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FEDERAL RESERVE BANK OF CHICAGO PRESIDENT’S ANNU AL REPORT TO MEMBER BANKS OF THE SEVENTH FEDERAL RESERVE D IST RI CT ACTIVITIES FOR THE YEAR 1949 Federal Reserve Bank of Chicago January 26, 1950 To the Member Banks of the Seventh Federal Reserve District: You w ill find in the following pages a brief description of the services performed by the Federal Reserve Bank of Chicago for the banks of the Seventh Federal Reserve District, as well as for the Government and the general public, during 1949. The operations of our Government Bond Department, which issues, services, and redeems Government securities, are described in some detail. To this record I would like to add one important fact that cannot be expressed in a chart, or a graph, or a tabulation: during 1949 we con tinued to enjoy from our Member Banks a whole hearted cooperation which alone made the handling of these volumes of work possible. For that support, I would like to extend the warmest thanks of myself and our entire organization. Very truly yours, President 7 TABLE OF CONTENTS Economic Summary............................................................................................... Federal Open Market Committee......................................................................... Government Bond Department............................................................................. Departmental Activities Services to Treasury Department Issuance of Government Securities....................................................... Servicing of Government Securities....................................................... Redemption of Government Securities................................................. Collection of Withheld Taxes............................................................... Services to Member Banks Discounts and Other Credits................................................................. Currency and Coin................................................................................. Collection of Checks and Other Items................................................ Safekeeping of Securities....................................................................... Investments............................................................................................. Economic Research............................................................................... Examination of Banks........................................................................... Bank and Public Relations..................................................................... Reconstruction Finance Corporation............................................................. General Bank Activities Accounting............................................................................................. Wires, Telephone, Mail, Files............................................................... Personnel ............................................................................................... Procurement........................................................................................... Building Operations............................................................................. Legal....................................................................................................... Statement of Condition......................................................................................... Statement of Earnings and Expenses..................................................................... Earnings liisto ry ................................................................................................... Directors and Officers............................................................................................. Board of Governors Organization Chart............................................................... 1 6 8 13 14 15 16 17 18 20 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 40 SEVENTH DISTRICT ECONOMIC SUMMARY FOR 1949 Business Slide Halted Reflecting the basic strength of the District’s postwar economy, general business activity in 1949 as a whole declined only slightly from the peak year of 1948. Unlike previous post war years, however, 1949 was characterized by a fairly marked dip during the first half and a recovery during the last six months. The dominant aspect of the minor recession and subsequent rise was the change in in ventory buying. Excessive caution in business purchases early in the year resulted in cutbacks in employment and production for many lines. However, consumer expenditures declined less than manufacturing output and it became evident by the middle of the year that inventory buying policies had been unduly restrictive. The resurgence of orders beginning about July was primarily responsible for the advances registered during the second half of the year. High and rising levels of government expenditures—state and local, as well as Federal —provided strong support to general levels of business during the year. Increased expendi tures for public construction, for instance, to a considerable extent offset the year’s declines in business expenditures for plant and equipment. Strikes in steel and coal during October affected economic activity adversely, particu larly in the Seventh District, but recovery during November and December was rapid. In general, however, labor strife was less widespread than in the earlier postwar period. Industrial Output Lower Manufacturing production in the Seventh District during 1949 dropped somewhat more than the eight per cent decline for the nation as a whole because of the greater relative im portance of durable goods in this area. However, factory output averaged roughly 75 per cent above the prewar level. During the final half of the year a distinct recovery from the low points of June and July was evident despite the handicaps of major work stoppages later in the year. Although the year’s volume of production in many types of manufacturing important to the District was below the record 1948 levels, a few industries established new output records. Less iron and steel, industrial and farm machinery, furniture, home appliances, and petroleum products were produced. On the other hand, over six million cars and trucks were turned out—an increase of about 20 per cent over 1948 to an all-time high record—and approximately two and one-half million television sets were produced as that industry moved into truly large-scale production. Continuing a trend which began in the fourth quarter of 1948, District employment in manufacturing industries declined steadily until June of 1949- The moderate upturn which began in July was interrupted by the coal and steel strikes which in turn had secondary effects later in the year extending to automobiles and other steel-using industries. Employment in nonmanufacturing industries followed chiefly seasonal trends but remained at relatively the 1 same level as the previous year, with the result that total employment averaged only two per cent under 1948. Plant and equipment expenditures by business dropped off substantially after the first quarter of last year as many industries gradually attained adequate capacity to meet the post war levels of demand. An increasing proportion of new capital outlays was for the purpose of modernization or improvement rather than expansion. Toward the end of 1949 few new major projects for expansion were contemplated except in the utility fields. Seventh District housing starts increased significantly during the latter half of 1949 and at a greater rate than the increase for the nation as a whole. This is in contrast to previous postwar years in which housing activities lagged behind national developments. Single family units continued to dominate the field, but a markedly higher number of apartment units were started than in the previous year. Mortgage funds became more freely available as the year progressed, partly as a result of the more liberalized mortgage buying program of the Fed eral National Mortgage Association. Greater availability of capital funds generally and a somewhat greater confidence regarding long-run real estate values also contributed to the increased mortgage funds. The market for newly finished homes continued strong as the year ended. Income and Consumer Expenditures Steady Declining moderately in each quarter of 1949, aggregate personal income in the fourth quarter reached a level about three per cent below that of October-December 1948, the post war peak. The gradual decline during 1949 contrasts with an upward movement of income during the previous year so that total payments to individuals were only slightly less than in 1948. Moreover, because of declines in individual income tax rates, it is probable that 1949 disposable income exceeded that of 1948 by a small margin. Wage and salary payments, the largest component of personal income, appear to have been about equal to those of 1948, as effects of the third-round wage increase and subse quent salary raises offset the moderate decline in employment and average hours worked. Proprietors’ income, however, declined about ten per cent during the year, owing to substan tial reductions in net farm income and some narrowing of merchants’ profit margins. Divi dend and interest payments increased moderately during the year. However, unemployment compensation advanced sharply in response to slackened industrial activity. Maintenance of total retail sales at near 1948 levels during the past year was marked by substantially increased price consciousness and buying selectivity on the part of consumers. Despite small but widespread price declines, retail sales dropped only two to three per cent from 1948 levels, indicating that physical sales volume probably exceeded that of 1948 by a small margin. Moreover, increases in service expenditures and purchases of new houses tended to offset this decline in retail sales, with the result that total consumer expenditures appear to have virtually equaled those of 1948. 2 Sales of automobiles and television increased sharply to new highs during the year, while sales of foods and food products about equaled those of 1948. Total Seventh District depart ment store sales declined approximately five per cent, however, as men’s and women s apparel, housefurnishings, and electrical appliances displayed considerable sales weakness, especially during the spring and early summer months. Credit sales of most types of consumers durable goods increased substantially, largely as a result of the marked easing in consumer credit terms which occurred after expiration of Regulation W on June 30. Prices paid by consumers in the major Seventh District cities eased less than two per cent during the year. Fairly substantial declines in the prices of clothing and housefurnishings, and lesser drops in food prices were offset in part by minor increases in most other items. Wholesale prices generally declined about six per cent during the year. Farm Income Reduced Although the physical volume of Seventh District farm products marketed in 1949 was larger than in the preceding year, a 12 per cent lower average level of prices resulted in reduced farm income. Cash receipts from marketings were off about eight per cent from the 1948 level in the five states of the Seventh District. This was moderately less than the 10 per cent decline for the United States as a whole as increased marketings of corn and livestock partially offset the effects of price declines. Production costs continued at about the 1948 level with the result that net farm income declined relatively more than gross cash receipts. Since prices of commodities purchased for family living declined only slightly, the purchasing power of net farm income was materially less than in the preceding year. This did not deter farmers, however, from making large additional investments in pro duction facilities—soil improvements, machinery and equipment, buildings and fences and in such living facilities as house modernization, automobiles, and household appliances. Ex penditure levels were maintained in some instances by drawing on past accumulations of cash, deposits, and war savings bonds and in others by increasing debts. Farm debts, both real estate and non-real estate, increased during 1949 but nevertheless remained on the whole at relatively low levels. Even so, debts became burdensome in some instances where production operations returned less than anticipated income. Expanded live stock feeding operations necessitated increased borrowing by many farmers. Farm real estate prices declined inthe District as a whole, although some areas showed moderate rises during the first half of the year and stable prices during the second half. In the better areas farm land continued to yield attractive returns and fewer farms were offered for sale. Farm Production at High Levels Crop production in the five states of the Seventh District did not equal the record high mark set in 1948 even though the 73-3 million acres of principal crops harvested exceeded the harvested area of a year ago by 350 thousand acres. Corn production of 1,535 million bushels, although 10 per cent less than the record high output in 1948, was the second largest crop on record and one-fifth larger than the 1938-47 average. Oat and soybean har vests were moderately smaller than in the preceding year but were at high levels relative to other recent years. Hay production of 20.5 million tons was up about nine per cent, although the harvested acreage was smaller than in the preceding year, but still was below the 1938-47 average. Corn, the most important crop in the District, encountered serious harvesting difficulties. A severe windstorm on October 10 in part of the District, several weeks of dry weather which caused the corn stalks to be brittle, and extensive corn borer damage which weakened stalks and ear shanks caused exceptionally heavy dropping of ears. Favorable weather, however, per mitted much of the dropped corn to be saved by hand-gleaning or salvaged by livestock. The exceptionally large inventory of corn accumulated from the 1948 and 1949 crops is a matter of concern to many Seventh District farmers as they attempt to assess future prospects. The large carry-over of feed grains from the 1948 harvest, together with high-level pro duction in 1949 encouraged expansion of livestock production, particularly hogs. Farmers in Seventh District states raised 15 per cent more pigs in 1949 than in the preceding year, account ing for 46 per cent of the United States total. Cattle feeding, dairy, poultry, and egg produc tion were continued at high levels. Prices of farm products, which had declined sharply in the second half of 1948, con tinued a gradual downward trend during 1949 and at year-end showed net declines of six per cent for both meat animals and dairy produccts, nine per cent for feed grains, 19 per cent for poultry and eggs, and 23 per cent for oil bearing crops. Government price support programs were of increasing importance in the markets for Seventh District farm products during 1949. Prices of most important crops and of dairy products and eggs were supported in varying degrees by loan or purchase programs. Sup ports were available also for hogs but market prices did not fall below the support level. Member Bank Earning Assets Increase In sharp contrast to the 300 million dollar decline of 1948, earning assets of member banks in the Seventh Federal Reserve District increased nearly 1,400 million dollars, or nine per cent, during 1949. This advance, the largest in the postwar years, corresponded to the national trend and was due almost entirely to the substantial expansion of Government secur ity holdings. During 1949 District member banks expanded their Government securities portfolios by nearly 1,200 million dollars, with the growth concentrated in the last seven months of the year. The principal causes of the increase were three reductions in member bank reserve re quirements, in May, June, and August. In total, these reductions lowered reserve require ments for each class of bank by four percentage points. Country banks, however, acquired a fairly small amount of additional Government securities. In general they deposited a sizeable proportion of their freed reserves in correspondent balances, rather than investing directly; and as a consequence central reserve city banks in this District accounted for 732 million of the total increase in Government holdings. Almost all of the acquired Governments were in the form of bills and certificates. Loans outstanding for District member banks on December 28, 1949 were slightly above year-ago levels, despite considerable variation during the year. During the first six months, total loans for District banks declined 225 million dollars, chiefly because of the rapid contraction in business loans experienced by central reserve city banks. A modest recovery during the fall in loans of this category, however, plus a substantial and fairly steady rise in real estate and "other” (largely consumer) loans, served to compensate for the first-half decline. In general, country and the smaller reserve city banks increased loans, particularly to nonbusiness borrowers, much more steadily and in greater magnitude than the larger banks. This tendency has been characteristic of District banking over the last two years. Deposits at District member banks reached 1evels at the end of 1949 moderately above those of December 1948, after a decline of 500 million dollars in the first half of the year. All classes of private deposits shared modestly in the advance. In addition, Government deposits in weekly reporting banks increased substantially above year-ago figures, especially during the last few months of the year. Member bank earnings for the first-half of 1949 were moderately higher than for the com parable period of the previous year. The growth in earning assets during the last six months of the year suggests that bank earnings for the second half will be still higher. Preliminary reports show this to be particularly true for central reserve city banks, which after suffering an earnings decline in early 1949 acquired large amounts of Government securities during the late summer months. 5 FEDERAL RESERVE BANK OF CHICAGO Participation in SYSTEM OPEN 6 $ MILLIONS FEDERAL OPEN MARKET COMMITTEE The activities of the System Open Market Account are directed by the Federal Open Market Committee, consisting of all the members of the Board of Governors of the Federal Reserve System and the presidents of five out of the twelve Federal Reserve banks. The president of the Federal Re serve Bank of Chicago serves on this committee in alternate years. To the Federal Open Market Committee is assigned the responsibility of deciding the amount and character of government securities to be bought or sold in the open market, together with the timing of such transactions with a view to the prevention of violent fluctuations in money rates and the maintenance of an orderly market for government securities. The Federal Reserve banks are required by law to co-operate in carrying out the objectives of the Open Market Committee. The United States government securities shown on the December 31, 1949, statement of the Federal Reserve Bank of Chicago represented this bank’s share in the portfolio of the System Open Market Account, in which all the Federal Reserve banks participate. This bank’s participation in the System Open Market Account amounted on Dec. 31, 1949, to $2,817,903,000 par value of securities, represent ing 14.92% of the total portfolio of $18,884,597, 000. This figure is comparable with an amount of $3,332,925,000 par value of securities held on December 31, 1948, a decrease of $515,022,000. In addition to the decrease in amount, the compo sition of our participation changed materially dur ing the year as will be noted from the following analysis: Dec. 31, 1949 Dec. 31. 1948 Increase or Decrease $ 797,316,000 863,550,000 112,328,000 1,559,731,000 $— 76,710,000 + 72,854,000 — 28,438,000 — 482,728,000 $3,332,925,000 $— 515,022,000 B ills................................ C of I’s .......................... N otes.............................. Bonds ............................ ............. . ... $ 720,606,000 936,404,000 83,890,000 1,077,003,000 Total .............................. ............. $2,817,903,000 It will be evident that the activities of the Sys tem Open Market Account during the year 1949 resulted in the net sale of a substantial total of government bonds, while changes in the holdings of shorter maturities,—that is, Treasury bills, cer tificates of indebtedness and notes,—were minor in amount. 7 GOVERNMENT BOND DEPARTMENT Fiscal A gent of the United States The act of Congress creating the Federal Reserve Sys tem stipulates that Federal Reserve Banks shall act as fiscal agents of the United States. Prior to that time the fiscal agency functions were performed by Sub-Treasuries located in various cities, and were confined largely to the handling of coin and currency. With a Federal debt at that time of only about $1,000,000,000, most of which was deposited as collateral to secure national banknote circulation, there were obviously few services required in connection therewith. The tremendous increase in the public debt, resulting principally from this country’s participation in two world wars, imposed a large number of new fiscal agency duties upon the Federal Reserve Banks. During the eight War Loan Drives of the recent war, for example, about 1,500 employees (constituting about one-third of the total number of employees of the Federal Reserve Bank in Chicago and Detroit) were engaged in conducting the various activities involved in the Treasury’s war financing program. In the Chicago office alone over $24,000,000, 000 of United States securities, representing more than 50,000,000 pieces, were handled in these operations. While peacetime activities are on a greatly reduced scale, the services performed for the Treasury, the com mercial banks and the public are similar in nature to those conducted during the war. A brief outline of these services, which are performed both at the head office in Chicago and at the branch in Detroit, follows: New Issues of M arketable Treasury Securities When the Secretary of the Treasury announces the opening of subscription books for a new cash or exchange offering of Treasury securities, the circulars and subscrip tion forms are prepared by the New Issue Division for distribution to all banks and others in the Seventh Federal Reserve District. When the completed subscriptions are returned they are processed by this division and delivery of the secu rities is approved. It may be of interest to note that be tween 10 and 14 per cent of the total amount of Treasury offerings are purchased by banks and other investors in the Seventh Federal Reserve District. A pplications for Savin gs Issues Practically all applications for Series F and G Savings Bonds and Series D Savings Notes are received by the miscellaneous items which bring the total interest bearing public debt to approximately $255,000,000,000. The Custody Division releases these securities against subscriptions for new issues, against requisitions of Issu ing Agents for blank Series E Savings Bonds, for pur poses of denominational exchanges, for the exchange of registered bonds into coupon bonds, for reissue of savings bonds, and to complete telegraphic transfers of securities. Detailed monthly reports by issues and denominations are Federal Reserve Bank through commercial banks. These applications are handled in the New Issue Division where the securities are inscribed in the owner’s name and de livered in accord '/ice with his instructions. However, new marketable s' .urities which are to be issued in regis tered form are inscribed at the Treasury Department in Washington, D. C., where registration books are main tained for payment of interest and transfer of ownership. Custody of Treasury Securities As fiscal agents of the Treasury, Federal Reserve Banks carry in their Custody Division a stock of all outstanding issues of Treasury securities, and whenever a new issue is offered for subscription a stock of all denominations of this issue is sent to the Federal Reserve Banks and to those branches where stocks are maintained. The Detroit Branch of this bank maintains a full stock of all such issues. There are presently outstanding the following number of publicly owned Treasury securities: made to the Treasury Department to account for the Federal Reserve Bank’s holdings of all Treasury secu rities. These custodies currently aggregate approximately $8,000,000,000. Treasury Tax and Loan Account (Formerly called "War Loan Account” ) When payment for newly issued securities is made by qualified depositaries under Circular No. 92, the accounts M arketable Securities Number of Issues Type of Security 32 2 8 13 Treasury bonds Treasury notes Treasury certificates of indebtedness Treasury bills Amount outstanding (in millions of dollars) $104,700 8,400 29,500 12,300 Sa vin gs Securities 4 1 Savings Bonds (Series D ,E ,F ,G ,) Savings Notes (Series D ) 57,000 7,000 $218,900 The above figures do not include special issues (not publicly held) of about $34,000,000,000 and several 9 missioner of the Public Debt. This privilege for many years applied only to short term securities, but may now be used in connection with all types of marketable Treas ury issues whenever a sale is involved. This activity together with that of making denominational exchanges is performed in the Denominational Exchange and CPD Division. M echanical Bookkeeping M achines used in Control unit. and the collateral records pertaining thereto are main tained in the Depositary Bank Division. About 1,800 banks out of a total of 2,500 in this district are qualified depositaries. Depositaries are periodically grouped into two classes, A and B, depending upon the amount of their Treasury Tax and Loan Account balances on a specified date. The latest date for establishing such groups was September 16, 1949, and there are currently 1,516 depositaries in Group A with total balances as of December 31, 1949, of $41,687,000, and 313 deposi taries in Group B with balances on that date of $522, 419,000. This account may also be used under the terms of Treasury Circular No. 848 in connection with the pay ment of Withheld and Social Security Taxes. "CPD Transfers" and Denom inational Exchanges When a bank or other investor buys or sells Treasury securities and delivery thereof is to be made in some other Federal Reserve city, the transactions may be com pleted by utilizing the Leased Wire System of the Federal Reserve Banks, the transaction being called a "CPD transfer’’—meaning a transfer authorized by the Com Coupon Redemptions Matured coupons detached from bearer issues of Treas ury securities and other Governmental Agencies and pre sented to the Coupon Redemption Division by banks or other investors are paid either by check or by credit to the member banks’ accounts. Redemption of Treasury Securities Marketable Treasury issues in either bearer or regis tered forms are redeemed at or after their maturity or redemption dates in the Securities Redemption Division. Bearer securities are paid either by check or credit to the member bank’s reserve account upon presentation, but registered securities must first be forwarded for release to the Treasury Department in Washington, D. C., where permanent registration books for the entire country are maintained, before payment can be made. Savin gs Bonds — Issuing Agents Although a large number of Series E Savings Bonds are issued at the Federal Reserve Bank, these represent a small percentage of the total Series E Bonds issued. Approximately 3,500 Issuing Agents (consisting prin cipally of banks, corporations and savings and loan asso ciations, but not including post offices) are furnished blank Series E Savings Bonds by this bank and account to it for all bonds consigned to such agents. Requisitions for blank bonds and ledger accounts for all such issuing agents, as well as transmittal letters forwarded by the agents in connection with sales of Series E Bonds, are 10 Preparing Blank Series E bonds for shipment to Issuing Agents handled and maintained in the Issuing Agents Division. Currently these agents are selling approximately $53,000, 000 issue price of Series E Bonds monthly. Sa vin gs Bonds — Reissues It is only natural that with the widespread ownership of savings bonds, and with resultant changes in the status of such holders because of death, marriage, etc., many occasions arise when savings bonds need to be re-issued. A separate Reissue Division handles these transactions, which originate in all sections of this dis trict. The head office in Chicago also performs this function for reissue cases received at the Treasury De partment from the entire United States. dollar redemptions. Except for a small volume of re demptions at the Treasury Department the figures quoted cover total redemptions for this district, whereas sales figures under Issuing Agents above do not include Post Office sales. Savings bonds were first put on sale in 1935, but the early maturities in 1945 to 1948 were not voluminous. Sa vin gs Bonds — Redemptions Prior to October 1944 redemptions of savings bonds were handled exclusively at Federal Reserve Banks, but since that date about 97 per cent of all redemptions are being handled by Paying Agents—mainly banks—who transmit the paid bonds to the Federal Reserve Banks. The Redemption Divisions at Chicago and Detroit service about 2,600 Paying Agents, who, together with the Fed eral Reserve Bank, are currently redeeming a monthly average of approximately 1,230,000 pieces of Series A to E Savings Bonds aggregating about $65,350,000 redemp tion value. Matured savings bonds included in these figures represent about 16 per cent of total current 11 quent outbreak of war, account for the heavy maturities starting in 1952 and reaching a peak in 1954. There are currently outstanding Series E, F and G Savings Bonds with 1954 maturities in the amount of approximately $9,000,000,000 (present redemption value). Paying Agents are given immediate credit upon receipt of the transmittal letter for the amounts paid out by them in cashing bonds, subject to later adjustment when the bonds are processed. Cancelled Securities Preparing registered m ail shipments post office for delivery to Greatly increased sales resulting from the initiation of the National Defense Program in 1941 and the subse All Treasury securities, marketable and non-market able, are cancelled by distinctive cancellation mark, and they are then sorted according to issue, denomination, and, in some cases, serial number, and delivered to the Treasury Department. Marketable issues are returned to Washington, but savings bonds are delivered to the Sav ings Bonds Division of the Treasury Department in Chi cago, national headquarters for savings bond operations. SERIES "E" SAVINGS BONDS SOLD THROUGH ISSUING AGENTS 12 SERVICES TO TREASURY DEPARTMENT ISSUANCE OF GOVERNMENT SECURITIES Although the Treasury Department issues some of its securities —both marketable and savings issues—directly, by far the major portion is issued through the Federal Reserve Banks, acting as fiscal agents of the United States. Information regarding new Treasury offerings, either for cash or in exchange, is distributed by the Federal Reserve Banks through commercial banks to the general public, and subscriptions from investors of all types are received for processing. The Federal Reserve Banks service agents for the sale of U. S. Savings Bonds, Series E, by supplying blank bonds, receiving payment for bonds issued, and maintain ing accounts. Detailed sales reports showing geographical and investor-type distribution of new issues of Government securities are supplied to the Treasury Department. GENERAL SUMMARY During 1949, the sales of savings securities were main tained at a rather constant level, and Treasury financing activities were confined primarily to refunding opera tions. As a result, Bank services necessary to handle the issuance of government securities were about the same in 1949 as in the previous year. STATEMENT OF OPERATIONS CHICAGO 1949 SUBSCRIPTIONS AND APPLICATIONS F o r m s R eceived Marketable Issues ................................... Savings Issues ......................................... N um ber of 10,950 164,425 560 11,930 450 12,300 21,800 486,000 21,750 469,000 1,300 199,200 1,025 186,950 $10,646,252,000 1,292,065,000 $8,270,875,000 1,197,855,000 $593,173,000 342,851,000 $353,284,000 190,772,000 8,091,315,000 1,292,065,000 6,753,375,000 1,197,855,000 593,173,000 342,301,000 353,284,000 190,825,000 112,400 712,000 111,200 748,800 7,830 220,550 5,960 213,250 824,480,000 6,873,000 $ 848,959,000 6,792,500 $197,054,000 3,165,950 $176,674,000 2,650,000 3,107 3,097 364 369 S u bscribers I n v o lv ed Marketable Issues ................................... Savings Issues ......................................... D o l la r V a l u e — S u b s c r ipt io n s A llotted Marketable Issues ................................... Savings Issues ......................................... P ie c es D e liv er ed on O r ig in a l I ssue Marketable Issues ................................... Savings Issues ......................................... SALES BY ISSUING AGENTS S e r ies E Sa v in g s B on d s Maturity V a lu e ....................................... Number of Pieces................................... NUMBER OF QUALIFIED ISSUING AGENTS AS OF DECEMBER 3 1 ............... DETROIT BRANCH 1948 1949 11,200 147,800 Marketable Issues ................................... Savings Issues ......................................... D o l l a r V a l u e — S u b s c r ipt io n s R ec eiv ed 1948 $ 13 SERVICES TO TREASURY DEPARTMENT SERVICING OF GOVERNMENT SECURITIES Servicing of the public debt after it is outstanding in the hands of the general public is one of the functions of Federal Reserve Banks in their capacity as fiscal agents of the United States. The principal services performed are: making denominational and other exchanges, handling telegraphic transfers of Government securities, maintaining a general stock of all Treasury issues outstanding with the public, reissuing savings bonds, maintain ing the Treasury tax and loan accounts, and other miscellan eous services. GENERAL SUMMARY Inasmuch as the servicing of government securities is closely related to the Treasury’s financing program, the amount of work handled by the Bank varies with the volume of Treasury operations. STATEMENT OF OPERATIONS MARKETABLE ISSUES D e n o m in a t io n a l a n d Services during the current year closely approximated those rendered by the Bank during 1948. The reissues involved in Treasury claim cases (the issu ance of duplicate bonds) represented a new activity in 1949. CHICAGO 1948 1949 DETROIT BRANCH 1948 1949 O ther Exchanges Pieces Received....................................... Maturity V alu e....................................... Pieces Issued........................................... Maturity V a lu e ....................................... T e l e g r a p h i c T r a n f e r s (CPD) Pieces Received....................................... Maturity V alu e....................................... Pieces Issued........................................... Maturity V alu e....................................... SAVINGS BONDS R e is s u e s Pieces Received....................................... Maturity V alu e....................................... Pieces Issued........................................... Maturity V alu e....................................... R e is s u e s — T r e a s u r y C l a im C a s e s Pieces Issued........................................... Maturity V alu e....................................... DEPOSITARY BANKS (WAR LOAN) Number of Payments Handled............... Depositary Balances as of December 31 Number of Qualified Depositaries as of December 3 1 ....................................... CUSTODY OF FISCAL STOCK Pieces Received from Treasury Dept.. . Pieces Prepared for Delivery............... 62,800 81,250 $1,382,582,000 $1,522,235,000 85,700 98,500 $1,375,708,000 $1,524,658,000 1,160 $ 27,672,000 2,300 $ 27,354,000 960 $ 12,671,000 2,650 $ 12,588,000 57,300 93,100 $3,895,367,000 $4,640,340,000 48,800 37,500 $5,379,602,000 $4,609,430,000 3,560 $373,607,000 7,200 $662,106,000 4,700 $159,598,000 3,900 $194,258,000 627,500 561,400 $ 208,512,000 $ 191,695,000 616,000 661,000* $ 202,034,000 $ 257,236,000* 97,190 $ 15,349,000 94,960 $ 12,456,000 90,290 $ 10,635,000 87,000 $ 9,664,000 36,100 $3,332,000 — — — — 21,360 $138,483,000 14,240 $ 93,396,000 — — 197,000 190,700 $ 425,623,000 $ 330,095,000 1,696 1,692 134 133 8,691,000 8,798,000 8,616,000 8,882,000 3,587,400 3,595,800 2,817,300 3,094,800 *Year 1948 includes $79,750,000 involving 110,000 pieces issued upon reissue on special authorization from Treasury Department and discontinued in June 1948. 14 SERVICES TO TREASURY DEPARTMENT REDEMPTION OF G O VERN M EN T SECURITIES thereof or through commercial banks designated as paying agents. Redeemed securities are cancelled and forwarded to the Treasury Department. Federal Reserve Banks as fiscal agents of the United States re deem Government securities at maturity, or prior to maturity in the case of securities eligible for redemption in that manner. Savings bonds are redeemed either directly from the holders GENERAL SUMMARY increase from year to year until a peak is reached in 1954, the year in which the maximum wartime sales of savings issues will mature. The reverse is true in the case of Armed Forces Leave Bonds, as the amount outstand ing is decreasing year by year because of redemption of these securities prior to their maturity. Comments on previous pages with reference to the Trea sury’s financing program during 1949 are applicable in connection with the redemption of Government secu rities. Savings bond redemptions remained on substan tially an even keel compared with the previous year. However, a considerable increase occurred in the re demption of matured savings bonds; this condition will STATEMENT OF OPERATIONS DETROIT BRANCH 1949 1948 CHICAGO 1949 1948 TREASURY ISSUES—OTHER THAN SAVINGS AND ARMED FORCES LEAVE BONDS Number of Pieces Bearer Securities .................................. Registered Securities............................ Maturity Value Bearer Securities................................... Registered Securities............................ 182,200 38,700 204,500 47,800 13,230 8,940 12,480 11,100 $7,876,693,000 530,309,000 $7,414,046,000 741,180,000 $1,000,622,000 97,184,000 $585,089,000 96,442,000 SAVINGS BONDS ^Number of Pieces By Paying Agents—A-E...................... By FRB —A-E...................... By FRB —F-G...................... 10,372,000 321.000 186.000 11,438,000 299,000 184,000 4,057,450 47,100 19.400 4,181,800 44,000 17,500 6,919,000 7,775,000 2,898,000 3,019,500 ^Number of Pieces $25 E Bonds Included in A bove.................................................... Number of Pieces Matured Bonds Included in Above ................................... Redemption Value By Paying Agents—A-E...................... By FRB —A-E...................... By FRB —F-G...................... Matured Bonds Included in Above......... 433,000 314,000 76,300 53,300 $ 564.660.000 85,268,000 160.320.000 150,426,000 $ 564,135,000 55.509.000 161,670,000 96.980.000 $ 165,168,000 8,777,500 16.913.000 20.885.000 $161,912,000 6,154,000 15.846.000 14.415.000 ARMED FORCES LEAVE BONDS Number of Pieces..................................... Redemption V alue..................................... 67,150 $ 15,465,000 191,150 $ 41,336,000 $ 16,500 3,673,000 48,950 $ 10,463,000 NUMBER OF QUALIFIED PAYING AGENTS AS OF DECEMBER 31, 1949.. 2,408 2,400 200 199 U. S. GOVERNMENT AND OTHER GOVERNMENTAL AGENCY COUPONS Number of Pieces ..................................... Dollar V a lu e.............................................. 1,735,000 $ 99,069,000 1,918,500 $ 108,164,000 179,800 9,141,000 195,600 $ 9,276,000 $ 15 SERVICES TO TREASURY DEPARTMENT COLLECTION OF WITHHELD TAXES The Bank acts as agent of the Treasury Department, assisting the Bureau of Internal Revenue in the collection of funds deposited by employers under withholding tax arrangements, GENERAL SUMMARY Depositary banks collected and transferred to us $1,423,000,000 in Withheld Taxes during 1949, for which they issued 653,000 depositary receipts. These figures represent decreases of 8% in dollar value and 3% in number of receipts, as compared with the remit tances handled during 1948. Offices of the Internal Revenue Department charged to us their certificates of deposit amounting to $1,495,000 , 000 . During the year, preliminary work was completed on a revised and expanded system for the collection of both Withheld Taxes and Social Security Taxes. Under the new plan, employers may remit either through depos itary banks, or directly to the Federal Reserve Banks. Accordingly, operations under the previous system were brought to a close December 31, 1949, except for resid ual work connected with deposits of 1949 taxes. STATEMENT OF OPERATIONS Receipts Issued by Depositaries....................................................................... Dollar Value of Receipts Issued....................................................................... CHICAGO 1949 1948 652,881 676,394 $1,423,024,000 $1,540,960,000 DEPOSITARY RECEIPTS RECEIVED 16 SERVICES TO MEMBER BANKS DISCOUNTS AND OTHER CREDITS The Federal Reserve Banks are empowered to make loans to member banks and, under certain circumstances, to commercial firms. GENERAL SUMMARY Member bank borrowings from Chicago and Detroit Branch decreased during 1949, primarily because of reductions in reserve requirements which became effective during the year. One advance of $50,000 was made secured by notes STATEMENT OF OPERATIONS CHICAGO 1949 NUMBER OF TRANSACTIONS A dvances to M em ber evidencing corn loans entered into pursuant to the loan program of the Commodity Credit Corporation. Four commitments, aggregating $66,533, were granted to financing institutions in connection with working capital loans to industrial enterprises under the pro visions of Section 13b of the Federal Reserve Act. Ba n k s DETROIT BRANCH 1948 1949 1948 2 Rediscounts ............................................. Secured by U. S. Government Obliga tions .................................................... Secured by Eligible Paper..................... Secured by Other Acceptable Assets— Section 10b ......................................... 312 1 1 — 4 Commitments ......................................... 61 — — I n d u s t r ia l L o a n s 484 — 3 70 -— —-: DOLLAR VALUE OF TRANSACTIONS A dvances to M em ber Banks Rediscounts ............................................. Secured by U. S. Government Obliga tions .................................................... Secured by Eligible Paper..................... Secured by Other Acceptable Assets— Section 1 0 b ......................................... $ Commitments ......................................... O $ 1,841,338,000 50,000 3,046,865,000 — — $ 50,000 66,533 I n d u s t r ia l L o a n s Chicago 38,029 $ 472,500 215,150,000 — 466,045,000 — — — — — ADVANCES TO MEMBER BANKS $ BILUONS Detroit TRANSACTIONS — number amount 17 HEAD OFFICE CASH OPERATIONS CURRENCY $ BILLIONS ____ ____ i 1 V4iLUE ^ — — 1945 1946 1947 1948 1949 COIN PIECES $ VALUE $ MILLIONS * Includes wrapped coin payments instituted in October of 1946 18 SER VIC ES TO M EM B ER B A N K S CURRENCY AND COIN etc. Similarly, banks having excess cash may turn it in to this Bank and obtain funds in return. Incoming cash is used either to supplement new currency and coin in outgoing shipments, or, if unfit for further circulation, is returned to the Treasury for destruction. Currency and coin are routed into general circulation through the Federal Reserve Banks, which act as distributing agents between the Treasury and the Banking community. Commercial banks desiring currency or coin may obtain it from this Bank in exchange for their draft, a charge to their reserve account, GENERAL SUMMARY Outgoing currency handled during 1949 declined moderately from all-time peaks established in 1948. However, increased volumes of currency for redemp tion, wrapped coin, and coin received from banks were processed in 1949. The net circulation of our Federal Reserve Notes amounted to $4,501,280,000 at the end of 1949, as against $4,598,426,000 on December 31, 1948, the net decrease amounting to $97,146,000. The all-time high of $4,669,338,000 was recorded on December 24, 1947. STATEMENT OF OPERATIONS CHICAGO PIECFS Currency Outgoing .................................................... Incoming .................................................... Forwarded for Redemption...................... Coin Outgoing—Loose ....................................... Wrapped .............................. Total ....................................... Incoming—From Banks .......................... From Mints .......................... From Other F. R. Banks. . . . DOLLAR VALUE OF PIECES Currency Outgoing .................................................... Incoming .................................................... Forwarded for Redemption...................... Coin Outgoing—Loose ....................................... Wrapped .............................. Total ....................................... Incoming—From Banks .......................... From Mints .......................... From Other F. R. Banks. . . . FEDERAL RESERVE NOTE ISSUES— FEDERAL RESERVE AGENT Pieces Received from Washington...................... Issued to Bank.............................................. Dollar Value of Pieces Received from Washington...................... Issued to Bank.............................................. 1949 1948 DETROIT BRANCH 1948 1949 530,888,131 558,377,758 227,775,957 536,339,523 554,539,859 214,308,066 138,959,206 140,140,943 41,762,180 143,610,922 133,988,000 23,954,149 764,496,603 563,457,000 1,327,953,603 1,282,457,814 45,100,000 5,000,000 698,834,817 554,211,410 1,253,046,227 1,100,820,759 162,450,000 11,450,000 51,462,807 46,889,700 98,352,507 110,937,421 4.500.000 3.545.000 97,388,734 5,700,550* 103,089,284 98,639,931 22,375,000 2,560,000 $2,984,250,500 3,207,451,014 847,900,014 $3,127,707,000 3,288,919,875 811,033,375 $867,504,156 918,374,667 175,634,606 $901,077,058 932,118,965 108,854,545 $ 47,352,801 58,465,400 $ 105,818,201 $ 106,010,802 550.000 400.000 $ 49,431,921 56,863,182 $ 106,295,103 $ 98,175,709 7.750.000 1.650.000 $ 4,422,446 3,320,900 $ 7,743,346 $ 9,340,413 117.000 275.000 $ 8,179,653 584,300* $ 8,763,953 - $ 8,674,806 1 ,600,000 610,000 61.144.000 59.910.000 55,908,000 57,120,100 9,740,000 9,188,020 8,840,000 9,344,340 $ 632,320,000 611,380,000 $ 594,040,000 625,720,000 $117,000,000 $111,000,000 126,080,000 115,200,000 ^Wrapped Coin Service Inaugurated October 15, 1948. 19 NUMBER OF CHECKS HANDLED 20 SER VIC ES TO M EM B ER B A N K S COLLECTION OF CHECKS AND OTHER ITEMS The Federal Reserve Banks act as nation-wide clearing agents for the routing of checks between commercial banks in much the same manner as clearing house associations do in local com munities, and accept and pay checks drawn by the Federal Government. They also collect drafts, notes, bonds, coupons, acceptances, etc., for member banks and deliver against payment securities sold by member banks. GENERAL SUMMARY The number of city and country items processed during 1949 increased 3% at Chicago and 2% at Detroit. However, the dollar value of all checks handled by Chicago decreased $7,304,418,000 for the year 1949, or about $24,000,000 for each working day. Preparation of outgoing cash letters on proof ma chines effected an 11% reduction in letters dispatched STATEMENT OF OPERATIONS DETROIT BRANCH 1949 1948 CHICAGO 1949 CHECKS Number of Checks Handled City ................................................ Country ....................................... Government-—P aper.................... Card ................... Totals.............................. and a 17% reduction in the number of employees at Chicago. Check Department employees at Chicago work 5 days each week on a rotating basis in order to comply with the Saturday closing law in effect since August 6, 1949. However, operations are continued for six full days each week in order to render maximum service on check collections. 1948 47,511,000 201,730,000 3,814,000 40,216,000 293,271,000 46,916,000 194,543,000 3,432,000 41,645,000 286,536,000 14,764,000 25,491,000 989,000 4,646,000 45,890,000 14,019,000 25,320,000 891,000 4,426,000 44,656,000 $50,956,061,000 34,009,768,000 3,725,385,000 2,708,362,000 $91,399,576,000 $55,257,910,000 36,482,969,000 4,433,454,000 2,529,661,000 $98,703,994,000 $12,302,979,000 5,361,938,000 884,793,000 308,535,000 $18,858,245,000 $13,034,004,000 5,443,955,000 676,738,000 292,534,000 $19,447,231,000 5,439 6,064 552 549 28,304 152,434 535,320 716,058 43,167 177,107 505,234 725,508 24,949 15,573 114,728 155,250 20,760 17,551 117,890 156,201 98,931 98,010 6,046 6,572 98,851,000 364,684,000 869,692,000 $ 131,997,000 472,313,000 829,902,000 $ Totals.............................. $ 1,333,227,000 $ 1,434,212,000 $ 116,009,000 $ 154.411,000 *Includes direct sendings to other Federal Reserve Banks by our Member Banks ............................ $ 265,809,000 $ 351,765,000 $ $ Dollar Value of Checks Handled City ................................................ Country ....................................... Government—P ap er................... Card ................... Totals.............................. DAILY AVERAGE NUMBER OF CASH LETTERS DISPATCHED......... NON-CASH ITEMS Number of Transactions City ................................................ Country* ..................................... Coupon and Security................. Totals.............................. *Includes direct sendings to other Federal Reserve Banks by our Member Banks ............................ Dollar Value of Transactions City ................................................ Country* ..................................... Coupon and Security................. $ 32,716,000 35,297,000 47,996,000 28,088,000 $ 43,793,000 58,950,000 51,668,000 47,368,000 21 SER VIC ES TO M E M B ER B A N K S SAFEKEEPING OF SECURITIES A free safekeeping service for U. S. Savings Bonds, Series E, is extended to members of the armed forces and to the general public. The Federal Reserve Banks act as depositories for securities owned by member banks. Securities so held are completely serviced as to collection of interest, redemptions, exchanges, etc. THOUSANDS Chicago GENERAL SUMMARY The dollar value of securities on hand at the close of 1949 increased considerably over 1948 year-end holdings. Greater holdings for member banks created increases of $956,000,000 at Chicago and $167,000,000 at Detroit. Chicago processed $325,000,000 in securities for exchange during December, 1949. U. S. Army personnel deposited 10% more Savings Bonds during 1949, while their withdrawals decreased 23%. The dollar value of civilian releases increased both at Chicago and Detroit. THOUSANDS Detroit pieces received,* pieces released* 100 * in clu de s Savin gs Bonds 0 1945 1946 STATEMENT OF OPERATIONS 1947 SAFEKEEPING—MEMBER BANKS, ETC. Pieces Securities—Received ................................. Released ................................. Coupons Detached from Securities......... Receipts Issued ................................................ Receipts Released ............................................ Receipts O utstanding..................................... SAFEKEEPING—SAVINGS BONDS Pieces Received U. S. Army Personnel........... Civilian ................................... Released—U. S. Army Personnel........... Civilian ................................... Held as of Dec. 31-U.S. Army Personnel Civilian.................... D ollar V alue of P ieces Received—U. S. Army Personnel........... Civilian ................................... Released—U. S. Army Personnel........... Civilian ................................... Held as of Dec. 31-U.S. Army Personnel Civilian.................... 22 1949 DETROIT BRANCH 1948 1949 CHICAGO 1948 1949 D ollar V alue of P ieces Securities—Received ................................. Released ................................. Held as of December 31 ■ ■ ■ Coupons Detached from Securities......... 1948 192,416 176,272 873,652 226,869 212,100 934,840 19,800 16,679 153,449 18,327 19,330 151,796 $10,152,780,248 9,196,352,276 5,385,248,323 84,143,991 22,285 22,937 57,959 $ 8,977,566,386 9,334,846,359 4,428,820,351 79,713,752 $ 1,206,608,026 1,039,569,259 529,600,750 4,515,654 $ 1,261,764,135 1,208,065,590 362,561,984 3,724,445 24,127 26,682 58,621 2,268 2,612 7,463 2,413 3,125 7,324 40,227 40,899 73,058 57,702 352,172 318,071 36,566 48,755 94,563 53,083 385,003 334,874 — 56,423 — 56,225 — 297,944 — 65,936 — 64,132 — 297,746 $ 2,559,945 7,806,110 3,966,405 14,061,439 18,215,625 47,981,919 $ 2,502,935 9,459,021 5,096,875 6,045,752 19,626,085 54,237,248 $ — 5,455,100 — 5,257,345 — 24,687,710 — $ 6,319,630 — 4,604,815 — 24,489,955 SER VIC ES TO M E M B ER B A N K S INVESTMENTS The Federal Reserve Banks act as securities agents for member banks. The purchase and sale of bonds by member banks, either for their own account or for the account of customers, may be effected through their Reserve Bank without charge. GENERAL SUMMARY The number of transactions handled by the Invest ment Department at Chicago declined somewhat in 1949 from that of the previous year. However, the par value of the securities involved showed a substantial increase. Reflecting the relaxation in reserve requirements during the year and the generally easier money market, purchase transactions more than doubled in dollar amount, while securities sold for member banks and others de clined 20%. At the Detroit Branch, the number of purchases increased 20% while sales transactions declined 22%. STATEMENT OF OPERATIONS CHICAGO 1949 NUMBER OF SECURITY TRANSACTIONS P urchases U. S. G overnments Member Banks and Others..................... Other F. R. Banks..................................... System Open Market Account............... O ther Member Banks and Others..................... Total Purchases............................ Sales U. S. G overnments Member Banks and Others Other F. R. Banks............. O ther Member Banks and Others Total Sales DOLLAR VALUE OF SECURITIES P urchases U. S. G overnments Member Banks and Others. . Other F. R. Banks................... System Open Market Account, O ther Member Banks and Others. . Total Purchases........... Sales U. S. G overnments Member Banks and Others Other F. R. Banks............. O ther Member Banks and Others Total Sales............. 1948 2,954 161 — DETROIT BRANCH 1948 1949 760 — — 3,045 162 2 631 — — — 760 — — 631 — ___ 9 3,124 18 3.227 7,282 474 8,630 436 496 — 634 — 7,818 48 9,114 496 634 $305,507,650 15,763,000 $130,174,450 9,810,400 $18,665,118 $13,795,134 62 ________ — 1, 000,000 145,000 $321,415,650 $141,275,850 $18,665,118 $13,795,134 $247,362,970 17,047,350 $308,371,730 24,157,500 $9,162,119 $26,799,201 577,410 $264,987,730 759,250 $333,288,480 $ 9,162,119 $26,799,201 291,000 23 SER VIC ES TO M E M B ER B A N K S ECONOMIC RESEARCH Information on current economic developments in which the Federal Reserve System has an interest is gathered and inter preted by the Bank. These studies are made available not only to the officers and directors of this Bank and to the Board of Governors, but also to member banks and business firms in the Seventh Federal Reserve District, an informational service being a very important activity of the Research Department. Members of the research staff maintain continuing close contact with leaders of banking, industry, agriculture, and trade so as to obtain first-hand information on banking and business in this Reserve District. GENERAL SUMMARY During 1949 the Research Department con tinued its current research and reporting work along the same general lines as in recent years. Greater emphasis was placed on the study of agri cultural and business conditions in the Seventh Federal Reserve District, Federal fiscal policy, and the functioning of the monetary mechanism. Cur rent developments in the field of bank credit and business finance, labor and industry, retail trade, consumer credit, state and local government finance, and farm credit continue to receive close attention. The Research Department continued to em phasize strengthening its ties with bankers, busi nessmen, and agricultural leaders. The Department answered thousands of inquiries for business and financial information received by mail, phone, or in person from banks, business firms, and others. A great amount of important data was again collected through the cooperation of Seventh Dis trict reporting banks and business firms. The usual summary reports of statistical data were pre pared and sent to the Board of Governors. The following material was published during the year as a result of current studies and collection of data in the Seventh District: Weekly Agricultural Letter; department store sales; bank condition statements—mem ber bank (national, and cities of Chicago, Detroit, Indianapolis, and New York) and Federal Reserve Banks combined. Monthly Business Conditions (monthly review) ; retail trade and consumer credit series —department stores, furniture, household appliance, jewelry, and shoes; financial reports—assets and liabilities of Seventh District member banks, bank debits, bankers acceptances, and commercial paper; other business sum maries—business indexes and farm business conditions. Quarterly Farm land value survey. Annual and Special Reports Department store sales and stocks by departments; deposit ownership survey; member bank operating ratio study; member bank earning asset analysis; mem ber bank bad debt loss analysis; and retail credit survey. The number of copies published of Business Conditions has been increasing steadily the past few years so that it now averages 13,000 monthly, of which 3,600 are sold at cost in bulk subscrip tions to a number of member banks which redis 24 tribute them to their customers. Approximately 30,000 copies were distributed of the December issue, which contained special articles on the agri cultural outlook for 1950 and the newly enacted farm legislation. SER VIC ES TO M E M B ER B A N K S EXAMINATION OF BANKS An examination of the state member banks in the District is made each calendar year by the Federal Reserve Bank. Field investigations required in connection with applications to exer cise banking functions are also carried out. Various applications and reports required by law to be rendered by organizations performing banking services in this Reserve District are analyzed and reviewed by the Bank before being submitted to the Board of Governors. GENERAL SUMMARY Three banks, 1 national and 2 state, were admitted to membership in 1949. The staff of the Bank Examination Department completed 591 examinations during the year. STATEMENT OF OPERATIONS CHICAGO 1949 1948 NUMBER OF EXAMINATIONS MADE Regular ................................................................................... Membership .......................................................................... Trust Departments ............................................................... Follow-up Investigations .................................................... 442 2 145 2 443 2 140 2 NUMBER OF MEMBER BANKS IN 7th F. R. DISTRICT N ational Banks As of January 1............................................................. Additions (See Note A ) ..................................... Withdrawals (See Note B ) ............................... As of December 31...................................................... 567 1 3 565 561 7 1 567 State Banks As of January 1............................................................. Additions (See Note A ) ..................................... Withdrawals (See Note B ) .............................. As of December 31...................................................... 441 2 3 440 DETROIT BRANCH 1949 1948 442 2 3 441 INCLUDED IN CHICAGO DATA NOTE A—ADDITIONS TO MEMBERSHIP DURING 1949 N ational Banks Farmers and Merchants National Bank of Monticello, Monticello, Indiana State Banks City Bank, Detroit, Michigan The State Savings Bank of Flat Rock, Flat Rock, Michigan NOTE B—WITHDRAWALS DURING 1949 N ational Banks 3—voluntary liquidations. (Assets and liabilities assumed by other banks) State Banks 2—voluntary withdrawals 1—consolidation 25 SER V IC E S TO M E M B ER B A N K S BANK AND PUBLIC RELATIONS The personnel assigned to the bank and public relations staff call on member and nonmember banks, attend conventions and group meetings, deliver public addresses, and in general attempt to determine ways in which the Bank’s services to its members may be improved. GENERAL SUMMARY The true value of the bank and public rela tions program cannot be presented in tables or charts, as the end result is best measured by the increases in understanding and acceptance of the Federal Reserve System by an ever-widening circle of bankers, businessmen, and others whose support is important to the success of its operations. Never theless, new goals were set and new records achieved in all the department’s operations. During 1949, 3,197 calls on banks were made by officers of the Head Office and Detroit Branch, bank relations representatives, and other staff members. This number of calls sets a new record. Volume of calls alone, however, is not an adequate criterion of this work. For instance, many calls were made to correct situations arising in the course of every-day transactions. In all such cases, the person-to-person contact resulted in re moving the difficulty and invariably provided the basis for a cementing of friendships. One tangible bit of evidence of the residual value of frequent contacts with our members has been the interest bankers have been taking in visiting the Federal Reserve Bank of Chicago. Officers have been so impressed by their contacts here that many have arranged to bring their entire staff to Chicago for an organized tour. In addi tion, bankers have sponsored tours by other groups. 26 More than eighty tours were conducted for 1,895 persons at the Head Office and Detroit Branch. These groups came from business organizations, schools, universities, churches, foreign countries, Government offices, and public welfare organiza tions. All State bankers’ conventions, group meetings, and special purpose bankers’ meetings in the Sev enth Federal Reserve District during the year were attended by officers of the Head Office and Detroit Branch, economists, or special representatives. Public relations activities of the Head Office and Detroit Branch included attendance at 271 industrial, business, and other meetings and the furnishing of speakers for about 150 business, banking, and civic groups. By means of press re leases and articles, the general public became fur ther informed on the activities of the Federal Reserve Bank of Chicago. The monthly staff meetings of the Bank and Public Relations Department, Research Depart ment, and Bank Examination Department were continued for the purpose of exchanging current economic information and keeping field men thor oughly acquainted with changes in bank operating procedure and Federal Reserve policy in order to serve member banks in the Seventh Federal Re serve District. SERVICES TO R. F. C. RECONSTRUCTION FINANCE CORPORATION The Federal Reserve Banks are fiscal agents of the Reconstruction Finance Corporation and the Commodity Credit Corporation. In such capacity the Bank disburses the proceeds of loans, makes advances for the accounts of various Governmental corpora tions, maintains custody of collateral, handles work relative to the redemption and exchange of securities, etc. GENERAL SUMMARY Reconstruction Finance Corporation Transactions handled for the account of the Reconstruction Finance Corporation increased consider ably during 1949. Disbursements and receipts functioned aggregated 104 per cent more in amount. The total number of all disbursement, receipt and custody transactions in 1949 increased 35 per cent from the 1948 volume. These gains were created by an increase in the number of loans made by the Reconstruction Finance Corporation to business enterprises and an increase in the number of mortgages purchased by its subsidiary, the Federal National Mortgage Association. Commodity Credit Corporation Transactions handled for account of the Commodity Credit Corporation for the year 1949 were 891 per cent more in number and 127 per cent more in amount than the transactions handled during 1948. This greatly increased volume in both disbursements and receipts was due to increased activity in the Commodity Credit Corporation’s price support operations. Disbursements for the purchase of loans from banks, from production credit associations, and from other institutions which act as lending agencies of the Corporation under grain loan programs increased substantially. Marked increases were recorded in dis bursements for payment of drafts issued by state Offices of Production and Marketing Administration; these drafts represented purchase, loan, and service transactions related to the various commodity programs. 27 GENERAL BANK ACTIVITIES ACCOUNTING funds by wire for member banks, the handling of all Bank dis bursements, the compilation of claims for services rendered the government, the assembly of cost data and construction of reports, etc. The central accounting routines of the Bank include the main tenance of the reserve accounts of member banks, the constant analysis of these reserves as regards the legal minimum of each bank, the maintenance of accounts with other Federal Reserve Banks through an interdistrict settlement fund, the transfer of GENERAL SUMMARY Transfers of funds at Detroit Branch increased in 1949, both in number of items and in dollar amount, while 1949 figures for Chicago were lower than those of the previous year. The number of general ledger entries decreased during 1949, as did entries to member bank reserve accounts. Chicago’s entries to other Federal Reserve Banks in creased during the period. STATEMENT OF OPERATIONS CHICAGO 1949 GENERAL LEDGER Number of Entries Functioned.................. DETROIT BRANCH 1949 1948 1948 277,632 1,460,758 FEDERAL RESERVE BOOKS Number of Entries Functioned.................. MEMBER BANKS' RESERVE ACCOUNTS Number of Entries Functioned.................. Active Accounts as of December 31 ............. 307,549 33,613 1,440,503 37,409 279,738 285,514 2,241,276 2,457,968 341,617 352,943 814 804 101 99 MEMBER BANK RESERVES Excess Over Requirement Period Period Maximum .................. July 15 $ 186,782,000 Jan. 15 $ M in imu m .................... Apr. 30 77,005,000 Nov. 30 Assessable Deficiencies B anks.......................... 134 Amount of Penalties Assessed................. $ 8,723 $ Period 136,677,000 July 15 $ 87,380,000 Dec. 15 206 15,636 Period 34,766,000 Apr. 15 $ 10,120,000 May 31 8 $ 292 25,053,000 9,472,000 17 $ 881 TRANSFER OF FUNDS Number of Transfers. . . Dollar V alu e................. 196,428 $65,419,048,000 199,652 $68,388,569,000 34,213 $16,627,317,000 34,116 $15,475,604,000 EXPENSE DISBURSE MENTS Expense Vouchers Functioned ............... Fiscal Agency Claims Prepared .................... $ $ $ $ 28 13,596,737 3,270,509 13,336,122 3,731,435 3,610,413 885,617 3,058,029 1,005,177 GENERAL BANK ACTIVITIES WIRES, TELEPHONE, MAIL. FILES In addition to the usual mail and telephone facilities, the Bank maintains the principal relay center of a leased wire system having connections with the Board of Governors in Washington, with the other Reserve Banks and Branches, with the Treasury Department, and with the Reconstruction Finance Corporation. Telegrams effecting transfers of funds for members, Fiscal Agency operations, and other banking transactions are processed both in code and. in clear. GENERAL SUMMARY The Chicago relay office of the Federal Reserve Leased Wires System matched its 1948 volume by processing over a million telegrams during 1949. Total messages handled by the Codes and Telegrams Divisions decreased slightly: wires sent and received by Chicago totaled 174,000; by Detroit, 45,000. STATEMENT OF OPERATIONS Air Express service (to all Federal Reserve Banks and Branches and to some member banks) was equal to peak figures established in 1948—shipments averaged over one thousand pounds a day during 1949. The 1,700,000 pieces handled by the Chicago General Files Division represented a 13% increase over 1948 volume. CHICAGO 1948 1949 DETROIT BRANCH 1948 1949 68,248 6,792 71,706 7,112 18,844 3,514 18,737 3,853 56,300 6,407 56,353 7,839 16,561 3,509 16,138 4,011 Received In C ode............................................... In C lear............................................... Dispatched In C ode............................................... In C lear............................................... 16,362 5,663 10,007 4,473 17,080 5,660 10,217 5,309 760 464 1,459 61 1,018 555 1,845 48 MAIL HANDLED Number of Pieces Received........................ Number of Pieces Dispatched, Mail and Express .................................................... 1,801,559 3,104,486 1,858,174 3,267,846 282,912 335,991 289,396 354,484 TELEGRAMS PROCESSED L e a s e d W ir e s Received In C ode............................................... In C lear............................................... Dispatched In C o de............................................... In C lear............................................... C o m m e r c ia l W ir e s M ILL IO N S THOUSANDS Chicago mm received, e t dispatched Detroit 29 GEN ER A L B A N K A C TIV ITIES PERSONNEL General personnel activities of the Bank are handled by central personnel units. Such work includes the selection, hiring, trans ferring, promotion, counseling, and termination of employees; the preparation of pay roll and sundry payments to employees, and making necessary withholding tax, retirement, and other deductions; the making of status changes and maintenance of earnings, retirement system, salary deductions, and personnel records; the administration of the Job Evaluation Plan, educa tion, training, employee welfare, and hospital surgical insurance programs, and a monthly employee’s magazine; the maintenance of a medical division, recreational library, and employee lounges. GENERAL SUMMARY Reduction in the personnel requirements of the Check and Government Bond Departments accounted for most of the decrease in number of employees at Chicago during 1949. Employee stability is reflected in lower personnel turnover at both offices, and in the continuous service record of 131 Chicago employees who have been with the bank thirty years or more. At the Detroit Branch, an aptitude testing program was established as an aid in selecting new employees, and a Michigan state charter was obtained to operate a bank credit union. Permissive legislation with respect to Saturday closing of banks was passed by the Illinois legislature and became effective August 6, 1949. In conjunction with other local Clearing House Association banks, the Chicago office closed to the public on Saturdays beginning that date. STATEMENT OF OPERATIONS CHICAGO 1948 1949 NUMBER OF EMPLOYEES As of December 31.............................. New Employees ..................................... Separations ............................................. MEDICAL Physical Examinations .......................... Requests for Medical Care................... CAFETERIA Number of Meals Served— Cafeteria ......................................... Officer’s Dining Room................... Daily Average Number of Meals Served Cafeteria—Noon O n ly ................. DETROIT BRANCH 1948 1949 2,304 395 539 2,448 823 748 380 78 100 404 101 140 833 33,337 936 36,995 73 3,158 117 3,434 719,993 10,308 829,020 10,714 *41,842 — 69,844 — 1,859 1,997 258 249 *because ofclosed August 13, 1949, Cafeteria building construction. NUMBER OF EMPLOYEES H UN DREDS 25 \ ______ TTTT TTTT 10 5 0 30 DETROIT CH ICA GO > / 15 11 L L 20 ew employe es hir< I ____ _ dl 1945 1946 1947 1948 1949 1945 1946 1947 1948 1949 GENERAL BANK ACTIVITIES PROCUREMENT The central procurement units of the Bank handle the purchasing of all equipment and supplies, the storage of supplies, and the maintenance of a printshop, an addressing division, and an office machine repair shop. GENERAL SUMMARY The number of purchase orders written at our head office for printing, office supplies, stationery, equipment, etc., during 1949 totaled 7,682, a decrease from the 8,228 orders written during 1948. This decrease was caused largely by the leveling off of the heavy inventories car ried in our warehouse. The dollar value of orders written during the year amounted to $828,000, as compared with orders of $887,000 during 1948. This decline resulted STATEMENT OF OPERATIONS PRINTING Duplicating........................ . . . . M im eograph...................... ___ M ultilith............................ ___ Multigraph ........................ ___ Photostat............................ ___ In our Printshop, the number of impressions and jobs decreased during the period, largely due to the absence of work formerly handled for the Reconstruction Finance Corporation. Our Addressograph Division exceeded 4,000,000 impressions during the year. CHICAGO DETROIT BRANCH 1948 1949 1948 1949 PURCHASING Purchase O rders............... from a smaller number of orders written, and a down ward trend in some prices. 7,682 8,228 2,154 2,401 Jobs Impressions 285 42,000 188,000 215 1,628 9,747,000 3,216,000 283 2,590 46,000 5,001 13,239,000 Jobs Impressions 44,000 323 160,000 271 1,672 13,019,000 268 2,068,000 48,000 3,415 5,949 15,339,000 Jobs Impressions — — 120,000 337 279 1,559,000 — — 2,000 252 868 1,681,000 Jobs Impressions — — 410 167,000 215 719,000 — — 9,000 339 964 895,000 PURCHASE ORDERS ISSUED CHICAGO 31 GEN ER A L BAN K A C TIV ITIES BUILDING OPERATIONS The operation of the bank’s main building and auxiliary space involves real estate valuation and rate procedures; contract negotiation; architecture, engineering and decorating in connection with major alterations; and the supplying of the services of air, water, heat, light and power, sewage disposal, vertical transportation, building and furniture repairs and maintenance, and decoration and cleaning, GENERAL SUMMARY For several years we have been engaged in a heavy program of renovation which includes five major pro jects and a great number of smaller ones. The large projects are; installation of standard doors in vault No. 4 and enlargement of our truck concourse, finished respectively in 1946 and 1948; air conditioning of the last four floors of our building, finished in 1949; con version of our electric power from direct to alternating current; and full modernization of the electric elevator system, including a signal control system in the principal elevators, to be finished in 1950. The smaller projects include replacement of our obsolete and worn-out police alarm system and of our master-controlled electric wall clocks; floor covering; sound reduction; limited lighting improvements; under-floor electric service to accommo date the growing use of electrically operated office ma chines; use of varied rather than standardized colors in decoration; up-to-date treatment of wall, door and win dow framing (as alterations are made) ; and relocation for efficiency of several large departments. We have two large projects left, neither of which has been started. The first is replacement with glass and metal or wood partitions of our obsolete tellers’ caging, and the second is increasing the capacity of our electric risers to meet the growing demands indicated by the increasing use of electrically operated business machines and the increase in lighting intensities. While we knew that this expansion in capacity would have to be made some day, our reserve capacity was exhausted much more rapidly than expected. Even now we have been compelled to divert power from its assigned location to serve a heavy concentration of IBM machines in our Check 32 Department. We have confined our lighting improve ment within the limitations of our present capacity and expect to wait several years for the full development of the present trend in lighting, especially the fluores cent tube. We have just completed relocation of the Personnel Department from the third floor and the Medical De partment from the 13th floor into a combination suite on the ninth floor. Our program for 1950 includes the provision of an enlarged men’s lounge room on the thirteenth floor in the quarters vacated by the Medical Department; the relaxation of the crowded conditions under which cafeteria employees have been working for several years; and a relocation of departments now on the third floor into more comfortable quarters. Finally, we shall relocate the Research Department on the fifth and sixth floor levels, which will permit returning about 3,500 square feet on the fifth floor to its original use as an auditorium. The continued rise in prices is reflected in the con tinued increase in the cost of operating our building according to the uniform accounting system of the Na tional Association of Building Owners and Managers. Under this system we regard the bank as a tenant and our resulting square foot unit costs represent typical office building costs such as taxes, depreciation, insur ance, elevator operation, cleaning, heating and ventila tion and general maintenance. For the first ten months of 1949 we operated the building at an annual esti mated square foot cost of $2.79 against 1948 figures of $2.14, 1941 figures of $1.20, and 1938 figures of $1.15. GEN ER A L BAN K A C TIV ITIES LEGAL Legal matters arising in the course of this Bank’s operations (litigation, preparation and approval of documents, preparation of opinions and memoranda relating to Federal and State regulations and laws) are handled by the legal department. GENERAL SUMMARY The Legal Department consists of the General Counsel, an Assistant Counsel and a secretary. In 1948 the General Counsel was selected and is continuing to act as legal and technical advisor to Governor Evans, hearing officer in the proceed ing under the Clayton Act instituted by the Board of Governors against Transamerica Corporation. The General Counsel is counsel for the Chairman of the System Insurance Committee, and also dur ing the year served on five System special com mittees or subcommittees. The legal matters handled by the department included conferences with and advice to officers and supervisors of various operating departments; examination for approval of all applications for membership in the Federal Reserve System, appli cations of national banks to exercise fiduciary powers and all documents evidencing changes in the corporate status of state member banks; cor respondence and conferences with representatives of member banks and state banking associations concerning banking laws, regulations and rulings of the Board of Governors; consultations and cor respondence with the Board of Governors and its staff; and examination of court orders relating to the special custody of securities. 33 FEDERAL RESERVE B A N K OF C H IC A G O COMPARATIVE STATEMENT OF CONDITION DECEMBER 3 1, 1949, AND DECEMBER 3 1 , 1948 ASSETS Dec. 31, 1949 $4,375,007,011.53 82,956,787.50 29,799,938.29 $4,487,763,737.32 9,751,829.40 $ 9,751,829.40 2,817,903,000.00 $2,827,654,829.40 3,514,194.10 18,464,500.00 435,848,992.88 15,368,009.11 $7,788,614,262.81 Dec. 31, 1948 $4,371,527,751.76 106,421,425.00 40,332,361.59 $4,518,281,538.35 28.157.000. $ 28,157,000.00 3,332,925,000.00 $4,501,280,050.00 $4,598,426,295.00 2,627,072,464.20 56,269,040.19 117,481,449.57 $2,800,822,953.96 370,515,152.61 1,678,405.13 $7,674,296,561.70 3,121,361,725.57 114,068,871.17 97,380,822.83 $3,332,811,419.57 353,456,394.26 1,752,251.75 $8,286,446,360.58 ............................................................................................. $ 26,885,350.00 S u r p l u s (Section 7) ....................................................................................... 72,028,821.73 S u r p l u s (Section 13b) .................................................................................. 1,429,383.78 O t h e r C a p i t a l A ccounts ............................................................................ 13,974,145.60 Total Liabilities and Capital Accounts........................................... $7,788,614,262.81 $ 25,479,500.00 68,841,817.57 1,429,383.78 8,037,924.98 $8,390,234,986.91 U. S. T r e a s u r y .......... R e d e m p t i o n F u n d — F e d e r a l R e s e r v e N o t e s ......................................... O t h e r C a s h .................................................................................................... Total Cash ....................................................................................... Bills D iscounted ........................................................................................... Total B ills......................................................................................... U. S. G o v e r n m e n t S e c u r i t i e s ..................................................................... Total Bills and Securities................................................................. Bank P r e m is e s ............................................................................................... F e d e r a l R e s e r v e N o t e s o f O t h e r B a n k s ................................................. Uncollected It e m s ....................................................................................... O t h e r A s s e t s ................................................................................................. Total A ssets...................................................................................... G o l d C e r t if ic a t e s On H and and D u e fr o m $3,361,082,000.00 3,191,169.34 22.147.000. 00 464,343,991.35 21,189,287.87 $8,390,234,986.91 LIABILITIES Federal Reserve N otes in A ctual Circulation ................................. D e p o s it s : Member Bank—Reserve Account ............................................................. U. S. Treasurer—General Account .......................................................... Other Deposits ............................................................................................. Total Deposits ................................................................................ D eferred Availability Items ................................................................... O t h e r L i a b i l i t i e s ........................................................................................... Total Liabilities . CAPITAL C a p i t a l P a id I n 34 A C C O U N T S 00 FEDERAL RESERVE BANK OF CHICAGO COMPARATIVE STATEMENT OF EARNINGS AND EXPENSES YEAR ENDED DECEMBER 3 1, 1949, AND YEAR ENDED DECEMBER 3 1. 1948 E a r n i n g s ................................................................................................................ 1949 $47,051,999.33 1948 $43,407,726.69 10,040,239.13 446,200.00 1,121,901.80 $11,608,340.93 $35,443,658.40 9,407,419.49 442,736.46 993,356.72 $10,843,512.67 $32,564,214.02 $ 4,268,571.03 131,944.37 $ 4,400,515.40 $ 826,315.07 289,304.22 $ 1,115,619.29 $39,844,173.80 $33,679,833.31 $ 535,630.69 $39,308,543.11 5,884,000.00 28,681,442.18 $ 4,743,100.93 1,556,096.77 $ 3,187,004.16 $ 337,420.86 $33,342,412.45 5,624,000.00 23, 621, 236.98 $ 4,097,175.47 1,472,491.62 $ 2,624,683.85 Ex p e n s e s : Operating Expenses........................................................................................... Assessment for Board of Governors................................................................. Cost of Federal Reserve Currency................................................................... Total Current Expenses....................................................................... Current Net Earnings........................................................................... A d d it io n s to C urrent N et E a r n in g s : Profit on Sales of U. S. Government Securities................................................ Other Additions................................................................................................. Total Additions to Current Net Earnings......................................... Total Current Net Earnings and Additions to Current Net Earnings............................................................................................. D e d u c t io n s F r o m C u r r e n t N et E a r n in g s : Total Deductions from Current Net Earnings................................... Net Earnings..................................................................................................... Transferred to Reserves for Contingencies.................................................... Paid United States Treasury (Interest on Federal Reserve N otes)............. Net Earnings After Reserves and Payments to United States Treasury. . . . Dividends Paid ................................................................................................. Transferred to Surplus (Section 7 ) ................................................................. FEDERAL RESERVE BAN K OF C H IC A G O SURPLUS ACCOUNT (SECTION 7) YEAR ENDED DECEMBER 3 1 , 1949, AND YEAR ENDED DECEMBER 3 1, 1948 l ............................................................................................. T r a n s f e r r e d t o S u r p l u s — As A b o v e .......................................................... S u r p l u s D e c e m b e r 3 1 ......................................................................................... Su rplu s Ja n u a ry $68,841,817.57 3,187,004.16 $72,028,821.73 $66,217,133.72 2,624,683.85 $68,841,817.57 35 FEDERAL RESERVE BANK OF CHICAGO STATEMENT OF EARNINGS AND EXPENSES NOVEM BER 16, 1914 (Date of Incorporation) TO DECEMBER 31, 1949 CURRENT NET EARNINGS YEAR CURRENT EARNINGS CURRENT EXPENSES 1914-15............. 1916 ............. 1917 ............... 1918 ............... 1919 ............... 1920 ............... 1921 ............... 1922 ............... 1923 ............... 1924 ............... 1925 ............... 1926 ............... 1927 ............... 1928 ............. 1929 ............. 1930 ............... 1931 ............... 1932 ............... 1933 ............... 1934 ............... 1935 ............... 1936 ............... 1937 ............... 1938 ............... 1939 ............... 1940 ............... 1941 ............... 1942 ............... 1943 ............... 1944 ............... 1945 ............... 1946 ............... 1947 ............... 1948 ............... 1949 ............... $ 268,885 665,937 2,083,164 8,481,747 12,012,078 30,303,218 20,382,170 6,748,863 6,511,359 5,202,169 5,424,663 6,567,043 6,167,352 8,936,418 9,889,451 4,834,153 4,143,601 5,613,671 6,764,554 8,152,371 6,177,615 4,423,476 4,575,583 3,954,026 4,254,602 4,831,217 5,089,095 6,590,508 8,738,325 14,204,919 20,076,761 21,235,190 21,318,967 43,407,727 47,051,999 $ 245,584 237,731 584,069 1,478,310 2,450,244 4,164,176 4,734,100 4,080,057 4,373,024 3,946,436 3,744,039 3,824,437 3,887,058 3,696,679 4,092,369 3,805,117 3,524,401 3,432,693 3,854,009 3,551,838 3,697,540 3,453,380 3,199,558 3,318,002 3,316,352 3,471,164 4,227,534 5,177,403 5,850,233 6,757,377 6,551,011 7,789,344 8,843,097 10,843,513 11,608,341 $ Totals.................. $375,082,877 $151,810,220 $223,272,657 36 23,301 428,206 1,499,095 7,003,437 9,561,834 26,139,042 15,648,070 2,668,806 2,138,335 1,255,733 1,680,624 2,742,606 2,280,294 5,239,739 5,797,082 1,029,036 619,200 2,180,978 2,910,545 4,600,533 2,480,075 970,096 1,376,025 636,024 938,250 1,360,053 861,561 1,413,105 2,888,092 7,447,542 13,525,750 13,445,846 12,475,870 32,564,214 35,443,658 ADDITIONS DEDUCTIONS TO FROM CURRENT NET CURRENT NET EARNINGS EARNINGS $ — — 2,127 — — 69,307 4,826 572,019 41,903 27,857 12,646 13,098 13,061 11,833 8,050 298,510 263,967 874,264 373,245 1,611,990 951,304 1,526,060 811,188 1,637,141 521,313 1,530,021 163,061 386,898 4,137,334 383,895 422,552 243,136 447,858 1,115,619 4,400,515 $22,876,598 $ 3,210 25,000 269,343 198,356 985,630 332,600 1,147,779 1,835,610 1,001,883 374,467 571,997 501,781 365,710 488,143 380,467 273,218 273,272 812,517 1,493,297 4,808,032 2,660,159 1,563,978 499,607 1,182,207 476,646 282,100 157 602,842 1,266,073 — 517,991 328,214 154,505 5,961,421 6,419,630 $38,057,842 NET EARNINGS (S ee d isp o sitio n , next page) $ 20,091 403,206 1,231,879 6,805,081 8,576,204 25,875,749 14,505,117 1,405,215 1,178,355 909,123 1,121,273 2,253,923 1,927,645 4,763,429 5,424,665 1,054,328 609,895 2,242,725 1,790,493 1,404,491 771,220 932,178 1,687,606 1,090,958 982,917 2,607,974 1,024,465 1,197,161 5,759,353 7,831,437 13,430,311 13,360,768 12,769,223 27,718,412 33,424,543 $208,091,413 FEDERAL RESERVE BANK OF CHICAGO STATEMENT OF DISPOSITION OF NET EARNINGS NOVEM BER 16, 1914 (Date of Incorporation) TO DECEMBER 31, 1949 TRANSFERRED TO SURPLUS Net Earnings (S ee d ta il, Year previouse page) 1914-15. .$ 20 ,0 9 1 403,206 1916. . 1917. . 1,231,879 1918. . 6,805,081 1919. . 8,576,204 1920. . 25,875,749 1921. . 14,505,117 19 2 2 . . 1,405,215 1923. . 1,178,355 1924. . 909,123 1925. . 1,121,273 1926. . 2,253,923 1927. . 1,927,645 1928. . 4,763,429 1929. . 5,424,665 1930. . 1,054,328 609,895 1931. . 1932. . 2,242,725 1933. . 1,790,493 1934. . 1,404,491 771,220 1935. . 932,178 1936. . 1937. . 1,687,606 1938. . 1,090,958 982,917 1939. . 1940. . 2,607,974 1941. . 1,024,465 1942. . 1,197,161 1943. . 5,759,353 1944. . 7,831,437 1945. . 13,430,311 1946. . 13,360,768 1947. . 12,769,223 1948. . 27,718,412 1949. . 33,424,543 Totals ...$208,091,413 Dividends Paid $ — 361,319 862,259 604,635 700,807 792,769 853,785 876,203 904,371 909,123 934,016 985,959 1,029,990 1,099,761 1,170,363 1,211,418 1,170,633 1,029,933 858,127 761,334 753,583 725,553 763,115 791,007 819,532 826,919 896,766 955,508 993,684 1,115,422 1,215,381 1,311,792 1,380,234 1,472,491 1,556,097 $32,693,889 Section 7 $ — — 215,799 6,200,446 7,875,397 14,688,500 2,075,323 — 657,289 27,398 — 187,257 1,267,964 897,655 3,663,668 3,651,464 — 157,090 — 560,738 121,279 932,366 669,479 — 153,241 883,370 279,031 158,265 1,770,131 100,484 237,632 4,765,619 6,710,302 12,212,414 12,048,976 1,139,227 2,624,684 3,187,004 $87,369,258 Franchise Tax Section 13b $ — $ — — — 215,799 — — — — 10,394,480 — — 11,576,009 1,186,301 — 246,586 — — — — — — — — — — — 602,838 — — — — ■— 1,091,513 — — — — 26,322 — — — 25,030 — 12,767 — 206 — — — — — — — — — — — — — — — — — — — — — — — $ 11,681 $25,313,526 — PAID U. S. TREASURY Interest on Section F. R. Notes Other 13b Outstanding Transfers $ — $ — $ — — — — — — — — — — — — — — — — — — — ■ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 17,637 — — 28,354 — — 28,354 — — 20,714 — — — 5,120 — 10,924 — — — 27,215 — 4,021 — — — 50 — — — 5,713 — 2,516 — — — — 10,249,335 — 427 23,621,237 — — 28,681,442 — — $62,552,014 $ — $151,045 ADJUSTMENTS— — 19,748,517 (la) — 19,748,517 (1) 19,748,517 (1) 1,417,702 (2) 1,417,702 (2) — 3,207,763 (3) — 3,207,763 (3) 7,615,843 (4) 7,615,843 (4) $1,429,383 $25,313,526 $151,045 Totals . .$213,917,195 $32,693,889 $72,028,821 NOTES: Balance to Profit & Loss $ 20,091 41,887 — 61,978 $ — 19,748,517 (lb ) $62,552,014 $19,748,517 (1) F. D. I. C. Stock (a) 1934— Purchase. (b) 1947—Retirement (proceeds to Treasury). (2) Payments from U. S. Treasury, Section 13b loans, Years 1934 and 1935. (3) Transferred from Surplus to Reserves for Contingencies, Years 1940, 1942, and 1943. (4) Transferred to Surplus (Section 7) from Reserves for Contingencies, Year 1945. 37 DIRECTORS AND OFFICERS DIRECTORS FRANKLIN J. LUNDING, President Jewel Tea Co., Inc. Barrington, Illinois Chairman JOHN S. COLEMAN, President Burroughs Adding Machine Company Detroit, Michigan Deputy Chairman WALTER J. CUMMINGS, Chairman Continental Illinois National Bank and Trust Company of Chicago Chicago, Illinois WILLIAM C. HEATH, President A. O. Smith Corporation Milwaukee, Wisconsin HORACE S. FRENCH, President The Manufacturers National Bank of Chicago Chicago, Illinois VIVIAN W. JOHNSON, President First National Bank Cedar Falls, Iowa WILLIAM J. GREDE, President Grede Foundries, Inc. Milwaukee, Wisconsin ALLAN B. KLINE, President American Farm Bureau Federation Chicago, Illinois NICHOLAS H. NOYES, Chairman, Finance Committee Eli Lilly and Company Indianapolis, Indiana OFFICERS N. B. DAWES, Vice President W. R. DIERCKS, Vice President E. C. HARRIS, Vice President J. K. LANGUM, Vice President C. S. YOUNG, President O. J. NETTERSTROM, Vice President A. L. OLSON, Vice President A. T. SIHLER, Vice President W. W. TURNER, Vice President A. M. BLACK, Cashier W. A. HOPKINS, Assistant Vice President L. H. JONES, Assistant Vice President M. A. LIES, Assistant Vice President F. A. LINDSTEN, Assistant Vice President L. G. MEYER, Assistant Vice President I. J. PETERSEN, Assistant Vice President F. L. PURRINGTON, Assistant Vice President H. F. WILSON, Assistant Vice President G. W. MITCHELL, Senior Economist C. P. VAN ZANTE, Chief Examiner E. D. BRISTOW, Assistant Cashier P. C. CARROLL, Assistant Cashier H. H. CONKLIN, Assistant Cashier E. A. HEATH, Assistant Cashier C. T. LAIBLY, Assistant Cashier H. J. NEWMAN, Assistant Cashier C. M. SALTNES, Assistant Cashier E. F. SHIREY, Assistant Cashier B. L. SMYTH, Assistant Cashier R. A. SWANEY, Assistant Cashier P. C. HODGE, General Counsel O. C. BARTON, Assistant Counsel J. J. ENDRES, Auditor A. M. GUSTAVSON, Assistant Auditor DIRECTORS AND OFFICERS (CO NTINUED) MEMBER OF FEDERAL A D V ISO R Y CO U N CIL EDWARD E. BROWN, Chairman of the Board The First National Bank of Chicago Chicago, Illinois MEMBERS OF INDUSTRIAL A D V ISO R Y COMMITTEE EDWARD J. DOYLE, President Commonwealth Edison Co. Chicago, Illinois EDWARD M. KERWIN, Vice President E. J. Brach and Sons Chicago, Illinois WALTER HARN1SCHFEGER, President Harnischfeger Corporation Milwaukee, Wisconsin G. BARRET MOXLEY, President Kiefer-Stewart Company Indianapolis, Indiana JAMES L. PALMER, President Marshall Field & Company Chicago, Illinois DETROIT BRANCH D I R E C T O R S CHARLES T. FISHER, JR., President National Bank of Detroit Detroit, Michigan CHARLES A. KANTER, Chairman of the Board The Manufacturers National Bank of Detroit Detroit, Michigan ERNEST GILBERT, Farmer Waldron, Michigan BEN R. MARSH, Vice President & General Manager Michigan Bell Telephone Company Detroit, Michigan JOHN A. STEWART, Vice President and Cashier Second National Bank and Trust Company Saginaw, Michigan OFFICERS E. C. HARRIS, Vice President H. J. CHALFONT, Manager H. L. DIEHL, Cashier R. W. BLOOMFIELD, Assistant Cashier A. J. WIEGANDT, Assistant Cashier 39 ORGANIZATION CHART BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FUNCTIONS SECRETARY Serves as Chief Administrative Officer of the Board in its relations with the divisions of its staff and with the Federal Reserve Banks, and as Assistant Secretary of the Federal Open Market Committee. Performs other duties assigned to him by the Chairman or the Board. Exercises general supervision over activities of the Secretary’s Office. LEG AL D IV ISIO N Advises and assists the Board with respect to legal matters arising in the conduct of its business. Prepares regulations, rulings, orders, opinions, and correspondence or other documents of a legal or semi-legal character. Handles litigation involving the Board and the conduct of hearings before the Board; and consults with and renders assistance to Federal Reserve Bank counsel in connection with litigation involving Federal Reserve Banks. Prepares drafts of proposed amendments to the law, analyzes and keeps the Board informed with respect to pending legislation on banking and related subjects, prepares material for Board’s Loose Leaf Service, and 40 prepares compilations of laws relating to the Federal Reserve System and digests of State laws on certain bank ing subjects. D IV ISIO N OF RESEARCH AN D STATISTICS Keeps Board informed of developments in industry, commerce, agriculture, and finance with a view to formu lation of credit and monetary policy. Prepares statistics and charts and currently interprets developments in pro duction and distribution of commodities, employment, income, expenditures, savings, and the course of prices, as well as in banking, consumer credit, capital markets, and international balance of payments. Makes special studies of fiscal and labor problems from the monetary point of view. Also keeps the Board advised of principal financial and economic developments abroad with partic ular reference to the international financial policies of the U. S. Government. Works with research departments of Federal Reserve Banks on similar problems. Has respon sibility for most of the contents of the Federal Reserve Bulletin and the Board’s Annual Report. Has charge of the Board’s general library. O FFICE OF THE SECRETARY Clears and conducts official correspondence of the Board. Prepares minutes covering the proceedings of, and a record of policy actions taken by, the Board and the Federal Open Market Committee. Maintains docket of matters awaiting action by the Board and exercises super vision over the official records of the Board. Gives special attention to general correspondence from the public including particularly requests for information on economic, monetary and banking questions. D IV ISIO N OF EXA M IN A TIO N S (1) Examines the Federal Reserve Banks. Reviews bank examination and supervisory activities of the Re serve Banks, and participates in conferences, to further coordination of policies and practices. Reviews the activi ties of the auditing departments of the Reserve Banks and participates in conferences of auditors. (2) An alyzes, and prepares reports with recommendations to the Board on, applications and data regarding (a) State banks for membership in the Federal Reserve System, (b) consolidations, mergers, out-of-town branches, etc., involving State member banks, (c) holding company affiliates for voting permits, (d) national banks for trust powers, and (e) certain other grants of authority. Re views reports of examination of State member banks and reports of examination of, and annual reports submitted by, holding company affiliates. (3) Examines corpora tions organized under section 25(a) of Federal Reserve Act, and, when directed by the Board, corporations oper ating under agreements with the Board made in accord ance with section 25 of the Act. (4) Follows develop ments in banking policies and practices, advises the Board regarding supervisory policies and procedures, and maintains liaison with other Federal supervisory agencies regarding individual banks and general banking matters. DIVISIO N OF BAN K O PERATIO NS Handles matters coming before the Board relating to the condition, operations, and earnings and expenses of Federal Reserve Banks, to condition and earnings and expense reports of member banks, and to the banking structure generally. Maintains a record of changes in the status of all banks and branches in the United States, including bank groups and chains, and compiles related data. Issues the Par List. Operates Interdistrict Settle ment Fund. Prepares production schedules for printing Federal Reserve notes, and supervises distribution of paper currency among Federal Reserve Banks. Super vises Reserve Bank budgetary procedure; receives and analyzes annual Reserve Bank budget statements and makes reports thereon to Board; follows up budgetary matters with Reserve Banks. Makes field surveys of operations of Federal Reserve Banks with principal refer ence to operating costs. Prepares schedules determining periodic reallocation of securities in the System Open Market Account. Handles matters relating to loans guaranteed by the Federal Reserve Banks. Maintains records relating to discount rates, bank premises, and fiscal agency and other operations of the Federal Reserve Banks. D IV ISIO N OF PERSO NNEL AD M INISTRATIO N Handles matters pertaining to personnel, salary admin istration, and appointment of directors of the Federal Reserve Banks. Serves as the Board’s central personnel unit for re cruitment, investigation, and classification of personnel, as well as the general administration of personnel poli cies. Maintains personnel and leave records, handles re tirement matters, and supervises the emergency medical room. D IV ISIO N OF AD M INISTRATIVE SERVICES Serves as central budgetary, procurement, duplicating, communications, space control, and service unit of Board. Prepares master budget. Collects funds re ceivable, makes authorized disbursements, and maintains Board’s books of account. Prepares pay rolls and keeps related records. Audits operations of cafeteria and con cessions. Distributes Board publications on a paid, ex change or complimentary basis and handles correspon dence relating thereto. Proofreads and prepares printer’s copy of material for Federal Reserve Bulletin, etc. Pur chases, stores and distributes supplies and equipment; and awards contracts for special services. Performs off set printing, photostat, mimeograph and addressograph work; maintains mailing lists; receives, distributes and dispatches all mail. Operates cafeteria, private dining rooms and snack bar; IBM equipment; telegraph switch ing center; telephone switchboard; main terminal of pneumatic tube system; passenger automobiles and deliv ery service; inter-division page service; and special stenographic and messenger service. Also operates and maintains Board’s building and grounds, including all mechanical equipment, such as elevators, air condition ing, etc. 41