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Federal Reserve Bank
of Cleveland




1933

cr>

vO

NINETEENTH ANNUAL REPORT
TO THE

FEDERAL RESERVE BOARD

ANNUAL REPORT
of the

Federal Reserve Agent
of the

Fourth Federal
Reserve District
to the

Federal Reserve Board

Covering Operations
for the
Calendar Year
1933

FEDERAL RESERVE BANK OF CLEVELAND




Directors and Officers, 1934
DIRECTORS
CLASS A
CHESS LAMBERTON, Franklin, Pa., 1934
ROBERT WARDROP, Pittsburgh, Pa., 1935

BEN R. CONNER, Ada, Ohio, 1936

CLASS B
R. P. WRIGHT, Erie, Pa., 1934

G. D. CRABBS, Cincinnati, Ohio, 1935
J. E. GALVIN, Lima, Ohio, 1936
CLASS C
L. B. WILLIAMS (Chairman), Cleveland, Ohio, 1934
E. S. BURKE, JR., (Deputy Chairman), Cleveland, Ohio, 1935
W. W. KNIGHT, Toledo, Ohio, 1936

OFFICERS
L. B. WILLIAMS, Chairman of the Board
and Federal Reserve Agent
W. H. FLETCHER, Assistant Federal
Reserve Agent
J. B. ANDERSON, Assistant Federal
Reserve Agent
HOWARD EVANS, Assistant Federal
Reserve Agent
F. V. GRATSON, Auditor

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
C. W. ARNOLD, Assistant Cashier
G. H. WAGNER, Assistant Cashier
D. B. CLOUSER, Assistant Cashier
P. A. BROWN, Assistant Cashier
E. A. CARTER, Assistant Cashier
A. G. FOSTER, Assistant Cashier

CINCINNATI BRANCH
DIRECTORS

OFFICERS

W. H. COURTNEY
THOS. J. DAVIS
B. H. KROGER
C. F. MCCOMBS

C. F. MCCOMBS, Managing Director
B. J. LAZAR, Cashier

JOHN OMWAKE

H. N. OTT, Assistant Cashier

S. B. SUTPHIN
GEO. M. VERITY

BRUCB KENNELLY, Assistant Cashier

PITTSBURGH BRANCH
DIRECTORS

OFFICERS

A. E. BRAUN

J. C. NBVIN, Managing Director

RICHARD COULTER
A. L. HUMPHREY
J. S. JONES

J. C. NEVIN
JAMES RAE
LLOYD W. SMITH




T. C. GRIGGS, Cashier

F. E. COBUN, Assistant Cashier
C. J. BOLTHOUSE, Assistant Cashier

— 2 —

NINETEENTH ANNUAL REPORT
OF THE

FEDERAL RESERVE BANK
OF CLEVELAND
At the beginning of 1933 the country was in the fourth winter
of the depression and it was generally believed that the worst of
the financial difficulties characteristic of such a period were past.
There had been a reduction in the number of bank failures from
the high level of late 1931 and early 1932; still they were too
numerous to inspire confidence. Inflation, free silver coinage,
barter plans, and debt reduction were being discussed with increasing freedom. Unemployment was serious and local relief
funds were insufficient to meet needs. Share-the-work plans had
been in operation for approximately two months, under the direction of the Banking and Industrial committees. The report of
the Share-the-work organization in the fourth district for March 1,
shortly before the work was taken over by the Chamber of Commerce of the United States, showed that in 2,649 establishments,
131,165 persons had been added to or retained on pay rol?s on
account of work-sharing. The Federal Home Loan Bank Act was
passed in July 1932, and by the beginning of 1933 some of the
twelve Home Loan banks that were to form a reserve system for
savings, building and loan associations were doing business. The
Reconstruction Finance Corporation had been in operation for ten
months and had made actual cash loans of $1,502,168,402. Banks
had been advanced more funds than any other class of borrowers.
The Banking and Industrial committees had been at work in Federal
reserve districts for seven months. Their efforts were directed at
establishing contacts between industries that needed and deserved
credit and banks with money to lend.
Two disturbances in the banking system, in widely separated
parts of the nation, and three months apart in time, were prophetic
of a breakdown in the financial system of the United States, a system that can only function smoothly when the flow of business is
continuous and uninterrupted in any of its component parts, and
when the confidence of the public is unimpaired. The period was
marked by bank failures and by business holidays and moratoria
proclaimed by the mayors of various cities and towns.
Authorities in Nevada proclaimed a twelve-day business and
bank holiday beginning November 1, 1932, for the purpose of allowing a State group banking organization respite from the demands of
depositors. On February 3, 1933, the Governor of Louisiana declared February 4 to be a holiday. This action provided a large
New Orleans bank with time to prepare to meet requests for pay-




o

ment of accounts when the banks reopened on Monday, February
6. Rumors as to the bank's solvency, started in another part of the
country, had gained newspaper publicity and consequent credence
among depositors of the southern bank.
On February 14, because of the inability of a group banking
organization in Detroit to meet the demands of its depositors for
extraordinary withdrawals, the Governor of Michigan declared an
eight-day holiday. All banks and exchanges in the state were closed,
and the situation of the people of Michigan started a wave of fear
that spread across the country, with the result that on Inauguration
Day, March 4, practically all banks in the United States had closed
their doors to the panic-stricken demands of their depositors, or had
placed restrictions on the withdrawal of funds.
The Governor of Ohio, on the day the Michigan moratorium on
banking operations was declared, issued a statement to the effect
that at that time there was no necessity for a similar move in Ohio.
His decision was based on the fact that there was no appreciable
disturbance to the banks of the state.
Member banks of the Cleveland Clearing House Association decided on Sunday, February 26, that restrictions on withdrawals
should go into effect the following day. All but two banks allowed
depositors to draw out 5 per cent of their accounts. One of these
paid 1 per cent and the other continued to pay 100 per cent. Other
clearinghouse associations in the state followed the Cleveland example, and within two days nearly all banks in Ohio had instituted
some method of limiting the amounts paid out to depositors.
The Ohio Legislature met in special session on February 27 and
passed two bills designed to safeguard Ohio banking. These bills,
named for their sponsors the Lawrence bill and the Gradison bill,
were immediately signed by the Governor and became law. The
Lawrence Act permitted any bank, with permission of the State
superintendent of banks, to limit withdrawals, make payments from
deposits in whole or pro rata in part, and to segregate deposits. The
Gradison Act made provision for reopening of closed banks.
National banks in the fourth district were able to take advantage
of State emergency banking laws through the Couzens amendment
to the National Banking Act, signed February 25 by the President,
which granted to the Comptroller of the Currency power to exercise
the same authority over national banks as was held by State officials
over State banks in emergency situations.
The privilege of restricting deposits on and after February 28
was given the banks of Pennsylvania by resolution of the Legislature. The resolution, made a part of the Pennsylvania banking
law March 8, was made retroactive to February 27, and was to be in
existence for six months. Pittsburgh papers on March 4 announced
that "Pittsburgh bankers today almost unanimously ignored the
banking holiday declared by Governor Pinchot and conducted their
business as usual."
Under authority of an emergency amendment to the West
Virginia law passed February 28 by the regular session of the State




Legislature, the State banking commissioner issued instructions to
all banks under his jurisdiction to restrict withdrawals of funds to
5 per cent of accounts, beginning March 1.
The Governor of Kentucky on March 1 invoked an old Kentucky
law authorizing the Governor to proclaim legal holidays by designating certain days of thanksgiving. He said in his statement that "In
consideration of the nation-wide banking situation and in view of
the fact that the people of the State of Kentucky, though suffering
from a general depression, may perhaps in comparison with the
people of other states have reason for thanksgiving," he would declare a four-day legal holiday. All banks were closed on March 1,
but on the other three days of the State holiday they were allowed
to pay out an aggregate of 5 per cent of deposits.
Franklin D. Roosevelt was inaugurated as President of the
United States on March 4, and his administration began with the
entire nation in a state of financial chaos. Nearly all banks were
closed; the ones that remained open were conducting business on a
very restricted basis; commodity and stock exchanges were closed.
The Federal Reserve Bank of Cleveland remained open to the public
until the closing hour, March 4. Early on Monday, March 6,
President Roosevelt issued a proclamation to the effect that all
banks were to observe a holiday from March 6 to March 9, inclusive.
This was also to prevent the export, hoarding, or earmarking of gold
and silver coin, bullion, or currency, or speculation in foreign exchange. The new Congress was called into special session on March
9, and at its first meeting passed an emergency bank act. The five
parts of the Banking Act of March 9 gave the President and the
Secretary of the Treasury broad powers and confirmed previous
emergency decrees; provided for the reorganization of some of the
national banks; provided for the recapitalization of some banks
through issuance of preferred stock; provided for new currency and
credits by Federal reserve banks; and provided for amendment of
the law and for funds to carry out its provisions. On March 9, also,
the national banking holiday was indefinitely extended.
Plans to reopen the banks were announced on March 10. Banks
in Federal reserve cities opened on March 13, banks in cities with
organized clearinghouse associations opened on March 14, and banks
in other communities opened on March 15. Member banks were
licensed by the Treasury Department with the cooperation of
Federal reserve banks, and nonmember banks were licensed by State
authorities.
Bald statement of the essential facts fails utterly to reveal the
excitement and tension of the period of the bank holiday, the
magnitude of the tasks that were set and accomplished, and the
overwhelming display of loyalty and devotion of persons who were
concerned in any way with restoring the banking system to working
order.
By the end of the business day March 15, well over 900 of the
1,409 member and nonmember banks in existence in the fourth
district on January 1, 1933, had been licensed by the Treasury De-




partment or by State authorities to resume full operations. The report for April 1 showed that 1,042 of the 1,392 banks then existing in
the district were licensed. Through the months that followed, the
slow, gruelling task of examining, reorganizing, consolidating, and
placing in liquidation the banks that were not in a position to receive licenses immediately after the holiday was carried out. At the
end of the year, 1,161 banks had received licenses and 175 were still
operating on a restricted basis.
One natural and important consequence of the depression phase
of the business cycle is the demand for legislative changes. This
year in the fourth district was no exception. State legislatures early
in the year passed laws amending their respective banking codes in
such a way as to cope with the emergency and to conform with
national enactments. The Ohio Legislature, which was in session
the greater part of the year, passed laws allowing banks to restrict
withdrawals and providing for reorganization and reopening or
liquidation of banks not in a position to continue business. At this
time also, provision was made for State banks to sell capital notes or
debentures. Authority for the Governor of Ohio to appoint a banking advisory board of seven members, to include and to serve with
the superintendent of banks, was written into the law. An act was
passed in Ohio providing for separate reports of condition of trust
companies and banks doing a trust business and according a preference to trust moneys deposited in another department of such an
institution. In December the Governor of Ohio signed a bill permitting the establishment in Ohio of mutual savings banks. The
three mutual savings associations in operation in Ohio had each
previously been provided for by individual acts of the Legislature.
A resolution of the Ohio Legislature late in March empowered a
Senate committee to make an investigation into banking practices
which have prevailed in Ohio during recent years, with a view to
preparing remedial legislation. Through the medium of hearings on
closed banks in Cleveland and Toledo, the Senate committee was
nearly ready, at the end of the year, to present a program for reform
of Ohio bank laws.
The following paragraph is an excerpt from the introductory
note to the Pennsylvania bank law:
"The codification and revision by the 1933 Legislature of the
laws relating to banks, trust companies, and building and loan associations . . . is the first time in the history of the state (Pennsylvania)
that the laws on these important subjects have been embodied in
complete self-sustaining acts. Sixteen years ago the Legislature by
the Act of July 25, 1917, created a commission of five persons to
codify and revise the laws relating to banks, private bankers, and
trust companies. By the Act of July 21, 1919, the commission was
continued for a period of two years and was directed to include in
the scope of its work the laws relating to savings institutions, building and loan associations, loan brokers, and all other institutions and
persons under the supervision of the Banking Department. By the




Act of May 27, 1921, the commission was again continued for two
years. The commission made its report in 1923 but the Legislature
failed to adopt the result of its work. In 1926 another attempt was
made to prepare a codification and revision of the banking laws.
The 1931 session of the Legislature made an appropriation to the
Department of Justice directing it to submit to the 1933 session
codifications and revisions of the banking and building and loan
association laws. The banking codes were thoroughly considered
by representatives of the State bankers' association and of the leading banking institutions of Philadelphia and Pittsburgh. Certain
features were incorporated in the bills by the Legislature that were
not originally proposed. The issuance of preferred stock was
authorized, mortgage pools were prohibited except in trust departments, and the organization of trust companies without banking
privileges was made possible." The building and loan code was
approved by Governor Pinchot on May 5, 1933, and the department of banking code and the banking code on May 15, 1933.
The West Virginia Legislature met in regular and in extraordinary session in 1933. Emergency legislation was passed late in
February, giving the commissioner of banking additional powers
over banking institutions, a small loans bill became law without the
approval of the Governor, laws affecting the deposit of State funds
in banks were amended, as was the law concerning consolidation of
banks, and in May a law was passed affecting county depositories.
An act was passed providing for conservators for banks and providing for reopening of banks, and the law pertaining to limitations
on loans by banking institutions and to the valuation of securities
purchased by them was amended.
The Banking Act of 1933—the "Glass bill" revised, amended,
and added to—was signed by the President on June 16, 1933. Its
provisions are national in scope, and banks in this district made adjustments throughout the year to conform. Interest on demand
deposits was prohibited immediately on passage of the law, and the
Federal Reserve Board in August issued a regulation limiting the
payment of interest on time deposits. Sections of the law pertaining
to the regulation and divorcement of affiliates of member banks
necessitated long, tedious hours of work by the Federal reserve
bank and counsel. Member bank directorates were increased or decreased in number to agree with the law.
The provision of the law for the insurance of bank deposits was
the section that created the greatest interest and received the most
comment in the press. Directors of the Federal Deposit Insurance
Corporation were announced in September, and the task of examining applying banks was begun, with the object of having the
temporary insurance fund in working order by January 1. All member banks were required to become members of the temporary deposit insurance fund, which began operations on January 1, 1934.
The first report of the Federal Deposit Insurance Corporation gives
the number of banks in each state which made application and are




—7—

now members of the temporary insurance fund. Of 1,001 banks in
Pennsylvania on June 30,1933, 995 were members of the insurance
fund when it became operative; of 168 banks in West Virginia as of
the same date, 157 qualified for deposit insurance; and of 422 banks
in Kentucky, 378 held membership in the Federal Deposit Insurance
Corporation. All member banks and all State nonmember banks
in Ohio that applied for membership were admitted to the fund.
The Ohio banking department announced that 401 State banks, 350
of which are nonmember banks, applied.
The history of the demand for gold early in 1933 is a chapter of
the year that stands by itself and each staff member has personal
reminiscences of a period that is unique in the annals of the Federal
Reserve System. Gold coin in quantity was not shipped out of this
bank to member banks for some time previous to the heaviest demand for gold for private hoarding early in 1933. Depositors of
member banks who asked for gold were requested to come to the
offices of the reserve bank for it. This practice may have deterred
some persons from obtaining gold coin, although to onlookers in the
bank on March 4 it seemed that everyone who could possibly want
gold was in the lobby. The President's order of March 6, which
declared the national banking holiday, also stopped the payment of
gold coin and certificates.

COIN RECEIVED AND COUNTED

1926

1927

1928

1929

1930

1931

1932

1933

The daily figures for payment of gold coin and certificates from
the three offices of this bank from February 1 to March 4 reveal accurately the degree of panic that was prevalent. Two days after the
Louisiana holiday, February 7, $46,810 in gold coin and certificates
was paid out, and on February 14, the day the Michigan holiday
was declared, $71,100 was paid out and the next day the figure
jumped to $127,970. The day Cleveland banks declared restrictions
on withdrawals, February 27, the total of gold coin and certificates
paid out, which had been creeping higher for several successive days,
amounted to $287,392. The demand for gold became fanatic during
that week, and on Saturday, March 4, the bank paid out $864,000.
The President's order of March 6, closing the banks, stopped the
paying out of gold and forbade hoarding. The gold began to be
returned almost immediately, from two motives probably, because
of the President's order, and because the safe disposition of any




— 8 —

quantity of gold proved difficult to holders of the metal. On March
14, the first day banks in clearinghouse cities were open, this bank
and its branches received $2,821,341 in gold coin and gold certificates, the largest amount that was received in any one day during
the year. March 22 was the first day after March 10 that daily
receipts dropped below one million dollars a day. Since gold receipts for a month after the sixth of March were so much larger
than gold payments for a month immediately preceding the sixth
of March, it was evident that long-hoarded gold was coming out of
hiding as well as the gold that had recently been demanded in great
quantity. Fluctuations in gold receipts throughout the year closely
followed press announcements of Presidential and Treasury warnings concerning penalties for failure to return gold.
The Banking Act of March 9 contained a provision that the
Reconstruction Finance Corporation might purchase preferred stock
of national banks or make loans thereon in an attempt to aid in reorganizing the banks or strengthening the capital structure. The
law also permitted the Reconstruction Finance Corporation to purchase preferred stock of State banks and trust companies in those
states in which such institutions are authorized to issue preferred
stock. Late in September a letter was sent by the Reconstruction
Finance Corporation to all banks urging them to issue preferred
stock or capital notes or debentures in a general effort to bolster the
capital strength of the banks of the entire country and to prepare
banks for membership in the Federal Deposit Insurance Corporation. Clearinghouse associations in the various cities of the district
met and endorsed this move and banks acceded to the request of the
President and the Reconstruction Finance Corporation. In October
a special nonmember preferred stock board was formed as a division
of the Reconstruction Finance Corporation with the intent of assisting nonmember banks to make ready for the insurance of deposits,
and Mr. H. J. Stoddard was appointed supervisor for the fourth
district. The Ohio Legislature passed a law allowing State banks
to sell capital notes or debentures, the Kentucky Legislature gave to
State banks the privilege of selling preferred stock, and the Pennsylvania banking law had incorporated in it a provision for the sale of
more than one class of stock by State banks.
While figures for operations of the Reconstruction Finance Corporation in the fourth district are not available for publication,
comparison of national figures at the end of 1933 with figures at the
beginning of the year show the colossal growth of the Corporation's
activities, in which this district shared. The fourth district received a proportionate number of the 12,584 loans, amounting to
$2,749,227,461, made by the Corporation up until December 30,
1933, of which 37.4 per cent had been repaid at that time.
The Federal Home Loan Bank System had grown throughout
1933 until its membership numbered 2,065 at the end of the year,
with total resources of $2,600,000,000, about 34 per cent of the entire assets of all building and loan associations in the United States.
The Cincinnati Home Loan Bank was the first to pay a dividend.
On October 23 President Roosevelt was handed a check for $95,830




—9—

as the Government's share in the first dividend declared by any of
the Home Loan banks. The Home Owners Loan Corporation, a
division of the Federal Home Loan Bank System, began operations
in August in an effort to relieve urban home owners who were unable to meet mortgage payments and to aid the mortgage holders.
In 1933 over 40,000 of these loans were made throughout the country
and the Corporation had tentatively approved about 248,000
applications. Ohio and Pennsylvania have been leading states in
the number of loans made.
RESERVE BANK OPERATIONS
Flexibility of the Federal Reserve System was displayed in
operations at the Federal Reserve Bank of Cleveland in the year
1933, though, to a considerable extent, the fluctuations were a result of factors not related to trade and industry. In the period immediately prior to, and for a time following the banking holiday in
March, activity in practically all departments of this bank increased
sharply, but as banking conditions improved a contraction in operations occurred generally.

BANKS

1926

1927

1928

ACCOMMODATED

1929

1930

1931

1932

1933

For the year as a whole the total volume of credit extended to
member banks was $823,000,000, compared with $1,889,000,000 in
1932, and was lower than in any year since the formative period of
the Federal Reserve System. Despite this low total, bills discounted
rose sharply in late February and early March (because of the demand for currency at that time) to approximately the level of late
1931 or early 1932, but they declined rapidly following the bank reopenings. During the year only 383 banks were accommodated, the
smallest number in over twelve years and there were only 6,666 loan
applications approved, less than half as many as in the preceding
year. As a result, the total number of items handled by the discount
department dropped to 26,857, compared with 46,140 items in 1932.
A $25,000,000 rediscount, the first since shortly after the war, was
made by this bank for about ten days in March for another Federal
reserve bank.
There was a slight decrease from 1932 in the amount of acceptances purchased or acquired in the year, but the total volume,
$32,000,000 (including bills payable in foreign currencies), was quite




— 10 —

insignificant in comparison with the total amount of earning assets.
These were made up chiefly of Government securities, purchases of
which amounted to $334,000,000 in the year, only slightly less than
in the preceding twelve months. Daily average earning assets in
1933 were $224,000,000, a gain of about $19,000,000 from 1932, but
with the average rate of return only 2.05 per cent, current net
earnings were down from the preceding year, despite the higher
daily average of earning assets.

BILLS

PURCHASED AND ACQUIRED

or
DOLLARS
250-

1926

1927

1928

1929

1930

1931

1932

1933

* REVISED FIGURE

These earnings amounted to $1,790,000 in 1933, compared
with $2,545,000 in 1932. Dividend payments to member banks
aggregated $789,000. After setting up a special reserve of
$800,000 and making allowance for depreciation, etc., there was a
deficit to surplus of $57,374.47. The Banking Act of 1933 abolished
the franchise tax requirement of the Federal Reserve Act.
The closing of some member banks prior to or at the time of the
banking holiday caused a reduction in paid-in capital stock of this
bank in an amount greater than the expansion resulting from increased capitalization of some member banks in 1933, in a number
of cases through the issue of preferred stock. At the year end the
capital structure of the Federal Reserve Bank of Cleveland was:
Capital stock paid in
$12,403,700.00
Capital stock subscribed
24,807,400.00
Surplus
28,236,352.85

BILLS DISCOUNTED FOR MEMBERS
or
DOLLARS

6000
4000
2000

" ^ ^ ^

|6059]

|5827|

LZJ
kllj
M
1926
1927
1928

^ ^ ^

1929




M

F lIlS90|

1930

—11 —

1931

[I889J
1932

^^L
1933

MEMBER BANK CREDIT

The closing of all banks in early March and the reopening of a
smaller number than were in operation prior to the banking holiday
destroyed the comparability of current banking statistics with those
of preceding years, but certain conclusions as to the trend of banking
developments in 1933 can be drawn from the figures that are available for a smaller group of banks.
A rapid shrinkage in deposits occurred at member banks in this
district in the first ten weeks of 1933, (judging by the weekly figures
of reporting member banks) when depositors were withdrawing
funds from banks generally.
Following the restoration of more normal operating conditions
in late March, banks in this district experienced a sharp rise in total
deposits. From March 1 to the end of 1933 total deposits, excluding
Government deposits, were up approximately 11 per cent at the
weekly reporting banks. This resulted partly from a return flow of
deposits transferred to other sections of the country, chiefly New
York, prior to the banking holiday, and to a redeposit of hoarded
funds. In addition, the Banking Act of 1933, which, among other
things, prohibited the payment of interest on demand deposits,
caused a considerable transfer of funds from demand to time accounts. As a result, demand deposits at the year end were approximately the same as in mid-March when the banks reopened, while
time deposits at reporting banks were up about 17 per cent. Sizable
additions were made to the banks' investments following the bank
reopenings, entirely through the purchase of Government securities,
but a continued liquidation of loans was evident throughout the
year, both security and "all other" loans sharing in the decline.
The increase in holdings of Government securities at reporting
member banks in the period following the banking holiday was
slightly greater than the contraction in loans and investments in
other than Government securities, but when the fact that 93 member banks remained unlicensed at the year end is considered, the
liquidation of all member bank credit in the year 1933, amounting
to about 20 per cent, was substantial, even though total loans and
investments of reporting banks increased slightly toward the year
end.
Condition of Fourth District Member Banks
(Figures in Millions)
Dec. 30,
1933

Dec. 31,
1932

$1,033
673

$1,538
591

392

514

—23.7

2,098

2,643

—20.6

880

993
1,243

—11.4
—19.8

2,539

—16.9

630
Number of banks
544**
* Including other items.
•* Licensed member banks from which condition reports were received.

—13.7

Loans and discounts
Investments—U. S. Govt. securities
Investments — all other securities
Total loans and investments
Demand deposits
Time deposits
United States deposits

997
62

Total deposits*




2,111

— 12 —

33

% change 1933
from 1932
—32.9

+ 13.8

+87.9

Total resources of 544 licensed member banks reporting on
December 30, 1933, were $2,664,000,000 in contrast with $3,265,
000,000 for all fourth district member banks on December 31, 1932.
The following table shows the principal resources and liabilities of
licensed member banks at the close of 1933, and all member banks
at the end of the preceding year.
Despite the decline in deposits and the number of banks, member bank reserves with the Federal Reserve Bank of Cleveland were
up sharply—amounting to $182,000,000 at the end of 1933, compared with $147,000,000 at the end of 1932.
MEMBERSHIP CHANGES
By reason of bank suspensions in January and February of 1933,
the closing of all banks in early March, and the reopening only of
those whose condition met requirements set up by the Secretary of
the Treasury, and increased interest in Federal reserve membership
on the part of State banks, changes in membership in the year were
numerous. As shown by stock records of this bank there were 643
member banks on December 30, 1933, but a considerable number
were not licensed to operate 100%. At the beginning of the year
there were 634 stockholding member banks in this district.
Many new national banks were organized in the year chiefly to
take over assets of banks not licensed following the banking holiday
and therefore caused no change in the number of banks actually
operating. In this district 21 State banks were admitted to membership in 1933, the greatest number in many years.
CURRENCY AND COIN OPERATIONS
The value of this bank's Federal reserve notes and bank notes in
circulation at the end of 1933 was approximately $30 millions higher
than at the close of 1932, and the total amount was somewhat greater
than might have been expected under more normal conditions, judging by the relatively low level of business activity. Over the twelvemonth period fluctuations in note circulation were unusually sharp.
At the start of the year the volume of notes in circulation was somewhat under the level at the beginning of 1932, but, due to hoarding
and increased needs of cash for business as a result of bank closings

CASH RECEIPTS AND DISBURSEMENTS
MILLIONS

or

DOLLARS

1000-

DISBURSEMENTS

Ulllui
1926

1927




1928

1929

1930

— 13 —

1931

1932

1933

in some communities, the decline in the number of checking accounts
as a result of the check tax, metered service plans, etc., was considerably above the level even of 1929.
In mid-February, as banking conditions became more strained,
demand for cash from banks increased sharply and note circulation
of this bank rose nearly $150,000,000 to $423,000,000, a new high
record, in little over a month. Following the banking holiday, note
circulation declined rapidly and in the last half of the year was close
to $300,000,000.

CURRENCY RECEIVED AND COUNTED
MILLIONS

or
DOLLARS
1250

FICURCS

1926

INDICATE

1927

MILLIONS OF PICCCS

1928

1929

1930

1931

1932

1933

The law requires that a reserve of at least 40 per cent gold be
maintained against Federal reserve notes in circulation and by
reason of gold withdrawals in the early part of the year and the
sharp increase in note circulation in the period, the reserve ratio
declined sharply; in one week of March it was only slightly above
its legal limit.
The Federal Reserve Act was amended by the act of March 9,
1933, to permit the issuance by Federal reserve banks of Federal
reserve bank notes which could be secured by direct obligations of
the United States Government up to 100 per cent of their value or
by any notes, drafts, and bills acquired by the Federal reserve banks
up to 90 per cent of their value. No reserves were required to be held
against these notes. Issuance of Federal reserve bank notes by this
bank was started in the latter part of March. By November 1st
approximately $27,000,000 of these bank notes had been issued, but
in the remainder of the year a slight contraction occurred.
The accompanying tables and charts show the extent to which
operations of the money department increased in the year, but coin
and currency receipts and disbursements were below the peak years,
indicating a smaller turnover of funds. Much of the currency was
Total Cash Receipts and Disbursements
Cleveland
Cincinnati
Pittsburgh
Total




Receipts

Disbursements

$578,690,539.93
210,480,949.93
347,193,375.70

$584,717,944.33
212,922,780.46
349,651,689.79

$1,136,364,865.56 $1,147,292,414.58

14 —

Currency Received and Counted
Cleveland
Cincinnati
Pittsburgh
Total

Pieces

Amount

52,523,557
28,520,491
38,829,048

$347,211,830.00
125,908,540.00
203,280,355.00

119,873,096

$676,400,725.00

Coin Received and Counted
Pieces
Cleveland
Cincinnati
Pittsburgh
Total

Amount

45,384,011
40,355,785
32,632,113

$11,444,796.00
7,735,570.84
6,694,708.00

118,371,909

$25,875,074.84

used by banks prior to the banking holiday to increase their cash
position and was never circulated, being returned in many cases in
its original packages.
CHECK COLLECTIONS
In the year 1933 checks collected through the Federal Reserve
Bank of Cleveland numbered 67,356,172 and had a total value of
$13,657,000,000. These figures represent declines from 1932 of 8
and 5 per cent, respectively, but the loss for the year was confined
to the first six months. In the last half of the year an increase over
1932 was recorded, and the smaller decline in dollar volume than in
number of items handled was partly attributed to the increase in
prices in the last half of the year and to the advance in wage rates
and pay rolls. The number of checks collected was about the same
as in 1923, the total being sharply reduced at the time of the bank
holiday in February and March, in which period many checks were
returned unpaid and several thousands of cash letters containing
tens of thousands of checks were returned without being handled.
As a result the year established an all time high for returned checks,
the volume for March being twelve times any single previous month.
The reduction in the number of checks handled in 1933 also was
affected by bank closings, the continuance of the check tax, and the
more stringent regulations in regard to service charges.

CHECK
FIGURES




COLLECTIONS

INDICATE MILLIONS OF CHECKS

— 15 —

The volume of checks collected in the first quarter of the year
was down 24 per cent from the corresponding period of 1932. Improvement was noticed in the latter months and in December the
number of checks collected was 14.5 per cent ahead of December
1932, and the dollar value was up 11 per cent in the same period.
Part of this increase represented Government checks distributed in
the latter half of the month through newly-created Federal agencies.
The number of Government checks paid in the entire year reached a
new high, a gain of 27.8 per cent from 1932 being shown. This reflected increased Government spending generally in this district,
chiefly through other than CWA and PWA agencies, for operation
of these two organizations did not get under way until the latter
part of December.
Transit Department Check Clearings and Collections for Year 1933
Cleveland

Items
Items
Items
Items

on Cleveland banks
on other banks in district No. 4
on banks in other districts
on Treasurer of the United States

Total
Items sent to Cincinnati and Pittsburgh branches

Items

Amounts

5,506,479
17,418,198
1,388,884
2,099,651

$2,990,259,709.53
1,510,773,949.20
154,588,759.50
326,385,137.33

26,413,212
395,222

$4,982,007,555.56
$ 45,903,048.70

Cincinnati

Items on other banks in district No. 4
Items on banks in other districts
Items on Treasurer of the United States
Total
Items sent to Main Office and Pittsburgh Branch

Items

Amounts

3,219,362
9,916,647
421,851
1,175,260

$1,352,112,277.33
622,225,278.53
47,312,093.76
116,791,982.27

14,773,120
134,280

$2,138,441,631.89
$
14,662,552.62

Pittsburgh

Items
Items
Items
Items

on Pittsburgh banks
on other banks in district No. 4
on banks in other districts
on Treasurer of the United States

Total
Items sent to Main Office and Cincinnati Branch

Items

Amounts

8,277,208
15,878,723
1,179,481
874,428

$5,260,588,705.00
969,465,728.86
211,360,041.70
94,988,425.00

26,209,840
119,455

$6,536,402,900.56
17,422,465.08

Items

Amounts

Recapitulation

Total number of items handled
Total amount of items handled
Items and amounts handled by both Main Office and
branches and not duplicated in above figures

67,356,172
648,957

$13,656,852,088.01
$

77,988,066.40

NON-GASH COLLECTION

The non-cash collection department handled 468,444 items
amounting to $405,846,056.45 in 1933. This was an increase of 15
per cent in number of items and of 26 per cent in amount from
the preceding year.



— 16 —

The number and amounts of items handled at the main office
and branches at Cincinnati and Pittsburgh are as follows:
Main Office
Cincinnati Branch
Pittsburgh Branch
Total

Number
397,949
38,764
31,731

$299,224,273.07
59,583,564.58
47,038,218.80

Amounts

468,444

$405,846,056.45

On items handled through the three offices, collecting banks
made collection charges on 41,291 items, aggregating $11,256,235.83,
at a rate of .127 of one per cent.
Member banks sent direct to other Federal reserve banks and
branches for collection 86,717 items, aggregating $73,824,566.55.

NON-CASH COLLECTIONS
FIGURES INDICATE THOUSANDS OF ITEMS

1929

1930

1931

1932

1933

FISCAL AGENCY OPERATIONS

Because of the increased flotation of Government securities,
operations of the fiscal agency department expanded. During the
year 1933 there were issued forty-six series of Treasury bills, five
series of certificates of indebtedness, four series of notes, and two
series of bonds, a total of 57 issues as compared with 47 in 1932.
Allotments of ninety-one day Treasury bills in the fourth district, totaling $50,483,000, were made on twenty-three of the fortysix series. Certificates of indebtedness amounting to $64,499,000,
Treasury notes aggregating $68,103,800, and bonds having a value
of $190,387,900, were distributed in the year. The total value of all
allotments in the period was $373,473,700.
Government securities delivered on allotment numbered
148,233 pieces.
Government securities received for exchange of denomination or
form (within the issue) consisted of 42,384 pieces in coupon form and
11,198 pieces in registered form, aggregating $149,493,000, including
$94,015,200 received for transfer by wire.
Wire transfers of Government short-term securities from other
districts to this district aggregated $115,756,100; from this district
to other districts $94,015,200.




— 17

Government coupons redeemed totaled 2,542,027, aggregating
$48,442,723.95. Federal farm loan coupons redeemed totaled
272,955, aggregating $8,253,624.52.

GOVERNMENT COUPONS REDEEMED
FIGURES INDICATE THOUSANDS OF COUPONS

1926

1927

1928

1929

1930

1931

1932

1933

Government obligations presented for redemption numbered
32,859 in registered form and 128,812 in coupon form and had a
value of $233,440,340.
Federal farm loan bonds and Federal intermediate credit bank
debentures presented for redemption numbered 616 and had a
value of $1,827,000.

TRANSFERS OF
OF
DOLLARS

FUNDS

FIGURES INDICATE THOUSANDS OF TRANSFERS

(2
10
6-

•

6
4_
2-

89 1
1926

1H

_
101 1 1 1151 I 1271
1927

1928

1929

H

1271

• _1

IP

I

1930

117

1931

i

LJ

1932

M

1933

PERSONNEL

In the annual election by member banks in Group 3, Ben R.
Conner of Ada, Ohio, was reelected Class A director and John E.
Galvin of Lima, Ohio, was reelected Class B director for three-year
terms ending December 31, 1936. The Federal Reserve Board
appointed Lewis B. Williams Chairman of the Board and Federal
Reserve Agent on March 15, 1933, to fill the unexpired term of
George DeCamp who resigned, having served as Chairman of the
Board and Federal Reserve Agent since December 1925. E. S.
Burke, Jr., Cleveland, Ohio, was appointed Class C director and
Deputy Chairman of the Board of Directors for the term of office
expiring December 31, 1935.
The Board of Directors appointed Lloyd W. Smith of Pittsburgh
director of the Pittsburgh Branch, to fill the vacancy created by the
death of R. B. Mellon which occurred on December 1, 1933.




— 18

Howard Evans, Chief Examiner, was appointed Assistant Federal
Reserve Agent, effective March 15. Elbert A. Carter was appointed Assistant Cashier on March 11 and Arthur G. Foster also
was made Assistant Cashier, effective October 1.
The death of Charles L. Bickford, Assistant Cashier in charge of
the money department, occurred on April 23, and on May 16 P. A.
Brown, Assistant Cashier at Pittsburgh, was transferred to Cleveland to fill the vacancy created by Mr. Bickford's death. Charles J.
Bolthouse was elected Assistant Cashier and transferred to the
Pittsburgh Branch to assume charge of the money department at
that office.
Increased activity in many departments, particularly in the
fiscal agency and custodies departments, in the latter instance to
handle collateral pledged with the Reconstruction Finance Corporation, necessitated the employment of much additional help. At the
end of 1933 there were 1,201 officers and employees at the main
office and branches, compared with 1,047 at the close of 1932. Of
this number salaries of 149 were reimbursable to the bank.

NUMBER OF EMPLOYEES

1932 REVISED

The Share-the-work movement created on December 15, 1932,
through voluntary contribution on the part of all officers and employees, was terminated on June 15, 1933, and practically all of the
approximately 50 persons given employment when the plan was
adopted were transferred to the regular pay roll of the bank in departments where the volume of work had increased.
GENERAL BUSINESS CONDITIONS
In the fields of trade and industry, as well as finance, the year
1933 no doubt can be classified as one of the most unusual on record.
Variations in the rate of industrial production, in employment, and
in public sentiment were very pronounced. Many new elements,
such as the various newly-created Federal agencies, entered the
general business picture, some of which, for a time at least, were
quite confusing. Still, at the close of the year there was little doubt
but that considerable progress toward recovery from the most severe
depression on record had been made, notwithstanding the fact that
many problems remained to be solved.




— 19 —

In the first quarter of 1933 the volume of production and trade
was very limited in all important lines in this district. Steel ingot
production was 30 per cent below the first three months of 1932.
Building contracts awarded in this district were down 43 per cent;
tire production was off 38 per cent; cement output 32 per cent;
electric power production 8 per cent; department store sales 28 per
cent; and debits to individual accounts, which represent chiefly
check payments, were 24 per cent smaller in the first quarter (which
included the bank holiday) than in the same period of 1932. The
Federal tax on checks and the bank closings were factors contributing to this decline in bank debits, but they were responsible for only
a part of the reduction.
Following the bank reopenings in mid-March and the readjustment of financial conditions so far as possible in such a short period
of time, an unusually sharp increase in production occurred in many
lines. The spring rise in manufacturing occurred later than usual, at
a time when operations generally are tapering off for the summer.
This, coupled with the increased demand for goods, resulting largely
from talk of inflation and fear of rising prices, caused the
adjusted production indexes in many lines to rise sharply between
April and July.
The expansion, however, was not paralleled by an increase in
consumption, partly because employment and pay rolls, and therefore purchasing power, lagged behind the increased production.
From August to November, though output in many lines exceeded the corresponding months of 1932, industrial production declined generally while surpluses piled up in the late spring and early
summer were being absorbed. At the same time employment and
pay rolls were expanding, partly through limitation of the number
of hours worked and the establishment of minimum wage rates
under the National Recovery Administration.
By November, employment and pay rolls had improved to the
point where they were in closer balance with production than for
many months. In the latter part of that period output increased
sharply, a more pronounced gain being shown by the heavy industries.
This expansion continued in December and accompanying it was
an increased demand for consumers' goods, resulting from distribution of a large volume of purchasing power through Civil and Public
Works Administration channels.
Although the fluctuations in operating rates were unusually
sharp in the period, most important lines of trade and industry in
the fourth district reported a larger business volume than in 1932.
The employment situation in the fourth district improved in
1933, after declining for over three years. As the year ended the
indexes for Ohio and western Pennsylvania were slightly below the
peak touched in October, but average gains of 9 and 15 per cent,
respectively, for the entire year were shown at industrial plants in
these two sections. Pay roll indexes, which had fallen to lower
levels in early 1933 than did those of employment, showed a pro-




— 20 —

portionately greater increase in the latter part of the year because
of the greater number of hours worked and wage increases.
Living costs of wage earners and lower-salaried workers in principal cities of the fourth district declined in the first half of 1933 to
the lowest level since 1916, but an increase of about 5 per cent occurred in the latter half of the year. The gain was the first since
1929, but it was slightly smaller than the average increase in the
entire country in the period.
There were only 1,685 commercial failures reported in the district in the entire year, a reduction of 42 per cent from 1932 and the
smallest number reported since 1923. Liabilities of the defaulting
concerns were 42.5 per cent less than in 1932.
The dollar volume of retail sales at department stores was just
about the same in 1933 as in 1932, the gains in the closing months of
the year offsetting the large reductions which occurred in the early
periods. Higher retail prices were partly responsible for the increased volume of sales reported in the closing months of the year
from similar periods of 1932, but as the year ended sales showed a
greater gain from late 1932 than could be accounted for by the advance in prices. Collections improved in the period and there was
comparatively less buying on credit than in 1932.
In the latter half of the year the dollar volume of wholesale sales
in the four reporting lines in this section increased sharply and for
the entire year hardware and dry goods sales were up about 11 per
cent. Wholesale drug sales were down 7 per cent and grocery sales
1.8 per cent in the same period.
The following table shows changes in some business indicators
of more or less importance to the fourth district:
Fourth District Unless Specified
(000 omitted)
Electric power production (Ohio, Pa., Ky.) . .k.w.h.
Building contracts awarded
$
Cement production (Ohio, Pa., W. Va.)
bbls.
Coal production
tons
Petroleum production (Ohio, Pa., Ky.)
bbls.
Shoe production
pairs
Pig iron production, U. S
tons
Steel ingot production, U. S
tons
Automobile production, U. S
units
Tire production, U. S
units
Plate glass production, U. S
sq. ft.
Glass container production, U. S
gross
Index of machine tool orders, U. S. —1922-24 = 100
Iron ore receipts — Lake Erie ports
tons
Coal shipments — Lake Erie ports
tons

% change 1933
from 1932

1933

1932

12,686,000
122,454
5,417
129,027
21,508

12,051,000
127,084
6,599
113,823
23,264
1
8,674
13,323
1,371
38,882
49,919
20,558

i

13,192
22,879
1,959
43,945
89,915
23,522

49

35

16,323
32,333

2,707
25,173

+ 5.3

— 3.6
—17.9
+ 13.4
— 7.5
+ 23.5
+ 52.1
+ 71.7
+42.9
+ 13.0
+ 80.1
+ 14.4
+ 40.0
+ 503.0
+ 28.4

1 Confidential

With the automobile industry showing a 43 per cent production
gain in 1933 from the low level of 1932, many closely allied industries
in this district showed a corresponding or greater improvement.
A few lines, however, operated at low levels throughout most of
the period. Brick production and cement output in the year were
considerably below 1932, the stimulation afforded the building industry through Public and Civil Works Administration channels




— 21 —

not occurring early enough in the year to allow the work to get under
way in any volume. Building contracts awarded in the closing
months of the year, however, were unusually large; in December
they were five times greater than in December 1932. The recent
gains were nearly enough to offset the large reductions in the first
part of the year, and there were indications of increased activity at
brick and tile plants as the year closed.
Generally speaking, the smaller industries of the district experienced a gain in production in the year 1933 from 1932. Considerable variation was apparent in employment and operating rates
over the entire period in the various lines, but for most of them the
year's results were better than in 1932. Paint sales increased quite
sharply and stocks were reduced; sales of electrical apparatus improved ; and operations of clothing plants, judging by employment
reports, were at substantially higher levels than in 1932.
The agricultural situation was confusing. Yield per acre of
principal crops in this district was considerably below the average
of the preceding ten years, but as a result of higher prices, the farm
value of these crops was up sharply from the low level of 1932. On
the other hand, livestock prices remained unusually low and because
of this, the gross increase in farm income (excluding productioncontrol payments) for 1933, estimates for which are not yet available, was probably less than the gain in crop values. It was substantial, however, according to the Department of Agriculture, and
farm purchasing power was up several points at the year end from
the close of 1932. Stocks of grain and livestock on farms in this
section were reduced in 1933.




— 22 —