest banking — a contrast between
large and small centers

32

Bank operations reflect high-level activity

36

Financial statements

39

Directors and Officers

f

The Seventh Federal Reserve District

m
1953 in Review
The y e a r in brief
I n 1953, for the first time since 1948, economic
activity underwent a transition from expansion
to decline. The year was divided rather clearly
into two parts — a gradual rise characterized the
first half and a moderate decline the second. This
change of pace within the year has tended to
overshadow the fact that the year as a whole
took its place at the top of a procession of four
record years.
A listing of the accomplishments of the Amer­
ican economy in 1953 becomes almost a monoto­
nous recitation of new record highs. Over-all the
year witnessed an increase from 1952 of about
5 per cent in total output of goods and services.
Personal income rose by a slightly higher pro­
portion, and virtually all groups excepting the
farmer participated. Moreover, these gains rep­
resent changes in real volume, as the general
level of prices showed great stability.
In the fourth quarter of 1953 total business
volume remained above the year-earlier level,
but factory output was noticeably lower. More­
over, virtually all business categories reported
sales, orders, and inventories in the fourth quar­
ter below peak levels set earlier in the year. Evi­
dence of this generalized slackening of activity
continued to accumulate as the most prosperous
year in history drew to a close.
In the credit sector the cleavage between
trends in the first and second halves was marked.
In the early months of 1953, booming busi­
ness kept credit demands strong. Interest rates
climbed as a result of a substantial rise in con­
sumer and mortgage credit, a large volume of
security issues, and an absence of the usual sea­
sonal decline in business loans. Credit extensions
continued heavy into the second quarter, but in
midsummer the pressure of demand for bor­
rowed funds began to ease noticeably in one
segment after another.

The usual fall upsurge in the demand for
credit was tardy in appearing and lacked the
vigor of earlier years. This change of pace was
striking considering the fact that business activity
had fallen but little from early summer peaks.
Interest rates on virtually all types of borrowings
began to recede after reaching levels well above
those of other recent years.
In the spring, the Federal Reserve System took
steps to ease the supply of funds. Treasury bills
were purchased in May and June, and reserve
requirements of member banks were cut at'mid­
year. In the second half of the year, reserve funds
continued to be supplied in a volume sufficient to
provide for the normal seasonal needs of public
and private borrowers.
Developments in the monetary field reflected
the moderate slowing of business investment
and a slackening toward year-end in credit buy­
ing of consumer durables, particularly automo­
biles. Business inventories began to decline in
the fourth quarter after a substantial rise from
the start of the year, and plant and equipment
expenditures finally reached the crest of a long
climb at about the same time.
The four-year boom, 1949-53, was based
largely upon rising Government expenditures for
defense and rising business outlays for capital
expansion. Both of these factors reached highwater marks last year.
In 1953, for the first time since 1950, Govern­
ment expenditures were lower in the second half
than in the first. Nevertheless, the Federal sector
provided a strong expansive influence for 1953
as a whole. Total cash expenditures rose by over
5 per cent from the previous year, to almost 77
billion dollars. Moreover, for the first time since
World War II, the Treasury spent substantially
more than it took in.
Despite continued high-level activity, easier
5

E x p a n sio n has keynoted economic trends over the past four years

6

money, and a large Federal deficit, it is apparent
that the last half of 1953 saw the beginning of
the second period in the postwar years in which
the resistance of the American economy to
downward pressures would be tested. The first
came in 1948-49 when an “inventory recession,”
concentrated in soft goods, failed to spread de­
spite apprehension that the long-awaited postwar
depression was at hand. In retrospect, it is ap­
parent that the effects of the working down of
inventories in 1949 were offset largely by a con­
tinued strong demand for automobiles and hous­
ing coupled with a substantial rise in Govern­
ment spending and a cut in income taxes.
At the end of 1953, after six months of
gradual decline, personal income was still very
close to the record levels of midyear. Industrial
production, however, had fallen 7 per cent from
the peak, and nonfarm employment was off by
one million. Retail sales were slower in the last
five months and probably failed to equal yearago results in the fourth quarter. Meanwhile,
consumers and business had added another thick
layer of possessions to their eight-year postwar
accumulation. As a result, their immediate
needs for goods of all kinds had been satisfied
so well as to still all talk of shortages.

The picture at year-end was brightened by the
knowledge that tax cuts would go into effect on
January 1. The financial health of business
firms, farmers, and consumers remained excel­
lent. Liquid asset holdings had risen further dur­
ing the year, and an ample supply of loanable
funds was available. Unemployment compensa­
tion and farm price supports were helping to
cushion the moderate downturn in earned in­
come. Finally, prices of goods and services con­
tinued firm in the face of slowing business, an
indication that speculative activity had been re­
strained during the upswing.
A factor of strength hard to evaluate but pres­
ent nonetheless was the reservoir of confidence
in the future. Informed businessmen had been
generally aware at the start of 1953 that the
uptrend was nearing its peak. The eventual rec­
ognition that an adjustment was in process did
not, therefore, surprise policy makers.
Many business executives were proposing ag­
gressive selling campaigns featuring improved
products as an antidote to lagging demand, while
Government spokesmen had indicated that they
saw nothing alarming in the business outlook and
had pledged vigorous use of monetary and other
measures to stabilize the economy.

The in d u strial sector — produ ction a ch ie v em e n t
m eets d efen se a n d civilian needs.
I n mid-1953 an uneasy truce ended three years
of hot war on the Korean peninsula. At about
the same time, the drive to achieve industrial
capacity equal to the task of supplying civilian
needs while meeting defense requirements was
largely realized. With an abundance of goods be­
ing turned out, any lingering fears of continuing
general price inflation gave way to consideration
of the perils of deflation.
New production records were achieved in vir­
tually all basic industries in 1953. Total factory
output exceeded the previous high year by about
8 per cent. In the spring an improvement in raw

material supplies permitted virtually all remain­
ing controls over wages, prices, and materials to
be stripped away. These developments coupled
with the absence of major work stoppages con­
tributed heavily to the swift upward surge of in­
dustrial activity in the first half of 1953, follow­
ing the ending of the steel strike in the late
summer of the previous year. During this period,
total output rose by nearly 20 per cent, and in­
dividual industries such as automobiles and elec­
trical machinery increased by much larger pro­
portions.
In the peak weeks of the spring of 1953, steel
7

Midwest centers lead nation
in growth in checkbook spending
Three-fourths of the Seventh District’s

thirty-two metropolitan areas reported a
1953 increase in checkbook spending which
was greater than the 7.2 per cent national
average. Since more than 90 per cent of all
money transactions are carried out by check,
the dollar amount of charges to checking ac­
counts provides a comprehensive indicator
of changes in over-all activity in local com­
munities.
According to this measure of business ac­
tivity, the region’s chief automobile manu­
facturing centers led the parade in 1953.
In terms of percentage gain in checkbook
spending over 1952, the top five Midwest
metropolitan areas were located in the Mich­
igan automotive complex.
In more diversified cities, the contrast be­
tween 1952 and 1953 levels of activity was
less sharp. Among Illinois and Iowa metro­
politan centers, for example, only Springfield
and Des Moines reported debits increases of
as much as 10 per cent. Smallest increases
appeared in those centers which most directly
serve agricultural areas.
Bank debits, although a very comprehen­
sive measure, are not a perfect indicator of
current local business activity since some
checks are drawn in order to complete out-ofcity transactions or to effect financial opera­
tions such as the purchase of securities or the
transfer of funds. For example, Sioux City
reported the only 1953 decline in debits
among Midwest centers chiefly because of
lower prices paid for cattle sold in its market.
The smaller dollar volume of cattle payments
moving through the banks meant smaller
incomes, but primarily for the cattle growers
rather than the residents of Sioux City.

8

was poured at a rate equal to 120 million tons
per year, passenger cars were assembled at a 7.8
million yearly pace, and television sets were
turned out at a 10 million annual rate. These
production rates were far in excess of consumer
takings in any one year, and it was generally
understood at the time that they would not be
maintained for long.
Heavy output added to inventories at all levels
of business in spite of record sales and caused
many firms to embark upon a policy of liquida­
tion. Attempts to run down inventories were
primarily responsible for the midyear turnabout
in industrial production and the continuing slide
in the second half of the year. The decline was
augmented by order cancellations and a cutback
in new commitments for military goods. In the
fourth quarter, national security expenditures
were running about 4.2 billion dollars per month
compared with a high of 4.6 billion in the second
quarter.
One of the most remarkable aspects of the
gradual downtrend in industrial activity after
the summer of 1953 was its universality. In the
final months of the year, every major manufac­
turing category was operating at lower rates,
seasonally adjusted, than the highs for the year.
Most types of activity had hit top rates by the
end of the second quarter, but for a few lines
such as paper products and crude oil the peak
was reached in the late summer or early fall.
D u ra b le s m a rk d ow nturn in M id w e st

In part, the second-half decline in industrial
production could be explained in terms of the
changing seasonal patterns in such important
Midwest industries as automobiles and farm
machinery. But this was only a part of the story.
The edge of demand for most goods had been
dulled by the addition to the large output in
earlier postwar years of the record first-half vol­
ume. In addition, optimistic production sched­
ules in the early fall in such lines as automobiles,
appliances, and petroleum products resulted in
a further pile-up of stocks.
For the most part, the industries which ex­

perienced the greatest declines in output in the
second half of 1953 were those which had en­
joyed the swiftest rise from the previous year. In
general, these were the durable goods lines —
products which are long lasting and the purchase
of which may be postponed or accelerated as
conditions warrant. Included, in addition to the
major consumer items — automobiles, appli­
ances, and furniture — are the machinery and
equipment purchased by business firms. These
industries characteristically show greater fluctu­
ations than the total of all goods and services.
In the past few years, strong civilian demand
for durables has been supplemented by heavy
dependence of the armed services upon Mid­
west factories for aircraft engines, ordnance,
military vehicles, and other supplies.
The Midwest has a very large share of the
metal-using, hard goods industries. This pre-emi­
nence is built upon a reservoir of skilled work­
men, central locations, and excellent transpor­
tation facilities leading to raw materials and
markets. Although the five states of the Seventh
District include only 16 per cent of the nation’s
population, they account for more than onefourth of U. S. production of durable goods.
Machinery, electrical goods, and transporta­
tion equipment are particularly important cate­
gories of manufacturing employment in the
Midwest. In Indiana, these classes accounted for
over 40 per cent of manufacturing employment
last spring; in Illinois and Wisconsin, it was 50
per cent; in Michigan, almost two-thirds. For
the nation as a whole, employment in these in­
dustries amounted to about 28 per cent of the
total for manufacturing. The region includes
two-thirds of all automotive industry employ­
ment and three-fourths of the farm implement
workers.
Automobiles: During 1953, the important
automobile industry produced 6.1 million pas­
senger cars and 1.2 million trucks — altogether
7.3 million vehicles. This was second only to the
8 million produced in 1950 and was 30 per cent
above the 5.6 million turned out in 1952.
In the first half of 1953, output of passenger
9

cars exceeded the same period in 1952 by 50 per
cent. Moreover, work on military contracts had
expanded substantially with the result that the
automobile cities — Detroit, Lansing, Flint,
South Bend, Kenosha, and certain other centers
— witnessed booming activity. This picture was
altered drastically in the second half as a result
of heavy dealer inventories and cutbacks in de­
fense contracts. In November and December car
output fell to the lowest point since the steel
strike, about 70 per cent of the October rate,
partly as a result of model change-overs.
In the spring of 1953 a number of newly com­
pleted Michigan plants designed for the produc­
tion of tanks and aircraft engines were diverted
to other uses as contracts were scaled down
or transferred to other producers. Produc­
tion of tactical vehicles was declining in the sec­
ond half of the year, and all outstanding con­
tracts were expected to be completed by the
middle of 1954.
Steel: The nation’s steel capacity rose by al­
most 7 million tons in 1953 to over 124 million.
Not all of this capacity was required toward
year-end as operating rates dropped well below
100 per cent. During the year 112 million tons
of steel were produced, well above the 1951
high of 105 million and 20 per cent more than
the 93 million for 1952.
The Chicago area’s share of last year’s pro­
duction tonnage was 20.7 million, more than the
Pittsburgh metropolitan area. Despite gains in
steel capacity, the area surrounding Chicago and
Detroit continues to consume more steel than it
produces. Thus, operating rates in these cities
held closer to capacity than was the case for
older producing areas. In fact, very substantial
projects for increasing steel capacity in the De­
troit area have been announced, mainly for the
production of types of steel used in large volume
by the automotive industry.
Electrical goods: Chicago, Milwaukee, and
Indianapolis along with some smaller Midwest
centers have an important stake in the electrical
goods industry. Until the final months of the
year, these firms continued to expand operations,
10

principally because of heavy defense orders and
the desire to stockpile sufficient television sets for
the fall market. Electronics constitute too vital a
component of modern military equipment to
allow much reduction in demand from that
source, but slow TV sales caused extensive lay­
offs toward year-end. In the year, however, over
7 million TV sets were produced, compared with
6 million in 1952.
Farm machinery: Production of farm imple­
ments in 1953 fell 7 per cent below the previous
year which, in turn, had failed to match record
1951. Production workers in the industry num­
bered only 110,000 in late 1953 — 30,000 less
than a year earlier and 50,000 below the 1951
peak. Defense work and production of civilian
goods in other lines helped maintain employ­
ment of some of the agricultural equipment
producers.
In ve n to rie s turn the corner

It is apparent that gains in output which are
based upon inventory growth can not be main­
tained for long. The rise in inventories continued
into the third quarter, but a fairly rapid liquida­
tion began in the fourth.
October was the first month to register an
over-all drop in business inventories, after a rise
of almost 5 billion dollars from the start of 1953.
By that time most appliance and TV set makers,
automotive and farm implement firms, and other
hard goods producers had been forced to cut
production as a result of accumulations of
stocks.
At year-end, dealers possessed over one-half
million new cars compared with about 300,000
on January 1. Dealers, distributors, and manu­
facturers were reported to have two million TV
sets in stock, almost double the previous year-end
total. In the soft goods lines, apparel stores were
troubled during the fall with bulging stocks re­
sulting from overenthusiastic sales projections
and the effects of warm weather on consumer
buying. Commissions in oil-producing states had
ordered reductions in allowable crude produc­
tion because of large above-ground stocks.

H a r d g o o d s show
largest output gains

ance in short-run business trends. When stocks
are building, demand exceeds purchases by final
users; when liquidation is under way, the reverse
holds true. As production falls, the process may
become cumulative because weekly hours are
reduced, layoffs occur, and consumer income de­
clines. In addition the effects spread quickly to
nonmanufacturing activity. In the fourth quar­
ter, railroads, for example, reported freight carloadings to be running 10 per cent below the
1952 period.
Inventories of hard goods manufacturers at
year-end appeared to be especially burdensome.
Holdings of these firms amounted to 57 per cent
of all manufacturers’ inventories in November
of 1953 compared with 49 per cent in June 1950.
It was in the durables lines also that the new
orders decline was most noticeable.
Department stores in large Midwest cities
ended 1953 with inventories 4 per cent higher
than at the beginning of the year, partly because
December sales did not match the 1952 figure.
Thus sales-stocks ratios declined despite very
cautious ordering throughout the fall. Larger
stocks were particularly marked in the apparel
and furniture departments.
G ro w th in p la n t capacity

From July on, manufacturers’ sales declined
on a seasonally adjusted basis until by November
they were 7 per cent below the spring peak. Al­
though the rate was still higher than in previous
years, an ominous note had been introduced by
the fall slump in new orders which continued to
run 10 per cent below the reduced level of sales
from August through November.
Even firms which did not consider inventories
“too high” in relation to sales were tempted to
reduce their investment in stocks as a result of
growing expectations of price concessions and
the ready availability of supplies. Deliveries had
accelerated to the point that many orders were
ready for shipment ahead of schedule, and firms
which had been buying 60 to 90 days or more
ahead could revert to a 30-day basis.
Inventory movements are of special import­

Expenditures of business firms on new plant
and equipment reached a new record high in
1953 for the fourth successive year. The year’s
28 billion dollar outlay brought the total for the
1950-53 period to 100 billion dollars— almost 43
billion of which was for manufacturing facilities.
Steel ingot capacity rose from 100 to 124 mil­
lion tons during this period and surpassed the
original goals set in 1950 when the enlarged de­
fense program was launched. Petroleum product
capacity increased by over 20 per cent, and
electric power capacity rose to 90 million kilo­
watts from 66 million in 1950. Virtually all
other producers of raw materials reported sub­
stantial gains.
Most industries were slowing capital outlays
in the fourth quarter of 1953, thus ending the
continuous upward sweep since 1950, and sur11

O rd e r b a c k lo g s declined as sales
of durable goods producers
outran new business
billion dollar*

billion dollars

veys indicated a moderately reduced level of
capital outlays for the early months of 1954.
Construction contract awards for commercial
and manufacturing buildings in the Midwest
were at a high level in the second half of 1953,
and public utility and commercial expenditures,
buoyed up principally by electric power and new
shopping centers, appeared likely to expand
further. But the much larger segments — manu­
facturing, mining, and transportation — doubt­
less had passed their peaks.
Unfilled orders for various types of capital
equipment had largely melted away by year-end.
Machine tool backlogs which amounted to 23
months of sales at their peak in 1951 were down
to less than six months. New orders for machin­
ery of all types fell by one-third between April
and November. Almost 70,000 freight cars had
been on order early in 1953, but by October this
figure had been worked down to 31,000.
Prices ste a d y , p rofit m a rg in s n a rro w

Throughout 1953, the general level of
prices showed continued stability despite pro­
nounced movements in other measures of eco­
nomic change. There were, of course, declines
12

in some sectors which were offset by increases
elsewhere, but sharp changes were relatively
rare. Only a few significant price increases
were posted after the ending of controls in the
spring of 1953, indicating the degree to which
supplies had improved relative to demand.
Average wholesale prices closed the year at
almost exactly the same level as at the start,
although there were diverse trends within the
aggregate. Farm products had slipped about 6
per cent, while most manufactured goods had
risen slightly under the influence of high-level
demand and the steady push of rising labor
costs. By the fall of 1953, prices received by
farmers were back to the pre-Korea level
and were showing signs of stability due in part
to the effects of Government programs on sup­
ported commodities.
Consumer prices were slightly higher than in
1952, but the over-all picture continued to be
one of stability as in the past two years. Food
costs were down a little, but rents increased
substantially in areas such as Detroit and Chi­
cago which were recently decontrolled.
Prices of manufactured goods did not
weaken appreciably in the fall despite overample supplies of many items. Raw materials

The price level showed great
stability through the year
per cent, 1 9 4 7 - 4 9 * 1 0 0

for industrial use which had spurted so sharply
after the beginning of the Korean war were
substantially deflated before 1953 began, al­
though steel scrap, natural rubber, and most
nonferrous metals experienced substantial de­
clines during the year.
Some reduction in production costs were
realized as 1953 drew to a close. Some firms
were benefiting from the cessation of pur­
chases of premium-priced foreign or “conver­
sion” steel. Others were able to withdraw aged,
high-cost equipment from use as orders de­

clined. Unit costs in most manufacturing lines
were reduced as a result of less overtime and
the elimination of marginal workers.
Profit margins were already narrowing in the
third quarter either because of price conces­
sions or, more often, reductions in volume.
Nevertheless, corporate profits before taxes
for 1953 were estimated to have been close to
the record total of 43.7 billion dollars in 1951
which was about 10 per cent above the 1952
figure. After taxes, profits of almost 20 billion
dollars were not far from record totals.

A gricu ltu re — a " s o f t " spot, but there w e re sig n s
o f sta b ility a t y e a r-e n d
W hile most segments of the economy continued
to set new records well into the year, agriculture
was experiencing further downward adjustments
in prices and income following the peaks
reached in 1951. At the close of the year, farm
product prices were off 6 per cent from a year
earlier, and large supplies continued to weigh
heavily on commodity markets.

Many farmers had reduced their spending for
machinery and new buildings from the high
levels of other recent years. Land values, which
had turned down about mid-1952, continued a
slow steady decline throughout 1953, and the
value of cattle on farms had declined sharply.
Despite reduced capital expenditures and a
shrinkage in value of land and some other assets,
farm debts showed a further moderate increase.
Thus, the financial position of agriculture deteri­
orated somewhat in 1953, but still remained
generally strong at year-end. Farm product
prices had dropped to 90 per cent of parity for
the first time since 1940. Farmers’ realized net
income, about 12.5 billion dollars, was 15 per
cent below the 1951 peak and approximated the
1945 and 1950 levels.
The downtrend in prices came to an end, at
least temporarily, in the closing months of the
year and gave rise to hopeful suggestions that

the readjustment of agriculture to a “peacetime”
economy had been largely completed. But with
over 5 billion dollars of agricultural commodi­
ties owned by the Commodity Credit Corpora­
tion or under price support loans, agriculture
geared to a large volume of production, foreign
markets showing only very limited signs of re­
covery, and some indications that domestic de­
mand might weaken, there was still considerable
concern in many rural communities.
M id w e st in fa v o re d position

The adjustments taking place in agriculture,
however, promised to be less severe in the Mid­
west than in a number of other areas. The rural
economy of this region is oriented primarily to
the production of livestock commodities which,
for the most part, are sold on the domestic mar­
ket. The key factor, therefore, is the buying
power of American consumers, and this had re­
mained strong throughout the postwar years.
The nation’s farmers grossed about 30 billion
dollars from sales of farm products in 1953, 7
per cent less than in the previous year. Both
crops and livestock provided less income than
in 1952. Midwest farmers fared relatively a little
better. Grossing nearly 6.9 billion, they came
within 5 per cent of equaling their previous
13

Prices of most Midwest
farm commodities moved to
lower levels in 1953

year’s sales. Their share of the national total,
nearly 23 per cent, showed a modest increase
over that of the previous year. This relatively
favorable showing occurred despite the heavy
decline in prices of cattle, which are second only
to hogs as a source of farm income in the Dis­
trict.
A further favorable factor in District agricul­
ture, as compared with several other areas last
year, was the weather. Whereas drouth visited a
number of important agricultural regions during
the growing season, it did not call on the Mid­
west until most crops were ready for harvest.
A djustm ent in cattle

The nation’s total output of agricultural com­
modities in 1953 was maintained at the record
rate set in the previous year — about 45 per cent
above the prewar, 1935-39, average. In the Mid­
west, however, total production was slightly
smaller than in the preceding year.
14

The major source of adjustment in Midwest
agriculture in 1953 was in the cattle business.
Farmers and ranchers marketed cattle in record
volume. Total slaughter was large enough to
bring to a halt the rapid build-up in herds which
had been under way since 1949. With about
one-fourth more cattle slaughtered than in 1952,
prices were down sharply. And as prices of
slaughter stock slipped, expected profits from
cattle feeding evaporated, and losses were
chalked up by many farmers on this phase of
their business.
Illinois cattle feeders, for example, recovered
less than half of the value of feed used in their
1952- 53 cattle-feeding activities. Normally farm­
ers must have a return of about $1.20 for each
dollar of feed if all costs are to be covered. As a
result of losses experienced in the past two years,
farmers have purchased fewer cattle for the
1953- 54 feeding season. The number on feed at
year-end was down 9 per cent from a year earlier
in the nation and 15 per cent in Iowa—the lead­
ing state.
Hogs, the major source of farm income in Illi­
nois, Indiana, and Iowa, provide a different
story. Prices averaged well above the 1952 level
and, although the number raised was down
about 10 per cent from the previous year, in­
come from sales of hogs increased. Under the
stimulus of high prices, farmers were expanding
hog production at year-end.
Another bright spot in the picture was pro­
vided by poultry and eggs. Prices of these com­
modities generally ranged about equal to or
above year-ago levels and, with lower feed costs,
returns were generally favorable. Eggs and
chickens were produced in record volume, but
the turkey crop was smaller than in the previous
year.
Milk production was increased moderately
as farmers added to their dairy herds, but since
prices averaged well below 1952, income from
dairy products declined.
Crops usually provide less than one-third of
farmers’ cash receipts in District sales and gen­
erally were sold at lower prices than in the

previous year. A large volume of marketings,
including part of the previous year’s large har­
vests, was instrumental in maintaining receipts
at about the 1952 level.
Production of crops in District states is im­
portant primarily as a source of raw materials
for the livestock industry. In this respect, of
course, corn is king. Although grown on nearly
every District farm, corn provides cash income
on less than 30 per cent of them. Its relative un­
importance as a cash crop, nevertheless, does not
diminish its significance to the area.
The 1953 harvest totaled 3,177 million bush­
els and was moderately smaller than in the
previous year. But with fewer hogs and cattle
being fed, part of the crop will be placed under
CCC price support loan. The Commodity Credit
Corporation owned or had under loan more
than half a billion bushels at the end of Novem­
ber, and stocks continued to accumulate.
The soybean and wheat harvests, although
making “good” yields, nevertheless turned in a
smaller total volume than in the previous year.
Here again, however, stocks are large, prices are
off, and the price support program is playing an
important role.

C a sh receipts from farm
marketings dropped below the 1952
level in all District states

Agricultural exports in 1952-53 were off
nearly one-third from the record volume of the
previous year, wheat and cotton bearing the
brunt of the decline. In part, the sharp drop in
exports was due to good crops throughout the
world’s major producing areas. The abundance
of supply erased concern about inventories for
future needs, with the result that there was a
willingness to draw down previously accumu­
lated stocks in some parts of the world. The
sharp drop in U. S. exports reflected also the
high level of domestic price supports which
tended to price our commodities out of world
markets.
Although exports do not account for a large
part of District agricultural commodities, except
for soybeans and lard, and to a lesser extent,
corn, Midwest agriculture feels repercussions
from any contraction in demand for commodi­
ties produced in other areas. This may be ex­
pected to show with even greater force as wheat
and cotton acreages are cut back and land in
others areas is diverted to soybeans, feed crops,
and livestock.
Land v a lu e s slip

After moving up about 25 per cent from mid1950 to mid-1951, under the speculative upsurge
associated with Korea, land values held about
steady until mid-1952, when a decline began
which continued through 1953.
M id -1 9 5 0
to
Korea p e a k

billion dollars

Korea p ea k
to
N ovem b er 1953

Illinois ..................
In d ia n a ................
I o w a . . . . ...............
M ic h ig a n ...............
W isconsin .............

(per cent change)
+32
— 8
—f—33
— 7
+25
— 8
4 “2 5
— 3
— 7

U. S .......................

+27

— 6

The descent thus far has been rather gentle.
While there is no indication that land values will
decline as rapidly as they advanced in the initial
part of the recent upsurge, there is every indica­
tion that the direction of movement will continue
downward at least until the decline in farm
15

product prices and income has run its course.
Farm m ortgage debt continued its postwar
uptrend in 1953 and, along with developments in
credit markets generally, is carrying a somewhat
higher interest rate than in other recent years.
Although real estate transactions typically in­
volved more credit relative to sales value in 1953
than at any time in the postwar period, the farm
mortgage debt situation continues generally
favorable. Total mortgage debt is still at a low
level relative to either land values or the current
level of farm income and even in drouth-affected
areas continues to be serviced with only very
few delinquencies. Farm mortgage foreclosures
remain almost nonexistent across the country­
side.
Reflecting the heavy load of short-term in­
debtedness which some farmers had accumu­
lated in recent years, there was a nominal volume
of refinancing of short-term debts into longerterm farm mortgage debt in 1953. This barom­

eter of financial stringency in agriculture, how­
ever, gave no positive storm warning in Corn
Belt states.
Short-term debts of farmers declined moder­
ately over the past year. The decline reflected
primarily the trend of cattle prices and the vol­
ume of feeder cattle purchased in areas where
cattle feeding is an important activity. Iowa and
Illinois farmers, for example, reduced their
short-term bank borrowings about 27 and 23 per
cent, respectively. A related factor, no doubt,
was the reduction in purchases of new farm ma­
chinery in 1953. In other Midwest states, how­
ever, where cattle feeding is less important,
farmers are using about the same amount of
short-term credit as a year ago. Delinquencies on
short-term farm loans have increased somewhat,
as indicated by a rise in the number of renewals
and extensions. The financial position of farm­
ers, nevertheless, remained generally strong at
year-end.

A g o o d y e a r fo r co n su m ers
Wages and salaries rose by about 8 per cent
nationally between 1952 and 1953, a consider­
ably larger relative gain than that shown by
other types of personal income. The decline in
farmers’ net income offset to a large extent
higher returns from dividends, unincorporated
businesses and other nonwage sources.
The largest income rise was posted by man­
ufacturing workers because of a 5 per cent
increase in average weekly earnings and a
similar rise in the number of workers employed.
Mainly, these increases were concentrated in
the durable goods lines. As a result most Mid­
west cities enjoyed an even larger year-to-year
income gain than did the nation as a whole.
Employment joined the long list of new rec­
ords. Unemployment, moreover, averaged the
lowest in the entire postwar period. But the situ­
ation was changing rapidly at year-end.
In September and October, unemployment
16

was estimated nationally at only 1.2 million in
spite of the widely held belief that 2 million
represented a virtually irreducible peacetime
minimum. In December, however, the number
had jumped to 1.9 million despite increased
seasonal hirings by trade and service firms.
Unemployment compensation claims dropped
to a low ebb in June, but a substantial rise oc­
curred in the second half. District states reported
insured unemployment to be up more sharply
than was the case for the nation as a whole.
D ecem ber 27, Ju ne 27, Decem ber 26,
195 2
1953
1953
(In thousands)
United States
Illinois
In d ia n a
Iow a
M ic h ig a n
W isconsin

1,005
43
16
5
26
14

S O U R C E : U. S. Departm ent of Labor.

852
53
16
4
20
10

1,711
92
47
15
93
42

In August manufacturing employment in the
nation stood at a peacetime high of 17.3 million.
By December this number had fallen over 5 per
cent, and layoffs continued. During this period
manufacturing wages and salaries dropped by
almost 6 per cent.
The increase in unemployment in the late
months of 1953 was largely confined to un­
skilled factory workers in durable goods indus­
tries, but some skills formerly in short supply
were no longer so classified. In most centers,
even those in which layoffs were important,
office workers continued to be hard to recruit.
Midwest centers had been among the tightest
labor markets in the nation in the first half of
1953, but this position was relinquished as the
year wore on. Manufacturing employment in
durable goods lines was particularly strong.
Michigan cities recorded the greatest gains from
1952, as manufacturing employment in that
state rose by over 16 per cent in the spring
over the same months in 1952 when allocations
had cut auto output.
By September, Detroit reported one of the
highest unemployment rates in the nation. The
number of jobless had moved up from 20,000
in the spring to 75,000 in the fall — about 5
per cent of the labor force. There was no fur­
ther rise to year-end, however.
Cities specializing in farm machinery such
as the Davenport — Rock Island — Moline
area and Racine, together with some smaller
centers, encountered rising rates of unemploy­
ment as production was cut back to reduce
swollen inventories.
M ilwaukee m anufacturing employment
dropped to 10,000 below the year-ago figure in
November and unemployment rose from 6,000
to 16,000. The dependence of this city on capital
goods industries and motor vehicles caused ap­
preciable loosening of the labor market after
the summer peak in jobs.
Chicago, because of its diversified indus­
tries, remained one of the tightest major labor
markets in the country. Even in Chicago, how­
ever, there was a general, if moderate, softening

at the end of 1953. Unemployment compensa­
tion and relief claims moved up as layoffs
occurred in farm machinery, television, and
other hard goods lines.
Indianapolis, like Chicago, continued to ex­
perience an active demand for workers. Manu­
facturing employment in November equaled the
year-ago figure.
Unemployment totals remained lower than
might have been indicated by reports of fac­
tory output cutbacks. Some of those laid off
found jobs readily in fields which had been
understaffed. Of considerable importance also
in mitigating unemployment was the shorten­
ing of work weeks in manufacturing.
The average week nationally declined to
about 40 hours from 41 hours earlier in the
year. The result was that average weekly earn­
ings in the fall were the lowest for the year
despite a continuing rise in basic wage rates.
“Overtime” which had added significantly to
factory workers’ take-home pay was rapidly dis­
appearing. In Midwest states the amount of
overtime work had been greater than in the
nation generally. The work week had averaged
42 hours; consequently, the reduction to 40
hours or less had a proportionately greater im­
pact on take-home pay.
A u tos pace retail trade

The volume of retail trade in most lines and
in virtually all District centers broke all rec­
ords last year. Nationally, total retail sales
topped the 1952 volume by 4 per cent. Reasons
for this are not hard to find. Consumer income
was substantially higher than in 1952, prices
were relatively stable, and the selection of all
kinds of merchandise was the widest ever.
Although new sales records were common
last year, gains from 1952 were generally
modest in both soft goods and durable lines.
Automobile dealers, whose sales volume rose
sharply on the crest of a spectacular increase
in new car purchases, were the main exception
to this pattern. Nationally, 1953 sales and the
per cent change from the previous year for
17

selected kinds of retail stores were as follows:
1953
(billion d ollars)
A utom otive g ro u p
G a so lin e stations
Food g ro u p
H om efu rnishings stores
G e n e ra l m erchandise
stores
D ru g stores
Lum ber a n d h a rd w a re g ro u p
A p p a re l stores

33.5
10.5
40.9
9.1
19.0
4.8
13.5
10.3

Perce nt
ch an ge
+ 1 8 .2
+ 5 .7
+ 2 .8
+ 1.9
+
+
—
—

1.5
1.4
1.5
3.0

Sales of general merchandise did moderately
better in most District centers than in the na­
tion, reflecting the generally larger increases in
employment and income in the Midwest last
year. Judging from department store volume,
however, changes in sales varied substantially
among individual centers (see chart). Led by
the 18 per cent larger volume in Flint, Mich­
igan cities showed by far the largest year-toyear sales gains. Seven of the ten largest
increases in the District occurred in Michigan
centers. Sharp increases in wage and salary in­
come, resulting from the upsurge in auto out­
put, obviously were responsible for this
favorable showing.
Other cities showing larger than average
gains in department store trade were Fort
Wayne, South Bend, and Indianapolis — all
heavily industrialized centers. Despite substan­
tially higher personal income payments, sales
volume in the Chicago and Milwaukee areas
increased only slightly in 1953. The continued
trend toward suburban shopping and aggres­
sive competition from specialty stores, how­
ever, may have adversely affected department
store trade in these and other major metropol­
itan areas.
In most Iowa cities, department store sales
were no better than in 1952, reflecting the
decline in farm incomes and the relatively
greater dependence of these areas upon agricul­
ture. Manufacturing layoffs and uncertainties
concerning the job outlook contributed to a 4
per cent decline in the Quad Cities area—where
industrial activity is heavily concentrated in pro­
18

duction of farm machinery and equipment.
Automobile sales jumped sharply in all
areas last year, however, and this probably ex­
plains the modest advance in general mer­
chandise sales relative to personal income.
Nationally, new car registrations from January
through November ran 42 per cent ahead of
the same period in 1952. For the year they
totaled about 5.8 million units, second only to
the 6.3 million new cars purchased in 1950.
Unit sales of used cars were also well ahead
of 1952, but because of sharply lower prices,
dollar volume was probably about the same
as in the previous year. Despite the lagging
used car volume, the gain in sales of automobile
dealers nationally accounted for about threefourths of the rise in total retail sales last year.
Thus, much of the increase in consumer buying
power was channeled into the automobile mar­
ket rather than the general merchandise lines.
The upsurge in new car purchases in most
District centers was even sharper than in the
nation generally. All metropolitan areas showed
substantial gains, and in three-fourths of the
District cities the percentage increase was
larger than the national average (see chart).
The pattern of relative changes less clearly
distinguishes between the different types of cen­
ters than was the case with department store
sales. In part this results from the fact that
the percentage gains in all but four of the
areas fell within a rather narrow range — from
40 to 55 per cent.
The uniformity of gains in new car registra­
tions in all areas points up the fact that sales
were limited because of inadequate supplies in
1952. Nevertheless, the expansion last year
represented considerably more than a recovery
from the artificially depressed level of the pre­
vious year. Nationally, new car registrations
in 1953 were about one-eighth larger than in
1951 — when new cars were generally in good
supply — and all District centers except South
Bend, Racine, Waterloo, and Cedar Rapids
showed sizable increases from the 1951 unit
volume. Substantially higher incomes, the ab-

R e ta il sa le s topped previous year
Department stores showed gains
in most District cities

New car registrations increased
sharply in all metropolitan areas

0

-5
I-

Flint

Flint

Fort Wayne

Fort Wayne

Jackson

Grand Rapids

Lansing

per cent increase, jonuory-november 1953 from 1952
10
20
30
40
50

60

Saginaw
Indianapolis
Detroit
Quad Cities

Kalamazoo
Lansing
Saginaw
Grand Rapids
South Bend
South Bend
Detroit
Peoria
Indianapolis
Jackson
Rockford
Des Moines
Seventh District
Chicago
Sioux City
Sioux City
Peoria
United States

Rockford
Terre Haute

Terre Haute

Milwaukee

Chicago

Kalamazoo

Milwaukee

United States

Cedar Rapids

Rocine

Des Moines

Cedar Rapids

Waterloo

Madison

Madison

Waterloo
Springfield

Quad Cities

SO URCE: R. L. Polk & Com pany

19

sence of Federal restrictions on credit terms,
and the intervening year of relatively light pur­
chases contributed to this increased level of
sales. In addition, many dealers, hard pressed
to move mounting stocks of cars, turned to in­
creasingly aggresive sales techniques and at­
tractive trade-in allowances or cash discounts
as the year progressed.
In sta lm e n t d ebt continues to m ount

Extension of credit plays an important part
in the sale of most consumer durable goods.
Well over half the new cars, two-thirds of the
used cars, and a major share of the furniture,
“big ticket” appliances, and television sets
bought in 1952 were financed in part through
the use of credit. Therefore, considering the
sharp rise in new car sales and the moderate
increase in sales of most other types of dur­
able goods which occurred last year, it is not
surprising that total consumer instalment debt
continued to mount.
By the end of 1953, consumer instalment
debt totaled about 22 billion dollars. This was
more than 3 billion dollars larger than a year
earlier, and about 7 billion greater than at
the time Regulation W was suspended in May
1952. The increase in 1953 was considerably
smaller than in the previous year, however,
despite the greater dollar volume of durable
goods sales. Although automobile credit ex­
panded more than in 1952, the growth in all
other types of instalment debt was smaller (see
chart). Moreover, the increase in debt during
the second half of 1953 was sharply lower
than during the first half and amounted to
only a third of the gain in the same period a
year earlier.
In part, the slower rate of growth in re­
cent months reflects a falling off in the use of
credit in financing purchases of durable goods.
In the latter part of 1953, credit extended on
consumer durables other than cars was an
eighth lower than a year earlier, although total
sales of such goods were maintained at about
the same level. Automobile credit extensions
20

in the July-November period were 5 per cent
greater than in the same months of 1952. Since
sales of automobile dealers jumped 22 per cent
in the same period, it is clear that a smaller
proportion of consumer expenditures for cars
involved credit. Stiffer credit standards on the
part of many lenders may have played a part
in this development.
Equally important in the smaller credit ex­
pansion since midsummer has been the rising
trend in the volume of repayments. During the
fall, repayments were running 12 per cent
larger than a year earlier on automobile debt
and 8 per cent higher on debt incurred for the
purchase of other consumer goods. Reasons
for the rise in repayments are twofold. First,
monthly servicing charges on instalment con­
tracts have expanded with the rapid growth in
total indebtedness since the spring of 1952.
Second, the marked relaxation of credit terms
which occurred following the suspension of
Regulation W has extended the length of time
before final repayments are made on contracts
written since then.
Based upon instalment contracts written in
the past, repayment volume changes more
slowly than does the volume of new credit ex-

In sta lm e n t d e b t on automobiles
expanded more last year than in 1952

tensions. Thus, the level of repayments has
lagged behind new credit extensions during the
past period of rapidly rising indebtedness but,
by the same token, would continue in heavy
volume for some time after new credit exten­
sions have fallen off. The main economic sig­
nificance of this is that credit provides
additional purchasing power to consumers —
mainly for purchase of durable goods — while
indebtedness is rising, but diverts a portion of
current income to contractual repayments when
indebtedness turns downward.

H o m e -b u ild in g a c tiv ity varies
widely, but most District centers
gain over 1952
-3 0

per cent change in number of permits issued,
january-november, 1953 from 1952
-2 0
-1 0
0
+10
+20

+30

L an sin g

F lin t *

Grand R a p id s*

Chicago

H om e b u ild in g h old s in h ig h volu m e
Des Moines'*

Residential construction continued at a fast
pace in most communities last year. Nationally,
work was begun on 1.1 million new dwellings
— the fifth consecutive year in which housing
starts exceeded the million mark. The 1953
total was 25,000 units less than in the pre­
vious year due to a sharp drop in public
housing. Private starts numbered about the
same as in the year before, and expenditures
for private residential construction, at 11.9
billion dollars, were 7 per cent higher than in
1952.
Changes in the volume of private home
building, as evidenced by the number of resi­
dential building permits issued, varied widely
among District centers. In 11 of 20 Midwest
metropolitan areas, housing starts increased
substantially last year. These included all but
one of the reporting Michigan cities and the
major District centers — Chicago, Detroit,
Milwaukee, Indianapolis, and Des Moines. In
Kenosha and the Quad Cities area, on the other
hand, home-building activity dropped sharply
as local employment conditions worsened dur­
ing the year. Starts in four other areas were
also down moderately, while little change oc­
curred in Fort Wayne, South Bend, and Sag­
inaw.
Significant differences in the pace of build­
ing among areas are to be expected, since both
the demand for and supply of housing are es­
sentially local in character. Moreover, the long

Detroit

Indianapolis

Kalam azoo*

Milwaukee

Green B a y *

Cedar R a p id s *

Fort Wayne*

South Bend

United S ta te s (private housing starts)

S a gin a w *

Kenosha*
^Exclude s som e o u tly in g p la ce s in the m etropolitan a re a for
w h ic h b u ild in g perm it d a ta a re not a v a ila b le .

21

useful life of most types of housing means
that new building in any one year is a relatively
minor proportion of the total housing supply.
Thus, small changes in the demand for housing
may result in large fluctuations in new con­
struction.
The fast pace of business activity obviously
contributed to and was an essential ingredient
in the favorable showing of home building in
most District centers last year. In addition,
however, construction activity is influenced by
a variety of other local factors, such as inmigration of families, the level of building in
earlier years, and the character, location, and
condition of the area’s housing inventory.
Thus, although the population of the Chi­
cago metropolitan area is nearly twice that of
the Detroit area, housing starts in the two
centers have been about equal during the post­
war years. In large part, this reflects the much
heavier in-migration of workers to the Mich­
igan city. On the other hand, Chicago has been
one of the strongest major housing markets in
the nation in the past year, as the demand for
new and better housing on the part of its
resident population continued strong. In ad­
dition to the relatively small proportion of new
housing added since the War, recent strength
in the Chicago market reflects the movement
from congested areas to the suburbs and from
rental to purchased dwellings, as well as the
older character of its existing housing inven­
tory.
M ortgage credit: It seems clear that the
marked relaxation of credit terms on new
housing, which followed the suspension of Reg­
ulation X and comparable restrictions on VAand FHA-insured loans in September 1952,
contributed importantly to the maintenance of
a large volume of home building last year.
Down payment requirements were generally
reduced appreciably for both conventional and
insured loans, and secondary borrowing to
finance down payments was again permitted.
At a later date, in the spring of 1953, contract
maturities on Federally-aided loans were ex­
22

tended from 20 to 25 and in some cases to
30 years. As a result, the number of prospec­
tive buyers entering the market for new houses
increased.
Reflecting the rise in interest rates on all
types of investments, most lenders increased
rates on conventional mortgages in late 1952
or early 1953, generally by Vi -Vi per cent.
Many lenders also took the opportunity af­
forded by the plethora of investment outlets
to tighten credit standards on mortgage loans.
More rigorous tests regarding both the finan­
cial capacity of prospective borrowers and the
character of property offered as collateral were
commonly adopted.
As interest rates advanced, fixed rate FHA
and VA loans became progressively less at­
tractive to lenders as compared with conven­
tional mortgages and other investment outlets.
Consequently, the proportion of total new hous­
ing starts financed with these types of mort­
gages dropped steadily through the winter and
spring. Moreover, many project builders com­
plained that commitments for future FHA and
VA loans on proposed construction had be­
come difficult to obtain, even at substantial
discounts from face value of the mortgages.
In May, interest rates were increased Vi per
cent on the 4 per cent VA loans and 14 per
cent on the 414 per cent FHA loans. The pro­
portion of housing starts financed with in­
sured loans promptly increased to about its
earlier level, although such loans are reported
to have continued to sell at discounts through
most of the year.
Beginning in early fall, mortgage funds be­
came easier to obtain in most District centers.
The principal factors accounting for this
change have been a continuing heavy inflow
of savings to financial institutions, a moderate
falling off in the volume of mortgage loan
closings, and a decline in the amounts of cor­
porate and municipal security flotations. In­
terest rates on corporate, municipal, and Gov­
ernment securities have declined moderately,
while mortgage rates have remained at the

higher level established early in the year. Thus,
at year-end, the increased attractiveness of
mortgage yields and the reduced demand for
credit generally pointed to prospects for an
ample supply of mortgage funds to meet the
needs of Midwest home builders and buyers.
S a v in g s g ro w th accelerated

Despite higher retail sales and moderately
larger expenditures for new housing, individuals
added considerably more to their savings bal­
ances last year than in 1952 or any other postwar
year. Savings accounts in Seventh District mem­
ber banks and in insured savings and loan associ­
ations in the five-state area increased by over
900 million dollars in the first 11 months of
1953, 11 per cent more than in the same period
of the preceding year. The gain was larger than
in 1952 in every District state, with Iowa show­
ing the largest and Illinois the smallest increase
relative to total balances.
As in the nation, however, additions to share
account holdings bulked larger than time deposit

gains. In fact, the inflow of savings to insured
associations in this region increased by nearly
one-fourth, while time deposits of member banks
grew moderately less than in the previous year.
The greater success of savings and loan associa­
tions in attracting new savings is vividly illus­
trated in Chicago, where insured associations,
holding only two-thirds as much in savings bal­
ances as do banks, experienced a savings inflow
twice as great.
N et sa vings inflow
Per cent
1952
1953 ch an ge

A ll C h ic a g o Banks
C o o k C ou n ty insured
sa vin gs a n d loans

(m illion dollars)
130
110
— 15
200

243

+22

Nationally, net new savings in the form of time
deposits at commercial and mutual savings
banks, savings and loan association share ac­
counts, and G overnm ent security holdings
amounted to about 10 billion dollars last year,
up from 7.7 billion in 1952. In addition, equities
in life insurance policies increased about 4 bil­
lion dollars, m oderate
additions were made to
holdings of currency
S a v in g s g r o w th exceeded earlier years in 1953
and demand deposits,
and a near-record vol­
ume of corporate and
municipal securities was
purchased by individu­
als, pension funds, and
nonprofit institutions.
All major types of fi­
nancial institutions ex­
perienced a larger sav­
ings inflow than in ear­
lier years (see chart).
By far the most striking
change in trend, how­
ever, occurred in Gov­
ernment security hold­
ings. Individuals in­
creased their holdings
by about 1.7 billion dol­
commercial bank
mutual savings
savings and loan
government
time deposits
bank deposits
share accounts
securities
lars, the first sizable gain
23

S a v in g s accou nt h o ld in g s increased
more in 1953 than in the previous year
N et increase
first 11 months of
1 952
1953
Illinois

Estimated
total h o ld in gs
Decem ber 1953

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

343

383

4,800

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

222

243

2,720

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

112

127

1,370

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

107

113

1,250

Iow a ......................

43

54

530

827

920

10,670

365

347

6,830

462

573

3,8 4 0

M ic h ig a n
In d ia n a
W isconsin
Total:

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

M e m b e r b an k s . . .
Insured sa v in g s a n d
loan associations

Note: S a v in g s a ccount h o ld in g s includ e tim e d e p o sits o f S e v ­
enth District m em ber b a n k s a n d sh are a ccounts o f insured
s a v in g s a n d lo a n a ssociatio n s.

since 1949. In part the expansion resulted from
an improvement in the savings bond program.
In the E and H bonds, sales volume increased
substantially more than redemptions last year,
reflecting greater participation in the payroll
savings plan, increased limits on the maximum
purchase permitted in any one year, and the in­
troduction of moderately higher yields in mid1952.
Individuals reduced their holdings of F and
G bonds again in 1953 as large blocks purchased
during the War reached maturity. Most of these
bonds were held by large investors, however, and
it seems probable that much of the proceeds have
been reinvested in marketable Government se­
curities— especially the new 314 per cent 30year bond issued last spring. Substantially higher

yields and increased uncertainty concerning the
future course of stock prices also may have con­
tributed to a sharp gain in individual holdings of
marketables during the year.
By the end of 1953, personal holdings of
liquid assets in the form of demand deposits,
time deposits, share accounts, and Government
securities totaled in excess of 200 billion dollars.
This is four times the amount of such balances
in 1939 and one-third larger than in 1946.
Many regard these tremendous liquid asset
balances as a potential source of purchasing
power which can be tapped to help sustain re­
tail sales volume if personal incomes decline.
While there is no question but that such holdings
strengthen the over-all financial position of con­
sumers, their influence in supporting current
levels of expenditure may be exaggerated.
In the first place, liquid asset balances are
highly concentrated. Over 90 per cent of all such
liquid assets were held by the top 30 per cent of
the nation’s spending units at the beginning of
1953, according to findings of the Survey of
Consumer Finances. Second, relatively few of
the workers most likely to suffer loss of their jobs
or significant reductions in weekly pay during
any business downturn hold sizable liquid asset
balances. Only about one-fifth of the unskilled
and service workers and one-third of all skilled
and semiskilled workers reported holdings
amounting to $500 or more in early 1953. Fi­
nally, uncertainties as to job security probably
would lead many families to strive to reduce
spending and add to their savings in periods of
business recession.

C red it m a rk e ts a n d credit p o licy
T he vast flows of savings into 1953’s finan­

cial markets were matched by equally striking
totals of demands for investible funds. State and
municipal authorities floated the largest volume
of new offerings on record, up more than onethird from 1952. Well over one billion of the 5.5
24

billion total was in the form of revenue bonds
to finance toll road and toll bridge construction.
Corporate security issues for new money climbed
to a figure challenging the peak total of 1952.
A halving of new offerings by manufacturers
and railroads was nearly offset by moderate in­

creases in commercial, communication, and
utilities issues and a trebling of offerings by
financial concerns desirous of bolstering work­
ing capital positions.
The Federal Government, too, was making
heavy net demands. The Treasury in 1953 initi­
ated more new cash offerings than at any time
since the days of World War II finance. Un­
avoidable borrowing needs were created by the
smaller than expected volume of receipts in the
first half of 1953 and by the 8.1 billion seasonal
deficit that materialized as anticipated in the
fall. Such borrowing took on increased signifi­
cance under the Treasury policy of lengthening
the maturity of its debt whenever such action
seemed practicable.
Added to all the above demands for longerterm funds was the total of residential mortgage
requests that flowed into lending institutions
without interruption as the year progressed. Indi­
vidual demands also impinged upon the shorterterm credit market in the form of applications
for instalment credit.
Agricultural credit needs continued to grow,
due almost entirely to direct or indirect bank
acquisition of price support loans guaranteed by
the Commodity Credit Corporation. The only
major type of credit which did not evince sub­
stantial growth was short-term credit to business.
The need fo r fle x ib ility

The funneling of all these credit demands into
the financial markets did not proceed evenly.
There was little automatic conformity with the
regular inflow of nonbank investible funds and
with the seasonal changes in bank lending
ability. Resolving such differences required flexi­
bility and responsiveness in the market forces of
supply and demand. The objective of the Federal
Reserve System was to assure that such responses
were not in conflict with the basic interests of
economic stability and growth.
Federal Reserve policy operations in 1953
were complicated by three related developments.
The balance of demands for and supplies of
credit appeared to shift during the year, from a

N e t re serve p o sitio n of the
banking system improved markedly
as 1953 progressed
billion dollars

tendency for demands to outrun available funds
to the reverse. Changing market expectations,
discounting a continuation of first one condition
and then the other, accentuated oscillations in
interest rates and credit availability. Finally, the
basic economic situation itself was shifting from
a cresting business boom to a mild easing. Adap­
tation to these sometimes conflicting trends re­
quired that Federal Reserve operations exhibit
a high degree of flexibility.
Reserve shifts: Moving into 1953 credit and
capital demands were strong, and bank loan
totals remained unseasonally high. To carry the
substantial increase of the previous fall in earn­
ing assets and currency demand, member banks
had borrowed heavily from Federal Reserve
Banks and entered the new year more than 1.5
billion in debt. A tone of mild restraint was evi­
dent in the money markets as banks used some
seasonally freed funds to pay down a portion of
their indebtedness.
This tone was preserved by a substantial re­
duction of Government security dealer repur­
chase agreements with the Federal Reserve Sys­
tem, by some liquidation of direct System hold­
ings of Treasury bills, and by a gold outflow
25

ernmental and private borrowers late in the year.
which absorbed most of the reserves freed by
The discounting of such developments led to
the seasonal return of currency from circulation.
repeated markdowns on outstanding securities.
Bank repayment of indebtedness was encour­
aged by a January increase in Federal Reserve
Some prospective borrowers hesitated to ac­
cept the costs involved in entering such a securi­
discount rates from 1% to 2 per cent, a level
ties market, at the same time many investors
more in line with Treasury bill yields.
grew increasingly reluctant to take investment
Despite the various reserve-draining opera­
tions, however, short-term Government securi­
action in the prevailing environment. Such
ties yields remained fairly stable aside from the
trends reached their climax with a sharp jump
upward in money market rates on June 1. The
usual tax influenced March fluctuations.
Rates climb: Beginning in early April, a
yields on longest Treasury bills closed at 2.47
combination of events and expectations induced
bid, and on the recently issued 314 per cent
bonds touched 3.32.
jagged upward movements in all market interest
rates. The Treasury announced a cash offering
Turning points
of 314 per cent bonds maturing in 1983, in what
was believed to be the first of a succession of
In this hypersensitive situation, continuation
steps to place more Federal debt in the long-term
of the Federal Reserve bill buying program re­
area. In the meantime, long-term offerings of
versed market rate trends on the following day.
corporate and municipal funds were appearing
A series of moves by Treasury and Federal Re­
in heavy volume. Short-term credit demand re­
serve authorities in the ensuing weeks completed
mained strong, and, in recognition, leading
the turnabout of investor and borrower expecta­
banks across the country announced the first
tions. The System stepped up its bill purchases,
increase in over a year in the rate charged prime
and the Treasury further eased the market by
commercial borrowers. Reserve drains continued
temporary borrowing from the Federal Reserve
as the Treasury drew in funds and banks con­
over the June tax period. Banks used the reserves
tinued to repay borrow­
ings. Privately owned
Federal R e se rve fa c to rs affecting
dem and deposit totals
member bank reserves
dropped more than sea­
sonally as banks moved
million dollars
more cautiously on loan
e x te n sio n s and sold
short-term Governments
to nonbank investors in
substantial volume.
Earjy in May the Fed­
eral Reserve System be­
gan a program of bill
purchases designed to
moderate reserve pres­
sures. M arket p artici­
p a n ts , h o w e v er, e x ­
pressed growing concern
over the prospects for
heavy borrowing de­
mands by both the gov­
26

thus released in rapid repayment of practically
all remaining indebtedness to Reserve Banks.
The Treasury also clarified market prospects
by announcing a cash offering of tax anticipation
certificates to be dated July 15, in total large
enough to cover the bulk of its second-half
deficit. Coordinately, the Board of Governors
announced reductions in reserve requirements
effective early in July. The official announce­
ment stated:
“This step was taken in pursuance of
Federal Reserve policy, designed to make
available the reserve funds necessary to
meet the essential needs of the economy
and to help maintain stability of the dol­
lar. The reduction, releasing an estimated
$1,156,000,000 of reserves, was made in
anticipation of the exceptionally heavy de­
mands on bank reserves which will de­
velop in the near future when seasonal re­
quirements of the economy will expand
and Treasury financing in large volume is
inescapable. The action is intended to pro­
vide assurance that these needs will be met
without undue strain on the economy and
is in conformity with System policy of
contributing to the objective of sustaining
economic equilibrium at high levels of
production and employment.”
Because of the absorption of reverses in re­
quirements against deposits created in purchas­
ing the new Treasury issues, as well as the re­
serve drains from the reversal of temporary
technical influences operating in June, no pro­
tracted reserve and market ease resulted. Rates
were stable over the remainder of the summer,
with Treasury bill yields around the level of the
early months of the year.
As the months progressed, private credit de­
mands in both the long-term and short-term
market slackened slightly, with the most marked
slowdown appearing in consumer credit.
Fall ease: Events in September provided a
second concentrated shift in market atmosphere,
this time in the direction of sharp declines in
yields. In preparation for forthcoming seasonal

reserve needs, moderate Federal Reserve pur­
chases of Treasury bills were effected during
much of that month. At mid-month, a combina­
tion of technical ease of reserve funds and re­
duction in foreign central bank rates led to a
sharp bidding down of short-term yields. The
movement was reinforced by nonbank demand
for short-term securities, particularly after the
Treasury ceased the sale of nonmarketable tax
savings notes on demand. Demands for short­
term credit were clearly lagging behind their
usual seasonal pattern, and this also was true of
the reserve drain from currency withdrawals.
Investor willingness to commit funds in longerterm instruments increased, and the market
readily absorbed corporate and municipal offer­
ings in sizes and at rates that would not have
been accepted four months earlier.
The tone of eased credit availability which
was established in this period prevailed through
the remainder of the year. Long-term rates con­
tinued to ease gently, despite the Treasury issu­
ance of intermediate term bonds both on ex­
change and in a modest cash offering. Slackening
in loan demand persisted, and the volume of pri­
vate securities offerings fell below the earlier
pace.
Short-term rates exhibited considerable fluc­
tuation, declining through mid-October and then
rising gradually to the day before Christmas.
Drains of reserves as deposit increases and cur­
rency withdrawals progressed were moderated
by System purchases of Treasury bills around
the first of November and through much of De­
cember. In total, such purchases added 500
million to bank reserves. In addition, the usual
December pressures were moderated by System
acquisitions of Governments from dealers under
repurchase agreements, which by December 29
aggregated nearly 700 million dollars.
M o n e y a t y e a r-e n d

At year-end, the pertinent questions in finan­
cial circles were concentrated on the prospects
for credit demands. An adequate supply of loan­
able funds was assured for the period which lay
27

ahead. Member banks on December 29 held
almost exactly the same 20 billion total of re­
serves which they had a year earlier, but some
important differences existed. Bank indebtedness
to the Reserve System was negligible, and tem­
porary dealer repurchase agreements with the
System totaled less than half the bank indebted­
ness at the end of 1952. Required reserves were
down, excess reserves were correspondingly
higher, and lower percentage reserve require­
ments gave each reserve dollar more expansion
potential.
In its operations for the year, the banking sys­

tem as a whole effected a 5 billion expansion in
total deposits and currency, less than half the
1952 increase. The smaller amount of deposit
creation in 1953 stemmed directly from the
smaller dollar growth in bank loans outstanding.
Most of the deposit increase which did occur
was placed by the public in time deposits, ex­
panding these accounts by exactly the same per­
centage as the year before. As a result, main­
tained savings and slackening loan demand com­
bined to hold the 1953 increase in the spendable
money supply—demand deposits and currency
outside banks—to less than 1 per cent.

M id w e s t b a n k in g — a co n tra st betw een la r g e a n d sm a ll centers
Banks throughout the M idwest were

full participants in most of the significant na­
tional credit developments which characterized
1953. With few exceptions, changes in over­
all Midwest banking figures were a mirror of
the changes in banks the country over. Credit
demands, after continuing strong through the
early months, dropped appreciably below their
usual pace as the year grew older. Over-all
increases by year-end were substantial in both
deposits and earning assets but somewhat be­
low the gains which 1952 had brought.
Within the Midwest, most outstanding dif­
ferences in trend occurred between banks of
major cities and those in smaller centers.
After moving ahead more or less together in
1952, banks in the leading cities — Chicago,
Des Moines, Detroit, Indianapolis, and Mil­
waukee — fell distinctly behind the country
bank rate of growth last year. In terms of loan
totals alone, this difference seemed likely to
continue, for large city banks were more heavily
concentrated in those loans which showed the
greatest tendency to lag by year-end.
Loan d e m a n d slo w s

Over 1953 as a whole, loans outstanding at
Midwest member banks moved up some 7 per
28

cent, to a total of nearly 8 billion dollars.
Loans fo business, however, dropped frac­
tionally for the first year since 1949 — both
here and around the nation. This net decline
was in sharp contrast to the record of the in­
tervening years, which under the pressures of
the post-Korean boom had chalked up more
than a 65 per cent increase in business loans.
Being closely related to the tempo of business
activity, last year’s business loan dip gave con­
firmation, if any was needed, of the turnaround
in Midwest business.
In the early months of the year, there were
few indications of the slackening to come later.
Rising business activity held credit demands
high. Even the usual spring paydowns of credit
lines by such seasonal borrowers as food pro­
cessors and sales finance companies were slow
in appearing, although less so in the Midwest
than elsewhere. For these and other business
lines, inventory build-ups and extensions of
trade and consumer credit helped to maintain
demand for funds. At midyear, the larger
banks, which hold the bulk of the business
loans, reported a first-half seasonal decline even
smaller than in 1952.
One distinction among borrowers was ap­
parent. Sustained demand for bank credit was

originating primarily from firms engaged in the
distribution of goods. Public utilities and man­
ufacturers — particularly of hard goods —
were paring down their new loan requests.
Needs for funds by these firms apparently were
stabilizing, and actions to fund some bank debt
into longer-term obligations were numerous.
With the capital markets becoming easier
after June, firms in other lines also chose to
refinance bank loans. Sales finance companies
were active in open market financings. With a
developing lag in their net expansion of instal­
ment credit, they were able to employ much of
the proceeds of new issues to reduce bank
lines.
The sharpest contrast to the pattern of the
past emerged in the fall, when business loans
actually declined moderately in place of the
usual substantial seasonal rise. Behind this trend
were the same dampening factors discerned
earlier in the year, but their influence became
more marked in the late months. Net seasonal
borrowing from banks by sales finance com­
panies was negligible, and metals producers ef­
fected their largest loan repayments in several
years. The usual post-harvest rise in loans to
firms handling agricultural products was cur­
tailed by lower agricultural prices and the
higher proportions of some crops which were
held out of private distribution channels by the
Federal farm price support program.
In many businesses, the supply of funds be­
coming available from internal sources was
catching up with working capital needs. Under
such circumstances, repayment of bank loans
was to be expected. The reduction in business
loans around year-end, however, apparently re­
flected more than the changing tempo of
business activity. Under the Mills Plan, cor­
porations have been paying a steadily increas­
ing proportion of their Federal income taxes
during the first six months of the year. Thus
third- and fourth-quarter cash drains through
taxes are dwindling. Furthermore, as the end
of 1953 approached, some bank loans may
have been retired in anticipation of the demise

of the excess profits tax, with its allowance of
capital credit for borrowed funds.
During 1953, no other bank credits appeared
as sensitive as business loans to the changing
tempo of over-all activity.
Consumer instalm ent loans of Midwest
banks rose rapidly in the early months of 1953.
By midyear retail automobile paper in the
portfolios of District banks outside Chicago
was 40 per cent or more above year-ago levels.
Increases of only moderately smaller propor­
tions occurred in loans to finance other dur­
able goods and to repair and modernize hous­
ing.
Moving into the third quarter, the pace of
consumer borrowing began to slow consider­
ably, and, aside from seasonal movements, this
trend continued to the end of the year. Auto­
mobile loans showed the first and sharpest
slackening; in Chicago, for example, this type of
bank credit actually declined fractionally dur­
ing the summer months. In total, however, con­
sumer loans outstanding continued to mount
slowly over the last half of 1953. By year-end,
the total 1953 increase in Midwest banks
amounted to 18 per cent, somewhat larger than
the 1952 gain.

L o an s at District member banks

29

Real estate loan holdings of Midwest banks
reflected a steady parade of borrowing requests
during the past year and by year-end had ex­
panded by 8 per cent, a shade less than the
increase in the previous year. Spurring mort­
gage loan expansion was the high level of new
home construction.
The expansion in mortgage holdings pro­
ceeded most rapidly in banks in the less populous
centers. Both there and elsewhere, roughly half
of the net increase was in the form of FHAinsured obligations. Acquisitions of these fixedrate loans in banks outside large cities pro­
ceeded rather evenly through the year. On the
other hand, VA-insured mortgages, carrying a
still lower fixed rate, found little acceptance in
Midwest banks. Only leading city banks reported
any net increases over the year, and these gains
were small and concentrated in the last three
months.
Agricultural credit was the one major area
in which loan trends displayed weakness from
the beginning of 1953. Expansion of farm real
estate loans, for example, was substantially
slowed, with most net increases in this region
centering in Wisconsin banks. Apparently de­
clining farm prices and incomes bred increas­
ing caution in prospective purchasers of farm
land.
Working capital loans to farmers continued
the downward trend begun in 1952 in the heavy
credit-using cattle-feeding areas of Illinois and
Iowa. In large part this decline was a reflection
of lower prices paid for livestock. Short-term
loans to farmers in other areas and for other
purposes recorded some minor advances. In
general, recent developments have tended to
introduce more conservatism on the part of
both farmers and their bankers.
The only increases of consequence in agri­
cultural credit were those fostered by the
swelling farm price support program of the
Commodity Credit Corporation. Lower prices
and bigger harvests led farmers to divert a
large volume of last year’s crops to sealed stor­
age, securing loans guaranteed by the CCC.
30

As early as the end of September, such CCC
loans in Midwest banks were running 20 mil­
lion dollars ahead of a year ago, and the
margin widened very rapidly as 1953 drew to
a close. One factor assuring substantial bank
participation in price support loans was the
introduction of large-scale offerings of certifi­
cates of interest in price support loans in CCC
hands. Such instruments appealed to many
urban banks which ordinarily do not actively
participate in agricultural financing. Chicago
banks alone acquired close to 160 million of the
total 810 million of certificates issued nationally
in October and December.
In ve stm en t a d d itio n s v a r y

Despite the smaller size of 1953 loan expan­
sion, such accommodation left most Midwest
banks with relatively few additional resources
for investment in securities. On the average,
the 1953 increase in investments was a scanty
2 per cent, compared with a 7 per cent rise
the year before. Such an average, however, con­
ceals sizable differences in experience among
institutions in and outside the region’s leading
cities. Milwaukee banks, facing unusually strong
loan demands, found it necessary to cut Govern­
ment securities holdings. Detroit and Chicago
institutions managed to end 1953 with approxi­
mately the same total of Governments with
which they had opened the year. In Iowa, and
particularly in Des Moines, on the other hand,
lagging loan demand facilitated large net invest­
ment in Governments over the year as a whole.
The net additions to Midwest Government
holdings were made chiefly in the period of
rising security market prices and declining
yields after early June. During the tight money
market of spring, most banks were liquidating
short-term securities more or less in line with
usual seasonal needs to meet reserve drains.
But by mid-July, the Treasury cash offering of
a tax anticipation certificate was able to find a
good many willing subscribers in banks around
the Midwest. Most succeeding months brought
still further acquisitions.

which slowly and steadily dropped behind the
increase in outlying areas as the year pro­
gressed. By year-end, the time deposit increase
in Chicago averaged 4 per cent, exactly half
the 1952 rate for both city and country banks.
In outlying areas, meanwhile, savers continued
to match their 1952 rate of time deposit ad­
ditions throughout 1953. With this rate of
deposit accruals, country bank managers had
the resources at hand to expand both loans
and investments at a faster rate than could the
larger city institutions.

C ity b a n k s trail in 1953 growth
of District member banks
leading city

other

P rofits up

0

+5%

+10% o

+5%

+10%

In general, banks in outlying areas increased
their portfolio of Governments by an average of
5 per cent during the year, while banks in the
leading cities reduced their holdings slightly.
Similarly, although banks in both groups added
to their stock of state and local obligations dur­
ing the year, the 9 per cent gain in outlying
banks was more than double the percentage
growth at banks in the leading cities.
D eposits fa re better a t country b a n k s

Behind this variation in investments lay a
clear divergence in deposit trends. Rural banks
continued to enjoy deposit gains comparable
in magnitude to 1952’s over-all 8 per cent rise.
In Chicago, in contrast, 1953 brought a slight
deposit loss. Most other large Midwest centers
fared only slightly better for the year as a
whole.
The lagging pace of city bank deposits be­
came apparent before 1953 was well advanced.
Early seasonal dips in demand deposits pro­
ceeded further than in 1952, and the eventual
recovery was slower to appear. The city bank
lag was confirmed in the trend of time deposits,

The shifting financial tides of 1953 had their
repercussions on the earnings position of banks.
The base of total earning assets was expanded
moderately over the year, and a good portion
of that expansion was centered in comparative­
ly high-yielding types of assets such as con­
sumer instalment and real estate loans. Mar­
ket interest rates on both loans and securities
moved higher in the early months, but the
opportunity to obtain higher yields on invest­
ment portfolios was fleeting, since securities
yields, within a few months, had returned to
the lowest levels in four years.
Operating in this environment, Midwest
banks in 1953 raised their gross operating
earnings by 13 per cent. Cutting into this in­
come were higher operating expenses, taxes,
and in some cases reserve provisions. None­
theless, a new record high of 124 million
dollars in net profits after taxes could be re­
ported. This represented an increase of 5 per
cent over their 1952 profits.
Here again, leading city banks and outlying
banks revealed contrasting trends. Net profits
for the former were up but 2 per cent over
1952, compared to nearly a 10 per cent rise
for the latter. In good part, however, these
differences were more apparent than real, stem­
ming from heavy reserve deductions in out­
lying banks in 1952, and in 1953 in some lead­
ing city banks. On a gross earnings basis, the two
groups reported fairly comparable gains.
31

B a n k o p e ra tio n s reflect h ig h -le v e l a c tiv ity
I n 1953, the volume of operations of the Fed­
eral Reserve Bank of Chicago and the Detroit
Branch continued to increase, reflecting the
record levels of business activity and the con­
tinued rise in deposits and deposit activity at
District member banks.
Typifying economic growth in the state of
Michigan, facilities of the Detroit Branch were
expanded by the addition of a newly con­
structed building. When opened in April, the
modern eight-story annex more than tripled
the Branch’s working area. The enlarged ca­
pacity made it possible for Detroit to serve all
Seventh District member banks in the state.
Accordingly, at year-end the Branch area was
expanded to include banks in the entire lower
peninsula for most Federal Reserve trans­
actions.
Procedures for the destruction of worn-out
currency were streamlined during the year.
Since last summer, each Federal Reserve Bank
has been destroying all Treasury-issued cur­
rency unfit for further circulation rather than
forwarding it to the Treasury for redemption
as had been done previously. Substantial sav­
ings are effected as a result of eliminated ship­
ping costs. During the last half of the year,
the Bank burned 83 million pieces — 110 mil­
lion dollars worth of silver certificates and 9
million dollars of United States notes.
A second operating improvement, involving
a new leased wire system of communication for
the entire Federal Reserve System, was put into
effect in July. The change included transfer of
the main teletype switching center from the
Chicago Bank to Richmond and elimination of
the minor switching centers on the East and
West coasts. Transmission facilities were also
modified to enable wires to be sent directly to
each Reserve Bank Branch, instead of first pass­
ing through their main office.
Services to the Commodity Credit Corpora­
tion were expanded sharply. In July, the CCC
32

transferred to the Federal Reserve Bank of Chi­
cago the custodian activities previously handled
for the eastern section of the country by the
Federal Reserve Bank of New York. In Octo­
ber, the Chicago Bank, as Fiscal Agent and
Custodian for the Commodity Credit Corpora­
tion, began the issuance, transfer, and redemp­
tion of Certificates of Interest in a pool of CCC
loans on commodities other than cotton. Sub­
sequently another pool was established for cot­
ton loans, and by the end of the year this Bank
had issued over five thousand such certificates of
interest having a total value in excess of 800
million dollars.
The number of commercial bank checks
cleared at Chicago and the Detroit Branch was
some 20 million greater than in the previous
year, and the value of checks handled increased
by almost 10 billion dollars to a total of 152
billion. The value of Government checks and
postal money orders processed also rose sharp­
ly above the preceding year, but there was little
change in the number. On the other hand,
despite an increase in number, the total dollar
value of acceptances, drafts, and securities col­
lected was less than in 1952.
Wire transfers of funds rose from 103 billion
dollars to 108 billion at Chicago and from 26
billion to 32 billion at the Detroit Branch.
Circulation of Seventh District Federal Re­
serve notes increased 3 per cent during the
year, reaching a new high of 5,143 million dol­
lars in December. However, the growth in the
Midwest, as elsewhere, was somewhat less than
the 1952 rise of about 4 per cent.
Over one billion dollars of unfit currency
were withdrawn from circulation in the Seventh
District during the year. About one-third of the
worn bills, representing 14 per cent of the dol­
lar volume, were destroyed at the Chicago and
Detroit Banks.
Member banks made a greater use of the
Bank’s discount facilities than in the previous

c
C ollections made through the Federal Reserve Bank
1953
C h ic a g o

Detroit
Branch

D o lla r volum e (millions)
Com m ercial b a n k ch ecks....................
G ove rn m en t checks1 .........................
O th er it e m s ......................................

123,751
11,499
1,130

2 7 ,8 9 6
4,028
140

Pieces (millions)
Com m ercial b a n k ch ecks....................
G ove rn m en t checks1 .........................
O th e r i t e m s ......................................

320
111
1

57
15
*

Per cent ch an ge
from 1952
Detroit
C h ic a g o
Branch

+ 6

+22
— 4

+6
+ 1
+7

+8
+30
— 9

+7
*
+ 14

*L e ss than 500,000 or less than .5 per cent.
1In c lu d in g Postal M o n e y O rde rs.

C a sh d e p a rtm e n t o p e ra tio n s
1953

D o lla r volum e (millions)
C urren cy p a id to b a n k s1....................
C o in p aid to b a n k s1...........................
C o in w r a p p e d ..................................
Unfit currency w ithdraw n
from circulation ...........................
Pieces (millions)
C urren cy p a id to b a n k s1....................
C o in p a id to b a n k s1.........................
C o in w ra p p e d ................................
Unfit currency w ithdraw n
from circulation ...........................

Per cent ch a n ge
from 1952
Detroit
C h ica go
Branch

C h ic a g o

Detroit
Branch

3,6 7 0
120
84

1,153
18
9

+ 5 .3
— 3.4
+ 2 .5

+ 7 .3
+ 2 0 .8
+ 2 4 .0

833

189

+ 6 .0

+ 3 3 .0

623
1,331
1,012

178
207
107

+ 4 .3
— 0.3
+ 6 .8

+ 5 .6
+ 17.6
+ 2 6 .1

204

52

— 2.9

+ 5 0 .8

^Excluding other Federal Reserve Banks.

S a fe k e e p in g o f securities
1953

Per cent ch an ge
from 1952
Detroit
C h ic a g o
Branch

C h ic a g o

Detroit
Branch

D o lla r volum e (m illions)
Securities received ...........................
Securities released ...........................
C o u p o n s detached ...........................

9,306
8,661
110

5,5 5 8
5,342
14

— 8
+ 10

— ii
— 12
+31

Pieces (thousands)
Securities received ...........................
Securities released ...........................
C o u p o n s detached ...........................

305
293
1,270

102
83
191

+ 15
+ 10
+5

+4
— 9
+ 4

*L e ss than .5 per cent.

*

year. Chiefly because of
substantial credit re­
quests in the first half,
total borrowings for the
y e a r a m o u n t e d to
15,141 million dollars,
about 800 million more
than in 1952.
The volume of invest­
ments made for member
bank accounts contin­
ued to grow. Purchases
increased over one-third
in Detroit and almost
one-sixth in Chicago,
while sales rose only
slightly.
Measured by number
of items handled, 1953
brought an increase in
work load connected
with the safekeeping of
securities for member
banks and the public.
The dollar volume of
the securities handled,
however, decreased be­
cause of a reduction
in the average dollar
amount.
R ef le c ti ng t he i n­
creased volume of serv­
ices to member banks,
the amount of mail han­
dled at Chicago and De­
troit rose slightly to 7.5
million pieces, while the
number of telegrams in­
creased to over 300,000,
a gain of 12 per cent.
The average total num­
ber of employees de­
clined slightly — from
3,018 in 1952 to 2,985
last year.
33

*

Services

to T r e a s u r y

Department
1953

Per C ent C h a n g e
from 195 2
Detroit
C h ic a g o
Branch

C h ic a g o

Detroit
Branch

H a n d lin g o f m arketable securities
D o lla r volum e (thousands)
N e w issues at p a r v a l u e .............................
Redem ptions at m aturity valu e ....................
Exchan ge s a n d transfers .............................

12,146,372
12,100,729
13,447,899

2 ,4 3 5 ,8 0 9
1,737,085
3 ,369,013

+ i. i
+ 2 4 .1
+ 6 .6

+ 2 3 1 .2
+ 3 2 .2
+ 3 6 .8

Pieces (thousands)
N e w i s s u e s ...................................................
Redem ptions ...............................................
Exchanges a n d t r a n s f e r s .............................

216
263
303

18
25
26

+ 6 3 .6
+ 3 6 .6
+ 16.9

+ 6 4 .0
+ 4 5 .1
+ 3 4 .5

H a n d lin g o f sa v in g s b on d s a n d notes
D o lla r volum e (thousands)
N e w issues at m aturity value ......................
Redem ptions at redem ption v a lu e * .............

1 ,562,357
1,756,977

5 9 6 ,2 3 0
8 9 5 ,668

+ 2 3 .5
+ 2 4 .7

+ 4 1 .7
+ 5 .0

Pieces (thousands)
N e w issues .................................................
Red e m p tion s* ..........................................

10,575
11,669

5 ,216
4,881

+ 7 .7
+ 4 .3

+ 15.1
+ 9 .7

Collections of Federal taxes (thousands)
D o lla r volum e of receipts p ro ce sse d ................
N u m b e r of receipts processed .........................

4 ,2 2 9 ,1 5 7
1,045

+ 7 .7
+ 2 3 .5

* Includes Armed Forces Leave Bonds.

Securities issued and redeemed, after a postwar dip, have climbed consistently
b illio n d ollars

M a rk e t a b le a n d s a v in g s securities h a n d le d th ro u gh the Federal Reserve B a n k o f C h ic a g o a n d its D etroit Branch.

34

As with services to member banks, the fiscal
agency operations of the Bank were also char­
acterized by increased activity. The table on
the facing page illustrates the substantial rise in
number of items processed as compared with
the previous year.
One important change in 1953 announced at
midyear was that banks authorized as deposi­
taries could receive Federal excise taxes along
with Social Security contributions and withheld
income taxes.

N o te circulation of the Chicago
Reserve Bank has paralleled the
national total of new currency
billion dollars

billion d ollars

C h a n g e s in m e m b er b a n k s

In 1953 the following Seventh District banks
became members of the Federal Reserve Sys­
tem:
National Bank of Albany Park
Chicago, Illinois
Ottawa National Bank
Ottawa, Illinois
First State Bank
Green, Iowa
Security Savings Bank
Marshalltown, Iowa
St. Ansgar Citizens State Bank
St. Ansgar, Iowa
West Liberty State Bank
West Liberty, Iowa
Bank of Dearborn
Dearborn, Michigan
Bank of Sturgeon Bay
Sturgeon Bay, Wisconsin
Since one bank withdrew from membership
and one underwent voluntary liquidation, there
was a net increase of six member banks, bring­
ing the District total to 1,014. The resources of
four additional banks were brought into the
System through mergers with member banks.

C h a n g e s in officers

During 1953 the following promotions were
made at the Federal Reserve Bank of Chicago
and the Detroit Branch:
Russel A. Swaney, to Vice President
Bruce L. Smyth, to Assistant Vice President
LeRoy A. Davis, to Assistant Cashier
Fred H. Grimm, to Assistant Cashier
Harry S. Schultz, to Assistant Cashier
Hugh J. Helmer, to Assistant Chief Examiner
Charles J. Scanlon, to Assistant Chief
Examiner
The following officers, each with many years
service at the Bank, were retired:
Harlan J. Chalfont, Vice President
F. L. Purrington, Assistant Vice President
Herbert H. Conklin, Assistant Cashier
C. M. Saltnes, Assistant Cashier

35

C o m p a r a t i v e S t a t e m e n t of C o n d i t i o n

A ssets
D ec. 3 1 , 1 9 5 3

G old Certificates on Hand and Due from U. S. Treasury .

D ec. 3 1 , 1 9 5 2

.

3,743,997,013.55

4,430,854,137.32

Redemption Fund — FederalReserveN o t e s .........................

151,495,190.00

119,452,700.00

Other C a s h .......................................................................

62,521,459.80

54,784,083.66

Total C a s h .......................................................

3,958,013,663.35

4,605,090,920.98

Discounts and A d v a n c e s .................................................

3,055,000.00

7,360,500.00

S e c u r i t i e s ................................

4,375,704,000.00

3,437,028,000.00

Total Bills and S e c u r i t ie s ...................................

4,378,759,000.00

3,444,388,500.00

P r e m i s e s ................................................................

6,448,254.79

6,680,636.02

Federal Reserve Notes of Other B a n k s ..................................

27,163,500.00

23,133,000.00

Uncollected I t e m s ............................................................

719,839,031.18

704,039,961.48

Other A s s e t s .......................................................................

25,934,569.76

22,954,908.03

Total A s s e t s .......................................................9,116,158,019.08

8,806,287,926.51

U. S.

Governm ent

Bank

L ia b ilitie s
Federal Reserve Notes in Actual C i r c u l a t i o n ......................

5,111,406,285.00

4,971,415,290.00

M em ber Bank — Reserve A c c o u n t ...........................

3,250,620,029.36

3,066,257,823.23

U. S. Treasurer — G ene ral A c c o u n t ...........................

30,188,768.35

28,709,863.68

Other D e p o s i t s .......................................................

73,835,665.01

85,944,791.80

Total D e p o s it s .................................................

3,354,644,462.72

3,180,912,478.71
519,439,776.68

Deposits:

Deferred Availability It e m s .................................................

505,627,999.92

Other L ia b ilitie s .................................................................

3,016,988.44

1,962,285.84

Total L i a b i l i t i e s ............................................

8,974,695,736.08

8,673,729,83 f.23

C a p ita l A cco u n ts
C ap ital Paid I n .................................................................

35,000,850.00

32,341,950.00

Surplus (Section 7 ) ............................................................

90,791,917.69

84,628,184.18

Surplus (Section 1 3 b ) .......................................................

1,429,383.78

1,429,383.78

Other Capital A c c o u n t s .................................................

14,240,131.53

14,158,577.32

9,116,158,019.08

8,806,287,926.51

Total Liabilities and Capital Accounts

36

Comparative

S t a t e m e n t of E a r n i n g s a n d E x p e n s e s

1952

1953
80,692,341.94

67,492,987.62

O p eratin g E x p e n s e s .................................................

13,981,511.54

13,227,178.27

Assessment for Board o f 'G o v e r n o r s ...........................

561,000.00

572,900.00

E a r n i n g s ............................................................................
Expenses:

Cost of Federal Reserve C u r r e n c y ...........................

2,413,367.33

1,755,196.48

Total Current E x p e n s e s ................................

16,955,878.87

15,555,274.75

Current Net E a r n i n g s ...........................

63,736,463.07

51,937,712.87

292,476.79

293,142.06

Additions to Current N et Earnings:
Profit on Sales of U. S. Governm ent Securities

.

Other A d d i t i o n s ......................................................
Total Additions to Current Net Earnings

.

Total Current Net Earnings and Additions .

123.39

6,171.30

292,600.18

299,313.36

64,029,063.25

52,237,026.23

Deductions from Current N et Earnings:
Retirement System (Increased Benefits to Mem bers) .
Other D e d u c tio n s ......................................................
Total Deductions from Current Net Earnings .

299,518.18
87,338.89

77.357.86

386,857.07

77.357.86

N et E a r n i n g s ......................................

63,642,206.18

52,159,668.37

Paid United States Treasury (Interest on Federal Reserve Notes)

55,473,065.89

45,238,680.03

N et Earnings After Payments to United States Treasury

8,169,140.29

6,920,988.34

Dividends P a i d ................................

2,005,406.78

1,894,010.38

Transferred to Surplus (Section 7 ) ................................

6,163,733.51

5,026,977.96

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

84,628,184.18

79,601,206.22

Transferred to Surplus — as a b o v e ......................................

6,163,733.51

5,026,977.96

Surplus December 3 1 ......................................................

90,791,917.69

84,628,184.18

Surplus

Account

( S e c ti o n 7)
Surplus January 1

37

S t a t e m e n t of D i s p o s i t i o n of Net E a r n i n g s

Year

Net
D iv id e n d s
E a rn in g s
P a id

P a id
to U. S.
T reasury

T ransferred
to C a p ita l
A cco u n ts

N et
D iv id e n d s
E a rn in g s
P a id

Year

(in t h o u s a n d s )

1914-15

20

403

361

191 7

1,232

862

T ransferred
to C a p ita l
A cco u n ts

(in t h o u s a n d s )

20

1916

P a id
to U. S.
T reasury

42
216

154

1918

6,805

605

6,200

1919

8,576

701

7,875

1920

2 5 ,8 7 6

793

10,394

1921

14,505

854

11,576

1922

1,405

876

1,186

1923

1,178

904

247

1924

909

909

194 0

2,608

827

n

1941

1,024

897

27

1,770
100

1942

1,197

956

4

238

6 ,710

4,766

1943

5,7 5 9

994

194 4

7,831

1,115

6
3

14,689
-

2 ,075

1945

13,430

1,215

657

1946

13,361

1,312

27

12,212
12,049

1947

12,789

1,380

10,250

1,139

1948

2 7,718

1,472

23,621

2,625

1949

3 3 ,4 2 5

1,556

28,681

3,187

1925

1,121

934

187

1926

2,254

986

1,268

1927

1,928

1,030

898

195 0

34,833

1,671

2 9 ,8 4 6

3 ,317

1928

4,763

1,100

3,664

1951

4 4 ,3 2 6

1,773

38,298

4,256

192 9

5,425

1,170

603

3,651

1930

1,054

1,211

-

1931

610

1,170

-5 6 1

1932

2,243

1,030

1,092

157

1952

5 2 ,1 6 0

1,894

4 5 ,2 3 9

5,027

1953

63,642

2,005

5 5 ,4 7 3

6 ,164

4 0 3 ,052

4 0 ,0 3 7

2 5 6 ,8 7 2

106,144

T o ta l

121

1933

1,790

858

932

193 4

1,404

761

643

Adju stm ents
la

-

ib
1935

771

754

18

193 6

932

726

28

178

1937

1,688

763

28

896

1938

1,091

791

21

279

4

1 939

983

820

5

158

Total

2

1,418

1,418

— 3,208

— 3,208

1. F.D.I.C. Stock:
a) 1934— Purchase
b) 1947— Retirem ent (proceeds to Tre asury).
2. P a ym ents from U. S. Treasury, Section 13b loa ns, 1934 a n d 1935.
3. Tran sferred from S u rp lu s to Reserves fo r C o ntinge ncie s, 1940, 1942, a n d 1943.
4. T ran sferred to S u rp lu s (Section 7) fro m Reserves fo r C on tin ge n c ie s, 1945.

38

19,749

19,749

19,749

3

N otes on a djustm ents

D e ta ils m a y not a d d to totals because o f ro u n d in g.

-

19,749

7 ,616

7,616
4 0 8 ,8 7 8

4 0 ,0 3 7

276,621

92,221

Directors and Officers

D irecto rs
JOHN S. COLEMAN, President

BERT R. PRALL, President

B u rro u gh s C orp oration
Detroit, M ic h ig a n

Butler Brothers
C hica go , Illinois

C h a ir m a n

D e p u t y C h a ir m a n

V IV IA N W. JO HNSON, P re sid e n t

WALTER J. C U M M IN G S, C h a ir m a n

First N a tio n a l B ank
C e d a r Falls, Iow a

Continental Illinois N a tio n a l B ank
a n d Trust C o m p a n y o f C h ica go
C hica go , Illinois

ALLAN B. KLINE, P r e sid e n t
A m e rica n Farm Bureau Federation
C hica go , Illinois

W ILLIAM J. GREDE, P re sid e n t
G re d e Foundries, Inc.
M ilw a u ke e, W isconsin

NUGENT R. OBERW ORTM ANN, P re sid e n t
The N o rth Sho re N a tio n a l B a n k of C h ica go
C h ica go , Illinois

WALTER E. H A W KIN SO N , Vice P re sid e n t

W ILLIAM R. SINCLAIR, C h a ir m a n o f the B o a r d

in c h a r g e o f F in a n c e a n d S e c re t a r y

A llis-C h alm ers M fg . Co.
M ilw a u ke e, W isconsin

K in g a n a n d Co.
In d ia n a p o lis, In d ia n a

O fficers
CLIFFORD S. YO U N G , P r e sid e n t
ERNEST C. HARRIS, First V ic e P r e sid e n t

GEORGE W. MITCHELL, Vice P re sid e n t

NEIL B. DAWES, Vice P r e sid e n t a n d S e c re t a r y

ARTHUR L. OLSON, Vice P re sid e n t

WILFORD R. DIERCKS, Vice P r e sid e n t

ALFRED T. SIHLER, Vice P re sid e n t

WALTER A. HOPKINS, Vice P re sid e n t

RUSSEL A. SW ANEY, Vice P re sid e n t

LOUIS G. MEYER, Vice P r e sid e n t

W ILLIAM W. TURNER, Vice P r e sid e n t
LAURENCE H. JONES, C a s h ie r

ERNEST T. BA U G H M AN , A ssista n t V ic e P r e sid e n t

FRANK A. LINDSTEN, A s sis ta n t V ic e P re sid e n t

PHIL C. CARROLL, A ssista n t V ic e P re sid e n t

HAROLD J. N EW M A N , A ssista n t V ic e P r e sid e n t

CLARENCE T. LAIBLY, A ssista n t V ic e P re sid e n t

INGOLF J. PETERSEN, A ssista n t V ic e P re sid e n t

M AR K A. LIES, A s sis ta n t V ic e P re sid e n t

BRUCE L. SMYTH, A s sis ta n t V ic e P re sid e n t
H. FRED W ILSON, A s sis ta n t V ic e P re sid e n t

(DW AR D D. BRISTOW, A ssista n t C a s h ie r

HARRY S. SCHULTZ, A s sis ta n t C a s h ie r

LEROY A. DAVIS, A s sis ta n t C a s h ie r

ELMER F. SHIREY, A s sis ta n t C a s h ie r

FRED H. GRIM M , A s sis ta n t C a s h ie r

GEORGE T. TUCKER, A s sis ta n t C a s h ie r

EDW ARD A. HEATH, A ssista n t C a s h ie r a n d A ssista n t S e c r e t a r y
PAUL C. HODGE, General C o u n s e l

ARTHUR M. GUSTAVSON, A ssista n t G e n e r a l A u d it o r

ORVILLE C. BARTON, A s sis ta n t G e n e r a l C o u n s e l

C. PAUL V A N ZANTE, C h ie f E x a m in e r

a n d A s sis ta n t S e c re t a r y

JOHN J. ENDRES, G e n e r a l A u d it o r

HUGH J. HELMER, A s sis ta n t C h ie f E x a m in e r
CHARLES J. SCANLON, A s sis ta n t C h ie f E x a m in e r

39

Directors and Officers
C on tinu ed

Member of Federal Advisory Council
EDW ARD E. BROW N, C h a i r m a n o f the B o a r d
The First N a tio n a l B a n k o f C h ic a g o
C h ica go , Illinois

Members of Industrial Advisory Committee
EDW ARD J. DOYLE

EDW ARD M. KERWIN, V ic e P re sid e n t

W ilmette, Illinois

E. J. Brach a n d Sons
C h ica go , Illinois

WALTER HARNISCHFEGER, P re sid e n t

G. BARRET MOXLEY, P re sid e n t

H arn isch feger C o rp o ra tio n

Kiefer-Stew art C o m p a n y

M ilw a u ke e , W isconsin

In d ia n a p o lis, In d ia n a

JAMES L. PALMER, P r e sid e n t
M a r sh a ll Field & C o m p a n y
C h ica go , Illinois

Detroit Branch
D ire cto rs
W ILLIA M M. DAY, V ic e P r e sid e n t a n d G e n e r a l M a n a g e r

CLIFFORD M. HARDIN, D e a n , Sch ool o f A gricu lture

M ic h ig a n Bell Telephone C o m p a n y

M ic h ig a n State C o lle g e

Detroit, M ic h ig a n

East Lansing, M ic h ig a n

R A Y M O N D T. PERRING, P re sid e n t

H O W A R D P. PARSHALL, P r e sid e n t

The Detroit Ban k

B a n k of the Com m onw ealth

Detroit, M ic h ig a n

Detroit, M ic h ig a n

JO HN A. STEWART, V ic e P r e sid e n t a n d C a s h ie r
Secon d N a tio n a l B a n k a n d Trust C o m p a n y o f S a g in a w
S a g in a w , M ic h ig a n

O fficers
RUSSEL A. SW ANEY, Vice P r e sid e n t

JOSEPH J. SRP, JR., A s sis ta n t C a s h ie r

RICH ARD W. BLOOMFIELD, A ssista n t V ic e P r e sid e n t

ARTHUR J. W IEGANDT, A s sis ta n t C a s h ie r

HAROLD L. DIEHL, C a s h ie r

G O R D O N W. LAMPHERE, A s sis ta n t G e n e r a l C o u n s e l

40