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REGISTERED
MAIL
FEDERAL
RESERVE
BANK
of CLEVELAND
FEDERAL
RESERVE BANK OF CLEVELAND,
Cincinnati
lind Pittsburgh,
serving tlte
!~:
• Pittsburgh
;-.,
--:'.'
.. -'·~~~·ii,>
witlt uraJfcltesat
Fourth
Federal
Reserve
District
~
tu2f<Ytt
for the year
I 9 5 0
FEDERAL RESERVE
OF
BANK
CLEVELAND
January 15, 1951
To the Member Banks of the Fourth
Federal Reserve District and Others:
As a public service institution, we are
pleased to provide this report of ouractivit1es
during the past year, together with some description of the nature of our operations.
Many of the functions of this bank have been
in existence, with changes in emphasis from time
to time, since the establishment of the Federal
Reserve System in 1914. In the course of years,
new responsibilities and methods have developed
and this report provides a glimpse of the current
stage in this continuing evolution.
Although traditionally we are known as a
bankers' bank, we value highly our contacts with
the public.
The administration of appropriate
monetary and credit policy is greatly facilitated
by the interchange of views and information.
Our directors and staff join in an expresion of appreciation of the cooperation received
not only from bankers, but also from representatives of commerce, industry, and agriculture
throughout the District.
Sincerely
~.
C
Chairman
yours,
o
CONTENTS
F
ECONOMIC
THE
REVIEW
BANK'S
FISCAL
SAFEKEEPING
.10
DEPARTMENT
COLLECTION
BANK
.......................................
16
....17
BANKS
OF CHECKS
AND COIN
.11-15
..
SERVICES ..
ADVANCES TO MEMBER
ECONOMIC
Pages 5-9
SERVICES
AGENCY
CURRENCY
.......................
1950
OF
AND OTHER
ITEMS
.. .18-19
OPERATIONS
... 20-21
AND INFORMATION
....22-23
RESEARCH
24
EXAMINATION
.25
BANK AND PUBLIC RELATIONS
OFFICE
26
OF COUNSEL
PERSONNEL
....
DEPARTMENT
BUILDING OPERATIONS
AND MAINTENANCE
PLANNING DEPARTMENT
PRINTING
MAIL
AND OTHER
AND EXPRESS
OF CONDITION
STATEMENT
OF EARNINGS
HISTORICAL
DATA
29
....32
AND EXPENSES
BANK'S
OF THE
ROLE
... 33
.... 34-35
.36-37
AND DIRECTORS
EMERGENCY
MAP
..........
31
STATEMENT
THE
29
......... 30
OPERATIONS
ACCOUNTING
OFFICERS
.......... 28
.
DUPLICATING
27
IN THE
SYSTEM
....39
CREDIT CONTROLS
FEDERAL
RESERVE
...38
SYSTEM
................ 40
ECONOMIC
REVIEW OF 1950
Before and After June
major arteries of transconL tinental trade the
and travel, and representing the
YING ASTRIDE
heart of the steel, machinery, chemical, and rubber industries, the Fourth District has always
been sensitive to changes in the nation's economic pulse. The past year was no exception.
The swift march of events during the latter part
of 1950 precipitated a series of nationwide economic problems whose impact was perhaps more
pronounced in this highly industrialized area
than in other sections of the country.
The rapid intensification of those problems in
recent months, however, has dimmed recollections of the expansive characteristics of the preKorean half of 1950. Although in retrospect the
pace of business last spring was leisurely as compared with today's tempo, the economy in reality
had reached a high plane before the outbreak of
hostilities added a further sharp upward thrust.
As early as the first month of 1950 personal
consumption expenditures were expanded beyond the general level that had prevailed for
more than a year. Supplemented by the service
insurance dividend, personal incomes were
reaching new heights. In the tide of private
spending the accent was on consumer durable
goods the buying of which in the past has always
been highly cyclical in character. As early as
:ay it seemed likely that automobile productio ,for example, would far exceed the previous
£eoDrdfor a single year and the eventual conseences of such extraordinary demand were
contemplated with more than average concern
in this District, where automotive steel and other
component parts loom large in the industrial
pa te-rn.
Moreover, the boom in virtually every type
of consumer durable goods was generating a
record growth in personal indebtedness which
likewise had cyclical implications. At the very
start of 1950, the amount of consumer instalment debt outstanding was larger than in any
previous January, yet the aggregate continued
to expand month after month. During the year
ended June 30, before international complications had become a factor in the market, nearly
$3 billion of additional instalment debt had been
incurred, representing the most rapid rate of
increase on record up to that time. The further
sharp expansion of $1 Y4 billion in the J ulySeptember quarter was merely an accentuation
of an established trend, to which the Fourth
District contributed its proportionate amount or
more.
Another inflationary movement whose origin
clearly antedates the outbreak of war is associated with the high level of housing and other
construction. Six months before the Korean invasion, the construction of new houses and other
dwelling units was proceeding at a pace some
fifty percent in excessof what had been regarded
as near-capacity volume in 1948 and 1949. That
large margin over preceding years was maintained through what in any event would have
been a very active building season, thereby
creating an assortment of costly labor and material shortages of the type characteristic of
speculative periods.
Like the consumer goods boom, this form of
economic activity also was accompanied by a
record expansion of bank credit, institutional
lending, and mortgage indebtedness. Overbuild-
ing and unsound lending have a special connotation in this part of the Middle West where the
construction boom of the 1920's and its aftermath reached perhaps greater extremes than in
many other parts of the country.
Despite an unprecedented demand for many
of the important industrial products of Ohio and
western Pennsylvania, wholesale prices in general were relatively stable during the early
months of 1950. More specifically, however,
prices of nonagricultural products, which had
receded only some six percent from the 1948
peak, began to show pronounced strength many
weeks before the world outlook was suddenly
altered.
Similarly the cost of living, which is of special
significance in a highly industrialized region,
started to rise in February from a point only
4;/1 percent below the all-time (1948) peak.
Although both hourly and weekly earnings in
manufacturing industries were the highest on
record at the beginning of 1950, the resumption
of the rise in living costs was being viewed before midsummer as a factor that might lead to
still higher labor costs.
Meanwhile industrial production for the country as a whole was gradually recovering the
ground lost during the 1949 recession. Here in
the Fourth District, above-capacity operations in
the iron and steel industry during April and
May, when some seasonal slackening usually
occurs, were interpreted as evidence of boomtime conditions. Concurrently the volume of
new orders received by manufacturers was establishing a succession of new record highs for
the month throughout the entire first half, indicating that a competitive push for material and
goods was under way before the atmosphere
suddenly became surcharged with fear of war.
It will also be recalled that the market valuation of shares of large industrial corporations,
many of which have establishments in the Fourth
District, had been rising steadily since mid-1949,
and by March of the past year such prices were
the highest in roughly twenty years, and by
June the earning power of such investments was
valued (in terms of quoted values) some 40
percent higher than a year earlier.
Also contributing to pre-Korean inflationary
sentiment was the trend of Federal finances.
During the first half of the calendar year, which
is usually the more productive half of the fiscal
period, the cash receipts of the U. S. Treasury
failed to match disbursements, which was taken
to indicate that the second and leaner half of
the year might bring a Federal deficit of significant proportions.
During this same interval, many institutional
investors were liquidating holdings of United
States Government securities in order to meet
the demand for funds converging from residential and other construction as well as from the
sale of consumer goods on credit. Notwithstanding this extraordinary demand for money, interest rates were relatively low. The yield on
gilt-edge bonds was only a shade above 2;/1 %,
and the bank-restricted Victory 2;/1's were
quoted to yield about 2Y4% early in 1950.
These low rates also had some inflationary implications in so far as long-term money rates
influence the capitalized value of income-producing property.
In fact only two circumstances; both pertinent
to industrial conditions in the Fourth District,
could be regarded as being somewhat deflationary throughout the early months of 1950. One
was the volume of unemployment which still
contained traces of the 1949 recession, and in
[ 6}
the face of which an extended rise in prices was
then regarded as improbable.
The other somewhat dampening factor was
the contraction which had occurred in expenditures for new plant and equipment. During the
first quarter of 1950 such commitments had
shrunk to a three-year low for the season. That
picture, however, also was destined to change
rapidly.
Up to the time of the outbreak of war in
Korea, public opinion was not profoundly impressed by the moderately inflationary situation.
In fact there was considerable sentiment to the
effect that the boom would perhaps soon burn
itself out, in which case some dykes might be
required to keep deflation rather than inflation,
within bounds.
The dramatic events of midyear, however,
quickly obliterated any possibility that the boom
would subside, and visibly accelerated the economic metabolism. Private spending, both by
consumers and business, was speeded up in anticipation of civilian shortages and rising prices
indicated by the drastic rearmament program.
Although plans for government defense spending
on a greatly enlarged scale actually added little,
if any, to buying power during the autumn
months of 1950, the underlying inflationary
direction was clear. The upward price-wage
spiral was intensified, at the same time that the
regulatory machinery authorized by the Defense
Production Act of 1950 was being set in motion.
The remainder of this review constitutes a
brief summary of Federal Reserve policy and
actions in the face of this situation.
Open Market Operations. In theory, open
market purchases or sales of United States
Government securities can be an effective means
of credit control. Such transactions can bring
about considerable ease or restraint in the money
market. In recent years, however, the use of this
type of credit control has been limited by the
responsibilities of the Federal Reserve System to
maintain orderly conditions in the market for
United States Government securities.
Notwithstanding this limitation, the Federal
Reserve System through its open market operations was able to modify considerably the condition of extreme monetary ease that prevailed
at the beginning of 1950. During the first
several months, the accelerating demand for
credit was permitted to reflect itself in a rise in
short-term money rates. By April, the rate on
new 91-day Treasury bills (of which $1 billion
or more were reoffered at maturity each week
during 1950) had been allowed to rise about
Ys %. By August the 1Y4% rate was reached,
and in mid-November the rate touched 1%%.
The steady stiffening in short-term rates was not
an accidental development but one which occurred as Federal Reserve credit was made less
readily available in the face of a strong inflationary demand for funds from a great variety of
private borrowers.
The rise in rates on short-term Government
securities not only made such securities more
attractive to investors but also tended to reduce
the incentive to sell Government securities for
funds with which to make other loans and investments.
[7 ]
lion, effective on various dates between January
11 and February 1, 1951. That announcement
was accompanied by the following statement:
"This action was taken as a further step
toward restraining inflationary expansion of
bank credit, in accordance with the statement
issued by the Board August 18, 1950, that the
Board and the Federal Open Market Committee
'are prepared to use all the means at their command to restrain further expansion of bank
credit consistent with the policy of maintaining
orderly conditions in the government securities
market.'
"The volume of bank credit and the money
supply have continued to increase despite previous actions by the Federal Reserve and other
supervisory agencies, and efforts of individual
banks to be restrictive in granting credit. Loans
of member banks have increased by about 7
billion dollars since June, reflecting in part seasonal influences and in part accumulation of inventories at rising prices. This is an unprecedented rate of expansion and has contributed to
an excessive rise in the money supply. Moreover
with the end of usual seasonal demands for
credit and currency banks will have additional
funds available for lending. The purpose of the
announced increase in reserve requirements is to
absorb such funds and generally to reduce the
ability of banks further to expand credit that
would add to inflationary pressures. The increase
is timed so as to absorb reserves coming into the
banks from the post-holiday return flow of currency."
Margin Requirements.
The 50 percent margin on collateral loans, to purchase or carry listed
securities, was unchanged throughout 1950. Although, as noted earlier, security prices had
Discount Rates. As a means of supplementing open market policy, discount rates were increased to 1% % by all Federal Reserve banks
during August. As anticipated, the influence of
that step was largely psychological in character,
because at no time during 1950 were member
banks patronizing the discount window on a
significant scale. The volume of advances made
by this bank is described in greater detail on
page 17 of this Report.
Reserve Requirements.
Although statutory
authority was available throughout 1950 whereby member bank reserve requirements could
have been increased by another $2~ billion, or
roughly 15 percent of actual reserves maintained, no change was made in such percentage
requirements during the year.
Partly because of the distinctive nature of the
inflationary movement, together with the necessity of restraining the consumption of essential
raw materials in the manufacture of civilian
goods, restrictions upon the expansion of bank
credit Were largely limited to specific types of
credit extension such as real estate loans and
consumer instalment loans.
Before the end of 1950, however, there were
indications that a broader restrictive policy
would need to be invoked. On December 29,
the Board of Governors announced an increase
in reserve requirements totaling roughly $2 bil-
[8J
reached the highest level in two decades by midsummer, the upward movement had not been
accompanied by an appreciable amount of bank
borrowing.
Selective Controls. Under the terms of the
Defense Production Act of 1950, enacted early
in September, the Federal Reserve System was
authorized to impose restrictions upon the extension of consumer credit and certain types of
real estate credit. Accordingly, Regulations W
and X were instituted in September and October, respectively. The manner in which these
new responsibilities affected the operations of
this bank is described at greater length on page
39 of this Report.
Banking Developments in the Fourth District.
It is difficult to establish a precise cause and
effect relationship between the various System
policies described above, and the concurrent
changes in deposits, loans, and investments of
banks in this District.
After the normal seasonal decline early in
1950, net demand deposits of member banks
(upon which reserve requirements are based)
increased steadily from $5,783 million in April
to a newall-time high of $6,366 million in
December, up nearly $500 million in twelve
months. On the whole, reserve city member
banks persistently adhered to a policy of full
investment, while legal reserves of country member banks as a group fluctuated within a range
of 14 percent to 24 percent in excess of requirements.
More detailed information is available with
respect to the 18 weekly reporting member banks
located in six leading cities of the District. At
these 18 banks, adjusted demand deposits increased 9 percent during 1950, as against an
expansion of only about 5 percent in the rest
of the nation.
Commercial loans at these banks rose very
rapidly during the second half of 1950. Nevertheless by the middle of December, the amount
outstanding was not any higher than in early
1949, whereas in nearly all other sections of the
country the expansion had carried well into
record high ground. With respect to mortgage
lending, new loans exceeded payoffs almost week
by week and at the end of 1950 outstanding
real estate loans were up more than 20 percent
for the year.
Investments of the 18 weekly reporting banks
declined slightly during the past year, partly as
a consequence of a small reduction in marketable United States Government securities outstanding. Late in 1950, roughly 85 percent of
the banks' investments were in the form of Federal obligations as against about 89 percent a
year earlier.
It is chiefly because of these still-substantial
holdings of United States Government securities,
not only in this District, but by banks and other
investors everywhere, that the problem of combating inflation through restrictive credit control has far more ramifications and complications
than was the case before World War II.
--~-[9 ]
THE BANK'S SERVICES
the federal government in such activities.
Services to the general public: Three forms
of services to the general public may be distinguished. First, the bank supplies directly to the
public a wide range of timely information on
business trends, the scope of which is considerably broader than financial statistics as such.
Second, the general public is the ultimate beneficiary of the specialized services rendered
directly to member banks insofar as such services
contribute to efficiency of banking. Third, the
bank plays a part in the Federal Reserve System's general function of assuring a flexible
supply of credit, geared to the needs of the
community as a whole. As a part of this latter
role, the administration of emergency credit
controls can be considered part of a broad
public service in assisting to combat inflation.
Each department of the bank contributes in
some way to one or more of such services. The
organization chart on this page, and the descriptions of the bank's activities in the succeeding pages, provide more detail.
of the central banking
structure in the United States. It performs a
wide variety of services to member banks of the
Fourth District, to the Federal Government, and
to the general public. The entire scope of these
services is somewhat difficult to visualize even
by those who may have day-to-day dealings with
one or more of the highly specialized departments.
Services to member banks: Besides the basic
function of administering the underlying reserves
of the banking system in the Fourth District,
this bank renders numerous specific services to
member banks. A few examples are clearance
of checks, collection of drafts, maintenance of
necessary supplies of currency and coin, safekeeping, as well as wire transfer of funds and
securities.
Services to the Federal Government:
These
include the issuance and redemption of government securities, special handling of government
checks, collection of the withholding tax, and
other services. The bank acts as fiscal agent for
T
HIS
BANK
IS
PART
ORGANIZATION
CHART
BOARD OF DIRECTORS
Federal Reserve Bank of Cleveland
PRESIDENT
FIRST
Cincinnati Branch
BOARD
OF DIRECTORS
Vice President
and Other Officers
FUNCTIONS
Accounting
Bank and Public Relations
Building and General Services
Cash
Check and Noncash Collections
Credits and Loans
Fiscal Agency
Personnel
Safekeeping
VICE
PRESIDENT
Main Office
Vice Presidents
and Other Officers
FUNCTIONS
Accounting
Bank and Public Relations
Building and General Services
Cash
Check and Noncash Collections
Credits and Loans
Fiscal Agency
Personnel
Safekeeping
Bank Examination
Legal
Research and Statistics
[ 10]
BOARD
OF DIRECTORS
Vice President
and Other Officers
FUNCTIONS
Accounting
Bank and Public Relations
Building and General Services
Cash
Check and Noncash Collections
Credits and Loans
Fiscal Agency
Personnel
Safekeeping
FISCAL
AGENCY
DEPARTMENT
Personnel of Fiscal Agency Department
NOTE: Much
of the wartime expansion in
the work load of the Fiscal Agency Department
proved to be more than temporary) because of the sharp and relatively
permanent
increase in the number
and
variety
of United
States
Government
securities outstanding) especially the Series
E savings bonds.
Since it appears possible that a further
expansion may occur as a consequence of
national defense requirements)
this years
ANNUALREPORTgives special prominence
to the Fiscal Agency Department
and its
manifold operations.
As of December
1) 1950
Total number of employees.
...... 292
Treasury Marketable Issues Division .. 27
New Issues
.. .. ..
3
Exchanges and Transfers...
9
Redemptions
9
Coupon Payments .
6
United States Savings Bonds Division ..256
New Issues
95
Reissues.............
22
Redemptions
.... 129
Safekeeping
10
Federal
HE FEDERALRESERVEBANKSin their capacity
as fiscal agents of the United States perform
T
many duties for the Federal Treasury, as well
as for other instrumentalities of the government.
All transactions involving public debt obligations, Treasury Tax and Loan Accounts, and
federal tax receipts (withholding tax) are handled in the Fiscal Agency Department. In the
Fourth District these services are available at
the Cincinnati and Pittsburgh branches as well
as at the head office in Cleveland. Most transactions originating at the branches are completed
by them. The processing of paid and reissued
United States savings bonds and federal tax receipts, however, is handled in Cleveland in order
to make the most economic and effective use of
special mechanical equipment.
During the past year, the expenses of the
Fiscal Agency Department totaled an estimated
$1,248,000, representing chiefly payrolls and
equipment rentals. The bank will be reimbursed
by the United States Treasury, however, for
nearly all of these expenditures.
The Fiscal Agency Department is divided
into two main divisions, the smaller one of
which (in terms of manpower) handles all
transactions in Treasury Department marketable
issues, Treasury savings notes, and matured coupons, while the other division processes all
United States saving bonds, Treasury Tax and
Loan Account, and federal tax transactions. A
table showing the number and distribution of
personnel by class of activity is shown above.
Taxes
9
TREASURY MARKETABLE ISSUES
DIVISION
All transactions in Treasury bills, certificates
of indebtedness, notes, bonds, matured coupons
and Treasury savings notes are handled in this
division.
Issues
Copies of announcements of new offerings by
the Secretary of the Treasury, together with
appropriate forms and instructions, are prepared
and forwarded to all banks and others concerned
in the district.
Employees in the Department
500
400
[ 11 ]
o
1946
1947
1948
1949
1950*
Exchanges and Transfers
In those cases where the form of the securities
and the Treasury regulations permit, owners
may request the following types of exchanges or
transfers prior to the maturity of the securities:
(1) denominational ex ch an ges
bearer securities,
of
(2) transfer of coupon form securities
to registered form and registered
form to coupon form,
(3) changes in ownership of registered bonds, and
(4) wire transfer of bearer form
securities involved in a sale.
When transactions involve only coupon
(bearer) form securities, the transactions are
usually completed in a few hours. If securities
are desired in registered form, a period of ten
days to two weeks usually is required to complete
the transaction as it is necessary to have the registration either recorded or released by the Treasury Department, Washington, D. C.
Wire Transfers of Securities
The service which permits the wire transfer
of bearer securities involved in a sale is very
popular. This makes possible the delivery in any
Federal Reserve bank city (as well as nearly all
reserve branch bank cities) of securities held by,
or delivered to, any of the three offices of this
bank. Securities may also be wired to any of
our offices from other Federal Reserve bank
cities. There is no charge for this service if the
securities mature or have been called for payment within one year. A nominal charge is made
for securities maturing beyond one year. In order
to effect exchange and transfer transactions as
quickly as possible it is necessary for each office
of this bank to carry a supply of unissued stock
of each denomination of all Treasury securities
that are outstanding.
Redemption of Securities
Matured and called bonds are received for
redemption. Bearer form bonds are paid upon
receipt when maturity or call date has been
reached. Registered securities are redeemed upon
receipt of release of registration advice from the
Treasury Department, Washington, D. C.
A valuable service which commercial banks
may use in forwarding matured bearer securities
belonging to them or their customers is the
restrictive endorsement. When maturing securities are forwarded bearing the restricted endorsement, appreciable savings in insurance and
surcharge cost are made possible.
Face Amount of United States Government Securities
Handled by Treasury Marketable Issues
Division During 1950
Issues.
.
Bills .....
. ....
Certificates
of Indebtedness
...
204,700,000
Savings Notes..
... .
355,000,000
and Transfers.
..
. . . . . . . . . . . . . ..
Notes
.
Treasury
$3,146,200,000
$1,633,800,000
Exchanges
952,700,000
Wire Transfers-Outgoing.
...
-Incoming ...
2,234,200,000
Other ....
381,500,000
Redemptions
. 3,256,100,000
Bills
.
Certificates
Notes...
1,402,000,000
of Indebtedness.
1,016,700,000
..
.
301,600,000
Bonds.
329,700,000
Treasury. Savings Notes-Cash.
.
-Taxes...
United
States
4,720,500,000
2,104,800,000
Government
90,700,000
115,400,000
Coupons....
.. .. .. ..
95,900,000
Treasury Savings Notes
Treasury savings notes are purchased for both
investment and tax payment purposes. Reissue
of the notes is possible under very limited circumstances. Denominational exchanges may also
be made under certain conditions.
The notes are redeemed both prior to and at
maturity. Notes are presented for payment of
principal and accrued interest by owners as
well as by the collectors of internal revenue for
deposit to the account of the Treasurer of the
United States as tax revenues.
[ 12 ]
Payment of Matured Coupons
Coupons of United States Treasury issues are
paid on and after maturity. Holders of large
numbers of coupons of the same payment date
may anticipate payment by forwarding them to
one of the offices of this bank up to ten days
prior to that date, which will permit processing
of the coupons and payment on the due date.
SAVINGS
BONDS DIVISION
The second major division of the Fiscal
Agency Department handles transactions in
United States savings bonds which are so numerous that nearly all operations are handled on a
highly mechanized basis.
The present line production methods were
devised by our staff in the early days of World
War II when manpower was so short that complete mechanization was necessary in order to
maintain satisfactory work schedules. In nearly
all sections of the savings bonds division the
work travels in a continuous route in units of
convenient size. The work is performed in brief
steps .so that each employee becomes a specialist
and. IS thus able to perform his task rapidly,
efficiently, and economically.
In the first War Loan drive, this bank devised procedures for informing the Treasury and
the State Savings Bonds Committees in this District regarding monthly sales and redemptions
on a geographical basis. These procedures were
sub~eque?tly prescribed by the Treasury for
natl?n-wide use, and are still in operation.
Smce the end of the War Loan drives many
procedures have been revised and refined to the
extent that processing previously required when
the records were received at the Treasury Department are now unnecessary, as the required
mfor~ation is supplied before leaving our bank.
S~vmg~ bon~ operations fall into four major
classifications: Issues, reissues, redemptions, and
safekeeping. A brief resume of these activities
follows.
Issues
During 1950 this bank received approximately 32,600 settlements from banks, savings
and loan .com.f>anies,employers with payroll
plans, credit unions, the Bureau of Supplies and
Accounts of the Navy Department and other
orgamzations qualified by this bank' as issuing
agents for Series E bonds. The settlements from
'"
agents covered the sale of around 5,620,000
savings bonds for a total issue price of roughly
$300,500,000.
The complete proof of the agents' settlements,
the crediting of the sales to the Treasury, and
the preparation of a consolidated list of all
agents' settlements received in a day with an
appropriate description of each sale, in addition
to the posting of the agents' liability accounts,
are accomplished by use of punches, sorters,
tabulators, computers, and transfer posting
equipment. With the exception of the examination of the bond stubs to determine that the
bonds have been inscribed in an acceptable manner, the operation is almost completely mechanized. The efficiencywith which such transactions
are handled is illustrated by the fact that the
labor cost of shipping bond stock to agents,
balancing agents' remittances, examining stubs,
processing stubs for the Treasury Department
records, and preparing statistical reports of
sales, is $.012 per bond. The issuing agents sold
about 58% of the Series E bonds handled
through this bank during the past year.
The 42% of Series E bonds not sold by
agents, which were cleared through this bank,
were inscribed in the Fiscal Agency Departments
at our three offices from applications received
from employers with payroll plans but who are
not inscribing agents, from regular monthly
Treasury plan purchases, and from others who
send their applications to this bank. These bonds
app,roximat.e a total of 2,500,000 pieces having
an Issue pnce of $63,100,000. All bonds issued
by this bank are inscribed by use of modern
addressing equipment which makes possible the
lowest cost known for this type of work.
A reservoir of plates, many thousands m
number, is maintained from which plates are
used at regular intervals to imprint bonds for
[ 13 ]
repeat purchasers. From the number of requests
that have been received from employers in the
last four months of the year to add names to
their lists of purchasers it appears that the
volume of bonds inscribed will increase sharply
in 1951. Many employees, whose firms became
qualified issuing agents early in World War II,
are still buying bonds under the payroll deduction and inscribing procedure devised at this
bank.
This bank is the only authorized issuing agent
for Series F and G bonds in this District. All
applications for these series are processed by
substantially the same methods as are used for
Series E bonds. The average number of bonds
to be inscribed for each application for F or G
bonds is about six. It is therefore more economical to cut and check one plate and produce the
number of bonds required, in addition to the
internal records that are needed, and then
destroy the plate than it is to have each bond
typewritten and checked.
end of 1950 there were 1,600 such organizations
in this District qualified to redeem these bonds.
The agents receive a fixed fee for their services
in this respect and are therefore not permitted
by the Treasury to make any other charge for
such service.
Agents receive payment for all paid bonds
transmitted on an immediate basis. The bonds
are then processed to prove the correctness of
the transmittal letter and the paid amounts of
the bonds.
All Series E bonds received from agents, as
well as all bonds submitted directly to this bank
for payment, are then processed by month and
year of issue for each denomination of bond in
order to permit the Treasury Department to
make proper accounting entries on its records.
The labor cost of handling bonds presented for
redemption through all of the various steps that
are required is just under 2 Y2 cents a bond.
UNITED
STATES
SAVINGS BONDS HANDLED
DURING 1950
Reissues
Requests are constantly being received to reissue savings bonds due to the decease of the
owner, co-owner or beneficiary, and for other
reasons permitted by the regulations, which require the retirement and reissue of over 20,000
bonds per month.
Reissue requests require a careful examination
of all the facts to determine that the transaction
is permitted by the regulations and that the necessary documents have been submitted. Transactions involving individuals are usually quite
simple to handle, but when fiduciaries and
corporations are involved many complex problems are presented.
The nature of the transactions requires skilled
handling in the examination stages and as soon
as a request has been approved, the transaction
is processed by use of line production methods.
The retirement of the old bond is recorded by
use of punch card methods, whereas the bonds
issued in lieu of those retired are printed by use
of addressing machines.
Number
of Bonds
Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 8,206,000
Reissues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemptions
253,800
8,820,400
Safekeeping
For the Public
Received
Withdrawn
Held
.
.
.
59,700
79,100
491,400
For the Navy
Received
Withdrawn
Held
.
.
.
79,700
105,200
177,400
TREASURY
TAX & LOAN DEPOSITS
Amount of Deposits
Amount of Withdrawals
Balance December 29,1950
WITHHOLDING
Total Remittances
& F.I.C.A.
$1,514,429,111.00
$1,515,531,471.00
$ 237,219,010.00
TAX DEPOSITS
$ 908,386,356.27
Redemptions
The banks, building and loan as well as
savings and loan companies in this District,
which have been qualified as agents to redeem
Series E type bonds payable to individual
owners, forward the bonds paid by them to us
for reimbursement at regular intervals. At the
Series F and G bonds presented for redemption require a greater amount of handling than
the Series E bonds. Usually documents accompany the bonds in order to complete the assignment and it is then necessary to forward a
complete description of the bond to the Chicago
[ 14 ]
office of the Treasury Department for release
of registration before payment can be made. As
these series of bonds require presentation by the
first of any month in order to receive payment
the first of the following month, time is not such
a factor in handling as in some other savings
bond operations.
Safekeeping
A service that is extremely popular with the
public is the safekeeping of savings bonds. This
service is offered at Treasury Department expense to all savings bond owners. A special arrangement with the Bureau of Supplies and
Accounts of the Navy Department provides for
bonds to be held in safekeeping in our vaults
for all Naval personnel wherever stationed while
in service.
At the end of 1950 this bank was holding
492,000 pieces for individuals and 178,000
pieces for Navy personnel, representing a total
of $62,000,000 maturity value of bonds. This
is somewhat lower than the peak of over 512,000
pieces held for individuals on August 31, 1949,
and more than 346,000 pieces held for individuals on August 31, 1945. The total maturity
value of the holdings on the peak dates was
approximately $65,000,000.
Treasury Tax and Loan Department
On January 1, 1950, the title of the War
Loan Deposit Account, which had been in existence for many years, was changed to Treasury
Tax and Loan Account. Incorporated banking
institutions designated as depositaries may pay
for purchases of certain government securities
made by themselves or customers, and for the
collections of Social Security and withholding
taxes, by credit to this account.
During 1950 securities purchased and taxes
collected in the amount of $1,515,000,000 were
paid by credit to the Treasury Tax and Loan
Account. On December 29, 1950, banking institutions in this District had on deposit $237,000,000 for the credit of the Treasurer of the United
States, subject to call.
SAFEKEEPING
F
SERVICES
MANY YEARS member
banks have been
using the facilities of this bank for the safekeeping of some of their securities. It is not only
a matter of obtaining adequate physical protection, but many outlying banks have also
found that purchases and sales of securities
(generally in the New York market)
can be
consummated more promptly when delivery can
be made, or taken, at a central location such as
one of our three offices. Borrowing from this
bank is likewise facilitated when the collateral
is readily deliverable on short notice.
Most of the securities thus held in our vaults
are designated as "unpledged"
(see adjoining
chart) which means that this bank acts only as
custodian.
In many other cases, however, the securities
are lodged with us pursuant to agreements between two outside parties. For example, when
member banks accept funds for deposit from
such public bodies as boards of education, city
and village governments, and other local political subdivisions, the depositary bank is generally
required by state law to post sufficient collateral
to insure the safety of such deposits. On December 31, 1950, this bank held $511,128,000 (face
value) of securities, owned by member banks,
but pledged as security for state and local
governments throughout the Fourth District.
A third important type of safekeeping service
is that rendered to member and nonmember
banks that have been authorized by the Federal
Treasury to accept withholding tax funds, social
security taxes, and. other funds received from
their customers, on behalf of, and for subsequent
remittance to, the Treasury. Such deposits must
at all times be fully covered by the placing of
securities (usually United States Government
obligations) in the custody of this bank.
The volume of securities handled by the safekeeping staff during the course of a year far
exceeds the volume on hand on any given date.
For
example,
during
1950 approximately
$8,500,000,000 of securities of various maturities
and denominations were accepted for safekeeping for varying lengths of time and an almost
equal aggregate was released in accordance
with instructions from respective owners. This
entailed not only the handling and verification of
these securities at the time of receipt, or release,
but also the clipping of coupons and the mechanics of exchange or redemption at maturity.
Buying and Selling of Securities:
In addition to the safekeeping service for member banks
OR
this bank will place orders for the purchase or
sale of bearer form securities of the United
States or its agencies, and other securities in
bearer form (not including stocks) regularly
handled by established dealers. During 1950
sales aggregating $97,581,000 and purchases of
$67,019,000 were made for member banks.
SECURITIES
(000 omitted)
[ 16 ]
HELD IN SAFEKEEPING
I
o PLEDGED
FOR SAFEKEEPING
1947
1948
ONLY
1949
1950
ADVANCES TO MEMBER BANKS
O functions
as well as oldest
of this bank is that of making
credit available to member banks, when and if
needed, on the strength of appropriate collateral.
In the earlier years of the Federal Reserve
System such credit was obtained by member
banks chiefly by presenting commercial or agricultural paper for rediscount. In more recent
times, however, and especially during the past
decade when nearly every member bank's portfolio has contained some U. S. Government
securities, advances to member banks have taken
the form of collateral loans, secured by obligations of the Federal Government, usually of a
short-term variety. Many of these borrowings
are negotiated for a period of only five days or
less, especially in the case of city banks, as shown
in the chart. Others run to as much as 90 days,
the maximum statutory limit.
During the year 1950, indebtedness of member banks at no time exceeded $52,940,000 and
NE OF THE MOST IMPORTANT
Advances to Members Banks, 1950
City Banks
Country Banks
the daily average for the year was $9,800,000,
or approximately the same volume as in several
preceding years.
This bank is also empowered to lend to industry for working capital purposes (Section
13-b), under certain prescribed conditions, one
of which is that the desired funds are not
obtainable from a commercial bank. As of
December 29, 1950, the amount of 13-b loans
and commitments outstanding was $535,000 or
$460,000 less than a year earlier.
A feature of the past year was the reinaugur ation on September 27 of Regulation V, whereby
this bank is authorized to guarantee, on behalf
of the armed services and several other Departments of the Federal Government, loans made
by banks to enterprises which are engaged in
production deemed essential for national defense,
and which are unable to obtain financing from
conventional sources. By December 29, 1950,
this bank had received seven applications totaling $26,900,000 from member banks on behalf
of such borrowers.
The experience gained in administering the
so-called "V" and "T" loan program during
and immediately after World War II has been
helpful in carrying out this new. responsibility.
ADVANCES TO MEMBER BANKS, 1950
Aggregate
for
the Year
Number
of Loan.
Average
Size of Loan
386
237
58
6a1
$2,828,964
889,989
152,793
$1,926,240
340
151
17
508
$3,111,029
1,296,358
338,235
$2;478,839
46
86
41
173
$ 744,130
176,483
75,902
$ 303,581
ALL BANKS
1·5 days
$1,091,980,000
6· 15 days
210,927,500
Over 15 days
8,862,000
Total
$1,311,769,500
CITY BANKS
1 ·5 days
$1,057,750,000
6·15 days
195,750,000
Over 15 days
5,750,000
Total
$1,259,250,000
COUNTRY
BANKS
1 ·5 days
$
6·15 days
Over 15 days
Total
$
Chart based an 11· manthsdata.)
[ 17 ]
34,230,000
15,177,500
3,122,000
52,519,500
CHECK
COLLECTIONS
with the other Federal Reserve
Ibanks and branches this bank acts as clearing
agent for the routing of checks and settlement
NASSOCIATION
of accounts, as among the commercial banks of
the country. This activity is integrated with
operations of local clearing house associations.
During 1950 the total number of checks handled increased 3 percent, as compared with
the previous year. In terms of dollar value of
checks handled the overall increase was 13 percent. The gain was in city and country checks,
whereas a decline from the previous year was
registered in the number of government checks
handled during the year. The peak month for
check collections during 1950 was March, when
a large volume of veterans' insurance refunds
was added to the usual March load of incometax business.
About 500 employees are required to handle
TRAVELS
the volume of check collection. Besides the regular day and night shifts, it has been found necessary to operate a special "twilight" shift on a
full-time basis, as well as a shorter evening shift
employing part-time services of students of local
business colleges.
The past year constituted the first full year of
100%-proof machine method of handling checks
in Cleveland and Cincinnati. The gain in efficiency was especially marked in the handling of
country checks.
In addition to the clearing of checks, the bank
performs a collection service with respect to a
wide variety of noncash items, such as drafts,
notes, securities, and coupons.
Both types of collection services, check and
noncash, are open to member banks and to nonmember clearing banks throughout the continental United States.
OF A TYPICAL
CHECK
This check Is included
bank.
check in an air mail shipFederal
Reserve
menllo Cleveland for Credil.
Bank of
BaSion for credil.
[ 18 J
CHECK COLLECTIONS,
1950
Total
42,700,000
140,300,000
33,400,000
Cleveland
14,800,000
56,700,000
21,900,000
Cincinnati
7,600,000
41,600,000
5,200,000
Pittsburgh
20,300,000
42,000,000
6,300,000
216,400,000
93,400,000
54,400,000
68,600,000
Value of Checks Handled
Checks on City Banks* . . . . . . . . . . . . . . . .. $30,240,000,000
Checks on Country Banks**............
27,810,000,000
Government Checks. . . . . . . . . . . . . . . . . . .
4,220,000,000
$11,150,000,000
13,720,000,000
2,570,000,000
$ 6,570,000,000
7,620,000,000
730,000,000
$12,520,000,000
6,470,000,000
920,000,000
~7,41.0,000,000
$14,920,000,000
$19,910,000,000
Number of Checks Handled
Checks on City Banks* ....................
Checks on Country Banks ** ................
Government Checks .......................
Total .............................
Total.
$62,270,000,000
*Payable by banks located in Cleveland,
Cincinnati,
or Pittsburgh.
**Payable by par banks located in continental U. S. outside of the three named cities.
(Either payor or payee located in Fourth District.)
COLLECTION
OF NONCASH
ITEMS, 1950
(Drafts, notes, bills, bonds, coupons, etc.)
Total .................
tPayable
863,600
350,800
$197,700,000
157,200,000
$ 64,900,000
80,100,000
$ 88,200,000
48,700,000
$44,600,000
28,400,000
$354,900,000
$145,000,000
$136,900,000
$73,000,000
by banks, business concerns or individuals
located in Cleveland, Cincinnati,
:j:Payable by par banks, business concerns or individuals
or payee located in Fourth District.)
NUMBER
CHECKS
Pittsburgh
143,400
43,500
Cleveland
127,500
223,300
Total .................
Value of Items Handled
City Items] ..................
Country Items] ..............
Cincinnati
144,800
181,100
Total
415,700
447,900
Number of Items Handled
City Items] ..................
Country Items] ..............
located in continental
OF
HANDLED
[ 19]
325,900 -
186,900
or Pittsburgh.
United States outside the three named cities. (Either payor
CURRENCY
AND
COIN
OPERATIONS
HE FEDERALRESERVEBANKSare the mediwhich the public's demand for
hand-to-hand currency (as distinguished from
deposit credit) is met. The reserve banks are
also the points to which surplus currency or
coin gravitates after it has been spent, and where
unfit money is taken out of circulation and replaced (if necessary) by new bills or coins.
The direction of the flow into, or out of, this
bank fluctuates not only from season to season,
but also within the limits of a calendar month,
presumably because paydays tend to cluster
around specific dates and are not evenly distributed over the entire month. In fact, even
within a typical week, the demand for currency
is apt to be the heaviest in the first day or two,
while the return flow tends to occur in the latter
part.
This bank receives a constant flow of currency
and coin from several sources shown in a chart
on the adjoining page. Of the $2,345,253,458
received during 1950 nearly 63 percent was
deposited by banks and United States Government agencies such as Post Offices, Internal
Revenue Offices and others, who in turn had
received it from the public. Retail stores, places
of entertainment, and gasoline service stations,
as well as railway and public utility companies,
are only a few of the channels through which a
steady stream of currency is received and returned to the banking system.
Of such returned currency (and coin) more
than one-third was unfit for further circulation,
and was replaced as needed. This proportion of
unfit money was essentially in accord with
normal expectations.
Another 8 percent represents notes of this
bank which, in the course of inter-district trade
and travel, had found their way to the other
eleven Federal Reserve Banks and which by law
must be returned to the originating, or debtor,
bank.
The balance of $674,441,200 needed roughly
to match the outflow during 1950, represents
new bills or coins which were put into circulation, chiefly to replace unfit money, but also
Tum through
INCOMING
l
Fir
OUTGOING
[ 20 ]
partly in response to the public's demand (as
manifested through banks) for additional handto-hand cash. Some of this new paper money was
deposited at this bank by the United States
Treasury, either in the form of silver certificates
or United States notes whose history actually
dates back to the Civil War. The balance was
made up of new notes issued by this bank, in
denominations of $5 or more, and which required the transfer of an equivalent amount of
this bank's assets to the Federal Reserve Agent
to be held by him as collateral while the notes
are outstanding.
The out flow of currency likewise takes place
through the commercial banking system. Owing
mostly to the economic importance of the three
largest cities of the District, and partly to the
intermediary role played by the large metropolitan banks, nearly one-half of the currency flowing back into circulation is paid out in these
three trading areas. Banks outside Cleveland,
Cincinnati and Pittsburgh also handle a substantial quantity of paper money and coin in the
aggregate. Shipping charges to and from member banks are absorbed by this bank.
Wrapped coin service (as distinguished from
loose coin) which has been available since J anuary 1948 at a nominal charge to the receiving
bank, continued to grow in popularity during
1950.
The cost of sorting and verifying, packaging
and mailing this vast volume of currency and
coin, not to mention the constant replacement
of unfit with new notes, is a considerable element
of expense in our operations. During 1950 this
cost is estimated at $900,000 or 12 percent of
total bank expense.
As indicated in the balance sheet on page
32 of this Report, the amount of this bank's
notes in actual circulation, and therefore subject
to routine wear and tear, as of December 29,
1950, was approximately $2,112,367,000 or
3 percent more than a year earlier. This $2 billionodd of our notes is estimated to constitute about
85 % of all money in circulation in this District.
The initial cost of printing and engraving these
outstanding notes, together with the charges for
shipping the notes from Washington is estimated
at $1,700,000.
Currency and Coin operations
during 1950
Currency and Coin on hand December 30, 1949
Receipts during 1950:
From Public (chiefly via banks)
Fit
Unfit
$1,480,753,158
.
$960,706,520
520,046,638
From Treasury (Silver Certificates,
U. S. Notes and coin)
.
From Other F. R. Banks *
.
From F. R. Agent (new notes)
.
Total Incoming
173,481,200
190,059,100
500,960,000
$2,345,253,458
.
Payments during 1950:
To Banks in Cleveland, Cincinnati
and Pittsburgh
.
To All Other Banks
.
To Other F. R. Banks **
.
To Treasury (unfit) for Redemption.
Total Outgoing
$120,285,404
$ 779,812,576
899,691,852
146,578,700
520,046,638
2,346,129,766
.
Net Decrease during 1950
.
Currency and Coin on hand December 29, 1950
*Notes originally issued by this bank.
**Notes originally issued by the other eleven F. R. Banks.
[ 21 ]
876,308
$119,409,096
ECONOMIC
T
RESEARCH AND INFORMATION
of the Research Department and
branch offices either for internal use, or m rethe Library during 1950 was carried forward
sponse to outside queries.
All of the various newspaper releases and
along the traditional functional lines.
Our responsibility to the Board of Governors
other publications, illustrated on the adjoining
involved, as for many years in the past, the as- _ pagec.experienced an increase in active circulation during 1950. The most popular medium
sembling and processing of detailed data on
judging from the size and growth of the mailing
banking conditions and department store trade,
and of forwarding our findings to the Board at
list, is "Business Trends", the script for the Saturday radio program, which was launched in
weekly and monthly intervals. The Research DeOctober 1948.
partment also was called upon by the Board of
The staff of the Research Department filled a
Governors to make regional studies in connection
with consumer credit, both before and after the
large number of speaking engagements during
reinstitution of Regulation W. Until inaugura1950, mostly with organizations not connected
tion of Regulation X, and the establishment of a
with this bank, but also in the course of meetspecial staff to administer it, the Research Deings arranged by the Bank and Public Relations
partment was also asked to make analyses of
department and Bank Examination.
certain aspects of real estate credit and the conThe work of the Library, with a staff of ten,
struction industry in this District.
continued to expand during 1950, not only beThe officers and employees of this bank have
cause of the constant increase in the amount of
continued to make increasing use of the research
reference material received, catalogued, and
staff and library during the past year. Although
circulated, but also because of the growing use
the physical facilities are for the most part
of its facilities by the public. A typical day's
located at the main office, our staff handled
quota of research questions received by phone,
many requests for information from the two
letter, or in person, is depicted herewith.
HE
WORK
SAMPLES OF NEWS BULLETINS
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.I" I.,., ..
),.11.
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N ••••
paper••
_.
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DEBITS.
_
tciol!liii1l9SO
~~'!::====
Do 1~'"OYCber lJ,
19S0
October by bank debita to der'
- __ ~ __'~'_~t~,~~.~h~~~h~w:.~.~e:.~t':b:1:i':h~.~dJd~ur!W~c~~~
District
Federal
Fo
DEPARTMENT
STORE SALES
Federal
Reserve
Re s e a r ct»
Yew'P'per3,
December 8
Bank
Department
of Cleveland
Date
D
.'
neserve
'n,
H./ ••,..
A"
Rp'''lrrlt
-'-. - :-:-~; . '.'~!.""~.,
N
-CIlANG~ IN
Dec. 7, 1950
-"ber
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• 20.11 ....
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('partlrlent
22, 19So
COl SUIER INSrAU1EN
25 FOUrth D1 t
• r1ct
- 7.0,1
c1t1el.
TCREDIT__
lleltbor
Cleveland
Do I.
0C70seR
~o.
19So
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_.,
SATUROAY. DfCfMIa
[ 23 ]
p. ".so
BANK
EXAMINATION
IDepartment
of the Bank Examination
to examine the State member
banks in the Fourth District at least once annually by a field investigation staff, consisting
of examiners and assistant examiners working
under the direction of a chief examiner. Typewritten reports are made of these examinations
and copies of the reports are made available to
the banks examined.
With few exceptions these examinations or
investigations are conducted jointly with representatives of the banking departments of the
several states in the district; and the Federal
Reserve Bank of Cleveland wishes to take this
opportunity to acknowledge the fine cooperation
with which the other banking agencies have
collaborated in the various joint examination
undertakings.
In its division of analysis and review the Department functions the condition statements and
reports of earnings and dividends submitted by
the State member banks; and through that division the Department is continuously engaged in
developing factual information relative to bank
T IS
THE
TREND
POLICY
Of
CAPITAL
RATIOS
operations. This factual analysis is enhanced by
the fact that we are provided with copies of the
condition statements and reports of earnings
and dividends submitted by the National banks
to the office of the Comptroller of the Currency
as well as with copies of the reports of examination of National banks made by examiners for
that office.
The types of information developed cover a
wide range, the principal one being the statement of member bank operating ratios, published annually, which permits banks to compare
their operations with others of relatively the same
size in the District.
FOURTH
DISTRICT
BANKS
as of June 30, 1950
Number
National Banks. . . . . . . . . . . ..
State Member Banks. . . . . . ..
State Nonmember Banks. . . ..
Total
Of
ALL
Total Assets
464
232
429
$7,116,543,000
3,833,293,000
2,014,435,000
1,125
$12,964,271,000
MEMBER
BANKS
0/0
50
10
Ratio of Capital
to Total Assets
1
,
40
••••••••
I
30
8
6
),
20
4
Ratio of Capital to
Assets Other Than
Cash and U. S. Gov't Sec.
10
2
o
o
1947
1949
1948
[ 24 ]
1950
BANK
T
AND
PUBLIC
RELATIONS
GENERAL OBJECTIVES of the bank and
public relations program of this bank are:
1. To render the best possible service to
the banks in the Fourth Federal Reserve District;
2. To keep in close and continuous contact with bankers so as to maintain a
cordial, harmonious and
practical
working relationship with the banks in
this District;
3. To present helpful and practical information to bankers, businessmen, and to
the public, and to encourage the exchange of facts and ideas between
bankers and others with representatives
of this bank.
Typical examples of bank and public relations
activities during 1950 were as follows:
In order to maintain contact with the 1,121
banks in the Fourth District, two scheduled
visits were made during 1950 to each bank by
an officer or field representative.
The policy of cooperation with local or regional clearing house associations and county
HE
banker groups through Banker Conference
Meetings was continued throughout the past
year. During 1950 approximately 1,400 bank
officers and directors from 420 banks attended
16 such conferences.
Another feature of the bank and public relations program is "Bankers' Day at the Federal" when groups of 30 to 50 officers and
employees of banks from a wide geographical
area of the District are taken on a tour through
the bank to get a first-hand view of our operations. A series of 26 such "Bankers' Days" were
held during 1950. In addition to these sponsored
tours, approximately 4,700 visitors toured the
three offices during the past year.
The movie, "A Day at Federal Reserve Bank
of Cleveland," produced by the officers and employees of this bank, was completed in July
1950. Since that time, there have been 423
showings of the movie to 32,709 people.
These and other bank and public relations
activities were an integral part of our operations
as the regional bank and a service institution in
the Fourth Federal Reserve District.
[ 25 J
OFFICE OF COUNSEL
HE OFFICEOF COUNSELconsists of Counsel,
Tthree
attorneys, and a secretary.
Minutes of meetings of Board of
Directors, Managing, and Discount Committees.
Insurance policies and bonds.
During 1950, which was the third year of its
existence as a part of the bank's organizational
structure, the Office of Counsel rendered considerable legal services in connection with the
issuance of Regulation X dealing with residential real estate credit. In addition, the reinstatement of consumer credit controls under Regulation W involved the preparation of many legal
opinions concerning this subject.
Legal matters normally handled by the Office
of Counsel include the following:
3. Correspondence and conferences with
representatives of member banks.
4. Issuing opinions concerning Federal
Statutes, state banking laws, rulings and
regulations of the Board of Governors
and operating letters of this bank.
5. Analyzing and determining the effect
upon the bank's operations of all existing and proposed legislation in banking
and other fields.
1. Conferences with and advice to officers
and department managers concerning
legal problems arising in their respective
operating departments and which relate
to internal and external activities.
6. Reviewing legal aspects involved in establishment of branches by member
banks.
2. Drafting or examining for legal approval
the following:
Applications for membership in the
Federal Reserve System.
Applications of National banks to
exercise fiduciary powers.
All documents evidencing changes
in corporate status of state member banks.
Operating and c i r cuI a r letters
issued by this bank.
Contracts,
leases.
purchase
orders, and
7. Participating in negotiation and preparing of necessary documents in connection
with 13b and V loans.
The law library used by the attorneys consists
of approximately 2,000 volumes which include
not only the laws and court decisions of the four
states in the Fourth District but also books on
specialized subjects and Federal statutes and
cases.
An effort has been made to have the several
lawyers in the Office of Counsel generally familiar with all phases of the legal work performed
making for well-rounded individual experience
and efficient legal service to the bank.
[ 26 ]
PERSONNEL
F
THE POINT OF VIEW of the Personnel
Department, the past year falls into two
distinct phases. During the earlier months,
activity was of a routine character. With a combined personnel of around 1,630, separations
during the first five months of the year totaled
only 100, for which only 62 replacements were
required and were obtained without difficulty.
That turnover rate was low in comparison with
several preceding years.
Employment of high school girl graduates
from the January and June classes was very
encouraging. The moment the Korean situation
broke, however, the entire outlook changed very
rapidly. It became difficult to secure likely
candidates for vacancies. The separations,
which had been 100 in the first five months,
jumped to 273 in the next six-month period,
from June to November. This loss was partly
offset by the accession of about 40 business
school students who are employed in a five-hour
twilight shift.
ROM
Number of full-time employees
at year end
2000
1900
1800
••••••••• ........••.....
......••••..
1700
1600
1500
1400
FISCAL
-...
~GENCY
1300
12(10
CHECK COLLECTION
1100
1000
•••••
900
800
MA NTENANCE
700
~ND
During the first eleven months as a whole
there was a reduction of 11 employees. However,
the re-establishment of consumer credit controls (Regulation W) and Regulation V loan
operations and the establishment of a new department to handle real estate credit (Regulation X) required the services of 34 employees,
so there was actually a reduction in the operating departments of 45 employees.
Very few of the terminations have been
caused directly by the increase in the armed
forces. Most of the individuals left to take jobs
in defense plants in order to obtain more lucrative salaries. The present labor markets in Cleveland, Cincinnati, and Pittsburgh are extremely
short of clerical workers, particularly those
possessing typing, shorthand, and accounting
skills.
The 219 employees, representing nearly 140/0
of our personnel, who have been in the bank's
employ for 25 years or longer, constitute a
highly experienced nucleus of workers around
which it should not be difficult to maintain a
very efficient organization.
The personnel services of the bank are administered by a personnel department at each
of the three offices.
These departments, in addition to performing
the usual activities of recruiting, hiring, transferring, promoting, counseling and terminating
services, preparing and maintaining complete
records of employment including earnings, also
operate the personnel classification plan (job
evaluation) , education, training, welfare and
recreational programs.
The medical department, restaurant facilities,
and publication of an excellent employees'
monthly paper also are under Personnel Department supervision.
PROTECTION
Number of Full-Time Employeel, December 1, 1950
(Ooes not include officers)
600
500
Department
400
19 OTHER
DEPARTMENT
300
200
100
1948
1949
Cincinnati Plttlburgh
Check Collection •
Fiscal Agency •••
Maintenance &
Protectian ....•
19 Others •..•.•
397
276
180
168
88
34
129
74
290
647
178
356
47
125
65
166
Total. .......
1610
882
294
434
o
1947
Total Cleveland
1950
[ 27 ]
BUILDING OPERATIONS AND MAINTENANCE
F
a postwar program of general rehabilitation, modernization, and renovation has been in progress at each
of the three bank buildings.
Old and inferior lighting equipment has been
replaced by the modern fluorescent type, and
throughout the buildings new floor coverings
have been laid. These replacements together
with an extensive renovating, redecorating, and
soundproofing program have greatly improved
working conditions in the three buildings.
In the Cleveland building the old metal frame
casement windows on the tenth floor, where the
cafeteria and recreational facilities are located,
have been replaced by large thermopane windows. The building also has been cleaned and
tuck-pointed during the past year.
With respect to electrical installations, the
original electrical risers have been split and
altered so that, in the event the demand for
power should exceed the capacity of the buildings's own DC power plant, outside power
(AC) could be used for lighting.
At Cincinnati the bank has taken occupancy
of two additional floors since purchasing the
building in 1947. Cafeteria facilities have been
installed for the first time in the Cincinnati
property as well as in the Pittsburgh office. At
the latter, new Diesel equipment has been installed capable of taking care of 30 percent of
the building's power requirements in the event
of a local power failure.
Other major improvements are under consideration or under way in the building at Cleveland. The replacement of all hot water lines,
which are more than 25 years old, is now in
progress. Modernization of the freight and
eight passenger elevators has been started and
is scheduled for completion during 1953. Rehabilitation of the power plant is progressing
step by step.
Also under active consideration is the replacement of the original boilers and engines and the
addition of refrigeration equipment adequate
for the entire building. Recently it became
OR THE PAST SEVERAL YEARS
[ 28 ]
necessary to discontinue air conditioning of one
of the two floors for which such facilities had
been provided. A gradual but significant increase in the use of heat-creating equipment,
such as IBM proof machines, Recordak, and
endorsing machines, called for more air-conditioning than the existing installation could
supply, and so the service had to be suspended
pending an increase in capacity.
Ordinarily such a suspension could be regarded as temporary, but in view of the probable
requirements of national defense, this bank is
postponing all modernizing programs of substantial nature, in conformity with the curtailment of construction in general.
PLANNING
T
HE PLANNING DEPARTMENT,which was
formed in 1946, makes careful surveys of
operational techniques in the various departments, with the aim of discovering and suggesting changes in procedures which will result in
significant economies in manpower requirements
or in material expense as well as in improved
performance.
In the five years of its existence, the Planning
Department has received 235 assignments ranging from minor rearrangements of office equipment, to others which led to the installation of
completely new and mechanized systems.
During 1950 nine major surveys were completed, of which four had been inaugurated in
the preceding year. One of these assignments
involved a survey of all of the some 2500 forms
in active use at our three offices. The findings
of this survey have led to the launching of a
forms-control program which has already re-
sulted in substantial improvements in design in
a number of cases. Owing to the wide variety
of forms involved, however, it is not expected
that this project will be carried to completion
during 1951.
The staff of five, including a junior officer,
is located at the main office, but its activities
extend to the two branches as well. In addition
to the survey function described above, the department edits and arranges for the printing of
all circulating and operating letters through
which this bank announces, for example, the
terms of a new Treasury offering, a change in
official personnel, or the terms of a Regulation
such as "W" or "X". During 1950 more than
90 different mailings of this stype were sent
out, some only to member banks, and some to
as many as 40,000 names, as in the case of some
of the recent regulations in which there is wide
public interest and responsibility.
DUPLICATING
WINGTOTHE LARGEamount of printing and
duplicating material that is required
by the routine operations of this bank, it has been
found economical to handle as much as possible
of this task by utilizing the bank's own employees
and equipment. Except for such types as forms
for tabulating equipment, which require hairline registration, and certain other work requiring unusual quality, all printing, mimeographing, multigraphing, hectographing, and photostating is done in the Duplicating Department.
This practice is not only less expensive, but the
O other
element of convenience is likewise an important
consideration.
Most of the work of printing or reproducing
of forms, which is the major duplicating requirement, is done at the main office which operates
nine pieces of duplicating equipment. The duplicating activities at the main office during 1950
consisted of approximately 5,100 jobs involving
10,600,000 impressions. Some of these jobs require only a few reproductions, while others
called for 100,000 or more copies. An adequate
variety of grades and weights of paper is carried
in stock.
[ 29 ]
MAIL
AND
EXPRESS
the postal and express
charges incurred in handling the bank's
D
mail and express shipments amounted to around
URING THE PAST YEAR,
$930,000 exclusive of the salaries of Mail Department employees.
Nearly half of that sum represents postage
and express costs involved in the shipments of
currency to and from member banks, and another 12% reflects the postage on new Federal
Reserve notes received from the Bureau of Printing and Engraving, together with the cost of
returning fit notes of other Federal Reserve
banks. Since shipments of this kind (as well as of
bearer securities) require elaborate safeguards
and entail surcharges, the postal expense per
package is much greater than on routine firstclass mail. Shipments by express are similarly
expensive.
Nearly all of the remaining 35-40%, as indicated on the subjoined chart, covers what may
be described as "ordinary" mail or express, the
bulk of which consists of checks. Each month
during 1950 around 9,500,000 checks were
mailed to country banks throughout the Fourth
Expenditures for Postage and Expressage
1946
Ordinary
Outgoing
for
Postage
and
1947
1948
1950*
---
230,655
288,928
341,728
Postage .................
Expressage ...............
214,161
82,981
248,378
140,565
297,293
136,429
Other Currency Shipments
New F .R. Currencyfrom Wash.
Fit Notes to other F. R. Banks
Unfit Notes to Washington.
297,142
388,943
433,722
57,247
39,065
1,533
67,722
33,327
1,424
98,472
22,694
2,486
97,845
102,473
123,652
37,779
1,423
25,751
277
27,666
782
39,202
26,028
28,448
Securities
Fiscal Agency Securities ...
Other Securities ..........
Total.
months actual, December
$664,844 $806,372 $927,550
estimated.
Expressage
(000 omlHed)
1946
1948
$201 ,345 $236,923 $306,310
. . . . . ..
29,310
52,005
35,418
Currency
and Coin Shipments to and from Member
Banks
·Eleven
Expenditures
Mail.
Checks.
1949
·Oecember
District for final collection and payment. Another .2,000,000 checks (approximate) were
1950* sent each month to payor banks throughout the
rest of the United States.
est.
This latter class of checks is dispatched almost
entirely via air express or air mail, to the Federal
Reserve bank or branch serving the respective
banks on which the sorted checks are drawn.
In this and other cases where the volume warrants, shipments are made in crash-proof bags.
The air-express pouches flown to New York
City each night average about 75 pounds.
The volume of conventional business mail has
not been unusual during 1950 but the advent
of Regulations V, W, X, (discussed elsewhere
in this Report) gave rise to a considerable expansion of special purpose mailings. Vendors and
lenders in every part of the District had to be
supplied with material relevant to the administration and observance of these Regulations.
As for many years in the past, our Mail Department continues to serve as a substation of
the Cleveland Post Office and is therefore permitted, among other things, to sort outgoing
mail according to train schedules, and to collect
mail directly from trains. Prompt delivery is
facilitated by virtue of these procedures.
[ 30 ]
ACCOUNTING
as in every year since
D the founding of this bank, the Accounting
URING THE PAST YEAR,
Department carried out the function of analyzing
member bank reserve balances in order to ascertain whether such balances conformed to minimum legal reserve requirements as established
from time to time by the Board of Governors
of the Federal Reserve System.
Each of the 26 reserve city member bank
accounts is analyzed at seven day intervals, and
the remaining 667 "country" member bank
accounts are examined on a semi-monthly basis.
During 1950 the daily average of reserve
balances, carried by all 693 member banks
combined, is estimated to have been approximately $1,185,000,000, or roughly $72,000,000
in excess of legal requirements. Such requirements, unchanged percentagewise throughout
1950*, were computed as follows:
an almost infinite number of transactions on
behalf of the Federal Treasury, ranging on a
given day all the way from the smallest government check that is paid out of the Treasury's
account, to a many-million-dollar transfer of
funds or a major Treasury refinancing operation.
It is estimated that during 1950 the total
debits and credits to the Treasury's account
totaled in the neighborhood of $18,500,000,000.
A detailed transcript, analogous in principle to
the monthly statement received by a depositor
from .his bank, is prepared each working day
and forwarded to the Treasury. This is a comparatively lengthy document, carries both debits
and credits together with supporting vouchers,
and serves not only as an authentic statement
of the Treasury's balance at this bank as of the
specified date but also as an aid in summarizing
and reconciling the activity in one of the largest
Large banks in Cleveland,
Cincinnati, Pittsburgh,
Columbus and Toledo '
All Other Banks
A sum equal to:
A sum equal to:
18% of Net Demand Deposits
plus 5% of Time Deposits
plus
Member banks are provided each business day
with a statement of their reserve position.
In addition to the basic (although not the
most time consuming) function of observing reserve balances, the Accounting Department is
also responsible for administering the "deferred
availability items" in accordance with the established time schedule of credit availability
which determines the amount of credit that becomes available to member banks day by day.
This delayed credit averaged around $205,000,000 during 1950, and may be compared (in
the balance sheet on page 32 of this Report)
with the counterpart asset described as "uncollected items", which on the average was
around $40,000,000 larger than the aggregate
of deferred availability items.
The Accounting Department likewise handles
12% of Net Demand Deposits
5% of Time Deposits
single deposit-liability accounts on this bank's
books.
Another important function executed by this
department is that of cost accounting, or "expense accounting" as it is more commonly
known within the bank. Punch card equipment
is now used extensively to tabulate the many
classifications of expenses for comparative purposes, and to provide a factual basis for the
preparation of departmental budgets, as well as
the entire bank budget.
The Accounting Department is also in charge
of the stockholders' ledger. During the past year
315 member banks purchased additional stock
in this bank to the amount of $2,569,500, either
as new members, or because their own capital
and surplus accounts had been enlarged.
• The increases in reserve requirements announced by the Board
of Governors on December 29 are not effective until early 1951.
[ 31 ]
COMPARATIVE
DECEMBER
STATEMENT
29, 1950 and
OF CONDITION
DECEMBER
30, 1949
ASSETS
Gold certifica tes
Redemption fund for Federal
Dec. 29, 1950
Dec. 30, 1949
Reserve notes
.
.
$1,476,814,243
67,288,483
$1,539,111,108
59,126,739
TOTAL GOLD CERTIFICATE RESERVES
.
1,544,102,726
1,598,237,847
.
22,754,336
21,343,444
1,566,857,062
1,619,581,291
Other cash
TOTAL CASH ..........•.......................
Discounts and advances
Industrial loans
U. S. Government securities:
Bills
Certifica tes
Notes
Bonds
TOTAL
U.
.
.
149,214
150
.
.
.
.
115,311,000
216,370,000
1,161,131,000
428,263,000
445,406,000
578,791,000
51,852,000
665,696,000
.
1,921,075,000
1,741,745,000
.
1,921,224,364
1,748,594,750
.
.
.
.
11,177,000
457,756,953
4,793,961
11,249,340
10,825,000
267,302,201
4,935,667
9,252,016
S. GOVERNMENT SECURITIES
TOTAL LOANS AND SECURITIES
Federal Reserve notes of other banks
Checks and other cash items in process of collection
Bank premises
Other assets
6,849,000
750
$3,973,058,680
$3,660,490,925
.
$2,112,367,140
$2,050,079,320
.
.
.
.
1,323,910,224
81,647,730
80,780,700
14,158,900
1,185,987,074
66,722,465
69,975,200
9,161,664
.
1,500,497,554
1,331,846,403
TOTAL ASSETS......................•..........
LIABILITIES
Federal
Reserve notes
Deposits:
Member bank-reserve
U. S. Treasurer-general
Foreign
Other deposits
account.
account.
TOTAL DEPOSITS
Deferred availability
Other liabilities
items
.
.
TOTAL LIABILITIES
CAPITAL
278,952,556
504,159
.
201,506,111
978,602
3,892,321,409
3,584,410,436
22,001,400
48,014,194
1,005,665
9,716,012
19,431,900
45,956,798
1,005,665
9,686,126
ACCOUNTS
Capital paid in
Surplus (Section 7)
Surplus (Section 13b)
Other capital accounts
.
.
.
.
TOTAL LIABILITIES AND CAPITAL ACCOUNTS
Con tingen t lia bility on acceptances purchased
Commitments to make industrial loans
for foreign corresponden
[ 32 }
.
ts
.
$3,973,058,680
$
$
1,969,894
457,500
$3,660,490,925
$
$
966,768
886,019
COMPARISON
OF
EARNINGS
AND
EXPENSES
FOR THE YEARS 1950 AND 1949
1950
Current earnings
Current expenses
.
.
','
CURRENT NET EARNINGS
$
1949
25,692,094
7,355,408
$29,331,256
7,186,175
.
18,336,686
22,145,081
.
3,471,928
22,857
2,961,697
107,433
.
3,494,785
3,069,130
13,001
404,108
.
3,481,784
31,791
18,516,075
2,665,022
3,760,963
17,903,138
.
.
3,270,604
1,213,208
3,146,002
1,156,754
2,057,396
$ 1,989,248
ADDITIONS TO CURRENT NET EARNINGS:
Profits on sales of U. S. Government securities (net)
All other.. . . . . . . . . . . . . . . . . . . . . . .
.
.
TOTAL ADDITIONS
DEDUCTIONS FROM CURRENT NET EARNINGS
.
Net additions
Transferred to reserves for contingencies
Paid U. S. Treasury (interest on outstanding F. R. notes)
.
.
Net earnings after reserves and payments to U. S. Treasury
Dividends paid
Transferred to surplus (Section 7)
.
[33 ]
STATEMENT
OF EARNINGS
EXPENSES
AND
SINCE THE BANK'S OPENING, NOVEMBER 16, 1914
YEAR
CURRENT
ADDITIONS
DEDUCTIONS
NET
CURRENT
CURRENT
NET
TO
FROM
EARNINGS
EARNINGS
EXPENSES
EARNINGS
CURRENT
NET
CURRENT
1914-15 ..........
1916 .............
1917 .............
1918 .............
1919 .............
1920 .............
$
113,815
452,129
1,367,216
5,226,864
7,800,829
$
169,589
150,224
55,774*
$
358,078
906,401
1,342,617
301,905
1,009,138
4,320,463
6,458,212
NET
EARNINGS
EARNINGS
$
$
$
(See disposition
next page)
8,097
255,456
184,667
364,427
55,774*
293,808
753,682
4,135,796
6,093,785
14,458,619
2,329,155
12,129,464
63,246
372,679
1921
1922
1923
1924
.............
.............
.............
.............
9,390,863
4,994,282
4,655,090
3,770,689
2,871,012
2,461,266
2,550,659
2,664,850
6,519,851
2,533,016
2,104,431
1,105,839
125,071
48,889
11,951
39,997
360,539
313,217
1,195,161
1,618,989
1925
1926
1927
1928
1929
.............
.............
.............
.............
.............
4,013,456
4,517,884
4,197,836
6,250,553
6,986,580
2,599,629
2,531,746
2,610,474
2,596,814
2,785,979
1,413,827
1,986,138
1,587,362
3,653,739
4,200,601
333,802
10,549
2,138
3,193
175
537,053
335,925
481,310
476,217
1930 .............
1931. ............
2,649,497
2,623,842
2,583,904
2,915,300
2,946,569
935,705
414,241
1932 .............
1933 .............
1934 .............
3,585,202
3,038,083
5,128,554
4,705,091
4,137,556
378,496
268,941
323,120
138,477
1935 .............
1936 .............
1937 .............
1938 .............
1939 .............
3,674,866
3,537,159
3,986,619
3,490,621
3,845,841
2,954,884
2,923,092
2,770,245
2,797,658
2,860,488
719,982
614,067
1,216,374
692,963
985,353
838,948
457,512
1940 .............
1941.. ...........
4,405,454
4,123,894
4,975,032
6,750,584
9,643,754
2,910,118
3,360,435
3,606,964
4,192,397
4,594,525
1,495,336
763,459
1,368,068
2,558,187
5,049,229
1,339,571
132,323
336,129
3,523,320
330,542
.............
.............
.............
.............
.............
13,289,224
13,873,579
15,189,482
29,265,175
29,331,256
4,436,638
4,982,573
6,277,763
6,757,536
7,186,175
8,852,586
8,891,006
8,911,719
22,507,639
22,145,081
406,086
184,973
255,381
596,085
3,069,130
123,057
332,370
255,483
4,016,649
4,165,071
9,135,615
8,743,609
8,911,617
19,087,075
21,049,140
1950 .............
25,692,094
7,335,408
18,336,686
3,494,785
44,792
21,786,679
1942 .............
1943 .............
1944 .............
1945
1946
1947
1948
1949
2,544,650
1,789,791
1,190,987
·Contra Entry
[ 34
J
769,651
510,364
560,189
239,497
495,334
530,424
604,637
996,514
1,196,585
917,941
449,485
455,350
374,810
482,285
11,820,031
6,284,383
2,268,688
921,221
473,153*
1,210,576
1,660,762
1,108,190
3,180,715
3,705,442
783,777
78,545
1,871,256
731,683
1,042,697
546,201
780,861
718,906
1,081,061
1,049,626
896,664
913,600
12,443*
387,729
899,733
401,924
1,921,307
908,225
1,316,468
5,181,774
4,977,847
STATEMENT
OF NET
OF DISPOSITION
EARNINGS
BY YEARS, SINCE NOVEMBER 16, 1914
NET
EARNINGS
(See detail
previous page)
YEAR
1914-15 ....
1916 .......
1917 .......
1918 .......
1919 .......
$
TRANSFERRED
TO SURPLUS
DIVIDENDS
PAID
55,774* $
293,808
753,682
4,135,796
6,093,785
SECTION 7
$
PAID
SECTION
13b
FRANCHISE
TAX
$
143,237
716,168
716,107
556,785
3,552,000
5,537,000
U. S. TREASURY
INTEREST ON
SECTION
F. R. NOTES
OUTSTANDING
13b
$
$
.......
.......
.......
.......
.......
11,820,031
6,284,383
2,268,688
921,221
473,153*
604,194
660,228
692,436
725,626
756,152
11,215,837
2,329,442
861,264
195,595
1,229,305*
1925
1926
1927
1928
1929
.......
.......
.......
.......
.......
1,210,576
1,660,762
1,108,190
3,180,715
3,705,442
778,811
808,505
832,583
856,843
910,007
431,765
852,257
275,607
2,323,872
2,795,435
1930
1931
1932
1933
1934
.......
.......
.......
.......
.......
783,777
78,545
1,871,256
731,683
1,042,697
952,934
936,513
858,427
789,058
769,096
169,157*
857,968*
180,083
57,375*
281,757
1935, ......
1936, .....
,
1937, ... , ..
1938 .......
1939 .......
780,861
718,906
1,081,061
1,049,626
896,664
772,127
752,931
773,118
799,145
823,216
48,456*
294,467
250,254
73,738
1940, ......
1941 .. , ....
1942 .. , ....
1943 .......
1944 .. , ....
1,921,307
908,225
1,316,468
5,181,774
4,977,847
842,330
869,942
888,550
922,163
967,056
1,063,869
22,825
421,070
4,259,012
4,010,790
15,108
15,458
6,848
599
9,135,615
8,743,609
8,911,617
19,087,075
21,049,140
1,025,112
1,094,157
1,123,392
1,138,865
1,156,754
8,103,326
7,648,581
779,013
1,794,840
1,989,248
7,177
872
21,786,679
1,213,208
2,057,396
1945
1946
1947
1948
1949
.. , .. ' ,
.. ' ....
.......
.......
.....
,.
1950 .......
$
$
1920
1921
1922
1923
1924
OTHER
TRANSFERS
$
3,294,713
714,988
832,746
8,156*
8,734
14,431
13,476
227
290*
1,461
*
7,010,673
16,153,370
17,903,138
18,516,075
'Contra Entry
ADJUSTMENTS
-14,146,864(1a)
14,146,864(lb)
1,015,572(2)
-6,120,844(3)
7,043,820(4)
NOTES:
l(a)
l(b)
2
3
4
Purchase of Federal Deposit Insurance Corporation Stock in 1934.
Transfer to Treasury of Proceeds of Redemption of FDIC Stock in 1947.
Payments received from Treasury, relative to Section l Ib loans in 1934-5.
Transferred from Surplus to Reserves for Contingencies.
Transferred from Reserves for Contingencies to Surplus (Section 7).
[ 35 ]
BALANCE TO
PROFIT
& Loss
55,774*
150,571
37,514
132,311 *
D
R
I
c
E
T
o
s
R
A
N
DIRECTORS
as of January
1, 1951
GEORGE C. BRAINARD (Chairman)
President, Addressograph-Multigraph
Corporation, Cleveland, Ohio
JOHN C. VIRDEN (Deputy Chairman)
Chairman of the Board, John C. Virden Company, Cleveland, Ohio
JOHN D. BAINER, President
EDWARD C. DOLL, President
The Merchants National Bank and
Lovell Manufacturing Company
Trust Company of Meadville
Erie, Pennsylvania
Meadville, Pennsylvania
LA WRENCE N. MURRAY, President
JOEL M. BOWLBY, Chairman of the Board
Mellon National Bank & Trust Company
The Eagle-Picher Company
Pittsburgh, Pennsylvania
Cincinnati, Ohio
LEO L. RUMMELL, Dean
BEN R. CONNER, President
College of Agriculture
The First National Bank of Ada
The Ohio State University
Ada, Ohio
Columbus, Ohio
CHARLES J. STILWELL, President
The Warner & Swasey Company, Cleveland, Ohio
OFFICERS
RAY M. GIDNEY, President
WILLIAM H. FLETCHER, First Vice President
ROGER R. CLOUSE, Vice President
WILBUR D. FULTON, Vice President
JOHN W. KOSSIN, Vice President
ALFRED H. LANING, Vice President
and Cashier
MAR TIN MORRISON,
Vice President
PAUL C. STETZELBERGER,
Vice President
DONALD S. THOMPSON,
Vice President
HAROLD E. J. SMITH, Assistant Vice President
CHARLES J. BOLTHOUSE, Assistant Cashier
MEMBER
OF
FEDERAL
PHILLIP B. DIDHAM, Assistant Cashier
GEORGE H. EMDE, Assistant Cashier
JAMES R. LOWE, Assistant Cashier
JOSEPH M. MILLER, Assistant Cashier
GEORGE R. ROSS, Assistant Cashier
WILBUR T. BLAIR, Counsel and Secretary
HARMEN B. FLINKERS, Assistant Secretary
HUGH M. BOYD, Chief Examiner
CARL F. EHNINGER, Auditor
MERLE HOSTETLER, Manager,
Research Department
ADVISORY
COUNCIL
(from Fourth District)
SIDNEY B. CONGDON, President
The National City Bank of Cleveland, Cleveland, Ohio
INDUSTRIAL
ADVISORY
COMMITTEE
HERMAN R. NEFF (Chairman)
President, The George S. Rider Company-Engineers,
SAM W. EMERSON, President
The Sam W. Emerson Company
Cleveland, Ohio
C. F. HOOD, Executive Vice PresidentOperations
United States Steel Company
Pittsburgh, Pennsylvania
[ 36 ]
Cleveland, Ohio
H. P. LADDS, President
The National Screw and Manufacturing
Company
Cleveland, Ohio
JOHN C. VIRDEN, Chairman of the Board
John C. Virden Company
Cleveland, Ohio
D
o
F
F
I
c
E
R
s
DIRECTORS
ERNEST H. HAHNE (Chairman)
President, Miami University
Oxford, Ohio
HENRY C. BESUDEN, Farmer
Winchester, Kentucky
JOSEPH B. HALL, President
The Kroger Company
Cincinnati, Ohio
L. M. CAMPBELL, President
Second National Bank
Ashland, Kentucky
STERLING B. CRAMER, First
Vice President
The Fifth Third Union Trust Company
Cincinnati, Ohio
GRANVILLE R. LOHNES, Treasurer
National Cash Register Company
Dayton, Ohio
SPEARS TURLEY, Vice President and
Trust Officer
State Bank and Trust Company
of Richmond, Kentucky
Richmond, Kentucky
OFFICERS
WILBUR
D. FULTON,
HENRY
N. OTT, Cashier
Vice President
RICHARD
PHIL J. GEERS, Assistant
CLYDE HARRELL,
G.JOHNSON,
Assistant
Cashier
Assistant
Cashier
Cashier
DIRECTORS
A. H. BURCHFIELD (Chairman)
President and General Manager, Joseph Horne Co.
Pittsburgh, Pennsylvania
JOHN BARCLAY, JR., President
Barclay-Westmoreland Trust Company
Greensburg, Pennsylvania
HUGO E. LAUPP, President
Wheeling Dollar Savings and Trust
Company
Wheeling, West Virginia
LAURENCE S. BELL, Executive
Vice President
The Union National Bank of Pittsburgh
Pittsburgh, Pennsylvania
HENRY A. ROEMER JR., President
Sharon Steel Corporation
Sharon, Pennsylvania
MONTFORT JONES, Professor of Finance
The University of Pittsburgh
Pittsburgh, Pennsylvania
SIDNEY A. SWENSRUD,
Gulf Oil Corporation
Pittsburgh, Pennsylvania
President
OFFICERS
JOHN W. KOSSIN, Vice President
ARTHUR G. FOSTER, Cashier
W. HUNTER NOLTE, Assistant Cashier
JOHN R. PRICE, Assistant Cashier
JOHN A. SCHMIDT, Assistant Cashier
ROY J. STEINBRINK, Assistant Cashier
[ 37 ]
THE BANK AS PART OF THE FEDERAL RESERVE SYSTEM
T
HIS BANK and its stockholder member banks
in the Fourth District make up part of the
Federal Reserve System. The bank's activities
described elsewhere in these pages are broadly
parallel to those of the other eleven Reserve
Banks. Such operations, particularly where aspects of overall credit policies are involved, are
supervised by the Board of Governors of the
Federal Reserve System, located in Washington.
The Board of Governors is composed of seven
members, each appointed by the President and
confirmed by the Senate for a term of fourteen
years. The Board of Governors exercises powers
prescribed by the Federal Reserve Act, as
amended, and by related legislation. Standing in
an advisory relation to the Board of Governors
is the Federal Advisory Council which is composed of one member from each Federal Reserve district selected annually by the board of
directors of each Federal Reserve Bank.
Open Market Operations. One of the most
important activities of this bank which is linked
in an intimate way with those of the System as
a whole is its open market operations. In buying
and selling government securities, both longterm and short-term, the timing and volume of
such transactions are arranged with a view to
the credit stabilization objectives of the System
as a whole. Such operations are carried out
under the direct guidance of the Federal
Open Market Committee, which is composed of
all of the members of the Board of Governors
and the presidents of five out of the twelve
Federal Reserve Banks. (This bank will be represented on the Federal Open Market Committee
during the year beginning March 1951.) Open
market transactions for the account of this bank,
as well as for other Federal Reserve Banks, are
executed by the Federal Reserve Bank of New
York, as agent.
This bank's participation in the System Open
Market Account amounted on December 29,
1950, to $1,921,000,000 par value of securities
representing 9.27 percent of the total System
Open Market portfolio. This figure is comparable with an amount of $1,742,000,000 par
value of securities held on December 30, 1949,
an increase of $179,000,000.
Other System-Wide Activities. Administration
within the District of the regulations issued by
the Board of Governors of the Federal Reserve
System is an important part of the System-wide
activities in which this bank participates. As a
consequence of the serious inflationary problems
accompanying the rearmament
program
launched in the second half of 1950, additional
administrative burdens were placed upon the
bank in respect to emergency credit controls
(described in greater detail on the opposite
page).
Another phase of activity where the work of
this bank is closely meshed with that of the
other Reserve Banks and the Board of Governors is the statistical program. In this connection
the Board of Governors is the primary collector
on a nation-wide scale of a number of important
statistical series on business and financial activities; examples are consumer credit, banking, and
department store statistics. In order to supply
necessary data to the Board of Governors this
bank collects a considerable quantity of information directly from respondents in the District.
Finally, a particular device for knitting
together the activities of the twelve Federal
Reserve Banks is found in the Presidents' Conference, which is a regular but informal meeting
of the presidents of the twelve Federal Reserve
Banks for purposes of making recommendations
with respect to system policy, administration,
and operation.
[38 ]
EMERGENCY
CREDIT CONTROLS
of war in Korea,
Fproblems
and as a direct response to the inflationary
accompanying the rearmament proOLLOWING
THE
OUTBREAK
gram, the Federal Reserve System including
this bank received new responsibilities in the
field of emergency credit controls. Pursuant to
the terms of the Defense Production Act of 1950,
the Board of Governors established new instalment credit controls through the reissuance of
Regulation W, effective September 18, and also
announced restrictions on the extension of credit
for residential construction through the issuance
of Regulation X, effective October 12. Both
regulations were designed to assist in the channeling of manpower and material toward the
defense effort, as well as to relieve inflationary
pressures on the price structure.
The administration of these two emergency
regulations within the Fourth District became
the responsibility of this bank.
Regulation W
Regulation W applies to instalment sales or
instalment loans, specifying minimum downpayment and maximum maturities for listed groups
of commodities such as autos, household furniture and household appliances. Instalment credit
for home repairs or improvements is also
covered. The initial terms were somewhat tighter
than those which had been widely offered in
business practice during the months just prior
to the regulation, but were more liberal than
those in force during most of the previous ex~
perience with Regulation W during World War
II and during a considerable part of the postwar period. On October 16 after the extent of
the inflationary pressures growing out of the
defense program had become more evident,
Regulation W was amended so as to provide
substantially more restrictive terms.
Immediately upon the issuance of Regulation
W, that portion of the bank's personnel which
had had previous experience with the regulation
was reactivated, and a separate department of
Consumer Credit was established, with a yearend staff of 31 including field investigators
operating from the Cleveland, Cincinnati, and
Pittsburgh offices.
Registration statements, as required by the
regulation, were received from approximately
17,000 individuals or firms located within the
Fourth District and doing instalment business
subject to the regulation. The statistical data
provided by the registration statements were
subsequently tabulated and analyzed in order to
provide information needed by the Board of
Governors to serve as benchmarks for the Board's
regularly issued consumer-credit statistics.
By late 1950 it was apparent that Regulation
W was having some restraining effect on consumer demand in the directions intended.
Regulation X
Regulation X applies to banks and other
financial institutions or individuals who are engaged in the business of making real estate loans.
It establishes terms governing maturities and
maximum loan values in the extension of credit
for residential construction. Companion restrictions were imposed at the same time by the
Federal Housing Administration and the Veterans Administration. The restraints were designed to reduce building from the 1950 level of
approximately 1,400,000 units down to a level
of between 800,000 and 850,000 units per year.
The tasks required in the administration of
Regulation W were in many respects entirely
new to this bank's operations. A small emergency
staff was recruited by borrowing from regular
operating departments. A series of conferences
were held with representatives of the various
types of financial institutions whose activities
are affected by the regulation. Valuable assistance to the bank in meeting regulatory problems has also been rendered by an Advisory
Committee on Residential Real Estate Credit for
the Cleveland area, as well as by similar committees for the Cincinnati and Pittsburgh areas.
Because of the large backlog of plans for
residential housing in existence at the start of
the regulation, and also because the late autumn
is normally slack in respect to building starts, it
has been difficult to evaluate accurately the
effects of Regulation X in its early phases.
Statutory authority both for Regulation W
and Regulation X, unless extended, will expire
June 30, 1951.
[ 39 ]
...J
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LLI
o
LLI
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[40 ]
@FedFRASER