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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