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OPERATION
OF

FEDERAL RESERVE BANK
OF CHICAGO

1929
SEVENTH FEDERAL RESERVE
DISTRICT

FIFTEENTH ANNUAL REPORT
TO
THE FEDERAL RESERVE BOARD



OPERATION
OF

FEDERAL RESERVE BANK
OF CHICAGO

1929
SEVENTH FEDERAL RESERVE
DISTRICT

FIFTEENTH ANNUAL REPORT
TO

THE FEDERAL RESERVE BOARD



FEDERAL RESERVE BANK OF CHICAGO
Directors and Ojficers for 1930
CLASS

A—DIRECTORS

GEORGE M. REYNOLDS, Chicago, Illinois

(1930)
Chairman of Board, Continental Illinois Bank
and Trust Company
EDWARD R. ESTBERG, Waukesha, Wiscon-

sin (1931)
President, Waukesha National Bank
GEORGE J. SCHALLER, Storm Lake, Iowa

(1932)

President, Citizens First National Bank

CLASS

B—DIRECTORS

AUGUST H. VOGEL, Milwaukee, Wiscon-

sin (1930)

Vice-President, Pfister and Vogel Leather
Company
STANFORD T. CRAPO, Detroit, Michigan

(1931)
Secretary and Treasurer, Huron Portland
Cement Company
ROBERT M. FEUSTEL, Fort Wayne, In-

diana (1932)

JAMES B. MCDOUGAL, Governor
JOHN H. BLAIR, Deputy Governor
CHARLES R. MCKAY, Deputy Governor
LOANS AND CREDITS
KENT C. CHILDS, Controller of Loans

and Credits
EUGENE A. DELANEY, Manager Credit

Department
JOSEPH C. CALLAHAN, Manager, Mem-

ber Bank Accounts Department
FRANKLIN

L.

PURRINGTON,

Manager,

Discount Department
INVESTMENTS
ALBA W. DAZEY, Manager,

Investment

Department
CASH AND CUSTODIES
OTTO J. NETTERSTROM, Controller of Cash

and Custodies
JESSE G. ROBERTS, Manager, Cash De-

partment
ROBERT E. COULTER, Manager, Cash Cus-

President, Indiana Service Corporation

CLASS C—DIRECTORS
WILLIAM A. HEATH, Evanston, Illinois

tody Department
FRED BATEMAN, Manager, Securities De-

partment

(1930)
Federal Reserve Agent
FRANK C. BALL, Muncie, Indiana (1931)
President, Ball Bros. Company
JAMES SIMPSON, Chicago, Illinois (1932)
President, Marshall Field and Company

OFFICERS
WILLIAM A. HEATH, Chairman
JAMES SIMPSON, Deputy Chairman
WILLIAM H. WHITE, Assistant Federal

Reserve Agent
CLIFFORD S. YOUNG, Assistant

Federal

Reserve Agent
HARRIS G. PETT, Manager, Division of

Research and Statistics
FRANCIS R. BURGESS, Auditor
WALTER A. HOPKINS, Assistant Auditor
CARL MEYER, Counsel
FRANK O. WETMORE, Chicago, Illinois,

Member Federal Advisory Council

WILLIAM

COLLECTIONS
C. BACH MAN, Controller of

Collections
IRVING FISCHER, Manager, Check Depart-

ment
Louis G. PAVEY, Manager,
Department

Collection

ADMINISTRATION
JAMES H. DILLARD, Controller of

Ad-

ministration
ROBERT J. HARGREAVES, Manager, Per-

sonnel Department
Louis G. MEYER, Manager, Service Department
FRANK A. LINDSTEN, Manager, Disburs-

ing Department
ARTHUR L. OLSON, Assistant Controller
FISCAL AGENCY
DON A. JONES, Controller of Fiscal

Agency Functions

DETROIT BRANCH
Directors and Officers
GEORGE B. MORLEY, Saginaw, Michigan
President, Second National Bank
DAVID MCMORRAN, Port Huron, Mich-

igan

Treasurer and Manager, McMorran Milling
Company
WILLIAM J. GRAY, Detroit, Michigan
President, First National Bank
JAMES INGLIS, Detroit, Michigan
President, American Blower Company




N. P. HULL, Lansing, Michigan
President, Grange Life Insurance Company
JULIUS H. HAASS, Detroit, Michigan
President, Peoples Wayne County Bank
WILLIAM R. CATION, Managing Director
HARLAN J. CHALFONT, Cashier
GEORGE T. JARVIS, Assistant Cashier
JOHN G. BASKIN, Assistant Cashier
FLOYD L. BOWEN, Assistant Auditor
ISADORE LEVIN, Assistant Counsel

FEDERAL RESERVE BANK
OF CHICAGO
Chicago, January 14, 1930.
Sir:
I have the honor to submit herewith, in accordance
with the usual custom, the fifteenth annual report of
the Federal Reserve Bank of Chicago, covering the
year 1929.
Respectfully,
W. A. HEATH,

Federal Reserve Agent.
HON. ROY A. YOUNG,

Governor, Federal Reserve Board,
Washington, D. C.




FEDERAL RESERVE BANK OF CHICAGO
Comparative Statement of Condition
( I N THOUSANDS OF DOLLARS)
Dec. 31,
1929

Dec. 31,
1928

Dec. 31,
1927

Gold with Federal reserve agent
Gold redemption fund with United States Treasury....
Gold held exclusively against Federal reserve notes..
Gold settlement fund with Federal Reserve Board
Gold and gold certificates held by bank

269,564
11,420

213,217
9,843

247,767
4,267

280,984
86,463
73,601

223,060
180,100
60,751

252,034
103,172
55,980

Total gold reserves
Reserves other than gold
Total reserves
Non-reserve cash
Bills discounted:
Secured by United States Government obligations..
Other bills discounted

441,048
12,652

463,911
11,764

411,186
16,831

453,700
12,405

475,675
10,781

428,017
9,362

75,121
37,547

80,872
65,647

30,976
21,694

Total bills discounted
Bills bought in open market
United States Government securities:
Bonds
Treasury notes
Certificates of indebtedness
Treasury bills

112,668
37,561

146,519
39,078

52,670
62,295

25,439
12,208
22,953
8,247

19,937
6,184
9,729

48,934
8,070
32,994

68,847
1,500

35,850

89,998

220,576

221,447

204,963

84,034
8,295
657

89,931
8,527
849

88,620
8,609
1,375

779,667

807,210

740,946

304,538

323,590

265,293

331,302
2,930
768
1,484

343,099
1,068
904
2,101

345,676
2,518
639
1,108

336,484

347.172

349,941

76,345
20,013
40,094
2,193

79,336
18,478
36,442
2,192

73,124
17,965
32,778
1,845

779,667

807,210

740,946

RESOURCES

Total United States Government securities
Federal Land Bank bonds
Total bills and securities
Uncollected items
Bank premises
All other resources
Total resources
LIABILITIES

Federal reserve notes in actual circulation
Deposits:
Member bank—reserve account
Government
Foreign bank
Other deposits
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




70.7

70.9

69.5

74,895

44,901

31,571

OPERATION OF THE FEDERAL
RESERVE BANK OF CHICAGO
IN 1929
HE year 1929 in the Seventh district came to a close with
business and industrial activity at a considerably lower level
than in 1928 or the earlier months of the year. The recession, though evident in some lines of industry since summer, notably
automobile production, became more general and widespread after
the drop in security prices in late October and early November, and
the opening of the new year finds many phases of the district's
economy in process of adjustment. In spite of the developments of
the fourth quarter, however, 1929 in the aggregate was characterized
by large scale production and distribution in several important industries. Automobile production, for example, was greater than
in any previous year and aggregated almost 1,000,000 cars heavier
than in 1928; output, while lower in the last quarter of the year
than in the same period a year ago, for the first nine months totaled
larger than in all of 1928. Distribution of automobiles fell off
considerably in the later months of 1929, but heavy gains recorded
in the earlier months effected an increase for the year as a whole
over 1928. The iron and steel industry of the district also experienced record activity through the first eight months of 1929, and
the usual seasonal recession which takes place in midsummer was
scarcely evident. In September, however, a decline was apparent,
this trend continuing to the close of the year, but aggregate output
for 1929 exceeded the 1928 volume. Shipments of steel and
malleable castings were in greater volume than the year previous;
the gain in steel casting shipments was evident for each month of
1929, but shipments of malleable castings in the later months of the
year were below the 1928 volume for the same months. Sales of
meat packing companies in the aggregate exceeded the total for the
preceding year by about 5.7 per cent. From the production viewpoint, the coal industry in 1929 also showed improvement over
1928 and 1927.

T

Distribution of commodities both at wholesale and retail was
larger during 1929 than in 1928, and the latter year had shown
expansion over 1927. Department store trade increased approximately 1 per cent over 1928, sales of shoes and furniture at retail
were larger, and chain store trade continued to gain in the aggregate.
In reporting wholesale lines, the grocery, hardware, dry goods, and
the electrical supply trade recorded heavier sales in 1929 than a year
ago, those of electrical supplies being especially good; drug and
shoe wholesalers reported a smaller volume sold than in 1928. As in
manufacturing lines, merchandising activity fell off in the later
months of the year.




FIFTEENTH

ANNUAL

REPORT

Several departments in the Federal Reserve Bank in 1929 carried
a heavier volume of work than in 1928, and in some cases operations
exceeded any previous year, notably in currency received and
counted, checks handled, and in transfer of funds. The volume
of reserve bank credit in use in the district during the year changed
little from 1928. The weekly average of total bills and securities
of the Federal Reserve Bank in 1929 was $195,166,000, compared
with $194,851,000 in 1928 and $155,813,000 in 1927.
It became apparent in the opening months of the year that member
banks were not liquidating their loans at the Federal Reserve Bank
as is usual at that season each year. On December 31, 1928, the
total loans to member banks amounted to approximately $146,000,000,
and by February 28 the item stood at $195,000,000, an increase of
$49,000,000. Furthermore, some of the member banks had been in
debt to the reserve bank practically continuously for a considerable
period. In these circumstances, steps were taken to correct the
situation by requesting liquidation of loans at the reserve bank by
those member banks which had been continuous and heavy borrowers, particularly those in Chicago, Detroit, Milwaukee, and other
of the important cities in the district, as the increased demands for
credit did not come from agricultural areas, but were concentrated
largely in the principal cities through a large increase in the collateral
loans of the member banks located therein. By this means total
loans to member banks were reduced from the high point of
$237,000,000 on March 20 to $88,000,000 on May 11, a drop of
$149,000,000, of which $124,000,000 occurred in Chicago, $16,000,000
in Detroit, $6,000,000 in Milwaukee, and the remaining $3,000,000
in other cities. Further reductions in borrowings were made by
Chicago member banks and on October 24, when the severe break
occurred in the securities markets, they were borrowing only
$4,600,000, and were therefore well prepared to meet the seasonal
commercial demand as well as to supply the additional amout of
credit required for collateral loans caused by the crisis in the securities markets. The growth of member bank loans on securities to
others, not brokers but chiefly customers who had transferred their
borrowings from brokers directly to the banks, increased very
materially between October 23 and November 13, for the most part
in Chicago, and liquidation of this type of loan subsequent to that
date has been on a limited scale.
The rediscount rate of the Federal Reserve Bank of Chicago on
November 23 was lowered to Ay2 per cent from the 5 per cent in
effect since July 11, 1928.
A total of 93 banks in the district suspended in 1929, an increase
of six over the 87 closed during the preceding year. Of the 1929
aggregate thirteen were national banks, five state member banks,
and seventy-five non-member, of which twelve were private institutions.




FEDERAL RESERVE BANK OF CHICAGO

The Seventh district shared to a considerable extent in the countrywide trend in bank mergers. During the year just closed, approximately 174 institutions have been involved in consolidations, with
aggregate capital of almost $144,000,000 and gross deposits of
nearly $2,300,000,000. The resulting institutions numbered 85,
with capital of over $176,000,000. In 1928, banks involved in consolidations numbered 159, with 78 resulting institutions whose
aggregate capital, however, amounted to less than $50,000,000 and
with gross deposits of only $841,000,000. Among the larger mergers
in 1929 may be noted: in Illinois, those of the Illinois Merchants
Trust Company and the Continental National Bank and Trust Company of Chicago into the Continental Illinois Bank and Trust
Company; of the Union Trust Company, the First National Bank
and the First Trust and Savings Bank, all of Chicago, into the First
National Bank and the First Union Trust and Savings Bank; of
the State Bank of Chicago, the Foreman National Bank and the
Foreman Trust and Savings Bank into the Foreman-State National
Bank and the Foreman-State Trust and Savings Bank; of the
Central Trust Company and Bank of America, of Chicago, into the
Central Trust Company of Illinois; and of the National Bank of the
Republic and the Chicago Trust Company, although both of these
latter institutions retained their individual identity; in Indiana, that
of the Tri-State Loan and Trust Company and the First National
Bank of Fort Wayne into the First and Tri-State National Bank
and Trust Company; in Iowa, that of the Iowa National Bank,
Des Moines National Bank and the Des Moines Savings Bank and
Trust Company into the Iowa-Des Moines National Bank and Trust
Company; and in Michigan, those of the National Bank of Commerce and Griswold-First State Bank of Detroit into the National
Bank of Commerce; of the Merchants National Bank and Dime
Savings Bank of Detroit into the Bank of Michigan; of the Old
National Bank and Kent State Bank of Grand Rapids into the Old
Kent Bank; and of the Industrial Savings Bank and Union Trust
and Savings Bank of Flint into the Union Industrial Bank of Flint.
In the matter of group and chain banking, also, the district has
witnessed significant developments during the year 1929, several
groups of many ramifications in the banking structure of the district
having come into existence in that period, in the main through organizations of holding companies for the purchase of constituent
institutions. Outstanding in this respect are the First NationalPeople's Wayne and the Guardian Detroit-Union groups in Detroit,
Michigan; the First Wisconsin group whose holding company is
known as the Wisconsin Bank Shares Corporation, of Milwaukee,
Wisconsin; and the National Republic Bancorporation of Chicago.'
whose organization was announced as the year drew to a close, with
stock holdings in some fifteen banks and investment companies in
Chicago and adjacent territory. The Northwest Bancorporation of




FIFTEENTH

ANNUAL REPORT

Earnings and Expenses
EARNINGS

Discounted bills
Purchased bills
U. S. securities
Federal Intermediate Credit Bank debentures
Federal Land Bank bonds
Deficient reserve penalties
Miscellaneous
Total earnings.

1929

1928

1927

$6,777,014 $5,427,825 $2,247,451
1,285,493 1,301,910 1,188,5+6
1,269,968 1,722,821 2,215,536
5,903
16,638
44,287
47,971
76,425
439,575
467,848
458,010
$9,889,451 $8,936,418
5,167,352

CURRENT EXPENSES

Salaries:
f 311,591 p 307,420 £ 296,811
Bank officers
1,677,987 1,712,899 1,730,516
Clerical staff
129,351
112,208
128,016
Special officers and watchmen
275,378
273,338
283,826
All other
344
274
232
Governors' conferences
269
168
128
Federal reserve agents' conferences
1,054
1,214
1,360
Federal Advisory Council
9,797
11,540
8,969
Directors' meetings
23,687
25,262
20,033
tTraveling expenses
95,764
106,972
106,654
Assessments for Federal Reserve Board expenses
3,444
3,199
9,697
Legal fees
Insurance (other than on currency and security ship
31,603
44,620
3,6,773
ments)
281,601
291,366
276,000
Taxes on banking house
35,136
32,037
26,703
Light, heat and power
21,373
21,947
21,225
Repairs and alterations, banking house
5,134
38,700
Rent
20,638
21,646
19,879
Telephone
41,758
40,930
43,281
Telegraph
243,679
243,272
265,294
Postage
55,671
55,411
62,745
Expressage
67,496
68,179
73,332
Insurance on currency and security shipments
76,749
73,073
74,581
Printing and stationery
61,235
54,444
55,890
Office and other supplies
82,894
85,365
81,381
Miscellaneous expenses
Federal reserve currency (including shipping charges) :
90,615
267,131
450,979
Original cost
19,275
23,973
Cost of redemption
21,690
$4,092,369 $3,696,679 $3,887,058
Total current expenses.
PROFIT AND LOSS ACCOUNT

Earnings
Current expenses
Current net earnings
Additions to current net earnings
Deductions from current net earnings:
Depreciation allowances on bank premises
Reserve for probable losses
Furniture and equipment
All other
Total deductions
Net deductions from current net earnings

1929

1928

1927

$9,889,451 $8,936,418 $6,167,352
4,092,369 3,696,679 3,887,058
$5,797,082 $5,239,739 $2,280,294
8,050 $

11,833 $

13,061

233,682 $ 192,809 $ 165,197
23,659
50,809
31,500
68,872
130,720
59,750
202,803
18,985
55,535
$ 380,467 $ 488,143

365,711

$ 372,417 $ 476,310

352,650

Net earnings available for dividends, surplus and fran$5,424,665 $4,763,429 $1,927,644
chise tax
Dividends paid
Transferred to surplus account
Franchise tax paid United States Government

$1,170,363 $1,099,761 $1,029,990
3,651,464 3,663,668
897,654
602,838

tOther than those connected with governors' and agents' conferences and meetings
of directors and of the advisory council.




FEDERAL RESERVE BANK OF CHICAGO
Minneapolis, while operating largely in other districts, during the
year 1929 acquired stock in several institutions in the Seventh district, located in Des Moines, Mason City, and Sioux City, Iowa, and
Berlin, Wisconsin. Many of the large banks in Chicago, Detroit,
and other important cities have assumed substantial control of
smaller outlying institutions by means of the acquisition by individual
directors of stock holdings in the latter banks.
Farm income in the Seventh district for the crop year July 1,
1929, to June 30, 1930, is estimated as 0.6 per cent more than that
of 1928-1929, according to the latest figures available. The income
from farm crops alone is expected to exceed that of the preceding
crop year by 9.5 per cent, reflecting in large measure a good crop
of winter wheat in contrast to a poor yield in 1928; this gain, however, is offset by a decline of 2.3 per cent in the income from live
stock and animal products. Crops in 1929 in general were smaller
than in 1928, the result of delayed planting, cool, unfavorable
weather until midsummer, followed by a drought, regarded by many
as the worst in years, extending from the middle of July to early
September. The production of winter wheat, rye, hay, peaches,
strawberries, and a number of truck crops, however, increased over
last year. A smaller crop of pigs and a larger one of lambs were
reported than in 1928. December 1 supplies of live stock available
for winter and spring marketing were indicated as less than a year
ago; dairy herds increased.
FINANCIAL RESULTS OF OPERATION
Net earnings of the Federal Reserve Bank of Chicago for the
calendar year 1929 were $5,424,665, as against $4,763,429 in 1928
and $1,927,644 in 1927. Out of 1929 net earnings, dividends of
$1,170,363 were paid, $3,651,464 was transferred to surplus, and
$602,838 paid to the United States Government as a franchise tax,
the first such payment since 1923 when $246,586 was paid. While
this bank paid no franchise tax to the United States Government
between 1923 and 1929, it has nevertheless, since its organization,
paid such tax to an aggregate of $24,222,013 in the years and in
the amounts shown below:
1917
1920
1921
1922
1923
1929




$ 215,799
10,394,480
11,576,009
1,186,301
246,586
602,838
$24,222,013

FIFTEENTH

ANNUAL REPORT

Comparative Volume of Operations in Principal Departments
1929, 1928, and 1927
1929

NUMBER OF PIECES HANDLED

Bills discounted:
Applications
Notes discounted
Bills purchased in open market for
own account
Currency received and counted. . . .
Coin received and counted
Checks handled
Collection items handled
U n i t e d S t a t e s Government
coupons paid
All other
United States securities — issues,
redemptions, and exchanges by
Fiscal Agency department... .
Transfers of funds
Envelopes received and dispatched

1928

1927

13,554
54,860

13,056
48,885

12,811
59,413

14,029
410,223,000
231,019,000
129,661,000

22,062
376,595,000
279,743,000
123,365,000

24,318
354,844,000
263,577,000
119,112,000

3.548,000
742,574

4,743,000
702,000

6,084,000
599,000

374,000
355,000
4,901,088

1,377,000
337,000
5.085,000

1,493,000
299,000
5,071,000

Bills discounted
$ 5,187,455,000
Bills purchased in open market for
own account
262,259,000
Currency received and counted.. . .
2,266,698,000
Coin received and Counted
34,327,000
Checks handled
35,219,944,000
Collection items handled:
U n i t e d S t a t e s Government
coupons paid
64,084,000
All other
996,964,000
United States securities — issues,
redemptions, and exchanges by
Fiscal Agency department....
1,189,208,000
Transfers of funds
31,088,981,000

$ 5,928,134,000

? 2,778,197,000

324,613,000
2,103,652,000
38,253,000
29,077,223,000

370,354,000
1,979,757,000
36,096,000
27,069,498,000

63,567,000
1,004,814,000

64,196,000
989,766,000

1,506,837,000
27,047,795,000

1,456,559,000
24,367,445,000

AMOUNTS HANDLED

MOVEMENT OF RESOURCES
Federal Reserve Bank of Chicago, 1920 to 1929, Inclusive

1920

1921

1922

1923

1924

1925

1926

1927

Data as of the last reporting date in each month.




10

1928 1929

FEDERAL RESERVE BANK OF CHICAGO

Although total current expenses in 1929 were $4,092,369 compared
with $3,696,679 in the preceding year, the gain was attributable in
large measure to increased cost of currency, amounting to $360,364.
DISCOUNT OPERATIONS IN 1929
The loan and discount operations of the Federal Reserve Bank
of Chicago during the year 1929 were marked by a substantial increase in the average amount of loans outstanding over the year
1928, though the total volume of paper handled was smaller. The
high point of loans for the year was on March 20, $237,173,000,
and the low point was on September 10, $82,547,000.
Country bank borrowings followed the usual seasonal fluctuations,
the bulk of the increase in loans coming from the larger centers.
Agricultural and livestock demands followed the usual seasonal
trend. A typical illustration of the trend of agricultural demand may
be found in the fluctuation of loans to member banks in the state
of Iowa. In this state the usual seasonal liquidation followed the
first of the year, when member banks' borrowings declined from
$6,385,000 on January 4 to $3,070,000 on February 23. The planting season brought this item back to $7,419,000 on June 1, followed by the summer reduction and then by the fall demand, which
brought the total amount up to the high point of $13,289,000 on
December 4. Thereafter, the marketing of farm products gradually
liquidated these loans down to $6,217,000 on December 31.
MOVEMENT OF LIABILITIES
Federal Reserve Bank of Chicago, 1920 to 1929, Inclusive

1928

Data as of the last reporting date in each month.




11

1929

FIFTEENTH

ANNUAL REPORT

The high point of member banks' borrowings in the city of Chicago was $149,445,000 on March 19 and the low point $1,472,000
on October 30.
We extended credit accommodation during the year to 709 banks,
represented by 13,554 applications and 54,860 notes rediscounted,
having a face value of $5,187,455,000. This represents a decrease
of $740,679,000 from the year 1928.
During the year $372,296 of rediscounted paper was taken
from rediscounts and placed in Failed Banks Accounts because of
the failure of 12 member banks indebted to us at the time of closing.
This, compared with $503,131 during the year 1928, represents
a reduction of $130,834.
The aggregate average reserve balances maintained by member
banks in the Seventh district exceeded the total legal requirements
throughout the year, the excess attaining a peak of 2.63 per cent in
July and registering lows of 2.14 in February, April, and August.
COLLATERAL AND SAFEKEEPING OPERATIONS
The volume of securities held as collateral during 1929 was at its
maximum on March 29, with $236,142,000, and showed the lowest
aggregate on December 31 with $151,002,000. In the preceding
year the high point of $245,327,000 was recorded July 2 and the
low point of $124,852,000 on January 11. December 31 holdings of
collateral amounted to $151,002,000 as against $214,526,000 at the
end of 1928.
Banks to the number of 769 had $287,977,432 in securities deposited for safekeeping with the head office and Detroit branch on
December 31, a drop of 25 in the number of banks and of $1,204,356
in the amount of securities from the corresponding aggregates at
the close of 1928. During the entire year of 1929, a total of 108,565
pieces was received for safekeeping, with an aggregate value of
$198,587,634, representing decreases of 34.6 and 30.0 per cent,
respectively, from 1928. The number of receipts issued declined
29.7 per cent—from 25,160 in 1928 to 17,682 in 1929—and the
number of receipts released decreased from 17,723 to 15,694, or
11.4 per cent.
There were detached from bonds in the Safekeeping and Collateral divisions during the year, 449,990 interest coupons with a
total value of $20,267,058.
INVESTMENTS
Operations of the Investment Department during 1929 for the
account of this bank were in conjunction with the other Federal
Reserve banks in accordance with a System policy.
There was purchased during the year for the System account about
$27,500,000 of short-term Government securities compared with
12




FEDERAL RESERVE BANK OF CHICAGO
$17,200,000 in 1928, but only $5,000,000 of these short-term securities was sold in this market in 1929 compared with $17,200,000
during the preceding year. The System Investment Account of this
bank was liquidated to some extent during the early part of the
year, and then remained practically stationary until November, at
which time this bank began to purchase quite liberally in this market,
and continued to do so for the remainder of the year.
This bank's purchases of bankers' acceptances during the year followed the usual practice, being made freely from the open market
and from member banks, but offerings for the first nine months
were less than for several years past, the attractive rates on
acceptances effecting better distribution to permanent investors.
During 1929 this bank purchased for its own Investment Account,
directly and through other Federal Reserve banks, about $145,500,000 of bills (exclusive of repurchase agreements and a small
amount of bills payable in foreign currency). Total purchases
inclusive of these two items amounted to $262,259,000 in 1929, as
compared with $324,600,000 in 1928. Holdings were at a low point
on April 29, with $1,651,000 of bills, exclusive of sales agreement
contracts, and reached a high point on October 17 of about
$46,000,000.
The bank handled approximately 8,700 purchases of Government
securities during the year for the account of member banks compared with 6,700 in 1928, but the par value amounted to about
$33,887,000 compared with $39,727,000 in 1928. The sales for
member banks were about 3,400 less in number but amounted to
about $6,500,000 more in par value. Purchases for the account of
the Treasury amounted to slightly more than $25,000,000 compared
with $43,000,000 last year.
COMPARATIVE TABLE OF GOVERNMENT SECURITY TRANSACTIONS 1929,
1928, AND 1927—AMOUNTS IN THOUSANDS OF DOLLARS
1929
Number
of Transactions
Certificates of Indebtedness, TreasuryNotes, and U. S.
Bonds:
•Market Purchases.
•Market Sales
Bought with Agreement
Sold under Agreement
Totals

1928

Amount

Number
of Transactions

1927

Amount

Number
of Transactions

Amount

$806,585
664,501

8,818
5,461

$274,609
195,443

6,897
8,967

$367,656
365,414

5,056
13,167

371

169,021

334

189,530

395

204,177

430
15,080

171,290
810,363

508
16,706

191,670
1,114,270

538
19,156

200,305
1,875,568

•These figures include special Certificates of Indebtedness to cover overdrafts amounting
to $116,500,000 in 1929, $131,000,000 in 1928, and $384,000,000 in 1927.




13

FIFTEENTH ANNUAL REPORT
FEDERAL RESERVE N O T E AND DEPOSIT LIABILITIES;
RESERVE POSITION

Reflecting a high level of business activity in the district through
the greater part of the year, as well as desire of the public for the
new currency, the volume of Federal Reserve notes in circulation
showed a considerable expansion in 1929 over the preceding year,
reaching a high point of $349,600,000 on July 10, whereas in 1928
the high point of $331,855,000 was reported on December 26. The
low point of 1929 Federal Reserve note circulation in the district
was recorded on February 6, with $274,126,000, compared with the
previous year's low of $229,549,000 on February 1. The trend of
Federal Reserve note circulation is shown since 1920 on the chart
presented on page 11. Member bank reserve deposits ranged from
a low point of $330,831,000 (May 22) to a high of $372,160,000 on
October 30, with a weekly average of $347,536,000 for the year as
against $349,965,000 in 1928; in that year the low point was shown
on August 29 with $335,592,000 and a peak of $379,474,000 on
July 3. Total cash reserves were at their lowest point in 1929 on
March 20 ($378,018,000), and the $588,639,000 reported July 24
constituted the high point. In 1928 the low point of cash reserves
was recorded on January 18 with $416,795,000 and the high point
on September 12 with $524,852,000. On the closing day of 1929,
this bank's reserve ratio was 70.7 per cent and on the first reporting
date, January 2, was 68.6 per cent; the high points were shown
May 15 and September 4 (85.9 per cent) and the low March 20
(60.0 per cent).
MEMBERSHIP
Four state banks in the Seventh district were admitted to membership in the System during 1929: the Continental Illinois Bank
and Trust Company and the Central Trust Company of Illinois,
Chicago, Illinois; Merchants Trust and Savings Bank, Battle Creek,
Michigan; and the Chesaning State Bank, Chesaning, Michigan.
One of these banks represented a consolidation of two member
banks, another the merger of a non-member with a state member
bank, and two were formerly eligible non-member banks entering
the System. Forty-two state banks terminated their membership in
the System during the year. One had previously merged with a
national bank (1928) ; another took over a non-member bank and
was readmitted under a new charter; one took out a membership
under a new title following consolidation with a national bank; three
merged with national banks ; two were converted into national institutions ; six represented mergers between state member banks, the
resulting institutions becoming non-members (in the case of two of
these banks, however, part of the assets were taken over by national




14

FEDERAL RESERVE BANK OF CHICAGO

banks); four merged with state member banks; four were taken
over by non-member banks (one in October, 1928) ; sixteen others
withdrew on six months' notice thereby becoming eligible non-members ; three were closed (one in December, 1928) ; and one membership was cancelled by the Federal Reserve Board. The termination
of twelve state memberships was pending at the end of the year,
ten of which represented voluntary withdrawals on six months'
notice and two were banks closed late in 1929. Thirteen banks
became members of the System by virtue of new national bank
charters, four of which represented conversions of non-member state
banks into national banks, two were readmitted under new names,
five were new banks, and two were conversions of state member
banks into national institutions. Thirty-three banks withdrew from
the System upon surrender of their national bank charters: six of
them were merged with other national banks (part of the assets of
one, however, were taken over by a non-member state bank) ; six
were absorbed by state non-member banks; two were readmitted
under new national bank charters; one was absorbed by a state nonmember bank which later became a member; two consolidated with
state member banks; one was converted into a state non-member
bank; one took over a non-member bank and was readmitted to the
System by virtue of a national bank charter under a new name; and
fourteen banks were closed (three late in 1928). Thirteen national
bank withdrawals were pending at the close of 1929: three because
of mergers with other national banks; seven having been taken over
by state non-member banks; one due to the conversion of a national
bank into a state non-member; and two because of the banks being
closed.
MEMBER BANKS—SEVENTH

December 31

1929

FEDERAL RESERVE

DISTRICT

December 31, 1928

December 31, 1927

Nat'l.

Nat'l.

Wisconsin
Total

State

Total

Nat'l.

State

Total

321
168

48
14

369
182

323
170

60
14

383
184

325
175

State . Total
69

259
91

41
137

300
228

272
95

55
147

327
242

285
94

15
64
145

110
949

13
253

123

110
970

15
291

125

1.202

1,261

111
990

17
310

394
190

349
239
128

1,300

Calls were made by representatives of the Bank Relations Department to 922 member banks and 374 non-member banks during 1929,
and eleven addresses were made by officers and other representatives
of the Federal Reserve Bank of Chicago and the Detroit Branch
during the year.
Fiduciary powers were granted to twenty-four national banks by
the Federal Reserve Board during the year, eighteen receiving full
powers, five supplemental powers, and one partial powers. Full
15




FIFTEENTH

ANNUAL REPORT

trust powers, previously granted, due to consolidations were confirmed in the case of six banks.
MEMBER BANKS AUTHORIZED AND APPROVED IN 1929 TO EXERCISE
FIDUCIARY POWERS

Illinois:

Chicago, Peoples National Bank & Trust Company
*Decatur, Millikin National Bank
Des Plaines, First National Bank
Dundee, First National Bank
Harvey, First National Bank
St. Charles, St. Charles National Bank

Indiana:

Bluffton, First National Bank in
Bluffton, Old National Bank
Greensburg, Citizens National Bank
*New Carlisle, First National Bank
Noblesville, American National Bank
Shelbyville, Shelby National Bank

Iozva:

*Coon Rapids, First National Bank
Creston, First National Bank
Des Moines, Central National Bank & Trust
Company
Ottumwa, Iowa National Bank
Primghar, First National Bank
fTipton, Tipton National Bank
*Webster City, Farmers National Bank
**Charlotte, First National Bank
Niles, City National Bank & Trust Company
Wyandotte, First National Bank

Michigan:

Wisconsin.

Beaver Dam, American National Bank
Berlin, First National Bank

* Supplemental
**Partial
f Partial then supplemental
All others full powers
CONFIRMATIONS OF TRUST POWERS PREVIOUSLY GRANTED DUE TO
CONSOLIDATIONS ALL HAVING FULL POWERS

Indiana:




Attica, Central National Bank & Trust Company
La Porte, First National Bank & Trust Company
16

FEDERAL RESERVE BANK OF CHICAGO

Iowa:
Michigan:
Wisconsin:

*Des Moines, Iowa-Des Moines National Bank &
Trust Company
Detroit, National Bank of Commerce
Muskegon, Hackley Union National Bank
Racine, First National Bank & Trust Company

*Power Number 9 granted with confirmation of other powers.
DIVISION OF RESEARCH AND STATISTICS
The work of the Research division continued to expand during
1929, with several special studies completed during the year and with
numerous tabulations prepared in answer to requests from officers
of the bank, the Federal Reserve Board, and others. Earnings and
expense studies of all Iowa and Michigan banks were prepared
covering 1928, and similar information was compiled for all member
banks of the Seventh district. Comparable records were completed
showing resource and liability items of national and state member
banks in the Seventh district by states and call dates from June 30,
1919, through 1929. Similar information for all banks of the district and for entire states of the district is being prepared and was
nearly half completed by the end of the year. The collection of data
on bank suspensions, consolidations, and changes in group and chain
banking was expanded. An analysis of department store trade in
the Seventh district by departments and including stock turnover by
months and by years from 1926 to 1928 inclusive was prepared for
the retail trade. The division operated in 1929 with a smaller working force than in prior years.
The reference library collection, administered as a part of this
division, has acquired 330 additional volumes and a large number of
unbound pamphlets during the year. About 7,800 volumes are on
the shelves. Many magazines and newspaper files now go back over
a period of ten years, and several sets for a period of fifteen or
twenty years. Reference and other library work continues in about
the same volume as in past years.
FISCAL AGENCY FUNCTIONS
During the year 1929 the volume of work in the Fiscal Agency
Department was much less than in the two preceding years, which
were heavier than normal because of the retirement of the Second
and Third Liberty Loans.
However, during 1929 this bank received 2,280 subscriptions for
new issues of Government securities totaling $346,191,000. On these,
there was alloted $219,527,500, delivery of which was made by 2,236
17




FIFTEENTH

ANNUAL

REPORT

shipments containing 30,080 pieces. Payment for certificates allotted
was made as follows:
By surrender of other Government securities. . . $ 71,781,970
By credit in War Loan Deposit Account
135,307,500
By cash
12,438,030
$219,527,500
There were surrendered to us for exchange, transfer, etc., Government securities amounting to $645,518,200, represented by 215,331
pieces—exclusive of 2,869 pieces amounting to $3,241,900 returned
to submitting banks for corrections in assignments, etc.—against
which we delivered 294,505 pieces totaling $605,520,550.
These figures include United States Treasury Certificates of
Indebtedness and Treasury Notes totaling $315,051,150 (35,090
pieces), which were accepted for telegraphic transfer to other Federal Reserve banks, and like securities totaling $280,366,750 (16,234
pieces) were delivered for account of other Federal Reserve banks.
Securities redeemed totaled $300,371,991, represented by 128,624
pieces. In addition, 3,548,134 coupons were cashed, amounting to
$64,083,863.
In December, 1929, the Treasury Department made its first offering of Treasury bills under the Second Liberty Loan Act, as
amended, and in response to our request forty-four tenders were
received totaling $4,099,000, of which six tenders totaling $2,960,000
were accepted.
GOLD SETTLEMENT FUND
A net loss of $142,637,000 was shown in Gold Settlement Fund
transactions between the Seventh and other Federal Reserve districts
in 1929, compared with a net loss of $39,772,000 in 1928 and a net
gain of $3,545,000 in 1927. Receipts from other Federal Reserve
banks amounted to $20,430,663,000, a gain of $2,177,696,000 over
the preceding year, and total payments in 1929 of $20,573,300,000,
as against $18,292,739,000 in 1928, increased $2,280,561,000. The
Gold Settlement Fund as of December 31, 1929, amounted to
$86,462,630.
CLEARINGS AND COLLECTIONS

The volume of checks handled during the year 1929 by the head
office and the Detroit branch combined, showed a marked increase
over 1928. The total number of checks increased 5.1 per cent, those
payable in Chicago and Detroit gained 7.9 per cent, those payable
outside of these cities increased 4.9 per cent, while Government
checks exhibited an opposite trend, declining 4.6 per cent. The total
number of items handled during the year by both offices was over
129,660,000 (including duplications), amounting to $35,219,944,000.
18




FEDERAL RESERVE BANK OF CHICAGO
Of these 91.3 per cent were drawn on banks in the Seventh district,
5.0 per cent on banks in other districts, and 3.7 per cent on the
United States Treasurer.
A total of 742,574 non-cash collection letters, with an aggregate
value of $996,963,989, was handled by the bank and its Detroit
branch in 1929, as compared with 701,865 letters with an aggregate
value of $1,004,814,493, handled during 1928. This is an increase
of 5.8 per cent in number of collections. Of this number, 598,218
with a total value of $824,621,190 were handled in the head office,
and 144,356 with a total value of $172,342,799 were handled by the
Detroit branch.
Transfers of funds aggregating $31,088,980,668 were made for
account of member banks during 1929, compared with $27,047,795,000 the preceding year. Of the 1929 total, $20,892,261,121
was transferred over leased wires, as compared with $17,642,202,987
in 1928, and $3,631,323,551 over commercial wires compared with
$3,263,582,473 in the preceding year.
All other transfers in 1929 amounted to $6,565,395,996 as compared with $6,142,009,373 in 1928.
Transactions numbered 355,462 compared with 336,541 in the
preceding year.
CASH AND CURRENCY OPERATIONS
Currency operations at the Federal Reserve Bank in 1929 exceeded
by a considerable volume the work carried in 1928. Currency
received amounted to $2,266,793,000 compared with $2,110,220,000
the preceding year. Payments in 1929 aggregated $2,214,910,000 as
against $2,107,963,000 in 1928. Gold certificates to the amount of
$473,881,500 were paid out, compared with $538,664,500 in the
preceding year. The number of currency shipments to country banks
in 1929 increased to 46,429 from the 39,438 reported in 1928, a
reflection of demand for the new currency.
INTERNAL ORGANIZATION
George J. Schaller, President, Citizens First National Bank, Storm
Lake, Iowa, was elected a Class A Director to succeed Elbert L.
Johnson of Waterloo, Iowa, whose term expired December 31, 1929,
and Robert M. Feustel, President, Indiana Service Corporation, Fort
Wayne, Indiana, was elected a Class B Director to succeed Robert
Mueller, Decatur, Illinois, whose term expired December 31, 1929.
Elbert L. Johnson had been a Director of the Federal Reserve Bank
since its beginning and Robert Mueller had been a Director since
February, 1923. James Simpson, Chicago, Illinois, whose term
expired December 31, 1929, was reappointed a Class C Director.
The Directors for the year 1930 will consist of the following:
CLASS A—George M. Reynolds, Chicago, Illinois; Edward R.
Estberg, Waukesha, Wisconsin; George J. Schaller, Storm Lake,
Iowa.




19

FIFTEENTH

ANNUAL REPORT

CLASS B—August H. Vogel, Milwaukee, Wisconsin; Stanford
T. Crapo, Detroit, Michigan; Robert M. Feustel, Fort Wayne,
Indiana.
CLASS C—William A. Heath, Evanston, Illinois; Frank C. Ball..
Muncie, Indiana; James Simpson, Chicago, Illinois.
The Federal Reserve Board again designated William A. Heath
as Chairman of the Board of Directors and Federal Reserve Agent
for the year 1930, and James Simpson as Deputy Chairman.
The Executive Committee for the year 1930 will consist of the
following: Governor McDougal, Mr. Heath, Chairman, and the
following Directors: Messrs. Estberg, Reynolds, Simpson, and
Vogel. The Membership Committee for the year 1930 will consist
of the following: Mr. Heath, Federal Reserve Agent, Governor
McDougal, and Mr. Vogel.
There was one resignation in the official staff at the Chicago office
during the year 1929. Frank M. Huston, Manager of the Division
of Research and Statistics, resigned as of June 30, 1929. There was
one death in the official staff during 1929. Charles L. Powell,
Counsel, died March 15, 1929.
There were three appointments in the official staff during 1929.
Arthur L. Olson was appointed Assistant Controller as of January
1, 1929; Harris G. Pett was appointed Manager of the Division of
Research and Statistics as of July 1, 1929; and C. S. Young was
appointed Assistant Federal Reserve Agent as of January 1, 1930.
The following is a comparison of the total number of employes,
exclusive of officials, at the Chicago office:
December 31, 1928
December 31, 1929

1,151
1,186

Increase

35

The Detroit Branch Board of Directors for the year 1930 will be
composed of N. P. Hull, Lansing, Michigan; James Inglis, Detroit,
Michigan; William J. Gray, Detroit, Michigan; Julius H. Haass,
Detroit, Michigan; William R. Cation, Detroit, Michigan; David
McMorran, Port Huron, Michigan; and George B. Morley, Saginaw,
Michigan.
The following is a comparison of the total number of employes,
exclusive of officials, at the Detroit Branch:
December 31, 1928
213
December 31, 1929
231
Increase




18
20