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EIGHTEENTH ANNUAL REPORT FEDERAL RESERVE BANK OF CHICAGO FOR THE YEAR ENDED DECEMBER 31, 1932 FEDERAL RESERVE AGENT SEVENTH FEDERAL RESERVE DISTRICT FEDERAL RESERVE BANK OF CHICAGO Chicago, January 27, 1933. Sir: I have the honor to submit herewith, in accordance with the usual custom, the eighteenth annual report of the Federal Reserve Bank of Chicago, covering the year 1932. Respectfully, EUGENE M. STEVENS, Federal Reserve Agent. HON. EUGENE MEYER, Governor, Federal Reserve Board, Washington, D. C. FEDERAL RESERVE BANK OF CHICAGO Directors and Officers for 1933 CLASS A—DIRECTORS *GEORGE M. REYNOLDS, Chicago, Illinois (1933) Director, Continental Illinois National Bank and Trust Company EDWARD R. ESTBERG, Waukesha, Wiscon- sin (1934) JAMES B. MCDOUGAL, Governor CHARLES R. MCKAY, Deputy Governor JAMES H. DILLARD, Deputy Governor WILLIAM C. BACHMAN, Assistant Deputy Governor EUGENE A. DELANEY, Assistant President, Waukesha National Bank GEORGE J. SCHALLER, Storm Lake, Iowa (1935) Deputy Governor OTTO J. NETTERSTROM, Assistant Deputy Governor President, Citizens First National Bank CLASS B—DIRECTORS MAX W. BABB, Milwaukee, Wisconsin (1933) FRED BATEMAN, Manager, Securities De- partment JOSEPH C. CALLAHAN, Manager, Member President, Allis-Chalmers Manufacturing Company STANFORD T. CRAPO, Detroit, Michigan (1934) Secretary and Treasurer, Huron Portland Cement Company NICHOLAS H. NOYES, Indianapolis, In- diana (1935) CLASS C—DIRECTORS EUGENE M. STEVENS, Evanston, Illinois (1933) Chairman FRANK C. BALL, Muncie, Indiana (1934) President, Ball Brothers Company JAMES SIMPSON, Chicago, Illinois (1935) Chairman, Commonwealth Edison Company MELVIN A. TRAYLOR, Chicago, Illinois, Member Federal Advisory Council OFFICERS EUGENE M. STEVENS, Chairman of the Agent JAMES SIMPSON, Deputy Chairman CLIFFORD S. YOUNG, Assistant Federal Reserve Agent GEORGE A. PRUGH, Assistant Federal Re- serve Agent HARRIS G. PETT, Manager, Division of Research and Statistics FRANCIS R. BURGESS, Auditor WALTER A. HOPKINS, Assistant Department tody Department ALBA W. DAZEY, Manager, Investment Department IRVING FISCHER, Manager, Check Depart- ment ROBERT J. HARGREAVES, Manager, Person- Treasurer, Eli Lilly and Company Board and Federal Reserve Bank Accounts ROBERT E. COULTER, Manager, Cash Cus- Auditor nel Department FRANK A. LINDSTEN, Manager, Disburs- ing Department Louis G. MEYER, Manager, Service Department ARTHUR L. OLSON, Manager, Loan Divi- sion Louis G. PAVEY, Manager, Department Collection FRANKLIN Manager, L. Discount PURRINGTON, Department JESSE G. ROBERTS, Manager, Cash De- partment WILLIAM W. TURNEE, Manager, Loan Division CARL MEYER, Counsel * On March 21, 1933, James R. Leavell, President, Continental Illinois National Bank and Trust Co., Chicago, was elected a Class A director to fi'l the unexpired term of George M. Reynolds, resigned. On March 24, 1933, Howard P. Preston was elected Deputy Governor. DETROIT BRANCH Directors and Officers GEORGE B. MORLEY, Saginaw, Michigan Chairman of Board, Second National Bank and Trust Company DAVID MCMORRAN, Bay City, Michigan President, Heinr. Franck Sons, Inc. WILSON W. MILLS, Detroit, Michigan Chairman, First National Bank JAMES INGLIS, Detroit, Michigan President, American Blower Corporation N. P. HULL, Lansing, Michigan President, Michigan Milk Producers Assn. JOHN BALLANTYNE, Detroit, Michigan WILLIAM R. CATION, Managing Director JOHN H. MARTIN, Assistant Federal Reserve Agent HARLAN J. CHALFONT, Cashier GEORGE T. JARVIS, Assistant Cashier JOHN G. BASKIN, Assistant Cashier FLOYD L. BOWEN, Assistant Auditor ISADORE LEVIN, Assistant Counsel EIGHTEENTH ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF CHICAGO GENERAL CONSIDERATIONS S ELSEWHERE, the year 1932 was one of severe strain on the economic and financial structure of the Seventh Fed. eral Reserve district. Nevertheless, there were certain factors which reflected definite improvement over the preceding year. For example, bank failures totaled 631 in 1931, and in 1932 aggregated 507, a reduction of approximately 20 per cent. In the total of deposit liability of failed banks, the betterment was more significant; in 1931, this amounted to $425,041,000, whereas in 1932, the total was $262,739,000, a decrease of 38 per cent. The assistance rendered to many banks by the Reconstruction Finance Corporation has been an important factor contributing to the lowered rate of b^n^ morHlifv, ! n th° last nUPrtfir o+ 1932. there was a perceptible check in the rate of deposit decline in many banks, and some of the major banks in the metropolitan districts showed substantial increases. Industrial production has materially decreased during the year, and there has been a continued growth in unemployment. At the same time costs of production have been adjusted further to reduced levels of consumption and lower prices, so that, in numerous cases, a comparatively small increase in output and distribution might well be reflected in substantially improved earnings. As in other districts, the continued decline in commodity prices has been serious in its effect both on agriculture and on manufacturing and business in general. Farm income for the crop year 1932-33 is estimated at 21 per cent less than in the preceding crop year, which in turn fell below 1930-31 by 24 per cent. Conditions in the majority of farming sections of the district, not only with respect to the lowered volume of income, but involving also the tax and mortgage situation, constitute a problem of deep concern. Taxes, while remaining high and therefore continuing to absorb a burdensome portion of reduced farm income, give evidence of responding in some quarters to public demand for lower governmental expenditure; on the other hand, defaults of interest and foreclosures on mortgages have become more numerous, and no definite solution of this problem has been developed. In certain quarters in this district, local committees have been set up to act as intermediaries between the debtor and creditor on maturing farm mortgages, and it is believed that this effort is contributing toward better understandings and adjustments of debts. In addition to the work of the Reconstruction Finance Corporation, the organization, early in the summer, of the district Banking and Industrial Committee exerted a helpful and steadying influence. A EIGHTEENTH ANNUAL REPORT The committee, with the full cooperation of this bank, undertook the study and consideration of a number of pressing problems and sought to lend its assistance in efforts toward reconstruction. Prominent among its undertakings were its efforts to make available adequate funds for live-stock feeding, a consideration of the farm mortgage problem, the stimulation of the use of trade acceptances in place of open book accounts, concerted efforts through the establishment of committees throughout the district toward advisable rehabilitation of plants in industry, and the spread of the share-the-work movement among industrial employes. With a view to liberalizing the loaning powers of the Federal Reserve banks, Congress during the year passed several amendments to the Federal Reserve Act, significant among them being that approved February 27, which enables reserve banks to make advances to member banks on assets not ordinarily eligible, provided that all eligible paper shall have first been exhausted. While this bank received a number of inquiries regarding the availability of credit under this amendment and several commitments were made, it was not called upon to make any advances, as the emergencies involved in each particular case were met without resorting to the additional credit arranged for. Under an amendment of July 21 to the Federal Reserve Act, provision was made for the extension of credit by the reserve banks in "unusual and exigent circumstances" directly to any individual, partnership or corporation on paper which would otherwise be eligible for discount for member banks, provided such paper be endorsed and otherwise secured to the satisfaction of the Federal CURRENCY DEMAND CHICAGO DISTRICT CHANBeS BY WEEKS MILLIONS OF DOLLARS + 100 +S50 *>\ \ +600 \ +S50 > • +500 > +45D V f / +4D0 +350 / +300 1 r < +250 +200 +1S0 / +100 + 50 0 -50 V r m JK J F M A M J j A Ni> s • 1929 A N 0 J J N. It | * F M A M J J A sa 1930 N D J F - \ / A s D N D J F M A M J J A 1931 ' 1932 J J A n D FEDERAL RESERVE BANK OF CHICAGO Reserve bank. Numerous inquiries were received at this bank pertaining to this amendment, and every effort was made to supply complete information, careful consideration being given to each inquiry. In the majority of cases, however, it developed that the proposed loans were not for eligible purposes. Many were not acceptable from a credit standpoint, and in several instances arrangements were made for credit direct with member banks in the vicinity of the proposed borrower. BANKING DEVELOPMENTS Member bank borrowing at the Reserve bank declined almost steadily throughout the year 1932, and on December 31 the total of bills discounted for member banks was 59^ million dollars less than at the close of the preceding year. The analysis of factors effecting this decrease is presented in detail in the accompanying tabulation. FACTORS IN MEMBER BANK BORROWING AT THE FEDERAL RESERVE BANK OF CHICAGO Changes between December 31, 1931 and December 31, 1932 (In millions of dollars) Changes making for decrease in member bank borrowing: 1. Excess of local Treasury expenditures over receipts 467.79 2. Increase in holdings of U. S. securities by the reserve bank (local transactions) 41.42 3. Decrease in unexpended capital funds 1.28 4. Increase in reserve bank float 0.67 Total 511.16 Changes making for increase in member bank borrowing: 1. Funds lost through inter-district settlements for commercial and financial transactions 166.78 2. Increase in demand for currency 148.08 3. Increase in member bank reserve balances 125.38 4. Decrease in holdings of acceptances by the reserve bank (local transactions) 5.84 5. Decrease in holdings of other securities 3.49 6. Increase in non-member clearing balances 1.39 7. Sales of gold to industry 0.67 Total Excess of changes making for decrease in member bank borrowing: Absorption of this excess: Decrease in member bank borrowings (discounts for member banks) 451.63 59.53 59.53 An excess of local Treasury expenditures over receipts of approximately 468 millions, which included Reconstruction Finance Corporation operations in this district, and a gain in holdings of U. S. securities by the Reserve bank (local transactions) of over 41 million dollars, were the principal developments making for lessened member bank recourse to the Reserve bank. Offsetting these factors to a considerable extent were almost 167 millions in funds lost through inter-district settlements for commercial and financial transactions, an increase in currency demand of 148 millions, and a gain in member bank reserve balances of 125 millions. The sum of these three items, however, together with four minor changes, was less than the changes making for a decrease, and resulted in the decline in member bank borrowing. 5 E I G H T E E N T H A N N U A L R E P O R T The demand for currency in the Seventh district expanded further in 1932, but the net increase for the year, amounting to 148 millions, was considerably smaller than the 295 million dollar gain for 1931. Weekly changes in currency demand since 1929 are shown in the chart. The discount rate at this bank was changed but once during the year—a rate of 2 ^ per cent being established on June 25, or a reduction of one per cent from the 3^2 per cent obtaining since October 17, 1931. On August 13, a rate of 6 per cent on discounts for individuals, partnerships and corporations was authorized, in connection with the amendment to the Federal Reserve Act of July 21, already discussed. Money rates in the district eased during the year. As has already been stated, banks suspended in the district during the year just closed totaled 507 and involved deposits of $262,739,000 —approximately 20 per cent less in number and 38 per cent lower in dollar volume than in 1931. Fewer large banks suspended during 1932; only 3 reported deposits in excess of $5,000,000 at time of closing, as compared with 11 in 1931. Reopenings numbered 77, more than twice those of 1931, with total deposits of $79,343,000, nearly treble the volume of that year. There were also in this district, as in others, numerous bank moratoriums and holidays during the year. Most of the banks involved therein reopened following adjustments with depositors and stockholders. Additional data on suspensions are presented in the accompanying table which covers the years 1921-1932. Mergers and absorptions fell off precipitately from 1931 in both number and amount of funds represented. Whereas 209 banks (revised figure) were absorbed in the earlier year, only 61 of the 117 banks merging in 1932 were thus eliminated. Loans and investments BANK , vfSIOl. RESERVE DISTRICT (Deposit Figures in Thousands of Dollars) Member Banks XTrt« ATa Total all Tlank-Q> 111 1 >11 1 1 K Year No. Deposits Total Xo. Deposits National No. Deposits State Member No. Deposits T-,^*- i\ Orl-JYlculDcr Banks Deposits No. 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 46 25 53 108 109 182 124 87 93 266 631 507 18,336 7,033 16,577 36,950 34,126 60,526 44,380 21,746 35,579 111,279 425,041 262,739 5 3 8 16 24 52 34 21 18 32 102 100 1,934 3,658 2,530 8,232 12,402 28,457 15,787 7,495 8,253 26,666 174,836 99,289 4 2 2 6 16 36 25 13 13 28 70 78 1,295 695 293 4,868 7,658 15,756 10,463 5,033 5,607 21,241 77,166 70,092 1 1 6 10 8 16 9 8 5 4 32 22 639 2,963 2,237 3,364 4,744 12,701 5,324 2,462 2,646 5,425 97,670 29,197 41 22 45 92 85 130 90 66 75 234 529 407 16,402 3,375 14,047 28,718 21,724 32,069 28,593 14,251 27,326 84,613 250,205 163,450 Total 2,231 1,074,312 415 389,539 293 220,167 122 169,372 1,816 584,773 FEDERAL RESERVE BANK OF CHICAGO involved in the 1932 consolidations aggregated 309 millions, and capital totaled 34 millions, in comparison with 2,221 millions of loans and investments and 169 millions of capital represented in the 1931 mergers. Two important additions to the national banks of the district took place during the year, one through the conversion of the Continental Illinois Bank and Trust Company of Chicago to a national bank—the Continental Illinois National Bank and Trust Company—and one through the organization of the City National Bank and Trust Company of Chicago, which took over the deposit liability of the Central Republic Bank and Trust Company of Chicago. Through closing of constituent banks, several small groups and chains were eliminated during the year: two in Chicago, one other in Illinois, two in Iowa, and one in Michigan. Of significance in both group and chain, and branch banking is the conversion by the First National Bank of Madison and First Wisconsin National Bank of Milwaukee of several Wisconsin Bankshares Corporation banks into branches through purchase. INDUSTRIAL AND TRADE CONDITIONS The manufacture and production of commodities in the Seventh district was reduced considerably further in 1932, the percentage declines in most lines being even greater than those shown in 1931 from 1930 and new low records being established in many instances. Prices of commodities likewise continued to drop during 1932. In the later months of the year, however, some reduction was noted in the rate of decline for several phases of production, and prices of certain commodities improved slightly. Activity in the steel industry of the district was the lowest in 1932 in many years, ingot production failing to exceed 25 per cent of capacity at any time during the year and dropping to less than 10 per cent at the close of the year. Production of agricultural machinery and of automobiles also was exceptionally light in 1932, the latter totaling approximately 45 per cent under the comparatively small volume of 1931. Shipments of steel castings totaled 60 per cent less than a year previous and those of malleable castings were in only half the 1931 volume, while stove and furnace shipments aggregated one-third less. Furniture manufacturers booked orders and made shipments totaling 45 per cent smaller than in 1931. Building construction was at a low ebb in 1932, amounting to less than half the volume of a year previous, while the 1932 dedine in distribution of building materials approximated 30 per cent, the latter half of the year, however, showing smaller losses from the same period of the preceding year than did the first six months. The shoe industry furnished an exception to the general trend in manufacture, production of shoes in the Seventh district gaining 6 per cent in 1932 over 1931. Food-producing industries, likewise, though recording declines in production from a year previous and suffering sharp reductions in prices at wholesale, showed much smaller recessions in output than did other lines. Production of E I G H T E E N T H A N N U A L R E P O R T packing-house commodities, for instance, declined only 3 per cent in volume from 1931, that of butter only 2 per cent, while the manufacture of cheese decreased 9x/2 per cent. Distribution of these commodities, also, showed only small declines in volume, although, owing to the lower prices, the aggregate value of sales was considerably reduced from 1931. Industrial employment during 1932 averaged approximately 20 per cent lower than in 1931, and aggregate wage payments were more than 30 per cent smaller, the downward trend, which was practically continuous during the first nine months of the year, being sharper than in 1931. In the final quarter of 1932, however, increased activity at automobile plants was largely responsible for a moderate reversal of this trend. As in 1931, the general contraction in manufacturing industries contributed most heavily to the aggregate losses, although non-manufacturing industry also declined to a much greater extent than a year previous. The distribution of commodities continued to decline sharply during 1932. The dollar volume of department store sales of reporting firms in the district totaled 25 per cent smaller than in 1931; the retail shoe trade showed a similar loss in volume; the retail furniture trade fell off 31 per cent; and sales of reporting chains aggregated 15 per cent smaller. Wholesale groups likewise recorded heavy losses in sales from 1931, the wholesale grocery trade declining 18 per cent, drugs 22 per cent, hardware 27 per cent, dry goods 30 GRAIN AND L I V E STOCK PRICES 1930 TO 1932 INCLUSIVE PRICE PER BUSHEL "i CENTS s s s •s mm* - "•« J H Al E m X s> m0- N "• cc)RM 10 • DOLLARS 1 3 PRICE PER 1D0 POUNDS •Ml s s HC]G D «. mm^ , •Mi D ^. vrTl F »•» ^, 10 0 DOLLARS 13 12 11 10 9 8 1 mm e *•« • 1930 1931 1932 5 4 3 2 1 O F E D E R A L R E S E R V E B A N K OF C H I C A G O per cent, shoes 39 per cent, and electrical supplies 38 per cent. In the later months of the year, however, the size of the declines from a year previous was reduced somewhat. Lower price levels than in 1931 accounted partly for the severity of the losses shown in dollar volume of both wholesale and retail lines. Inventories were maintained at a low level throughout the year. In agriculture, substantial increases in the production of corn, oats, barley, buckwheat, flaxseed, potatoes, sugar beets, dry beans, hay, and truck crops were shown in 1932 over 1931. On the other hand, the production of wheat, rye, soy beans, cow peas, fruit, tobacco, and canning crops recorded a marked decrease in this comparison. The district crop of spring pigs was 5 to 10 per cent smaller than in 1931, but the autumn crop increased by a small amount over the preceding fall—probably not more than 4 per cent. The supply of live stock on farms was approximately the same on December 1, 1932, as a year earlier. The number of hogs available for winter and spring marketing declined one per cent from 1931, but the number of dairy and beef cattle increased by one per cent. Indications are that farmers are awaiting a favorable market to cull out the older dairy cattle. Prices declined sharply during the year. DETAILS OF OPERATION OF THE FEDERAL RESERVE BANK OF CHICAGO IN 1932 Financial Results—Net earnings, after depreciation, reserves, etc., totaled $2,242,725 in 1932, as compared with $609,895 in the preceding year and with $1,054,328 in 1930. Dividends to the amount of $1,029,933 were paid, franchise tax of $1,091,513 was paid to the United States Government, and $121,279 transferred to surplus. Surplus at the end of 1931 aggregated $38,411,011 and at the close of 1932 amounted to $39,497,033, representing, in addition to the transfer from net earnings indicated above, a transfer from reserve for depreciation on United States bonds of $964,743. Loan and Discount Operations—The outstanding feature in the loan and discount operations of the Federal Reserve Bank of Chicago during the year 1932 was the almost continual decrease in volume from the beginning to the conclusion of the year. On January 2, loans to member banks stood at the high point for the year, aggregating $94,012,000, as compared with loans of $14,969,000 on December 31, which latter amount represented the low point for the year. This decline in loans to member banks is similar to that experienced by other Federal Reserve banks and to some extent is due to the credit supplied by the purchases of Government securities by the System and advances made by the Reconstruction Finance Corporation, as well as to growth in gold stock during the latter part of the year and the issue of National bank notes under the amendment to the Federal Home Loan Bank Act; no doubt the reduced volume of business was also a contributing factor. FEDERAL RESERVE BANK OF CHICAGO Comparative Statement of Condition (In Thousands of Dollars) Gold Gold Gold Gold Gold Total deposits Deferred availability items Capital paid in Surplus All other liabilities Total liabilities Ratio of total reserves to deposit and Federal reserve note liabilities combined per cent Contingent liability on bills purchased for foreign correspondents 10 174,097 49,659 130,114 823,728 27,811 596,593 29,277 353,870 21,592 851,539 19,279 625,870 10,859 375,462 11,382 3,813 11,156 50,272 24,224 10,891 11,913 74,496 42,052 22,804 52,370 53,354 2,901 49,276 30,905 22,538 36,160 262,210 105,531 3,490 89,603 1,000 281,143 419 2,674 43,214 7,595 1,454 225,569 1,232 3,105 53,531 7,827 1,297 165,777 94 2,333 68,621 8,061 1,127 929,290 632,857 519,471 283,976 3,291 10,376 691 139,163 360,832 2,590 770 960 298,334 51,885 18,011 38,411 3,178 365,152 66,523 20,145 39,936 1,938 1,207,317 LIABILITIES Federal reserve notes in actual circulation Deposits: Member bank—reserve account Government Foreign bank Other deposits 493,247 50,484 52,862 416,028 40,898 16,157 39,497 2,587 Total resources 703,262 92,717 27,749 692,150 409,360 1,782 2,806 2,080 Total United States Government securities Federal Intermediate Credit Bank debentures Total bills and securities. Due from foreign banks Federal reserve notes of other banks. Uncollected items Bank premises All other resources Dec. 31 1930 1.207,317 Total bills discounted Bills bought in open market United States Government securities: Bonds Treasury notes Certificates and bills Dec. 31 1931 483,620 9,627 40,775 34,301 187,134 Total gold reserves Reserves other than gold Total reserves Non-reserve cash Bills discounted: Secured by United States Government obligations.. Other bills discounted Dec. 31 1932 699,870 3,392 14,969 3,964 RESOURCES with Federal reserve agent redemption fund with United States Treasury. . held exclusively against Federal reserve notes.. settlement fund with Federal Reserve Board... and gold certificates held by bank 929,290 632,857 173,000 1,097 76.8 76.5 74.4 5,215 33,551 58,223 FEDERAL RESERVE BANK OF CHICAGO The high point of member bank borrowings in the City of Chicago was $14,962,000 on June 24, and the low point $105,000 on December 29. In the City of Detroit, member banks' borrowings reached a high point of $46,650,000 on February 8. During a portion of the year and at its close no Detroit banks were borrowing. In Iowa, which is preeminently an agricultural state, member banks' borrowings reached a high point at $8,677,000 on January 30 and receded to $2,466,000 on December 31. Credit accommodations were extended to 662 member banks during the year, represented by 15,284 applications and 92,706 notes rediscounted having a face value of $1,054,226,288. In dollars, the volume represents an increase of $45,193,160 over the year 1931. In addition to loans to member banks, 242 notes amounting to $109,375, secured by Adjusted Service Certificates, were rediscounted on 10 applications for 7 non-member banks. One hundred member banks suspended operations in this district during the year. Of these, 79 were indebted to the Federal Reserve Bank of Chicago at the time of suspension in the amount of $7,310,325. This compares with $7,016,026 placed in failed bank accounts during the year 1931, representing liabilities of 76 member banks. Claims against suspended banks as of December 31, 1932, aggregated $1,060,535, representing liabilities to this bank of 32 banks. During the year, collections from claims against closed banks totaled $7,112,739, which included payment in full of the accounts of 72 banks. Open Market Operations—Purchases by this bank of bankers' acceptances in 1932 aggregated only $84,447,000—inclusive of allotments on System account, repurchase agreements, and of purchases from other Federal Reserve banks—as compared with $347,353,000 in 1931. The high point of the bank's holdings for the year was $42,395,000 on January 2, and the low $3,964,000 on December 31. The principal reason for these declines is found in the fact that financing by means of bankers' acceptances decreased in 1932 and that the large accepting banks in the Seventh district pursued a policy of holding bills for their own investment, rather than marketing them. This development resulted in open-market rates on acceptances falling considerably under the bank's minimum buying rate, so that in 1932, for the first time since open-market operations were begun in 1915, this bank was offered, and consequently purchased no acceptances for a period of several months. The bank's minimum buying rate was reduced to 2^4 per cent on January 12, and showed a subsequent recession to 2% per cent on February 26 and to 2y2 per cent on March 25. The last change during the year was made on June 24, when the rate was lowered to one per cent. On the other hand, the open-market rate for prime bills was quoted at }i per cent during the closing weeks of the year. 11 Earnings and Expenses EARNINGS 1932 Discounted bills Purchased bills United States Goyernment securities. Deficient reserve penalties Miscellaneous 1931 1,336,846 367,299 3,455,199 53,856 400,471 Total earnings $ 5,613,671 1930 939,567 $ 1,222,081 629,854 764,703 2,503,592 1,937,290 35,290 32,290 469,751 443,336 $ 4,143,601 $ 4,834,153 325,015 1,533,928 414,510 250 " 1,035 12,229 17,990 97,092 11,769 61,130 44,642 290,102 31,227 7,680 40,289 61,727 22,872 38,656 217,127 52,743 95,858 320,490 1,634,841 406,045 89 115 1,228 11,637 18,666 108,972 15,220 64,654 44,663 166,941 31,944 12,059 45,228 67.093 20,013 41,049 231,868 58,546 83,541 $ 3,292,737 $ 3,377,871 $ 3,384,902 122,299 17,657 135,718 10,812 404,177 16,038 $ 3,432,693 $ 3,524,401 $ 3,805,117 1932 1931 1930 CURRENT EXPENSES Salaries: Officers Clerical employes Other employes Governors' conferences Federal reserve agents' conferences Federal advisory council Directors' meetings Traveling expenses} Assessments for Federal Reserve Board's expenses. Legal fees Insurance on currency and security shipments Other insurance Taxes on banking house Light, heat and power Repairs and alterations, banking house Office and other supplies Printing and stationery Telephone Telegraph Postage Expressage Miscellaneous expenses Total, exclusive of cost of currency. Federal reserve currency: Original cost Cost of redemption Total current expenses. 322,012 1,449,098 410,210 240 138 1,400 12,532 21,429 97,988 16,598 43,341 44,509 292,193 37,127 28,194 37,769 46,882 20,844 33,973 249,096 49,309 77,855 PROFIT AND LOSS ACCOUNT 5,613,671 3,432,693 Earnings Current expenses Current net $ 2,180,978 earnings. Additions to current net earnings: Profit on United States Government securities sold All others Total additions 4,143,601 $ 4,834,153 3,524,401 3,805,117 $ 873,140 1,124 $ Deductions from current net earnings: Bank premises—depreciation Furniture and equipment Reserve for probable losses Reserve for self-insurance All other 874,264 211,754 52,213 $ 812,517 255,952 42,558 263,967 298,510 233,682 8,883 $ 233,682 14,588 21,593 500,000 42,654 Total deductions 619,200 $ 1,029.036 233,681 38,980 30,707 $ Net deductions from current net earnings S57 273,272 273,218 9,305 25,292 61,747 Net additions to current net earnings $ 2,242,725 Net earnings Dividends paid Transferred to surplus Withdrawn from surplus Franchise tax paid United States Government. 1,029,933 121,279 1,091,513 $ 609,895 1,054,328 1,170,633 1,211,418 '560,738 1*5*7*096 t Other than those connected with governors' and agents' conferences and meetings of directors and of the advisory council. 12 Earnings and Expenses—Continued SURPLUS ACCOUNT 1932 1931 1930 Surplus, beginning of year $38,411,011 Additions to surplus: 121,279 Transferred from net earnings Withdrawn from reserve for depreciation on 964,743 United States bonds Charges to surplus: Excess of expenses and dividend payments over earnings Reserve for depreciation on United States bonds. $39,936,492 $40,093,582 560,738 964,743 157,090 Surplus, end of year. $38,411,011 $39,936,492 $39,497,033 The amount of United States Government securities handled by the Investment Department was much greater than in earlier years. This was largely the consequence of this bank cooperating with the System policy of accumulating a large volume of United States Government securities during the summer and of making substantial additions to the bank's supplies of short-term United States Government securities in June. Total holdings, therefore, reached an alltime high of $287,380,100 on June 29, 1932, from which point they subsequently declined to $262,210,000 on December 31. The low point of the year was $105,531,100 on January 2 and 3. COMPARATIVE TABLE OF GOVERNMENT SECURITY TRANSACTIONS 1932, 1931, and 1930 (Inclusive of transactions with member banks and with other Federal Reserve banks) AMOUNTS IN THOUSANDS OF DOLLARS 1932 1931 Number of Transactions Certificates of Indebtedness, Treasury Notes, and U. S. Bonds: •Market Sales tBought with Agreement. tSold under Agreement.. Totals Amount Number of Transactions 17,112 11,434 13 11 28,570 $ 753,803 515,614 25,844 25,844 1,321,105 11,189 9,596 5 6 20,796 1930 Number Amount of Transactions Amount $463,074 450,785 705 7,705 922,269 $348,388 413,264 68,532 61,978 892,162 5,895 7,361 220 199 13,675 •These figures include special Certificates of Indebtedness to cover overdrafts amounting to $24,000,000 in 1932, $160,000,000 in 1931, and $95,000,000 in 1930. tinclusive of Agreements purchased through other Federal Reserve banks. Member Bank Reserves: Reserve Ratio—Reflecting open-market operations of the Reserve System and the augmented stock (since June) of monetary gold in the country, member bank reserve balances in this district showed materially increased volume in 1932. For the month of December, these balances were 82.25 per cent in excess of 13 E I G H T E E N T H A N N U A L R E P O R T legal requirements, this representing the maximum excess for the year. The lowest percentage of excess over legal requirements was shown in February—3.58 per cent. In the preceding year, average excess ranged from a low of 2.04 per cent in February to a high of 8.32 per cent in September. The ratio of this bank's total reserves to deposit and Federal Reserve note liabilities combined was at its 1932 maximum of 83.7 per cent on March 30, and the low point of 70.4 was recorded June 29, at which time a large volume of Federal Reserve notes went into circulation as a result of banking disturbances for the most part in the city of Chicago. Membership, Fiduciary Powers, and Bank Relations—The following tabulation shows changes in status of banks, affecting" membership during 1932: Losses to Membership: 1930 1932 1931 3 Consolidation of state member bank with national b a n k . . . . 2 5 Consolidation of state member bank with state member bank 3 s Consolidation of state member bank with non-member bank Conversion of state member bank to national bank Conversion of state member bank to non-member bank. . . Refund of deposit to state bank closed in preceding year Succession of state member bank by state member bank.. Suspensions and insolvencies of state member banks Voluntary withdrawal of state bank Consolidation of national bank with national bank Consolidation of national bank with state member bank.. Consolidation of national bank with non-member bank. . . Conversion of national bank to non-member bank Refund of deposit to national bank closed in preceding year Succession of national bank by national bank Suspensions and insolvencies of national banks Voluntary liquidation of national bank Total losses 3 3 16 4 19 1 14 2 11 s 3 23 5 27 7 26 2 13 7 60 4 18 IS 1 20 4 1 4 15 2 70 158 97 183 Additions to Membership: Admission of state bank Primary organization of state bank Reopening of state member bank Conversion of state member bank to national bank Succession of state member bank by state member bank. Primary organization of national bank Reopening of national bank Succession of national bank by national bank Total additions 2 "7 23 13 10 135 Net losses 170 87 6 1 4 9 1 Withdrawals Pending at Close of Year: Consolidation of state member bank with national bank Consolidation of state member bank with non-member bank... •Suspensions and insolvencies of state member banks Voluntary withdrawal of state member bank Consolidation of national bank with national bank Consolidation of national bank with state member bank Consolidation of national bank with non-member bank Conversion of national bank to non-member bank Succession of national bank by national bank Suspensions and insolvencies of national banks io 21 Total withdrawals pending. •Including three member banks in custody pending reorganization. tRevised figure. 14 10t "2 11 451 2 10 1 4 1 4 13 FEDERAL RESERVE BANK OF CHICAGO The following banks were authorized and approved in 1932 to exercise fiduciary powers: Illinois: Chicago, Continental Illinois National Bank & Trust Company Chicago, City National Bank & Trust Company *Peru, State-National Bank Rockford, Illinois National Bank & Trust Company f Rock ford, Third National Bank f Savanna, First National Bank Indiana: Logansport, National Bank of Logansport Iowa: Newton, Newton National Bank Sioux City, First National Bank in Sioux City Michigan: Detroit, First Wayne National Bank Pontiac, First National Bank at Pontiac Wisconsin: Neenah, First National Bank •Partial. f Supplementary. All others full powers. The institutions listed below were given confirmations of full trust powers previously granted, due to consolidations or change of title: Indiana: Terre Haute, Terre Haute First National Bank Michigan: Detroit, First National Bank Wisconsin: *Shawano, First National Bank *Partial. MEMBER BANKS—SEVENTH FEDERAL RESERVE DISTRICT December 31, 1932 December 31, 1931 December 31, 1930 Nat'l Illinois Indiana Iowa Michigan . Wisconsin Total State Total Nat'l State Total Nat'l State Total 218 110 166 70 90 22 9 21 95 10 240 119 187 165 100 263 128 197 71 101 34 9 24 108 11 297 137 221 179 112 312 153 236 87 106 38 12 31 130 11 350 165 267 217 117 654 157 811 760 186 946 894 222 1,116 During 1932 representatives of the Bank Relations Department made 867 visits to member banks and 220 visits to non-member institutions—an aggregate of 1,087 calls. Visitors to the number of 3,546 were received at the head office and the Detroit Branch. At the head office 1,553 callers were bankers; 857 students, for the most part in groups; and 592 fell under other classifications. 15 E I G H T E E N T H A N N U A L R E P O R T Comparative Volume of Operations in Principal Departments 1932, 1931, and 1930 Number of Pieces Handled 1932 Bills discounted: Applications Notes discounted Bills purchased in open market and from other F. R. banks for own account Currency received and counted Coin received and counted Checks handled Collection items handled: United States Government coupons paid All other United States securities—issues, redemptions, and exchanges by Fiscal Agency department Transfers of funds Envelopes received and dispatched... 1931 1930 15,294 92,948 9,826 61,060 8,796 38,847 2,260 359,168,000 290,267,000 99,242,000 16,522 398,698,000 328,241,000 121,752,000 17,728 409,291,000 323,631,000 128,039,000 3,252,000 757,000 3,003,000 780,000 3,299,000 753,000 386,000 224,000 4,511,000 437,000 276,000 4,889,000 318,000 328,000 4,826,000 Amounts Handled Bills discounted Bills purchased in open market and from other F. R. banks for own account Currency received and counted Coin received and counted Checks handled Collection items handled: United States Government coupons paid All other United States securities—issues, redemptions, and exchanges by Fiscal Agency department Transfers of funds $ 1,054,336,000 $ 1,009,299,000 $ 1,171,330,000 84,447,000 2,184,821,000 27,859,000 17,601,483,000 359,330,000 2,262,720,000 35,497,000 30,271,276,000 64,095,000 803,509,000 56,620,000 1,168,078,000 60,367,000 1,183,646,000 2,448,504,000 20,378,015,000 MOVEMENT 347,353,000 2,245,632,000 30,547,000 23,367,737,000 2,174,263,000 27,928,297,000 1,025,083,000 35,038,613,000 OF RESOURCES FEDERAL RESERVE BANK OF CHICAGO 1923 TO 1932 INCLUSIVE MILLIONS OF DOLLARS 900 1925 1924 1925 1926 1927 DATA AS OF THE LA5T REPORTING DATE IN EACH MONTH. 16 1928 1929 1950 1931 1952 FEDERAL RESERVE BANK OF CHICAGO Collateral and Safekeeping Operations—The amount of securities and paper held as collateral for bills discounted and for loans at this bank showed an almost uninterrupted decline from the 1932 high point of $233,351,567 on January 2 to a low of $74,240,703 on November 28. The high point of 1931, reached on December 19, amounted to $240,838,349; and the low of $113,387,640 was registered on February 13. On December 31, 1932, a total of 660 banks was using the safekeeping facilities afforded by the Reserve bank, as compared with 721 at the close of 1931. Pieces to the number of 93,061 valued at $371,277,444 were received during 1932, a decline of 54,170 pieces and of $45,023,452 in value from the preceding year. The number of receipts issued in 1932 was 15,215, which was 7,290 less than in 1931. Receipts to the number of 22,705, representing 142,670 pieces having a total value of $346,636,559, were released, as compared with 29,966 releases representing 189,879 securities amounting to $473,585,548 in the preceding year. Although these figures show a marked reduction from 1931, the work of the department remained heavy because a large number of defaults in bonds and coupons necessitated the handling of many items more than a customary number of times. Fiscal Agency—The activities of the Fiscal Agency Department continued to increase in the year 1932, the dollar value of securities handled being approximately 12 per cent over the preceding year. During the year this bank received 4,536 subscriptions for new issues of Government securities (including Treasury bills) totaling $3,895,659,450. On these, there was allotted $664,317,550, delivery MOVEMENT OF LIABILITIES FEDERAL RESERVE BANK OF CHICAGO 1925 TO 1932 INCLUSIVE MILLIONS OF DOLLARS 900 ~~ 800 100 BOO 1923 1924 1925 1926 1927 192B DATA AS DFTHE LAST REPORTING DATE IN EACH MONTH 17 1929 1930 1931 1932 . EIGHTEENTH ANNUAL REPORT of which was made by 4,470 shipments containing 95,590 pieces and amounting to $666,954,850. The difference between this figure and allotments represents transfers on allotment to and from other Federal Reserve banks. Payment for securities allotted was made as follows: By surrender of other Government securities. .$347,999,100 By credit in War Loan Deposit Account 228,180,730 By cash 87,995,269 By discount on Treasury bills 142,451 Total $664,317,550 There were surrendered to this bank for exchange, transfer, etc., Government securities amounting to $1,139,419,650, represented by 236,039 pieces, while there were delivered 417,526 pieces totaling $1,327,625,600. These figures include United States Treasury certificates of indebtedness, Treasury notes and Treasury bills, totaling $613,667,600 (30,460 pieces), accepted for telegraphic transfer to other Federal Reserve banks, and like securities totaling $818,178,800 (30,090 pieces) delivered for account of other Federal Reserve banks. Securities redeemed totaled $642,129,784, represented by 54,343 pieces. In addition, 3,252,248 coupons amounting to $64,095,033 were cashed. In February 1932 the Federal Reserve Bank of Chicago, together with the other Federal Reserve banks, was requested to act as custodian for the Reconstruction Finance Corporation. This necessitated the building up of a new division in which there are now 183 employes. During the year the Fiscal Agency Department (including the Detroit Branch) for account of the Reconstruction Finance Corporation made 2,803 advances to 1,839 borrowers for a total of $294,282,788, of which $49,875,304 was repaid. Gold Settlement Fund—Transactions between the Seventh and other Federal Reserve districts recorded a net gain to this bank of $128,133,000 in 1932, as compared with a gain of $176,324,000 in 1931. Receipts from other Federal Reserve banks totaled $13,577,648,000 and payments amounted to $13,449,515,000 during the year. These figures reflected a considerable decrease in amount from the $17,413,303,000 received and $17,236,979,000 paid out for similar transactions in 1931. Our balance in the Gold Settlement Fund amounted to $92,716,936 on December 31, 1932. Clearings and Collections—The number of checks handled during the year 1932 by the Head Office and the Detroit Branch combined, was less than the 1931 volume. A large part of the decrease was due to the tax on checks imposed by the Revenue Act of 1932. The total number of checks decreased 18.5 per cent; those payable 18 FEDERAL RESERVE BANK OF CHICAGO in Chicago and Detroit decreased 9.3 per cent; those payable outside of these cities decreased 22.3 per cent; and Government checks decreased .6 per cent. The total number of items handled during the year by both offices was 99,241,539 (including duplications), amounting to $17,601,483,000, of which number 89.3 per cent was drawn on banks in the Seventh district, 5.3 per cent on banks in other districts, and 5.4 per cent on the United States Treasurer. On December 31, 1931, there were 495 banks using the Federal Reserve clearing facilities as compared with 504 on December 31, 1932. The Federal Reserve Bank of Chicago and its Detroit branch handled 756,578 non-cash collection letters in 1932, as compared with 780,215 in the preceding year; in aggregate value the 1932 volume was $803,508,761, a decline of $364,569,131 from 1931. Of the foregoing 1932 totals, Detroit handled 131,762 items valued at $78,214,222 as against 131,883 items and $128,297,527 a year earlier. The volume of funds transferred by Chicago and Detroit for member banks was only $20,378,014,526 in 1932, whereas $27,928,297,109 was handled in this manner during 1931. Of the 1932 total, $15,437,401,787 went over leased wires and $1,515,811,353 over commercial wires. All other transfers comprised the remaining $3,424,801,386. Cash Department—The amount of currency handled in the Cash Department during 1932 was less than in the preceding year. Payments of paper currency aggregated $2,288,518,000 as compared with $2,518,902,000 in 1931. Currency received amounted to $2,184,388,000 as compared with $2,234,314,000 in the preceding year. However, there was an increase in Federal Reserve note circulation of this bank of $164,524,000, from $527,626,000 on January 2 to $692,150,000 on December 31. Although this increase is considerably less than the gain of $378,234,000 in 1931, it is doubtless in large measure a reflection of continued, though decreased, hoarding in this district. The number of paper currency shipments to country banks was 34,684, as against 38,473 in 1931. The number of coin shipments to country banks was 8,542, as compared with 8,924 in the preceding year. Internal Organization—George J. Schaller was re-elected a Class A director for the term expiring 1935. Nicholas H. Noyes, Treasurer of Eli Lilly and Company, Indianapolis, Indiana, was elected a Class B director for the term expiring 1935. James Simpson was re-appointed a Class C director for the term expiring 1935. Eugene M. Stevens was re-designated as Chairman of the Board and Federal Reserve Agent. James Simpson was re-designated as Deputy Chairman of the Board. The directors for the year 1933 are shown on page 2. The Executive Committee for the year 1933 will consist of the following: Chairman, Governor McDougal; Eugene M. Stevens, 19 EIGHTEENTH ANNUAL REPORT Chairman of the Board and Federal Reserve Agent; Messrs. George M. Reynolds, James Simpson, Edward R. Estberg, and George J. Schaller, Directors. The Committee on Admission for the year 1933 will consist of the following: Chairman of the Board and Federal Reserve Agent, Eugene M. Stevens; Governor McDougal and Director Estberg. Robert M. Feustel, Class B Director, died May 8, 1932. Mr. Feustel served as a member of the Board of Directors from January 1, 1930, until his death. There was one resignation from the official staff during the year: John H. Blair, deputy governor, resigned as of December 31. The following is a comparison of the total number of employes, exclusive of officials, at the Chicago office: December 31, 1931 1,045 December 31, 1932 1,178 Increase 133 Wilson W. Mills, Chairman of the First National Bank—Detroit, Detroit, Michigan, was appointed a director of the Detroit Branch to fill the unexpired term of William J. Gray, who died December 22, 1932. Mr. Gray served as a director of the Detroit Branch from January 1, 1926, until his death. John Ballantyne was reappointed as director and William R. Cation as managing director. The directors for the year 1933 are shown on page 2. There was one appointment to and one resignation from the official staff of the Detroit Branch during the year 1932. William C. Recknagel was appointed Assistant Federal Reserve Agent, April 23, 1932, and resigned December 2, 1932. The following is a comparison of the total number of employes, exclusive of officials, at the Detroit Branch: December 31, 1931 207 December 31, 1932 248 Increase 41 20
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