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ANNUAL REPORT of the Federal Reserve Agent of the Fourth Federal Reserve District to the Federal Reserve Board Covering Operations for the Calendar Year 1929 FEDERAL RESERVE BANK OF CLEVELAND Letter of Transmittal January 22, 1930. SIR: I have the honor to transmit to you herewith the fifteenth annual report of the Federal Reserve Bank of Cleveland, covering operations for the calendar year 1929. Respectfully, GEORGE D E C A M P , Federal Reserve Agent. HON. ROY A. YOUNG, Governor, Federal Reserve Board, Washington, D. C. Directors and Officers, 1930 DIRECTORS CLASS A O. N. SAMS, Hillsboro, Ohio, 1930 CHESS LAMBERTON, Franklin, Pa., 1931 ROBERT WARDROP, Pittsburgh, Pa., 1932 CLASS B S. P. BUSH, Columbus, Ohio, 1930 R. P. WRIGHT, Erie, Pa., 1931 G. D. CRABBS, Cincinnati, Ohio, 1932 CLASS C W. W. KNIGHT, Toledo, Ohio, 1930 L. B. WILLIAMS (Deputy Chairman), Cleveland, Ohio, 1931 GEO. DECAMP (Chairman), Cleveland, Ohio, 1932 OFFICERS GEO. DECAMP, Chairman of the Board and Federal Reserve Agent E. R. FANCHER, Governor M. J. FLEMING, Deputy Governor F. J. ZURLINDEN, Deputy Governor H. F. STRATER, Cashier and Secretary W. F. TAYLOR, Assistant Cashier W. H. FLETCHER, Assistant Federal Reserve Agent J. B. ANBERSON, Assistant Fdrl g ; £ $ ^ t t t $ 5 £ ee a Reserve Agent D B C L O I J S E R > Assistant Cashier F. V. GRAYSON, Auditor C. L. BICKFORD, Assistant Cashier CINCINNATI BRANCH DIRECTORS OFFICERS THOS. J. DAVIS C. F. MCCOMBS, Managing Director FRED A. GEIER B. H. KROGER E. S. L E E B. J. LAZAR, Cashier C. F. MCCOMBS H. N. OTT, Assistant Cashier JOHN OMWAKE GEO. M. VERITY BRUCE KENNELLY, Assistant Cashier PITTSBURGH BRANCH DIRECTORS OFFICERS A. E. BRAUN J. C. NEVIN, Managing Director J. R. EISAMAN A. L. HUMPHREY R. B. MELLON T. C. GRIGGS, Cashier JOSEPH R. NAYLOR P. A. BROWN, Assistant Cashier J. C. NEVIN JAMES RAE F. E. COBUN, Assistant Cashier FIFTEENTH ANNUAL REPORT FEDERAL RESERVE BANK OF CLEVELAND FEDERAL RESERVE CREDIT Notwithstanding that general manufacturing in the fourth district was unusually active during the past year, new high production records being established in a number of industries, the volume of bank credit extended by commercial banks was but slightly higher than in the previous year, while reserve bank credit utilized was less than in 1928. This reduction occurred in spite of an increase of 54 in the number of borrowing banks and of nearly 34% in the number of approved applications for rediscounts and advances. Including holdings of Government securities and bills purchased in the open market, the daily average of earning assets at the Cleveland reserve bank was less by about $4,000,000 than in the year immediately preceding. BILLS DISCOUNTED FOR MEMBERS BILLIONS OF DOLLARS OF 3OLLXRS • 6 .1 A _ 2 Ft 5J 1 Z4 J • • 1 S.7J 3 • 1927 I9?R 6 4 L5*J 2 1929 The number of rediscount items handled increased sharply, 17,843 pieces being accepted as against 11,184 in 1928. Collateral notes also were greater in number, a comparison showing 13,149 and 9,914 for the same periods. The number of bankers acceptances handled was reduced from 15,209 to 7,330, bringing the total for all items handled to a little more than 5 per cent above that of last year. The reserve ratio of the Cleveland bank fluctuated rather widely, exhibiting a sharp drop between the first of August and the first of November. This was occasioned by a loss in gold holdings, resulting 7 BILLS PURCHASED AND ACQUIRED MILLIONS DOLLARS DOLLARS 250 200 ISO 100 50 •I f»«J 1922 I I L'"J 1923 • • Tuej L"'J 1924 I92S I• 1 I54j • 64 L j 1927 250 • 200 5 L" ! 1928 • L |27 1 150 100 50 1929 largely from the transfer of funds out of the district through the gold settlement fund. In the period above-mentioned both note circulation and deposit liability fell off, (the latter but slightly) the total amount being about $21,000,000. From August 7 to November 6 the gold holdings of this bank decreased nearly $125,000,000, which, notwithstanding the decline in liabilities subject to reserve, brought the reserve ratio down from 81.9, the high point of the year, to 52.4 per cent. Immediately following the severe break in security quotations in late October and in early November, with a sharp reduction in loans in New York and a transfer of funds to the interior, gold holdings increased $75,000,000 to the end of the year, bringing the ratio to 71.8 per cent, which was substantially above the level of the early part of 1929 or of the late months of the year before. MEMBER BANK CREDIT Total credits extended by reporting member banks in the fourth district fluctuated within a comparatively narrow range throughout the year, and at its close were $17,000,000 below the amount reported for the average of the last month of 1928. There were, however, important changes in some items. Loans on securities reached the "high" in early November, approximately $80,000,000 above the January average. "All other" loans increased less than was expected in a period of such activity as developed during the year, indicating to a degree the ability of business to finance its operations without recourse to the use of bank credit, either through the use of its own cash resources, the sale of its securities, or otherwise. The increase in loan account of reporting members has been offset by a corresponding drop in investment account, which shows a decrease for the year of about $100,000,000. A feature disclosed by figures of a special group of reporting banks is an interruption of the trend in savings deposits, which had moved steadily upward for a number of years. The average increase for the previous three years was in the neighborhood of $47,000,000, whereas 1929 recorded a decrease of $12,000,000. EARNINGS AND EXPENSES Gross earnings for the calendar year 1929 were $6,987,000, exceeding the figure for the previous year by $736,000, largely because of higher discount rates prevailing at the reserve bank. Total expense increased $189,000, leaving current net earnings of $4,201,000, distributed as follows: Reserves and charges Dividends Transferred to surplus account. $ 495,000 910,000 2,796,000 $4,201,000 Net earnings for the year amounted to approximately 1.9 per cent of average capital, surplus and deposits, combined. CHANGES IN MEMBERSHIP During the year seven banks, three national and four state, were admitted to membership. There were 30 losses to membership for the reasons given below: Voluntary withdrawals 3 Insolvencies 3 Absorbed by other member banks 5 Absorbed by non-member banks 4 Consolidated with national banks 5 Consolidated with state member banks 4 Succeeded by new member banks 5 Voluntary liquidation (terminal) 1 The net result of membership changes was a loss of 23 banks. On December 31, 1929, there were 698 national and 99 state bank members in the fourth district. FEDERAL RESERVE NOTES The circulation of federal reserve notes in the fourth district during the past year, despite an increase in general business activity over that of 1927 and 1928, was below the average of either of those two years. The decrease is attributed in part to the more general use of checks, the tendency toward the use of checks for payroll purposes, and in the last few months of the year to a reduction in production and the volume of retail sales. The introduction of the new small-size currency, which was shipped to banks for payment into circulation on July 10, increased the circulation for that week, but the "curiosity demand" which it was thought might result in currency expansion for some weeks or months was soon satisfied, circulation for the week following the new issue being lower than for the week immediately preceding. Except for the week of December 24, when expansion usually occurs as a result of the holiday demand, the volume of our notes in circulation since the small-size currency was paid out has been lower than that of any week in the first half-year, barring the week of Feb. 6. CASH FIECEIPTS AND DISBURSEMENTS or DOLLARS DOLLARS 2000 1600 1200 eoo 400 2000 • 1600 1 1 1111 ll Jl 11 III 1200 eoo 400 Details of the operations of the money department are given in the following schedule: Total Receipts and Payments All Sources Office Receipts Payments Cleveland $ 643,261,000 218,672,000 572,623,000 $ 645,334,000 220,356,000 571,278,000 $1,434,556,000 $1,436,968,000 Pittsburgh Currency Received and Counted Office Total Pieces Total Amount Cleveland 71,768,000 32,701,000 56,877,000 $435,235,000 142,364,000 415,051,000 161,346,000 $992,650,000 Pittsburgh CHECK CLEARING AND COLLECTION While both the total number of items handled and the amounts collected for all three offices of the bank combined show increases over those of the previous year, there was a marked decrease at the — 10 — main office in checks drawn on Cleveland banks. This has been largely the result of an increase in the membership of the local clearing-house association. It is also partly due to mergers and consolidations of important Cleveland banking units, which, however, did not take place until late in the year, and consequently did not materially affect 1929 figures. CHECK SILLIONS or DOLLARS COLLECTIONS or DOLLARS 40 20 40 • . • I I I nBHHHHHB 20 The number of employees in the check collection department has decreased more than 10 per cent in the last year, the daily average number of items handled per employee has increased nearly 200 and the cost per item handled shows a small reduction. The accompanying table gives details of check collection operations: Transit Department Check Clearings and Collections for Year 1929 Cleveland On Cleveland banks On other banks in fourth district On banks in other districts On Treasurer of United States Items 7,255,185 24,977,805 1,091,602 1,090,118 Amounts S 7,920,680,649.93 3,310,011,713.43 142,439,800.24 115,953,091.56 Items sent to Cincinnati and Pittsburgh branches 34,414,710 355,934 $11,489,085,255.16 69,964,684.24 On Cincinnati banks On other banks in fourth district On banks in other districts On Treasurer of United States 4,864,874 13,778,240 593,856 772,058 Items sent to main office and Pittsburgh Branch 20,009,028 270,854 $ 5,537,701,822.53 1,226,876,556.12 84,525,891.84 123,409,959.33 $ 6,972,514,229.82 48,855,913.14 On Pittsburgh banks On other banks in fourth district On banks in other districts On Treasurer of United States. . . 9,831,389 19,836,074 751,441 672,555 $10,655,718,080.04 1,657,245,839.56 513,882,613.49 85,191,243.84 Items sent to main office and Cincinnati branch... . 31,091,459 62,339 $12,912,037,776.93 $72,831,397.69 Cincinnati Pittsburgh — 11 — Recapitulations Total number o f items handled Total amount of items handled Items and amounts handled by both main office and not duplicated in above figures 85,515,197 689,127 $31,373,637,261.91 $191,651,995.07 NON-CASH COLLECTIONS In 1929, 380,464 items amounting to $511,642,761.49 were handled through the non-cash collection department. The number and amounts of items handled at the main office and branches at Cincinnati and Pittsburgh are as follows: Number Main office. . Cincinnati branch... Pittsburgh branch 311,974 38,570 29,920 380,464 Amounts $417,301,673.22 43,794,850.91 50,546,237.36 $511,642,761.49 On items handled through the three offices, collecting banks made collection charges on 32,396 items at a rate slightly more than 1/10 of one per cent. COLLECTIONS NON-CASH MILLION) or OF DOLLARS DOLLARS 600 600 100 200 • III III rj73j i3"! 11 400 L3**! 200 Member banks sent direct to other federal reserve banks and branches for collection, 53,436 items aggregating $63,811,839.39. The total number of collection items handled for the year shows a decrease of a little more than one per cent in the number of items handled. This may be attributed to bank consolidations, financing by credit companies, increase in chain stores which operate on a cash basis and the elimination and consolidation of small business firms. The gradual absorption of the small merchant and manufacturer into the large chains and units is responsible to a degree for the declining numbers of trade acceptances and notes received by the collection department. The item loss in commercial paper handled is offset in part by the increased number of coupons and securities received for collection during 1929. — 12 — FISCAL AGENCY OPERATIONS During the year 1929 there were issued four series of Treasury certificates of indebtedness and one series of Treasury bills. Allotments thereon in this district were as follows: March 15 nine-month 4 Ji % certificates June 15 nine-month 514% certificates September 16 nine-month 4%% certificates December 16 nine-month 3 J4% certificates December 17 ninety-day Treasury bills $31,122,000 33,110,500 44,753,000 11,891,000 2,450,000 Government securities delivered o,n allotment numbered 21,449 pieces, representing 1,435 separate transactions. Government securities received for exchange of denomination or form (within the issue) consisted of 51,612 pieces of coupon form and 9,741 pieces in registered form, aggregating $119,704,650. Against such receipts there were delivered 46,510 obligations in coupon form and 16,008 in registered form. There were 10,047 separate exchange transactions. GOVERNMENT COUPONS REDEEMED UILUONS MILLIONS or Of DOLLARS DOLORS 100 FIGURES INDICATE THOUSANDS Of COUPO 100 s ao 80 60 40 20 • • • • • • • • III ill 60 40 20 Government and federal farm loan coupons redeemed during 1929 totaled 3,021,777 aggregating $60,555,310. Government obligations presented for redemption numbered 2,282 in registered form and 72,339 in coupon form and had a value of $133,970,983. Included in these coupon form redemptions were 2,709 Treasury savings certificates and war savings stamps, which totaled $74,533. There also were redeemed 14 federal land bank bonds valued at $39,100. In all, 16,914 separate redemption transactions were functioned. PERSONNEL In the regular November election, Robert Wardrop, of Pittsburgh, Pennsylvania, and George D. Crabbs, of Cincinnati, Ohio, were reelected Class "A" and Class "B" directors, respectively, for the threeyear terms ending December 31, 1932. There were no other nominations for either post. The Federal Reserve Board reappointed George DeCamp as Class "C" director for three years, at the same time redesignating him as Chairman of the Board and Federal Reserve Agent for the usual one-year term. 1Q The Reserve Board also reappointed John Omwake and A. L. Humphrey as directors at the Cincinnati and Pittsburgh branches, respectively, for three-year terms. Thomas J. Davis and Joseph R. Eisaman were elected by the Board of Directors of the main office to serve at Cincinnati and Pittsburgh for similar periods. The present Managing Directors at the branches, C. F. McCombs at Cincinnati and J. C. Nevin at Pittsburgh, were also reelected to serve for the year 1930. In May, the Reserve Board authorized the appointment at each branch of an Acting Assistant Federal Reserve Agent for a six-month period, in connection with the maintenance and issue of a supply of new small-size currency. In December these appointments were extended to Feb. 1, 1930. NUMBER OF EMPLOYEES NUM3EH 1200 eoo NUMBER • m Ml 1200 I I I I I 600 400 400 There has been no change in the official staff of the bank, and the number of officers and employees dropped from 923 at the close of 1928 to 921 last December. GENERAL BUSINESS CONDITIONS Business conditions in the fourth district for the year 1929 as a whole, were unusually good. Operations at industrial plants attained peak levels and most concerns experienced the best year in history. Not only was the output of goods in unprecedented volume, but the earnings reported by many corporations have never before been equaled. In the first half of 1929, general business improved with each succeeding month, continuing the uptrend which started early in 1928. The turning point was reached in early summer, and industrial activity began to recede gradually in August. The peak, however, was so far above the general level of preceding years that even with the gradual falling-off which was noticed in autumn and the more drastic declines of November and December, operations at the year end were only slightly less than the average of the past three years. Employment and payrolls have been well maintained. The high point of the year occurred in August, with mild recessions in Septem- — 14 — ber and October. In the last two months of the year this decline was somewhat accelerated. In spite of these decreases, employment averaged higher than last year. Iron and steel, the district's basic industry, fared unusually well during the first half of the year but operations fell off in the fall until output in December was at a lower rate than in other parts of the country. In the early part of the year heavy automotive requirements, coupled with large orders from other sources, kept steel mills working at capacity for months. In the latter part of the year, however, local mills have borne the brunt of the decline in steel requirements, due to the large proportion of automotive steel produced locally. Rail orders, which have been unusually large recently, counterbalanced the decrease in some centers, but have benefited few of the fourth district steel mills. The increased volume of business in the first part of the year was contracted for at relatively high prices, so that earnings showed a decided gain over former years. The rubber and tire industry, after staging a recovery in late 1928, operated at record levels for the first few months of 1929, but was soon confronted with abnormal inventories of finished goods. This situation was partly remedied by a sharp decline in production which occurred in the third quarter. In spite of this, output for the year was only slightly less than in 1928. In the latter months of 1929, prices of crude rubber, which had been around twenty cents for some time, fell to around sixteen cents, due partly to larger imports. Coal production in the district showed improvement throughout the year, reflecting increased operations at Ohio mines, which have been producing on a more satisfactory scale than for the past several years. Production for 1929 was substantially greater than in the same period of last year. Shipments of coal at Lake Erie ports were the largest ever reported, being 14 per cent larger than 1928, the best previous year. Prices, however, are still low and wages of workers and net earnings were unsatisfactory but were better than for some time. Building was the only major industry which has not made a favorable showing. Over-built conditions in some sections and high financing costs have resulted in relatively little building in the residential field. Other types, however, have not been affected to such a degree and were about on a par with 1928. Most other types of industrial activity were satisfactory. Consumption of electric power exceeded 1928 by about ten per cent. Motor accessory, machinery, tool and equipment concerns enjoyed a very prosperous year. Paint production was in record volume and demand from automotive sources kept operations at glass factories at high levels. Agricultural production was about the same as in 1928. Decreases in some crops were counterbalanced by increases in others. The tobacco crop was slightly larger than in 1928, but was of poorer quality. Statement of condition of the Federal Reserve Bank of Cleveland December SI, 1929 and December 31, 1928 1929 RESOURCES 1928 Cash Reserves: Gold with Federal Reserve Agent Gold settlement fund — Federal Reserve Board Gold redemption fund — Federal Reserve notes Gold bullion, coin and certificates $130,900,000.00 70,959,579.80 6,493,334.30 45,906,231.87 $119,070,895.00 72,505,853.84 7,414,225.11 39,847,450.69 Total gold reserves Legal tender notes, silver coin and certificates $254,259,145.97 8,618,135.00 $238,838,424.64 11,687,024.00 $262,877,280.97 6,724,403.46 $250,525,448.64 6,504,202.34 76,718,607.35 23,499,106.07 29,478,800.00 1,500,000.00 92,702,241.74 52,377,239.91 32,961,800.00 $131,196,513.42 66,851,964.38 6,267,803.43 1,087,613.31 $178,041,281.65 67,068,387.44 6,535,180.62 1,113,530.16 $475,005,578.97 $509,788,030.85 $188,197,920.00 $216,890,225.00 173,739,386.42 1,981,661.90 2,255,055.57 182,774,489.60 1,215,785.61 1,507,600.01 $177,976,103.89 62,957,322.61 $185,497,875.22 65,383,472.73 $ 15,632,200.00 29,140,768.62 1,101,263.85 $ 14,418,550.00 26,345,333.54 1,252,574.36 $475,005,578.97 $509,788,030.85 Total cash reserves Non-Reserve Cash Bills and Securities: Bills discounted for members Bills bought in open market U. S. Government securities Other securities. . . ... Total bills and securities Unoollected Items Bank Premises — Less reserves for depreciation Total Resources 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: Capital stock paid in Surplus fund Miscellaneous liabilities .... Total Liabilities — 16 —