Full text of Annual Report of the Federal Reserve Bank of Chicago : President's Annual Report to Member Banks : Activities for the Year 1951

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F E D E R A L R E S E R V E B A N K OF C H I C A G O

President's Annual Report TO MEMBER BANKS

HG
2613
CU

F29a
1951

IVITI ES

FOR

THE

YEAR

1951

B a n ko f

Federal

C h i c a g o

Reserve

January 31, 1952
Office OF THE President

Table of Contents

Federal Reserve Serves a Defense Economy

Research Department

Departmental Summaries
General Bank Activities
Personnel

Communications

Services to Member Banks
Currency and Coin

Collection of Checks and Other Items

Investments

Safekeeping of Securities

Discounts and Other Credits

Examination of Banks

Board of Governors Activities—Regulations V, W, and X

Services to Treasury Department
Servicing of Government Securities

Issuance of Government Securities

Redemption of Government Securities

Collection of Federal Taxes

Comparative Statement of Condition.

Comparative Statement of Earnings and Expenses

History of Earnings

Directors and Officers

FEDERAL RESERVE SERVES A DEFENSE ECONOMY

War and rumors of war played a vital role in the
course of business and banking developments throughout
1951. With military spending rising steadily and rapidly
from an annual rate of 25 to 50 billion dollars during
the year, a high level of business activity was inevitable.
At the same time private investment outlays, defenseconnected to an important extent, rose by over 10 billion.
In any other country, so broad a program of preparedness
would have entailed substantial consumer belt-tightening
and continuously rising prices. At the start of the year
such a prospect was foreseen for America by many observers. Instead, individuals acquired a physical volume
of goods and services roughly as large as the record total
of 1950; yet, after March, the general level of prices
remained remarkably stable.

Total Spending Rose

Defense without inflation during the final three quarters of 1951 was achieved through a combination of
forces. First, American business put forth a great productive effort, demonstrating considerable ingenuity in
dealing with material shortages. Second, the imposition
of higher individual and corporate tax rates diverted an
increasing share of income from the private spending
stream. Third, credit expansion was more closely controlled by lenders and the monetary authorities, and an
effort was made to direct funds into the most productive
channels. Finally, and perhaps most importantly, consumers chose to spend a smaller proportion of their
income than in any year since the end of World War II.
The effect of slackened demand at the retail level was
to aid importantly in braking the general price rise early
in March. Other types of spending (business and Government) even continued upward after that month.
Falling retail sales during the spring months led dealers
to reduce their forward buying in order to bring stocks
into line, even though the rate of total consumer spending in the final three quarters of 1951 turned out to be
only slightly below the level of the January-March
period. Certain lines, however, such as television sets,
household appliances, used cars, and some textile products, were hard hit. It was only toward the end of the
year that the market for some of these items picked up
significantly.

Business Inventory Buying

Like consumers, many businesses attempted to build
stocks after the onset of the Korean war. As the months
passed, such efforts met with increasing success. In fact,
when consumer buying leveled off in mid-March, excessive inventories took the spotlight as the principal shortrun business problem. Many merchants had to relearn
the lessons of 1920 and 1937—that supply can outrun
short-run consumer demand even in the face of rising
personal incomes.
By late fall the move to get stocks into line with sales
had been largely completed and cautious reordering was
under way. This is evidenced by the fact that October
sales of Seventh District department stores were above
the year-ago totals, whereas inventories were below. Only
in isolated cases were holdings burdensome. Manufacturers' inventories continued to climb after mid-1951,
but this primarily reflected the build-up of stocks by
defense contractors. Over the year, the total book value
of business inventories rose by about 10 billion dollars.
Total spending rose in 1951, with Government outlays rapidly increasing.
$
BILLIONS

350

Seasonally adjusted
annual rates
J

300

GOVERNMENT
250

BUSINESS
200

150

CONSUMER
100

II III IV
1949

II III IV
1950

II III IV
1951——

Producing for the Government

For many manufacturers, lagging retail sales and
tighter material controls brought a heightened interest in
obtaining defense contracts or subcontracts. The District
has received its proportionate share of these awards, as
gauged by the distribution of existing capacity. Many
of these contracts are for military "hardware," however,
and actual deliveries must await a tedious process of
organizing production obtaining special machine tools,
and, in some important cases, construction of new plants.
Meanwhile, allowable output of consumer goods, such
as automobiles and appliances, was cut back by increasingly severe allocations. Employment in affected industries declined, but, except for automobile centers, the
layoffs have not been sufficient to dent the tight labor
market. In Detroit, the hometown of the motor vehicle,
the number of job seekers rose from 13,000 in March to
about 100,000 in December. Defense work probably
will absorb many of these persons by the end of 1952,
but for the time being the process of channeling resources
into defense work is creating hardships.
Spending for Expansion

Business expenditures for new plant and equipment
exceeded any previous year by a substantial margin. In
large part, the total represents new facilities for the
production of armaments or addition to capacity in basic
industries. Many of the projects have been aided by
certificates of necessity allowing speedy amortization or
through special allocation of materials.
In the District, the largest facilities completed or undertaken in 1951 were for iron and steel in the ChicagoGary and Detroit areas and for aircraft engines in and
around Detroit, Chicago, and Indianapolis. Utility
expansion continues strong in all sectors. Construction
contract awards for manufacturing plants in this area in
recent months have been running about double the comparable 1950 total. Commercial awards, on the other
hand, have slipped below 1950 levels. Until control
orders are relaxed, many plans for shopping centers,
office buildings, warehouses, and the like will be held in
abeyance.

More Farm Output

Generally high employment and rising personal income provided a favorable demand situation for farm
products in 1951. The situation was strengthened also
by the increasing military requirements for food and
other agricultural commodities, and a large volume of
2

exports. Although large supplies of most farm products
were available, prices received by farmers were materially
higher than in 1950.
District farmers' cash receipts from marketings reached
a new high. The approximately 15 per cent increase from
1950 was due primarily to the higher prices, especially
of livestock and livestock products. The volume of
marketings did not change importantly from the high
level of the previous year.
Farm product prices, after setting a record high in
February, drifted slowly downward in the succeeding
seven months but showed indications of strength toward
year-end. Prices of production materials purchased by
farmers were higher also, and absorbed a substantial
portion of the increase in cash farm income. Nevertheless, the realized net income of farm operators was
appreciably higher than in the previous year. Most farm
products were subjected to price ceilings at some stage
of processing or distribution but, since these were at
relatively high levels, they had little effect on either
prices or income, except in the case of beef.
Livestock production expanded to the point where
annual feed consumption exceeded production. Although
not an immediate problem, many farmers and country
bankers became increasingly concerned about a potential
feed shortage. Intensive efforts will be made, therefore,
to expand production of feed crops. Unless this is successful the number of livestock on farms will have to
be reduced in the near future.
Farmers continued to invest heavily in machinery and
other capital equipment as they mechanized additional
operations or replaced existing equipment with new
models. High wage rates and labor shortages contributed to the intense interest in mechanization but
fear of machinery shortages, as the defense program got
under way, was probably the most important factor in the
heavy buying experienced shortly after midyear. Most
District farms are well equipped to continue high level
production.
1952 a n d More Problems

Over-all, at the end of the year business and agriculture could look forward to a high and rising level of
activity. Personal income was at or near peak levels
except in localities hit temporarily by output limitations.
Liquid asset holdings have been rising at a rapid rate.
In this five-state area, time deposits and savings and
loan shares increased by over 300 million dollars in the
first nine months of 1951 compared with only about
200 million in the same period a year earlier. Moreover,
consumers have had ten months to digest the fruits of
their buying spree and to work off excessive debt.

From the standpoint of controlling inflation, 1952 may
provide a sterner test than the year just past. Defense
spending is likely to rise throughout the year. More
steel, copper, and aluminum will be used for armament
and other essential purposes. If consumers begin to
spend up to their capabilities it may be more difficult
to rebuild retail inventories, especially in the case of
metal products, than it was to reduce them from the
levels of last May. In the meantime, a number of manufacturers have received approval for price increases, and
some of the major industrial unions are seeking higher
wages.
In any case there is some reason for satisfaction in the
relatively favorable march of economic events in 1951.
The transition to the higher state of preparedness dictated by the situation in Korea is now well on its way,
and should be largely completed within the next twelve
months. If the remainder of the period can be bridged
without severe strain on the economy, the prospects for
continuing stability will be greatly improved.

A high and rising level of business activity is almost
invariably accompanied by an expansion of debt—private
or public or both. Since Korea the Federal Government
has run a substantial cash surplus. During this period,
however, private "deficit spending" has constituted one
of the most potent expansionary forces in the economy.
The credit situation has been complicated by two sets of
somewhat paradoxical facts: (1) Higher prices require
additional credit, but more credit tends to produce higher
prices; and, (2) Credit is often needed to increase the
District member bank loans have outpaced the
national rise since Korea.
$ BILLIONS

$ BILLIONS

7.0

6.5

Seventh District

5.5

For nondefense
inventory,
working capital,
and other

For plant and
equipment,
including
defense supporting
25

To finance
defense contracts
June-October

June-October

1950

1951

Defense and defense-related uses were accounting
for a substantial share of commercial loans of the District's large banks by the fall of 1951.
output of goods, but new lending also increases the
supply of money and hence tends to raise total demand.

CREDIT AND CREDIT CURBS

6.0

%
100

Nation

5.0

4.5
June

Dec.

June

Dec.

1950

1951

In both the Seventh District and the nation, loans
continued to rise throughout the year, but with important changes in rates of growth. During the first quarter
of 1951, the high and rising level of production and
spending resulted in unseasonally large demands for
bank credit. In particular, business borrowings for working capital purposes continued strong, especially after
the slackening in retail sales began to reduce theflow of
funds generated internally for inventory replacement
and expansion.
After the change in pace of business activity in March,
however, lending slowed significantly. Both businessmen
and bankers were more cautious in increasing inventory
loans. The typical spring rise in real estate and consumer
lending appeared dampened by a growing volume of
repayments. A sizable share of the sharply increased
consumer savings was being channeled into debt repayment, partly as a natural result of the rapid borrowing
during earlier months. All told, District member bank
loans increased but two per cent in the second quarter of
1951, half the first quarter rate of growth.
The lull in lending continued through much of the
summer. By August and September, however, seasonal
demands began to speed new borrowing. Heavy demands for credit to finance cattle feeding came from
the District's farmers. Feeder loans rose more in the
fall of 1951 than they had in the loan boom of late
1950. In meeting this demand, country banks transferred to their large city correspondents more than twice
as much cattle paper as in the preceding year. Loans to

MILLIONS

3,500

3,000

Total

2,500

2,000

1,500

1,000

ShortTerm
500

0
"Long Term" decreased, 'ShortTerm" increased
because of change in classification as
issues held approached maturity
-500

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Federal Reserve holdings of Government securities rose 3 billion dollars during 1951, primarily
as a result of large purchases of long terms (maturing or callable in more than 1 year) in the first 4 months.
businesses also rose substantially in the major cities, although not in other parts of the District. Some of this
rise was in response to normal seasonal needs, but in
the District's largest banks fully one-third of the net
business credit extended during the third quarter of the
year was used to finance production under defense contracts. As a consequence, the large centers, particularly
Chicago, again led the loan expansion through the end
of the year. In the aggregate, the District loan rise
during 1951 was roughly half as great as the 1950
record.
Tightening the Over-all Supply of Money

Primary responsibility for maintaining an adequate
but not excessive supply of credit rests with the Federal
Reserve System. The rapid post-Korean loan expansion,
continuing through the first quarter of 1951, prompted
the System to put into operation several of its most
potent instruments of credit restraint. The slackened
rate of growth in credit after last spring was a partial
reflection of the implementation of these measures. In
the Federal Reserve Bank of Chicago, many of the significant changes in activities during the year resulted
from its participation in the formulation and regional
administration of these national monetary policies.
4

Both major types of available credit controls—general
and selective—were employed by the System in its effort
to curb new lending. The first general control action of
1951, an increase in reserve requirements, took place in
January and February. In the Seventh District alone,
about 300 million dollars of member bank reserves were
absorbed by the uniform increase in requirements of 2
percentage points against demand deposits and 1 percentage point against time deposits. Reserve requirements are now at their legal maximum for all except
central reserve city banks.
Far more important, however, was the change a month
later in Federal Reserve open market policy. After consultation with the Treasury, the Federal Open Market
Committee during March and April gradually ceased
purchasing Government securities for the sole purpose
of supporting market prices. Resultant lower prices and
higher yields on Government securities deterred bank
selling of existing Government holdings to obtain additional loanable funds, and at the same time made subsequent investment in Governments more profitable. Such
developments appreciably reduced the willingness of
bank and nonbank lenders to expand loans to private
borrowers. This was particularly true in the case of new
Government insured mortgage loans, which did not par-

ticipate in the general increase in interest rates during
the spring.
At the same time, the new policy sharply curtailed
the volume of new bank reserves paid out by the Reserve
System in purchasing Government securities. Between
mid-April and the end of the year, operations of the
Federal Open Market Committee to adjust bank reserves,
preserve orderly market conditions, and aid Treasury
financing added only 417 million dollars of Governments to the combined Government security holdings of
the Federal Reserve Banks. This figure contrasts with a
net acquisition of nearly 3 billion dollars during the
comparable period of 1950. Over the year as a whole,
participation in the open market account by the Federal
Reserve Bank of Chicago increased its total holdings
of Government securities by approximately 12 per cent.
Federal Reserve Bank of Chicago Participation
in the System Open Market Account

investigators is continuously employed in checking compliance and in making decisions in borderline cases
which may or may not be subject to regulation.
The attempt to restrain real estate and consumer
credit has met with considerable success. New housing
permits granted in the five District states totaled 70,330
in the first 9 months of 1951 compared with 105,690
during the same months of 1950. The decline probably
would have been greater had not lenders made commitments on a large volume of loans prior to the institution of the regulation and the new open market policy.
Even more marked was the change in trend of instalment
credit outstanding. In the first seven months of 1951
such credit declined by 550 million dollars in contrast to
a rise of 1.7 billion in the same period the year before.
After August 1, 1951, however, when an amendment
to the Defense Production Act eased the terms on
instalment lending, the amount outstanding began to
rise.

(Millions of Dollars)
Dec. 31, 1950

Increase or
Decrease

71
1,898
756
797

$ 189
354
1,900
700

—$118
+ 1,544
— 1,144
+
97

$3,522

$3,143

Dec. 31, 1951

Bills
Certificates
Notes
Bonds
Total

379

At the end of 1951 the Chicago Bank's ownership of
Government securities accounted for 15 per cent of total
System holdings.

Consumer and Mortgage Credit Curbs

General credit controls have an advantage over other
types of credit restraint measures in that they are impersonal and relatively easy to administer. Under certain
conditions, however, it is necessary to supplement general
controls with selective controls in order to influence
more directly the volume and use of particular types of
credit.
As authorized under the Defense Production Act of
1950, and its amendments, the Board of Governors of
the Federal Reserve System established minimum down
payments and maximum maturities for instalment credit
and for mortgages on new residential property. Administration of these new selective controls is largely the
responsibility of the individual Federal Reserve Banks.
Under its delegated authority the Federal Reserve Bank
of Chicago has registered 7,200 mortgage lenders and
almost 30,000 grantors of instalment credit—far more
than any other Reserve Bank. The Bank's staff of

The Voluntary Credit Restraint Program

Over and above the tightened controls initiated by the
Federal Reserve System, individual lenders were also
enlisted in the battle against inflation. Curtailment of
credit expansion necessarily involves rejection of some
loan applications. In time of emergency, however, it is
particularly important that credit not be denied to borrowers engaged in activities essential to the national
well-being. Individual loan officers are in the best
possible position to judge each loan application on its
merits and reach an informed decision as to whether the
prospective credit is in the national interest. Primarily
for this reason the Voluntary Credit Restraint Program
was inaugurated in March of 1951.
Voluntary Credit Restraint was established as a cooperative venture in which officials of commercial banks,
insurance companies, investment banks, savings and loan
associations, and the Federal Reserve System could work
together through a network of national and regional
committees. The national committee has drawn up a set
of general standards for judging the inflationary nature
of loans for financing inventory acquisition, capital expenditure, expenditures of state and local governments,
and international trade; as well as loans on real estate
not covered by Regulation X, and loans secured by stocks
and bonds not covered by regulations governing the
usual margin requirements. The regional committees,
composed of representatives of the lending agencies and
one Federal Reserve official, review loan applications
which are submitted by individual lenders. Chicago is
the headquarters for special committees for each of the
5

major types of lending institutions in the Midwest.
Separate committees of commercial bankers are functioning in the states of Michigan and Iowa.
The difficulties in determining the advisability of fulfilling credit requests vary considerably. Perhaps onethird of the credit granted to business by Seventh
District banks in the last six months has gone to finance
defense or defense-supporting production. A number of
defense loans were guaranteed under the V-loan program which is administered by the Federal Reserve
Banks. Such loans are automatically considered desirable since the borrower must have a defense contract.
Other cases are less easy to judge. Every loan differs
in some respects, and Voluntary Credit Restraint Committee bulletins must of necessity be employed only as
general guides.

Other Limits A p p e a r

By the end of 1951 many bankers had additional
reasons for becoming more selective in granting new
credits. The continuing rise in bank loans brought
capital-to-risk-asset ratios of commercial banks to new
lows, and more and more banks were beginning to
regard themselves as "loaned-up." Moreover, Federal
Reserve bank examiners have noted that a growing number of loans in bank portfolios are marginal in character.
Finally, as a result of tight reserve positions, more member bankers were borrowing from the Federal Reserve
Bank of Chicago during December of 1951 than at any
time in recent years. Such internal pressures should
reinforce the effectiveness of monetary policy and the
Voluntary Credit Restraint Program in checking further
credit expansion during the year ahead.

GROWING DEMAND FOR FEDERAL RESERVE
SERVICES

Booming business conditions have had a two-fold
effect on the Federal Reserve Bank of Chicago. In addition to shaping the supervisory and policy-making
responsibilities of the Bank, rising levels of economic
activity created greater demand for the many Reserve
Bank services. The scope of such services rendered to
the financial community may be judged by the fact that
they occupy the full time of most of the 2,800 employees
of this Bank and its Detroit Branch.
The increase in the total volume of spending in 1951
—by business, individuals, and Federal, state, and local
governments—was directly reflected in Bank operations.
6

Public requirements for currency and coin increased
steadily after last March, touching an all-time peak
around Christmas time. Supplying these needs was the
responsibility of the Bank's Cash Department in its role
as distributor of coin and currency to the District's commercial banks and other institutions. So great were the
demands for circulating media that shortages of various
coin denominations developed during the latter part of
the year. As a result, the Department had to devise
rationing arrangements for these types of coin.
Measured in terms of dollar volume, however, most
money transactions in this country are conducted by
check. The clearest evidence of increased spending,
therefore, appeared in the volume of checks handled by
the Check Department. On the average, the Department
serviced nearly 1.1 million checks a day, six per cent
more than for 1950. Probably the most important service
organization in the Bank, Check employs some 900
people on a three-shift, day-and-night basis. The Department not only routes, collects, and credits all outof-city checks negotiated by member banks, but also
accepts and pays checks drawn by the United States
Government, and collects certain noncash items for member banks, such as drafts, coupons, and acceptances. The
functions of the Check Department were further expanded in mid-1951 when the Federal Reserve Banks
assumed the duty of processing all United States postal
money orders issued and paid in each District. In six
months of operations, more than 28 million money orders
moved through the Bank.
The stepped-up pace of Government activity also
added to the work of the Bank's operating sections. By
law, the Bank serves asfiscal agent for the United States
Treasury in this area. In that capacity, it holds Government checking deposits, receives withheld tax payments,
and performs most of the operations in connection with
the issuance, exchange, and redemption of Government
securities. Higher tax levies, larger governmental outlays, and a substantial volume of Treasury debt financing
have meant heavy work loads in the various divisions
of the Government Bond and Withheld Tax departments. In particular, the beginning maturities of wartime issues of Series E savings bonds have necessitated
some adjustments within the Savings Bond Redemption
Division.
Throughout the Bank, meeting the needs of the expanding Midwest business and financial community required more time, money, and personnel than in any
other peacetime year in the history of the Federal Reserve
Bank of Chicago. Other sections of this Report provide
a full account of how each of the Bank's departments
adjusted to these growing demands.

THE RESEARCH DEPARTMENT

As contrasted with the central banks of other countries, the Federal Reserve System is unique in one important respect—a respect which many assert is responsible for much of its strength. Instead of having a single
central bank, we have twelve great regional Reserve
Banks independently and cooperatively serving their
banking and business communities and bringing to the
central agency of the System, the Board of Governors
in Washington, a clear picture of the special problems
and characteristics of each area. Thus, national credit
policies are strongly influenced by a grass roots appraisal
of needs and resources.
To take full advantage of our "decentralized" central
banking system, the officers and directors of each of the
Reserve Banks must be in close touch with local as well
as national economic conditions. Basically this is a major
responsibility of the Bank's Research Department—to
study and report current developments and to measure
both short- and longer-run regional trends and fluctuations. The flow of information and interpretation is a
two-way process: not only is it valuable for ascertaining
trends and appraising existing and proposed programs,
but also it enables the Bank to inform the communities
in the District of important developments often obscured

by over-all trends and by the complex movements so
characteristic of economic phenomena.
Policy decisions, both in business and Government, are
increasingly dependent on the results of economic research. Currently, Government officials rely heavily upon
economic analysis as they grapple with the problems of
increasing defense production while trying to restrain
inflation through appropriate tax, credit, and controls
policies. Businessmen look to economic studies for help
in judging their inventory positions and plant expansion
programs; farmers in allocating their acreage to alternative crops and in timing their marketings; and bankers
in formulating loan and investment policies.

The Role of Research in the Bank
Understanding economic developments necessitates
familiarity with facts. Statistics are facts in their most
concentrated form. Economists of the Research staff
make use of the data compiled by the Department's
financial and trade statistics sections along with material
collected by other individuals and institutions. They
also keep abreast of developments by extensive personal
contacts.

From these sources

Banks

Business Firms

Conferences and
Public Contacts

Financial Literature

. . . economic information is
collected and interpreted by
The
Research
Department
Staff

•
•

statistical analysis
economic analysis
library services

. . . and disseminated to
these important groups
(1) Financial Institutions
(2) Business Community
(3) Board of Directors of the Bank
(4) President and Officers of the Bank
(5) Board of Governors
(6) Farmers
(7) Schools and Universities

The form in which the Research Department's product
appears depends upon those who use its services, for
in the end, research is merely a tool of the manager of
any agency or enterprise. For this reason the economic
analysts of the department are trained to evaluate economic information and present it concisely tailored to
a particular need. Staff members prepare reports for the
officials of the Reserve Bank itself and for the Board of
Governors. They serve the banking and business community through published statistical releases, written
articles, speeches, and replies to inquiries.
The Research Department works on a basis of give
and take. It draws its material from the region and the
nation and makes it available in a concentrated and
organized form. In a sense, it is similar to the Bank's
Check or Cash departments in that it acts as a clearing
house—not for checks or currency, but for economic
information.

The Inflow of Information
The economist is always being asked how much,
where, when, and why. Are bank loans to business
increasing? What is responsible for the change? How
large is it? When and where is it occurring? The
answers to questions of this type require enormous
amounts of information, the raw material out of which
the answers must be fabricated.

The sources of this raw material are in effect the
Bank's "listening posts" in the community. One such
group is the District's thousand member banks, which
furnish the Research Department with weekly, monthly,
quarterly, and annual reports. The commercial banking
system is the focal point for vital information about the
tempo and level of economic activity. These reports,
therefore, cover not only the essential characteristics of
commercial bank operations but also provide a basis for
appraising business needs for credit and the effects of
bank operations on economic activity.
The significant classifications of bank investments and
loans, the characteristics of deposit ownership, the flows
of bank debits and credits, and the interrelations among
these factors as well as their behavior from place to
place or time to time, suggest the infinity of alternative
relationships from which the economist selects his facts.
The complexity of the analysis indicates the care with
which data reporting systems must be devised and the
necessity of a broad understanding of potential information needs to insure the maintenance of appropriate
records.
The District's department stores and certain other
types of retail stores are additional monitoring stations
for the Bank. Their reports of sales, inventories, and
volume of goods sold on credit are summarized in the
Research Department and made available to the business
community where they are accepted as an important
indicator of economic activity.

In addition to these regular, periodic reports of current developments, many special surveys are made to
obtain information on specific problems. A current
example is a census of lenders on urban real estate, to
provide hitherto unavailable information on an important credit use. In this instance, after obtaining a
reasonably complete picture, it is expected that a list
of regularly reporting firms will be established; their
experience will provide continuing current information
on trends in urban real estate lending.
Another census was conducted with respect to financial institutions which extend consumer credit, and more
recently detailed information has been obtained from a
group of commercial banks for the purpose of making
a detailed study of profits, taxes, and capital requirements of banks and the interrelations of these factors.
Similarly, the rapid expansion of credit in rural areas to
finance feeder cattle this past fall, a matter of much
interest to monetary authorities as well as to bankers,
farmers, and even consumers of beef, was the subject
of a special survey.
Since the Bank is by no means the only organization
which has developed sensitive indicators of the Midwest's economic health, the Research Department relies
heavily upon data collected and statistical reports published by other agencies, public and private. Although
it may not always be evident to bankers and businessmen

who report facts to government agencies, extensive efforts
are made to coordinate data collection activities of the
Federal Reserve Banks and of Federal Government
agencies. This coordination, effected primarily through
the Division of Statistical Standards of the Bureau of
the Budget, has not only eliminated needless duplication
of data-gathering agencies and thus stretched limited
research budgets, but it has also minimized the number
of reports and questionnaires received by individual
businesses.
Only somewhat less important than formal statistical
series are the informal listening posts—personal contact
with bankers, businessmen, and public officials through
interviews and conferences. Such an exchange of ideas
not only fills in the informational gaps which cannot be
easily covered by regular statistical reports, but also provides some of the qualitative judgments with which any
processed data must be leavened.
Finally, there are sources of information readily at
hand in the Reference Library, in the form of published
results of research conducted by business firms, universities, and governmental departments, and in the
news columns of the financial press. Availability of
the findings of other professional analysts insures a
prompt awareness of developments and techniques used
elsewhere.

Analyzing the Data

The collection of raw data on any economic activity
is only the first step toward producing a useful research
product. The data must be edited for consistency and
completeness. The edited reports then must be summarized, the results tested and evaluated, and released
in a form which will have the greatest usefulness. For
some types of research these steps can be performed
deliberately, using all the time that is necessary to be
sure that the results are complete and accurate. Much
of the research at the Federal Reserve Banks, however,
must be performed rapidly for the conclusions to be
most useful. Department store managers, for example,
are much more interested in what happened last week
than in what happened last month. Similarly, monetary
officials need reasonably accurate measure of immediate
developments in all important types of credit if their
policy decisions are to be timely and most appropriate
to developing problems.
Editing, tabulating, and publishing statistical information thus require speed as well as accuracy. Modern
high-speed tabulating equipment, of the type used in
the Research Department, is a requisite for the desired
timeliness. The technique of adapting data to mechanical tabulation is a highly specialized job. But even
more specialized are the skills, the training, and judg-

ment required for interpreting the tabulated data and
giving meaning to the vast inflow of information.
The processed data available to the economists of the
Research Department answer more or less satisfactorily
the questions of how much, when, and where. But they
do not answer questions as to why developments have
occurred, how they will progress, and what they mean.
This is the job of economic analysis. Analysis involves
comparing the reported developments with trends at
other times, in other places, and with other indicators of
economic activity. The goal is to isolate the factors
which have caused the observed events, to appraise the
consequences of what has occurred, and to prescribe
remedial action, if any is called for.
For example, data on the nation's over-all employment of money have needed interpretation recently. In
the last six months of 1951, the rise in total deposits
and currency more than matched the 5.8 billion dollar
rise in the last half of 1950. In the earlier period, wholesale prices jumped nearly one-fifth, yet since June, 1951,
there has been little net change. The explanation was
not that money had suddenly lost its inflation potential.
Rather, the inflationary effect of the 1951 rise was offset
by a mild decline in the seasonally adjusted rate at
which people spent money; while the effects of the 1950
rise in money supply were multiplied by a sharply increasing rate of money use. These developments emphasize the vital importance of factors affecting the

rapidity with which consumers and businesses expend
bank balances. Determining what those factors are, why
they change, and how they are shifting at the moment
is a matter of continuing research.
The various facets of credit expansion are naturally
the subject of regular review by the Department. To
minimize the threat of inflation, early detection of excessive credit extension and prompt compensating action
are essential. Such detection, however, is not always
easy. In the last half of 1951, District business loans
rose 325 million dollars. Was this "excessive"? Out of a
welter of influences, many of which are indeterminate,
such as normal seasonal credit demands, defense needs,
and higher business prices and costs, Research had to
derive significant trends, make estimates, and supply a
final answer.
Moreover, for intelligent current policy-making,
future credit trends must also be known. Will bank

loans to business increase over the first half of 1952?
Tax requirements, seasonal needs, and changes in consumer behavior are but a few of the elements which
enter into the issue. It is the Department's task to assay
all expected influences and put together a final forecast,
subject to continuing revision as the actual pattern of
events unfolds.
Essentially, economic analysis serves to bridge a basic
gap in time. Clear and obvious information on many
business and financial problems becomes available only
after those problems have passed into history. Particularly in the field of credit policy, waiting for exact
knowledge allows the most fertile opportunities for
constructive action to slip away. The chief function
of the Bank's economic analysts, therefore, is to resolve
this dilemma. By synthesizing the meaning of past relationships, current impressions, and expressed future
expectations, research can construct a foundation of approximate knowledge as a basis for timely action.

Viewing a quarter-century of movements in principal assets and deposits of District Member Banks
provides a perspective for analysis of current developments. The 1951 loan rise capped a decade of uninterrupted loan expansion, raising total deposits to a new all-time high.
$ BILLIONS

20
From 1929 through 1935, loans
shrank 75%, Government
holdings rose 400%

Deposits

10
8
6
4

U. S. Government
Securities

Loans
1
.8
.6
.4

District bank loans" hit
bottom" two years after
the pit of the depression

The only year of
net loan contraction
since 1938

.2
1926 27

41 42

43 44

After 18 years,
the '29 loan
peak passed

45 46

47 48

Reporting the Results
Research D e p a r t m e n t Publications and Reports
The information drawn from the business and banking
community is returned to the community as a finished
product of economic research as well as transmitted
to the directors and officers of the Bank and to the
Board of Governors.

MEMBER BANKS

By major District cities separately and cities
combined (weekly)
By states and District total (monthly)
District midyear analysis (annually)

REPORTS
OF BANK
CONDITION

FEDERAL RESERVE BANKS

12 banks combined (weekly)
Federal Reserve Bank of Chicago (weekly)

Member banks, a source of much of the raw data
processed in the Research Department, are especially
interested in management aids for their own internal
operations. Hardly less important to them are appraisals
of general developments which will affect the banking
business nationally or in important areas. The first need
entails detailed reporting of a wide variety of banking
data, usually in the form of processed statistical reports
which are circulated primarily to the banks. The latter
involves a more general treatment of the data with
primary emphasis on interpretation, especially since current trends may presage future developments. This type
of report commonly is an article written by an economist
and published for general distribution.

OTHER
BANKING
PUBLICATIONS
AND REPORTS

The business community, also an important source
of information, looks to the Federal Reserve Banks for

MEMBER BANKS

Operating Ratio Study (annually)
• Loan balances, losses or recoveries (annually)
MEMBER AND NONMEMBER BANKS

Bank debits (weekly and monthly)
Deposit survey (annually)
DEPARTMENT STORES

SALES
AND
STOCKS
OF RETAIL
STORES
AND
CONSUMER
CREDIT

• Instalment credit (monthly)

OTHER
PUBLICATIONS
AND REPORTS

^
t
^
^

• Changes and ratios, by departments (monthly)
Review, by departments (annually)
Total sales (weekly)
• Index revision
OTHER RETAIL STORES

District and city department, apparel, furniture,
household appliance, and jewelry stores (monthly)
Survey of credit granting retail firms (annually)
LENDING INSTITUTIONS

Business Conditions (monthly)
Agricultural Letter (weekly)
Farm Real Estate Market and Credit (quarterly)
District Business Indexes (monthly)

The Bank's series on department store sales reveals a surprisingly close relationship (one per cent
in most years) to the nation's disposable personal income, i.e., personal income less taxes.
$
BILLIONS

2.0

1.8
1.6
1.4

1.2

DEPRESSION YEARS
- reduced demand for department store goods
more than the decrease
in income

Disposable Personal
INCOME

District
Department Store
SALES

1.0
.9
.8

POSTWAR
BOOM PERIOD

WORLD WAR II

shortages of goods
.5

1930

1935

1940

1945

1950
13

a continuous review of economic developments affecting
the general level of employment, production^ prices,
and income. The various Reserve Banks follow such
developments closely in their areas and provide a continuous reporting service on them. Important, also, are
explanations and interpretations of Government policies
and their impact on business. Farmers, schools and
universities, and the public in general are likewise consumers of the Research Department's analyses of national
and regional trends.
The directors and officers of the Bank and the Board
of Governors—those who form monetary policy—receive these reports and others, often highly specialized
in nature, which do not reach the printed form. All in
all, the Research Department produces each month a
large variety of reports, destined for various kinds of
audiences. Moreover, there are a number of less formal
methods of relaying the fruits of the research process
to those who can benefit from it.

Business Conditions

Wages still climbing

The Library Channels Information

The Library of the Federal Reserve Bank of Chicago
is one of the largest libraries of its kind in the country.
It is a "special" library, concentrating in the fields of
economics, banking, and finance. By collecting all upto-the-minute reports and findings in these fields, it
functions as a vital information center for the Bank and
the business community. Serving as a depository or
storehouse for books and documents is a secondary function of the Library; its primary function is far more
dynamic. As a major research tool for current analysis,
it is constantly alert to changing economic developments
and continually adapting to the shifting and steadily
growing informational needs of those it serves.
The backbone of the Library is its collection of over
8,000 books, 325 periodicals, and 20 newspapers in the
areas of banking, finance, labor, public expenditures
and taxation, and business. Especially outstanding is its
collection of current statistical series and periodic releases from Federal agencies, business and trade associations, and professional organizations. In addition to
basic reference materials, the Library specializes in information about particular industries and financial institutions in the Seventh District. It has developed an
expanding file of data on important cities and areas in
the Midwestern states. It also has available a wealth
of detail on Congressional action, such as hearings,
committee prints and the like, as well as reports from
state and local governments in the District.

Obtaining this vast amount of information is only
the first step in the Library workflow. The staff
processes, classifies, and files the steady stream of incoming material by subject, date, and countless other
ways to maximize its availability and usefulness. Old
and obsolete material is regularly weeded out to provide
space for the new. All catalogs, indexes, and announcements are carefully checked to make sure that no useful
information source is being overlooked.
Channeling the right information to the right people,
however, is the end object of the Library's program.
This it accomplishes in two broad ways. First, it automatically distributes among the various members of
the Bank's staff many of its acquisitions such as daily
newspapers, magazines, and other sources of current
information. High priority is accorded to the task of
routing to the economists all material pertinent to their
current research projects.
Secondly, the staff members stand ready at all times
to handle the many requests for information that come
from Bank personnel as well as from bankers, businessmen, students, and teachers in the area. Made by phone,
by letter, or in person, "outside-the-Bank" inquiries
take up about ten per cent of the worktime of the
librarian and her staff of assistants.
Inquiries vary widely in frequency and complexity—-

ranging from the common "What is the latest figure on
industrial production?" or "How is the Federal Reserve
System organized?" to an occasional "What was the
purpose of the preferential rediscount rate?" In many
cases, answers are immediately available. For others, a
staff member may have to put in several hours of "digging" before the right information is uncovered. Where
the questions are quite technical or involved, the economists in the Research Department are consulted for
assistance. Every available means is employed to place
in the hands of inquiring persons the business and
financial information which they seek.
Teamwork the Key

As an integral part of the Research Department, the
Library takes its place along with each of the various
operating and analytical sections in the performance
of day-to-day research activities. Close-working coordination on the part of all—statisticians, clerks,
librarians, research assistants, and economists—characterizes the Department's operation. The result is a continuing flow of timely and thorough economic analysis,
which serves as a base for decision-making by both
public and private institutions. This, the service of research, has grown increasingly important with each passing year, and its value will continue to increase in step
with the expanding complexity of the American economy.

PERSONNEL
Competition for new employees stiffened during 1951.
Attractive hourly wage rates, particularly from defense
industries, induced many prospective white collar employees to turn to factory work. The demands of the
armed services further reduced the pool of available
replacements.

increased 10% at Chicago and 16% at Detroit to meet
the needs of added functions and increased general
activity. As part of the effort to make the Bank a more
attractive place to work, salaries paid during the year
were higher, individually and collectively, and life insurance coverage for employees was broadened at Bank
expense.

Despite these handicaps the number of employees was

EMPLOYEES
DETROIT

CHICAGO
1947

1947

1948

1949

1950

1951

1951
0

500

1000

1500

2000

2500

500

COMMUNICATIONS
change in check department regulations regarding wire
service on unpaid items were reflected by the marked
increase in telegraphic activity during 1951 at both the
Chicago and Detroit offices.

As the principal relay center of the Federal Reserve
leased wire system, the Chicago relay office processed
more than 1,303,000 telegrams in 1951. About 13% of
these telegrams originated or terminated at the Chicago
office; the remainder were relayed to their ultimate
destinations through the facilities of the Chicago center.

The mail department at Chicago handled more than
7 million pieces of mail during 1951—almost a million
more than in 1950.

More, and larger, transfers of funds by wire, and a

TRANSFER OF FUNDS

MAIL

TELEGRAMS

THOUSAND
TRANSFERS

MILLION
PIECES

THOUSAND
PIECES

200

100

CHICAGO

CHICAGO
15

NUMBER

DISPATCHED

150

DISPATCHED

CHICAGO
2

100
RECEIVED

DETROIT
50

DETROIT

DET ROIT
1941

1948

1949

1950

1951

1947

1948

1949

1950

1951

1947

1948

1949

1950

1951

New automatic coin counting and wrapping machines, developed for the Federal Reserve System, are now
being installed in the Cash department. These machines count, wrap, and package coin in one operation.

SERVICES TO MEMBER BANKS

CURRENCY AND COIN
Coin receipts from and shipments to banks, both at
Chicago and Detroit, were up in dollar value but
slightly lower in number of pieces. A substantial increase was also reflected in the demand for wrapped coin.
The net circulation of our Federal Reserve Notes
reached an all-time high of $4,777,199,000 on December 21, 1951. The previous high was $4,669,338,000
on December 24, 1947.

The volume of currency shipped to and received from
banks during 1951 established all-time peaks as to
dollar amount and number of pieces both at Chicago
and Detroit. New highs also were reached at Chicago
with respect to pieces and dollar value of new currency
received from the Treasury Department and with respect
to Federal Reserve Notes issued to the Bank by the
Federal Reserve Agent.

DETROIT BRANCH

CHICAGO
1951
PIECES
Currency
Incoming from Banks
Incoming from U. S. Treasurer

1950

1951

1950

568,354,571
168,708,000

556,958,260
154,964,000

142,578,000
41,356,000

129,657,000
41,560,000

Outgoing

595,210,696

574,194,712

159,368,000

142,971,000

Unfit—Forwarded for Redemption
Unfit-—Retained in Reserve

160.874,176
47,050,000

209,091,771

32,001,000

45,619,000

727,568,424

1,171,841,129

113,527,000

118,618,000

484,194,000
138,910,000
3,240,000

173,650,000

45,425,000

8,000,000

231,000

65,850,000
1,447,000

1,360,753,205

1,407,330,352

173,142,000

188,444,000

803,485,000

576,615,000

60,448,000

73,413,000

$3,305,304,478

215,960,000

$3,202,911,541
198,068,000

$ 955,815,000
54,468,000

$835,211,000
67,720,000

3,591,359,000

3,339,024,000

1,054,240,000

885,650,000

535,958,978
260,550,000

835,909,041

145,444,000

213,069,000

11,302,000

$ 10,156,000

Coin
Incoming from Banks—Counted
Incoming from Banks—Diverted
to Coin Wrapping
Received from Mints
Received from Other F. R. Banks
Outgoing
Total Wrapped During Year
DOLLAR VALUE OF PIECES
Currency
Incoming from Banks
Incoming from U. S. Treasurer
Outgoing
Unfit—Forwarded for Redemption
Unfit—Retained in Reserve
Coin
Incoming from Banks—Counted
Incoming from Banks—Diverted
to Coin Wrapping
Received from Mints
Received from Other F. R. Banks
Outgoing
Total Wrapped During Year
FEDERAL RESERVE NOTE ISSUES—FEDERAL
RESERVE AGENT
Pieces
Received from Washington
Issued to Bank
Dollar Value of Pieces
Received from Washington
Issued to Bank

64,091,237

23,110,000

101,878,807

47,965,150
7,665,000
1,720,000

1,369,500
4,770,000
1,700,000

1,190,000
231,000

2,271,000
596,000

121,389,161

112,329,002

13,561,000

13,429,000

77,612,150

58,199,550

5,537,000

5,464,000

102,278,000
78,184,000

73,260,000
74,066,000

13,680,000
13,648,000

15,720,000
15,428,000

$1,148,420,000
880,780,000

$ 745,000,000
772,420,000

186,500,000

$195,000,000
190,340,000

189,860,000

N U M B E R OF CHECKS HANDLED
City
MILLIONS

200

150

CHICAGO
100

20
10
0

1941

1948

1949

1950

1951

DETROIT

Count

SERVICES TO MEMBER BANKS

COLLECTION OF CHECKS AND OTHER ITEMS
The largest operation in the Bank, by almost any
measure, became larger in 1951. At both Chicago and
Detroit more checks for more money were handled
during 1951 in each check classification: City, Country,
and Government.
Demands on the check department were increased
further during the year with the inception of a new
activity. Effective July 1, new, punched-card type Postal
Money Orders were processed through the Federal

Reserve Banks. In the half-year the new operation
added approximately 28 million and 4 million to the
item counts of Chicago and Detroit, respectively.
After March 1, 1951, special treatment was accorded
to large checks drawn in payment of corporation income
and excess profits taxes. The Treasury Tax and Loan
Accounts were credited with ll/ 2 billion dollars from
this source at Chicago last year.
DETROIT BRANCH

CHICAGO
1950

1951
CHECKS
Number of Checks Handled
City
Country
Government—Paper
Card
Postal Money Order**. .

Totals

307,479,000

60,691,000

50,571,000

$ 66,735,237,000
45,493,769,000
4,417,370,000
2,936,524,000
370,504,000

$ 57,548,493,000
38,968,304,000
3,230,109,000
2,816,129,000

$ 16,976,870,000
7,913,200,000
1,485,630,000
343,608,000
72,032,000

$ 14,243,353,000
6,456,731,000
959,238,000
363,959,000

$119,953,404,000

$102,563,035,000

$ 26,791,340,000

$ 22,023,281,000

3,958

4,067

549

548

28,807
158,186
647,978

25,933
160,987
632,473

21,354
14,788
153,054

21,310
14,218
143,982

834,971

819,393

189,196

179,510

105,101

106,908

5,775

6,007

Totals
* Includes direct sendings to other
Federal Reserve banks by our
member banks

* Includes direct sendings to other
Federal Reserve banks by our
member banks

14,863,000
29,504,000

360,332,000

NON-CASH ITEMS
Number of Transactions
City
Country*
Coupon and Security

Totals

16,100,000

48,246,000
214,132,000
3,813,000
41,288,000

DAILY AVERAGE NUMBER OF
CASH LETTERS DISPATCHED

Dollar Value of Transactions
City
Country*
Coupon and Security

1950

54,121,000
228,125,000
4,694,000
44,891,000
28,501,000

Totals
Dollar Value of Checks Handled
City
Country
Government—Paper
Card
Postal Money Order**..

1951

75,693,000
381,287,000
870,066,000

1,327,046,000

302,840,000

65,040,000

34,115,000
1,339,000
5,374,000
3,763,000

380,618,000

38,069,000

1,080,000
5,124,000

29,377,000
33,778,000
65,540,000

994,624,000

33,874,000
57,414,000

1,440,282,000

129,357,000

128,695,000

289,251,000

25,175,000

26,096,000

* *New Activity July 1, 1951

SERVICES TO MEMBER BANKS

INVESTMENTS
a preference for Treasury Bills and other short-term
securities which customarily are redeemed rather than
sold in the open market.

The dollar value of securities purchased at both Chicago and Detroit was somewhat greater in 1951 than in
the previous year. Securities sales, however, were considerably under the 1950 level. The drop in sales reflects

INVESTMENTS
CHICAGO

PURCHASES
SALES

DETROIT

1948
1949
1950
1951
0
$ MILLIONS

SAFEKEEPING OF SECURITIES
the dollar value more than tripled, indicating transactions
in securities of larger denominations.
Although safekeeping services performed for owners
of savings bonds declined somewhat from 1950 at both
Chicago and Detroit, there still were more than a quarter of a million savings bonds received or released at
the two offices.

Activity in safekeeping operations at Chicago continued at a high level during 1951. As in 1950, more
than one third of a million individual pieces of securities were received or released for member banks, leaving a year end dollar balance of securities in safekeeping
of over five billion dollars. While the number of pieces
handled at Detroit varied little from the previous year,

DETROIT BRANCH

CHICAGO
1951
SAFEKEEPING—MEMBER

BANKS,

ETC.

PIECES

Securities—Received
Released
Coupons Detached from Securities

SAFEKEEPING—SAVINGS
PIECES

Received
Released
Held as of December 31

226,354
182,498
1,031,985

31,159
25,964
180,405

32,964
25,531
164,989

$9,561,411,853
9,579,972,640
5,100,952,229
98,635,596

$10,513,427,538
10,779,162,846
5,119,513,015
88,837,308

$4,207,921,000
4,156,262,000
618,565,000
9,158,912

$1,353,693,070
1,316,385,463
566,908,357
6,512,833

72,988
105,677
597,511

86,402
126,445

630,200

37,215
54,476
272,374

52,591
60,766
289,769

8,781,420
9,313,381
65,539,142

11,996,316
12,122,757
66,071,103

BONDS

DOLLAR VALUE OF PIECES

Received
Released
Held as of December 31

1950

1951

198,878
150,794
1,143,517

DOLLAR VALUE OF PIECES

Securities—Received
Released
Held as of December 31
Coupons Detached from Securities

1950

3,881,600
4,461,075
24,373,355

5,608,685
5,343,565
24,952,830

SERVICES TO MEMBER BANKS

DISCOUNTS AND OTHER CREDITS
ADVANCES TO MEMBER BANKS
$
BILLIONS

Loans made to member banks amounted to 3,621 millions of dollars at Chicago in 1951, almost doubling the
1950 volume of 1,922 millions. Similar loans made at
Detroit totaled 976 millions of dollars in 1951, representing an almost six-fold increase over the 1950 figure
of 146 millions. These loans consisted almost entirely of
borrowings secured by United States Government obligations and were made for relatively short periods to
meet temporary needs.

CHICAGO

Two industrial loan commitments were authorized
under the provisions of Section 13b of the Federal Reserve Act; one at Chicago for $300,000 and one at
Detroit for $2,100,000.

DETROIT
1947

1948

1949

1950

1951

EXAMINATION OF BANKS
Membership in the Federal Reserve System in the
Seventh District totaled 1,012 on December 31, 1951,
reflecting an increase of four members in the past year.
National banks accounted for 568 of the members, while
State member banks totaled 444.

An examination of the State member banks is made
by the Federal Reserve bank each calendar year, usually
jointly with representatives of a State Banking Department. The following tabulation summarizes these cooperative activities for 1951:

NUMBER OF EXAMINATIONS MADE DURING 1951
CLASSIFICATION

Regular

446

Trust Department

151

Special

NUMBER

BOARD OF GOVERNORS ACTIVITIES

REGULATIONS V, W A N D X
Guaranteed loans to industries engaged in Defense
Production were reinstated late in 1950. As the program
gained momentum during 1951, guarantees were issued
to financing institutions in all sections of the District.
Loans varying in amounts from $10,000 to $75,000,000
have been guaranteed by the Departments of the Army,
Navy, and Air Force, as well as by the General Services
Administration and the Atomic Energy Commission.

A field force of 22 men made 13,300 visits and investigations (including 1,360 reinvestigations) in order
to determine the extent of compliance with Regulation
W on the part of dealers and other registrants not subject to examination by any cooperating supervisory
agency. Of the total of 27,400 registrants in this District, 76 were made the subject of disciplinary conferences at the Bank in order to discuss their violative practices, and 17 cases involving serious violations were referred to the Board of Governors for disciplinary action.

Regulation X was amended during the year to require
registration of all businesses engaged in extending real
estate construction credit. Following this amendment,
7,200 registration statements were received and an investigative force of three men made 2,700 calls (including 34 reinvestigations) on creditors not subject to
examination by any cooperating supervisory agency.

REGULATION V
Loans Guaranteed for Defense
Production

REGULATION W
Consumer Credit

REGULATION X
Residential Real Estate Credit

SERVICES TO TREASURY DEPARTMENT

SERVICING OF GOVERNMENT SECURITIES
positaries remained about the same throughout the
year. The dollar amount credited to the accounts by
depositaries serviced by Chicago exceeded $4.7 billion,
an increase of $2.2 billion over the previous year. Payments made through depositaries served by Detroit
aggregated $1.6 billion, or $490 million over 1950.
This large increase was primarily due to the procedure
of channeling through Treasury Tax and Loan Accounts
payments of income and excess profits tax during the tax
period months in 1951, and partly due to payments for
the two special issues of Treasury bills, Tax Anticipation Series.

Securities received for denominational and other
exchange purposes in 1951 increased somewhat at both
Chicago and Detroit over the previous year's figures.
The dollar value of telegraphic transfers of securities,
however, declined approximately 24% in the current
year and even though the volume of such transfers decreased considerably, over $10 billion of securities were
handled in connection with wire transfers in 1951 at
Chicago and Detroit.
Considerable increased activity was reflected in the
use of Treasury Tax and Loan Accounts during 1951
although the number of banks qualified as special de-

DETROIT BRANCH

CHICAGO

MARKETABLE ISSUES

1951

1950

1951

DENOMINATIONAL AND OTHER
EXCHANGES

Pieces Received
Maturity Value

63,800
$1,655,324,400

57,200
$1,619,026,000

830
$ 39,717,000

830
29,468,900

Pieces Issued
Maturity Value

84,000
$1,686,302,700

86,700
$1,613,702,000

2,650
$ 39,469,000 $

2,740
29,494,900

Pieces Received
Maturity Value

57,100
$4,319,306,300

80,700
$5,946,987,000

6,200
$888,435,500

4,990
$ 837,455,500

Pieces Issued
Maturity Value

55,200
$4,524,582,000

61,900
$6,234,578,350

9,400
$885,414,800

8,200
$1,004,743,500

TELEGRAPHIC TRANSFERS ( C P D )

SAVINGS BONDS
REISSUES

Pieces Received
Maturity Value

691,400
630,000
$ 224,048,900 $ 237,541,600

90,300
$ 13,746,400 $

92,710
14,147,400

Pieces Issued
Maturity Value

596,800
$ 208,924,600

660,100
$ 229,712,200

89,900
$ 13,731,700 $

92,410
13,647,800

DEPOSITARY BANKS—TREASURY
TAX AND LOAN ACCOUNT
Number of Entries to Deposit and
Collateral Accounts
Depositary Balances as of December 31
Number of Qualified Depositaries as of
December 31
CUSTODY OF FISCAL STOCK
Pieces Received from Treasury Dept.. .
Pieces Prepared for Delivery
Unissued Government Securities on
hand December 31
Series E Savings Bonds with Issuing
Agents December 31

307,600
297,500
$ 398,702,000 $ 366,682,000

34,958
$129,825,600

32,839
$ 130,902,500

1,697

1,690

139

138

8,469,000
8,620,300

8,582,600
8,070,600

4,516,600
4,486,300

3,918,400
3,869,900

$6,153,475,000

$7,589,200,000

$2,385,600,000

$2,355,466,000

$ 181,537,400

$ 163,900,000

40,327,000 $

35,039,000

SERVICES TO TREASURY DEPARTMENT

ISSUANCE OF GOVERNMENT SECURITIES
Subscriptions received for new issues of Government
securities during 1951 increased 8% at Chicago and
declined 10% at Detroit. During the year, over
$12 billion of securities were allotted in this District.
Sales of Series E Savings Bonds by issuing agents
closely patterned the national trend. The maturity value
of Series E Bonds sold dropped $112 million, or 121/2%,
for the District in the current year. Chicago's reduction
was 16% over the previous year's sales while Detroit
sales dropped only 3%. During the year, however,

many corporations reactivated payroll savings plans,
resulting in a wider distribution of such securities this
past year. The number of pieces of Series E Bonds sold
by issuing agents increased approximately 15% at both
Chicago and Detroit. A portion of this increase also was
due to the centralization of issuance of savings bonds
for the Army personnel in this District, an operation
formerly carried on at various points throughout the
United States.

CHICAGO

SUBSCRIPTIONS A N D

DETROIT

BRANCH

1951

1950

$13,632,413,000
895,105,000

$12,543,416,000
856,073,000

560,614,000
362,479,700

578,622,000
441,340,700

$10,580,908,000
895,105,000

$ 9,925,942,000
856,073,000

560,614,000
360,333,900

578,572,000
441,431,100

24,100
551,000

20,700
498,700

1,122
245,800

1,280
232,500

115,200
640,300

111,500
699,500

11,884
260,400

8,500
260,620

1951

APPLICATIONS

DOLLAR VALUE—SUBSCRIPTIONS RECEIVED

Marketable Issues
Savings Issues
DOLLAR VALUE—SUBSCRIPTIONS ALLOTED

Marketable Issues
Savings Issues
NUMBER OF SUBSCRIBERS

Marketable Issues
Savings Issues
PIECES DELIVERED ON ORIGINAL ISSUE

Marketable Issues
Savings Issues
SALES B Y I S S U I N G

AGENTS

SERIES E SAVINGS BONDS

Maturity Value
Number of Pieces

NUMBER OF QUALIFIED ISSUING
AGENTS AS OF DECEMBER 31

574,837,000
7,563,000

3,109

681,855,000
6,572,500

189,339,000
3,877,000

194,580,000
3,328,500

366

3,039

361

SERIES "E" SAVINGS BONDS sold through issuing agents
DOLLAR VALUE

$
MILLIONS

PIECES

800

MILLION
PIECES

100

600

500

CHICAGO

400

BOO

200

DETROIT

100

1
0

1947

1948

1949

1950

1951

1947

1948

1949

1950

1951

SERVICES TO TREASURY DEPARTMENT

REDEMPTION OF GOVERNMENT SECURITIES
The number of pieces and maturity value of Treasury
issues redeemed in 1951 show an increase at both
Chicago and Detroit over the previous year. The increase
was principally due to the large volume of Armed Forces
Leave Bonds that matured in 1951 and to the redemption of Series D Savings Bonds, proceeds of the latter
being applied on the purchase of the new Series A
Savings Notes which carried a more attractive yield.

The redemption of savings bonds in 1951 increased
slightly for the District. The increase in redemption
value was only 3% over the previous year, but the
number of pieces of bonds redeemed was 83 thousand
less in Chicago, whereas 464 thousand more pieces were
redeemed in the current year at Detroit. This apparent
contradiction resulted from the fact that the increase
in redemptions was heavier in the larger denominations
and in Series F and G Bonds.
DETROIT BRANCH

CHICAGO

1951

1950

51,300
$2,503,894,300

37,410
$1,604,759,200

4,582,491
43,727
17,889

4,113,200
47,000
19,900

1950

1951
TREASURY ISSUES*
Number of Pieces
Maturity Value

318,000

289,900

$8,808,678,400

$8,188,838,500

SAVINGS BONDS
Number of Pieces
By Paying Agents—A-E
By FRB
—A-E
By FRB
—F-G

11,127,100

11,186,000

218,500

209,900

Redemption Value
By Paying Agents—A-E
By FRB
—A-E
By FRB
—F-G

$ 687,699,200
41,978,800

$ 679,944,200
78,533,900
184,723,800

188,285,900
4,549,700

19,020,900

174,476,800
8,974,500
17.578,800

1,609,300
90,448,600

185,500
19,771,300

213,900
18,461,300

281,100

239,808,000

U. S. GOVERNMENT AND OTHER
GOVERNMENTAL AGENCY COUPONS
Number of Pieces
Dollar Value

1,580,400
94,728,276

314,600

includes Savings Notes and Armed Forces
Leave Bonds.

COLLECTION OF FEDERAL TAXES
Many changes made in the Social Security Act became
effective January 1, 1951. The annual base salary on
which the tax is paid was raised from $3,000 to $3,600
and coverage was broadened to include types of workers
previously excluded. The depositary receipt system was
extended effective July 1, 1951, to include railroad retirement taxes relating to wages paid after June 30,

1951. These changes, as well as the higher rate structure of Federal income taxes, are reflected in the statement of operations below. The dollar value of tax
deposits received in 1951 was 40% greater than in 1950.
A considerable portion of this increase was due to the
substantially larger personal income received by the
public in 1951.

TAX DEPOSITS RECEIVED
1951
Number of Receipts
Dollar Value of Receipts

1950

801,000

809,000

$2,797,000,000

$1,993,000,000

FEDERAL RESERVE BANK OF CHICAGO

COMPARATIVE STATEMENT OF C O N D I T I O N
DECEMBER 31, 1951, AND DECEMBER 31, 1950

ASSETS
GOLD CERTIFICATES O N HAND AND DUE FROM U. S. TREASURY

D e c

$4,221,263,933.92

$4,160,181,824.23

122,652,645.00

100,276,265.00

53,922,299.04

33,633,040.67

$4,397,838,877.96

$4,294,091,129.90

REDEMPTION FUND—FEDERAL RESERVE NOTES
OTHER C a s h

Total Cash
BILLS DISCOUNTED

340,600.00

105,990.95

3,521,975,000.00

3,142,824,000.00

$3,522,315,600.00

$3,142,929,990.95

U. S. GOVERNMENT SECURITIES

Total Bills and Securities
BANK PREMISES

6,342,488.93

5,062,021.99

22,180,500.00

17,542,500.00

652,609,324.88

716,750,210.97

19,336,519.88

18,406,141.04

$8,620,623,311.65

$8,194,781,994.85

$4,764,080,565.00

$4,559,959,775.00

3,227,709,792.94

2,797,828,130.46

6,862,718.83

102,305,078.74

102,613,235.40

131,643,083.81

$3,337,185,747.17

$3,031,776,293.01

392,025,045.87

482,690,658.85

1,835,009.47

855,900.31

$8,495,126,367.51

$8,075,282,627.17

FEDERAL RESERVE NOTES OF OTHER BANKS
UNCOLLECTED ITEMS
O t h e r ASSETS

Total Assets

1 9 5 1Dec.31,1950

LIABILITIES
FEDERAL RESERVE NOTES IN ACTUAL CIRCULATION
DEPOSITS:

Member Bank—Reserve Account
U. S. Treasurer—General Account

Other Deposits
Total Deposits
DEFERRED AVAILABILITY ITEMS
OTHER LIABILITIES

Total Liabilities

CAPITAL
CAPITAL PAID IN

SURPLUS (Section 7)
SURPLUS (Section 13b)
OTHER CAPITAL ACCOUNTS

Total Liabilities and Capital Accounts

ACCOUNTS
30,375,250.00

$ 28,698,300.00

79,601,206.22

75,345,443.17

1,429,383.78

14,091,104.14

14,026,240.73

$8,620,623,311.65

$8,194,781,994.85

FEDERAL RESERVE BANK OF CHICAGO

COMPARATIVE STATEMENT OF EARNINGS AND EXPENSES
YEAR ENDED DECEMBER 31, 1951, AND YEAR ENDED DECEMBER 31, 1950

1950

1951
EARNINGS

58,699,425.22

41,659,635.28

11,993,932.03
566,300.00
1,540,691.88

14,100,923.91

44,598,501.31

10,064,335.34
473,900.00
1,371,612.24
11,909,847.58
29,749,787.70

—
18,330.10

5,131,653.36

18,330.10

5,139,640.07

44,616,831.41

34,889,427.77

222,406.87
68,599.16

56,411.31

291,006.03

56,411.31

44,325,825.38

34,833,016.46

38,297,505.75

29,845,729.40

6,028,319.63
1,772,556.58

4,987,287.06

4,255,763.05

3,316,621.44

EXPENSES:

Operating Expenses
Assessment for Board of Governors
Cost of Federal Reserve Currency
Total Current Expenses
Current Net Earnings
ADDITIONS TO CURRENT NET EARNINGS:

Profit on Sales of U. S. Government Securities
Other Additions
Total Additions to Current Net Earnings
Total Current Net Earnings and Additions

7,986.71

DEDUCTIONS FROM CURRENT NET EARNINGS:

Loss on Sales of U. S. Government Securities
Other Deductions
Total Deductions from Current Net Earnings
Net Earnings
Paid United States Treasury (Interest on Federal Reserve Notes)
Net Earnings After Payments to United States Treasury
Dividends Paid

Transferred to Surplus (Section 7)

1,670,665.62

FEDERAL RESERVE BANK OF CHICAGO

SURPLUS ACCOUNT (Section 7)
YEAR ENDED DECEMBER 31, 1951, AND YEAR ENDED DECEMBER 31, 1950
1951
SURPLUS

January

TRANSFERRED TO SURPLUS—As ABOVE
SURPLUS DECEMBER 31

75,345,443.17

1950
$

4,255,763.05
$

79,601,206.22

72,028,821.73
3,316,621.44

75,345,443.17

FEDERAL RESERVE BANK OF CHICAGO

NOVEMBER 16, 1914 (Date of incorporation) TO DECEMBER 31, 1951

YEAR

CURRENT
EARNINGS

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
1950
1951

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
41,659,635
58,699,425

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
11,909,847
14,100,924

Totals

$475,441,937

$177,820,991

268,885
665,937
2,083,164
8,481,747
12,012,078

CURRENT
EXPENSES

30,303,218

CURRENT
NET
EARNINGS
$

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

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
874,2 64
373,245
1,611,990
951,304
1,526,060

811,188
1,637,141
521,313
1,530,021

163,061

7,447,542
13,525,750
13,445,846
12,475,870
32,564,214
35,443,658
29,749,788
44,598,501

386,898
4,137,334
383,895
422,552
243,136
447,858
1,115,619
4,400,515
5,139,640
18,330

$297,620,946

$28,034,568

2,888,092

NET
EARNINGS
(See disposition,
next page)

291,006

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
34,833,017
44,325,825

$38,405,259

$287,250,255

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
56,411

FEDERAL RESERVE BANK OF CHICAGO

STATEMENT OF DISPOSITION OF NET EARNINGS
NOVEMBER 16, 1914 (Date of Incorporation) TO DECEMBER 31, 1951

PAID U. S. TREASURY

TRANSFERRED TO SURPLUS
Net
Earnings
Year

Dividends
Paid

(See detail,
previous page)

20,091
1914-15. .$
403,206
1916..
1917..
1,231,879
6,805,081
1918..
8,576,204
1919..
1920.. . 25,875,749
1921. . . 14,505,117
1,405,215
1922. .
1,178,355
1923.•
1924..
909,123
1925..
1,121,273
2,253,923
1926..
1,927,645
1927..
4,763,429
1928. .
5,424,665
1929. .
1930. .
1,054,328
609,895
1931..
1932. .
2,242,725
1933...
1,790,493
1934. .
1,404,491
1935..
771,220
1936. .
932,178
1937..
1,687,606
1938. .
1,090,958
1939...
982,917
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
1950.. . 34,833,017
1951.. . 44,325,825
Totals . . .$287,250,255
ADJUSTMENTS—
—19,748,517
19,748,517
1,417,702
— 3,207,763
7,615,843
Totals ...$293,076,037
NOTES:

—
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
1,670,666
1,772,556

$36,137,111

Section 7

Section 13b

—
—

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

215,799

—

20,091
41,887
— 61,978

—
—
—

—
—

—

10,394,480
11,576,009

1,186,301
246,586

—

—
—

—

602,838

—

—
—
—

—

—
—

— 26,322
—

25,030
12,767
206

1,091,513

—
—

17,637
28,354
28,354
20,714
5,120
10,924
27,215
4,021
50
5,713
2,516

—

427

3,316,622

—

4,255,763
$94,941,643

Profit
& Loss

—

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

—

to
Other
Transfers

—

Section
13b

Balance

—

Franchise
Tax

Interest on
F. R. Notes
Outstanding

11,681

$25,313,526

$151,045

10,249,335
23,621,237
28,681,442
29,845,729
38,297,506
$130,695,249

—

$ —

—19,748,517 ( l a )

(1)
(1)
(2)
(3)
(4)

19,748,517(lb)
1,417,702 (2)
— 3,207,763 (3)
7,615,843 (4)
$36,137,111

$79,601,206

$1,429,383

$25,313,526

$151,045

$130,695,249

$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.

—

DIRECTORS A N D OFFICERS
DIRECTORS
FRANKLIN J . LUNDING, Chairman

Director and Chief Executive Officer
Jewel Tea Co., Inc.
Chicago, Illinois

of the

Board

Director and Chairman, Executive Committee
Lever Brothers Company
New York, N . Y.

JOHN S. COLEMAN, Deputy

Chairman

President
Burroughs Adding Machine Company
Detroit, Michigan
WALTER J . CUMMINGS, C h a i r m a n

WALTER E. HAWKINSON, Vice President

Continental Illinois National Bank
and Trust Company of Chicago
Chicago, Illinois

in charge of Finance, and Secretary
Allis-Chalmers Mfg. Co.
Milwaukee, Wisconsin

HORACE S. FRENCH, P r e s i d e n t

VIVIAN W . JOHNSON, P r e s i d e n t

The Manufacturers National Bank of Chicago
Chicago, Illinois
WILLIAM J . GREDE,

First National Bank
Cedar Falls, Iowa

President

ALLAN B . KLINE, P r e s i d e n t

Grede Foundries, Inc.
Milwaukee, Wisconsin

American Farm Bureau Federation
Chicago, Illinois
WILLIAM R. SINCLAIR, Chairman of the Board

Kingan and Co.
Indianapolis, Indiana

OFFICERS
CLIFFORD S. YOUNG,

ERNEST C. HARRIS, First Vice President
ALLAN M. BLACK, Vice President
HARLAN J. CHALFONT, Vice President

NEIL B. DAWES, Vice President and Secretary
WILFORD R. DIERCKS, Vice
WALTER A. HOPKINS, Vice

President
President

LOUIS G. MEYER, Vice President
GEORGE W . MITCHELL, Vice President
ARTHUR L. OLSON, Vice President
ALFRED T . SIHLER, Vice President
WILLIAM W . TURNER, Vice President
LAURENCE H . JONES,

Cashier

PHIL C. CARROLL, Assistant Vice President
CLARENCE T. LAIBLY, Assistant Vice President
MARK A. LIES, Assistant Vice President
FRANK A. LINDSTEN, Assistant Vice President

HAROLD J. NEWMAN, Assistant Vice President
INGOLF J. PETERSEN, Assistant Vice President
FRANKLIN L. PURRINGTON, Assistant Vice President
H. FRED WILSON, Assistant Vice President

EDWARD D . BRISTOW, Assistant
Cashier
HERBERT H . CONKLIN, Assistant
Cashier
EDWARD A. HEATH, Assistant Cashier and

CARL M . SALTNES, Assistant
Cashier
ELMER F. SHIREY, Assistant
Cashier
BRUCE L. SMYTH, Assistant
Cashier
RUSSEL A. SWANEY, Assistant
Cashier
GEORGE T. TUCKER, Assistant
Cashier

Assistant Secretary

PAUL C. HODGE, General

Counsel

ORVILLE C. BARTON, Assistant General Counsel
and Assistant Secretary

President

JOHN J. ENDRES, General

Auditor

ARTHUR M. GUSTAVSON, Assistant General Auditor
C. PAUL VAN ZANTE, Chief

Examiner

RESEARCH LIBRARY F.R.B. RICHMOND

3 5078 00027161 4

HG 2613

Federal Reserve Bank of
Chicago

C-4
F29a

PRESIDENT'S ANNUAL REPORT, 1951

Full text of Annual Report of the Federal Reserve Bank of Chicago : President's Annual Report to Member Banks : Activities for the Year 1951

FRASER